Tsb0127205.Pdf

Ⅰ . Names, titles, phone numbers, and e-mail addresses of spokesman and acting Spokesman Spokesman: Spike Wu Title : Chief Executive Officer, Retail Banking Group Tel : 886-2- 5576-3701 E-mail address : [email protected]

Acting spokesman: Wilson Chou Title : Senior Vice President Tel : 886-2-5576-2568 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 : 886-2-2568-3988 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, Jianguo N. Rd., Sec.1, Zhonghsan Dist.,Taipei City. Website : http://www.taishinbank.com.tw Tel : 886-2-2504-8125

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 : Qinzhen Yang, Peter Tsai 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 : 886-2-2545-9988

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. Letter to Shareholders 2

II. Brief Introduction of The Bank 5

III. Corporate Governance Report 7

IV. Fund Raising Activities 52

V. Business Status 64

VI. Financial Status 83

VII.Review and Analysis of Financial Status 92 and Business Performance and Risk-Management Items

VIII.Special Notes 106

IX. Directory of Head Office & Branches 115

X. Notes to Financial Statements 121

Rating Agency Date Ratings Issuer L-Term BBB+ Issuer S-Term F2 Outlook Stable Fitch Ratings 2012.10.09 Support 3 National L-Term AA- (twn) National S-Term F1+ (twn)

Issuer L-Term BBB Issuer S-Term A-2 Taiwan Ratings 2012.12.11 Outlook Stable National L-Term twA+ National S-Term twA-1 I. Letter to Shareholders

In 2012, many of the world's developed economies were challenged by the possibilities of a sequent recession. As the European debt crisis escalated and members such as Greece and Spain both calling for financial aid, the EU was forced to adopt its own expansionary measures after the United States, and enforce strict rules on austerity. As a result, the lack of import demands from Europe and the United States had negatively impacted export-driven countries in Asia. In 2012, Taiwan, Japan, South Korea and Singapore all registered negative export growth at -2.3%, -2.9%, -1.3% and -0.3% respectively. Even though China and Hong Kong were still able to hold on to growth, their growth rates were merely 1/3 of what they used to be in 2011.

In order to stimulate the economy, US, EU and Japan had all maintained interest rates at historical low levels and taken more aggressive expansionary approaches. For example, The Japanese dollar (Yen) has continued to depreciate.This caused a dramatic shift of capital into emerging markets in 2012, resulting in more than 20% year- one-year gains to be seen in stock market in areas such as Hong Kong, India, Thailand, and Philippines. In light of the strong money supply, the most significant challenge to Asian governments this year becomes how they are able to direct this capital towards real economic developments.

Overall, Taiwan posted an economic growth of 1.26% in 2012, which was far lesser than the 4.07% registered in 2011. However, as the economic indicator turned yellow-blue since September, there had been signs of economic recovery supported by stock market gains during the second half of the year. At the end of the year, the stock market index closed 9% above previous year's level at 7,700 points, and recovered all grounds that had been lost in the first half because of concerns toward the export slump, rising oil and power prices, and the taxation of capital gains on securities.

Despite drastic changes in the global financial environment, Taiwan's banking industry as a whole still achieved growing profitability with ROA and ROE totalling 0.68% and 10.41% respectively in 2012. At the end of 2012, Taiwanese banks averaged an overdue loan ratio of 0.4% and a coverage ratio of 274%. The outstanding asset quality had provided local banks the needed confidence to extend 9.72% additional credit to SMEs, while taking initiatives to explore opportunities in China and other markets around the world.

In operating performance, the bank raked in after-tax profit of NT $ 8.646 billion in 2012, representing growth of 11.7%; Equivalent to NT$1.80 of earnings per share (EPS). As for capital structure, BIS ratio move up to 13.19% at the end of 2012, compared with12.76% at the end of 2011. Tier1 ratio was as high as 8.44%, capital structure is very sound.

In terms of Credit Rating of Taishin International Bank, Fitch Ratings released its rating list in Oct. 2012: L-Term IDR is “BBB+”, National L-Term is “AA-(twn)”, outlook is ”Stable”. Taiwan Ratings released its rating list in Dec.2012: L-Term IDR is “BBB”, National L-Term is “twA+”, outlook is ”Stable”.

Performances of the bank’s two major business units, retail banking group and wholesale banking group, follow:

Retail Banking Group

As of the end of 2012, outstanding amount of retail mortgage loans reached NT$292 billion, for market share of 5%; outstanding auto loans amounted to NT$21.7 billion, for market share of 25.6%, ranking first place in the

2 I. Letter to Shareholders 01

market. The number of credit cards in circulation reached 3.15 million cards, for market share of 9.2%, ranking fourth place, and annual credit-card spending value reached 152.7 billion, for market share of 8.7%, ranking fifth place. The number of merchants hit 58,000 stores, for market share of 19.9%, ranking third place.

With regards to the credit card business: the enormous potentials presented in UnionPay Cards had prompted the bank to introduce "UnionPay Card Online Acquiring" services since March 2012. Taishin was the pioneering bank to approve this new business, it now ranks second in acquiring purchases made using UnionPay Cards. Furthermore, Taishin Bank's co-brand cards with Shinkong Mitsukoshi had accumulated 1.16 million cardholders in total as of the end of 2012; more surprisingly, the new Infinity Card/Jade Card introduced in 2012 had amassed 200,000 new users at first launch, generating nearly NT $60 billion credit card transactions. This co-brand effort has reached a new milestone, as Taishin cardholders spent a record-breaking NT$20 billion at Shinkong Mitsukoshi stores.

With regards to branch services: the bank has teamed with Visa International to introduce "Visa Money Transfer" services targeted at customers who have smaller overseas remittances requirements. This new innovation has greater flexibility than conventional wire transfers in terms of amounts, charges and operating hours, and therefore appealed to those who have the need to make small, regular remittances.

Wholesale Banking Group

As of the end of 2012, outstanding corporate loans reached NT$196.1billion, up 2.8% than a year earlier, ranking fourteenth out of 38 domestic financial institutions. In addition, in line with the government’s policy of financing small and medium enterprises, the outstanding loans to small and medium enterprises reached 66.6 billion as of the end of 2012, compared with the previous year 54.6 billion, growth up 22%, which performance is quite excellent .

The bank undertook NT$241.6 billion of factoring business in 2012, ranking third place in the market, and outstanding amount of US$59.7 billion for derivative contracts, ranking fifth place. It undertook stock-affair service for 186 listed firms, ranking fourth place.

The profit of overseas branch is NT$446 million before income tax in 2012 for Hong Kong branch, compared with NT$347 million before income tax in 2011, growth up 28.5%.

With regards to new services: the bank launched its "Gold account" in June 2012, giving customers the access to purchase gold denominated in USD on February 6, 2013, the bank officially commenced its RMB services and gave customers the convenience of transferring funds and conducting exports/imports with Chinese counterparts at any DBU nationwide. Meanwhile, the bank will draw valuable experiences from its Hong Kong Branch and OBUs (offshore banking units) to assist customers manage RMB cash flows with the best flexibility.

To ensure the sustainable growth and global competitiveness of our financial industry, the government has identified "Financial Globalization" as one of the nation's "Golden Decade" initiatives. In addition, several strategies have also been targeted specifically for the financial service industry, such as: "Development of a Taiwan-centric financial platform," "Enhancing cross-strait financial interactions through featured services," "Funding platforms for featured industries," and "World-connected financial practices." Over the long run, the financial service industry shall focus on incorporating modern technologies, developing unique features, and adopting globalized practices.

In response to this upcoming trend, the bank shall place more emphasis on financial product R&D and cross- border opportunities. For the retail banking segment, the bank will incorporate the latest innovations of networking and cellphone technologies into its services, while introducing new forms of mobile payment and exploring

3 collaborative opportunities with participants from other industries to satisfy customers' needs. For the wholesale banking segment, the bank will continue extending its collaborations with overseas and Chinese counterparts to improve service quality to customers, and enhance existing risk management systems and operating platforms to minimize credit and operational risks.

Taishin Bank remains committed in its goal of delivering tri-win solutions for customers, shareholders, and employees. We will bring more innovation into our products and services, plan further ahead for our businesses, and ultimately deliver the expectations of our shareholders.

Thomas T.L. Wu Chairman Taishin International Bank

4 II.Brief Introduction to The Bank 02

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.: 886-2-2568-3988

Business units: 102 units, including 98 domestic and overseas branches (including Hong Kong branch), trust department, overseas department, offshore banking units (OBU), and representative’s office in Ho Chi Minh City of Vietnam.

B. History

1. The bank was founded by Mr. Thomas T.L. Wu, his friends, and some well-known entrepreneurs in 1990. 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 Dah An Bank via share swap for the establishment of Taishin Financial Holding Co., Ltd. on Feb. 18, 2002, 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. To integrate the resources and funds of the financial holding company and achieve higher efficacy, the bank acquires Taishin Bills Finance on Jan. 22, 2011. Since both companies are subsidiaries of Taishin Financial Holding, with similar management concept and corporate culture, it is believed that both companies can quickly integrate their resources and systems, to lower operating costs and boost operating efficiency.

2. Since its establishment, the bank has been constantly expanding business items and operating network, actively exercising the intermediary role for the supply and demand of funds in the society, so as to support economic prosperity.

3. The board of the director of the bank oversees the auditing division and secretariat. The headquarters oversees human resources division, finance division, corporate planning division, legal division, compliance division, information technology services division, administrative & services division, risk management division, performance management division, and process and service division. Meanwhile under the auspices of wholesale banking group and retail banking group, there are 16 first-tier business and management units.

5 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 financial internationalization, including offshore banking unit, Hong Kong branch, which was inaugurated on June 25, 2003 after obtaining the license in Feb. 2003; With the approval of the Ministry of Finance on September 21, 2004, the bank applied with Vietnamese regulator for the setup of representative’s office in Ho Chi Minh city on Dec. 13, 2004. The office was approved for establishment in Jan. 2005, marking a major step forward for the bank’s overseas business. The bank boasts 102 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 bills, securities dealer, certification and underwriting, factoring, securities investment and underwriting, offshore banking, issuance of bank debentures, wealth management, and sale of gold bullion, gold and silver coins.

5. The bank’s affiliates include Taishin Insurance Agency Co., Ltd, Taishin Insurance Brokers Co.,Ltd, Taishin Dah An Leasing Co., Ltd, and Taishin Real Estate Management Co., Ltd.

6 III.Corporate Governance Report 03

III. Corporate Governance Report

A. Organization System

a. Organizational Chart Base date: April 1, 2013

Shareholder's Meeting

Supervisor

Board of Directors (Chairman)

Secretariat Audit President Division Division

Staff Conduct Review and Staff Performance Appraisal Committee Non Performing Asset Recovery Committee Trust Asset Evaluation Committee Credit Approval Committee Labor Safety & Health Committee

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

Retail Banking Group Wholesale Banking Group

Retail Banking Payment Service Financial Market Global Trade Credit Division Division Division Finance Division

Retail Banking Non Performing Consumer Corporate Banking Overseas Business Asset Recovery Finance Division Division Division Division

Strategic Planning Retail & Wealth Wholesale Credit Service Industry Division of Retail Management Administration Division Banking Business Channel Division Division

Wholesale Banking Segmentation Financial Products Wholesale Banking Administration Division Division Product Division Division

7 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 financial 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 official documents. (3) Evaluation and implementation of operations related to major general affairs, construction and improvement, procurement, properties and offices. (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 office, 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 retail banking and wholesale 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 financial information.

5. Legal Division (1) Drafting, 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.

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.

8 III.Corporate Governance Report 03

(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, operation 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 workflow and establishment, execution and management of centralized operation system. (3) Launch workflow reformed project and execution, evaluation and review the result.

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

12. Corporate Banking Division (1) Formulate short-, medium-, and long-term business objects and strategic planning for the financial businesses of medium- and large-scale manufacturing customer groups. (2) Coordinate the marketing, promotion, and the maintenance and management of account relations for medium- and large-scale manufacturing customer groups.

13. Service Industry Division (1) Formulate short-, medium-, and long-term business objects and strategic planning for the financial businesses of medium- and large-scale service customer groups. (2) Coordinate the marketing, promotion, and the maintenance and management of account relations for medium- and large-scale service customer groups.

14. Wholesale Banking Administration Division (1) The Planning, execution and management of wholesale banking business goal and strategy plan. (2) Cross-unit integration and coordination. (3) Integration and perform management of budget goals of wholesale banking. (4) Formulation and management of credit-extension flow. (5) The execution and management of international banking business. (6) Delivery and clearance of financial products. (7) The planning and management of wholesale banking service system. (8) Credit risk control. (9) Formulation of related business regulations and operating flow.

15. 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.

9 (2) Economic and industrial research, short-term Taiwan stock investment. (3) Bills transaction, underwriting and trading.

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

17. 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.

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

19. Retail and Wealth Management Channel Division (1) In charge of planning and management of the business and channel of branches. (2) Deployment and management of branches. (3) Enforcement, pushing, and management for the operation and service quality of branches. (4) Operational management and sales promotion of retail banking.

20. Financial Products Division (1) Operation, management, maintenance, development, and adjustment of retail banking insurance products. (2) Development and management of retail 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 afflicted business. (4) The development of new trust products and service. (5) Planning and management of short-term securities and mutual-fund investments by subsidiaries. (6) Integrate market trend and product feature, and offer analytical report and consulting for investments in domestic and foreign securities.

21. Consumer Finance Division (1) Development, design, management, and promotion of retail banking products. (2) Sales promotion of commercial banking-related products. (3) The development, operating management, sales promotion, credit investigation, auditing, and customer maintenance for auto loans and products with repo condition.

22. Payment Service 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 flow of business clients. (2) In charge of the bank’s marketing and communications resources.

23. Retail Banking Credit Division (1) In charge of the formulation of the credit policy to retail banking products.

10 III.Corporate Governance Report 03

(2) Establishment and utilization of forecast model. (3) Risk management, estimate and management of bad debts and provisions. (4) Credit investigation and credit-extension management for credit cards and retail banking.

24. 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.

25. Segmentation Division (1) In charge of the analysis of customer-group information. (2) The development, planning and trial execution of event marketing. (3) Development, management, and expansion of virtual channels.

26. Strategic Planning Division of Retail Banking Business (1) Handling of first- 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-office and planning affairs for chief executive officer of retail banking. (4) Strategic planning and enforcement management for retail banking.

11 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 (I) March 31, 2013 Stake of spouse Spouse or relatives within second-degree Shareholding Shareholding in the Current shareholding and offspring before kinship who serve managerial posts or seats upon election name of others Current Date of Date of age of majority jobs with of board directors/ supervisors of the bank Title Name getting Term first getting Share Share Education and working experience the bank Amount Share Amount Share elected elected Amount of of Amount of of and other of of stake of of stake title name Relationship shares stake shares stake companies shares (%) shares (%) (%) (%) Taishin Financial Holding Co., Ltd. Three Director, First Bank, Supervisor, Hua Nan Bank Director Kuo Ruisong Brother-in-law Chairman 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Note 1 Representative: Thomas T.L. Wu years MBA, University of California, LA supervisor Lin Longshi Brother-in-law Director, International Bank of Taipei Professor, department of information Thomas Taishin Financial Holding Co., Ltd. Three Chairman Brother-in-law Director 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 science, Business School, Soochow University Note 2 T.L. Wu Representative: Jui-Sung Kuo years Supervisor Brother-in-law Ph.D. in Physics, New Hampshire University Long-Su Lin Chairman of Taishin Asset Management,supervisor of TECO image Taishin Financial Holding Co., Ltd. Three Director 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 System Co.,ltd., Department of Accounting and Statistics, National Chengchi Noe3 Nil Nil Nil Representative: Jeffrey T.S. Wu years University Chairman, Taiwan Cooperative Bank, Bank of Taiwan Banking department, Taishin Financial Holding Co., Ltd. Three National Chengchi University Independent director, First Bank, Chief secretary Director 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Note 4 Nil Nil Nil Representative: Teh-Nan Hsu years of the Ministry of Finance Master, public administration, National Chengchi U. Master, economics, San Francisco U. Independent director, First Bank, Chief secretary of the Ministry of Finance Taishin Financial Holding Co., Ltd. Three Director 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Master, public administration, National Chengchi U. Note 5 Nil Nil Nil Representative: Richard R.C. Liu years Master, economics, San Francisco U. Taishin Financial Holding Co., Ltd. Three Standing Supervisor, Taishin Financial Holding, Taishin Bank Director 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Note 6 Nil Nil Nil Representative:Chu-Chan Wang years Pharmaceutical department, Kaohsiung Medical college Taishin Financial Holding Co., Ltd. Three Supervisor , Taishin Bank Chairman, NSEnergy Director 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Note 7 Nil Nil Nil Representative: Shang-Pin Wu years PhD in Applied Chemistry, Keio University (Japan) Independent Taishin Financial Holding Co., Ltd. Three Minister of Ministry of Economic Affairs:Chairman of TRITRA 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Note 8 Nil Nil Nil director Representative: Chih-Kang Wang years PhD in Marketing, Texas A&M University Chairman, Taiwan Power Co. Independent Taishin Financial Holding Co., Ltd. Three 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Dean, College of Management at National Taiwan University Note 9 Nil Nil Nil director Representative: Neng-Pai Lin years PhD in Business, Ohio State University Standing director, Bank of Taiwan Standing Taishin Financial Holding Co., Ltd. Three 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Director, graduate school of accounting, National Taiwan University, Doctor of Note 10 Nil Nil Nil Supervisor Representative: Yang-Tzong Tsay years business management and commerce, U. of Maryland Thomas T.L. Taishin Financial Holding Co., Ltd. Three Director, Taishin Financial Holding, Taishin Bank. Chairman Brother-in-law Supervisor 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Note 11 Wu Representative: Long-Su Lin years Ph.D. in Chemistry, Virginia State University, Director Brother-in-law Kuo Ruisong Taishin Financial Holding Co., Ltd. Three Standing Supervisor, Taishin Financial Holding, Director, Chang Hwa Bank Supervisor 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Note 12 Nil Nil Nil Representative:Toney Chen years Department of accounting, National cheng Chi University

Note 1: Representative Thomas Wu, is concurrently acting as Chairman of Taishin Financial Holding, Chairman of Taishin Charity Foundation, Director of Taishin Real Estate 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, Director of Yung-Kuang, Supervisor of Shin Kong Agriculture & Animal husbandry, Supervisor of Shin Kong Hae-Yang, Supervisor of Shin Kong Chao Feng ,Supervisor of Shin-Shi Enterprise, Supervisor of Chin-Shan Investment, Director of Beitou Hotel. Note 2: Representative Jui-Sung Kuo, is concurrently acting as Chairman of Jui-Fang Co.,, Chairman of Hsinan Investment, Director of Taishin Financial Holding, Director of An-Long Enterprise, Director of TECO Image Systems, Director of Cheng Xin Development, Director of Shi-Ho Digital Technology, Director of Century Development, Director of Shinhaigas Co., Ltd Supervisor of Taiwan Shin Kong Security, Supervisor of SerComm, Supervisor of Chun-Hsiang Enterprise Consultants. Note 3: Representative Jeffery T.S. Wu is concurrently the Chairman of Taishin Venture Capital Investment, Chairman of Taishin Asset Management, Director of Taishin charity foundation, Director of Taishin Real Estate Management Co. Ltd., Director of Dong An Asset Development & Management Co., Ltd., Director of Taiwan Motorsports & Recreation, Director of First International Telecom (under restructuring), Supervisor of Taishin Securities, Supervisor of Taishin Insurance Agency, Supervisor of Taishin Insurance Brokers Co., Ltd., and Supervisor of TECO Image System Co., Ltd. Note 4: Representative Hsu, Teh-Nan, no other job at the bank and other companies. Note 5: Representative Richard R.C. Liu, no other job at the bank and other companies. Note 6: 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 Holding, Supervisor of Tai-Wa Co.

12 III.Corporate Governance Report 03

March 31, 2013 Stake of spouse Spouse or relatives within second-degree Shareholding Shareholding in the Current shareholding and offspring before kinship who serve managerial posts or seats upon election name of others Current Date of Date of age of majority jobs with of board directors/ supervisors of the bank Title Name getting Term first getting Share Share Education and working experience the bank Amount Share Amount Share elected elected Amount of of Amount of of and other of of stake of of stake title name Relationship shares stake shares stake companies shares (%) shares (%) (%) (%) Taishin Financial Holding Co., Ltd. Three Director, First Bank, Supervisor, Hua Nan Bank Director Kuo Ruisong Brother-in-law Chairman 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Note 1 Representative: Thomas T.L. Wu years MBA, University of California, LA supervisor Lin Longshi Brother-in-law Director, International Bank of Taipei Professor, department of information Thomas Taishin Financial Holding Co., Ltd. Three Chairman Brother-in-law Director 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 science, Business School, Soochow University Note 2 T.L. Wu Representative: Jui-Sung Kuo years Supervisor Brother-in-law Ph.D. in Physics, New Hampshire University Long-Su Lin Chairman of Taishin Asset Management,supervisor of TECO image Taishin Financial Holding Co., Ltd. Three Director 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 System Co.,ltd., Department of Accounting and Statistics, National Chengchi Noe3 Nil Nil Nil Representative: Jeffrey T.S. Wu years University Chairman, Taiwan Cooperative Bank, Bank of Taiwan Banking department, Taishin Financial Holding Co., Ltd. Three National Chengchi University Independent director, First Bank, Chief secretary Director 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Note 4 Nil Nil Nil Representative: Teh-Nan Hsu years of the Ministry of Finance Master, public administration, National Chengchi U. Master, economics, San Francisco U. Independent director, First Bank, Chief secretary of the Ministry of Finance Taishin Financial Holding Co., Ltd. Three Director 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Master, public administration, National Chengchi U. Note 5 Nil Nil Nil Representative: Richard R.C. Liu years Master, economics, San Francisco U. Taishin Financial Holding Co., Ltd. Three Standing Supervisor, Taishin Financial Holding, Taishin Bank Director 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Note 6 Nil Nil Nil Representative:Chu-Chan Wang years Pharmaceutical department, Kaohsiung Medical college Taishin Financial Holding Co., Ltd. Three Supervisor , Taishin Bank Chairman, NSEnergy Director 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Note 7 Nil Nil Nil Representative: Shang-Pin Wu years PhD in Applied Chemistry, Keio University (Japan) Independent Taishin Financial Holding Co., Ltd. Three Minister of Ministry of Economic Affairs:Chairman of TRITRA 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Note 8 Nil Nil Nil director Representative: Chih-Kang Wang years PhD in Marketing, Texas A&M University Chairman, Taiwan Power Co. Independent Taishin Financial Holding Co., Ltd. Three 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Dean, College of Management at National Taiwan University Note 9 Nil Nil Nil director Representative: Neng-Pai Lin years PhD in Business, Ohio State University Standing director, Bank of Taiwan Standing Taishin Financial Holding Co., Ltd. Three 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Director, graduate school of accounting, National Taiwan University, Doctor of Note 10 Nil Nil Nil Supervisor Representative: Yang-Tzong Tsay years business management and commerce, U. of Maryland Thomas T.L. Taishin Financial Holding Co., Ltd. Three Director, Taishin Financial Holding, Taishin Bank. Chairman Brother-in-law Supervisor 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Note 11 Wu Representative: Long-Su Lin years Ph.D. in Chemistry, Virginia State University, Director Brother-in-law Kuo Ruisong Taishin Financial Holding Co., Ltd. Three Standing Supervisor, Taishin Financial Holding, Director, Chang Hwa Bank Supervisor 2010.06.18 2002.01.28 4,915,752,571 100 4,915,752,571 100 0 0 0 0 Note 12 Nil Nil Nil Representative:Toney Chen years Department of accounting, National cheng Chi University

Note7: 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, Director of Ho- Cheng Co., Director of Global Securities Finance, Director of Chang-Fong Transportation, Director of TNS Logistics International. 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 Holding, Independent director of Nan Ya Plastics, Independent director of Formosa Sumco Technology, Director of Straits Exchange Foundation, Executive commissioner of General Association of Chinese Culture. Note 9: Neng-Pai Lin, is concurrently acting as Independent director of Taishin Financial Holding, Independent director of Darfon Electronics, independent director RDC Semiconductor,Director of TECO Image Systems Note 10: Representative Tsay, Yang-Tzon, also an independent director of E-Ton solar tech, and obipharma Co., Ltd Standing Supervisor of Taishin Financial Holding Co., and supervisor of Kingpak Technology, and SZS and Supervisor of Coremax Corp. Note 11: Representative Long-Su Lin, is concurrently acting as Chairman of Ennead Inc., Chairman of Ennead Leasing, 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 , Director of music dake, Director of Ennead Agriculture & Animal husbandry, Supervisor of Taishin Financial Holding, Supervisor of KONIG FOODS, Supervisor of Tai-Li-Ya Development. Note 12: Representative Toney Chen is currently acting as Chairman of Taishin Leasing and Financing Co.,Ltd

13 2. Major shareholders of institutional shareholders

April 23, 2013 Names of Institutional Major shareholders of institutional shareholders shareholders Cathay Life Insurance Co., Ltd.. 3.40% Taishin Leasing & Financing Co., Ltd.2.85% Ching-Wei Co., Ltd. 2.30% Vanguard Emerging Markets Stock Index Fund, A Series Of Vanguard International Equity Index Funds 1.76% Taishin Financial Holding Co., Ltd Pan City Co., Ltd.1.38% TASCO Chemical Corporation 1.23% Dimensional Emerging Markets Value Fund 1.22% Shinkong Synthetic Fibers Corporation 1.19% Tong Shan Investment Co., Ltd. 1.17% Farglory Life Insurance Co., Ltd. 1.00%

3. Major Shareholders of Major Institutional Shareholders

April 23, 2013 Names of Institutional Major Shareholders of Institutional Shareholders Shareholders Cathay Life Insurance Co., Ltd. Cathay Financial Holding 100.00% Pan Asian Plastics Corp - 30.00%, Yun Teh Industrial Co., Ltd. - 24.50%, Ruey-Shin Taishin Leasing & Financing Enterprise Co., Ltd. - 19.00%, Ruey-Shiang Invest Co., Ltd. - 5.50%, Jia-Jia Invest Co., Co., Ltd. Ltd. - 4.93%, Chia-Chia Invest Co., Ltd. - 4.20%, Tung Rung Invest Co., Ltd. - 4.20%, Chang-Sheng Invest Co., Ltd. - 4.20%, Yuan-Sheng Invest Co., Ltd. - 3.47% Ching-Wei Co., Ltd. Thomas T.L.Wu 96.58% ,Peng ,Hsueh-Fen 3.42% Vanguard Emerging Markets Stock Index Fund, A Series Of Not applicable Vanguard International Equity Index Funds Minyuan enterprise 49.20%;Fengpu investment 47.40%;Wang Wei-ren 1.70%;wang wei- Pan City Co., Ltd. hao 1.70% Taiho investment - 58.07%, He-Cheng Invest Co., Ltd. - 19.55%, Fong-He Development Co., Ltd. - 9.11%, Da-Jan Invest Development Co., Ltd. - 1.61%, He-Fong Invest Co., Ltd. TASCO Chemical Corporation - 1.07%, Fong-He Invest Co., Ltd. - 0.99%, Wu Cheng-Ching - 0.99%, Wu Shang-Bin - 0.99%, Wu Pei-Jyuan - 0.95%, Wu Pei-Rong - 0.93% Dimensional Emerging Markets Not applicable Value Fund Shin Kong Company Ltd. - 4.79%, Shin Kong Recreation Co., Ltd. - 4.28%, Shin-Sheng Invest Co., Ltd. - 4.16%, Shinkong Textile Co., Ltd. - 3.10%, Shin Kong Life Insurance Co., Shinkong Synthetic Fibers Ltd. - 2.94%, Shinkong Insurance Co., Ltd. - 2.79%, Julian Invest Co., Ltd. - 2.18%, Toray Corporation Industries Inc. - 2.02%, Ruey-Shin Enterprise Co., Ltd. - 1.57%, CitiBank Taiwan in its Capacity as Master Custodian of Dimensional Emerging Markets Value Fund - 1.48% Ruey-Shin Enterprise Co., Ltd. - 78.75%, Wu Guei-Lan - 3.125%, Eugene Wu - 3.125%, Tong Shan Investment Co., Anthony Wu - 3.125%, Thomas T.L. Wu - 3.125%, Hsu Hsien-Hsien - 2.50%, Sun Ruo- Ltd. Nan - 2.50%, Ho Hsing-Hua - 1.875%, Eric Wu - 1.875% Xin-Yu Inv. Co., Ltd. - 18.85%, Fareast Land Development Co., Ltd. - 12.38%, Yuan-Jian Inv. Co., Ltd. - 8.84%, Zhao Teng-Xiong - 8.42%, Rui-Qi Intl. Investment Co., Ltd. - 6.81%, Farglory Life Insurance Co., Ha-Fo Intl. Investment Co., Ltd. - 6.66%, Far Glory International Investment Co., Ltd. - Ltd. 6.38%, Yeh Chun-Yao - 5.91%, Zhao Yu-Nyu - 5.73%, Dong-Yuan Construction Co., Ltd. - 5.59%

14 III.Corporate Governance Report 03

4. Information on Board directors and supervisors (II)

March 31, 2013 possession of over five-year working experience and the Qualifications Compliance with independence ( Note) Number following professional qualifications of other Instructor or Judge, prosecutor, Working companies higher teaching lawyers, public experience in of public positions at college certified commerce, offering departments of accountant, or legal affairs, where commerce, legal other finance, the board 1 2 3 4 5 6 7 8 9 10 affairs, finance, professionals accounting, director or accounting, or or technicians with or other fields supervisor others related national licenses related to serves as to the bank’s related to the the bank’s independent Name operation bank’s operation operation director Thomas T.L. Wu P P P 0 Jui-Sung Kuo P P P P P 0 Jeffrey T.S. Wu P P P P P P P P P 0 Teh-Nan Hsu P P P P P P P 0 Richard R.C.Liu P P P P P P P P P P P 0 Chu-Chan Wang P P P P P P P 0 Shang-Pin Wu P P P P P P P P 0 Chih-Kang Wang P P P P P P P P P 3 Neng-Pai Lin P P P P P P P P P 3 Yang-Tzong Tasy P P P P P P P P P 2 Long-Su Lin P P P P P 0 Toney Chen P P P P P P P P P 0

Note : 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 an 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; however, this excludes remuneration committee members who exercise their duties in accordance with Article 7 of Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter. (8) Not a spouse 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.

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

March 31 , 2013 Stake of spouse Spouse or relatives Shareholding and offspring within second-degree Shareholding in the name of before age of kinship who serve Date of election others Major education Current jobs with other Title Name majority managerial posts (appointment) (experience) companies Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Chairman of Dah An Leasing , Director of Taishin President Chief Executive Venture Capital Investment, and Chief Officer of Taishin Taishin Leasing and Executive Larry Bank Graduate Financing(China) Co.,Ltd, Officer, 2012.03.21 0 0 0 0 0 0 Chung School of Economics, Director of taishin financial Wholesale National Taiwan &leasing (Tianjin) Co, Banking University Director of Dah Chung Bills Group Finance Co Director of TAMCO Director of Taishin Financial Chief Vice President of Holding Insurance Brokers Executive First TrustDepartment Co., Ltd, Taishin Insurance Officer, Spike, 2011.01.21 0 0 0 0 0 0 of Economics, Brokers Co.,Ltd, Taishin Retail C.W. Wu National Taiwan Securities,Taishin Insurance Banking University Agency, Lienan Service and Group metro-consultant Co.,Ltd. Vice President of Taishin Bank. Department Chief Y.H. 2012.06.15 0 0 0 0 0 0 of Electronic Auditor Wang Engineering , National Taiwan University Vice President Chief Accounting Officer of Senior of Royal Bank of Taishin Holding Co. Ann Vice 2010.08.13 0 0 0 0 0 0 Scotland MBA, Supervisor of Taishin Cheng Nil President University of New Marketing Consultant and Haven Taishin Securities. Chief Financial Senior Officer & Senior Melody Senior Vice President of Vice 2009.07.01 0 0 0 0 0 0 Vice President of Chien Taishin Financial Holding. President KBC. MBA, National Chengchi University Vice President of China Development Senior Johnny Industrial Bank. Vice 2009.07.14 0 0 0 0 0 0 Liu MBA, Massachusetts President Institute Of Technology Director of Taishin Investment Trust, Senior Vice President Yungsheng Trade, and Senior of ChinaTrust Bank C Chinjui International Vice Sam Lin 2008.12.11 0 0 0 0 0 0 Master of Accounting, Financial Consulting President Claremont McKenna Supervisor Kai-Rui Asset Management and Consultant Senior Vice President Senior of Taishin Bank Amy director of Taishin Marketing Vice 2012.01.01 0 0 0 0 0 0 Department of Law, Hsia Consulting. President Chinese Culture University

16 III.Corporate Governance Report 03

Vice President of KGI Vice The University Of Chief Risk Officer of Taishin Jey Chen 2011.06.03 0 0 0 0 0 0 President Texas At Austin, Financial Holding Doctor of Philosophy

Director of Taishin Insurance Nil Agency , Dah An Leasing Vice President of and Taishin Investment Taishin Bank Trust and Taishin Financial Vice Shawn Department of 2011.03.01 0 0 0 0 0 0 Holding Insurance Brokers. President C.L Teng Economics, National Supervisor of Taishin Chung Hsing Venture Capital Imvestment University and Taishin Asset Management . Vice President of Vice Chao-Min Taishin Bank Vice President of Taishin 2011.04.01 0 0 0 0 0 0 President Lin Department of Law, Financial Holding Soochow University Vice President of Taishin Bank Vice Jai, Lu- Vice President of Taishin 2011.09.23 0 0 0 0 0 0 Department of Law, President June Financial Holding National Taiwan University Assistant Vice President of Citi Bank Vice Chris Vice President of Taishin 2009.11.18 0 0 0 0 0 0 MBA, University President Chang Financial Holding of California, Los Angeles, Vice President of Taishin Bank, Vice Josephine 2009.02.01 0 0 0 0 0 0 Department of - President Yang History, National Taiwan University

17 Stake of spouse Spouse or relatives Shareholding and offspring within second-degree Shareholding in the name of before age of kinship who serve Date of election others Major education Current jobs with other Title Name majority managerial posts (appointment) (experience) companies Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Supervisor of Hsiang Vice President of Chao Investment, Weifeng Taishin Financial Investment, Chiahao Vice David 2009.11.18 0 0 0 0 0 0 Holding MBA, Investment, Yiheng President Chang National Chung Hsing Investment, Chingwei University Co.,Ltd. Vice President of Taishin Financial Holding Vice President of Vice Bermuda Investment Helen Liu 2008.07.28 0 0 0 0 0 0 President MBA, University Of Wisconsin-Madison, Vice President of Taishin Bank, Vice Jerry Department of 2008.12.11 0 0 0 0 0 0 President Yang International Trade,Tamkang University Vice President of Taishin Bank University of Texas Vice Li-Tzu at Dallas, Master Supervisor of Taishin 2011.03.01 0 0 0 0 0 0 President Chen of Science in Investment Trust Management and Administration Sciences Vice President of Vice Phyllis Taishin Bank 2011.06.03 0 0 0 0 0 0 President Wang MBA, Kansas State University Nil Manager of United Overseas Bank Vice Christy Western Michigan 2012.03.16 0 0 0 0 0 0 President Shyy University, Master of Science in Accounting Vice President of Taishin Bank Vice Robin 2012.01.01 0 0 0 0 0 0 Department of President Shieh Accounting, National ChengChi University Vice President of Taishin Bank Shang- Vice University of Texas, Ming 2012.01.01 0 0 0 0 0 0 President El Paso, U.S.A., Tsai Master of Business Administration Senior Manager, Royal Bank of Vice John Canada, Taipei 2012.02.17 0 0 0 0 0 0 President Chiu Branch. MAB, University of Dallas, U.S.A.

Vice President of Taishin Bank Master Vice Pei-Che Supervisor of Taishin 2012.08.17 0 0 0 0 0 0 of Information President Tseng Secureties Investment Management, Kainan Advisory Co.,Ltd. University

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Manager of Taishin Branch Chih-Chieh Bank, Department 2012.01.01 0 0 0 0 0 0 Manager Chang of Finance, National ChengChi University

Wen- Manager of HSBC, Branch Hsiang 2012.01.01 0 0 0 0 0 0 Department of BA, Manager Kuo Soochow University Manager of Taishin Chi- Bank, Department Branch Cheng 2012.01.01 0 0 0 0 0 0 of Machinery Manager Fan engineering, Minhsin Industrial College Manager of Taishin Bank Department of Branch Yu-Ching Financial, Southern 2012.01.01 0 0 0 0 0 0 Manager Chen Taiwan University of Science and Technology

Manager of Chun- TaishinBank, Branch Hung 2012.01.01 0 0 0 0 0 0 Department of Manager Lu Economics, Chinese Culture University Manager of China Branch Chien-Liang Leasing ,Department Director of Ri-Chang 2012.01.01 0 0 0 0 0 0 Manager Cheng of BA, National Electronics, Co., Ltd. ChungHsin University

19 Stake of spouse Spouse or relatives Shareholding and offspring within second-degree Shareholding in the name of before age of kinship who serve Date of election others Major education Current jobs with other Title Name majority managerial posts (appointment) (experience) companies Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Manager of Taishin Branch Pei-Shi Bank, Department of 2012.01.01 0 0 0 0 0 0 Manager Su Economics, Soochow University Manager of Taishin Branch Shu-Hua Bank, Department 2011.12.09 0 0 0 0 0 0 Manager Chen of BA, Aletheia University Manager of Taishin Branch Po-Yu Bank , Department 2011.08.26 0 0 0 0 0 0 Manager Huang of Law, Soochow University Manager of Taishin Bank, Department of Hsiao- Branch Accounting, Southern Chuan 2011.08.26 0 0 0 0 0 0 Manager Taiwan University Chiu of Science and Technology Manager of EnTie Bank, Department Branch Chi-Sun 2011.08.05 0 0 0 0 0 0 of Cooperation Manager Tuan Economics, FengChia University Manger of Taishin Hsin- Bank, Department of Branch Hung 2011.07.01 0 0 0 0 0 0 International trade, Manager Yeh Lunghua Business College Manager of Chinatrust, Nil Branch Shu-Hui 2011.07.01 0 0 0 0 0 0 Department of BA, Manager Kuo Fu Jen Catholic University Manager of Taishin Yung- Branch Bank, Department Chieh 2011.07.01 0 0 0 0 0 0 Manager of BA, FengChia Chang University Manager of Taishin Branch Pai-Shih 2011.07.01 0 0 0 0 0 0 Bank, MBA, Chinese Manager Lee Culture University Manager of Taishin Shih- Branch Bank, Department of Yang 2011.07.01 0 0 0 0 0 0 Manager Finance, Tamkang Chien University Manager of Chinatrust, Branch Shou-Te 2011.07.01 0 0 0 0 0 0 Department of Manager Weng Finance, Tamkang University Manager of Taishin Ching- Branch Bank, Department Ching 2011.07.01 0 0 0 0 0 0 Manager of BA, Chungyou Peng TechnologyCollege Manager of Taishin Bank, Department of Hui- Branch international trade, Ching 2011.07.01 0 0 0 0 0 0 Manager Fuhsing Industrial Teng and Commercial College

20 III.Corporate Governance Report 03

Stake of spouse Spouse or relatives Shareholding and offspring within second-degree Shareholding in the name of before age of kinship who serve Date of election others Major education Current jobs with other Title Name majority managerial posts (appointment) (experience) companies Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Manger of Taishin Ming- Bank, Chemical Branch Chu 2011.06.28 0 0 0 0 0 0 Department of Manager Hsu engineering, Shude College Manager of Taishin Branch Yu-Lin Bank, Department 2011.06.10 0 0 0 0 0 0 Manager Cho of BA, Taichung Business College Manager of Taishin Yu- Branch Bank, Department Chang 2011.06.10 0 0 0 0 0 0 Manager of Mathematics, Chang Soochow University Manger of JihSun Yuan Branch Bank , Department -Liang 2011.06.10 0 0 0 0 0 0 Manager of BA, Tamkang Liu University Manager of Taishin Bank, Department Branch Fai-Yean 2011.04.18 0 0 0 0 0 0 of Accounting and Manager Yu Statistics, Ming Chuan college Manager of Taishin Branch Jui-Pei Bank, Department of 2011.04.18 0 0 0 0 0 0 Manager Hung Finance, Shih Chien University Manager of Taishin Chih- Bank, Chemical Branch Chiang 2011.04.01 0 0 0 0 0 0 Department of Manager Chang engineering, Eastern Nil College Manager of Taishin Branch Yi-Fang Bank , Department 2011.04.01 0 0 0 0 0 0 Manager Wang of Fu Jen Catholic University Manager of Taishin Bank, Easter Branch Gina 2011.04.01 0 0 0 0 0 0 Michigan University, Manager Shen Master of Business Administration

Assistant Vice President of Far Chu- Branch Eastern Investment Chun 2011.04.01 0 0 0 0 0 0 Manager Trust, Deutsche Yeh Bank MBA, YuanZe University Manager of Taishin Branch Yu-Fen Bank, Department of 2011.04.01 0 0 0 0 0 0 Manager Cho Economics, Chinese Culture University Manager of Taishin Bank, Department Branch Shu-Fang 2011.04.01 0 0 0 0 0 0 of Industrial Manager Chou management, Tamsui College Chi- Manager of Taishin Branch Hsiang 2011.04.01 0 0 0 0 0 0 Bank, MBA, Manager Lai FengChia University

21 Stake of spouse Spouse or relatives Shareholding and offspring within second-degree Shareholding in the name of before age of kinship who serve Date of election others Major education Current jobs with other Title Name majority managerial posts (appointment) (experience) companies Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Assistant Vice President, Feng- Branch ChinaTrust, Ching 2011.04.01 0 0 0 0 0 0 Manager Department of BA, Tai National Open University

Manager of ChinaTrust , Branch Yu-Wen 2011.04.01 0 0 0 0 0 0 Department of foreign Manager Lin trade, Chiaokuang Business College Manager of Taishin Chao- Branch Bank, Department of Peng 2011.01.01 0 0 0 0 0 0 Manager BA, Chinese Culture Liu University Manager of Taishin Bank, Chin- Graduate School Branch Tang 2011.01.01 0 0 0 0 0 0 of International Manager Chang Economics, National Chung Cheng University Manager of Taishin Hung- Branch Bank, Department Jung 2010.11.01 0 0 0 0 0 0 Manager of Tourism , Chinese Tsao Culture University Manager of Taishin Bank, Department Nil Branch Li-Hua of Accounting and 2010.09.01 0 0 0 0 0 0 Manager Li Statistics, Hsing Wu Institute of Technology Manager of Taishin Branch Yu-Nhng Bank, Department 2010.09.01 0 0 0 0 0 0 Manager Tseng of BA, Soochow University Manager of TaChong Bank, Department Branch Sandy 2010.08.30 0 0 0 0 0 0 of Accounting and Manager Wang Statistics, MingChuan University Manager of Taishin Branch Ling-Ling Bank, Department of 2010.08.01 0 0 0 0 0 0 Manager Tung Economics, National Taiwan University Manager of ABN Chen- AMRO, Department Branch Yuan 2010.05.17 0 0 0 0 0 0 of Cooperation Manager Lee Economics, Tamkang University

Manager of Taishin Bank, General Branch Yu-Ni 2010.04.16 0 0 0 0 0 0 Commerce Division, Manager Chen National ChuTung Senior High School

22 III.Corporate Governance Report 03

Stake of spouse Spouse or relatives Shareholding and offspring within second-degree Shareholding in the name of before age of kinship who serve Date of election others Major education Current jobs with other Title Name majority managerial posts (appointment) (experience) companies Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Manager of Taishin Bank, Department of Branch Wei-Jye 2010.04.16 0 0 0 0 0 0 International Trade, Manager Chang Ta Hwa Institute of Technology Assistant Vice President of Branch Kuan-Ta TaiNan Securities 2010.02.01 0 0 0 0 0 0 Director of Yuya Co. Manager Wang Department of Bank Insurance, FengChia University Hsiu- Manager of Taishin Branch Chuan 2010.02.01 0 0 0 0 0 0 Bank, MBA, YuanZe Manager Lin University Manager of Taishin Chun- Branch Bank, Department Min 2010.02.01 0 0 0 0 0 0 Manager of BA, Chungyou Chang Business College Manger of Taishin Bank, Department Branch Nelson 2010.02.01 0 0 0 0 0 0 of International Manager Kuo Trade ,Providence University Manager, Hsinchu 10th Credit Jui- Branch Cooperative, Chueh 2009.10.01 0 0 0 0 0 0 Manager Accounting section, Tseng Hsinchu Kuangfu Nil Senior High Manager of Taishin Bank, Department of Financial Branch Hsin-Hua management, 2009.09.01 0 0 0 0 0 0 Manager Hsieh National Kaohsiung First University of Science and Technology Manager of Taishin Branch Steven Bank, Department of 2009.09.01 0 0 0 0 0 0 Manager Lin Law, Fu Jen Catholic University Manager of Taishin Bank, Accounting and Branch Chen-Jui 2009.08.01 0 0 0 0 0 0 statistics section, Manager Yu Lingtung Business College Manager of Taishin Hsin- Branch Bank, Department Chan 2009.06.01 0 0 0 0 0 0 Manager of BA, MingChuan Wu University Manager of Taishin Bank, Georgia Branch Shihta 2009.06.01 0 0 0 0 0 0 State University, Manager Shu Master of Business Administration

23 Stake of spouse Spouse or relatives Shareholding and offspring within second-degree Shareholding in the name of before age of kinship who serve Date of election others Major education Current jobs with other Title Name majority managerial posts (appointment) (experience) companies Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Manager of Taishin Bank, Department of Applied science Branch Yi-Ting department, 2009.03.01 0 0 0 0 0 0 Manager Lin correspondence school, Taichung Technological College Manager of Taishin Chih- Branch Bank, Department of Yuan 2008.12.05 0 0 0 0 0 0 Manager management, Chiayi Kang University Manager of Standard Hua- Chartered Bank, Branch Nung 2008.12.05 0 0 0 0 0 0 Department of Manager Hung BA, MingChuan University Manager of Taishin Bank, Financial Gung- Branch department, National Hsiang 2008.11.14 0 0 0 0 0 0 Manager Kaohsiung First Huang University of Science and Technology Manager of Taishin Branch Mei-O Bank, Section of 2008.09.01 0 0 0 0 0 0 Manager Cheng foreign trade, Taiwan Business College Manager of Taishin Bank, Department Branch Ya-Fang 2008.06.01 0 0 0 0 0 0 of foreign trade, Nil Manager Yu Takming Business College Manager of Taishin Branch Pei-Ming Bank, Department 2008.04.25 0 0 0 0 0 0 Manager Lee of Law,Soochow University Manager of Taishin Bank, Department of Financial, advanced Branch Li-Hung 2008.04.25 0 0 0 0 0 0 study school, Manager Liu Kaohsiung University of Applied Science and Technology Manager of Taishin Branch Fu-Chu Bank, Department 2008.04.25 0 0 0 0 0 0 Manager Wang of Finance, Aletheia University Manager of Taishin Bank, Division of Branch Shine 2008.04.25 0 0 0 0 0 0 Finance, National Manager Pan Taipei College of Business Senior deputy manager, Hualien Business Bank, Branch Pei-Jan 2008.04.25 0 0 0 0 0 0 Department of Manager Chuang electrical engineering department, Fuhsing Business College

24 III.Corporate Governance Report 03

Manager of Taishin Hua- Bank, Department Branch Lung 2007.12.28 0 0 0 0 0 0 of Accounting, Manager Kao National ChungHsing Nil University Vice President of UBS , The Bernard Branch Kuo-Jen 2007.12.28 0 0 0 0 0 0 M. Baruch College, Manager Li U.S.A., Master of Science Manager of Taishin Branch Su-Hung Bank, Department of 2007.12.28 0 0 0 0 0 0 Manager Liu Financial Tax, MeiHo colleague Manager of Taishin Branch Grace Bank, Business 2007.11.02 0 0 0 0 0 0 Manager Chen section, Nanying Business School Manager of Taishin Wen- Branch Bank, Department Cheng 2007.11.02 0 0 0 0 0 0 Manager of BA, Tamkang Chang University Assistant Vice President of Taishin Bank, Accounting Bao- Branch and statistics section, Huey 2007.10.12 0 0 0 0 0 0 Manager correspondence Huang school, National Chengkung University

25 Stake of spouse Spouse or relatives Shareholding and offspring within second-degree Shareholding in the name of before age of kinship who serve Date of election others Major education Current jobs with other Title Name majority managerial posts (appointment) (experience) companies Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake

Manager of Taishin Bank, Department Yu- Branch of Banking and Hsiu 2013.03.15 0 0 0 0 0 0 Manager Insurance, National Lin Kaohsiung University of Applied Sciences

Manager of Taishin Wei- Branch Bank, Department of Feng 2013.03.15 0 0 0 0 0 0 Manager Finance, Ming Chuan Hsu University Manager of Taishin Bank, Department of Branch Ju-Yin 2013.03.01 0 0 0 0 0 0 Economics, National Manager Tsai Chung Hsing University Manager of Taishin Yueh- Bank, Department Branch Yun 2013.03.01 0 0 0 0 0 0 of International Manager Lee Trade, Ming Chuan University Vice President of Taishin Bank, Branch Ahsien 2013.03.01 0 0 0 0 0 0 Master of Finance, Manager Chang National Taipei University Assistant Vice Pau- President of Taishin Branch Chung 2013.03.01 0 0 0 0 0 0 Bank, Renssellaer Manager Hom Polytechnic Institute, Nil U.S.A.MBA Assistant Vice President of Branch Jui-Ren Taishin Bank, 2013.03.01 0 0 0 0 0 0 Manager Day Stevens Institute of Technology, Master of Science Management Manager of Taishin Bank, Department of Branch Mi-Jr General Commerce, 2013.01.01 0 0 0 0 0 0 Manager Shiu Yudah Vocational High School of Commerce Manager of Taishin Branch Yi-Chen Bank, Department of 2013.01.01 0 0 0 0 0 0 Manager Wang Accounting, Soochow University

Assistant Vice President of Taishin Chung- Branch Bank, Department Hsien 2013.01.01 0 0 0 0 0 0 Manager of Architecture, Yu National Cheng Kung University Manager of Taishin Chien- Bank, Department Branch Hsing 2013.01.01 0 0 0 0 0 0 of Business Manager Lee Administration, Yu Da University

26 III.Corporate Governance Report 03

Manager of Taishin Bank, Department Chien- Branch of Electrical Wen 2012.10.05 0 0 0 0 0 0 Manager Engineering, National Yang Chin-Yi University of Technology Vice President of Taishin Bank, Department Branch Mei-Ling 2012.09.14 0 0 0 0 0 0 of Business Manager Chang Administration, National Chung Hsing University Manager of Taishin Bank, Department Branch Shih-Wei of Finance and 2012.08.17 0 0 0 0 0 0 Manager Wu Taxation, JinWen University of Science & Technology Manager of Taishin Bank, Master of Branch Ming-Yi 2012.08.17 0 0 0 0 0 0 Commerce, National Manager Chou Kaohsiung University of Applied Sciences Assistant Vice Nil President of Taishin Branch Alan Bank, Department of 2012.08.17 0 0 0 0 0 0 Manager Chung International Trade, Fu Jen Catholic University Manager of Taishin Bank, Department of Shipping & Branch Pei-Fen 2012.05.01 0 0 0 0 0 0 Transportation Manager Wu Management, National Taiwan Ocean University

Manager of Taishin Tung- Bank, Master Branch Yuan 2012.05.01 0 0 0 0 0 0 of Business Manager Huang Administration, Feng Chia University

Assistant vice president of taishin bank Master of Branch Jui-Hui 2012.07.01 0 0 0 0 0 0 Regional Economics, Manager Chen Nankai University, People's Republic of China Assistant vice president of taishin Branch Shu-Ling 2011.03.04 0 0 0 0 0 0 bank Department of Manager Tsao Banking, National Chengchi University

27 c. Compensations for board directors, supervisors, president, and vice presidents 1. compensations for board director (including independent directors)

Base date: Dec 31, 2012; Unit: NT$1,000

Compensations for directors Remuneration as an employee Share of combination Share of combination Amount of shares of A.B.C.D.E.F Job-leaving Compensations of A,B,C and D in Job-leaving Amount of Expende for Salary,bonus,and for employee and G in compensation(A) and retirement from distribution after-tax net profit and retirement Employee dividend-sharing(G) restricted stock business excution(D) special allowance(E) warrants after-tax net profit payment(B) of earnings(C) payment (F) units Compensations (H) from invested Title Name All companies other All All All All All All All All All All The bank Companies in the than subsidiaries Companies Companies Companies Companies Companies Companies Companies Companies Companies Companies The The The The The The The financial statement The The The in the in the in the in the in the in the in the in the in the in the bank bank bank bank bank bank bank bank bank bank financial financial financial financial financial financial financial Cash Stock Cash Stock financial financial financial statement statement statement statement statement statement statement dividend dividend dividend dividend statement statement statement

Chairman Thomas T.L.Wu

Director Chu-Chan Wang

Director Shang-Pin Wu

Director Teh-Nan Hsu

Director Jui-Sung Kuo 22,657 22,751 0 0 0 0 5,698 5,708 0.33% 0.33% 1,422 1,422 0 0 0 0 0 0 0 0 0 0 0.34% 0.35% 138 Director Richard R.C. Liu Jeffrey T.S. Wu Director (2012.11.23 on board) Independent Chih-Kang Wang Director Independent Neng-Pai Lin Director Note 1: Compensation for chauffeurs reaches NT$2,297,000. Note 2: No actual collection of job-leaving or retirement payment.

28 III.Corporate Governance Report 03

c. Compensations for board directors, supervisors, president, and vice presidents 1. compensations for board director (including independent directors)

Base date: Dec 31, 2012; Unit: NT$1,000

Chairman Thomas T.L.Wu

Director Chu-Chan Wang

Director Shang-Pin Wu

Director Teh-Nan Hsu

29 Compensation brackets Base date: Dec 31, 2012 Names of directors The combined compensation of The combined compensation of (A+B+C+D) (A+B+C+D+E+F+G) Compensation brackets of board directors All companies in All companies in The company the consolidated The company the consolidated financial statement financial statement Chu-Chan Wang/ Chu-Chan Wang/ Chu-Chan Wang/ Chu-Chan Wang/ Chih-Kang Wang / Chih-Kang Wang / Chih-Kang Wang / Chih-Kang Wang / Shang-Pin Wu / Shang-Pin Wu / Shang-Pin Wu / Shang-Pin Wu / Lower than NT$2 M. Jeffrey T.S. Wu / Jeffrey T.S. Wu / Jeffrey T.S. Wu / Jeffrey T.S. Wu / Neng-Pai Lin / Neng-Pai Lin / Neng-Pai Lin / Neng-Pai Lin / Teh-Nan Hsu / Teh-Nan Hsu / Teh-Nan Hsu / Teh-Nan Hsu / Jui-Sung Kuo Jui-Sung Kuo Jui-Sung Kuo Jui-Sung Kuo

NT$2 M. (inclusive)-NT$5 M. (exclusive) Richard R.C. Liu Richard R.C. Liu Richard R.C. Liu Richard R.C. Liu

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

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

NT$15 M. (inclusive)-NT$30 M. (exclusive) Thomas T.L. Wu Thomas T.L. Wu Thomas T.L. Wu Thomas T.L. Wu

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

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

Over NT$100 M.

Total 9 9 9 9

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

Base date: Dec 31, 2012;Unit:NT$1,000

compensations for supervisors Share of combination Job-leaving or Compensations of A, B, C and D in expense for business Compensation (A) retirement payment from distribution of after-tax net profit execution (D) Compensations (B) earnings (C) from invested Title Name All All All All companies other All companies companies companies companies than subsidiaries The The The companies in The The in the in the in the in the Bank Bank Bank the financial Bank Bank financial financial financial financial statement statement statement statement statement Standing Yang-Tzong Supervisor Tsay Supervisor Long-Su Lin 11,025 11,025 0 0 0 0 1,129 1,129 0.14% 0.14% Nil

Supervisor Toney Chen

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

30 III.Corporate Governance Report 03

Compensation brackets Base date: Dec 31, 2012

Names of supervisors Compensation brackets for Combined amount of (A+B+C+D) the company’s supervisors The Bank All companies in the financial statement

Under NT$2 M. Long-Su Lin Long-Su Lin

NT$2 M.(inclusive)-NT$5 M. (exclusive) Toney Chen Toney Chen

NT$5 M. (inclusive)-NT$10 M. (exclusive) Yang-Tzong Tsay Yang-Tzong Tsay

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 3 3

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

31 3. Compensation for president and vice presidents

Base date: Dec 31, 2012 Unit: NT$1,000 Share of the Bonus and special Employee dividend-sharing(D) Job-leaving or retirement combined value of Amount of employee Amount of restricted Salary(A) allowance (C) payment (B) All companies in the A.B. C and D in after- warrants stock units The Bank Compensations financial statement tax net profit(%) from invested Title Name All All All companies All companies All companies All companies companies companies companies other than Cash Stock Cash Stock The The Bank in the financial The Bank in the financial The Bank in the financial in the The Bank in the The Bank in the subsidiaries dividend dividend dividend dividend Bank statement statement statement financial financial financial statement statement statement President Larry chung Chief executive officer Spike wu Chief auditor Y H Wang Senior vice president Wilson chou Senior vice president Sam lin William Yao Senior vice president (2012.08.11 relief of duty) Senior vice president Amy Hsia Senior vice president Johnny Liu Senior vice president Ann cheng Senior vice president Melody chien Senior vice president Jack su John Chiou Vice president (2012.02.17 on board) Vice president Jey chen Vice president Ada chen Vice president Jospehine Yang Vice president Min-Hsing Liu Vice president Chai, Shang-Ming 94,978 97,498 1,429 1,429 134,885 135,796 0 0 0 0 2.68% 2.77% 0 0 0 0 585 Charles Shieh Vice president (2012.02.17 relief of duty) Vice president Robin Shieh Vice president Sam chiang Vice president Phyllis wang Vice president Christy shyy Chin-Ju Chou Vice president (2012.09.28 on board) Vice president Chao-Min Lin Patrick Ling Vice president (2012.08.17 relief of duty) Vice president Chris Chang Vice president David Chang Peter Tseng Vice president (2012.08.17 on board) Vice president Jerry Yang Vice president Jai,Lu-June Vice president Helen Liu Vice president Shawn C.L Teng Note 1: Compensation for chauffeurs reaches NT$4,631,000 Note 2: No actual collection of job-leaving or retirement payment; the appropriation or provisions for job-leaving or retirement funds reached NT$1,429,000

32 III.Corporate Governance Report 03

3. Compensation for president and vice presidents

33 Compensation brackets Base date: Dec 31,2012 Names of president and vice president Compensations brackets for presidents and vice All companies in the consolidated presidents The company financial statement Chou, Chin-Ju / Tseng, Pei-Che/ Chou, Chin-Ju / Tseng, Pei-Che/ Below NT$2,000,000 Charles shieh Charles shieh Y. H. Wang/ Christy Shyy/ Chao-Min Lin/ Y. H. Wang/ Christy Shyy/ Chao-Min Lin/ NT$2,000,000(inclusive)~5,000,000(exclusive) Chao-Min Lin/ Jai, Lu-June Chao-Min Lin/ Jai, Lu-June Phyllis Wang/ Wilson Chou/ John Chiou/ Phyllis Wang/ Wilson Chou/ John William Yao/ Chris Chang/ David Chang/ Chiou/William Yao/ Chris Chang/ Jey Chen/ Ada Chen / Jerry Yang/ David Chang/ Jey Chen/ Ada Chen / NT$5,000,000(inclusive)~10,000,000(exclusive) Josephine Yang/ Helen Liu/ Jerry Yang/ Josephine Yang/ Helen Liu/ Samuel Chiang/ Chai, Shang-Ming/ Samuel Chiang/ Chai, Shang-Ming/ Ann Cheng/ Shawn, C.L. Teng/ Ann Cheng/ Shawn, C.L. Teng/ Robin Shieh/ Min Hsing Liu Robin Shieh/ Min Hsing Liu Larry Chung/ Spike, C.W. Wu/ Sam Lin/ Larry Chung/ Spike, C.W. Wu/ Sam Lin/ NT$10,000,000(inclusive)~15,000,000(exclusive) Amy Hsia/ Jack Su/ Johnny Liu/ Amy Hsia/ Jack Su/ Johnny Liu/ Melody Chien Melody Chien NT$15,000,000(inclusive)~30,000,000(exclusive)

NT$30,000,000(inclusive)~50,000,000(exclusive)

NT$50,000,000(inclusive)~100,000,000(exclusive)

Over NT$100,000,000

Total 32 32

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 profits in the recent two years, as listed in the company’s financial 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 2012, total compensations for directors, supervisors, president, and vice presidents accounted for 3.16% of the after-tax net profit t and the share listed in the consolidated financial statement was 3.26%. In 2011, total compensations for directors, supervisors, president, and vice presidents accounted for 3.19% of the after-tax net profit and the share listed in the consolidated financial statement was 3.27%

2. The company’s compensation policy

(1) Compensations for managerial staffers are determined according to the company’s overall profit 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. In considering major changes in the company’s business status or business performance, the salary and compensation committee will make proposal for approval by the board of directors.

34 III.Corporate Governance Report 03

C. Status of Corporate Governance

a. Information on the operation of the board of directors In the recent fiscal year(2012), the board of directors convened 49 times and status of attendance by directors and supervisors follows:

number of Actual number Actual rate of title Name attendance note of attendance attendance (%) by proxy Taishin Financial Holding Chairman 42 7 85.71 Representative: Thomas T.L. Wu Taishin Financial Holding Director 42 7 85.71 Representative: Jui-Sung Kuo Taishin Financial Holding Appointment on Director 5 0 100.00 Representative: Jeffrey T.S. Wu November 23, 2012 Taishin Financial Holding Director 48 1 97.96 Representative: Teh-Nan Hsu Taishin Financial Holding Director 46 3 93.88 Representative: Richard R.C. Liu Taishin Financial Holding Director 45 4 91.84 Representative: Chu-Chan Wang Taishin Financial Holding Director 43 6 87.76 Representative: Shang-Pin Wu Independent Taishin Financial Holding 35 11 71.43 director Representative: Chih-Kang Wang Independent Taishin Financial Holding 46 0 93.88 director Representative: Neng-Pai Lin Standing Taishin Financial Holding 43 0 87.76 Supervisor Representative: Yang-Tzong Tsay Taishin Financial Holding Supervisor 12 0 24.49 Representative: Long-Su Lin Taishin Financial Holding Supervisor 47 0 95.92 Representative: Toney Chen

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.

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.

35 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. Status of communication of independent director with in-house chief auditing and CPA (such as communication items, method, and results for the bank’s finance and business status) Status of communication between independent director and in-house chief auditing:

(1) The bank’s independent directors regularly hold communications meetings with the chief auditor and meeting minutes are submitted to the board of directors. (2) Independent directors and chief auditor of the bank attend the meetings of the board of directors and communicate with independent directors and chief auditor 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 independent director, 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 independent director for inspection. (5) Investigation reports on major incidents of the bank (such as irregularities, natural disaster, and major losses) are all submitted to independent directors. (6) Independent directors can communicate and discuss with chief auditor over the aforementioned affairs or other affairs anytime. Status of communication between independent director and CPA: The bank’s independent director can discuss with CPAs over the company’s finance, business status, and auditing findings of CPAs.

3. Participation of supervisors in the operation of the board of directors.

In the recent fiscal year (2012), the board of directors convened 49 times and status of attendance:

Actual number of Title Name Attendance rate (%) Note attendance Standing Taishin Financial Holding 43 87.76 supervisor Representative: Tsay, Yang-Tzong Taishin Financial Holding Supervisor 12 24.49 Representative: Long-Su Lin Taishin Financial Holding Supervisor 47 95.92 Representative: Toney Chen

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

Other items which should be recorded: 1.The makeup and responsibilities of supervisors: (1) 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 reflect and express their opinions to the human resources division via the company’s internal website. (2) Status of the communication of supervisors with in-house auditing chief and CPA (such as communication items, method, and results for the bank’s finance and business status)

36 III.Corporate Governance Report 03

a. Status of the communication between supervisors and in-house auditing chief (a) The bank’s supervisors regularly hold communications meetings with the general auditor and minutes of the meeting are submitted to the board of directors. (b) 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. (c) 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. (d) The auditing reports for the bank and its subsidiaries of the bank’s auditing division are submitted to supervisors for inspection. (e) Investigation reports on major incidents of the bank (such as irregularities, natural disaster, and major losses) are all submitted to supervisors. (f) Supervisors can communicate and discuss with chief auditor over the aforementioned affairs or other affairs anytime. b. Status of the communications between supervisors and CPAs The bank’s supervisors can discuss with CPAs over the company’s finance, business status, and auditing findings of CPAs. 2. 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 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 corporate Items Operating status governance of the banking industry and reasons 1. Makeup of the bank’s shareholdings and shareholders’ interest (1) The way the bank handles suggestions (1) The bank has only one shareholder, Taishin (1) No deviation or disputes of shareholders. Financial Holding, whose stock-affairs unit handles (2) Grasp by the bank of the list of the bank’s shareholders’ suggestion or disputes and makes major shareholders and the ultimate necessary disclosures on its website as a channel controllers of major shareholders. of communications with shareholders. (3) Risk management mechanism and (2) The bank has only one shareholder, Taishin (2) No deviation firewall vis-a-vis affiliates. Financial Holding, which owns 100% stake in the bank. (3) The bank’s Risk Management Division is in charge (3) No deviation of establishing 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 institution of independent board (1) The bank instituted two seats of independent (1) No deviation directors by the bank board directors in 2007. (2) Periodic evaluation of the independence (2) The bank will evaluate the independence of (2) No deviation of certified public accountants certified public accountants before signing the letter of entrustment with them every year.

37 Deviation from the guidelines of the practical corporate Items Operating status governance of the banking industry and reasons 3. The establishment of communications (1) The bank’s parent company has instituted the No deviation channel with related parties “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 system for related parties,” for the use by the bank and its other 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 (1) The bank has disclosed finance and business (1) No deviation for the disclosure of the company’s information on its website and undertaken the finance and corporate governance. disclosure of major information and the application (2) The bank has also embraced other for online information publication. information-disclosure methods (such (2) The bank conducts major information disclosure (2) No deviation as the installation of English-language and application for online information publication websites, the designation of staffers and implements spokesman’s system, according to handle information collection and to the regulations of the Securities Transaction disclosure, the implementation of Law. spokesman’s system, and the posting of the videotaped process of investor conference on the website. 5. The institution and operation of nomination (1) Taishin Financial Holding established salary and No deviation or compensate committee compensations committee on Sept. 22, 2011, (The existing “guide according to related measures. lies for the corporate (2) According to the organizational charter of the governance of the salary and compensations committee of Taishin banking industry” Financial Holding, the committee is in charge doesn’t mandate of screening the compensations policy of its the institution of the subsidiary Taishin Bank. The committee will committee and the screen the policy, system, standards, and structure bank will evaluate of salaries and compensations of the directors, the feasibility of its supervisors, and managerial staffers of Taishin institution at proper Bank. 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: (1) The bank offers competitive remuneration packages and benefits to retain talented employees. The bank also organizes team-building activities and works with Teacher Chang Foundation to provide employees a joyful and healthy workplace. Taishin Bank respects employees' opinions and uses morning meetings and employee opinion surveys as means of communication. (2) The bank has entrusted Taiwan Corporate Government Association to hold classes at home and directors and supervisors have undertaken sufficient hours of courses. Status of the study has been posted at the website of Taiwan Stock Exchange according to the requirement. (3) The bank’s board directors and supervisors have avoided cases with related interests according to regulations. (4) 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. (5) The bank properly handles customer complaints to uphold consumer interests. (6) The bank has taken out liability insurance for board directors and supervisors. (7) The bank's donations to stakeholders and charity organizations in 2012 totaled NT$ 8,167,868.

38 III.Corporate Governance Report 03

Deviation from the guidelines of the practical corporate Items Operating status governance of the banking industry and reasons 8. Description of results and major deficiencies (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. 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 1. Implementation of corporate governance (1) Banks formulate corporate (1) The bank doesn’t establish a specialized unit for pushing social- social-responsibility policy responsibility policy or system but various units of the bank have been or system, and review the fulfilling corporate social responsibility, as description in the following status of its implementation table. effect. (2) Propagandas on employees' code of conduct are organized in (2) Status of banks pushing February and August each year over the bank's HR intranet portal. social responsibility via The awareness program covers issues such as professional ethics, specialized or part-time prohibition against part-time jobs, avoidance of conflicting interests, units. and policies on gifts and treatments. Violators are subjected to (3) Banks regularly hold the review of the disciplinary board in accordance with "Employee Not applicable education, trading, and Disciplinary Rules." The bank requires all new recruits to undergo the promotion of corporate orientation program, during which they are taught the company's core ethics for directors, values and organizational culture, as well as standard phone manners supervisors, and and service procedures expected from them. According to the bank's employees, incorporate "New Recruit Orientation Policy," those who do not complete the the events into the orientation training are considered to have failed the probation. performance evaluation Furthermore, to ensure the legitimacy of the bank's daily operations, system for employees, and "Regulatory compliance" has also been included as part of the criteria set up clear and effective in directors', supervisors', and employees' performance appraisal, and rewarding and punitive are assessed on an annual basis. system.

39 Deviation from the guidelines Items Operating Status for the social responsibilities and reason 2. Development of sustainable environment (1) Banks dedicate to (1) In its formal organizational structure, the bank has set up labor enhancing the utilization security and sanitation section, which adheres to the concept of efficiency for various “the premise for safety of environmental design and priority of resources and utilized precautionary measures,” in order to create a sanitary, safe, and recycled products to healthy environment for Taishin Bank. The labor security and lower the impact on the sanitation section is in charge of various tasks, including pushing environment. of tobacco-hazard prevention law and maintenance of the quality (2) Banks establish of working environment via semiannual inspection of operating environmental environment. management system suited (2) For environmental protection and anti-global warming, Taishin to their industrial features. Bank has dedicated to the environmental protection and energy (3) Set up specialized conservation. During summertime, it pushes “Cool Biz” event, asking environmental management employees to shed garment during office time and set air-conditioning Not applicable unit or personnel for the temperature at 26 Celsius degrees. In line with the measures of upholding of environment. Taiwan power, terminate the function of air conditioning irregularly (4) Banks notice the effect and regularly check the contract power capacity of various office of climate change on buildings. During off hours, control the use of elevators t one side operation and formulate at various buildings, to cut power consumption. Install T5 energy- the strategy for carbon saving lighting fixtures for office lighting and regional power circuit, abatement and reduction of to reduce power consumption and achieve the goal of environmental greenhouse gases. protection. Meanwhile, push e-office and paperless office; install stationery collection boxes to achieve more efficient utilization of resources. Promote “using love as energy” event, urging employees to ride bicycles, take mass transportation vehicles, and embrace car pooling, so as to reduce carbon emission, enhance health, and fulfill the commitment to environmental protection. Demonstrate the respect of and care for the nature and actively rally employees, their families, and clients to “use love as energy and love the earth together.” 3. Uphold public benefits (1) Banks comply with related (1) The bank’s working rules have been approved by the regulator labor laws/regulations and and publicized. The personnel rules are formulated according to respect globally-recognized the regulations of labor laws/decrees, for the purpose of protecting basic workers' rights, the labor rights of employees. The bank has created a fair working protect employee’s legal environment where employees are equally entitled to compensations, rights,non-discriminatory employment, training resources, and promotion opportunities. employment policies, (2) The bank provide employees a safe and healthy working environment, and establish proper and has installed the necessary facilities to ensure workplace security management method and and facilitate emergency evacuation or medical assistance if needed. procedure. Furthermore, the bank organizes employee health check-ups and (2) Banks provide employees health trainings on a regular basis. a secure and healthy (3) Through the use of internal correspondences and intranet portals, workplace and conduct employees are timely informed on the bank's latest business activities regular security and health and decisions, and are properly advised on changes that may pose education for employees. material impacts against their interests. The bank has an employee (3) Banks formulate and opinion box and an employee helpline in place, through which Not applicable publicize consumer employees may express opinions in the utmost privacy. right policy and provide (4) The bank has disclosed related inquiry and service phone numbers transparent and effective at its corporate website, enabling consumers to reflect any problem consumer complaint concerning the bank’s products or services. Related inquiry and procedure for its products service phone numbers: and services. (a) dedicated around-the-clock customer service line: (02)2655-3355 (4) The bank's consumer (b) dedicated customer complaint line: (02)2700-3166 protection policy, as well as (5) For the selection of suppliers and public bidding for various the existence of transparent procurements, the bank follows the “measures governing procurement and effective procedures and supplier management,” so as to assure products have stable for handling consumers' quality and meet the requirements. Suppliers meeting the conditions complaints over. can undertake evaluation and register as the bank’s qualified suppliers to provide services or products to the bank. (6) For information on sponsored events and public-service and charity services, please refer to item 6 of the table: Other important information conducive to the understanding of the operation of corporate social responsibilities

40 III.Corporate Governance Report 03

Deviation from the guidelines Items Operating Status for the social responsibilities and reason 4. Intensified information disclosure (1) Method of the bank for (1) The bank is a company with public share offering (stock code No. disclosing information related L5848), discloses its latest information on the Market Observation to relevant and reliable Post System of Taiwan Stock Exchange, and regularly files report on Not applicable corporate social responsibility. related financial figures. (2) Bank compiles the book of (2) The bank also regularly updates information on its website according corporate social responsibility to legal requirement, so that customers can learn of the bank’s to disclose the satus of business performance via online inquiry. corporate social responsibility The bank’s website is at http://www.taishinbank.com.tw/ 5. Description of deviation of the self-made guidelines for corporate social responsibilities from the “guidelines for corporate social responsibilities of listed firms”: Not applicable 6. 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 benefits, 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 the bank and Taishin Financial Holding obtained the certificates 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 For environmental protection and anti-global warming, Taishin Bank , in line with the planning of Taishin Financial Holding, has dedicated to the environmental protection and energy conservation. During summertime, it pushes “Cool Biz” event, asking employees to shed garment during office time and set air-conditioning temperature at 26 Celsius degrees. In line with the measures of Taipower, terminate the function of air conditioning irregularly and regularly check the contract power capacity of various office buildings. During off hours, control the use of elevators at one side at various buildings, to cut power consumption. Install T5 energy-saving lighting fixtures for office lighting and regional power circuit, to reduce power consumption and achieve the goal of environmental protection . Meanwhile, push e-office and paperless office; install stationery collection boxes to achieve more efficient utilization of resources. Promote “using love as energy” event, urging employees to ride bicycles, take mass transportation vehicles, and embrace car pooling, so as to reduce carbon emission, enhance health, and fulfill the commitment to environmental protection. Demonstrate the respect of and care for the nature and actively rally employees, their families, and clients to “use love as energy and love the earth together.” (3) Public benefits and charity In 2010, Taishin Bank set up “Taishin Bank Public Service and Charity Foundation,” mainly for engagement in public- service and charity events, including assistance for underprivileged groups to enhance their skills for livelihood and improve life, and sponsorship for the events of other public-service groups and seminars for society-related issues, and other social welfare-related charity events, with the goal of helping underprivileged groups achieve “independence in economy and daily life.”After its establishment, the foundation rolled out “your ballot decides the strength of love” event, the first online public-service event in Taiwan. Under the event, small and medium social-welfare institutions were invited to put forth proposals online for voting by online social groups, in deciding the recipients of donations. A total of 793 proposals were received over the three years it was held,and we invited public-service partners,such as Franz Collection;Advantech Foundation;Chunghwa Telecom Foundation and Chiling Charity Foundation to join the event the scope of donation recipients were expanded from “social welfare”to “culture education” and “digital learning”. The 3rd "Your Ballot Decides the Strength of Love" event received overwhelming response as 220,000 online voters casted more than 710,000 votes in total. In addition to the public service partners mentioned above, the event also received donations from Taishin managers, employees, LPGA star Yani Tseng and the general public, which boosted the charity fund from NT$4.3 million to NT$15 million and benefited a total of 167 charity organizations. Apart from organizing the "Your Ballot Decides the Strength of Love" event, Taishin Charity Foundation is also planning for a nation-wide visit to charity organizations located in other areas so that resources can be allocated more effectively to the socially disadvantaged. (4) Art and culture Taishin Bank donated to establish “Taishin Bank Culture and Art Foundation” in 2011, with the theme of “promoting cultural life quality and strengthening artistic-development environment.” It supports arts as a nonprofit institution, intensifies exchanges between artistic innovation and private industry, and realizes the corporate social responsibility of payback to the society. The foundation initiated “Taishin Artistic Award,” giving highest glory and encourage to award winners in the two fields of visual and performing arts. 2012 marked the tenth edition of the award. Meanwhile, Taishin Financial Holding also arranges multi-functional performing and exhibition space at its headquarters building to invite artists and musicians to hold artistic exhibitions and noontime musical concerts. (5) Sports sponsorship In 2011, Taishin sponsored Yani Tseng, LPGA female golfing champion, the first Taiwanese financial institution to do so. Taishin had also mobilized its customers and employees to cheer for the champion using banners, online messages etc, while some had even paid their visits to the LPGA Tour in Taiwan. It also invited Yani Tseng to become the endorser of Taishin Charity Foundation, to help with promoting the “your ballot decides the strength of love” event, so as to augment Taishin’s social influence. 7. Description of banking products or corporate social responsibility report which have been certified by international certification bodies: Nil. 41 g. Status of the company in fulfilling management of integrity and measures

Deviation from the guidelines Items Operating Status for the social responsibilities and reason 1. Policies and schemes established (1) The bank implements integrity management and uphold the core to ensure business integrity values of “Integrity, Commitment, Innovation, and Corporation.” (1) The bank's commitment to It formulates “criteria for employee behaviors,” to prevent business integrity, as conveyed dishonest behaviors of employees and manifests their duty and in policies and external obligation for informing. The company periodically provides documents, and commitments directors, supervisors, managerial staffers, employees, and actual by the board of directors and controllers training courses on corporate governance, trend of the management to ensure financial market, legal norm, and countermeasures for corporate business integrity. risks, so as to materialize integrity management. Meanwhile, to (2) Initiatives taken by the bank to integrate the management policy of integrity and management prevent dishonest behaviors, strategy for human resources, the company incorporates the and the procedures, code indicators of legal compliance in management, information of of conducts, and training major abnormal incidents, business auditing, and financial status programs introduced as part of into the contents for performance evaluation. the initiative. (2) The criteria of employee behaviors include: (3) Measures taken by the bank a. Norm for work ethic: Formulate guidelines for employees in to prevent bribery and illegal exercising their duties, for compliance by employees. political donations in business b. Maintenance of employee relationship: Maintain the privacy of employees, healthy working environment, and equal working areas that are more prone to Not applicable the risks of dishonesty. environment. c. Bank on side job and avoidance of interest: Forbid employees to take side jobs and engage in behaviors involving conflict of interest with their jobs. d. Norm on gift and treatment: Employees should not receive finance or improper benefits with no or improper rewards. e. Maintenance of client privacy: Employees should abide by operating procedure in exercising their duties and properly keep and maintain customers’ information. f. Business information and maintenance of business secret: Employees should uphold the business secret, trademark, copyright, patent, and other intellectual properties. g. Fair trade: Employees should not solicit clients with improper marketing method. h. Anti-money laundering: Disclose regulations related to the prevention of money laundering and actively report related incidents. i. Informing duty and obligation: Provide employees informing channel and protect informants.

42 III.Corporate Governance Report 03

Deviation from the guidelines Items Operating Status for the social responsibilities and reason 2. Implementation of integrity management (1) Banks should avoid engaging (1) For the selection of suppliers and public bidding for various customers with history of procurements, the bank follows the “measures governing dishonesty in business procurement and supplier management,” so as to assure products dealings; in addition, an integrity have stable quality and meet the requirements. Suppliers meeting clause must be included in any the conditions can undertake evaluation and register as the bank’s commercial contracts signed by qualified suppliers to provide services or products to the bank. banks. (2) According to the internal control auditing system of the financial (2) Availability of an internal holding company and the bank, the company has established unit responsible for ensuring the system of chief for legal compliance and set up the division business integrity within the of legal compliance, which is in charge of the planning, bank, and supervision by the management, and execution for the system of chief for legal board of directors. compliance. The chief should report affairs concerning legal (3) Policies established by the bank compliance to the board of directors and supervisors at least to prevent conflicts of interest, once semiannually. and internal channels created (3) The bank has reporting channels in place to accept verbal and for raising concerns. written reports of violations. (4) Accounting policies and internal (4) Accounting System controls implemented as a. The bank’s accounting system follows “Commercial Accounting effective means of ensuring Law,” “Guidelines for TheCompilation of Financial Statement Not applicable business integrity, and auditing of Securities Issuers,” “Guidelines for The Compilation of activities performed by internal Banks with Public Share Offering,” and common accounting audit personnel. criteria, as well as “Sample for Banking Industry’s Accounting System” issued by Bankers Association. It features faithful and complete chronicling of the bank’s various operations, effectively manifests the function of international subversion, and mirror the company’s financial status and management results, so that it can serve as a reference for decision making. b. Internal control system The bank’s internal control system follows article 45-1 of the” Bank Law” and article 6 of “The Measures Governing Internal Control and Auditing System of Financial 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. 3. Establish of a misconduct reporting channel, and Please refer to the explanation of above item 2.implementation of Not applicable disciplinary policies against integrity management(3)(4). violators of business integrity. 4. Strengthen information disclosure (1) Availability of a website for (1) The bank is a company with public share offering (stock code No. disclosing information relating L5848), discloses its latest information on the Market Observation to business integrity. Post System of Taiwan Stock Exchange, and regularly files report (2) Other means of information on related financial figures. Not applicable disclosure undertaken by the (2) The bank also regularly updates information on its website bank (such as the establishment according to legal requirement, so that customers can learn of of an English website, appointing the bank’s business performance via online inquiry. dedicated personnel to collect The bank’s website is at http://www.taishinbank.com.tw/ and disclose information etc). 5. Description of deviation of the self-made guildelines for integrity management from the “guildlines for corporate integrity management of listed firms”: Not applicable. 6. Other key information conductive to the understanding of the implementation of integrity management (e.g.: declaration of the bank's commitment to business integrity to vendors, policies and training programs, reviews over the bank's business integrity principles etc):Nil.

43 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 the bank's corporate governance and its deviation from the guidelines for the practical 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 the bank's corporate governance and its deviation from the guidelines for the practical corporate governance of the banking industry and reasons.” 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, 2012 to December 31, 2012. 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 confirms 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

Feb. 21, 2013

44 III.Corporate Governance Report 03

Items needing improvement in the internal control system of Taishin Bank and improvement plan Base date: Dec 31, 2012

Schedule for Items needing Improvement measures completing the improvement improvement IT management The bank has implemented an ISO27001-compliant personal information Improvement management system based on the standards (BS10012) set forth by The British completed Standards Institution (BSI). It has obtained BSI certification on September 15, 2012.

2. Auditing report of certified public accountant.

Inspection Report of Certified Public Accountant

To Taishin International Bank Co., Ltd. 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 financial 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 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. The CPA submits the inspection scope, basis, inspection procedure, and inspection result, as attached, according to article 31 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.

Certified Public Accountant (signature of Yang Qinzhen)

Deloitte & Touche Taiwan

March 14, 2013

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

Disclosure items Cases and values Status of improvement 1. Indictment of executives or staffers When serving at Taiwan Securities Co., Leng already left the job from Taishin by prosecutors for job-related crimes. Ltd., former staffer Leng was indicted by Bank on Sept. 1, 2010. On Jan. 20, the prosecutors of Taiwan Shilin district 2012, the Financial Supervisory court on June 16, 2011 for violating Commission order the bank to Securities Transaction Law in underwriting dismiss Leng for violation of securities the stocks of a hi-tech company,. law. The bank already reported its handling of the case to the Securities and Futures Bureau, FSC on Feb. 7, 2012. 2. Fines inflicted by Financial A bank employee was found to have The bank has implemented an Supervisory Commission (FSC) for uploaded customer's information onto ISO27001-compliant personal violation of laws/regulations the bank's extranet, for which the bank information management system was fined NT$4 million under Letter based on the standards (BS10012) No. Financial-Supervisory-Banking- set forth by The British Standards Control-201200320901 issued by the Institution (BSI). It has obtained BSI FSC on 2012.11.27. certification on 2012.9.15. 3. Penalties inflicted by FSC for (1) Bank officials contact offshore Already revised related business violating item 1, article 61, Banking insurance agents in private for regulation and held educational Law arranging seminars, a move which training program to strengthen was rectified by the Financial employee to follow the law Supervisory Commission (FSC, No. compliance. 10000032740, May 9, 2011). (2) Clerk Yieh embezzled funds of Already rectified the operating flow surrogated collection, which was and security control mechanism for rectified by the FSC with an order for surrogate fund collection at counters. the dismissal of Yieh’s job (FSC, No. 10000331690, Nov. 11, 2011). (3) The FSC rectified the mistake Already revised the operating for outsourcing the destruction of mode and execution procedure for documents (FSC, No. 10000371210, outsourcing work for the destruction Dec. 9, 2011). of documents. 4. Irregularities causing over NT$50 Nil Nil million of loss in one year or several years whose loss or nature should be disclosed, including malpractices of staffers, major occasional incidents (fraud, stealth, embezzlement or stealth of assets, forged trading, fake certificates and securities, collection of kickbacks, natural disaster, loss inflicted 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 financial institutions. 5. Other items designated by FSC for Nil Nil mandatory disclosure 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. 2012.01.15 Passage of apgrading representative's office in Ho Chi Minh City, Vietnam, to a branch.

2012.01.19 Passed the 2012 business plan and budget.

46 III.Corporate Governance Report 03

2012.02.02 Passed the re-appointment of the bank's "Board Credit Review Committee" members, and the revision of the bank's "Board Credit Review Policy."

2012.02.16 Passed to reappoint Senior Vice President Wilson Chou as the bank's spokesperson, with effect from February 17, 2012. Vice President Shawn C.L Teng was relieved of acting spokesperson with immediate effect.

2012.03.08 Passed the bank's 2011 financial statements.

2012.04.26 Passed the partial revision to the bank's "Board of Directors Meeting Rules."

2012.06.07 Passed the board of directors' decision to acknowledge the bank's 2011 financial statements on behalf of shareholders, including the consolidated financial statements, business reports, and earnings appropriation reports.

2012.06.07 Passed the changes made to Article 6-3 and Article 44 of the "Articles of Incorporation."

2012.06.07 Passed the revisions made to the "Asset Acquisition and Disposal Procedures."

2012.06.21 Passed the decision to set June 28, 2012, as the baseline date for 2011 dividends.

2012.08.09 Passed the bank's 2012 first half financial statements.

2012.08.30 Passed the proposal to issue the 2012 subordinated bank debenture, totaling NT$15 billion in face value.

2012.09.06 Passed the proposal to apply to the competent authority for two new product offerings: "Foreign currency, gold option, and gold account-linked structured deposit" and "Gold account and gold option-linked structured deposits."

2012.10.18 Passed the changes made to Article 6-3 of the "Articles of Incorporation."

2012.11.22 Passed the partial revision to the bank's "Board of Directors Meeting Rules."

2012.11.29 Jeffiey T.S. Wu was appointed the bank's director since November 23, 2012.

2013.03.14 Passed the proposal to dispose all shareholdings of VISA Inc. and MasterCard Inc. in the U.S. open market.

2013.03.21 Passed to abolish the bank's "Board of Directors Foundation Rules."

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, financial chief,accounting chief, and internal chief auditing ) in the recent year and as of the date of the publication of the annual report: Nil

D. Information on CPA fee

Name of accounting firm Name of CPA Audit period Note Deloitte&Touche Qinzhen Yang Peter Tsai 2012.01.01-2012.12.31 Nil

47 Items of fee Auditing fee Non-auditing fee Total Amount bracket

1 Uunder NT$2M 2 NT$2M(inclusive)~NT$4M 3 NT$4M(inclusive)~NT$6M 4 NT$6M(inclusive)~NT$8M P 5 NT$8M(inclusive)~NT$10M 6 Over NT$10M(inclusive) P P a. Mandatory disclosure of the auditing and non-auditing fees and the contents of non-auditing service of CPAs,their accounting firms, and affiliates whose non-auditing fee exceeds one fourth of the auditing fee

Non-auditing fee Whether the Name of auditing covers Name Auditing accounting the entire fiscal Note of CPA fee System Business Human Others firm Sub-total year or not design registration resources (note 2) (note 1) NT$6.3million for personal information pretection consulting service NT$1.15 million for tracking and follow up auditing of internal- control defects NT$710,000 for surrogate payment NT$560,000 for BIS reauditing fee

NT$990,000 for IFRS Qinzhen consulting fee Deloitte Yang 2012.01.01~ 7,830,000 224,000 11,332,249 11,556,249 NT$230,000 for & Touche 2012.12.31 administrative relief for Peter business income tax and Tsai change in the amount of audit remuneration reported NT$300,000 for auditing impairment of assets NT$150,000 for Transfer Pricing report NT$250,000 for the expense of checking major bad-debt accounts NT$910,000 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 firm 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.

48 III.Corporate Governance Report 03

E. Replacement of CPA:

a. Concerning former CPA

replacement date April 28, 2011 Reason for In line with the job rotation of Deloitte &Touche Accounting Firm, the CPAs for the bank’s financial replacement and statement were changed from Yang Qingzhen and Weng Rongsui to Yang Qingzhen and Peter Tsai explanation since first quarter of 2011. Explain consigner or status of related parties CPA Consigner termination or refusal of consignment by Active terminate consignment Not applicable Not applicable CPA Refusal to accept (continue) consignment Not applicable Not applicable Certification auditing report other than report without Not applicable reserved opinions in the recent two years and reason Not applicable Accounting principle or practical affairs Not applicable Disclosure of financial report Yes Not applicable Auditing scope or procedure Existence of different opinions with the Not applicable Others bank Not applicable No Not applicable Explanation Other disclosed items (Items which should be disclosed Not applicable according to item 5-1-4, article 10 of the criteria

b. Concerning succeeding CPA: Not applicable. c. Reply of former CPA to item 5-1 and item 5-2-3, article 10 of the criteria: Not applicable.

F. Chairman, presidents, and financial or accountant managers who served at the accounting firm of the CPAs or its affiliates within the recent year: Nil.

G. Changes in shareholding transfer or shareholding pledge by directors, supervisors, or managers, and all parties that are subject to reporting under Article 11 of Regulations Governing the Ownership of Banking Institutions by Single Individuals or Stakeholders,in the recent year and as of the date of the publication of the annual report.

49 a. Changes in shareholdings

2012 As of March 31 , 2013 Title Name Changes in Changes in pledged Changes in Changes in pledged shareholding shareholding shareholding shareholding Director/ Supervisor Taishin Financial 0 0 0 0 (Major shareholder) Holding Co., Ltd

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

Base Date: March 31, 2013 Names and relationship of the 10 largest shareholders Shareholding of Total who are related parties spouse shareholding according to Financial Own shareholding and offspring in the names Accounting Criteria before the age of others No.6 or who are spouses of majority Name or relatives with Note second-degree or closer kinship Share Share Share Number Number Number of of of stake of of Name Relationship of shares stake stake (%) shares shares (%) (%) Taishin Financial Holding Co., Ltd Representative: 4,915,752,571 100 0 0 0 0 Nil Nil Thomas T.L. Wu

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, 2012 ;unit:share,% Investment by the company directly or indirectly controlled by the bank and the bank’s Investment by the bank directors, supervisors, General investment Equity investment presidents, vice presidents,assistant vice presidents, and branch chiefs Amount of Share of Amount of Share of Amount of Share of shares stake shares stake shares stake Taishin Dah An Leasing 20,000,000 100.00% 0 0.00% 20,000,000 100.00% (Original is Dah An Leasing)

50 III.Corporate Governance Report 03

Investment by the company directly or indirectly controlled by the bank and the bank’s Investment by the bank directors, supervisors, General investment Equity investment presidents, vice presidents,assistant vice presidents, and branch chiefs Amount of Share of Amount of Share of Amount of Share of shares stake shares stake shares stake Taishin Insurance Agency 2,622,040 87.40% 0 0.00% 2,622,040 87.40%

Chang Hwa Bank 19,243,950 0.27% 1,632,820,900 22.55% 1,652,064,850 22.81% Taishin Real Estate Management 12,000,000 60.00% 0 0.00% 12,000,000 60.00% Co., Ltd An-Sin Real Estate Management 3,900,000 30.00% 0 0.00% 3,900,000 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% 11,760 0.00% 79,193,984 18.29%

Taiwan Future Exchange Company 2,681,396 0.96% 0 0.00% 2,681,396 0.96%

Taipei Foreign Exchange Company 160,000 0.81% 0 0.00% 160,000 0.81%

Financial Information Service 10,237,500 2.28% 0 0.00% 10,237,500 2.28%

Taiwan Asset Management 10,000,000 0.57% 0 0.00% 10,000,000 0.57% Taiwan Financial Asset Service 5,000,000 2.94% 0 0.00% 5,000,000 2.94% Corp. Apex Venture Capital 2,009,346 4.67% 0 0.00% 2,009,346 4.67%

Li Yu Venture Capital 267,155 1.49% 0 0.00% 267,155 1.49%

Harbinger Venture Capital 3,350,000 3.35% 0 0.00% 3,350,000 3.35%

United Venture Capital 1,296,000 4.52% 0 0.00% 1,296,000 4.52%

Chinese New Venture 1,564,080 5.00% 0 0.00% 1,564,080 5.00%

Han Chinese Venture Capital 2,324,000 4.73% 0 0.00% 2,324,000 4.73%

Kun Chi Venture Capital 3,333,333 3.33% 0 0.00% 3,333,333 3.33%

Asia Pacific Telecom 15,000,000 0.46% 0 0.00% 15,000,000 0.46%

Easy Card Investment Holding 1,921,872 2.40% 0 0.00% 1,921,872 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%

Payeasy Digital Integration 2,172,500 5.00% 8,354 0.02% 2,180,854 5.02%

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 30,000,000 0.28% 0 0.00% 30,000,000 0.28% 1)

Note 1: The bank holds preferred shares of Taiwan High-Speed Rail Corp. Note 2: Endowed assets

51 IV. Fund Raising Activities

A. Capital and Shares

a. Sources of capital

March 31, 2013; Unit: share/NT$ Registered capital Paid-in capital Month Issuing Source of Note year price Amount of Amount of Capital Value Value shares shares Cash MOEA No. 09901005390 98.12 13.5 4,915,752,571 49,157,525,710 4,915,752,571 49,157,525,710 capital Jan.12,2010 (note) increment

Note: 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 Share not issued Total Common shares 4,727,517,277shares Not listed 0 share 4,915,752,571shares C-type preferred shares 188,235,294shares Not listed

b. Makeup of Shareholders (Common shares)

March 31, 2013 Makeup of Foreign shareholders Government Financial Other Individuals institutions and Total agencies institutions institutions foreigners Amount

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)

March 31, 2013 Makeup of Foreign shareholders Government Financial Other Individuals institutions and Total agencies institutions institutions foreigners Amount

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

52 IV.Fund Raising Activities 04

c. Diversification of shareholding Diversification of shareholding (common shares)

face value per share: NT$10; March 31, 2013 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

Over 1,000,001 1 4,727,517,277 100

Total 1 4,727,517,277 100

Diversification of shareholding (C-type preferred shares)

face value per share: NT$10; March 31, 2013 Grades of shareholding Number of shareholders Amount of shares owned Share of stake (%)

Over 1,000,001 1 188,235,294 100

Total 1 188,235,294 100 d. List of major shareholders face value per share: NT$10; March 31, 2013 Shares Amount of shares owned Share of stake (%) Names of major shareholders Taishin Financial Holding Co., Ltd. 4,915,752,571 100

Note: Taishin bank is 100% owned subsidiary of Taishin Financial Holding Co., Ltd

53 e. Information on share prices, book value, earnings, and dividend in the recent two years

Year 2011 2012 March 31, 2013 Item Highest Not applicable Not applicable Not applicable Market price per share lowest Not applicable Not applicable Not applicable (note 1) Average Not applicable Not applicable Not applicable

Book value Before dividend payout (NT$ ) 12.62 13.50 14.50 per share (note 2) After dividend payout (NT$ ) 11.50 Note4 Not applicable

Earnings Weighted average amount of shares (1,000 shares) 4,727,517 4,727,517 4,727,517 per share Earning per share (NT$ ) 1.61 1.80 0.77

Cash dividend 1.12 Note4 Not applicable

Dividend Stock dividend from retained earnings - Note4 Not applicable per share Stock dividend from legal reserves - Note4 Not applicable

Accumulated retained dividend (NT$1,000 ) (note 3) - 120,000 149,589

Analysis of P/E ratio Not applicable Not applicable Not applicable investment Price/earnings ratio Not applicable Not applicable Not applicable returns (note1) Yield rate of cash dividend Not applicable Not applicable Not applicable

Note 1: Not applicable due to absence of market price for reference since the bank is not listed firm. 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 2012. 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, the company shall either provide a legal reserve and a special earnings reserve from the surplus, or reverse existing special earnings reserves into the opening balance of undistributed earnings. For the balance, pay out stock dividend and bonus to preferred shares. Should there still be surplus, appropriate 0.01% of the amount as employee bonus. The remaining surplus should be combined with retained earnings at the beginning of the period, for payout of stock dividend and bonus for common shareholders in part or in entirety. For stock bonus, the objects of payout can include employees of affiliates.

As a subsidiary of Taishin Financial Holding, the bank should support the need of the operating fund of the parent company. Under the principle of maintaining the bank’s capital adequacy ratio at the reasonable level, except the payout of dividend and bonus of preferred shares, the dividend and bonus payout for common shareholders should be made in the form of cash dividend in principle. The company should keep the policy of stock dividend and cash payout in stable.

If the bank fail to reach reasonable capital rate, except the payout of stock dividend and bonus for preferred shares, payout of stock dividend and bonus for common shares should be made in the form of 50% cash dividend and 50% stock dividend in principle. The ratio, however, can be adjusted according to the status of profits, corporate funds, capital accumulation, and dilution effect of stock dividend. The dilution effect of stock-dividend payout should not exceed 20% for estimated after-tax earnings per share after the issuance of new shares.

54 IV.Fund Raising Activities 04

2. Status of execution

The board of directors will resolve to issue NT$120,000,000 of cash dividend for preferred shares, NT$5,932,423,000 of cash dividend for common shares, and NT$593,000 of employee bonus for 2012. 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:

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, the company shall either provide a legal and a special earnings reserve from the surplus, or reverse existing special earnings reserves into the opening balance of undistributed earnings. 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 remainder plus the opening balance of retained earnings will be available to shareholders in the form of dividends, which may be fully or partially distributed. 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. For stock bonus, the objects of payout can include employees of affiliates.

Percentages and scope for compensations for directors and supervisors:

After Taishin Bank becomes 100%-owned subsidiary of Taishin Financial Holding, its directors and supervisors are appointed by the parent company. The 57th meeting of 5th board of directors on April 3, 2003 approved the revision of article 44 of the corporate charter, removing payout of compensations for directors and supervisors. The revision was approved by the Ministry of Economic Affairs (MOEA, No. 09201117920, April 20, 2003).

2. Accounting treatment for the difference between accrual and actual payment for employee bonus and compensations for directors and supervisors.

There is no difference between the estimated employee bonus and the actual amount of payout for the current period.

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. There is no difference between the estimated employee bonus and the actual amount of payout for the current period. (2) Amount of employees’ bonus to be paid in stock, and as a percentage to net profit after tax plus employees’ total bonus for the current period: Nil. (3) Earnings per share after the proposed payout of employee bonus and compensations for board directors and supervisors: NT$1.80 per share.

4. Actual dividends for employee bonus and compensations for board directors and supervisors of previous year (including dividend shares, amount and stock price), discrepancies if any from the amount of employees' bonus and directors'/supervisors' remuneration previously recognized, and the causes and treatments for the discrepancies:

There is no difference between the estimated employee bonus and the actual amount of payout for the previous year. i. Buyback of the bank’s shares: Nil.

55 B. Issuance of bank debentures

Issuance of Bank Debentures - I First issuance of subordinated Second issuance of subordinated Types of bank debentures bank debentures in 2005 bank debentures in 2005 Date and Number of the approval document of the FSC, No. 0930031635, Nov. 9, 2004 FSC No. 0930031635, No. 9, 2004 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 place ROC ROC Denomination currency New Taiwan dollar New Taiwan dollar Issuing price Same as par value Same as par value NT$1.508 bn Total amount NT$3.3 bn (A: NT$1.2875 bn; B: NT$0.2205 bn) Bond A: Yea 1-7: fixed rate at 2.70%. The bank’s posted floating rate of Year 8-12: one-year time savings deposit+0.30% for the Should bond holders waive right to execute first five years. put option in the year; the bank will give them The bank’s posted floating rate of one-year time an interest markup of 0.8% on its posted fixed Coupon savings deposit+0.50% from the sixth year. rate of one-year time savings deposit. Should Bond B: the bank waive its right to execute redemption Fixed 2.25% for the first five years. option in the year, the bank will pay an interest The bank’s posted floating rate of one-year time markup of 0.95% on its posted fixed rate of savings deposit+0.75% from the sixth year. one-year time savings deposit, which should be reset per annum. 10 years from the issue date. 12 years from the issue date. Maturity Maturity on March 4, 2015 Maturity on April 28, 2017 Status Subordinated Subordinated Guarantee institution Nil Nil Trustee Nil Nil Underwriter Nil Nil Certifying lawyer Nil Nil Certifying CPA Peter Tsai Peter Tsai Certifying financial 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 Nil. Redeemed all of the bond on Unpaid balance NT$3.3 bn March 4, 2013 Paid-in capital in the previous NT$31,753,524,000 NT$31,753,524,000 year Post-final accounts book NT$59,657,278,000 NT$59,657,278,000 value in the previous year Status of contract Normal Normal performance

56 IV.Fund Raising Activities 04

First issuance of subordinated Second issuance of subordinated Types of bank debentures bank debentures in 2005 bank debentures in 2005 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 fixed 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 exercise put option and should the interest the bond by repaying the principal, and interest rate higher than 1.85%, the bank may since five years from the issue date on March 4, Stipulations for redemption or exercise call option. 2010 and the information will be posted on the early liquidation 3. Put option by bond holders: Should bond bank’s website or in major daily newspapers holders intend to exercise put option, they in the place of the bank’s headquarters one should inform the bank their intension month ago. with “notice for the exercise of put option” within 10 days following the fulfillment 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 defined as matured entirely and de-listed in OTC. Conditions for conversion or Not applicable Not applicable exchange Restrictive stipulation Nil Nil To support the actual need of medium- and To support the actual need of medium- and Fund utilization plan long-term loan long-term loan The total amount of the issuance and outstanding bonds in the percentage of the 52.31 57.84 book value of previous year (%) Eligible capital and type Yes, Tier II Yes, Tier II Name of rating agency, issue Nil Nil date, and the rating

57 Issuance of Bank Debentures - II

Third issuance of Fourth issuance of Types of bank debentures subordinated bank debentures in 2005 subordinated bank debentures in 2005 Date and Number of the approval FSC No. 0930031635 Nov. 9, 2004 FSC No.0930031635 Nov. 9, 2004 document of 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 ROC ROC Denomination currency New Taiwan dollar New Taiwan dollar Issuing price Same as par value Same as par value Total amount NT$5.192 bn NT$5 bn (A:NT$2.95 bn; B:NT$1.442 bn; C:0.8 bn) Coupon Bond A,B:Fixed rate 2.70% for the first seven Year 1-7: The bank’s posted fixed rate for years and fixed rate 3.20% for the eighth one-year time savings deposit+0.80% through the 12th year. Year 8-12: The bank’s posted fixed rate for Bond C:The bank’s posted floating rate for one-year time savings deposit+1.10%The one-year time savings deposit + 0.65%. face interest rate is re-set every year. 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 Nil Nil Certifying CPA Peter Tsai Peter Tsai Certifying financial institution Taishin Bills Finance Taishin Bills Finance Repayment method Appropriation of budget from business Appropriation of budget from business revenue or issuance of new bonds revenue or issuance of new bonds Unpaid balance Nil. Redeemed all of the bond on Nil. Redeemed all of the bond on January 2,2013. January 2,2013. Paid-in capital in the previous NT$31,753,524,000 NT$31,753,524,000 year Post-final accounts book value in NT$59,657,278,000 NT$59,657,278,000 the previous year Status of contract performance Normal Normal Stipulations for redemption or The bank can redeem the entirety of part The bank can redeem the entirety of part early liquidation of the bond by repaying the principal, plus of the bond by repaying the principal, plus interest, seven years after the issuance of the interest, seven years after the issuance of the bond (on May 18, 2012) or on every interest bond (on June 6, 2012) or on every interest payment date afterwards with a written notice payment date afterwards with a written notice issued seven business days before the date, issued seven business days before the date, on any other day with a written notice issued on any other day with a written notice issued two months before the date. two months before the date. Conditions for conversion or Not applicable Not applicable exchange Restrictive stipulation Nil Nil Fund utilization plan To support the actual need of medium- and To support the actual need of medium- and long-term loan long-term loan The total amount of the issuance and outstanding bonds in the 66.22 74.93 percentage of the book value of previous year (%) Eligible capital and type Yes, Tier II Yes, Tier II Name e of rating agency, issue Nil Nil date, and the rating

58 IV.Fund Raising Activities 04

Issuance of Bank Debentures - III

Types of First issuance of First issuance of bank debentures (note 1) subordinated bank debentures in 2010 subordinated bank debentures in 2012 Date and Number of the approval FSC No. 10100301840, FSC No. 09900101150, Mar.23,2010 document of the central regulator September 24, 2012 Issuing date April 12, 2010 October 19, 2012 Face value NT$ 50M NT$ 50M Issuing and trading place ROC ROC Denomination currency New Taiwan dollar New Taiwan dollar Issuing price Same as par value Same as par value NT$10 bn NT$5.6 bn Total amount (A:NT$4.5 bn; B: NT$5.5 bn) (A:NT$1.1 bn; B: NT$4.5 bn) Bond A:Fixed interest rate at 2.65% per annum Bond B:Interest rate is set at “the floating interest rate for one-year time savings deposit of Chunghwa Post Co., Ltd.” plus 1.5%. The Bond A:Fixed interest rate at 1.53% per paper rate will adjusted annually according to the annum Coupon following standard. Bond B:Fixed interest rate at 1.65% per “The floating rate for time savings deposit of annum 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. A:7 years from the issue date. 7 years from the issue date. Maturity on October 19, 2019 Maturity Maturity on April.12, 2017 B:10 years from the issue date. Maturity on October 19, 2022 Status Subordinated Subordinated Guarantee institution Nil Nil Trustee Nil Nil Underwriter Nil Nil Certifying lawyer Nil Nil Certifying CPA Yang, Qinzhen Yang, Qinzhen Certifying financial institution Not applicable Not applicable Appropriation of budget from business revenue Appropriation of budget from business Repayment method or issuance of new bonds revenue or issuance of new bonds Unpaid balance NT$10 bn NT$ 5.6 bn Paid-in capital in the previous NT$49,157,525,000 NT$49,157,525,000 year Post-final accounts book value in NT$53,433,376,000 NT$57,550,558,000 the previous year Status of contract performance Normal Normal Stipulations for redemption or Nil Nil early liquidation Conditions for conversion or Not applicable Not applicable exchange Restrictive stipulation Nil Nil Strengthen capital structure , improve Improve financial structure and raise capital Fund utilization plan capital adequacy ratio and redeem priority adequacy rate. issuance of bank debentures earlier. The total amount of the issuance and outstanding bonds in the 46.79 53.17 percentage of the book value of previous year (%) Eligible capital and type Yes, Tier II Yes, Tier II Name e of rating agency, issue “A+(twn)” issued by Fitch Ratings, Taiwan “twA” issued by Taiwan Ratings on April 6, 2010. date, and the rating Branch on October 9,2012.

59 Issuance of Bank Debentures - IV

Types of bank debentures Second issuance of subordinated bank debentures in 2012

Date and number of the approval document of the FSC No. 10100301840, September 24, 2012 central regulator

Issuing date December 14,2012

Face value NT$ 50M

Issuing and trading place ROC

Denomination currency New Taiwan dollar

Issuing price Same as par value

NT$6.1bn Total amount (A:NT$3.8 bn; B: NT$2.3 bn)

Bond A:Fixed interest rate at 1.53% per annum Coupon Bond B:Fixed interest rate at 1.65% per annum

A:7 years from the issue date. Maturity on December 14, 2019 Maturity B:10 years from the issue date. Maturity on December 14, 2022

Status Subordinated

Guarantee institution Nil

Trustee Nil

Underwriter Nil

Certifying lawyer Nil

Certifying CPA Yang, Qinzhen

Certifying financial institution Not applicable

Appropriation of budget from business revenue or issuance of new Repayment method bonds

Unpaid balance NT$ 6.1 bn

Paid-in capital in the previous year NT$49,157,525,000

Post-final accounts book value in the previous year NT$57,550,558,000

Status of contract performance Normal

Stipulations for redemption or early liquidation Nil

Conditions for conversion or exchange Not applicable

Restrictive stipulation Nil

Strengthen capital structure , improve capital adequacy ratio and redeem Fund utilization plan priority issuance of bank debentures earlier.

The total amount of the issuance and outstanding bonds in the percentage of the book value of 63.77 previous year (%)

Eligible capital and type Yes, Tier II

Name e of rating agency, issue date, and the rating “A+(twn)” issued by Fitch Ratings, Taiwan Branch on December 7,2012.

60 IV.Fund Raising Activities 04

C. Issuance of preferred shares

Issuance of Preferred Shares Issuing (undertaking) date March 30, 2007

Preferred share C via private placement Item Par 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 Preference over common shares property Right and No voting or election right at shareholders’ meeting but having the right of being obligation Exercise of voting right elected and the voting right at the preferred C shareholders’ meeting. Entitled to subscription right for new shares at cash capital increment, same to Others common shares The amount of redemption or 0 conversion The amount of non- NT$3,199,999,998 redemption or non-conversion Preferred share C may be converted to common Outstanding Preferred shares share at 1:1 since March 22, 2009. Preferred share C is a perpetual security and the bank may Redemption or conversion redeem by issuring price at any time since year 10 stipulation 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 Not applicable 2010 Lowest Not applicable Average Not applicable Highest Not applicable 2011 Lowest Not applicable Market price Average Not applicable per share (note1) Highest Not applicable 2012 Lowest Not applicable Average Not applicable Highest Not applicable Current year as of April.30, Lowest Not applicable 2013 Average Not applicable The amount of conversion or subscription as of annual Nil Other rights report printed. Terms of conversion right or Refer to the company’s corporate charter subscription The impact on Preferred C shareholders, possibility on dilution and the impact on Nil current shareholders The impact on capital adequacy ratio after Reduced by 0.43% approximately redemption

Note 1: Not applicable due to absence of market price for reference since the bank is not listed firm.

61 D. Issuance of overseas depository certificates: Nil.

E. Issuance of stock options and restricted right shares for employees

1. issuance of stock option for employees:Nil. 2. issuance of restricted right shares for employees:Nil.

F. Acquisition of or sell to other financial institutions

1. Mandatory disclosure of the opinions of certified public accountant on the propriety of share-swap ratio for the acquisition of or sell to other financial 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 five years and of the opinions of underwriting securities firms for the cases conducted via the issuance of new shares: Not applicable 3. Mandatory disclosure of the execution of the acquisition of or sell to other financial 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 financial 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: Nil. For undergoing merger and the acceptance of new shares floated by other financial institutions, disclose their execution and the effect on the interest of shareholders: Nil.

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 bank debentures 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 benefits or which fails to achieve the goal in execution schedule or benefits.

a. Contents of plan 1. Previous issuance of securities via public or private placement and issuance of bank debentures 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.

62 IV.Fund Raising Activities 04

b. Status of execution Fund utilization plan for the issuance of securities or bank debentures via public or private placement and issuance of bank debentures 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 the company’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.

63 V. Business Status

A. Business Contents

a. Growth and change in various business items 1. Wealth Management

For wealth management, the bank provides tailor-made financial consulting service to customers, whose total assets exceeding NT$1 million or active users of retail banking and credit card services. The bank also provides financial information to deposit account holders averaging less than NT$1 million in balance as means of growing banking relationship with potential customers. Via strong Financial Advisory system, we provide tailor-made financial recommendations to each customer according to their life stage, financial needs and risk preferences. The bank’s wealth management operation covers sound financial planning, investment portfolio management, asset allocation recommendations and a broad range of financial 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 dedicated treatment and events for payback to customers. In addition, provide dedicated physical examination to customers, so that they can take care of their health.

2. Retail Banking

The bank’s retail banking operation covers consumption loans (housing loan, auto loan, unsecured loan, and subordinated housing loan), credit card, micro corporate loans, 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. Wholesale Banking

Wholesale banking operation provides an array of financial products and services to various institutional clients, including corporations, government-owned companies and financial 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, underwriting, stock affairs, financial advisory, asset securitization, and discretionary assets management, etc.

4. E- Financial Business

The Electronic Banking Department currently covers Taishin Bank's digital virtual service, including ATM, Internet banking, and mobile banking. In addition to enhancing system functionality, the department also explores ways to increase customers' usage and utilize the virtual network as means of building customer loyalty. In order to meet customers’ demands for smaller overseas remittances, Taishin Bank has joined Visa International to offer "Visa Money Transfer" service over its Internet banking platform. The availability of "Internet banking / automated service equipment" gives customers quicker, cheaper, and more secure means of channeling funds. To accommodate customers' diverse demands for transfer transactions, these are equipped with smartphone app transactions including password authentication (One Time Passwords, OTP), enabling customers to complete non-designated transactions without debit cards or card readers.

64 V. Business Status 05

The mobile banking system’s functionality has increased greatly since it was first introduced in 2010. New features have also been added in 2012, such as fund trading, currency exchange, barcode-based payments, and e-tag settings. In addition to basic transaction functions, extra transaction functions have been added which have greatly enhanced the system’s features. In light of the growing amount of users and trade volumes over the mobile banking network, Taishin Bank has placed its major focus on delivering the easiest and most convenient user experience by introducing a new device-based authentication method. Customers can complete non-designated transactions after security certification process through chip cards, which is both secure and practical. Taishin Bank operates an ATM network that covers the majority of Taiwan to serve customers within and outside its branches. Usage of Taishin Bank's ATM network has increased progressively over the last few years, both in terms of users and transaction volume. After accumulating valuable experiences, we optimized our ATM interfaces at the end of 2012. Featuring a simplified and more intuitive layout with revised procedures that not only shorten the time taken to complete each transaction, the optimized ATMs also provide a smoother, more satisfying user experience.

In an attempt to reward long-time virtual network users, Taishin Bank has created a reward point system and introduced a series of incentive campaign to promote usage. This new system integrates four of the bank's major electronic networks as well as marketing campaigns organized with internal and external partners. The system was innovative in many ways that it won the 12th "e-21 Silver Award" by the Ministry of Economic Affairs in 2012.

5. Trust Financial Service

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 order to meet the diversified trust need of corporate customers, the bank launched “employee shareholding trust” in May 2012; furthermore, the new law “restricted employees the right to new shares”was completed in the second half of 2012 .This has given rise to trust management opportunities that could be offered in conjunction with this new form of compensation, therefore the bank will launch “employee savings trust” in the second half of 2013 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.

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 firms via custodian bank, the bank launched “collective investment account for foreign and overseas Chinese employees” custodian business in March 2011.

For mutual fund business, the bank provides comprehensive investment portfolios covering a broad range of industries around the world to satisfy the diverse needs of customers. We also continually introduce new mutual funds that are tailored to meet the different characteristics and requirements of customers and offer differentiated merchandise

In terms of fixed yields products, The bank offers quality overseas corporate bonds and bank debentures for customers favoring fixed yields in their assets allocation. The bank also accepts professional investors to entrust offshore structured notes, so as to provide more opportunities to high-assets professional investors.

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

Net income share 2012 2011

Retail banking 63% 67%

wealth management 26% 24%

consumption financing 25% 27%

credit card 12% 16%

Wholesale banking 37% 33%

Total 100% 100%

b. Business plan for the current year 1. Wealth Management

(1) Brand image ██Strengthen brand image, becoming the best wealth-management bank in the minds of customers. Adhere to the core concept of “sincerity is the best service,” take care of customers’ assets from the angle of customers, and utilize the bank’s smart financial system to provide tailor-made assets deployment suggestion. ██Based on the concept of sustainable management and the goal of all-round assets management, continue introducing plural and new product business, so as to bring investors steady returns and assets growth in both bullish and bearish markets. ██enhance employee quality and customer satisfaction, and strengthen risk-management and crisis- handling capability. (2) Multi-channel distribution ██Further develop non-branch sales channels and utilize Internet media to develop online and mobile banking customers. Customers can choose to become cloud members and enjoy various privileges using the automated service network. ██Exclusive campaigns for cloud wealth management members. ██Enhanced cross-selling via financial advisors. (3) Refined customer segmentation ██Increased wealth management customer base by upgrading potential customers, while improving product penetration to existing wealth management customers. ██Broadened analysis on sub-segment customers; shifting business focus from product-driven to customer-driven; offering products and services that satisfy customers' needs; and integrating the resources of Taishin Financial Holding to deliver the ultimate one-stop-shopping experience. (4) Diversified product lines ██Enrich product integrity by introducing the best products on the market through the open platform, along with Taishin’s unique product offerings, including securities lending trusts and the “ So Easy plan”. ██Provide the most attractive perks and benefits in the market along with the best feedback to wealth management customers. ██Introducing packaged products combined with customized asset allocation to improve the growth of wealth management and insurance businesses, while increasing the deposit base in the meantime.

66 V. Business Status 05

2. Retail Banking

(1) Differentiate from the competition by raising product awareness and competitiveness. (2) Improve business performance by optimizing credit-approval efficiency without compromising credit quality and risk management. (3) Provide customers with the most suitable products and services based on precise statistical analyses and cross-channel collaborations. (4) Establish cross-industry alliance and integrate marketing resources. (5) Incorporate the latest technologies into new products and target emerging customers.

3. Wholesale Banking

(1) Enrich the existing product line through product innovation; anchor customer relationship by offering more variety of solutions. (2) Enhance collection and payment services and strengthen transaction-backed financing. Provide integrated NTD and foreign currency cash management as means of promoting current deposits ratio while enhancing customer relationship and reducing credit risks. (3) Extend the existing collaboration bntween retail and wholesale banking segments; utilize retail banking channels to explore export negotiation business; aim to achieve higher growth in SME financing; explore potential SME (small and medium enterprise) customers. (4) Explore collaborative opportunities with Chinese banks on trade financing services. (5) Establish overseas branches in Singapore and Brisbane, Australia; utilize Taishin Group's Chinese leasing platform to engage in RMB-denominated leasing and factoring services for higher lending spreads. (6) Optimize credit-extension procedures and enhance risk management to ensure sound asset quality. (7) Develop a comprehensive talent training system to support growing businesses; build the bank's overseas talent pool through regular job rotation.

4. E-Financial Business

In order to provide customers with a better user experience, the bank's official website and internet banking system will undergo a major overhaul this year. Apart from introducing a more intuitive interface, the bank will also simplify its transaction flow so that customers are able to complete their transactions in just three clicks. Meanwhile, the upgraded system will support multiple operating systems and multiple browsers. Furthermore, in response to growing online shopping demands, the bank will also upgrade its online ATM functions to host a number of smart pay transactions that will provide customers more seamless banking service.

Taishin Bank will make several intuitive changes to the flow and interface of its mobile banking system, after consolidating opinions from users. These changes have been scheduled to take place in the second half of this year, and will be focused on delivering the best user experience. Moreover, much expectation has been placed on Taishin Bank's mobile banking platform to serve as a bridge with its customers wherever they go. As a result, the mobile platform will be integrated with every information and service the bank has offered, including online applications for various products , VIP upgrades and online financial consultation. Given the highly mobile nature of smartphones, the mobile banking network is not only a transaction media, but also a means in which customers can access Taishin Bank's personalized services.

In the last few years, banks and convenience store chains have worked closely to incorporate ATMs into retail services, which not only brought greater convenience to customers' lifestyles but also set the model example of a win-win solution. In 2013, Taishin Bank will continue working closely with convenience store chains, and introduce a new customer loyalty program - The Coupon System, based on a cross-industry alliance. The idea of this new initiative is to offer more privileges to customers simply for using Taishin Bank's ATMs.

67 5. Trust financial service

(1) Enhance “So Easy target wealth-management project” to boost the scale of installment products and push installment payment products, so as to satisfy customers’ needs. (2) Push “yield-type securities” actively engage in securities lending market, and develop potential customer groups for securities-delivery deposits, so as to create securities lending income for clients. (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) Enrich Taishin Bank official website with information on market trends, products and subscription privileges. (6) Promote funds with a variety of themes; provide custom-tailored services to customers of different profiles and segments. (7) Modify the product lineup of domestic and offshore funds, so as to satisfy the customers’ needs about asset allocation planning. (8) Introduce privileges on fund subscriptions as means of exploring customers and anchoring banking relationship. (9) Introduce multi-themed and RMB-denominated offshore ETFs, so as to offer customers suitable instruments in any market condition. (10) Offer quality offshore bank debentures and corporate bonds in multiple currencies (including RMB). (11) Continue to accept professional investors to entrust offshore structured notes.

c. Market analysis 1. Wealth Management

(1) Status of market demand and supply and growth potential: ██The deregulation of RMB services for domestic banking units (DBU) since February 6 had opened up new opportunities for trade financing, wholesale banking, retail banking, and wealth management segments. Meanwhile, the active trading of RMB-denominated derivatives may potentially attract overseas capital to fuel the growth of the domestic financial market. It has been estimated that RMB services alone would contribute approximately NT$5.7 billion in profit to Taiwan's banking industry, representing 3.8% of industry-wide net profit after tax. ██Reports have indicated that the monthly average income of wealthy households in Taiwan had increased by 14% in 2012, ranking first among all Asian countries. With a monthly average household income of NT$215,000, Taiwan's wealthy tier ranks 4th in Asia. ██The Directorate-General of Budget, Accounting and Statistics has estimated a 3.59% GDP growth for Taiwan this year, which puts the country on path for a U-shaped recovery. (2) The bank’s competitive niche ██In 2012, the bank achieved a 37% growth in wealth management revenue, an 8.2% annual growth in earnings, and delivered net profit after tax totaling NT$10.2 billion, the best in the past 8 years. This growth momentum is expected to be sustained until 2013. ██The bank respects its customers and continues to offer the best services by tending to customers' opinions. "Genuine care" has been imprinted in Taishin's culture as the fundamental value for achieving service excellence, and for which it had been widely acclaimed at home and abroad in 2011.

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██The bank provides plural products, pioneers the use of scientific financial analysis, and offers tailor-made wealth-management objectives and assets-deployment suggestion. For sophisticated management of customers, the bank develops 3M management structure based on customer needs, including service management (SM), product management (PM), and channel management (CM). ██Professional team, coupled with the capability of systematic risk assessment and monitoring, responds to market changes rapidly and provides customers solutions. Provide customers optimal products via database marketing, by analyzing the types of existing customers and understanding deeply the needs of different customers. ██Provide the most attractive perks and benefits in the market along with the best feedback to wealth management customers. ██Take advantage of the existence of numerous branches and automated channel, integrate the resources of the financial holding company, and manifest the synergy of integrated marketing via cross selling. ██Decrease resources waste via continuous inspection and improvement of operating flow. (3) Favorable factors for development outlook ██Service and trade agreements in ECFA are scheduled to be completed in 2013; by which time the Great China market will be open to broader opportunities where businesses may explore. ██Thanks to stable cross-Taiwan Strait relationship and the reduction of inheritance and gift tax, overseas funds begin back to Taiwan. ██Start with the cross-strait currency settlement mechanism, a number of RMB-denominated financial products such as domestic funds, structured deposits, international bonds and investment-linked insurance can obtained in Taiwan without using overseas channels. ██The government is highly committed to the growth of the financial industry. Its most recent effort was the "Financial Service Development Initiative" proposed by the Financial Supervisory Commission, which was aimed to achieve a number of goals such as facilitating financial interactions between China and Taiwan, permitting broader services, encouraging overseas deployment. ██Leeway for the development of wealth-management business in Taiwan is very large. (4) Unfavorable factors for development outlook ██The strict regulation and management of the authorities over structured notes and trust-type investment products runs counter to market opening. ██Large-scale increase in the need for domestic and foreign financial talents will accelerate the turnover of talents. ██Foreign banks are expanding their market shares via a mergers and acquisitions strategy, and are importing their operation modes. ██The bank has relatively fewer branch counts, and smaller size per branch. (5) The bank’s countermeasures ██The bank is aggressively expanding its number of branches particularly in metropolitan areas and central business districts of suburban areas. The bank will obtain customers' recognition by offering products suited to their needs via “service” and ”segmentation” . ██Constantly review and improve procedures to efficiently provide the best service. ██Integrate resources of financial holding company, manifest the synergy of cross selling, and increase the number of products held by customers, so as to become the major corresponding bank of customers. ██Adhere to high quality, professional service and focus on innovation, collaborative culture, provide employees with comprehensive training and career planning.

69 2. Retail Banking

(1) Status of market demand and supply and growth potential The beginning of 2012 was largely dominated by the economic slump carried from the previous year, which resulted in poor investment environment, weak capital demands from businesses, and weak consumers' confidence. However, the world's economy eventually found its way to recovery in the second half of the year as economic activities picked up in USA and China, while Japan adopted its expansionary monetary and fiscal policies. The Directorate-General of Budget, Accounting and Statistics, Executive Yuan, had estimated Taiwan's 2012 GDP growth at 1.26%. Despite recovering economic activities, much of the world's economic outlook still depends on how the European debt problem will be resolved, and the United State's financial policies after QE; Global Insight has estimated a 2.6% growth for the global economy in 2013. In Taiwan, the Directorate- General of Budget, Accounting and Statistics has estimated the nation's 2013 economic growth at 3.59% with a 1.86% growth in consumer spending on the basis of favorable economic outlooks, recovering stock market, reduced unemployment, improved consumers' confidence, progress in cross-strait currency settlement, and potentials given rise by RMB services. (2) The bank’s competitive niche ██The bank is a market leader in retail banking, with well-established brand values and customer loyalty. ██Continued process optimization to improve performance and service quality. ██Ensure balanced growth against risks by using statistical analyses and credit management. ██Integrate group resources to enhance cross-selling mechanisms, and take the advantage of widespread channels to expand business scale. ██Use customer segmentation strategy with differentiated marketing, to provide a wide range of products and services . (3) Favorable factors for development outlook ██Deregulation of cross-strait policy and financial regulation; commodity diversification is boosting the overall market demand. ██Increasing number of high net worth customers, giving rise to opportunities in high-end financial services. (4) Unfavorable factors for development outlook ██Economic recovery remains uncertain at this point, which has affected consumers' willingness to spend and may pose potential credit risks in the future. ██Over-banking in the retail banking segment, resulting in slim profit margins. (5) The bank’s countermeasures ██Monitor credit risks by analyzing customers' behaviors; flexibly adjust credit policies and pricing strategies to accommodate changes in the external environment. ██Enhance collaboration with distribution partners, and increase product penetration and brand awareness through cross-industry alliances. ██Utilize group resources in cross-selling and packaging customized financial solutions. 3. Wholesale Banking

(1) Status of market demand and supply and growth potential The global financial sentiment may recover as Europe and USA both weathered through the worst of the crisis. In Taiwan, however, the market is still dominated by similar or even indistinguishable services offered by excessive participants, which compelled banks to compete at slim margins. However, the government remains highly committed to the growth of the financial industry, and has taken a number of initiatives to open up banking restrictions and encourage overseas deployment. The most significant of all is the deregulation on cross-strait banking, which has so far revitalized the

70 V. Business Status 05

capital market, and may potentially attract overseas capital to provide new sources of revenue for the banking industry. (2) The bank’s competitive niche ██Ability to integrate a multitude of products offered under the financial holding group; commitment to financial product/service innovation; attention to customers' multidimensional needs; and the ability to deliver one-stop financial shopping experience. ██Outstanding cash management and E-banking platforms that can be used to offer cash collection/ payment services. ██Excellent risk control mechanisms help ensure sound asset quality. (3) Favorable factors for development outlook ██Via differentiated management measures, the Financial Supervisory Commission gradually induces financial institutions to raise their loan coverage rate to over 1%, contributing to the healthy business development of financial institutions and improve excessive price competition for domestic credit extension ██The government has been actively involved in introducing modern technologies, globalization, and differentiated features to the financial industry. These efforts may prove helpful in changing the competitive environment. ██Fast-growing demand for offshore banking in the wake of rapid development of Chinese and emerging Asian economics ██Possess plural product resources and development capability of the financial holding firm to provide one-stop-shopping financial services to customers ██The "Regulations Governing the Banking Activity and the Establishment and the Investment by Financial Institution Between the Taiwan Area and the Mainland Area" has eased restrictions for operating in mainland china. local banks may now establish branches in China within a relatively short time. (4) Unfavorable factors for development outlook ██Over-banking status, homogeneous traditional financial products are difficult to create high profits. ██Overseas income is limited, since there is only one overseas branch. (5) The bank’s countermeasures ██Make proper use of group resources. Provide differentiated services and products to different client segments, so as to create service value. ██Take advantage of the leasing platform in mainland China, expand customer groups and consolidate existing customer relationship. ██Accelerate applied to establish overseas branches progress, particularly in Asia Pacific. d. R&D of financial products and business development status 1. Major financial products and scale of retail banking in recent two years

Item 2011 2012 Mortgage Loan NT$266.1 bn NT$292 bn Auto Loan NT$15.7 bn NT$21.8 bn Other consumer loan NT$21.6 bn NT$26.6 bn Credit card 2,960,000 cards 3,150,000 cards

71 (1) As of the end of 2012, outstanding mortgages reached NT$292 billion, with market share of 5%; outstanding auto loans amounted to NT$21.8 billion, with market share of 25.6%, ranking first place in the market; and outstanding amount of other consumer loans hit NT$26.6billion, with market share of 3.27%.Outstadning amount of overall consumer loans grew 23% in the year. (2) As of the end of 2012, the bank’s credit cards in circulation numbered 3.151million cards, with market share of 9.2%, ranking fourth place in the market the number of effective cards amounted to 2 million cards, with 9.3% market share, ranking fifth place; in the year, total credit-card spending value topped NT$152.7 billion, for market share of 8.7%, ranking fifth place. The bank currently has 58,000 merchants as its customers, representing a market share of 19.9%, ranking third place. (3) In 2011, set up marketing alliance department under retail banking marketing division to develop auto- loan business via strategic alliance. As of the end of December 2012, outstanding loans reached NT$5.59 billion.

2. Major financial products and scale of wholesale banking in recent two years

(1) Outstanding loans extended by domestic branches to state and private enterprises. With equal emphasis on risk management and business development, the bank’s outstanding loans for state and private enterprises reached NT$196.1 billion at the end of 2012, ranking 14th place among 38 domestic financial institutions, similar to the ranking a year earlier. (2) Outstanding loans for small and medium enterprises 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$66.6 billion of outstanding loans to small and medium businesses as of the end of 2012, up 22% over a year earlier, compared with the industry average of 10%. (3) L/C and export negotiation Due to increasing varieties of trade financing options available and changes in commercial practices, the total amount of L/C issued in 2012 reached US$700 million , a declined of 29% over the previous year, whereas export negotiation had increased by 25% over the previous year to US$1.65 billion. (4) Factoring business The bank is still a market leader for factoring business and undertook NT$241.6 billion of such business in 2012, declined 19% than previous year, with equal emphasis on the maintenance of customer relationship, pricing and risk.

3. Major financial products and scale of trust financial business in recent two years

unit: NT$ million Year 2011 AUM 2012 AUM So Easy target wealth-management plan 6,167 5,004 Planned money trust 5,928 6,500 Securities trust 28,025 27,649 Offshore Structured notes 26,061 18,664 Offshore ETF 2,083 2,251 Overseas bonds 1,184 4,275 Domestic and overseas funds 106,783 108,979

4. R&D achievements in recent two years

(1) Launch of co-brand cards with Shinkong Mitsukoshi - adjusted product benefits to include EasyCard functions, allowing customers to pay for more varieties of purchases. (2) Dynamic Currency Conversion (DCC) - Taishin is pioneered the ability to enable customers to charge credit card purchases denominated in NTD when used overseas.

72 V. Business Status 05

(3) eTag autoload - the first in the market to offer autoload function to customer's prepaid toll account via credit card or direct debit, thereby giving customers one less thing to worry on the road. (4) Limited edition NFC accessory for iPhone 4 - a new accessory that gives cellphones the access to EasyCard and Paypass information, allowing payments to be made via cellphone. (5) Explored new channels (e.g. social networks) that can be used to reach the bank's existing customers and increase product penetration at lesser costs. (6) Enhanced scoring system - reduced the bank's credit risks by optimizing scorecards designed for various products.

5. Future R&D plan

(1) Retail banking ██Refined scorecards and statistical models, and introduced location-based analysis for improved marketing efficiency and product penetration. ██Introduced new technologies and enhanced virtual sales channels to make mobile payment a reality. Launched products that were more relevant to customers' needs and market trends. ██Continued process optimization and introduced a bank-wide image database to facilitate better service efficiency and quality. (2) Wholesale banking ██Improved new product development and pricing; increase self-developed products in our portfolio for higher profitability. ██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 efficiency and quality and lower credit-extension and operating risk. ██Plan financial trading system to accommodate the rollout of new diversified products in the future and integrate credit-line management for derivatives, and improve trading flow and enhance trading capability. ██Focus on launching RMB business in light of current round of deregulations. ██Expand offshore financing and the number of overseas branches , 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 ██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 profit margin. ██Continue strengthening risk controlling mechanism and risk management and avoid improper sale, and provide clients professional planning of asset allocation ██Offer enhanced privileges as rewards to wealth management customers. ██Strengthen the wealth management team, enhance employee’s expertise ██Improve ability to analyze customers, to provide more suitable products. (2) Long-term business development plan ██Strengthen brand image and become the best wealth-management bank in the minds of customers, thereby becoming a leading financial institution in Taiwan.

73 ██Via segmented customer group management, enhance the performance of the bank and enhance customer satisfaction. ██Achieve breakthrough in private banking business among domestic banks. ██Actively develop overseas markets

2. Retail Banking

(1) Short-term business development plan ██Conduct various trials and increase the volume of high-yield services under balanced risks. ██Learn customers' lifestyles to offer suitable products and services at different life stages of their lives. ██Consolidate group resources and cross-selling for better profitability. ██Explore strategic alliances as means of increasing sales coverage and depth. ██Explore new forms of sales channels and alternative means of reaching potential target customers. (2) Long-term business development plan ██Consolidate the financial group's distribution channels and resources to offer the ultimate one-stop shopping experience, and aim to become customers' most preferred bank. ██Continue improving service efficiency and effectiveness through process optimization. Innovate and differentiate from other competitors. ██Refine existing risk management techniques as means of enhancing asset quality. ██Continue focusing on product innovation. Increase product penetration by exploring new and differentiated forms of services/products.

3. Wholesale Banking

(1) Short-term business development plan ██Materialize segmented customer group management. Allocate group resources to deliver the most comprehensive financial services. ██Segment groups and industries to efficiently control group/industry risk and resource allocation. ██Enhance sales efforts on transaction-backed financing; enhance collection and payment services as means of controlling customers' cash flows; anchor customer relationship under balanced risks. ██Enhance collaboration between retail and wholesale banking segments; replicate successful experiences; explore potential SME customers. ██Take initiative in capturing overseas opportunities; explore potential areas of collaboration with Chinese banks; establish branch presence in Singapore and Brisbane, Australia. ██Build the bank's overseas talent pool through regular job rotation, in order to accommodate growing businesses. (2) Long-term business development plan ██Enhance service capabilities and product innovation; anchor customer relationship and aim to raise customers' satisfaction and contribution. ██Grasp the cash flow of customers and provide comprehensive financial service via diversified products under the financial holding company. ██Plan to set up branches in the Asia-Pacific 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.

74 V. Business Status 05

4. Trust Financial Services

(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 wholesale banking and the business of “Collective Investment Account for Mainland China or Overseas Foreign Employees ,” so as to expand the channel for wholesale banking. ██Provide planning-type trust customers with systematized transaction and electronic service to satisfy customer’s need. ██Develop an overseas ETF order placement platform where customers can place limit orders. Introduce kinds of ETFs on a regular basis, giving customers the flexibility to respond to market changes. ██Provide more convenient e-trading service function. ██Provide more diversified online wealth-management information. ██Expand the sales volume of financial products and the scale of assets under management on the basis of asset allocation , so as to increase the fee income. ██Develop an overseas ETF order placement platform where customers can place limit orders. Introduce thematic ETFs on a regular basis, giving customers the flexibility to respond to market changes. ██Continue to provide quality overseas bank debentures and corporate bonds denominated in various foreign currencies(include RMB ), to help with the assets allocation of customers with preference for fixed yields. ██Continue push offshore structured notes suited to professional investors, so as to enhance customer service and provide more attractive investment products. ██Reach potential customers and increase the amount of assets under management by publishing periodicals, organizing investment seminars and marketing campaigns etc. ██Carefully select and introduce new thematic funds ahead of the market; aim to satisfy customers' needs for variety and proper asset allocation. ██Provide abundant financial information over the Internet, and aim to deliver the ultimate one-stop shopping experience via the Internet platform. ██Consolidate customers' financial goals at various stages of their lives to introduce systematic investment plans, which help accumulate asset base over time. (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 track and develop risk-management indices, so as to grasp product performance and risk for customers. ██Continue introducing pluralized new products and business, in order to bring steady returns to investors in both bullish and bearish markets. ██Promote the proper idea of asset allocation; aim to increase the number of products sold and the amount of assets under management.

75 ██Track product performance regularly; develop risk indicators that can be used to monitor product performance and risks. ██Continue introducing a variety of new funds and innovative means of investment to deliver customers' expectations.

B. Employee

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

Base date: March 31,2013

Current year as of Year 2011 2012 March 31, 2013

Male 2,481 2,462 2,433 Numbers of female 3,798 3,727 3,670 employee Total 6,279 6,189 6,103 Average age 35 35.8 36.1 Average service years 6.9 7.5 7.7 Doctor 0.08% 0.10% 0.10% Master 15.00% 16.09% 16.48% Shares of education College 79.77% 78.30% 78.03% degrees Senior high 5.29% 5.43% 5.31% Under Senior high 0.08% 0.08% 0.08% Test for trust business 2,852 2,837 2,811 Basic test fro internal control 3,333 3,287 3,256 Qualification test for property insurance staffers 3,096 3,062 3,009 Investment-type insurance policy staffers. 1,583 1,569 1,547 Kinds of professional Life insurance staffers 3,389 3,269 3,219 certificates Future business staffers 475 483 486 owned by employees and Securities investment analysis 20 20 19 their numbers Senior securities staffers 424 437 446 Investment trust and consulting staffers 340 368 379 B-type laws and regulations for investment trust and consulting (including professional ethical 1,444 1,522 1,502 code)

b. Employee Training and development To support continuous business growth , personal training and development has been the consistent insistence of Taishin Financial Holding. Taishin Bank's excellence in talent management had won itself the "8th National HRD InnoPrize" by the Council of Labor Affairs in August 2012, a bronze certification in Taiwan TrainQuali System (TTQS) by the Bureau of Employment and Vocational Training in September, and the "Best Human Resource Development Award" by Taiwan Academy of Banking and Finance in November. The total number of trainees reached more than 210,000 people/attendances and the average annual training hours per person hit

76 V. Business Status 05

45hours. Measures for personnel training and development meant to enhance colleague’s overall competitive edge follow:

1. Taishin University

Utilize the integration of Taishin University and CTMS training management system, each of the courses offered had been associated to various managerial roles and general roles within the organization since 2012, so that every staffer can take advantage of systematic and structured course design and system function to carry out plural learning. The platform features “transparent learning information,” “diversified learning channel,” “and integrated learning resources.”

2. Talented Accumulation Program

Choosing and recruiting different levels of colleagues by the 360 evaluation mechanism and the committee, and developing reserve team leaders, branch manager trainees, MA, AMA, and TSP multi-stratum talented accumulation program. Planning training for different levels of talents to reach the destination by the core value and strategy, cooperate with National Taiwan University to incorporate EMBA courses into cultivation plan for talent bank since 2010. Via study and lecture on cases, integrate the practical management experience of talent-bank members and theories, to further enhance management capability.

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 participating in development projects. Being with superior is the most suitable way to advance the development. Meanwhile, establish training deposit book system, under which the company appropriates 10,000 points of training resources annually for every staffer, as subsidy for staffers to obtain professional certificates, cultivate second expertise, and enhance foreign-language and computer skill, so as to integrate personal development and corporate objective, thereby boosting the overall competiveness of the organization.

C. Corporate Responsibility and Code of Ethics

In addition to the management of core financial business, Taishin Financial Holding also emphasizes the social responsibility of an enterprise. It integrates the resources of subsidiaries for long-term dedication to public services, charity, arts and humanity, sports sponsorship, and promotion of financial academics. Via substantial payback to the society, community, and underprivileged groups, it exercises the corporate power to contribute to the betterment of the nation and society.

a. Public service and charity 1. “Care for Taiwan” series

Taishin Financial Holding has joined hands with famous shopping website PayEasy.com to carry out “Care for Taiwan” series events since 2002, helping disaster victims in Hsinyi village, Chungliao village, Yuchih village, and Kuohsing village to develop local economy. Based on the concept of “giving fishing pole and teaching fishing,” it rallies people to sponsor agricultural products, pushes credit-card donation, and pushes characteristic products and travels at backward areas, successfully helping with the reconstruction of disaster- stricken areas and posing as a paradigm for corporate participation in public services.

From 2005, “Care for Taiwan” series has targeted “Kuohsing-village karate teenager team,” helping those teenagers raise training fund via the establishment of theme website and the utilization of media reporting. In

77 2012, Taishin Insurance Agency - a member of Taishin Financial Holding, sponsored Taiwanese contestants to participate in The 13th WSKF World Championships held in Hong Kong, and returned with excellent achievements. In the year, the team won 124 medals in domestic and overseas tournaments (including 39 gold medals, 41 silver medals, and 44 copper medals).

In 2008, “Care for Taiwan” series extended its reach to rice plantation in Taiwan. In order to sustain Taiwan’s rice plantation and enable people to each pure Taiwanese rice, Taishin Financial Holding and PayEasy. com established brand new platform for production and marketing of Taiwanese rice, pushing corporate sponsorship of “one-acre rice paddy” and family sponsorship of “one-acre rice paddy of my family” programs, so that Taiwan’s good rice can penetrate local families. In addition to benefiting the health of local people and boosting the income of farmers, the program has created more working opportunities in Taiwan villages. In total, Taishin Financial Holding has sponsored rice procurement for over 97 units, equivalent to 48 hectares of rice paddies. It has given 50,000 rice gift boxes to over 10,000 Taishin customers and staffers, which have eaten over 170,000 kilos of quality Taiwanese rice. In addition to benefiting rice farmers, it has also carried out excellent marketing for good Taiwanese rice.

2. Taishin Charity Foundation

In 2010, Taishin Bank set up “Taishin Charity Foundation,” mainly for engagement in public-service and charity events, including assistance for underprivileged groups to enhance their skills for livelihood and improve life, and sponsorship for the events of other public-service groups and seminars for society-related issues, and other social welfare-related charity events, with the goal of helping underprivileged groups achieve “independence in economy and daily life.”

After its establishment, the foundation rolled out “your ballot decides the strength of love” event, the first online public-service event in Taiwan. Under the event, small and medium social-welfare institutions were invited to put forth proposals online for voting by online social groups, in deciding the recipients of donations. A total of 793 proposals were received over the three years it was held, and we invited public-service partners,such as“Franz Collection" “Advantech Foundation" “Chunghwa Telecom Foundation"and“Chiling Charity Foundation"to join the event, the scope of donation recipients were expanded from “social welfare”to “culture education” and “digital learning”.

The 3rd "Your Ballot Decides the Strength of Love" event received overwhelming response as 220,000 online voters casted more than 710,000 votes in total. In addition to the public service partners mentioned above, the event also received donations from Taishin managers, employees, LPGA star Yani Tseng and the general public, which boosted the charity fund from NT$4.3 million to NT$15 million and benefited a total of 167 charity organizations. Apart from organizing the "Your Ballot Decides the Strength of Love" event, Taishin Charity Foundation is also planning for a nation-wide visit to charity organizations located in other areas so that resources can be allocated more effectively to the socially disadvantaged. b. Academics and Art and Culture 1. Academic promotion

Taishin Financial Holding also continuously takes part in important academic seminars, in the hope of helping with the healthy development of Taiwan’s financial industry and the overall financial market, via exchanges and discussion among elites from the fields of industries, government, and academics. Taishin took part in various academic seminars, including The Greater China Financial Planning Forum, Peace and Prosperity Forum, International Corporate Governance Summit Forum, Advanced Education Workshop, NTU International Conference on Finance, and Conference on the Theories and Practices of Securities Financial Markets.

78 V. Business Status 05

2. Art and culture

Taishin Bank donated to establish “Taishin Bank Culture and Art Foundation” in 2011, with the theme of “promoting cultural life quality and strengthening artistic-development environment.” It supports arts as a nonprofit institution, intensifies exchanges between artistic innovation and private industry, and realizes the corporate social responsibility of payback to the society. The foundation initiated “Taishin Artistic Award,” giving highest glory and encourage to award winners in the two fields of visual and performing arts. 2012marked the tenth edition of the award. Meanwhile, Taishin Financial Holding also arranges multi-functional performing and exhibition space at its headquarters building to invite artists and musicians to hold artistic exhibitions and noontime musical concerts.

c. Sports sponsorship In 2011, Taishin sponsored Yani Tseng, LPGA female golfing champion, the first Taiwanese financial institution to do so. Taishin had also mobilized its customers and employees to cheer for the champion using banners, online messages and more, while others even visited to the LPGA Tour in Taiwan. The bank also invited Yani Tseng to become the endorser of Taishin Charity Foundation, to help with promoting the “your ballot decides the strength of love” event, so as to augment Taishin’s social influence.

d. Environmental Protection Taishin Financial Holding has long advocated the importance of environmental protection and energy conservation,and committed itself through actions such as shared rides and light dress codes. Furthermore, Taishin also introduced a number of green practices into its daily operations, from "e-flow Correspondences," "Shared Company Vehicles" to "Paperless" and "e-Statements." Taishin has even planned to introduce a "Bank- wide Image system" to handle counter transactions, mortgage applications, and EDC applications. The bank achieves the benefits of procedure improvement as well as reducing the use of paper.

D. Information equipment

a. Major information systems

Items Names of systems Hardware Software Business contents NT-dollar core system ■HP-UX ■B@NCS NT-dollar application system 1 ■HP Superdome (B@NCS) ■ORACLE ■B@NCS NT-dollar reporting system ■IBM OS400 ■Import/Export forex deposit/loan 2 Forex system (FITAS) ■IBM AS/400 ■FITAS ■SWIFT global banking financial system ■IBM AIX ATM front-end ■ATM front-end handling system 3 ■IBM RS/6000 ■IBM MQ system(FEP) ■Financial clearance system ■ORACLE

■MS Windows Financial trading system ■ Treasury financial and treasury trading 4 ■IBM X86 Server ■SunGard (SUNGARD) ■ Trading risk management system ■MS SQL Integrated data system ■HP-UX ■ Operating database system(ODS) 5 ■HP Superdome (DAI) ■ORACLE ■ Information warehousing(DW/DM) Automated sales ■HP-UX ■ Instant customer browsing system(SCV) 6 ■HP Superdome application system(SFA) ■ORACLE ■ Automated sales operation system(SFA) ■SUN Solaris ■ Transaction services for NT-dollar, foreign 7 Consumer Internet banking ■SUN E6900 ■Weblogic exchange, funds and trusts, credit cards, ■ORACLE insurance and stocks

79 Items Names of systems Hardware Software Business contents

■IBM AIX ■ Corporate Internet banking system for NT- 8 B2Bank ■IBM RS/6000 ■IBM Websphere dollar, foreign exchange, e-collection and ■ORACLE e-payment. 9 Trust Investment product ■MS Windows ■ Trading system of funds, trust loans, US bonds ■IBM X86 Server system (TIPS) ■MS SQL and ADR ■SUN Solaris Credit card acquire frond- 10 ■SUN M5000 ■Weblogic ■ Credit card transaction switch end system (CPS) ■ORACLE

■IBM AIX ■ Inquiry for NT dollar/foreign currency trading, Wholesales business 11 ■IBM RS/6000 ■Weblogic credit-line management, and the management system(WBS) ■Oracle of guarantors and collateral. ■ Image processing for NTD services (accounts/ ■ Image process remittance/applications/account opening/ ■Weblogic management system ■HP Unix checks), merchant application, collection (legal 12 ■Oracle SOA (IPMS) ■SUN Unix correspondences/financial documents/house ■Oracle UCM registration transcripts), consumer mortgage/ unsecured loans/ etc ■IBM AIX ■ Factoring management 13 ■IBM RS/6000 ■Weblogic ■ Accounts receivable system system (OAEFB) ■Oracle

■ Wholesale banking credit ■MS Windows 14 ■IBM X86 Server ■ Wholesale banking credit review system review system (OAECR) ■MS SQL

b. Future development or installation plan 1. Expand the application of virtual server and cloud computing technology and flexibly utilize information equipment to enhance service quality. 2. Establish new computer central office according to the standard of international central office Tier III, to assure the stability and safety of computer system. 3. Prepare information system for overseas branches, including Brisbane and Singapore branches. 4. Enhance the utilization rate of global trade and small and medium enterprises, in addition to expanding the scope of the domestic market. 5. Continue undertaking foreign currency system, expand its application in overseas branches, and improve foreign-currency loan and deposit operation and forex-product system. 6. Expand the development and application of mobile banking and further expand link-up application services for mobile devices, such as iPhone , iPad and Android. 7. Upgrade integrated system for front-, medium-, and rear-end operations for financial-product trading, so as to enhance the market competitiveness for financial trading. 8. Upgrade customer credit-risk calculation system, so as to effectively control the default risk of customers. c. Emergent backup and security protection system 1. In response to the execution of personal information law, the bank introduced personal information management standard and establish personal information management system. 2. Strengthen information protection mechanism and enhance safety management. 3. Strengthen wireless encryption mechanism for mobile devices, so as to enhance the safety of wireless transmission. 4. Conduct risk identification for the various applications used; explore areas of weakness and develop system security modules.

80 V. Business Status 05

5. Understand the needs of an off-site support and enhance the off-site system accordingly. 6. Develop an information security action plan.

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:

(1) Labor Insurance: The company bears 70% of the insurance premium; employees bear 20% (2) Health Insurance: The company bears 60% of insurance premium; employees bear 30% (3) 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. (4) Travel safety insurance: Employees traveling abroad for company affairs are covered by travel safety 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 are entitled to marriage subsidy, birth subsidy, funeral subsidy, hospitalization subsidy, festival subsidy, birthday subsidy, travel subsidy, club subsidy, and educational subsidy for offspring.

In addition to various subsidies provided by employee welfare committee, the company also provides employees physical examination, subsidies for participating in wedding and funeral, long-service incentive, subsidy for self development (including subsidy for studying foreign language and computer and subsidy for professional certificates), and subsidy for on-the-job training.

For employee assistance, the company cooperates with Teacher Chang Foundation in providing “employee daily-life service program” and establishes “care-for-employee mailbox” and “care-for-employee line” for use by employees.

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 countermeasures, as well as reasons for inability to estimate loss. Thanks to the harmonious labor-management relationship, there has been no loss resulting from labor- management dispute in recent years.

81 F. Important contract

Starting and expiry dates of Nature of Contract Participants Main contents Restrictive clauses contract

Procurement Mercuries Data Purchase of banking Contract date: August 24, 2012 None contract Systems Ltd. equipment

G. Approval of applications for securitized products according to the statute for the securitization of financial 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.

82 VI. Financial Status 06

VI. Financial Status

A. Brief balance sheet and income statement in recent five years

Brief Balance Sheet Unit: NT$1,000

year Financial information in recent five years 2010(new items 2012 2011 2009 2008 compilation) Cash and cash equivalent, Due from the Central 45,625,606 40,645,345 50,522,320 136,515,846 140,063,783 Bank and call loans to other banks Financial assets at fair value through profit or 49,231,145 40,781,549 36,979,776 24,907,554 45,859,862 loss Bonds and securities purchased under resell 4,269,494 1,058,738 2,992,554 2,420,000 0 agreements Receivables, net 86,077,469 88,122,428 97,304,516 84,838,866 79,128,739 Loans, net 658,454,135 600,808,129 531,674,018 495,583,668 514,045,040 Available-for-sale financial assets 207,278,563 191,190,849 177,358,294 36,484,764 25,124,530 Held-to-maturity financial assets 1,917,473 2,421,241 3,312,094 6,214,140 8,102,021 Investments accounted for by the equity method, 1,785,834 1,939,912 1,861,285 1,281,667 1,440,756 net Other financial assets, net 2,910,429 2,893,816 2,941,610 2,873,039 3,083,144 Property and equipment, net(note3) 17,475,160 17,424,442 17,747,428 17,898,096 16,226,923 Goodwill and intangible assets 1,688,796 1,921,980 2,079,117 1,605,915 0 Other assets, net 5,525,686 6,745,987 8,783,300 22,134,089 24,251,038 Total assets 1,082,239,790 995,954,416 933,556,312 832,757,644 857,325,836 Due to banks and Central bank 52,366,146 62,532,398 57,252,391 54,181,462 72,725,981 Financial liabilities at fair value through profit or 9,114,382 8,353,108 16,202,864 16,990,037 37,848,640 loss Bonds and securities sold under repurchase 53,499,333 43,486,925 32,611,770 7,239,422 11,780,535 agreements. Payables 21,425,730 22,379,981 27,040,897 18,956,708 22,271,480 Deposits 826,959,852 756,502,655 699,985,966 654,664,982 633,654,632 Bank debentures 36,700,000 25,000,000 25,000,000 25,000,000 36,100,000 Other financial liabilities 13,670,671 13,340,332 13,184,858 151,200 167,285 Other liabilities 1,384,159 1,377,985 1,584,681 2,140,457 911,917 Pre-payout 1,015,120,273 932,973,384 872,863,427 779,324,268 815,460,470 Total liabilities Post-payout Note2 938,403,859 878,376,915 779,985,137 Note1 Capital stock 49,157,526 49,157,526 49,157,526 49,157,526 41,750,118 Capital surplus 3,269,423 3,197,017 3,169,946 3,193,573 3,806,630 Pre-payout 13,809,799 10,593,956 8,159,642 944,099 ( 3,210,060 ) Retained earnings Post-payout Note2 5,163,481 2,646,154 283,230 Note1 Unrealized revaluation increments 207,232 6,093 0 0 0 Unrealized gain or loss on financial instruments 677,524 27,334 206,290 138,235 ( 481,283 ) Cumulative translation adjustments ( 820 ) ( 539 ) ( 519 ) ( 57 ) ( 39 ) Other adjustment items in shareholder's equity ( 1,167 ) ( 355 ) 0 0 0 Total stockholder’s Pre-payout 67,119,517 62,981,032 60,692,885 53,433,376 41,865,366 equity Post-payout Note2 57,550,557 55,179,397 52,772,507 Note1 Certifying CPA Qinzhen Yang Qinzhen Yang Rongsui Weng Rongsui Weng Rongsui Weng Certifying CPA Peter Tsai Peter Tsai Qinzhen Yang Qinzhen Yang Qinzhen Yang Standard without Revision without Standard without Standard without Standard without Type of CPA’s auditing report reservation reservation reservation reservation reservation Note 1: 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 resolustion not to issue dividend. Note 2: Proposal for the dividend payout from earnings in 2012 has yet to be approved by the board of directors. Note 3: According to “The Equalization of Land Rights Act”, the bank revaluated the value of land in 2012, the amount of land appreciation is NT$244,624,000.

83 Brief Balance Sheet Unit:NT$1,000 Year Current year as of Item March 31,2013 Cash and cash equivalents, Due from the Central Bank and call loans to other banks 43,208,339 Financial assets at fair value through profit or loss 52,861,856 Available-for-sale financial assets, net 205,963,348 Derivative financial assets for hedging 0 Bonds and securities purchased under resell agreements 11,210,913 Receivables, net 74,190,125 Current tax assets 129,230 Assets Held for Sale, net 0 Loans, net 675,170,835 Held-to-maturity financial assets, net 1,961,854 Investments accounted for using equity method, net 657,221 Restricted Assets 0 Other financial assets, net 2,241,644 Property and Equipment, net 17,520,713 Investment property, net 266,140 Intangible assets, net 1,646,242 Deferred tax assets 5,036,246 Other assets, net 2,686,689 Total assets 1,094,751,395 Due to banks and Central Bank 45,134,979 Loans from The Central Bank and other banks 0 Financial liabilities at fair value through profit or loss 10,671,498 Derivative financial liabilities for hedging 0 Bonds and securities sold under repurchase agreements 65,946,729 Payables 18,957,108 Current tax liabilities 1,028,728 Liabilities directly associated with assets held for sale 0 Deposits 831,184,750 Bank debentures 25,000,000 Preferred stock liabilities 0 Other financial liabilities 20,313,143 Provisions 733,649 Deferred tax liabilities 787,878 Other liabilities 2,832,091 Pre-payout 1,022,590,553 total liabilities Post-payout N/A Equity attributable to shareholders of the parent 71,892,174 Capital stock 49,157,526 Capital surplus 3,325,490

84 VI. Financial Status 06

Year Current year as of Item March 31,2013 Pre-payout 17,494,221 Retained earnings Post-payout N/A Other equity 1,914,937 Treasury shares 0 Noncontrolling interests 268,668 Pre-payout 72,160,842 Total equity Post-payout N/A Certifying CPA Qinzhen Yang Certifying CPA Peter Tsai Standard without Type of CPA’s auditing report reservation

Brief Income Statement Unit:NT$1,000

Year Financial information in recent five years 2010 2012 2011 2009 2008 Item (new compilation) Net Interest Income 13,874,234 12,993,667 11,850,525 10,002,148 14,138,465 Net income and gains (losses) other 9,930,615 7,773,763 12,895,822 9,202,859 9,446,541 than interest income Reversal allowance for loan losses 617,039 1,807,336 ( 1,211,169 ) ( 4,265,429 ) ( 15,584,932 ) Operating expenses ( 14,078,952 ) ( 13,362,370 ) ( 12,391,889 ) ( 11,476,422 ) ( 13,922,650 ) Income (Loss) Before Income Tax 10,342,936 9,212,396 11,143,289 3,463,156 ( 5,922,576 ) Income (Loss) Before Extraordinary 8,646,318 7,739,100 8,172,742 821,279 ( 4,098,205 ) Gain Accumulated effect from change in 0 0 0 122,820 0 accounting principle (after tax) Extraordinary Gain ( after tax) 0 0 0 0 0 Net Income (Loss) 8,646,318 7,739,100 8,172,742 944,099 ( 4,098,205 ) Basic Earnings (Loss) per share (NT$) 1.80 1.61 1.70 0.21 ( 1.03 )

85 STATEMENTS OF COMPREHENSIVE INCOME Unit: NT$1,000 Year Current year as of March 31,2013 Item Interest income 5,517,900 Interest expense ( 2,063,793 ) Net interest income 3,454,107 Net income and gains other than interest income 4,225,943 Gross income 7,680,050 Reversal allowance for loan losses and Provision for guarantee reserve 185,274 Operating expenses ( 3,627,632 ) Net income from continuing operations before income tax 4,237,692 Tax (expense) benefit ( 562,972 ) Net income from continuing operations 3,674,720 Profit or loss of discontinued operations 0 Consolidated net income(loss) for the period 3,674,720 Other comprehensive income for the period, net of income tax ( 508,783 ) Total comprehensive income for the period 3,165,937 Net income attributable to shareholders of the parent 3,668,505 Net income attributable to noncontrolling interests 6,215 Total comprehensive income attributable to shareholders of the parent 3,159,722 Total comprehensive income attributable to noncontrolling interests 6,215 Basic earnings per share (dollar) 0.77

B. Financial analysis for recent five years

Financial Analysis Unit:NT$1,000

Year Financial information in recent five years items 2012 2011 2010 2009 2008 Deposit/loan ratio(%) 80.67 80.47 76.88 76.81 82.73 NPL ratio(%) 0.14 0.16 0.33 0.58 1.38 Interest income/average outstanding 1.07 0.95 0.73 1.18 2.61 deposit ratio(%) Management Interest income/average outstanding loans ability 3.50 3.47 3.23 3.43 5.71 ratio(%) Turnover rate of total assets ( times ) 2.20 2.09 2.65 2.31 2.75 Revenue per employee (NT$1,000) 3,846 3,307 3,934 3,281 3,890 Profit per employee (NT$1,000) 1,397 1,233 1,299 161 ( 676 ) Returns on tier 1 capital(%) 16.90 15.87 20.83 7.59 ( 13.80 ) Returns on assets(%) 0.83 0.80 0.91 0.11 ( 0.47 ) Profit-making Returns on shareholder’s equity(%) 13.29 12.52 14.32 1.98 ( 9.10 ) capability Net Profit rate (%) 36.32 37.27 33.03 4.92 ( 17.38 ) Earnings per share(NT$1) 1.80 1.61 1.70 0.21 ( 1.03 )

86 VI. Financial Status 06

Year Financial information in recent five years items 2012 2011 2010 2009 2008

Financial Liabilities/assets ratio(%) 93.80 93.68 93.50 93.58 95.12 structure Fixed asset/shareholder’s equity ratio(%) 26.04 27.67 29.24 33.50 38.76 Asset growth(%) 8.66 6.68 12.10 ( 2.87 ) ( 4.05 ) Growth rate Profit growth(%) 12.27 ( 17.33 ) 221.77 158.47 ( 318.87 ) Cash flow rate(%) 5.34 8.24 15.32 ( 0.10 ) 5.91 Cash flow Propriety of cash flow ratio(%) 177.41 404.20 1,434.57 1,115.21 553.53 Cash-flow satisfaction ratio(%) ( 8.82 ) ( 14.05 ) ( 24.46 ) ( 9.57 ) 21.16 Liquid reserve ratio(%) 24.37 25.02 26.04 22.75 20.25 Secured loans for related parties(NT$1000) 8,033,236 3,961,203 3,748,978 5,183,344 16,677,172 Share of outstanding secured loans for related parties in 1.10 0.59 0.61 0.91 2.83 total outstanding loans(%) Market share of asset(%) 2.78 2.64 2.59 2.49 2.64

Business Market share of book value(%) 2.66 2.72 2.77 2.61 2.18 Scale Market share of deposit(%) 2.79 2.65 2.62 2.53 2.61 Market share of loans(%) 2.83 2.67 2.58 2.58 2.67 Reasons for changes in various financial ratios in recent two years: 1. Asset growth:please refer to explanation of financial status for recent two years . 2. Profit-making capability and growth rate:the bank continued to maintain sound asset quality throughout 2012, and was therefore able to deliver positive earnings. All profit-related ratios have improved compared to 2011. 3. cash flow:please refer to explanation of liquidity analysis for recent two years .

Year Current year as of March 31,2013 items Deposit/loan ratio(%) 82.30 NPL ratio(%) 0.16 Interest income/average outstanding deposit ratio(%) 0.19 Management Interest income/average outstanding loans ratio(%) 0.65 ability Turnover rate of total assets ( times ) 0.70 Revenue per employee (NT$1,000) 1,232 Profit per employee (NT$1,000) 589 Returns on tier 1 capital(%) Annual analysis data,not applicable to quarterly report Returns on assets(%) 0.34 Profit-making Returns on shareholder’s equity(%) 5.21 capability Net Profit rate (%) 47.85 Earnings per share(NT$1) 0.77

Financial Liabilities/assets ratio(%) 93.39 structure Fixed asset/shareholder’s equity ratio(%) 24.28 Asset growth(%) Annual analysis data,not applicable to quarterly report Growth rate Profit growth(%) Annual analysis data,not applicable to quarterly report Cash flow rate(%) 15.89 Cash flow Propriety of cash flow ratio(%) Annual analysis data,not applicable to quarterly report Cash-flow satisfaction ratio(%) ( 16,252.52 ) Liquid reserve ratio(%) 23.22 Secured loans for related parties(NT$1000) 7,880,096

87 Year Current year as of March 31,2013 items Share of outstanding secured loans for related parties in total outstanding 1.06 loans(%) Market share of asset(%) 2.79

Business Market share of book value(%) 2.80 Scale Market share of deposit(%) 2.78 Market share of loans(%) 2.86

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 annual average of 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 =net revenue/total number of employees (7) Profit per employee=After-tax net profit/total number of employees 2. Profit-making capability (1) Returns on Tier I capital=pre-tax income/average Tier I 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 profit rate=after-tax income/net revenue (5) Earnings per share= (after-tax net profit-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 fixed assets in book value=net value of fixed 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) Profit growth= (Pre-tax income in current year-pre-tax income in previous year)/pre-tax income in previous year 5. Cash flow (1) Cash flow ratio=net cash flow for business activities/(call loans and overdraft of bank and peers + promissory notes payable +financial liabilities from change in fair value + liabilities of repot bills and bonds + accounts payable due in one year) (2) Propriety ratio of net cash flow=net cash flow for business activities in recent five years/ (capital outlay + cash dividend) in recent five years (3) Satisfactory rate for cash flow=net cash flow for business activities/net cash flow 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 financial institutions capable of undertaking deposit/loan business (2) Market share of book value=book value/total book value of financial institutions capable of undertaking deposit/loan business (3) Market share of deposits=total deposits/total deposits of financial institutions capable of undertaking deposit/ loan business (4) Market share of loans=total loans/total loans of financial institutions capable of undertaking deposit/loan business

88 VI. Financial Status 06

BIS Ratio (Capital Adequacy Ratio) Unit: NT$million Year (note 1) BIS ratio in recent five years(note 2) BIS ratio in Current year as Analytical 2012 2011 2010 2009 2008 of March 31, Items 2013(note5) Common shares 47,275 47,275 47,275 47,275 39,868 Disclosure Perpetual non-accumulated preferred shares 1,882 1,882 1,882 1,882 1,882 unnecessary Perpetual Non-accumulated subordinated debts Capital collected in advance Capital surplus (except surplus deriving from 3,269 3,197 3,214 3,194 3,807 value increment of fixed assets) Tier I Legal reserves 4,974 2,646 283 813 Capital Special reserves 190 190 75 Accumulated profit/loss 8,646 7,758 7,876 944 ( 2,049 ) Minority shareholding right Other items of shareholders’ equity ( 84 ) ( 273 ) ( 157 ) ( 118 ) ( 797 ) Minus: good will 1,152 1,152 1,152 1,152 1,152 Minus: unamortized loss from the sale of NPL Minus: items for capital reduction 2,006 2,101 2,525 1,712 1,490 Total tier I capital 62,994 59,422 56,696 50,313 40,957 Eligible Perpetual accumulated preferred shares Capital Perpetual non-accumulated subordinated debts Capital surplus from value increment of fixed 207 6 assets 45% of unrealized gain from available for sale 342 135 144 116 142 Convertible bonds Tier II General provisions 8,503 7,604 6,367 4,963 1,611 capital Long-term subordinated debts 28,457 21,097 22,058 19,939 20,478 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 2,006 2,101 2,525 1,712 3,539 Total Tier II capital 35,503 26,741 26,044 23,306 18,692 Short-term subordinated debts Tier III Non-perpetual preferred shares capital Total Tier III capital Eligible Capital 98,497 86,163 82,740 73,619 59,649 Standard approach 679,515 607,211 551,857 508,984 535,984 Credit risk Internal evaluation approach Securitized assets 726 1,158 1,514 620 806 Basic indicator approach Weighted Operating Standard approach /selective standard 39,101 36,815 34,888 38,272 45,552 risk assets risk approach Advanced measurement approach Standard approach 27,256 30,258 20,863 20,417 24,316 Market risk Internal model approach Total risk assets 746,598 675,442 609,122 568,293 606,658 BIS ratio 13.19% 12.76% 13.58% 12.95% 9.83% Ratio of Tier I capital in risk weighted assets 8.44% 8.80% 9.31% 8.85% 6.75% Ratio of Tier II capital in risk weighted assets 4.75% 3.96% 4.27% 4.10% 3.08% Ratio of Tier III capital in risk weighted assets 0.00% 0.00% 0.00% 0.00% 0.00% Ratio of common shares in total assets 4.37% 4.75% 5.19% 5.68% 4.65% 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%. * Should there be consolidated financial 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 file 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 III capital/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 financial information has been certified or perused by certified public accountants. Note 6: For year with the implementation of Basel I, the table should be filled as the following: (1) List 50% of the reduction item for Basel I capital and the first-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. 89 BIS Ratio ( Consolidated ) Unit: NT$million BIS ratio in Year (note 1) BIS ratio in recent five years(note 2) Current year as of 2012 2011 2010 2009 2008 March 31, Analytical Items 2013(note5) Common shares 47,275 47,275 47,275 47,275 39,868 Disclosure Perpetual non-accumulated preferred shares 1,882 1,882 1,882 1,882 1,882 unnecessary Perpetual Non-accumulated subordinated debts Capital collected in advance Capital surplus (except surplus deriving from 3,269 3,197 3,214 3,194 3,807 value increment of fixed assets) Legal reserves 4,974 2,646 283 813 Tier 1 Capital Special reserves 190 190 75 Accumulated profit/loss 8,646 7,758 7,876 944 ( 2,049 ) Minority shareholding right 263 367 414 344 543 Other items of shareholders’ equity ( 84 ) ( 273 ) ( 157 ) ( 118 ) ( 797 ) Minus: good will 1,152 1,152 1,152 1,152 1,152 Minus: unamortized loss from the sale of NPL Minus: items for capital reduction 1,529 1,528 1,886 1,347 1,391 Total tier 1 capital 63,734 60,362 57,749 51,022 41,599 Perpetual accumulated preferred shares Eligible Capital Perpetual non-accumulated subordinated debts Capital surplus from value increment of fixed 207 6 assets 45% of unrealized gain from available for sale 342 135 144 116 142 Convertible bonds Tier II General provisions 8,503 7,604 6,367 4,963 1,611 capital Long-term subordinated debts 28,457 21,097 22,058 19,939 20,799 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 1,529 1,528 1,886 1,347 3,440 Total tier II capital 35,980 27,314 26,683 23,671 19,112 Short-term subordinated debts Tier III Non-perpetual preferred shares capital Total Tier III capital Eligible Capital 99,714 87,676 84,432 74,693 60,711 Standard approach 679,825 607,931 553,501 510,883 535,050 Credit risk Internal evaluation approach Securitized assets 726 1,158 1,514 620 806 Basic indicator approach Weighted Operating Standard approach /selective standard risk 39,101 36,815 34,888 38,272 45,552 risk approach assets Advanced Market Standard approach 27,257 30,280 20,881 20,452 24,415 risk Internal model Total risk assets 746,909 676,184 610,784 570,227 605,823 BIS ratio 13.35% 12.97% 13.82% 13.10% 10.02% Ratio of tier I capital in risk weighted assets 8.53% 8.93% 9.45% 8.95% 6.87% Ratio of tier II capital in risk weighted assets 4.82% 4.04% 4.37% 4.15% 3.15% Ratio of tier III capital in risk weighted assets 0.00% 0.00% 0.00% 0.00% 0.00% Ratio of common shares in total assets 4.37% 4.75% 5.19% 5.67% 4.65% 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%.

90 VI. Financial Status 06

C. Inspection report on the financial statement of the latest year by supervisors or audit committee

Inspection report of supervisor Taishin International Bank Co., Ltd

Attached please find 2012 business report, financial statement, and proposal for profit sharing, of which the financial statement has been audited and certified by CPAs Yang Qinchen and Peter Tsai of Deloitte Taiwan , as showing in the auditing report.

The supervisor has viewed the aforementioned documents and found no major inadequacies, thereby delivering this report to shareholder’s meeting, according to article 219 and 228, Company Law.

To Shareholder’s Meeting of Taishin International Bank:

Standing supervisor Yang-Tzong ,Tsay

Supervisor Long-Su Lin

Supervisor Toney Chen

May.16, 2013

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

E. Consolidated financial statement of parent company and subsidiary for the recent year certified by certified public accountant: refer to appendix 2.

F. Should there occur financial insolvency of the bank and its affiliates in the recent year and as of the date of the publication of the annual report, specify its effect on the bank’s finance: Nil.

91 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Item

A. Financial status:

Main reasons for major changes in assets, liabilities, shareholders’ equity in recent two years and their effects

Unit: NT$1,000

year change 2012 2011 item value % Asset Cash and cash equivalent, Due from the Central Bank 45,625,606 40,645,345 4,980,261 12.25% and call loans to other banks Financial assets at fair value through profit or loss 49,231,145 40,781,549 8,449,596 20.72% Bonds and securities purchased under resell agreements 4,269,494 1,058,738 3,210,756 303.26% Available-for-sale financial assets 207,278,563 191,190,849 16,087,714 8.41% Loan, net 658,454,135 600,808,129 57,646,006 9.59% Receivable , net 86,077,469 88,122,428 ( 2,044,959 ) -2.32% Hold-to-maturity financial assets 1,917,473 2,421,241 ( 503,768 ) -20.81% Investments accounted for by the equity method, net 1,785,834 1,939,912 ( 154,078 ) -7.94% Property and equipment, net 17,475,160 17,424,442 50,718 0.29% Other financial assets 2,910,429 2,893,816 16,613 0.57% Goodwill and intangible assets 1,688,796 1,921,980 ( 233,184 ) -12.13% Other assets, net 5,525,686 6,745,987 ( 1,220,301 ) -18.09% Total assets 1,082,239,790 995,954,416 86,285,374 8.66% Liabilities Due to banks and Central Bank 52,366,146 62,532,398 ( 10,166,252 ) -16.26% Deposit 826,959,852 756,502,655 70,457,197 9.31% Financial liabilities at fair value through profit or loss 9,114,382 8,353,108 761,274 9.11% Bonds and securities sold under repurchase agreements 53,499,333 43,486,925 10,012,408 23.02% Payables 21,425,730 22,379,981 ( 954,251 ) -4.26% Bonds debentures 36,700,000 25,000,000 11,700,000 46.80% Other financial liabilities 13,670,671 13,340,332 330,339 2.48% Other liabilities 1,384,159 1,377,985 6,174 0.45% Total liabilities 1,015,120,273 932,973,384 82,146,889 8.80% Capital stock 49,157,526 49,157,526 0 0.00% Capital surplus 3,269,423 3,197,017 72,406 2.26% Retained earnings 13,809,799 10,593,956 3,215,843 30.36% Unrealized revaluation increments 207,232 6,093 201,139 3301.15% Unrealized gain or loss on financial instruments 677,524 27,334 650,190 2378.69% Cumulative translation adjustments ( 820 ) ( 539 ) ( 281 ) 52.13% Other adjustment items in shareholders’ equity ( 1,167 ) ( 355 ) ( 812 ) 228.73% Total shareholders’ equity 67,119,517 62,981,032 4,138,485 6.57% 1. Increases in financial assets at fair value through profit and loss were mainly the result of additional short-term note investments. 2. Increases in bill and bond resales mainly comprised of additional investments in bill resale - commercial paper. 3. Increases in advances and loans comprised of short-term, medium-term and long-term tenures. 4. Increases in deposits and remittance were mainly contributed by additional time deposits and savings deposits. 5. Increases in bill and bond repurchases mainly comprised of government bonds and commercial paper. 6. Increases in bank debentures payable were mainly the result of additional bank debentures issued in 2012. 7. Increases in retained earnings were mainly contributed by higher balances of legal reserves and accumulated profits. 8. Increases in unrealized revaluation increments were contributed by a land revaluation conducted in 2012 in accordance with the Equalization of Land Rights Act. 9. Increases in unrealized gains/losses on available-for-sale financial assets were mainly the results of revalued bonds and shares.

92 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Item 07

B. Management outcome:

Main reasons for major changes in interest income and pre-tax net profit in recent two years, business goal and basis, their possible effect on the bank’s future finance, and countermeasures:

Unit: NT$1,000

Year change 2012 2011 item value % Net interest income 13,874,234 12,993,667 880,567 6.78% Interest income 22,313,017 19,880,352 2,432,665 12.24% Interest expense ( 8,438,783 ) ( 6,886,685 ) ( 1,552,098 ) 22.54% Net Income and Gains ( Losses) other than 9,930,615 7,773,763 2,156,852 27.75% interest income Fee income, net 6,402,970 6,117,143 285,827 4.67% Gain on financial assets and liabilities at fair 2,905,584 291,413 2,614,171 897.07% value from profit or loss Realized gain (loss) on available-for-sale 151,559 ( 48,257 ) 199,816 -414.07% financial assets Gain on disposal of investments accounted for 396,042 0 396,042 - by the equity method Investment income recognized under the equity 13,113 103,373 ( 90,260 ) -87.31% method Impairment losses on assets ( 39,627 ) 0 ( 39,627 ) - Exchange gain,net ( 354,561 ) 838,041 ( 1,192,602 ) -142.31% Other miscellaneous net income 455,535 472,050 ( 16,515 ) -3.50% Reversal allowance for loan losses 617,039 1,807,336 ( 1,190,297 ) -65.86% Operating expenses ( 14,078,952 ) ( 13,362,370 ) ( 716,582 ) 5.36% Income(loss)before income tax 10,342,936 9,212,396 1,130,540 12.27% Income tax (expense) benefit ( 1,696,618 ) ( 1,473,296 ) ( 223,322 ) 15.16% Income before extraordinary gain 8,646,318 7,739,100 907,218 11.72% Accumulated effect from change in accounting - 0 0 - principle(after tax) Extraordinary gain(after tax) 0 0 - - Net income 8,646,318 7,739,100 907,218 11.72%

1. Increases in interest income were mainly the result of additional interests received from loans. 2. Increases in interest expenses were mainly the result of additional interests paid for deposits. 3. Increases in gains on financial assets and liabilities at fair value through profit and loss were mainly contributed by upward revaluations of bonds held in possession. 4. Increases in realized gains/losses on available-for-sale financial assets were mainly contributed by dividends and disposals of corporate bonds, bank debentures, and beneficiary securities. 5. Increases in gain on disposal of equity-accounted investments were mainly the result of disposing shares held in PayEasy.com 6. Decreases in income from equity-accounted investments were mainly the result of lesser income recognized from Taishin Insurance Agency. 7. Increases in asset impairment were mainly attributed to additional impairment losses recognized on assets carried at cost. 8. Decreases in gains/losses on exchange were mainly the result of lesser gains/losses incurred on forward exchange agreements. 9. Decreases in bad loan reversal gains were mainly the result of lesser bad loans recovered during the year.

93 C. Cash flow

Liquidity Analysis for the Recent Two Years Unit: % Year 2012 2011 Change Item Cash flow ratio 5.34 8.24 -35.19 Propriety ratio for cash flow 177.41 404.20 -56.11 Satisfaction ratio for cash flow ( 8.82 ) ( 14.05 ) -37.22 1.Cash flow ratio decreased , mainly due to decrease of cash flow for current business activities 2.Propriety ratio for cash flow declined ,mainly due to decrease of cash influx caused by current operating activities than past year 3.Satisfaction ratio for cash flow rose, mainly due to decrease of cash influx caused by current investment activities.

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 flow from business influx 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 12,395 ( 8,716 ) ( 432 ) 3,247 - - 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 finance

Major Capital Outlays and Funding Sources Unit: NT$1,000

Actual or Actual or Actual or anticipated fund utilization planned planned Total funds Plan items funding completion needed sources dates 2008 2009 2010 2011 2012 2013 Land Own fund 2009 1,228,418 1,228,418 2009 572,211 572,211 2010 22,742 22,742 Housing & Own fund 2011 19,169 19,169 Buildings 2012 8,328 8,328 2013 148,520 148,520 2008 209,771 209,771 2009 73,466 73,466 Machinery 2010 225,642 225,642 Own fund equipment 2011 208,092 208,092 2012 203,602 203,602 2013 406,577 406,577

94 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Item 07

Actual or Actual or Actual or anticipated fund utilization planned planned Total funds Plan items funding completion needed sources dates 2008 2009 2010 2011 2012 2013 2008 13,827 13,827 Transportation 2009 5,988 5,988 Equipment & 2010 24,158 24,158 Own fund Miscellaneous 2011 17,291 17,291 Equipment 2012 27,882 27,882 2013 7,638 7,638 2008 627 627 2009 691 691 Leased 2010 61,066 61,066 Own fund assets 2011 55,591 55,591 2012 12,762 12,762 2013 84,832 84,832 Expected benefits : To accommodate new business initiatives in 2013, the bank has committed in a number of system developments, upgrades, and procurements at home and abroad. These projects were aimed to enhance the current operating environment and raise customer loyalty with more product variety and higher quality services.

E. Long-term investment policy in the recent year , main reasons for their profit or loss, improvement plan, and investment plans for 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 Holding 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 financial businesses according to related laws.” Consequently, the bank follows article 74 of the Banking Law in its equity-investment policy and plan.

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

2012 Credit Risk Management System

Items Contents Credit Risk Management aims at protecting the interests of shareholders by maximizing profits at reasonable risk level. As the basis for adjustments in credit policy and collection policy, changes in net cash flow are regularly monitored to catch up with the trend in asset qualities. Under the premise of complying with risk-management strategy and adhering to the existing 1. Credit Risk business strategy, adopt the following strategy to control credit risk: Management 1. In evaluating credit-extension cases, emphasize cash flow as major repayment source and Strategy, goal, policy obtain proper risk reward. and Process 2. Via the establishment of various system tools and tables/reports, strengthen the evaluation, monitoring, and management of credit risk. 3. Based on consideration of general economic outlook and change in global financial market, actively review, adjust credit-extension monitoring and/or ceiling for credit-extension position.

95 Items Contents 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 and management of delinquent cases. Corporate Credit Management Division is the credit risk management unit for Wholesale Banking 2. Credit Risk Group. It consists of credit management, screening, global trade, and asset management Management departments. Credit extension management department is in charge of the planning of internal Organization and credit evaluation system, the monitoring of credit-extension position, the diversification of credit- Structure extension risk, the planning and formulation of management measures, the appraisal of the value of mortgaged properties, and the review and credit examination after the extension of loans. Various auditing departments are in charge of the review of credit-extension cases, the property management department is in charge of the statistics of credit-extension assets for wholesale banking, the evaluation of the provisions for bad debts, and collection of overdue loans, nonperforming loans, and bad debts. 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 profit models, customers are divided into test and champion groups according to various credit criteria so as to strike optimal balance between risk and profits. Asset qualities and the characteristics of defaults are analyzed regularly to adjust risk management indicators 3. Scope and features of and achieve the business goals. credit risk report and For Wholesale Banking Group, internal rating systemic used for measurement and management evaluation system 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. 4. Policies for hedging Taking collaterals in the main credit risk mitigation technique. Collaterals include real estate, and /or mitigating chattels, and securities. Each of them has its own appraisal method and period. risk and strategies The continuing effectiveness of hedges/mitigations is monitored by applying the internal and processes credit rating system, credit portfolio management and review, coupled with credit exposures for monitoring diversification and credit limit setting. Strategies and processes for hedging and /or mitigating the continuing risk are reviewed and adjusted according to changes in factors such as macro economy or effectiveness of financial regime. hedges/mitigations. 5. Regulatory Capital Requirement Standardized Approach Methodology

Credit Risk Exposure Value and Capital Requirement after Mitigation on Standardized Method

Dec 31, 2012/unit: NT$1,000 Risk Exposure after Type of Risk Exposure Capital Requirement Mitigation Sovereigns 187,464,702 9 Non-central government public sector entities 1,936,583 30,985 Banks (including multilateral development bank) 38,339,248 1,306,124 Corporate (including securities and insurance company) 349,646,087 26,467,789 Retails 143,881,501 8,871,336 Residential properties 176,250,484 6,404,090 Equities 3,195,973 827,162 Other Assets 141,079,920 10,453,722 Total 1,041,794,498 54,361,217

96 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Item 07

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

2012 Securitization Risk Management System

Items Contents 1. Risk Management Strategy and (1) Risk Management strategy Process for Securitized Assets 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 financial management division first analyzes the deployment status of the bank’s assets and liabilities, before putting forth proposal for the securitization business according to the guidance of the bank’s management strategy (including execution costs and benefits) set by the board of directors. (note) Securitized assets of non-originating bank are managed according to market risk management policy. In the enforcement of management flow, 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.

2. Risk Management Organization Board of directors and Structure for Securitized Assets President

Finance Division Retail Banking Group Information Technology Services Group Planning, Provision of workflow financial information for the Provision of historical data evaluation, and targets of securitized for the targets of securitized the issuance assets and its accounting assets and information process treatment. needed by consigned coordination. Risk management institutions. strategy and mechanism for the targets of securitized assets 3. Scope and features of report on Contents of regular risk management report include: risk of securitized assets and 1. Detailed information on kind, value, credit rating, and evaluation of investment evaluation system beneficiary certificates and asset-backed securities 2. Trust report and report of custodian institution(should it exist) 3. Performance of securitized assets 4. Policies for hedging and/or Consider industrial concentration, economic-cycle risk, and effective capital utilization of mitigating risk and strategies risk assets in undertaking assets securitization business and carry out random review and processes for monitoring of cost-effectiveness, so as to determine proper timing for continuing the securitization the continuing effectiveness of business. hedges/mitigations. 5. Regulatory Capital Requirement Standardized Approach Methodology

Status of Securitized Business: Nil.

97 Risk exposure and required capital relating to asset securitization - by transaction type

Base date: Dec 31, 2012 /unit: NT$1,000 Exposure type Conventional Synthetic total

Exposure Exposure Capital Capital Book Type of assets Capital Capital Exposure Retained or requirement requirement type Retained or Liquidity Credit Subtotal requirement requirement (5)= acquired (6)= before Bank acquired facility enhancement (1) (2) (4) (1)+(3) (3) (2)+(4) securitization role Mortgage- backed Banking 3,628,832 3,628,832 58,061 3,628,832 58,061 security book Non- Originating bank Trading book

Sub-total

Banking book Originating bank Trading book

Sub-total

Total 3,628,832 3,628,832 58,061 3,628,832 58,061

Information on Securitized Products

(1) Summarized Information on Investment in Securitized Products Base date: Dec 31, 2012/unit: NT$1,000 Evaluated Accumulated Original cost accumulated Value on book Items Listed accounting items reduction A income D=A-(B+C) C B Available–for-sale financial 1 3,610,291 ( 14,745 ) 3,625,036 assets–beneficiary certificates Financial assets at fair value 3 989,445 ( 344 ) 989,789 through profit or loss-ABCP Total 4,599,736 ( 15,089 ) 4,614,825 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 Asset- 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 asset-backed securities (ABS): including beneficiary certificates for corporate-loan claims or asset-backed securitized (collateralized loan, obligation, or CLO) beneficiary certificates for securitized bond assets or asset-backed securities (collateralized bond obligation, or CBO) beneficiary certificates for securitized claims on credit-card debts or asset-backed securities, beneficiary certificates by securitized claims on auto loans or asset-backed securities, beneficiary certificates for securitized claims on consumption loans/cash-card debts or asset-backed securities, beneficiary certificates for securitized leasing claims or asset-backed securities, and other securitized beneficiary certificates or asset-backed securities. (3) (ABCP) Short-term beneficiary certificates or short-term asset-backed securities (asset-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 beneficiary certificates of asset-backed securities held by the bank with the bank serving as an originating institution.

98 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Item 07

(2) Mandatory information disclosure for investment in securitized products with original cost exceeding NT$300 million. (excluding those held for credit enhancement with the bank serving as an originator)

Unit: NT$1,000 Payment Names method Listed Credit Unrealized attachment Contents of Denomination Issuer and its Purchase Maturity Coupon for Accumulated Book accounting rating Original cost profit & point of assets pool securities currency location date date rate principal impairment value item (note 3) Loss (note 4) (note 5) (note 2) and interest

Ginnie Mae secured Available– Government GNR Mortgage for-sale National 2012 2037 Fitch loan,original 2011- USD Fixed 1.75% Monthly 311,504.00 2,483 313,987 - financial Mortgage 01.11 10.16 AAA cost=USD 168B assets Association 10,776,599.69 deals:2,607 pools

Available– Ginnie GNR Mae secured for-sale 1 * USD.1M. DUE 16 GNMA MBS 2011 2034 Moody's Mortgage financial USD LIBOR + Monthly 337,667.63 301 337,968 loan,original MAR POOL 11.30 03.16 Aaa assets 0.3% cost=USD 2034 11,589,367.51 deals:12pools Available– Ginnie GNR Mae secured for-sale 1 * USD.1M. DUE 20 GNMA MBS 2010 2040 Moody's Mortgage financial USD LIBOR + Monthly 521,135.45 4,185 525,321 loan,original APR POOL 04.30 04.20 Aaa assets 0.65% cost=USD 2040 17,886,305.70 deals:2pools

Available– Ginnie GNR Mae secured for-sale 1 * USD.1M. DUE 16 GNMA MBS 2011 2040 Moody's Mortgage financial USD LIBOR + Monthly 350,204.34 2,596 352,800 loan,original OCT POOL 11.15 10.16 Aaa assets 0.43% cost=USD 2040 11,992,101.93 deals:17pools

Bullet Financial payment Chinatrust Land assets at of Financial Bank of fair value Land Bank 2012 2013 Fitch principal Holding - TWD 1.117 989,445.00 344 989,789 Taiwan through of Taiwan 11.13 02.18 A plus Class B (Note 6) profit or interest preferred stock loss at maturity 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: The foreign currency asset pool consisted entirely of mortgages guaranteed by Agencies (equivalent to the guarantee of the U.S. government), hence all amounts are recoverable. 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), details, value on book in original currency and number. Note 6: Taishin Bank's 8th collateralized debt obligation issued in the form of special purpose trust by Land Bank of Taiwan.

(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.

99 3. Operational risk Management system

2012 Operational Risk Management System

Items Contents Taishin Bank got the approval of FSC for the Standardized Approach in 2007. However, we are planning to adopt the Advanced Measurement 1. Operational Risk Management Strategy Approach in the future. So far, we have developed systems and processes and Process to comprehensively identify, monitor, measure, mitigate, manage and report operational risks. The bank has set up independent operating-risk management unit; in charge of integrating the management structure for the bank’s operating risks, so 2. Operational Risk Management that staffers at various levels can follow consistent standards in identifying, Organization and Structure. evaluating, managing, monitoring and reporting various operating risks when carrying out their duties. The scope of operating risk is defined as “ risk triggered by improprieties or mistakes of internal flow, staffers, systems, or external incidents, including legal risk but excluding strategic risk and reputation risk.” 3. Scope and features of operational risk The bank has established operating risk management system, including loss report and evaluation system database, self evaluation of risk, and critical risk index, to analyze, evaluate, and assess the chance and exposure value of operating risk and put forth action plan on the basis of the analytical results, in order to cut the rate for the occurrence of similar operating risk in the future. 4. Policies for hedging or mitigating risk and strategies processes for monitoring The bank has instituted business continuity management (BCM) and taken the continuing effectiveness of hedges/ out insurance as the hedging tools. mitigations. 5. Regulatory Capital Requirement Standardized Approach Methodology

Capital Requirement for Operational Risk

Dec 31, 2012, unit: NT$1,000 Year Gross Income Capital Requirement 2010 21,677,718 2011 24,801,302 - 2012 23,942,522 Total 70,421,542 3,128,132

4. Market risk management system and capital requirement

2012 Market Risk Management System

Items Contents 1. Market Risk Strategy and Taishin market risk policy is meant to manage risk, in order to maximize shareholder’s Process value. We have established a risk management framework, including an independent risk management department to maintain integrity of the risk control processes, clearly defined market risk management policies and 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 Management Our market risk team is responsible for daily management and control of our market risk Organization and Structure exposures, ensuring our business activities adhere to our market risk policies. The market risk management team comprises of: a limit control unit responsible for monitoring the use of risk limits approved by board and preparing daily trade profit and lost an IT unit responsible for system development and maintenance, and a Quant Team responsible for VaR calculations, product pricing, stress-testing, model development and validation, and analyzing non-vanilla type derivatives. There is also a finance team responsible for handling settlements and bookkeeping.

100 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Item 07

Items Contents 3. Scope and features of Risk reporting is performed in a timely fashion and measurements are made at different market risk report and levels, from products to trading desks. We seek to monitor and control our market risk evaluation system exposures through a variety of separate but complementary financial/trading management and reporting systems. Qualitative tools: Our major objective is to promote risk transparency and risk awareness. We accomplish this through an independent risk management function, alone with the setup of risk policies and processes, including pricing verifications, benchmarking, model validation and a new product review/ 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 specific market risks. 4. Policies for hedging or Market risk is managed by diversifying exposures, controlling position sizes and mitigating risk and strategies establishing economic hedges in related securities or derivatives. The ability to actively and processes for monitoring manage risk is related to its hedge strategy, and identifying adverse changes in the the continuing effectiveness liquidity of an exposure or its related hedge instrument and in the correlation of price of hedges/ mitigations movements between the two is essential to effective hedging. We have policies and procedures in place to ensure active and efficient hedges. 5. Regulatory Capital Standardized Approach Requirement Methodology

Capital Requirement for Market Risk

Dec 31, 2012, unit:NT$1,000 Type of Risk Capital Requirement Interest rate risk 1,917,469 Equity securities risk 91,808 Currency rate risk 171,179 Commodity price risk 0 Total 2,180,456

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.

(1) Analytical table for the structure of maturity dates for NT-dollar funds Dec 31, 2012/unit:NT$1,000 Value for remaining period before maturity Total 181 days- Over one 0 -10 days 11 -30 days 31- 90 days 91-180 days one year year Main fund inflow 926,991,170 134,703,788 179,393,953 87,875,554 37,299,015 75,454,069 412,264,791 upon maturity Main fund outflow upon 1,012,702,885 62,645,996 104,985,672 144,116,407 168,038,368 203,455,566 329,460,876 maturity Shortfall before ( 85,711,715 ) 72,057,792 74,408,281 ( 56,240,853 ) ( 130,739,353 ) ( 128,001,497 ) 82,803,915 maturity Note: refers to all NTD-denominated within the bank.

101 (2) Analytical table for the structure of maturity dates for US-dollar funds. Dec 31, 2012/ unit: US$1,000 Value for remaining period before maturity Total 181 days-one 0- 30 days 31- 90 days 91-180 days Over one year year Main fund inflow upon maturity 11,298,158 4,742,890 2,453,978 1,523,883 842,732 1,734,675 Main fund outflow upon 11,261,236 4,333,937 1,830,973 2,895,994 1,354,881 845,451 maturity Shortfall before 36,922 408,953 623,005 ( 1,372,111 ) ( 512,149 ) 889,224 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 1. Management principle Risk management for fund liquidity is to assure that under any circumstance at present or in the future, the bank’s liquid fund can meet the fund need resulting from assets growth or fulfilling mature obligations. Finance Division should monitor and manage the following items: ██Under normal market change or emergent situation, possess sufficient fund to meet dueobligations and fulfill guarantee and commitment for credit extension. ██Carry out fund maneuvering at reasonable market prices. ██Meet liquidity need for business growth. Basic principles for funding liquidity-risk management include: ██Principle of diversification: Finance division must avoid over-concentration in fund maneuvering, in terms of maturity date, maneuvering tools, currency, place, funding source, and trading partners. ██Principle of stability:Finance division follows the strategy of fund stability to reduce the reliance on unstable funding sources and avoid the effect of market swing on funding sources. ██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 sufficient 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. ██Principle of matching of assets and liabilities on maturity. ██Pay attention to payment commitment resulting from credit-extension business. 2. Risk assessment of fund liquidity Assessment of liquidity risk mainly includes estimate of shortfall for short-term cash flow and accumulated shortfall. The calculation of accumulated fund shortfall should include items inside and outside balance sheet. For utilization of trading-book fund, the financial management division should reach an agreement with management unit of trading-book management unit concerning ceilings for monthly and accumulated fund utilizations. Should there be exceptional cases, notify the financial management division before undertaking trading, so as to lower fluctuation and risk of fund need. 3. Assumption for calculating fund-liquidity risk In order to correctly assess liquidity risk and establish complete monitoring and control procedure, the financial management division should carry out liquidity-risk management assumption for banking book, scenario emulation, and the evaluation and establishment of customer behavior and pricing assumption, which should be recorded in detail in document. The aforementioned assumptions and verification of models should be carried out by risk management division.

102 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Item 07

4. Setup of quota for fund liquidity risk Liquidity risk quota is formulated by financial risk division and along with related business assumption and the logic for trial calculation, is subject to review by risk management division, which will then report to the risk management commission of the financial holding company and the board of directors for approval. The same procedure is followed for adjustment during the year.

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

Name of law/regulations Effect of the bank countermeasures 1. All notifications required from the bank had been added to business agreements and Individual information protection Additional duties to inform customers on application forms. law implemented on October various parts of the bank's businesses 2. The bank has obtained BS10012 certification 1,2012 on September 5, 2012,and will continue to ensure compliance with the law. The bank needs to assess whether it should change the current account opening procedures, trading flows, and The bank has engaged a team of professional Foreign Account Tax system configurations. Furthermore, consultants to assess the impacts of the law, and Compliance Act(FATCA) the bank needs to conduct impact develop responsive measures where appropriate. assessments on products and counterparties that are possibly affected by the law. A DBU may commence RMB services The bank has created its RMB account on Regulations Governing Foreign by creating a settlement account at an February 5 at Bank of China Taipei Branch (the Exchange Business of Banking RMB settlement bank, or by creating RMB settlement bank), and commenced RMB Enterprises an inter-bank account at an agent bank services since February 6 in its DBU. located in Mainland China. c. Effect of technological and industrial changes on the finance of the bank and countermeasures 1. Cloud-end service technology

To cope with the new needs arising from various businesses, Taishin Bank has established advanced server virtual platform since 2009, enabling the bank to cut initial investment cost for information system. The bank began to introduce cloud-end service technology since2012, transforming VIP service in the direction of cloud- end digitalization and increasing the communications and information exchange between VIP clients and the bank. To meet the needs of the bank's offshore branches and Chinese offices, the IT department will integrate resources within the bank to enhance customer information management, while achieving simplified work flows and resource sharing that improve the bank's productivity, competitiveness, and management efficiency as a whole, and accomplish our goal to implement smart corporate management without boundaries.

2. Mobile payment:

In light of the latest Internet and cellphone technologies, the bank will commit more resources to develop platforms, apps, and new ideas that can be used for mobile payments, thereby giving us the ability to serve customers anytime, anywhere. d. Effect of change in the corporate images of the bank and countermeasures. In addition to the painstaking management for the financial business, Taishin Financial Holding, the parent firm, and the bank has dedicated to social care, public service, and environmental protection, due to their deep awareness of the responsibility and mission of enterprises in the society. Via active participation in

103 environmental protection, social public services, and humanistic and artistic events, an enterprise can properly exercise its power and bring change and influence to the society. Via substantial payback to the society, community, and underprivileged groups, an enterprise can play the role of the best social member. e. Anticipated benefits and possible risks from acquisition and countermeasures. According to bank’s experience in financial acquisitions, including Tainan First Credit Cooperation and HsinChu Tenth Credit Cooperative and the acquisition of Daan Bank, financial mergers can generate a number of benefits, including expansion of financial scope.

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 benefits to shareholders.

1. Anticipated benefits:

(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 efficient 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 financial products and services to existing clients and thereby augment revenue directly. 2. Possible risks for acquisition

A number of factors will affect the achievement of acquisition synergy and realization of anticipated benefits, 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: 1. The bank had been approved by the Financial Supervisory Commission on July 3, 2012 to establish a new domestic branch, which is expected to locate in Wenshan District, Taipei City.

2. All branch establishments have been supported by complete market surveys and assessments beforehand, including a thorough understanding regarding population growth and commercial activities in the proximity. The bank assesses its decisions carefully to ensure a balanced growth, and with this new branch, the bank will be able to broaden its service coverage and respond to customers' needs more quickly. A wider branch presence will provide the bank with the ability to offer more convenient services to its customers and compete its peers for service excellence.

3. Some of the known risks involved in the branch establishment are: over-banking and customer overlapping in local area. These risks have already been taken into consideration, which the bank will seek to mitigate by adjusting its business strategies and risk policies.

104 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Item 07

g. Risk associated with business concentration

1. Backup mechanism

In the wake of operational concentration, resources and talent are shared, which will cause profound influence on the bank following the outbreak of emergent incidents. To cope with possible risk, the risk management division of the financial holding firm formulates integrated business sustaining plan, including emergent countering mode for field, system, and personnel, and disaster recovery plan. Operating service division also carries out periodic tests of its business sustaining plan and backup copies of data at different sites are also produced periodically.

2. Document transmission

In the wake of operating concentration, internal transmission or delivery of original copies of document may result in information leakage of loss of documents, thereby causing serious consequence on the customers and the bank. To prevent the problems, the bank keeps the track for signed reception and formulates complete delivery rules for the delivery of key documents.

h. The effect of the change of management right on the bank, related risk and Countermeasures: Nil.

i. Litigation and non-litigation incident: Nil.

j. Effect and risk of large equity transfer or replacement by Director, supervisor, or major shareholders holding more than one percent and countermeasures:The bank is 100% owned subsidiary of Taishin Financial Holding Co., Ltd

K. Other major risks and countermeasures: Nil.

G. Crisis response mechanism:

To assure continuing operation of the company’s key businesses and strengthen the company’s capability in handling emergent incidents, so as to minimize the effect of disaster and resume normal operation quickly, the bank has formulated “business continuing management” policy, which defines emergent incidents, grades risks, designates responsible units, and specifies related handling procedure.

H. Other important affairs: Nil.

105 VIII. Special Notes

A. Information of affiliates

a. Consolidated financial statement with affiliates The bank did not produced consolidated financial statement with affiliates in 2012, since affiliates which should be covered by the consolidated financial statement, according to the “guidelines for the compilation of consolidated proxy statement, financial statement, and affiliation report for affiliates.” are the same companies which should be covered by the consolidated financial statement for parent company and subsidiaries, according to the No.7 financial accounting criteria.

b. Consolidated proxy statement of affiliates

1. Organizational chart of affiliates

Taishin International Bank Organizational chart of affiliates

(Base date: Dec 31, 2012)

Taishin International Bank

100% 87.4% 60%

Taishin Dah An Taishin Insurance Taishin Real Estate Leasing Co., Ltd Agency Co., Ltd Management Co., Ltd

100%

Taishin Insurance Brokers Co., Ltd

106 VIII. Special Notes 08

2. Business status of affiliates

Base date:Dec 31,2012, Unit: NT$1,000 Current After-tax Total Total Book Operating Operating Name of enterprises Capital Profit/loss Profit/loss Assets Liabilities Value revenue profit (after tax) Per share Taishin Dah An Leasing 200,000 209,670 174 209,496 0 4,903 4,437 0.22 Taishin Insurance Agency 30,000 1,197,706 105,826 1,091,880 791,660 49,915 18,472 6.16 Taishin Insurance Brokers 60,000 78,093 1,239 76,854 14,372 1,751 2,203 0.37 Taishin Real Estate 200,000 608,338 295,603 312,735 60,539 30,323 25,997 1.30 Management

3. Information on affiliates

Base date: Dec 31, 2012, unit: NT$1,000 Date of Paid-in Name of enterprise Address Major business or product items establishment Capital 3th fl., No.44, Taishin Insurance 1996.09.19 Zhongshan N. Road, 30,000 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 and apparatus. 4. Wholesale of precision equipment. 5. Retail of precision equipment. 6. Retail of auto. Taishin Dah An fl.2-2, No.9, Dehui 7. Retail of ship and parts. 1997.10.13 200,000 Leasing Co.,Ltd Street, Taipei city 8. Retail of flying devices and parts. 9. procurement of money debt claim of financial institutions. 10.Management consulting. 11. information software service. 12.Information processing service. 13.Other business services. 1. Construction management industry. 2. Residence and office building development and leasing. 3. Development and leasing of industrial factories. 4. Specific professional zone development. 5. Investment and construction of public. Taishin Real Estate 2th fl., No.9, Dehui 200,000 construction projects. 1995.08.17 Management Co., Ltd Street, Taipei city 6. New town and new community development. 7. Agency for area expropriation and urban land rezoning. 8. Urban renewal. 9. realty transaction. 10.Realty leasing. 11.Business credit investigation.

107 4. Information on directors, supervisors, and presidents of affiliates

Base date: Dec 31, 2012 Shareholding Name of enterprise Title Name or representative Shareholding Stake Representative Taishin International Bank 20,000,000 100.00% Chairman Larry Chung Director Steve S.F. Shieh Taishin Dah An Leasing Director Shawn C.L. Teng Supervisor Welch Lin President Vincent Shieh - - Representative Taishin International Bank 2,622,040 87.40% Chairman Jack Su Director Shawn C.L. Teng Taishin Insurance Director Welch Lin Agency Co.,Ltd Director Spike Wu Supervisor Jeffrey Wu President Andy An - - Representative Taishin Insurance Agency 6,000,000 100.00% Chairman Jack Su Director Welch Lin Taishin Insurance Brokers Director Spike Wu Co.,Ltd Director Steve S.F. Shieh Supervisor Jeffrey Wu President Andy An - - Representative Taishin International Bank 12,000,000 60.00% Chairman Lung-cheng Chen Director Thomas T.L.Wu Taishin Real Estate Director Jeffrey Wu Management Representative Taishin Asset Management 8,000,000 40.00% Supervisor Welch Lin President Shean Yng Liaw - -

108 VIII. Special Notes 08

c. Affiliate report

Statement

Taishin International Bank Statement on Affiliation Report

The company’s affiliation report for fiscal 2012 ( Jan 1,2012-Dec 31, 2012) was compiled according to “Guidelines for Compilation of Consolidated Business Report, Consolidated Financial Statement, and Affiliation Report of Affiliates”, whose disclosed information has no major differences from related information disclosed in the notes of the financial statement for the same period

Taishin International Bank

Thomas T.L. Wu Chief Executive Officer

April 19, 2013

109 CPA Inspection Opinion on Affiliation Report

Deloitte No.10204078 May 8, 2013

Recipient: Taishin International Bank Co., Ltd Theme: Confirmation of the absence of major inadequacies in information contained in the 2012 affiliation report of your company

1. Your company issues a statement, as attached, expressing that your affiliation report for fiscal 2012(Jan 1, 2012-Dec 31, 2012) was compiled according to “Guidelines for the Compilation of Consolidated Business Report, Consolidated Financial Statement, and Affiliation Report of Affiliates,” whose disclosed information has no major differences from related information disclosed in the notes of the financial statement for the same period. 2. After comparison, the CPA find no major differences between your affiliation report for fiscal 2012, compiled according to “Guidelines for the Compilation of Consolidated Business Report, Consolidated Financial Statement, and Affiliation Report of Affiliates,” and the notes of your 2012 financial statement.

Deloitte & Touche Taiwan

110 VIII. Special Notes 08

d. Relationship between subordinated and controlling company (Base date: Dec 31,2012) Unit: share;% Shareholding and lien obligation of controlling Director, supervisor, or manager Controlling Controlling company representating controlling company company Reason name Shares owned Share of stake Shares with lien Title Name

Chairman Thomas T.L.Wu

Director Jeffrey Wu

Director Te-nan Hsu

Director Richard R.C, Liu

Director Jui-Sung Kuo Own 100% of Taishin the shares with Director Shang-pin Wu Financial voting right 4,915,752,571 100.00% - Holding issued by the Director Chu-Chang Wang Co., Ltd bank Independent director Chih-kang Wang

Independent director Neng-bai Lin

Standing Supervisor Yang-Tzong Tasy

Supervisor Toney Chen

Supervisor Long-Su Lin e. Dealing between subordinated and controlling company 1. Dealing for purchase and sale:Nil. 2. Property dealing:Nil. 3. Fund lending:Nil.

111 4. Asset leading Unit:NT$1,000 Type of Method Target Comparison Amount Collection Other dealing Nature of of rental Lease Period Basis for rental with common of current of current agreed (Rental out Lease collection Name Address rental level rental rental conditions or On lease) (payment)

Fl. 13, No. 118, Renai Business Set on reference Monthly Similar to Deposit of Rental out 2012.05.01 2017.04.30 832 Normal Road, Sec. 4, Taipei lease of market price collection market price 138

Fl. 13, No. 118, Renai Business Set on reference Monthly Similar to Deposit of Rental out 2012.07.01 2017.06.30 80 Normal Road, Sec. 4, Taipei lease of market price collection market price 40

Fl. 16, No. 118, Renai Business Set on reference Monthly Similar to Deposit of Rental out 2010.11.01 2015.10.31 7,449 Normal Road, Sec. 4, Taipei lease of market price collection market price 1,832

Fl. 15, 17, 19, No. 118, Business Set on reference Monthly Similar to Deposit of Rental out Financial Renai Road Sec. 4, 2010.03.01 2013.02.28 16,171 Normal lease of market price collection market price 4,042 Holding Taipei Building Business Set on reference Monthly Similar to Deposit of Rental out 2011.09.01 2012.05.31 4,902 Normal lease of market price collection market price 2,941 Fl., 12, 13, 16, 20, 21,22, 23, No. 118, Renai Road, Sec. 4, Business Set on reference Monthly Similar to Deposit of Rental out 2011.06.01 2015.12.31 4,933 Normal Taipei lease of market price collection market price 2,114

Fl. 18, No. 118, Renai Business Set on reference Monthly Similar to Deposit of Rental out 2011.03.17 2016.03.16 1,649 Normal Road, Sec. 4, Taipei lease of market price collection market price 412

Business Set on reference Monthly Similar to Deposit of Rental out Fl. 12, No. 96, Jianguo 2010.05.01 2015.04.30 4,070 Normal lease of market price collection market price 1,017 Taiwan N. Road, Sec. 1, Taipei Securities Building Fl.13, No. 96, Jianguio Business Set on reference Monthly Similar to Deposit of Rental out 2010.12.01 2015.04.30 7,928 Normal N. Road, Sec. 1, Taipei lease of market price collection market price 1,981

Business Set on reference Monthly Similar to Deposit of Rental out 2009.12.01 2012.11.30 8,635 Normal Fl. 2, No,. 44, lease of market price collection market price 2,354 Zhongshan N. Road, Business Set on reference Monthly Similar to Deposit of Rental out 2010.11.01 2012.11.30 1,023 Normal Sec. 2, Zhongshan lease of market price collection market price 278 Chung District, Taipei Business Set on reference Monthly Similar to Deposit of Rental out Shan 2012.12.01 2017.11.30 878 Normal Building lease of market price collection market price 2,634 Fl. 3, No,. 44, Zhongshan N. Road, Business Set on reference Monthly Similar to Deposit of Rental out 2011.10.01 2014.07.31 10,271 Normal Sec. 2, Zhongshan lease of market price collection market price 2,567 District, Taipei Fl. 6, No. 207, Jiuzhong Business Set on reference Monthly Similar to Deposit of Rental out Road, Sec. 2, Neihu 2010.01.01 2012.12.31 396 Normal lease of market price collection market price 99 District, Taipei Fl. 5, No. 207, Jiuzhong Neihu Business Set on reference Monthly Similar to Deposit of Rental out Road, Sec. 2, Neihu 2011.09.01 2012.12.31 437 Normal Building lease of market price collection market price 109 District, Taipei Fl. 5, No. 207, Jiuzhong Business Set on reference Monthly Similar to Deposit of Rental out Road, Sec. 2, Neihu 2011.06.01 2012.05.31 624 Normal lease of market price collection market price 156 District, Taipei Fl. 3, No. 187, Dongxing Road, Sec. Business Set on reference Monthly Similar to Deposit of Rental out 2010.06.01 2015.05.31 1,124 Normal 2, Nantun District, lease of market price collection market price 281 Nantun Taichung City Building Fl. 2, No. 187, Dongxing Road, Sec. Business Set on reference Monthly Similar to Deposit of Rental out 2011.11.15 2015.05.31 390 Normal 2, Nantun District, lease of market price collection market price 97 Taichung City

112 VIII. Special Notes 08

Type of Method Target Comparison Amount Collection Other dealing Nature of of rental Lease Period Basis for rental with common of current of current agreed (Rental out Lease collection Name Address rental level rental rental conditions or On lease) (payment) Fl., 3, No. 116, Wufu Business Set on reference Monthly Similar to Deposit of Rental out Wufu 3F. 2nd Road, Xinxing 2011.08.12 2014.08.11 707 Normal lease of market price collection market price 176 District, Kaohsiung City guarantee 1F fl.1, No. 95, Business Set on reference annual Similar to deposits On lease Wenchang Road, Shilin 2010.10.01 2012.09.30 37 Normal lease of market price payment market price & margins District, Taipei paid 0 guarantee 1F fl.1, No. 95, Business Set on reference annual Similar to deposits On lease Wenchang Road, Shilin 2012.10.01 2014.09.30 113 Normal lease of market price payment market price & margins District, Taipei paid 0 guarantee Fl. 31, No. 66, Business Set on reference Monthly Similar to deposits On lease Zhongxiao W. Road, 2010.10.01 2012.09.30 94 Normal lease of market price payment market price & margins Sec. 1, Taipei paid 54 guarantee Fl. 31, No. 66, Business Set on reference Monthly Similar to deposits On lease Zhongxiao W. Road, 2012.10.01 2013.09.30 31 Normal lease of market price payment market price & margins Sec. 1, Taipei paid 54 guarantee ATM Shin Kong Business Set on reference Monthly Similar to deposits On lease 2012.01.01 2012.12.31 1,260 Normal Mitsukoshi lease of market price payment market price & margins paid 0 guarantee B1, fl. 1, No. 150, Business Set on reference Monthly Similar to deposits On lease Nanjing E. Road, Sec. 2011.04.16 2016.04.15 9,120 Normal lease of market price payment market price & margins 2, Taipei City paid 2,280 B2,No. 44, Zhongshan guarantee N. Road, Sec. 2, Taipei Business Set on reference Monthly Similar to deposits On lease 2011.03.01 2012.02.28 44 Normal City lease of market price payment market price & margins (208.209) paid 0 B2,No. 44, Zhongshan guarantee N. Road, Sec. 2, Taipei Business Set on reference Monthly Similar to deposits On lease 2012.03.01 2013.02.28 220 Normal City lease of market price payment market price & margins (208.209) paid 0 guarantee B3,No. 44, Zhongshan Business Set on reference Monthly Similar to deposits On lease N. Road, Sec. 2, Taipei 2011.11.01 2012.10.31 110 Normal lease of market price payment market price & margins City(338) paid 0 guarantee B3,No. 44, Zhongshan Business Set on reference Monthly Similar to deposits On lease N. Road, Sec. 2, Taipei 2012.11.01 2013.10.31 22 Normal lease of market price payment market price & margins City(338) paid 0 guarantee Fl., 4-1, 4-2, No. 207, Business Set on reference Monthly Similar to deposits On lease Fuxing Road, Taoyuan 2011.09.01 2013.08.31 1,701 Normal lease of market price payment market price & margins City, Taoyuan County paid 446 guarantee Fl. 14-1, No. 205, Business Set on reference Monthly Similar to deposits On lease Fuxing Road, Taoyuan 2010.03.01 2012.02.28 48 Normal lease of market price payment market price & margins City, Taoyuan County paid 59 guarantee Fl. 14-1, No. 205, Business Set on reference Monthly Similar to deposits On lease Fuxing Road, Taoyuan 2012.03.01 2014.02.28 240 Normal lease of market price payment market price & margins City, Taoyuan County paid 59

113 5. Other important dealings: As of Dec 31, 2012, the bank had NT$236,000,000 of collectible fund for linked taxation under consolidated final account.

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

B. Securities and bank debentures issuance via private placement in the recent year and as of the date of the publication of the annual report:Nil.

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.

114 IX. Directory of Head Office & Branches 09

IX. Directory of Head Office & Branches

Business units Address Telephone

Greater Taipei Area

1F and 2F, No.88, Sec.6, Jhongshan N. Rd., Jhongshan District, Taipei City 104, Tienmou Branch (02) 2836-3988 Taiwan (R.O.C.)

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

1F, No.282, Sec. 4, Jhongsiao E. Rd., Da-an District, Taipei City 106, Taiwan Jhongsiao Branch (02) 6636-9999 (R.O.C.)

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 (02) 2568-3988 Department (R.O.C.)

Trust Department 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

1F and B1, No.150, Sec. 2, Nanjing E. Rd., Songshan District, Taipei City 105, Jianciao Branch (02) 2508-1899 Taiwan (R.O.C.)

2F, No.17, Sec. 2, Jianguo N. Rd., Jhongshan District, Taipei City 104, Taiwan International Department (02) 2505-6966 (R.O.C.)

2F, No.17, Sec. 2, Jianguo N. Rd., Jhongshan District, Taipei City 104, Taiwan Offshore Banking Unit (02) 2505-6966 (R.O.C.)

1F and 3F and B1, No.17, Sec. 2, Jianguo N. Rd., Jhongshan District, Taipei City Jianpei Branch (02) 2505-6966 104, Taiwan (R.O.C.)

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

115 Business units Address Telephone

No.57, Sec. 1, Chongcing S. Rd., Jhongjheng District, Taipei City 100, Taiwan Simen Branch (02) 2371-7878 (R.O.C.)

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

Donghu Branch No.452-1, Sec. 5, Chenggong Rd., Neihu Dist., Taipei City 114, Taiwan (R.O.C.) (02) 2630-5678

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

No.133, Sec. 3, Minsheng E. Rd., Songshan District, Taipei City 105, Taiwan Dunbei Branch (02) 2712-6666 (R.O.C.)

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

116 IX. Directory of Head Office & Branches 09

Business units Address Telephone

No.79, Alley 3, Lane 182, Sec. 2, Wunhua Rd., Banciao Dist., New Taipei City 220, Chiangtsui Branch (02) 8252-9999 (R.O.C.)

Bannan Branch No.41,43, Guancian E. Rd., Banciao Dist., New Taipei City 220, Taiwan (R.O.C.) (02) 2956-6789

No.114, JianguoRd.,&No.66, Minzu Rd., Sindian Dist., New Taipei City 231, Taiwan Sindian Branch (02) 2915-7766 (R.O.C)

North Sindian Branch No.23,25, Baoqiang Rd., Xindian Dist., New Taipei City 231, Taiwan (R.O.C.) (02) 2912-3988

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

1F and 2F, No.98,102, Sec. 2, Xianmin Blvd., Banqiao Dist., New Taipei City 220, Xinban Branch (02) 2957-1858 Taiwan (R.O.C.)

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

Taoyuan, Hsinchu, Miaoli Area

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

North Taoyuan Branch No.166, Sec. 1, Daxing W. Rd., Taoyuan City, Taoyuan County 330, Taiwan (R.O.C.) (03) 346-4888

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

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

117 Business units Address Telephone

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

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

ShiFu Branch No.91, Sec. 2, Wenxin Rd., Xitun Dist., Taichung City 407, Taiwan (R.O.C.) (04) 2258-8757

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

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

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

118 IX. Directory of Head Office & Branches 09

Business units Address Telephone

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

Chiayi-Tainan Area

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

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

119 Business units Address Telephone

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

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

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 Offices

Business units Address Telephone

Overseas units

6F, Sun Life Tower, The Gateway, 15 Canton Road, Tsimsbatsui, Kowloon, Hong Hong Kong Branch 852-22349009 Kong

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

120 X. Notes To Financial Statements 10

X. Notes To Financial Statements

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholder 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, 2012 and 2011, and the related statements of income, changes in stockholder’s equity, and cash flows for the years then ended. These financial statements are the responsibility of Taishin Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the 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, 2012 and 2011, and the results of its operations and its cash flows 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 financial accounting standards, and accounting principles generally accepted in the ROC.

As stated in Notes 1 and 35 to the accompanying financial statements, Taishin Bank had a cash merger with Taishin Bills Finance Co., Ltd. a wholly owned subsidiary of Taishin Financial Holding Co., Ltd., with Taishin Bank as the surviving company. Based on Statement of Financial Accounting Standards (SFAS) Interpretation No. (91) 243 and 244 and No. (95) 081 issued by the Accounting Research and Development Foundation of the Republic of China, the transaction was treated as a reorganization and was recorded at the carrying values of both entities’ assets and liabilities.

We have also audited Taishin Bank’s separately prepared consolidated financial statements for the years ended December 31, 2012 and 2011, on which we have issued an unqualified opinion in our report dated March 14, 2013.

March 14, 2013

121 Notice to Readers

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

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

122 X. Notes To Financial Statements 10

TAISHIN INTERNATIONAL BANK CO., LTD.

BALANCE SHEETS DECEMBER 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars)

Percentage 2012 2011 Increase (Decrease) ASSETS Amount Amount % Cash and cash equivalents (Note 4) $ 12,395,086 $ 11,125,892 11 Due from the Central Bank and call loans to other banks (Notes 33,230,520 29,519,453 13 5 and 32) Financial assets at fair value through profit or loss 49,231,145 40,781,549 21 (Notes 2 and 6) Bonds and securities purchased under resell agreements 4,269,494 1,058,738 303 (Note 2) Receivables, net (Notes 2, 3, 7 and 8) 86,077,469 88,122,428 ( 2 ) Loans, net (Notes 2, 3, 8 and 32) 658,454,135 600,808,129 10 Available-for-sale financial assets (Notes 2, 9, 26 and 33) 207,278,563 191,190,849 8

Held-to-maturity financial assets (Notes 2 and 10) 1,917,473 2,421,241 ( 21 ) Investments accounted for by the equity method, net (Notes 2, 1,785,834 1,939,912 ( 8 ) 11, 26 and 32) OTHER FINANCIAL ASSETS, NET Financial assets carried at cost (Notes 2 and 12) 2,229,245 2,377,454 ( 6 ) Other miscellaneous financial assets (Notes 2, 3, 8 and 13) 681,184 516,362 32 Other financial assets, net 2,910,429 2,893,816 1 PROPERTY AND EQUIPMENT (Notes 2 and 14) Cost Land (including revaluation increments) 10,837,813 10,606,688 2 Buildings 7,707,903 7,791,798 ( 1 ) Machinery equipment 1,135,134 1,385,691 ( 18 ) Transportation equipment 34,330 49,515 ( 31 ) Miscellaneous equipment 82,904 123,367 ( 33 ) Leased assets 193,364 162,809 19 19,991,448 20,119,868 ( 1 ) Accumulated depreciation ( 2,524,712 ) ( 2,708,877 ) ( 7 ) 17,466,736 17,410,991 - Prepayments for buildings and equipment 8,424 13,451 ( 37 ) Property and equipment, net 17,475,160 17,424,442 - GOODWILL AND INTANGIBLE ASSETS (Notes 2 and 15) 1,688,796 1,921,980 ( 12 ) OTHER ASSETS Prepayments (Note 27) 446,668 456,106 ( 2 ) Refundable deposits (Note 33) 383,486 779,093 ( 51 ) Deferred income tax assets (Notes 2 and 30) 4,671,621 5,482,805 ( 15 ) Other miscellaneous assets (Notes 2 and 16) 23,911 27,983 ( 15 ) Other assets, net 5,525,686 6,745,987 ( 18 ) TOTAL $ 1,082,239,790 $ 995,954,416 9

Note: Based on Statement of Financial Accounting Standards (SFAS) Interpretation No. (91) 243 and 244 and No. (95) 081 issued by the Accounting Research and Development Foundation of the Republic of China, the merger of Taishin Bank and Taishin Bills Finance Co., Ltd. (“Taishin Bills Finance”) was treated as a reorganization and was recorded at the carrying value of both entities’ assets and liabilities. Also in accordance with SFAS Interpretation No. (95) 141, the financial statements of Taishin Bank as of and for the year ended December 31, 2010 were retroactively restated assuming the assets and liabilities of Taishin Bills Finance have been included at carrying value.

The accompanying notes are an integral part of the financial statements.(With Deloitte &Touche audit report dated March 14, 2013)

123 Percentage 2012 2011 Increase (Decrease) LIABILITIES AND STOCKHOLDER’S EQUITY Amount Amount % LIABILITIES Due to banks and Central Bank (Note 17) $ 52,366,146 $ 62,532,398 ( 16 ) Financial liabilities at fair value through profit or loss (Notes 9,114,382 8,353,108 9 2, 6 and 32) Bonds and securities sold under repurchase agreements 53,499,333 43,486,925 23 (Notes 2 and 32) Payables (Notes 2, 18 and 30) 21,425,730 22,379,981 ( 4 ) Deposits (Notes 19 and 32) 826,959,852 756,502,655 9 Bank debentures (Note 20) 36,700,000 25,000,000 47 Other financial liabilities (Note 21) 13,670,671 13,340,332 2 Other liabilities (Notes 8 and 22) 1,384,159 1,377,985 - Total liabilities 1,015,120,273 932,973,384 9 STOCKHOLDER'S EQUITY Capital stock (Note 23) Common stock - issued and outstanding 47,275,173 47,275,173 - Preferred stock - issued and outstanding 1,882,353 1,882,353 - Capital surplus (Note 24) Additional paid-in capital 3,089,037 3,089,037 - Other capital surplus (Note 2) 180,386 107,980 67 Retained earnings (Note 25) Legal reserve 4,973,500 2,646,154 88 Special reserve 189,981 189,981 - Unappropriated earnings 8,646,318 7,757,821 11 Unrealized revaluation increment 207,232 6,093 3,301 Cumulative translation adjustments (Note 2) ( 820 ) ( 539 ) 52 Unrealized gains or losses on financial instruments (Notes 677,524 27,334 2,379 2 and 26) Net loss not recognized as pension cost ( 1,167 ) ( 355 ) 229 Total stockholder’s equity 67,119,517 62,981,032 7

TOTAL $ 1,082,239,790 $ 995,954,416 9

124 X. Notes To Financial Statements 10

TAISHIN INTERNATIONAL BANK CO., LTD.

STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Percentage 2012 2011 Increase (Decrease) Amount Amount % INTEREST INCOME (Notes 2 and 32) $ 22,313,017 $ 19,880,352 12 INTEREST EXPENSE ( 8,438,783 ) ( 6,886,685 ) 23 NET INTEREST INCOME 13,874,234 12,993,667 7 NET INCOME AND GAINS (LOSSES) OTHER THAN INTEREST INCOME Fee income, net (Notes 2, 28 and 32) 6,402,970 6,117,143 5 Gain on financial assets and liabilities at fair value through 2,905,584 291,413 897 profit or loss (Notes 2, 6 and 32) Realized gain on available-for-sale financial assets (Note 2) 151,559 ( 48,257 ) 414 Gain on disposal of investments accounted for by the 396,042 - - equity method (Notes 2, 11 and 32) Investment income recognized under the equity method 13,113 103,373 ( 87 ) (Notes 2 and 11) Impairment loss (Notes 2 and 12) ( 39,627 ) - - Exchange gain, net (Note 2) ( 354,561 ) 838,041 ( 142 ) Other non-interest net income and gains (losses) Other miscellaneous net income (Note 2) 455,535 472,050 ( 3 ) GROSS INCOME 23,804,849 20,767,430 15 REVERSAL ALLOWANCE FOR LOAN LOSSES 617,039 1,807,336 ( 66 ) (Notes 2 and 8) OPERATING EXPENSES (Notes 29 and 32) Personnel expenses ( 8,068,723 ) ( 7,455,755 ) 8 Depreciation and amortization ( 757,509 ) ( 952,400 ) ( 20 ) Others ( 5,252,720 ) ( 4,954,215 ) 6 Total operating expenses ( 14,078,952 ) ( 13,362,370 ) 5 INCOME BEFORE INCOME TAX 10,342,936 9,212,396 12 INCOME TAX EXPENSE (Notes 2 and 30) ( 1,696,618 ) ( 1,473,296 ) 15 NET INCOME $ 8,646,318 $ 7,739,100 12

TAISHIN INTERNATIONAL BANK CO., LTD.

STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) 2012 2011 Pretax After-tax Pretax After-tax BASIC EARNINGS PER SHARE (Note 31) $ 2.16 $ 1.80 $ 1.92 $ 1.61 DILUTED EARNINGS PER SHARE (Note 31) $ 2.10 $ 1.76 $ 1.87 $ 1.57

Note: Based on Statement of Financial Accounting Standards (SFAS) Interpretation No. (91) 243 and 244 and No. (95) 081 issued by the Accounting Research and Development Foundation of the Republic of China, the merger of Taishin Bank and Taishin Bills Finance was treated as a reorganization and was recorded at the carrying value of both entities’ assets and liabilities. In addition, based on Interpretation No. (95) 141, the nancial statements of Taishin Bank as of and for the year ended December 31, 2010 were retroactively restated, assuming the carrying values of the income and expense of Taishin Bills Finance were included. Thus, for the years ended December 31, 2011, the net income of Taishin Bank included the net income of Taishin Bills Finance of $18,721.

The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated March 14, 2013)

125 TAISHIN INTERNATIONAL BANK CO., LTD.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars)

Issued and Outstanding Unrealized Capital Surplus Retained Earnings Capital Stock Unrealized Cumulative Gains Net Loss Not Revaluation Translation or Losses on Recognized as Common Preferred Additional Employee Other Capital Special Unappropriated Legal Reserve Increment Adjustments Financial Pension Cost Total Stock Stock Paid-in Capital Stock Options Surplus Reserve Earnings Instruments BALANCE, JANUARY 1, 2011 $ 47,275,173 $ 1,882,353 $ 3,145,166 $ 20,369 $ 4,411 $ 283,230 $ - $ 7,876,412 $ - ( $ 519 ) $ 206,290 $ - $ 60,692,885 Retroactive adjustments arising from a merger (Note) 5,140,000 - - 478 - 377,676 48,568 277,609 - - 51,081 - 5,895,412 Appropriation of the 2010 earnings Legal reserve - - - - - 2,362,924 - ( 2,362,924 ) - - - - - Preferred cash dividends ------( 120,000 ) - - - - ( 120,000 ) Cash dividends ------( 5,393,488 ) - - - - ( 5,393,488 ) Reclassification of trading loss reserve to special ------141,413 - - - - - 141,413 reserve Employee stock-based compensation - - - 83,200 ------83,200 Unrealized revaluation increment on land ------6,093 - - - 6,093 Cumulative translation adjustments ------( 20 ) - - ( 20 ) Unrealized gain or loss on available-for-sale financial ------( 178,956 ) - ( 178,956 ) assets Net loss not recognized as pension cost ------( 355 ) ( 355 ) Net income for the year ended December 31, 2011 ------7,739,100 - - - - 7,739,100 Effects of cash merger with Taishin Bills Finance (Note) ( 5,140,000 ) - ( 56,129 ) ( 478 ) - ( 377,676 ) - ( 258,888 ) - - ( 51,081 ) - ( 5,884,252 ) BALANCE, DECEMBER 31, 2011 47,275,173 1,882,353 3,089,037 103,569 4,411 2,646,154 189,981 7,757,821 6,093 ( 539 ) 27,334 ( 355 ) 62,981,032 Appropriation of the 2011 earnings Legal reserve - - - - - 2,327,346 - ( 2,327,346 ) - - - - - Preferred cash dividends ------( 120,000 ) - - - - ( 120,000 ) Cash dividends ------( 5,310,475 ) - - - - ( 5,310,475 ) Employee stock-based compensation - - - 77,592 ------77,592 Employee stock-based compensation expired - - - 238 ------238 Unrealized revaluation increment on land ------201,139 - - - 201,139 Cumulative translation adjustments ------( 281 ) - - ( 281 ) Investments accounted for by the equity method - - - ( 1,013 ) ( 4,411 ) ------( 5,424 ) Unrealized gain or loss on available-for-sale financial ------650,190 - 650,190 assets Net loss not recognized as pension cost ------( 812 ) ( 812 ) Net income for the year ended December 31, 2012 ------8,646,318 - - - - 8,646,318 BALANCE, DECEMBER 31, 2012 $ 47,275,173 $ 1,882,353 $ 3,089,037 $ 180,386 $ - $ 4,973,500 $ 189,981 $ 8,646,318 $ 207,232 ( $ 820 ) $ 677,524 ( $ 1,167 ) $ 67,119,517

The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated March 14, 2013)

126 X. Notes To Financial Statements 10

127 TAISHIN INTERNATIONAL BANK CO., LTD.

STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars)

2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 8,646,318 $ 7,739,100 Reversal allowance for loan loss ( 616,243 ) ( 1,804,027 ) Reversal for guarantee reserve ( 796 ) ( 3,309 ) Compensation cost of employee stock options 77,056 82,094 Recovery of loans written off 3,080,899 4,282,825 Depreciation 490,352 616,890 Amortization 267,157 335,510 Unrealized valuation (gain) loss of financial assets and liabilities ( 998,984 ) 1,317,954 Amortization of premium or discount on investment in bonds 426,456 369,831 Return on liquidation of financial assets carried at cost 39,627 - Provision (reversal) for impairment loss on assumed collaterals and 1,017 ( 133,792 ) residuals (Gain) loss on disposal of investment ( 34,763 ) 84,559 Investment income recognized under the equity method, net ( 13,113 ) ( 103,373 ) Gain on disposal of investments accounted for by the equity method ( 396,042 ) - Cash dividends received from equity-method investees 24,032 32,508 Deferred income tax expense 863,349 1,076,812 Others 7,290 10,524

Net changes in operating assets and liabilities Increase in financial assets for trading purpose ( 7,450,612 ) ( 5,119,727 ) Decrease in accounts receivable 1,961,199 9,184,040 Increase in other financial assets ( 393,774 ) ( 284,321 ) Decrease in other assets 1,220,545 981,526 Increase (decrease) in financial liabilities for trading purpose 761,274 ( 7,849,756 ) (Decrease) increase in accounts payable ( 1,006,416 ) 324,944 Increase in other financial liabilities 361,928 177,884 Decrease in other liabilities ( 33,473 ) ( 52,414 ) Net cash provided by operating activities 7,284,283 11,266,282

128 X. Notes To Financial Statements 10

2012 2011 CASH FLOWS FROM INVESTING ACTIVITIES (Increase) decrease in due from the Central Bank and call loans to other ( $ 3,711,067 ) $ 8,107,264 banks (Increase) decrease in bonds and securities purchased under resell ( 3,210,756 ) 1,933,816 agreements Increase in loans (including delinquent loans) ( 59,793,545 ) ( 71,333,466 ) Acquisition of available-for-sale financial assets ( 1,407,195,518 ) ( 927,705,805 ) Proceeds from disposal of available-for-sale financial assets 1,390,613,839 914,002,834 Proceeds from disposal of investments accounted for by the equity 522,976 ( 2,070 ) method Capital reduction of financial assets carried at cost 115,800 46,186 Repayment of held-to-maturity financial assets 404,016 983,226 Acquisition of property and equipment ( 315,830 ) ( 303,748 ) Proceeds from disposal of property and equipment 15,044 5,431 Net payment for acquiring other company - ( 5,895,412 ) Net cash used in investing activities ( 82,555,041 ) ( 80,161,744 )

CASH FLOWS FROM FINANCING ACTIVITIES (Decrease) increase in due to the Central Bank and other banks ( 10,166,252 ) 5,280,007 Increase in bonds and securities sold under repurchase agreements 10,012,408 10,875,155 Increase in deposits 70,457,197 56,516,689 Issuance of bank debentures 11,700,000 - Preferred cash dividends and cash dividends distributed ( 5,430,475 ) ( 5,513,488 ) Decrease in guarantee deposits received ( 1,337 ) ( 10,202 ) Others ( 31,589 ) ( 22,410 ) Net cash provided by financing activities 76,539,952 67,125,751

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,269,194 ( 1,769,711 )

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 11,125,892 12,895,603

CASH AND CASH EQUIVALENTS, END OF YEAR $ 12,395,086 $ 11,125,892

SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 8,320,484 $ 6,418,547 Income tax paid $ 606,748 $ 691,856

The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated March 14, 2013)

129 TAISHIN INTERNATIONAL BANK CO., LTD.

NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2012 AND 2011 (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 financial instruments - letters of credit, bankers’ acceptances, checking and savings accounts, credit cards, derivative instruments, etc.

As of December 31, 2012 and 2011, Taishin Bank had 6,189 and 6,279 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, 2012 and 2011. In order to integrate corporate resources and enhance operation efficiency, Taishin Financial Holding made a reorganization to merge with Taishin Bills Finance Co., Ltd. (“Taishin Bills Finance”) on January 22, 2011, with Taishin Bank as the survivor company, including the acquisition plan of Taishin Bills Finance by Taishin Bank.

The merger price was based on the audited net equity value of Taishin Bills Finance on the base date of merger with total amount of $5,895,412 thousand. Taishin Bank will pay in cash to Taishin Financial Holding 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, and accounting principles generally accepted in the Republic of China (ROC).

For readers’ convenience, the accompanying financial 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 financial statements shall prevail.

Significant accounting policies are summarized as follows:

130 X. Notes To Financial Statements 10

Foreign Currency Transactions The financial statements of foreign operations are translated into New Taiwan dollars at the following exchange rates: a.Assets and liabilities - at exchange rates prevailing on the balance sheet date; b.Shareholder’s equity - at historical exchange rates; c.Dividends - at the exchange rate prevailing on the dividend declaration date; d.Income and expenses - at average exchange rates for the year.

Exchange differences arising from the translation of the financial statements of foreign operations are recognized as a separate component of shareholder’s equity. Such exchange differences are recognized in profit or loss in the year in which the foreign operations are disposed of.

Non-derivative foreign-currency transactions are recorded in the respective currencies when the transactions occur. Income and expenses are recorded at average exchange rates. Exchange differences arising from settlement of foreign-currency assets and liabilities are recognized in profit 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 shareholder’s equity if the changes in fair value are recognized in shareholders’ equity; b.Recognized in profit and loss if the changes in fair value is recognized in profit or loss.

Foreign-currency nonmonetary assets and liabilities that are carried at cost continue to be stated at exchange rates at trade dates.

Accounting Estimates Under above guidelines, laws and principles, management may make certain estimates and assumptions, which are related to the financial instrument valuation, allowance for bad debts, depreciation of property and equipment, pensions, income tax, bonuses to employees, directors and supervisors, asset impairment loss, reserve for losses or guarantees, etc. Actual results could differ from these estimates due to changes in operating conditions and assumptions.

Current and Noncurrent Assets and Liabilities Because of bank’s business characteristics, the assets and liabilities of Taishin Bank are classified 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 36.

Financial Instruments at Fair Value through Profit or Loss Financial instruments classified as financial assets or financial liabilities at fair value through profit or loss (“FVTPL”) include financial assets or financial liabilities held for trading and those designated as at FVTPL on initial recognition. Taishin Financial Holding and subsidiaries recognize a financial asset or a financial liability on their balance sheets when Taishin Financial Holding and subsidiaries become a party to the contractual provisions of the financial instrument. A financial asset is derecognized when Taishin Financial Holding and subsidiaries have lost control of their contractual rights over the financial asset. A financial liability is derecognized when the obligation specified in the relevant contract is discharged, cancelled or expired.

131 Financial instruments at FVTPL are initially measured at fair value. At each balance sheet date subsequent to initial recognition, financial assets or financial 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 profit or loss. For securities companies, all regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. For banks and bills companies, all regular way purchases or sales of financial assets are recognized and derecognized on a settlement date basis except for stocks and beneficial certificates which are recognized and derecognized on a trade date basis.

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

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.

Bonds and Securities Purchased/Sold under Specific Agreements Bonds and securities purchased under resell agreements are recorded at purchase price and accounted as financing transactions. Bonds and securities sold under repurchase agreements are recorded at the selling price. Interest revenue and expenses arose from the transactions mentioned above are recorded on accrual basis.

Delinquent Loans Overdue loans or other credit items including their 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 reclassified from loans are reported under loans, while others are reported as other miscellaneous financial 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.

On January 1, 2011, Taishin Bank adopted the third-time revised Statement of Financial Accounting Standards (SFAS) No. 34, “Financial Instruments: Recognition and Measurement.” One of the main revisions is that impairment of receivables originated by a company should be covered by SFAS No. 34. Loans and accounts receivable are assessed for impairment at the end of each reporting period and considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the accounts receivable, the estimated future cash flows of the asset have been affected. Objective evidence of impairment could include:

● Significant financial difficulty of the debtor;

● Occurrence of past-due loans and receivables;

● It is becoming probable that the debtor will enter bankruptcy or financial re-organization.

132 X. Notes To Financial Statements 10

Loans and accounts receivable that are assessed as not impaired individually are further assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of loans and accounts receivable could include the Company’s past experience in collecting payment and an increase in the number of delayed payments, as well as national or local economic conditions that correlate with defaults on the loans and receivables.

The amount of impairment loss recognized is the difference between the asset carrying amount and the present value of estimated future cash flows, after taking into account the related collateral and guarantees, discounted at the receivable’s original effective interest rate.

The carrying amount of accounts receivable is reduced through the use of an allowance account. When loans and accounts receivable are considered uncollectible, they are written off against the allowance account after the board of directors approve. Recovery of written-off delinquent loans is recognized as recovery of allowance for loan losses and classified into other non-interest net income and loss.

Taishin Bank evaluates the collectibility of credit assets based on the borrowers’/clients’ delinquent status and financial 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. Effective January 1, 2011, normal loans are also provided with allowance at 0.5%, as the minimum standard of allowance for bad loans and guarantees. The minimum provision for allowance for bad loans and guarantees can be made sufficient over three year period beginning in January 1, 2011.

Available-for-sale Financial Assets Available-for-sale financial assets are initially measured at fair value plus transaction costs that are directly attributable to the acquisition. At each balance sheet date subsequent to initial recognition, available-for-sale financial assets are remeasured at fair value, with changes in fair value recognized in equity until the financial assets are disposed of, at which time, the cumulative gain or loss previously recognized in equity is included in profit or loss for the year. The regular way purchases or sales of financial assets are recognized and derecognized on a settlement date basis except for stocks and beneficial certificates which are recognized and derecognized on a trade date basis.

The recognition, derecognition and the measurement of fair value of available-for-sale financial assets are the same with those of financial 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 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 profit or loss.

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

133 Held-to-maturity Financial Assets Held-to-maturity financial assets are carried at amortized cost using the effective interest method. Held-to-maturity financial assets are initially measured at fair value plus transaction costs that are directly attributable to the acquisition. Profit or loss is recognized when the financial assets are derecognized, impaired, or amortized. All regular way purchases or sales of financial assets are accounted for using 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’s recoverable amount is due to an event which 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 exercise significant influence over the investees’ operating and financial policy decisions are accounted for by the equity method.

The acquisition cost of investment is allocated to the assets acquisition and liabilities acquisition on the basis of their fair values at the date of acquisition, and the acquisition cost in excess of the fair value of the identifiable net assets of the investee is recognized as goodwill. Goodwill is not amortized. The fair value of the net identifiable assets acquisition in excess of the investment cost is used to reduce the fair value of each of the noncurrent assets acquisition (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.

When the investor subscribes for its investee’s newly issued shares at a percentage different from its percentage of ownership in the investee, the investor 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 should be debited to capital surplus, but the capital surplus arising from long-term investments is insufficient, the shortage is debited to retained earnings.

Under Article 36 of the Financial Holding Company Law, Taishin Bank, as a subsidiary of a financial holding company, is allowed to make new investments only if the investments are made through the financial holding company. It provides, however, that Taishin Bank may keep its equity investments made before Taishin Bank became a subsidiary of a financial 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 financial assets carried at cost is the same with that for dividends on available-for-sale financial 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 fixed 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 financial assets, except for the absence of restriction on the timing of their disposal.

134 X. Notes To Financial Statements 10

Property and Equipment Property and equipment are stated at cost plus revaluation increment less accumulated depreciation. Major additions and improvements to these assets are capitalized, while costs of repairs and maintenance are expensed currently.

Depreciation is calculated using the straight-line method over the assets’ estimated useful lives, and leasehold improvements are amortized over the lease terms. The related costs (including revaluation increment), accumulated depreciation, 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 or loss 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.

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.

Goodwill Goodwill arising on acquisition of companies was previously amortized over the estimated life of five 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. However, the impairment loss of goodwill can not be reversed.

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.

Deferred Assets and Other Assets Deferred assets are amortized on a straight-line basis over 5 years lives.

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.

135 Pension Cost Pension cost under a defined benefit plan is determined by actuarial valuations. Contributions made under a defined contribution plan are recognized as pension cost during the period in which employees render services.

Curtailment or settlement gains or losses of the defined benefit plan are recognized as part of the net periodic pension cost for the period.

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.

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 benefits associated with the transaction have been realized or are realizable.

Income Tax Taishin Bank applies the intra-year and inter-year allocations method to its income tax, whereby deferred income tax assets and liabilities are recognized for the tax effects 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 assets will not be realized.

Adjustment of prior years’ income tax payable is recognized as current income tax expense.

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

Taishin Bank, its parent company, Taishin Financial Holding, and other more than 90% owned 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.

Reclassifications Certain accounts in the financial statements as of and for the year ended December 31, 2011 have been reclassified to conform to the presentation of the financial statements as of and for the year ended December 31, 2012.

136 X. Notes To Financial Statements 10

3. EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES

Financial Instruments On January 1, 2011, Taishin Bank adopted the newly revised Statement of Financial Accounting Standards (SFAS) No. 34, “Financial Instruments: Recognition and Measurement.” The main revisions include (1) the original loans and receivables are included in applicable scope of SFAS No. 34; (2) additional guidelines on impairment testing of financial assets carried at amortized cost when a debtor has financial difficulties and the terms of obligations have been modified; and (3) accounting treatment by a debtor for modifications in the terms of obligations.

Operating Segments On January 1, 2011, Taishin Bank adopted the newly issued SFAS No. 41 - “Operating Segments.” The requirements of the statement are based on the information about the components of Taishin Bank that management uses to make decisions about operating matters. SFAS No. 41 requires identification of operating segments on the basis of internal reports that are regularly reviewed by Taishin Bank’s chief operating decision maker in order to allocate resources to the segments and assess their performance. This statement supersedes SFAS No. 20, “Segment Reporting.” Adopting this accounting change only affected Taishin Bank’s way of reporting segment information. Taishin Bank restated the segment information as of and for the year ended December 31, 2011 to conform to the disclosures as of and for the year ended December 31, 2012.

4. CASH AND CASH EQUIVALENTS

December 31 2012 2011 Cash on hand $ 6,713,083 $ 5,864,434 Checks for clearing 2,044,551 1,701,611 Due from banks 1,327,123 1,712,160 Others 2,310,329 1,847,687 $ 12,395,086 $ 11,125,892

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

December 31 2012 2011 Reserve for checking account $ 8,408,402 $ 7,682,795 Reserve for demand account 18,897,660 17,774,148 Reserve for foreign deposit 68,661 15,145 Call loans to banks 5,455,195 3,847,298 Others 400,602 200,067 $ 33,230,520 $ 29,519,453

Taishin Bank is required to maintain reserve balances in the Central Bank. These reserves amounted to $27,374,723 thousand and $25,472,088 thousand as of December 31, 2012 and 2011, respectively.

137 6. FINANCIAL INSTRUMENTS AT FVTPL

December 31 2012 2011 Financial assets at FVTPL Investment in bills $ 27,489,720 $ 20,752,480 Quoted stocks and mutual funds 181,313 48,423 Government bonds 4,924,044 2,977,651 Corporate bonds, financial debentures and other bonds 6,989,057 8,332,770 Futures 13,020 32,108 Forward exchange contracts 672,048 382,144 Currency swaps 3,032,412 1,683,493 Interest rate swaps 2,856,945 4,009,205 Cross-currency swaps 528,533 1,062,038 Equity-linked swaps 233,098 200,720 Currency options 2,242,389 949,930 Interest rate options - 1,386 Equity-linked options 8,550 241,062 Credit default swaps 7,409 18,022 Commodity swaps 19,174 20,220 Commodity options 4,297 26,625 Fixed-rate commercial paper 29,136 22,978 Asset-based commercial paper - 20,294 $ 49,231,145 $ 40,781,549 Financial liabilities at FVTPL Stock borrowings $ - $ 54,469 Forward exchange contracts 1,616,250 505,101 Currency swaps 1,582,580 1,394,062 Interest rate swaps 2,857,300 4,167,772 Cross-currency swaps 518,344 1,054,910 Equity-linked swaps 231,737 200,720 Credit default swaps 7,409 18,022 Commodity swaps 19,174 20,220 Currency options 2,071,263 776,522 Interest rate options 19 5,760 Equity-linked options 205,238 111,671 Commodity options 4,297 26,625 Futures 771 - Asset-based commercial paper - 17,254 $ 9,114,382 $ 8,353,108

a. Taishin Bank uses various derivative instruments to fulfill customers’ needs as well as to manage Taishin Bank’s asset and liability positions and risk.

b. The aggregate par values of bonds and bills classified as financial assets at FVTPL and used for transactions under repurchase agreements were $20,855,500 thousand and $16,086,300 thousand as of December 31, 2012 and 2011, respectively.

138 X. Notes To Financial Statements 10

c. Gain or loss of financial assets and liabilities for trading purpose for the years ended December 31, 2012 and 2011 were as follows:

Years Ended December 31 2012 2011 Financial Assets Financial Liabilities Financial Assets Financial Liabilities Gain (loss) on valuation $ 15,135,896 ( $ 14,136,912 ) $ 7,504,423 ( $ 8,822,377 ) Gain (loss) on disposal 1,905,233 ( 1,144 ) 1,565,895 3,242 Dividend revenue 2,511 - 40,230 - $ 17,043,640 ( $ 14,138,056 ) $ 9,110,548 ( $ 8,819,135 )

The nominal principal amounts of outstanding derivative contracts as of December 31, 2012 and 2011 were as follows:

2012 2011

Trading-purpose Forward exchange contracts $ 140,098,878 $ 96,832,219 Currency swaps 376,587,906 321,081,584 Interest rate swaps 871,904,399 416,362,928 Cross-currency swaps 21,204,468 26,243,432 Futures 159,704 - Currency options 310,398,197 163,910,601 Interest rate options 138,000 4,330,000 Equity-linked options 7,020,675 9,400,191 Commodity options 89,855 469,653 Credit default swaps 1,096,306 1,164,772 Equity-linked swaps 7,996,578 4,081,581 Commodity swaps 895,936 442,540 Fixed-rate commercial paper 4,780,000 3,030,000 Asset-based commercial paper - 3,391,500

7. RECEIVABLES, NET

December 31 2012 2011 Notes and accounts receivable $ 82,697,458 $ 84,419,390 Revenue receivable 81,357 85,072 Interest receivable 2,027,452 1,877,812 Acceptance receivable 1,517,155 1,601,907 Tax refund receivable 128,226 60,887 Other receivables 171,927 205,216 Due from asset-based commercial papers 360,016 699,449 Less: Allowance for receivables ( 906,122 ) ( 827,305 ) $ 86,077,469 $ 88,122,428

139 8. LOANS, NET

a. The details of loans are as follows:

December 31 2012 2011 Negotiated $ 3,132,598 $ 3,793,118 Overdraft 3,036,123 4,542,054 Short-term loans 148,734,481 132,244,276 Medium-term loans 207,019,317 187,778,122 Long-term loans 303,366,455 278,391,606 Delinquent loans 1,439,914 1,528,252 Adjustments for discount or premium ( 441,403 ) ( 250,681 ) 666,287,485 608,026,747 Less: Allowance for loan losses ( 7,833,350 ) ( 7,218,618 ) $ 658,454,135 $ 600,808,129

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

Year Ended December 31, 2012 Other Financial Receivables Loans Total Assets Balance, January 1, 2012 $ 827,305 $ 7,218,618 $ 242,651 $ 8,288,574 Provision (reversal) for loan losses 85,287 ( 217,144 ) ( 484,386 ) ( 616,243 ) Loans written off ( 9,348 ) ( 1,532,807 ) ( 282,557 ) ( 1,824,712 ) Recovery of loans written off 2,878 2,364,683 713,338 3,080,899 Balance, December 31, 2012 $ 906,122 $ 7,833,350 $ 189,046 $ 8,928,518

Year Ended December 31, 2011 Other Financial Receivables Loans Total Assets Balance, January 1, 2011 $ 1,152,296 $ 5,813,817 $ 320,077 $ 7,286,190 Reversal for loan losses ( 5,322 ) ( 1,268,125 ) ( 530,580 ) ( 1,804,027 ) Loans written off ( 323,039 ) ( 794,554 ) ( 358,821 ) ( 1,476,414 ) Recovery of loans written off 3,370 3,467,480 811,975 4,282,825 Balance, December 31, 2011 $ 827,305 $ 7,218,618 $ 242,651 $ 8,288,574

c. The details of bad debt expenses for 2012 and 2011 are as follows:

December 31 2012 2011 Reversal allowance for receivable and loan losses ($ 616,243 ) ( $ 1,804,027 ) Reversal for guarantee reserve ( 796 ) ( 3,309 ) ( $ 617,039 ) ( $ 1,807,336 )

d. Details for receivables and allowance for loan accounts for the as of December 31, 2012 were as follows:

140 X. Notes To Financial Statements 10

Receivables (including delinquent loans reclassified from other items (excluding loans))

Total Receivable Total Allowance Item December 31, December 31, December 31, December 31, 2012 2011 2012 2011 Individual assessment of $ 406,626 $ 1,006,555 $ 377,018 $ 458,523 Objective evidence of impairment impairment Combined assessment of 2,809,939 3,288,894 363,679 396,848 impairment Combined Non objective evidence assessment of 82,078,409 82,201,465 354,471 214,585 of impairment impairment Total $ 85,294,974 $ 86,496,914 $ 1,095,168 $ 1,069,956

Loans

Total Loans Total Allowance Item December 31, December 31, December 31, December 31, 2012 2011 2012 2011 Individual assessment of $ 9,676,481 $ 10,199,582 $ 2,804,137 $ 2,945,780 Objective evidence of impairment impairment Combined assessment of 6,599,433 8,284,387 1,321,544 1,486,145 impairment Combined Non objective evidence assessment of 650,452,974 589,793,459 3,707,669 2,786,693 of impairment impairment Total $ 666,728,888 $ 608,277,428 $ 7,833,350 $ 7,218,618

9. AVAILABLE-FOR-SALE FINANCIAL ASSETS

December 31 2012 2011 Investment in bills $ 147,893,662 $ 140,430,090 Domestic quoted stock 2,903,125 2,127,296 Mutual funds 2,781,905 1,341,453 Government bonds 23,492,422 20,744,511 Corporate bonds 13,924,361 10,898,381 Bank debentures 12,658,053 9,862,973 Beneficial securities 3,625,035 5,786,145 $ 207,278,563 $ 191,190,849

a. Investment in bills placed as reserves for clearing at the Central Bank was $7,000,000 thousand as of December 31, 2012 and 2011.

b. Bonds pledged as collaterals to court as of December 31, 2012 and 2011 amounted to $590,224 thousand and $599,570 thousand, respectively. Please refer to Note 33 for relevant information regarding bonds pledged as collaterals.

c. The aggregate par values of the bonds and bills classified as available-for-sale financial assets and used in transactions under repurchase agreements were $30,832,575 thousand and $27,860,119 thousand as of December 31, 2012 and 2011, respectively.

141 10. HELD-TO-MATURITY FINANCIAL ASSETS

December 31 2012 2011 Investment in bills $ - $ 272,903 Bank debentures 1,917,473 2,148,338 $ 1,917,473 $ 2,421,241

The aggregate par values of bonds classified as held-to maturity financial assets and used in transactions under repurchase agreements were $1,019,760 thousand and $1,060,150 thousand as of December 31, 2012 and 2011, respectively.

11. INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD

December 31 2012 2011 Carrying Ownership Carrying Ownership Value Interest (%) Value Interest (%) Quoted stocks Chang Hwa Commercial Bank Co., Ltd. (“Chang $ 363,336 0.27 $ 345,220 0.27 Hwa Bank”) Unquoted stocks Taishin Real-Estate Management Co., Ltd. (“Taishin 187,641 60.00 180,923 60.00 Real-Estate”) Taishin Insurance Agency Co., Ltd. (“Taishin 954,318 87.40 937,680 87.40 Insurance Agency”) Taishin Dah An Leasing Co., Ltd. (“Taishin Dah An 209,495 100.00 207,181 100.00 Leasing”) An Hsin Real-Estate Management Co., Ltd. (“An 71,044 30.00 59,800 30.00 Hsin Real-Estate”) PayEasy Digital Integration Co., Ltd. (“PayEasy - - 209,108 65.36 Digital”) $ 1,785,834 $ 1,939,912

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, 2012 and 2011 were as follows:

2012 2011 Chang Hwa Bank $ 306,941 $ 295,853

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, 2012 and 2011 were as follows:

December 31 2012 2011 Balance, beginning of year $ 15,543 $ 15,543 Movements ( 3,491 ) - Balance, end of year $ 12,052 $ 15,543

Goodwill amounted to $75,438 thousand as of December 31, 2012 and 2011.

142 X. Notes To Financial Statements 10

a. Based on the investees’ financial statements for the years ended December 31, 2012 and 2011, the amounts of investment income (loss) recognized under the equity method were as follows:

2012 2011 Individual Net Investment Income Individual Net Investment Income Income (Loss) (Loss) Recognized Income (Loss) (Loss) Recognized PayEasy Digital ( $ 119,891 ) ( $ 66,585 ) ( $ 209,098 ) ( $ 136,671 ) Taishin Real-Estate 25,997 15,599 16,429 9,857 Taishin Insurance Agency 18,472 16,478 217,776 190,340 An Hsin Real-Estate 68,922 20,676 46,062 13,818 Taishin Dah An Leasing 4,437 4,437 2,358 2,336 Chang Hwa Bank 8,470,750 22,508 9,042,355 23,693 $ 13,113 $ 103,373

b. 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 significant influence on CHB, Taishin Bank reclassified 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 financial statements. Thus, CHB’s operating assets, including the investment cost in excess of the fair value of the identifiable net assets, 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 profit performance and ability to generate cash flows in the future under normal operations. Under a going concern assumption, the estimated cash flows 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, 2012.

c. Taishin Bank sold its 45% and 15.36% equity in PayEasy Digital common stock for a total of $522,977 thousand in June and July 2012; gain on disposal of shares was $396,042 thousand. As a result, Tashin Bank lowered its holding percentage to 5% and did not have significant influence on PayEasy Digital. Therefore, Tashin Bank reclassified investments accounted by equity method to financial assets carried at cost.

12. FINANCIAL ASSETS CARRIED AT COST

December 31 2012 2011 Domestic unquoted stocks $ 1,441,867 $ 1,590,076 Overseas unquoted stocks - US$25,756 thousand as of December 31, 2012 and 2011 787,378 787,378 $ 2,229,245 $ 2,377,454

143 a. 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.

b. Taishin Bank’s domestic unquoted stocks were financial assets carried at cost; they were investments in stocks of Pacific Securities Co., Ltd., Han-Hsin Venture Capital Co., Ltd., Han-Hua Venture Capital Co., Ltd., and United Venture Capital Co., Ltd. The investment value has been impaired and possibility of restoration was very small; thus, Taishin Bank had recognized impairment loss of $39,627 thousand for the year ended December 31, 2012.

13. OTHER MISCELLANEOUS FINANCIAL ASSETS

December 31 2012 2011 Delinquent loans reclassified from other items $ 415,864 $ 459,013 (excluding loans) Less: Allowance for bad debts ( 189,046 ) ( 242,651 ) Bond investment without active market 300,000 300,000 Gold account 154,366 - $ 681,184 $ 516,362

14. PROPERTY AND EQUIPMENT

December 31 2012 2011 Accumulated Carrying Carrying Cost Depreciation Value Value Land (including revaluation increments) $ 10,837,813 $ - $ 10,837,813 $ 10,606,688 Buildings 7,707,903 ( 1,853,557 ) 5,854,346 6,072,685 Machinery equipment 1,135,134 ( 528,214 ) 606,920 573,248 Transportation equipment 34,330 ( 10,519 ) 23,811 13,891 Miscellaneous equipment 82,904 ( 43,020 ) 39,884 41,966 Leasehold improvement 193,364 ( 89,402 ) 103,962 102,513 Prepayments for building and equipment 8,424 - 8,424 13,451 $ 19,999,872 ( $ 2,524,712 ) $ 17,475,160 $ 17,424,442

Taishin Bank revalued its land in 2012. The total amount of revaluation increment recognized for land was $244,624 thousand. The reserve for land value increment tax is accounted as other liabilities and amounted to $41,780 thousand.

15. GOODWILL AND INTANGIBLE ASSETS

December 31 2012 2011 Goodwill (Note 1) $ 1,152,274 $ 1,152,274 Intangible assets - customer value 291,622 426,214 Intangible assets - computer software 244,900 343,492 $ 1,688,796 $ 1,921,980

144 X. Notes To Financial Statements 10

To increase the number of customers, credit card usage, revolving balance, and increase profits 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 $11,216 thousand every month and was classified under the account of depreciation and amortization expense.

16. OTHER MISCELLANEOUS ASSETS

December 31 2012 2011 Assumed collaterals and residuals, net $ 5,529 $ 6,546 Others 18,382 21,437 $ 23,911 $ 27,983

17. DUE TO THE CENTRAL BANK AND OTHER BANKS

December 31 2012 2011 Due to other banks $ 31,587,281 $ 36,485,717 Call loans from other banks 20,042,570 25,336,986 Bank overdraft 736,295 709,695 $ 52,366,146 $ 62,532,398

18. PAYABLES

December 31 2012 2011 Notes and accounts payable $ 11,003,786 $ 12,733,355 Accrued expenses 2,982,403 3,026,803 Interest payable 2,077,301 1,959,002 Acceptance payable 1,517,155 1,601,907 Exchange note payable 2,034,103 1,688,621 Tax payable 925,381 604,952 Receipts under custody payable 398,869 302,021 Other payables 486,732 463,320 $ 21,425,730 $ 22,379,981

19. DEPOSITS

December 31 2012 2011 Checking deposits $ 4,821,934 $ 4,892,117 Demand deposits 140,504,142 127,158,916 Time deposits 283,395,508 260,538,369 Negotiable certificates of deposit 794,100 9,025,100 Savings deposits 396,954,669 354,260,057 Remittances and drafts issued 489,499 628,096 $ 826,959,852 $ 756,502,655

145 20. BANK DEBENTURES

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

December 31 2012 2011 Subordinated bank debentures - 2005 (I) $ 1,508,000 $ 1,508,000 Subordinated bank debentures - 2005 (II) 3,300,000 3,300,000 Subordinated bank debentures - 2005 (III) 5,000,000 5,000,000 Subordinated bank debentures - 2005 (IV) 5,192,000 5,192,000 Subordinated bank debentures - 2010.04.12 10,000,000 10,000,000 Subordinated bank debentures - 2012 (I) 5,600,000 - Subordinated bank debentures - 2012 (II) 6,100,000 - $ 36,700,000 $ 25,000,000

a. Taishin Bank made a first issue of bank debentures amounting to $1,508 million in 2005, as follows:

Bank Maturity Issue Redemption Method Issue Date Term Interest Rate Face Value Debentures Date Amount and Interest Payment Taishin Bank’s floating interest rate for one- year time deposit plus $1,287.5 0.30% from the first A 2005.03.04 2015.03.04 million to the fifth year and Debentures are Taishin Bank’s floating redeemable at par $500thousand, interest rate for one- value in cash on 10 $10 million, year time deposit plus the maturity date. years and $1 million, Interest is accruable 2.25% fixed interest respectively rate from the first to the and payable annually fifth year and Taishin from the issue date. $220.5 B 2005.03.04 2015.03.04 Bank’s floating interest million rate for 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 fifth 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.

b. Taishin Bank made a second issue of bank debentures amounting to $3,300 million in 2005, as follows:

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

146 X. Notes To Financial Statements 10

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 satisfied, 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 satisfied 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 satisfied.

4) Exercise of redemption right by Taishin Bank:

If terms of exercising redemption right are satisfied 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. c. Taishin Bank made a third issue of bank debentures amounting to $5,000 million in 2005, as follows:

Bank Maturity Issue Face Redemption Method and Issue Date Term Interest Rate Debentures Date Amount Value Interest Payment Taishin Bank’s fixed Interest is accrued interest rate for one- at a simple rate and year time deposit plus paid annually from the 0.80% from the first to issue date. Additional the seventh year and interest is not accrued 2005, third 12 $5,000 Taishin Bank’s fixed $100 if principal and interest 2005.05.18 2017.05.18 issue years million interest rate for one- million are withdrawn after the year time deposit plus interest date. Debentures 1.10% from the eighth are redeemable at par year. The interest rate value in cash on the is recalculated annually. maturity date, unless the 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. d. Taishin Bank made a fourth issue of bank debentures amounting to $5,192 million in 2005, as follows:

Bank Maturity Issue Redemption Method Issue Date Term Interest Rate Face Value Debentures Date Amount and Interest Payment $2,950 2.70% fixed interest Interest is accrued A 2005.06.06 2017.06.06 million rate from the first to the at a simple rate and seventh year and 3.20% paid annually from the $1,442 fixed interest rate from issue date. Additional B 2005.06.06 2017.06.06 the eighth to the twelfth interest is not accrued million $100 year. if principal and interest million, $10 12 are withdrawn after Taishin Bank’s floating million, and years the interest date. interest rate for one- $1 million, Debentures are year time deposit plus respectively redeemable at par $800 0.65%. The interest rate C 2005.06.06 2017.06.06 value in cash on the million is recalculated annually. maturity date, unless the redemption or put option is exercised.

147 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 fifth anniversary by notifying the holders in written form two months before redemption. e. Taishin Bank made a first issue of bank debentures amounting to $10,000 million on April 12, 2010, as follows:

Redemption Bank Maturity Issue Face Issue Date Term Interest Rate Method and Debentures Date Amount Value Interest Payment $4,500 Interest is accrued A 2010.04.12 2017.04.12 2.65% fixed interest rate million at a simple rate and paid annually “Floating rate of one-year time from the issue deposit of Chunghwa Post date. Additional Co., Ltd.” posted on Central interest is not Bank’s website at 10:30 am accrued if principal 7 years of two business days prior to $50 million and interest are $5,500 the interest calculation period B 2010.04.12 2017.04.12 withdrawn after million plus 1.5%. The interest rate the interest date. is recalculated annually. The Debentures are floating rate is provided by redeemable at par the Central Bank on the reset value in cash on day at 10:30 a.m. the maturity date. f. Taishin Bank made a first issue of bank debentures amounting to $5,600 million on October 19, 2012, as follows:

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

Interest is accrued at $1,100 1.53% fixed a simple rate and paid A 2012.10.19 2019.10.19 7 years million interest rate annually from the issue date. Additional interest is $50 million not accrued if principal and interest are withdrawn after 10 $4,500 1.65% fixed B 2012.10.19 2022.10.19 the interest date. Debentures years million interest rate are redeemable at par value in cash on the maturity date. g. Taishin Bank made a second issue of bank debentures amounting to $6,100 million on December 14, 2012, as follows:

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

Interest is accrued at $3,800 1.53% fixed a simple rate and paid A 2012.12.14 2019.12.14 7 years million interest rate annually from the issue date. Additional interest is $50 million not accrued if principal and interest are withdrawn after 10 $2,300 1.65% fixed B 2012.12.14 2019.12.14 the interest date. Debentures years million interest rate are redeemable at par value in cash on the maturity date.

148 X. Notes To Financial Statements 10

21. OTHER FINANCIAL LIABILITIES

December 31 2012 2011 Principal of structured products $ 13,464,333 $ 13,254,742 Appropriated loan fund 54,000 85,590 Gold account 152,338 - $ 13,670,671 $ 13,340,332

Under the Financial Supervisory Commission’s guidelines, effective January 1, 2011, Taishin Bank treated the principal of structured products as other financial liabilities instead of deposits. The principal excluded in deposits when calculating every legal rate and limit.

22. OTHER LIABILITIES

December 31 2012 2011 Unearned revenues $ 262,219 $ 342,895 Unearned interest revenues 176,819 94,947 Reserve for guarantee liabilities 218,654 219,511 Guarantee deposits 71,047 72,383 Reserve for other losses 350,488 392,147 Temporary credits 248,930 246,427 Reserve for land value increment tax 41,780 - Others 14,222 9,675 $ 1,384,159 $ 1,377,985

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.

23. CAPITAL STOCK

a. As of December 31, 2012, 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 par value.

Details of outstanding capital stock as of December 31, 2012 were as follows:

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 9,521,440 - 9,521,440 surplus transferred to common stock Redemption of preferred stock A - ( 3,000,000 ) ( 3,000,000 ) Preferred stock B transferred to 4,000,000 ( 4,000,000 ) - common stock Less: Cancellation of treasury stock ( 985,820 ) - ( 985,820 ) Less: Cancellation of parent company’s ( 2,541,314 ) - ( 2,541,314 ) stock $ 47,275,173 $ 1,882,353 $ 49,157,526

149 As of December 31, 2012, 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.

b. On March 27, 2007, Taishin Bank’s board of directors on behalf of the shareholders modified 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.

c. 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. From five years after the issuance date, Taishin Bank has the right to redeem partial or all outstanding preferred stock - C at issue price. On October 18, 2012, Taishin Bank’s Board of directors modified the redeemed years from five years to ten years. Ten years after the issuance date, the dividend rate will increase to 4.75% per annum for the unredeemed part.

d. On November 12, 2009, Taishin Bank’s board of directors on behalf of the shareholder 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.

24. OTHER PAIN-IN CAPITAL

The capital surplus from shares issued in excess of par and donations may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to capital (limited to a certain percentage of the Company’s paid-in capital and once a year).

The capital surplus from long-term investments, employee stock options and conversion options may not be used for any purpose.

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 $77,056 thousand and $82,094 thousand for the years ended December 31, 2012 and 2011, respectively.

25. APPROPRIATION 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 deficits should be appropriated in the following orders:

150 X. Notes To Financial Statements 10

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, 2012 and 2011, the bonus to employees was $593 thousand and $531 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 shareholder. 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 stockholder’s equity accounts - unrealized loss 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.

Appropriation of earnings to legal reserve shall be made until the legal reserve equals Taishin Bank’s paid-in capital. Legal reserve may be used to offset a deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

The appropriations of earnings for 2011 and 2010 had been approved by the board of directors on behalf of the shareholder on June 7, 2012 and June 16, 2011, respectively. The appropriations and dividend per shares were as follows:

Appropriation of Earnings Dividends Per Share (Dollars) 2011 2010 2011 2010 Preferred stock dividends $ 120,000 $ 120,000 $ 0.64 $ 0.64 Common stock dividends 5,310,475 5,393,488 1.12 1.14

The appropriations of earnings for 2011 and 2010 had been approved by the board of directors on behalf of the shareholder on June 7, 2012 and June 16, 2011, and the amount was $531 thousand and $539 thousand, respectively. There were no differences between the approved amounts of the bonus to employees and the remuneration to directors and supervisors and the accrual amounts reflected in the financial statements for the years ended December 31, 2012 and 2011, respectively.

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.

151 26. UNREALIZED GAIN OR LOSS ON FINANCIAL INSTRUMENTS

For the years ended December 31, 2012 and 2011, movements of unrealized gain or loss on financial instruments were as follows:

Available-for- Equity-method Total sale Financial Assets Investments 2012 Balance, January 1, 2012 $ 29,038 ( $ 1,704 ) $ 27,334 Recognized in stockholders' equity 682,104 1,670 683,774 Transferred to profit or loss ( 33,584 ) - ( 33,584 ) Balance, December 31, 2012 $ 677,558 ( $ 34 ) $ 677,524

2011 Balance, January 1, 2011 $ 206,221 $ 69 $ 206,290 Recognized in stockholders' equity ( 261,742 ) ( 1,773 ) ( 263,515 ) Transferred to profit or loss 84,559 - 84,559 Balance, December 31, 2011 $ 29,038 ( $ 1,704 ) $ 27,334

27. PENSION PLANS

The pension plan under the Labor Pension Act (LPA) is a defined contribution plan. Based on the LPA, Taishin Bank make monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages. Such pension costs were $267,770 thousand and $259,513 thousand for the years ended December 31, 2012 and 2011, respectively.

Based on the defined benefit plan under the LSL, pension benefits 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 committee’s name. Taishin Bank recognized pension costs of $19,342 thousand and $21,036 thousand for the years ended December 31, 2012 and 2011, respectively.

Information about the defined benefit plan was as follows:

a. Components of net periodic pension cost:

Years Ended December 31 2012 2011 Service cost $ 19,848 $ 20,531 Interest cost 27,229 26,955 Actual return on plan assets ( 13,132 ) ( 16,443 ) Loss on plan assets ( 14,603 ) ( 10,007 ) Net pension cost $ 19,342 $ 21,036

b. Reconciliation of funded status of the plan and accrued/prepaid pension cost as of December 31, 2012 and 2011:

2012 2011 Benefit obligation Vested benefit obligation ( $ 130,694 ) ( $ 109,280 ) Non-vested benefit obligation ( 881,506 ) ( 791,514 ) Accumulated benefit obligation ( 1,012,200 ) ( 900,794 ) Additional benefit based on future salaries ( 482,672 ) ( 460,671 ) Projected benefit obligation ( 1,494,872 ) ( 1,361,465 ) Fair value of plan assets 1,373,304 1,366,775

152 X. Notes To Financial Statements 10

Funded status ( 121,568 ) 5,310 Unrecognized net loss 156,947 36,754 Prepaid pension cost $ 35,379 $ 42,064

Vested benefit ( $ 154,653 ) ( $ 132,846 )

c. Actuarial assumptions as of December 31, 2012 and 2011:

2012 2011 Discount rate used in determining present values 1.875% 2.00% Future salary increase rate 3.000% 3.00% Expected rate of return on plan assets 1.875% 2.00%

2012 2011 d. Contributions to the fund $ 12,657 $ -

e. Payments from the fund $ 19,260 $ 10,936

According to the order of Bei-Shi-Lao-Yi No. 09940317000 and No. 10037554900, the allocation of workers’ retirement reserve fund has been suspended from September 1, 2010 to August 31, 2012.

28. FEE INCOME, NET

Years Ended December 31 2012 2011 Fee income Fees from imports and exports $ 148,885 $ 155,320 Interbank service fees 563,985 542,890 Fees from loans 274,366 337,952 Fees from guarantees 83,639 122,510 Underwriting commission 46,604 34,762 Factoring fees 353,531 387,511 Fees from the trustee business 1,344,531 1,529,662 Fees from the trustee associate business 121,981 124,144 Agency fees 2,581,180 1,853,563 Credit card fees 2,671,826 2,661,627 Others 203,141 204,057 8,393,669 7,953,998 Fee expense Credit card fees ( 981,218 ) ( 895,987 ) Interbank service fees ( 121,935 ) ( 93,631 ) Fees from the trustee business ( 28,442 ) ( 63,541 ) Fees from outsourcing collection service ( 186,810 ) ( 168,266 ) Agency fees ( 57,869 ) ( 45,352 ) Fees from marketing ( 397,307 ) ( 365,058 ) Others ( 217,118 ) ( 205,020 ) ( 1,990,699 ) ( 1,836,855 ) Fee income, net $ 6,402,970 $ 6,117,143

153 29. PERSONNEL, DEPRECIATION AND AMORTIZATION EXPENSES

Years Ended December 31 2012 2011 Personnel expenses Salary $ 7,057,567 $ 6,466,752 Labor/health insurance 477,870 444,632 Pension 287,112 280,549 Others 246,174 263,822 Depreciation 490,352 616,890 Amortization 267,157 335,510

30. INCOME TAX

a. A reconciliation of income tax expense based on income before income tax at the 17% statutory rate and income tax expense was as follows:

Years Ended December 31 2012 2011 Income tax expense at the 17% statutory rate $ 1,758,299 $ 1,566,107 Tax effect of adjusting items: Permanent differences Tax-exempt income ( 403,145 ) ( 261,433 ) Others ( 13,947 ) 71,321 Temporary differences 136,912 ( 142,967 ) Loss carryforward used ( 1,027,840 ) ( 897,940 ) Current income tax expense 450,279 335,088 Deferred income tax expense Temporary differences ( 164,532 ) 178,872 Loss carryforwards 1,027,840 897,940 Adjustment for other valuation allowance 41 - Adjustment for prior year's tax 375,395 57,060 Overseas income tax expense 7,595 4,336 $ 1,696,618 $ 1,473,296

154 X. Notes To Financial Statements 10

b. Details of deferred income tax assets and liabilities were as follows:

Years Ended December 31 2012 2011 Assets Allowance for bad debts in excess of tax limit $ 1,262,394 $ 1,175,114 Loss carryforwards 3,468,217 4,409,011 Excess of reserve for guarantee liabilities 19,079 10,969 Unrealized loss on financial instruments - 16,910 Unrealized loss on collaterals 181 9 Linked debt settlement 59,492 66,638 Linked credit card bonus point liabilities 111,822 - Linked administrative remedy interest 2,479 - Others - 41 4,923,664 5,678,692 Liabilities Amortization of goodwill ( 195,887 ) ( 195,887 ) Unrealized gain on financial instruments ( 56,156 ) - ( 252,043 ) ( 195,887 ) Deferred income tax assets, net $ 4,671,621 $ 5,482,805

The movements of deferred income tax assets (liabilities) were as follows:

Year Ended December 31, 2012

Payables to Balance, Balance, Recognized in Taishin Financial December 31, January 1, 2012 Income Statement Holding 2012 Temporary differences Allowance for bad debts in excess of $ 1,175,114 $ 87,280 $ - $ 1,262,394 tax limit Loss carryforwards 4,409,011 ( 992,959 ) 52,165 3,468,217 Unrealized loss on collaterals 9 172 - 181 Linked debt settlement 66,638 ( 7,146 ) - 59,492 Excess of reserve for guarantee 10,969 8,110 - 19,079 liabilities Linked credit card bonus point - 111,822 - 111,822 liabilities Linked administrative remedy interest - 2,479 - 2,479 Unrealized (gain) loss on financial 16,910 ( 73,066 ) - ( 56,156 ) instruments Amortization of goodwill ( 195,887 ) - - ( 195,887 ) Others 41 ( 41 ) - - $ 5,482,805 ( $ 863,349 ) $ 52,165 $ 4,671,621

155 Year Ended December 31, 2011

Payables to Balance, Balance, Recognized in Taishin Financial December 31, January 1, 2011 Income Statement Holding 2011 Temporary differences Allowance for bad debts in excess of $ 987,267 $ 187,847 $ - $ 1,175,114 tax limit Loss carryforwards 5,258,898 ( 1,060,040 ) 210,153 4,409,011 Unrealized loss on collaterals 23,144 ( 23,135 ) - 9 Linked debt settlement 76,914 ( 10,276 ) - 66,638 Excess of reserve for guarantee 15,719 ( 4,750 ) - 10,969 liabilities Unrealized (gain) loss on financial 168,476 ( 151,566 ) - 16,910 instruments Unrealized exchange loss 14,892 ( 14,892 ) - - Amortization of goodwill ( 195,887 ) - - ( 195,887 ) Others 41 - - 41 $ 6,349,464 ( $ 1,076,812 ) $ 210,153 $ 5,482,805

Loss carryforwards as of December 31, 2012 comprised of:

Unused Amount Expiry Year

2016 $ 2,618,636 2017 430,233 2018 419,348 $ 3,468,217 c. The estimated payables to Taishin Financial Holding due to the adoption of the linked-tax system were as follows:

December 31 2012 2011 Payables to Taishin Financial Holding (recorded $ 236,600 $ 301,337 under payables) d. Information on the integrated income tax was as follows:

December 31 2012 2011 Balance of imputation credits accounts (ICA) $ 38,499 $ 27,951 Unappropriated earnings generated on and after $ 8,646,318 $ 7,757,821 January 1, 1998

The creditable ratio for distribution of earnings of 2012 and 2011 was 0.45% (estimate) and 0.35%, 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 2012 earnings may be adjusted, depending on the ICA balance on the date of dividend distribution. e. The income tax returns through 2006 had been assessed by the tax authorities.

156 X. Notes To Financial Statements 10

f. In regard to the amortization of $632,098 thousand, $758,518 thousand, $758,518 thousand, $758,518 thousand and $758,518 thousand of goodwill from the merger of Dah An Bank reported in the 2002, 2003, 2004, 2005 and 2006 income tax returns of Taishin Bank, the tax authorities had disapproved the amortization as deductible due to the goodwill was resulted from the negotiations with the dealing parties rather than a purchase from active market. Taishin Bank filed appeals and litigations to the tax authorities and the administrative courts. Taishin Bank had lost the appeals and litigations for 2002 and 2003 income tax returns and recognized the loss as income tax expenses for the year ended December 31, 2012. Taishin Bank is filing a petition for constitutional interpretation.

g. In regard to the goodwill amortization $18,109 thousand, $71,577 thousand and $71,405 thousand from the acquisition of the 10th Credit Cooperative of Hsin-Chu in the 2004, 2005 and 2006 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 identifiable assets and liabilities were not analyzed by fair value. Taishin Bank is filing appeals to the tax authorities.

31. EARNINGS PER SHARE (“EPS”)

Year Ended December 31, 2012 Earnings Per Share Amounts (Numerator) Shares (In Dollars) (Denominator) Pretax After-tax (In Thousands) Pretax After-tax Net income $ 10,342,936 $ 8,646,318 Less: Preferred dividends ( 120,000 ) ( 120,000 ) Net income $ 10,222,936 $ 8,526,318 Basic EPS Income for the year attributable to $ 10,222,936 $ 8,526,318 4,727,517 $ 2.16 $ 1.80 common stockholder Effect of dilutive potential common stock Convertible preferred shares 120,000 120,000 188,235 Bonus to employees - - 43 Diluted EPS Income for the year attributable to common stockholder plus effect of dilutive potential common stock $ 10,342,936 $ 8,646,318 4,915,795 $ 2.10 $ 1.76

Year Ended December 31, 2011 Earnings Per Share Amounts (Numerator) Shares (Denominator) (In Dollars) Pretax After-tax (In Thousands) Pretax After-tax Net income $ 9,212,396 $ 7,739,100 Less: Preferred dividends ( 120,000 ) ( 120,000 ) Net income $ 9,092,396 $ 7,619,100 Basic EPS Income for the year attributable to $ 9,092,396 $ 7,619,100 4,727,517 $ 1.92 $ 1.61 common stockholder Effect of dilutive potential common stock Convertible preferred shares 120,000 120,000 188,235 Bonus to employees - - 41 Diluted EPS Income for the year attributable to common stockholder plus effect of dilutive potential common stock $ 9,212,396 $ 7,739,100 4,915,793 $ 1.87 $ 1.57

157 32. 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 Marketing Consultant Co., Ltd. Same as above Taishin Asset Management Co., Ltd. (“Taishin AMC”) Same as above Taishin Securities Co., Ltd. (“Taishin Securities ”) Same as above Taishin Securities Investment Trust Co., Ltd. Same as above Taishin Holdings Insurance Brokers Same as above Taishin Securities Investment Advisory Co., Ltd. (“Taishin Under control by the same parent company Securities Investment Advisory ”) Chang Hwa Bank Under control by the same parent company Taishin 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 (become non-related party on July 2012) Its chairman is a relative within the first degree of Taishin Shin Kong Recreation Co., Ltd. Bank’s chairman Shin Kong Life Insurance Co., Ltd. (“Shin Kong Life Its chairman is a relative within the second degree of Taishin Insurance”) Bank’s chairman Shin Kong Synthetic Fibers Co., Ltd. (“Shin Kong Synthetic Same as above Fibers”) Shin Kong Financial Holding Co., Ltd. (“Shin Kong Financial Same as above Holding”) 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 Anlon Co., Ltd. (“Anlon”) Same as above UBright Optronics Corporation Same as above Wholly owned by PayEasy Digital (become non-related party PayEasy Travel Agency Co., Ltd. on July 2012) 65.75% owned by PayEasy Digital (become non-related party Contect Digital Integration Co., Ltd. on July 2012) 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 Shin Kong Insurance Broker Co., Ltd. Same as above Shin Kong International Venture Capital Co., Ltd. Same as above Shin Kong Investment Trust Co., Ltd. Same as above MasterLink Securities Co., Ltd. Shin Kong Financial Holding’s subsidiary Taishin Financial & Leasing (China) Co. Wholly owned by Taishin Venture Capital Investment Taishin Financial & Leasing (Tianjin) Co. Same as above Dah Chung Bills Finance Co., Ltd. (“Dah Chung Bills”) Taishin Bank serves as its corporate director Ming Huang International Property Co., Ltd. (“Ming Huang Taishin Financial Holding’s supervisor International Property”) Taishin International Investment Development Co., Ltd. Same as above Taishin International Investment Development’s parent Taishing Leasing & Financing company Peng Cheng Co., Ltd. (“Peng Cheng”) Taishin Financial Holding’s corporate director CyberSoft Digital Service Co., Ltd. (“CyberSoft Digital Related party in substance (become non-related party on Service”) December 2012) Shin Kong Mitsukoshi Department Store Co., Ltd. (“Shin Kong Related party in substance Mitsukoshi”) Its chairman is a relative within the second degree of Taishin Miniatures Museum of Taiwan (“Miniatures Museum”) Financial Holding’s ex-general manager (become non-related party on August 2011) Directors, supervisors and managers of Taishin Bank and its Directors, supervisors and managers related parties

158 X. Notes To Financial Statements 10

Material Transactions with Related

a. Loans, deposits and guaranteed loans

Loan to Related Parties Percentage of Interest Rate Ending Balance Loans (%) (Per Annum %) Interest Revenue Year ended December 31, $ 760,458 0.12 0.0001~6.51 $ 16,551 2012 Year ended December 31, 1,241,692 0.20 0.0001~12.50 19,381 2011

Year Ended December 31, 2012 Non- Ending Highest Loans to Related Parties Normal Loans performing Collateral Balance Amount Loans Consumer loans Land, building, 57 accounts $ 195,916 $ 223,948 $ 195,916 $ - chattels Self-used residence mortgage loans 68 accounts 452,034 525,458 452,034 - Land, building Other loans Jiouru Investment 50,000 50,000 50,000 - Land, building Peng Cheng 26,000 58,000 26,000 - Land, building Jiouru 20,000 60,000 20,000 - Land, building Others 16,508 17,781 16,508 - Land, building $ 760,458 $ 760,458

Year Ended December 31, 2011 Non- Ending Highest Loans to Related Parties Normal Loans performing Collateral Balance Amount Loans Consumer loans Land, building, 54 accounts $ 112,391 $ 136,520 $ 112,391 $ - chattels Self-used residence mortgage loans 68 accounts 369,375 438,975 369,375 - Land, building Other loans Ming Huang International Property 220,000 220,000 220,000 - Land, building Jiouru 60,000 65,000 60,000 - Land, building Jiouru Investment 50,000 58,500 50,000 - Land, building Anlon 24,000 24,000 24,000 - Land, building Shin Kong Synthetic Fibers 400,000 400,000 400,000 - Land, building Others 5,926 7,132 5,926 - Land, building $ 1,241,692 $ 1,241,692

159 Year Ended December 31, 2012 Interest Reserve for Ending Highest and Service Guarantee Balance Amount Charge Rate Liabilities (Per Annum %) Collateral Guarantee for loans of related parties Anlon $ 20,000 $ 20,000 0.65 $ - Stock, land, building

Year Ended December 31, 2011 Interest Reserve for Ending Highest and Service Guarantee Balance Amount Charge Rate Liabilities (Per Annum %) Collateral Guarantee for loans of related parties Peng Cheng Co., Ltd. $ 16,000 $ 95,000 0.50~0.80 $ - Land, building Anlon 20,000 20,000 0.60~0.70 - Stock, land, building

Percentage of Interest Rate Deposits from Related Parties Ending Balance Deposits (%) (Per Annum %) Interest Expense Year ended December 31, 2012 $ 8,979,605 1.09% 0.00~1.36 $ 155,928 Year ended December 31, 2011 24,090,726 3.18% 0.00~1.36 144,507

Year Ended December 31, 2012 Interest Rate Ending Balance Interest Expense (Per Annum %) Deposits from related parties An Hsin Real-Estate $ 2,076,751 0.00~1.36 ( $ 10,358 ) Taishin Insurance Agency 975,719 0.00~0.17 ( 1,716 ) Shin Kong Mitsukoshi 815,747 0.00~0.17 ( 1,284 ) Taishin Financial Holding 803,141 0.12~1.36 ( 118,576 ) Taishin Holding Insurance Broker 714,828 0.17 ( 827 ) Dah Chung Bills 416,271 0.00~1.00 ( 3,947 ) Taishin Securities Investment Advisory 302,134 0.02~1.36 ( 2,627 ) Individual A 400,985 0.04~0.75 ( 184 ) Others 2,474,029 ( 16,409 ) $ 8,979,605 ( $ 155,928 )

Year Ended December 31, 2011 Interest Rate Ending Balance Interest Expense (Per Annum %) Deposits from related parties Taishin Financial Holding $ 17,759,020 0.12~1.36 ( $ 120,444 ) Shin Kong Mitsukoshi 1,027,073 0.00~0.17 ( 1,387 ) Taishin Insurance Agency 1,024,058 0.00~0.17 ( 1,490 ) Taishin AMC 512,671 0.00~0.65 ( 779 ) Dah Chung Bills 421,405 0.00~1.00 ( 3,119 ) Others 3,346,499 ( 17,288 ) $ 24,090,726 ( $ 144,507 )

All transactions with related parties are made under arm’s length terms in compliance with normal policies.

160 X. Notes To Financial Statements 10

b. Due from banks and due to banks

Year Ended December 31, 2012 Interest Revenue Related Party Item Balance Highest Amount Interest Rate % (Expense) Chang Hwa Bank Due from banks $ 1,419 $ 12,910 - $ -

Year Ended December 31, 2011 Interest Revenue Related Party Item Balance Highest Amount Interest Rate % (Expense) Chang Hwa Bank Due from banks $ 2,030 $ 2,576 - $ -

All transactions with related parties are made under arm’s length terms in compliance with normal policies. c. Trading of securities

Year Ended December 31, 2012 Repurchase Agreements Resell Agreements Purchase Price Sales Price Interest Rate Interest Rate Ending Ending (Accumulated (Accumulated (Per Annum (Per Annum Balance Balance Related Parties Amount) Amount) %) %) MasterLink Securities $ 4,376,297 $ 5,106,817 $ 380,611 0.73~0.76 $ - - Chang Hwa Bank 1,021,535 1,622,683 - - - - Dah Chung Bills 1,077,146 1,063,867 - - - - Taishin Financial Holding - - 2,594,693 0.71~0.73 - - $ 6,474,978 $ 7,793,367 $ 2,975,304 $ -

Year Ended December 31, 2011 Repurchase Agreements Resell Agreements Purchase Price Sales Price Interest Rate Interest Rate (Accumulated (Accumulated Ending (Per Annum Ending (Per Annum Related Parties Amount) Amount) Balance %) Balance %) MasterLink Securities $ 15,222,176 $ 15,793,936 $ - - $ - - Chang Hwa Bank 1,065,584 1,966,081 - - - - Dah Chung Bills 799,955 1,007,706 - - - - Shin Kong Life Insurance - - 1,999,466 0.48~0.75 - - Taishin Financial Holding - - 1,964,264 0.40~0.72 - - $ 17,087,715 $ 18,767,723 $ 3,963,730 $ -

All transactions with related parties are made under arm’s length terms in compliance with normal policies. d. Derivative transactions

Year Ended December 31, 2012 Nominal Derivative Principal Unrealized Related Parties Contracts Period Amount Gain (Loss) Account Balance Dah Chung Bills Interest 2008.4.17- $ 1,500,000 ( $ 3,546 ) Financial ( $ 3,546 ) rate 2016.8.22 liabilities at swaps FVTPL MasterLink Securities Interest 2008.1.11- 600,000 ( 2,474 ) Financial ( 2,474 ) rate 2013.1.17 liabilities at swaps FVTPL

161 Year Ended December 31, 2011 Nominal Derivative Unrealized Related Party Period Principal Account Balance Contracts Gain (Loss) Amount Dah Chung Bills Interest rate swaps 2008.04.17- $ 1,500,000 ( $ 9,483 ) Financial ( $ 9,483 ) 2016.08.22 liabilities at FVTPL

All transactions with related parties are made under arm’s length terms in compliance with normal policies.

e. Property transactions

Taishin Bank sold its equity in PayEasy Digital to the following transaction parties in June and July 2012. The transaction price was set based on mutual negotiation and on the opinion letter of fair price issued by experts.

Transaction Parties Disposition of the Shares Proceeds from Disposal Gain on Disposal Shin Kong Mitsukoshi 17,380,000 $ 346,557 $ 260,482 Cybersoft Digital Service 2,329,501 46,450 35,251 Taishin Venture Capital 2,172,500 43,320 32,874 Taishin AMC 2,172,500 43,320 32,874

The above related party transactions are made at arm’s length in compliance with Taishin Bank’s policies.

f. Other material transactions

Years Ended December 31 2012 2011 Item Amount Item Amount Taishin Insurance Agency Fee income $ 96,660 Fee income $ 719,697 Taishin Holding Insurance Brokers Fee income 2,029,349 Fee income 741,603 Cybersoft Digital Service Operating expense 533,973 Operating expense 531,950 Shin Kong Mitsukoshi Fee income 306,134 Fee income 286,452 Shin Kong Mitsukoshi Operating expense 318,315 Operating expense 222,472

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 2012 2011 Salaries $ 135,487 $ 233,442 Pensions 1,429 1,419 Incentives 136,307 109,085 $ 273,223 $ 343,946

33. MORTGAGED OR PLEDGED ASSETS

December 31 Mortgaged or Pledged Assets Description 2012 2011 Available for sale financial Certificate of deposits and $ 7,590,224 $ 7,599,570 assets bonds Refundable deposits Cash and certificate of deposits 383,486 779,093

162 X. Notes To Financial Statements 10

34. SIGNIFICANT COMMITMENTS AND CONTINGENCIES

a. In addition to those mentioned in Note 6, Taishin Bank had the following contingent liabilities and commitments as of December 31, 2012 and 2011:

2012 2011 Guarantees $ 10,690,938 $ 15,707,401 Letters of credit 3,914,509 5,080,798 Trust liabilities 217,960,185 221,598,142 Unpaid equipment purchase contracts 369,458 290,067 Unused loan commitments (excluding credit card) 91,380,922 84,137,768 Unused loan commitments (credit card only) 414,857,606 411,994,680

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 December 31, 2012 and 2011 Trust assets 2012 2011 Trust liabilities 2012 2011 Deposit $ 5,628,392 $ 11,617,121 Payables $ 51,912 $ 39,713 Financial assets Tax payable 4,705 149 Bonds 22,939,642 27,244,798 Self-valuation securities Common stocks 30,665,747 26,274,145 under custody 31,036,445 28,220,801 Mutual funds 115,885,224 112,762,884 Other liabilities - 446,325 Bonds and securities Trust capital 186,271,241 194,700,887 purchased under Reserves and retained resell agreements - 658,321 earnings 595,882 ( 1,809,733 ) Derivatives 839 3 Receivables and prepaid 91,120 21,272 Real estate 8,832,776 11,096,377 Securities under custody 31,036,445 28,220,801 Others 2,880,000 3,702,420

$ 217,960,185 $ 221,598,142 $ 217,960,185 $ 221,598,142

163 Trust Income Statements Years Ended December 31 2012 and 2011 2012 2011 Revenues Interest $ 32,666 $ 33,009 Rent 126,540 175,501 Cash dividends 1,144,123 1,451,195 Fund distribution 53,320 53,582 Gain from property transaction - 3,418,093 Others 96,294 83,525 1,452,943 5,214,905 Expenses Administration fees ( 56,512 ) ( 75,406 ) Custodian fees ( 725 ) ( 3,278 ) Service fees - ( 34,181 ) Repair - ( 4,704 ) Interest - ( 494 ) Taxes ( 6,025 ) ( 14,105 ) Insurance ( 16,964 ) ( 2,025 ) Professional service fees - CPA ( 465 ) ( 1,191 ) Professional service fees - lawyer - ( 1,088 ) Others ( 30,014 ) ( 36,406 ) ( 110,705 ) ( 172,878 ) Net income $ 1,342,238 $ 5,042,027

Trust Asset Summary December 31, 2012 and 2011 2012 2011 Deposit $ 5,628,392 $ 11,617,121 Financial assets Bonds 22,939,642 27,244,798 Common stocks 30,665,747 26,274,145 Mutual funds 115,885,224 112,762,884 Bonds and securities purchased under resell agreements - 658,321 Derivatives 839 3 Receivables and prepayments 91,120 21,272 Real estate 8,832,776 11,096,377 Securities under custody 31,036,445 28,220,801 Others 2,880,000 3,702,420 $ 217,960,185 $ 221,598,142

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.

164 X. Notes To Financial Statements 10

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 five years. Rental payments are made annually.

2) As of December 31, 2012, the estimated future lease payments under the building lease contracts are as follows:

Year Amount 2013 $ 376,584 2014 333,159 2015 273,877 2016 160,599 2017 82,822

d. 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.

35. OTHERS

Taishin Bank had a cash merger with Taishin Bills Finance, based on Statement of Financial Accounting Standards (SFAS) Interpretation Nos. (91) 243 and 244 and (95) 081 issued by the Accounting Research and Development Foundation of the ROC, this merger was treated as a reorganization and was recorded at the carrying values of both entities’ assets and liabilities because both Taishin Bank and Taishin Bills Finance were a 100% subsidiaries of Taishin Financial Holding. In addition, based on SFAS Interpretation No. (95) 141, the Bank’s financial statements as of and for the year ended December 31, 2010 were retroactively restated assuming Taishin Bills Finance assets and liabilities had been included in these financial statements at carrying value. Taishin Bank acquired from Taishin Bills Finance the following net assets, amounting to $5,895,412 thousand:

Item Amount Due from the Central Bank and call loans to other banks $ 600,000 Financial assets at FVTPL 11,283,533 Receivables, net 667,272 Available-for-sale financial assets, net 4,635,374 Properties and equipment, net 342,796 Other assets 156,374 Due to banks and Central Bank ( 4,993,820 ) Financial liabilities at FVTPL ( 355,065 ) Bond and securities sold under repurchase agreements ( 6,205,088 ) Payables ( 69,091 ) Other liabilities ( 166,873 ) Payment for cash merger $ 5,895,412

The above assets were to be used for operating purposes. Taishin Bank had no plan to dispose of any significant assets. Taishin Bank’s net income for the year ended December 31, 2010 included Taishin Bills Finance’s net income for the same year.

165 36. FINANCIAL INSTRUMENTS

a. Fair value

December 31, 2012 Carrying Value Fair Value Financial assets Cash and cash equivalents $ 12,395,086 $ 12,395,086 Due from the Central Bank and call loans to other banks 33,230,520 33,230,520 Financial assets at FVTPL 49,231,145 49,231,145 Bonds and securities purchased under resell agreements 4,269,494 4,269,494 Receivables 86,077,469 86,077,469 Loans 658,454,135 658,454,135 Available-for-sale financial assets 207,278,563 207,278,563 Held-to-maturity financial assets 1,917,473 2,008,952 Bond investment without active market 300,000 300,000 Other financial assets 381,184 381,184

Financial liabilities Due to banks and Central Bank 52,366,146 52,366,146 Financial liabilities at FVTPL 9,114,382 9,114,382 Bonds and securities sold under repurchase agreements 53,499,333 53,499,333 Payables 21,425,730 21,425,730 Deposits 826,959,852 826,959,852 Bank debentures 36,700,000 36,700,000 Other financial liabilities 13,670,671 13,670,671

December 31, 2011 Carrying Value Fair Value Financial assets Cash and cash equivalents $ 11,125,892 $ 11,125,892 Due from the Central Bank and call loans to other banks 29,519,453 29,519,453 Financial assets at FVTPL 40,781,549 40,781,549 Bonds and securities purchased under resell agreements 1,058,738 1,058,738 Receivables 88,122,428 88,122,428 Loans 600,808,129 600,808,129 Available-for-sale financial assets 191,190,849 191,190,849 Held-to-maturity financial assets 2,421,241 2,435,078 Bond investment without active market 300,000 300,000 Other financial assets 216,362 216,362 Financial liabilities Due to banks and Central Bank 62,532,398 62,532,398 Financial liabilities at FVTPL 8,353,108 8,353,108 Bonds and securities sold under repurchase agreements 43,486,925 43,486,925 Payables 22,379,981 22,379,981 Deposits 756,502,655 756,502,655 Bank debentures 25,000,000 25,000,000 Other financial liabilities 13,340,332 13,340,332

166 X. Notes To Financial Statements 10

b. Methods and assumptions used to estimate the fair values of financial 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, other miscellaneous financial assets, due to banks and Central Bank, payables, remittances, bonds and securities sold under repurchase agreements, and other financial liabilities.

2) Fair values of financial instruments at FVTPL, available-for-sale or held-to-maturity financial assets and bank debentures 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 financial instruments.

The fair value of debt investments not actively traded in the market is determined at their expected future cash flow, 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 based on their quoted prices in an active market. For those derivatives 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 derivatives.

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) Investments accounted for by the 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 should be determined at their carrying values. Information of investments by the equity method is shown in Note 11.

5) Financial assets carried at cost are investments of non-public stocks and stocks traded in the Emerging Stock Market. Practically, it costs an amount of money more than reasonable costs to acquire identifiable fair value. Therefore, the fair value of financial assets carried at cost is not disclosed. c. Fair values of financial assets and liabilities estimated based on quoted market prices or by using valuation techniques were as follows:

December 31, 2012 Quoted Market Prices Valuation Techniques Financial assets Financial assets at FVTPL $ 38,607,041 $ 10,624,104 Available-for-sale financial assets 167,042,473 40,236,090 Held-to-maturity financial assets - 2,008,952 Financial liabilities Financial liabilities at FVTPL 771 9,113,611

167 December 31, 2011 Quoted Market Prices Valuation Techniques Financial assets Financial assets at FVTPL $ 31,148,031 $ 9,633,518 Available-for-sale financial assets 162,511,707 28,679,142 Held-to-maturity financial assets - 2,435,078 Financial liabilities Financial liabilities at FVTPL 54,469 8,298,639 d. Valuation gains (losses) arising from changes in fair value of financial instruments determined using quoted market prices gains $424,770 thousand in 2012 and losses $1,125,081 thousand in 2011. On financial instruments with fair value determined using valuation techniques, there were valuation gains of $574,214 thousand in 2012 and losses $192,873 thousand in 2011. e. The interest income (expense) associated with financial assets (liabilities) other than those at FVTPL were as follows:

Year Ended December 31 2012 2011

Total interest income $ 22,023,554 $ 19,680,158 Total interest expense 8,438,783 6,886,685 f. Fair value input levels

December 31, 2012 Fair Value Measurement of Financial Instruments Total Level 1 Level 2 Level 3 Non-derivative financial products Assets Financial assets at FVTPL Stocks and mutual funds $ 181,313 $ 181,313 $ - $ - Bond investment 11,913,101 11,153,564 759,537 - Others 27,489,720 - 27,489,720 - Available-for-sale financial assets Stocks and mutual funds 5,685,030 5,685,030 - - Bond investment 50,074,836 5,427,275 44,647,561 - Others 151,518,697 - 149,692,892 1,825,805 Other financial assets Bond investment without active market 300,000 - - 300,000

Derivative financial products Assets Financial assets at FVTPL 9,647,011 13,020 8,313,697 1,320,294 Liabilities Financial liabilities at FVTPL 9,114,382 771 8,097,084 1,016,527

168 X. Notes To Financial Statements 10

December 31, 2011 Fair Value Measurement of Financial Instruments Total Level 1 Level 2 Level 3 Non-derivative financial products Assets Financial assets at FVTPL Stocks and mutual funds $ 48,423 $ 48,423 $ - $ - Bond investment 11,310,421 11,300,959 9,462 - Others 20,752,480 - 20,752,480 - Available-for-sale financial assets Stocks and mutual funds 3,468,749 3,468,749 - - Bond investment 41,505,865 7,708,342 33,797,523 - Others 146,216,235 - 143,570,099 2,646,136 Other financial assets Bond investment without active market 300,000 - - 300,000 Liabilities Financial liabilities at FVTPL 54,469 54,469 - -

Derivative financial products Assets Financial assets at FVTPL 8,670,225 32,108 6,979,739 1,658,378 Liabilities Financial liabilities at FVTPL 8,298,639 - 7,336,000 962,639

Note 1: This table aims to understand the method that the bank used to measure financial assets and financial liabilities. This table applies to financial assets and liabilities at fair value through profit or loss, available-for-sale financial assets, financial assets and financial liabilities without quoted prices in an active market, and hedging derivative instruments. Note 2: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. According to SFAS No. 34 “Accounting for Financial Instruments” in paragraph 5, active markets must have the following attributes: (1) assets or liabilities traded in the market are identical, (2) easiness of finding buyers and sellers in the principal (or most advantageous) market for the asset or liability that are both able and willing to transact, (3) pricing information are readily available to the public. Note 3: Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (e.g. price) or indirectly (e.g. value derived from price), in the active markets. 1) Quoted prices of similar financial instruments in active market are the Company’s fair value of financial instruments if based on recent quoted price for similar financial instruments. Similar financial instruments should be decided in accordance with characteristics and transaction conditions of these instruments. Fair value of financial instruments will vary depending on factors specific to the similar asset or liability. The factors include: Prices are not current, price quotations vary substantially, transaction price between related parties, relevance between the quoted price of similar instruments and the quoted price of financial instruments. 2) Quoted prices for identical or similar assets or liabilities in markets that are not active. 3) Valuation models are used to measure fair value, and the inputs (e.g. interest rate, yield curve, and volatilities) are based on accessible date from the markets (the observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data). 4) Inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs). Note 4: Level 3 inputs are inputs that are not available in the market. Unobservable inputs are inputs such as historical volatilities used in option pricing model since historical volatilities are not representative of the expectation of volatilities of market participants. Note 5: The classifications on this table shall be consistent with the classifications on the balance sheet. Note 6: When using valuation model to measure fair value of financial instruments, the Company shall determine whether inputs have significant impacts on the fair value measurements if inputs comprise observable and unobservable inputs. If unobservable inputs have significant impacts on the measurements, the Company shall classify this type of financial instruments into lowest level. Note 7: If adopted valuation models or the classified level have material changes in the same financial instruments in current period (e.g. significant changes between Level 1 and Level 2, changes in unobservable inputs having material impacts on fair value measurements, materiality of investment amount of this category of financial instruments, and the impact of current fair value measurements on net earnings, corresponding assets and liabilities, and stockholders’ equity), the Company shall describe the changes and the underlying reasons.

Changes in Level 3 financial assets were as follows:

Year Ended December 31, 2012

Valuation Increase Decrease Beginning Ending Item Gains Sell or Balance Buy or Issue Transfer in Transfer out Balance (Losses) Disposal Financial assets at FVTPL $ 1,658,378 $ 231,046 $ 653,559 $ - ($ 1,222,689 ) $ - $ 1,320,294 Available-for-sale financial 2,646,136 ( 103,201 ) 1,132,091 - ( 1,849,221 ) - 1,825,805 assets Other financial assets 300,000 - - - - - 300,000 Total $ 4,604,514 $ 127,845 $ 1,785,650 $ - ($ 3,071,910 ) $ - $ 3,446,099

169 Year Ended December 31, 2011

Valuation Increase Decrease Beginning Ending Item Gains Buy or Sell or Transfer Balance Transfer in Balance (Losses) Issue Disposal out Financial assets at FVTPL $ 1,618,593 ($ 350,657 ) $ 762,079 $ - ($ 371,637 ) $ - $ 1,658,378 Available-for-sale financial 3,965,582 ( 997 ) 1,646,558 - ( 2,965,007 ) - 2,646,136 assets Other financial assets 300,000 - - - - - 300,000 Total $ 5,884,175 ($ 351,654 ) $ 2,408,637 $ - ($ 3,336,644 ) $ - $ 4,604,514

Changes in Level 3 financial liabilities were as follows:

Year Ended December 31, 2012

Valuation Increase Decrease Beginning Ending Item Gains Sell or Balance Buy or Issue Transfer in Transfer out Balance (Losses) Disposal Financial liabilities at $ 962,639 $ 256,381 $ 584,213 $ - ($ 786,706 ) $ - $ 1,016,527 FVTPL

Year Ended December 31, 2011

Valuation Increase Decrease Beginning Ending Item Gains Sell or Balance Buy or Issue Transfer in Transfer out Balance (Losses) Disposal Financial liabilities at $ 785,389 ($ 193,046 ) $ 752,511 $ - ($ 382,215 ) $ - $ 962,639 FVTPL g. Financial risk

1) Market risk

Taishin Bank engages in derivatives mainly to meet customers’ needs, trade for business and manage market risks. While taking into account the CAR ratio, annual budget, and the anticipation on market fluctuations, 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 flows 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.

170 X. Notes To Financial Statements 10

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 engages in the trading of equity instruments including stock, convertible bonds, and stock-index options and stock options.

(In Thousands of Original Currencies) December 31 Market Risk Type Currency 2012 2011 Exchange rate risk value EUR $ 5,309 $ 295 JPY 401,276 ( 3,075,662 ) USD ( 11,554 ) ( 21,806 ) Others (Note) 789,000 644,840 Interest rate sensitivity DV01 Interest curve of bonds TWD ( 12,442 ) ( 10,121 ) USD ( 93 ) ( 81 ) Others (Note) ( 841 ) ( 590 ) Interest curve of IRS TWD 3,573 3,713 USD 1 28 Others (Note) 723 425 Equity securities risk value TWD 4,074,427 3,288,104 USD 9,238 560 Others USD 85,513 41,898

Note: Presented as N.T. dollars which is translated from original currencies.

2) Credit risk

Credit risks refer to the losses from financial 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 70.61% and 68.09% of the total loans as of December 31, 2012 and 2011, 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 financial 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 financial assets are the same as carrying values, please refer to accompanying financial statements.

The contract amounts of financial assets with off-balance-sheet credit risks held by the Bank as of December 31, 2012 and 2011 were as follows:

Financial Instrument Type 2012 2011 Guarantees $ 10,690,938 $ 15,707,401 Letters of credit 3,914,509 5,080,798 Unused loan commitments (excluding credit card) 91,380,922 84,137,768 Unused loan commitments (credit card only) 414,857,606 411,994,680

171 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.

The prominent concentration of credit risk was as follows:

December 31 2012 2011 Percentage Percentage Industry Type Carrying Value Carrying Value of Item of Item Manufacturing $ 131,563,896 19.73 $ 129,854,589 21.35 Wholesale and retailing 36,678,593 5.50 33,091,780 5.44 Finance and insurance 64,982,196 9.75 51,518,906 8.47 Real estate and leasing 22,642,995 3.40 23,461,021 3.86 Service 8,133,458 1.22 7,333,517 1.21 Individuals 377,912,422 56.68 341,117,005 56.07 Others 24,815,328 3.72 21,900,610 3.60 $ 666,728,888 $ 608,277,428

December 31 2012 2011 Percentage Percentage Geographic Location Carrying Value Carrying Value of Item of Item Asia $ 623,698,449 93.55 $ 574,796,514 94.49 Europe 1,060,669 0.16 1,819,307 0.30 North America 1,420,074 0.21 661,662 0.11 Others 40,549,696 6.08 30,999,945 5.10 $ 666,728,888 $ 608,277,428

3) Liquidity risk

Taishin Bank’s ratios of liquidity reserves were 24.37% and 25.02% as of December 31, 2012 and 2011, respectively. Since the capital and operating funds are deemed sufficient to meet the cash flow arising from the performance of all the contracted obligations. Therefore, liquidity risk is not considered to be significant. 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 financial instruments are to match maturity and interest rate of financial assets and liabilities and to control unmatched gap. Because of uncertainty of transaction terms and different kinds, maturity and interest rate of financial 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 financial assets and liabilities according to their characteristic in order to analyze its liquidity ability. The maturity analysis was as follows:

172 X. Notes To Financial Statements 10

December 31, 2012 Over Three Less Than One Month to Over Six Months Over One Year Financial Instrument Months to Six Over Five Years Total One Month Three Months to A Year to Five Years Months

Assets

Cash and cash equivalents $ 12,395,086 $ - $ - $ - $ - $ - $ 12,395,086

Due from the Central Bank 16,461,611 2,968,285 3,128,353 4,939,730 5,732,541 - 33,230,520 and Call loans to other banks

Financial assets at FVTPL 42,286,374 1,613,787 1,793,430 959,785 2,386,878 190,891 49,231,145

Bonds and securities purchased under resell 4,269,494 - - - - - 4,269,494 agreements

Receivables (excluding 65,770,736 4,629,617 5,200,281 10,320,228 1,062,729 - 86,983,591 allowance)

Loans (including delinquent 138,354,126 65,865,079 29,245,276 40,330,318 296,699,628 96,234,461 666,728,888 loans) (excluding allowance)

Available-for-sale financial 122,592,976 22,704,084 5,121,168 9,087,954 44,747,370 3,025,011 207,278,563 assets

Held-to-maturity financial - - - - 1,917,473 - 1,917,473 assets

Investments under equity - - - - - 1,785,834 1,785,834 method

Financial assets carried at - - - - - 2,229,245 2,229,245 cost

Other miscellaneous financial 154,366 - - - 300,000 415,864 870,230 assets (excluding allowance)

Total assets 402,284,769 97,780,852 44,488,508 65,638,015 352,846,619 103,881,306 1,066,920,069

Liabilities

Due to the Central Bank and 24,719,027 6,952,189 5,919,940 14,757,990 17,000 - 52,366,146 other banks

Financial liabilities at FVTPL 2,199,466 1,707,172 1,631,951 952,456 2,550,869 72,468 9,114,382

Bonds and securities sold under repurchase 47,298,811 6,200,522 - - - - 53,499,333 agreements

Payables 18,776,707 493,581 681,556 1,294,595 179,291 - 21,425,730

Deposits 116,901,428 204,670,133 125,323,204 180,932,595 199,132,492 - 826,959,852

Bank debentures - - - - 25,000,000 11,700,000 36,700,000 Other financial liabilities 4,378,921 2,648,912 823,793 2,834,747 1,117,479 1,866,819 13,670,671 Total liabilities 214,274,360 222,672,509 134,380,444 200,772,383 227,997,131 13,639,287 1,013,736,114 Net current gap $ 188,010,409 ($ 124,891,657 ) ($ 89,891,936 ) ($ 135,134,368 ) $ 124,849,488 $ 90,242,019 $ 53,183,955

173 December 31, 2011

Over Three Less Than One Month to Over Six Months Over One Year Financial Instrument Months to Six Over Five Years Total One Month Three Months to A Year to Five Years Months

Assets

Cash and cash $ 11,125,892 $ - $ - $ - $ - $ - $ 11,125,892 equivalents

Due from the Central Bank and Call loans to 13,950,805 2,645,596 2,568,242 4,971,278 5,383,532 - 29,519,453 other banks

Financial assets at 32,713,663 1,502,282 902,283 1,795,697 3,486,139 381,485 40,781,549 FVTPL

Bonds and securities purchased under resell 1,058,738 - - - - - 1,058,738 agreements

Receivables (excluding 68,427,165 5,057,558 7,022,582 8,090,869 351,559 - 88,949,733 allowance)

Loans (including delinquent loans) 97,919,672 77,610,893 33,941,115 40,263,009 266,167,394 92,375,345 608,277,428 (excluding allowance)

Available-for-sale 69,583,843 57,795,507 11,912,437 10,660,881 35,911,927 5,326,254 191,190,849 financial assets

Held-to-maturity - 272,903 - 138,020 2,010,318 - 2,421,241 financial assets

Investments under - - - - - 1,939,912 1,939,912 equity method

Financial assets carried - - - - - 2,377,454 2,377,454 at cost

Other miscellaneous financial assets - - - - 300,000 459,013 759,013 (excluding allowance)

Total assets 294,779,778 144,884,739 56,346,659 65,919,754 313,610,869 102,859,463 978,401,262

Liabilities

Due to the Central Bank 28,945,847 6,886,607 8,373,755 18,309,191 16,998 - 62,532,398 and other banks

Financial liabilities at 811,407 1,416,237 1,243,406 1,599,052 3,222,304 60,702 8,353,108 FVTPL

Bonds and securities sold under repurchase 39,362,090 4,017,948 106,887 - - - 43,486,925 agreements

Payables 20,570,159 404,530 711,190 659,044 35,058 - 22,379,981 Deposits 113,349,266 174,033,282 105,875,341 177,966,468 185,278,298 - 756,502,655 Bank debentures - - - - 1,508,000 23,492,000 25,000,000 Other financial liabilities 3,041,941 2,809,414 986,821 2,473,723 1,115,272 2,913,161 13,340,332 Total liabilities 206,080,710 189,568,018 117,297,400 201,007,478 191,175,930 26,465,863 931,595,399 Net current gap $ 88,699,068 ($ 44,683,279 ) ($ 60,950,741 ) ($ 135,087,724 ) $ 122,434,939 $ 76,393,600 $ 46,805,863

174 X. Notes To Financial Statements 10

4) Cash flow risk and fair value from change in interest rates

Taishin Bank’s cash flow risks as a result of change in interest rates refer to cash flow fluctuations in the future from its assets with floating rates and liabilities with floating 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 flow risks as a result of change in interest rates.

a) Expected revaluation date and expected settlement date

As of December 31, 2012 and 2011, 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 financial assets and liabilities according to its earliness of revaluation date and settlement date in the following table.

December 31, 2012 Over Three Over Six Less Than One Month to Months to Six Months to A Over One Year Financial Instrument One Month Three Months Months Year to Five Years Over Five Years Total

Assets Due from the Central Bank and call loans to $ 9,324,735 $ 2,978,126 $ 3,138,725 $ 4,956,107 $ 5,751,547 $ - $ 26,149,240 other banks Financial assets at 42,334,472 1,613,787 1,793,430 959,785 2,386,878 190,891 49,279,243 FVTPL Available-for-sale 120,050,631 22,704,084 5,121,168 9,087,954 44,747,370 3,025,011 204,736,218 financial assets Held-to-maturity - - - - 1,917,473 - 1,917,473 financial assets Loans 138,357,660 77,566,899 29,245,275 40,328,218 296,698,186 83,092,731 665,288,969 Others - - - - - 53,262,691 53,262,691 Total assets 310,067,498 104,862,896 39,298,598 55,332,064 351,501,454 139,571,324 1,000,633,834 Liabilities Deposits 111,589,995 203,830,619 126,162,718 180,932,595 199,132,491 - 821,648,418 Borrowings (including deposits from post 71,875,105 13,047,711 5,722,940 13,595,690 25,071,000 11,700,000 141,012,446 office) Others 2,449,482 1,812,172 1,828,951 2,114,756 2,550,869 72,468 10,828,698 Total liabilities 185,914,582 218,690,502 133,714,609 196,643,041 226,754,360 11,772,468 973,489,562 Interest sensitivity gap $ 124,152,916 ($ 113,827,606 ) ($ 94,416,011 ) ($ 141,310,977 ) $ 124,747,094 $ 127,798,856 $ 27,144,272

December 31, 2011 Over Three Over Six Less Than One Month to Months to Six Months to A Over One Year Financial Instrument One Month Three Months Months Year to Five Years Over Five Years Total Assets Due from the Central Bank and call loans to $ 7,959,100 $ 2,649,176 $ 2,571,718 $ 4,978,007 $ 5,390,819 $ - $ 23,548,820 other banks Financial assets at 33,024,177 1,502,282 902,283 1,795,697 3,486,139 381,485 41,092,063 FVTPL Available-for-sale financial assets 68,315,388 57,795,507 11,912,437 10,660,881 35,911,927 5,326,254 189,922,394 Held-to-maturity financial assets - 272,903 - 138,020 2,010,318 - 2,421,241 Loans 97,933,628 90,251,545 33,941,113 40,263,009 266,157,173 78,202,714 606,749,182 Others - - - - - 61,134,420 61,134,420 Total assets 207,232,293 152,471,413 49,327,551 57,835,614 312,956,376 145,044,873 924,868,120 Liabilities Deposits 107,829,052 181,257,647 98,650,976 177,966,468 185,278,298 - 750,982,441 Borrowings (including 68,206,201 10,875,530 8,329,827 17,106,083 1,525,000 23,577,590 129,620,231 deposits from post office) Others 1,029,312 2,124,692 1,308,313 1,924,949 3,222,304 60,702 9,670,272 Total liabilities 177,064,565 194,257,869 108,289,116 196,997,500 190,025,602 23,638,292 890,272,944 Interest sensitivity gap $ 30,167,728 ($ 41,786,456 ) ($ 58,961,565 ) ($ 139,161,886 ) $ 122,930,774 $ 121,406,581 $ 34,595,176

175 b) Effective interest rate (excluding financial instruments at FVTPL)

As of December 31, 2012 and 2011, the effective interest rate of financial instruments held or issued by the Bank grouping based on main currencies are as follows:

Effective Interest Rate (%) 2012 2011 NTD USD NTD USD Bonds and securities purchase under resell 0.77~0.82 - 0.87~0.89 - agreements Available-for-sale financial assets 0.71~5.88 0.00~8.13 0.72~5.13 0.00~8.75 Held-to-maturity financial assets - 3.75~7.38 - 3.75~7.38 Loans 0.0001~20.00 0.52~6.30 0.0001~20.00 0.10~6.30 Bonds and securities sold under repurchase 0.60~0.82 0.29~0.49 0.58~0.89 0.28~0.87 agreements Deposits 0.00~4.00 0.02~1.95 0.00~4.00 0.01~2.38 Bank debentures 1.53~2.76 - 1.70~2.76 -

37. OTHER DISCLOSURES REQUIRED FOR OF FINANCIAL INSTITUTIONS

a. Asset quality

Item December 31, 2012

Non- Non- Coverage Ratio Allowance for Loan performing Loans Loans performing Loans (Note c) Losses Business Type (Note a) Ratio (Note b) Corporate Secured $ 397,141 $ 141,348,888 0.28% $ 2,876,979 724.42% finance Unsecured 50,404 161,212,404 0.03% 1,093,233 2,168.95% Mortgage loans (Note 162,955 217,680,801 0.07% 1,756,305 1,077.78% d) Consumer Cash cards 57,114 6,156,205 0.93% 375,581 657.60% finance Credit loans (Note e) 142,743 27,216,977 0.52% 715,829 501.48% Others Secured 65,476 111,407,408 0.06% 826,626 1,262.48% (Note f) Unsecured 27,904 1,706,205 1.64% 188,797 676.60% Total 903,737 666,728,888 0.14% 7,833,350 866.77% Credit card 94,496 32,453,086 0.29% 436,685 462.12% Accounts receivable factoring with - 41,567,908 - 315,848 - no recourse (Note g)

Item December 31, 2011

Non- Non- Coverage Ratio Allowance for Loan performing Loans Loans performing Loans (Note c) Losses Business Type (Note a) Ratio (Note b) Corporate Secured $ 457,798 $ 119,038,390 0.38% $ 2,672,076 583.68% finance Unsecured 6,306 160,303,167 - 1,309,832 20,771.91% Mortgage loans (Note 179,343 206,149,360 0.09% 1,102,819 614.92% d) Consumer Cash cards 78,474 8,189,094 0.96% 671,787 856.06% finance Credit loans (Note e) 150,513 23,447,039 0.64% 806,301 535.70% Others Secured 48,035 88,834,441 0.05% 424,571 883.88% (Note f) Unsecured 48,222 2,315,937 2.08% 231,232 479.51% Total 968,691 608,277,428 0.16% 7,218,618 745.19% Credit card 94,686 33,613,235 0.28% 488,089 515.48% Accounts receivable factoring with - 49,576,406 - 105,891 - no recourse (Note g)

176 X. Notes To Financial Statements 10

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 de ned 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 nancial institutions. Note e: Credit loans are to t 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 nancial business are de ned as secured or unsecured consumer nancial 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 de ned as non-performing loans within three months from the date that factors or insurance companies ascertain not to compensate the loss.

Item December 31, 2012 December 31, 2011 Exempted from Exempted from Exempted from Exempted from Report as Non- Report as Non- Report as Non- Report as Non- performing performing performing performing Business Type Loans Receivables Loans Receivables Negotiated amount performed in accordance with $ 3,820,789 $ 1,190,424 $ 5,279,584 $ 1,667,299 the agreement (Note a) Loans executed in accordance with debt clearing 1,901,402 1,364,786 2,079,662 1,367,876 and renewal regulations (Note b) Total 5,722,191 2,555,210 7,359,246 3,035,175

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, 2012 December 31, 2011 As Proportion As Proportion Rank Transaction Party Transaction Party Loans (Note c) of Net Equity Loans (Note c) of Net Equity (Note a) (Note b) (Note b) (%) (%) A Group (liquid crystal A Group (liquid crystal 1 panel and components $ 13,966,999 20.81% panel and components $ 15,444,056 24.52% manufacturing industry) manufacturing industry) B Group (other financial K Group (liquid crystal 2 intermediation not 8,594,907 12.81% panel and components 7,734,083 12.28% elsewhere classified)) manufacturing industry) C Group (other financial E Group (other financial 3 intermediation not 8,516,764 12.69% intermediation not 7,565,729 12.01% elsewhere classified) elsewhere classified) D Group (liquid crystal F Group (man-made fibers 4 panel and components 6,887,869 10.26% 6,553,605 10.41% manufacturing industry) manufacturing industry) E Group (other financial C Group (other financial 5 intermediation not 6,070,350 9.04% intermediation not 6,279,800 9.97% elsewhere classified) elsewhere classified) L Group (ocean freight F Group (man-made fibers 6 5,589,766 8.33% transportation forwarding 5,908,179 9.38% manufacturing industry) services) G Group (other financial I Group (computer 7 intermediation not 5,513,070 8.21% 5,611,510 8.91% manufacturing industry) elsewhere classified) H Group (other periphery B Group (computer 8 computer equipment 5,280,023 7.87% 5,415,622 8.60% manufacturing industry) manufacturing industry) I Company (semi-conductor I Company (printed circuit 9 packaging and testing 5,059,442 7.54% board manufacturing 5,172,356 8.21% industry) industry) J Group (monitors and J Group (monitors and 10 terminals manufacturing 5,019,127 7.48% terminals manufacturing 4,868,214 7.73% industry) industry)

177 Note a: Sorted by the balance of loans on December 31, 2012 and 2011, 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 nancing, medium-term loan, medium-term secured loan, long-term loan, long-term secured loan, delinquent loans, inward remittances, factoring without recourse, acceptance, and guarantee. 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, 2012 and 2011 were as follows:

2012 2011 Average Average Average Value Interest Average Value Interest Rate % Rate % Assets Due from banks and call loans to banks $ 29,567,111 0.66 $ 28,054,773 0.62 Financial assets at FVTPL 35,005,185 0.83 26,531,008 0.75 Bonds and securities purchased under resell 2,108,321 0.82 1,940,882 0.71 agreements Receivables 48,654,510 4.72 47,753,379 4.89 Loans 639,434,450 2.61 577,811,944 2.51 Available-for-sale financial assets 201,629,537 1.11 187,696,707 1.09 Held-to-maturity financial assets 2,089,874 4.20 3,056,223 3.15 Liabilities Due to banks and call loans from banks 54,122,847 1.11 55,419,826 1.13 Bonds and securities sold under repurchase 51,922,415 0.74 34,711,459 0.60 agreements Demand deposits 321,109,568 0.27 299,036,422 0.24 Time deposits 475,416,933 1.19 427,750,415 1.05 Bank debentures 26,432,240 2.53 25,000,000 2.46 Other financial liabilities 13,303,464 1.71 14,142,116 1.60 d. Interest rate sensitivity

December 31, 2012 Item 181 Days- More Than 1-90 Days 91-180 Days Total 1 Year 1 Year Interest-sensitive assets $ 686,375,750 $ 20,450,808 $ 41,173,328 $ 116,147,795 $ 864,147,681 Interest-sensitive liabilities 337,779,320 117,004,143 152,177,880 236,837,927 843,799,270 Interest sensitivity gap 348,596,430 ( 96,553,335 ) ( 111,004,552 ) ( 120,690,132 ) 20,348,411 Net equity 66,721,962 Ratio of interest-sensitive assets to liabilities 102.41% Ratio of interest sensitivity gap to net equity 30.50%

December 31, 2011 Item 181 Days- More Than 1-90 Days 91-180 Days Total 1 Year 1 Year Interest-sensitive assets $ 589,515,405 $ 27,157,814 $ 43,703,479 $ 139,341,998 $ 799,718,696 Interest-sensitive liabilities 362,787,867 81,070,674 134,901,875 211,499,947 790,260,363 Interest sensitivity gap 226,727,538 ( 53,912,860 ) ( 91,198,396) ( 72,157,949 ) 9,458,333 Net equity 62,990,673 Ratio of interest-sensitive assets to liabilities 101.20% Ratio of interest sensitivity gap to net equity 15.02% 178 X. Notes To Financial Statements 10

Note a: The amounts listed above include amounts in N.T. dollars only (i.e., excluding foreign currency) for both head oce and domestic branches. Note b: Interest-sensitive assets and liabilities are interest-earning assets and interest-bearing liabilities with income or cost aected by interest rate uctuations. Note c: Interest sensitivity gap = Interest-sensitive assets - Interest - sensitive liabilities Note d: Ratio of interest-sensitive assets to interest-sensitive liabilities = Interest-sensitive assets (N.T. dollars only) Interest-sensitive liabilities

(In Thousands of U.S. Dollars) December 31, 2012 Item 181 Days- More Than 1-90 Days 91-180 Days Total 1 Year 1 Year Interest-sensitive assets $ 2,768,004 $ 1,312,602 $ 527,994 $ 1,540,581 $ 6,149,181 Interest-sensitive liabilities 2,936,901 2,783,811 930,382 383,627 7,034,721 Interest sensitivity gap ( 168,897 ) ( 1,471,209 ) ( 402,388 ) 1,156,954 ( 885,540 ) Net equity 32,187 Ratio of interest-sensitive assets to liabilities 87.41% Ratio of interest sensitivity gap to net equity ( 2,751.23% )

(In Thousands of U.S. Dollars) December 31, 2011 Item 181 Days- More Than 1-90 Days 91-180 Days Total 1 Year 1 Year Interest-sensitive assets $ 3,626,583 $ 927,104 $ 351,495 $ 1,293,411 $ 6,198,593 Interest-sensitive liabilities 3,667,774 2,315,523 705,397 334,021 7,022,715 Interest sensitivity gap ( 41,191 ) ( 1,388,419 ) ( 353,902 ) 959,390 ( 824,122 ) Net equity 34,217 Ratio of interest-sensitive assets to liabilities 88.26% Ratio of interest sensitivity gap to net equity ( 2,408.52% )

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 aected by interest rate uctuations. Note c: Interest sensitivity gap = Interest-sensitive assets - Interest-sensitive liabilities Note d: Ratio of interest-sensitive assets to interest-sensitive liabilities = Interest-sensitive assets (U.S. dollars only) Interest-sensitive liabilities e. Profitability

December 31 Item 2012 2011 Pretax 1.00 0.95 Return on total assets After tax 0.83 0.80 Pretax 15.90 14.90 Return on net equity After tax 13.29 12.52 Profit margin 36.32 37.27

Note a: Return on total assets = Income before (after) tax Average assets Note b: Return on net equity = Income before (after) tax Average net equity Note c: Pro t margin = Income after tax Net revenue Note d: Pro tability presented above is cumulative from January 1 to December 31 of 2012 and 2011, respectively.

179 f. Maturity analysis of assets and liabilities

December 31, 2012 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 inflows $ 926,991,170 $ 314,097,741 $ 87,875,554 $ 37,299,015 $ 75,454,069 $ 412,264,791 Major maturity cash outflows 1,012,702,885 167,631,668 144,116,407 168,038,368 203,455,566 329,460,876 Gap ( 85,711,715 ) 146,466,073 ( 56,240,853 ) ( 130,739,353 ) ( 128,001,497 ) 82,803,915

December 31, 2011 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 inflows $ 869,504,187 $ 205,737,709 $ 165,612,383 $ 44,864,429 $ 73,665,202 $ 379,624,464 Major maturity cash outflows 943,601,610 161,594,580 151,883,487 131,739,547 200,611,085 297,772,911 Gap ( 74,097,423 ) 44,143,129 13,728,896 ( 86,875,118 ) ( 126,945,883 ) 81,851,553

Note: The amounts listed above include accounts in N.T. dollars only (i.e., excluding foreign currency) for both head oce and domestic branches.

(In Thousands of U.S. Dollars) December 31, 2012 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 inflows $ 9,091,660 $ 3,690,890 $ 2,136,476 $ 1,411,242 $ 526,517 $ 1,326,535 Major maturity cash outflows 9,024,765 3,591,374 1,383,056 2,743,412 866,260 440,663 Gap 66,895 99,516 753,420 ( 1,332,170 ) ( 339,743 ) 885,872

(In Thousands of U.S. Dollars) December 31, 2011 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 inflows $ 9,187,511 $ 3,799,481 $ 3,018,816 $ 960,018 $ 317,567 $ 1,091,629 Major maturity cash outflows 9,119,390 3,363,069 2,209,685 2,404,303 665,547 476,786 Gap 68,121 436,412 809,131 ( 1,444,285 ) ( 347,980 ) 614,843

Note: The amounts listed above include accounts in U.S. dollars for head oce, domestic branches, and OBU.

180 X. Notes To Financial Statements 10

g. Capital adequacy

Year Consolidated Taishin Bank December 31, December 31, December 31, Item 2012 2012 2011 Tier I capital $ 63,733,753 $ 62,993,938 $ 59,422,148 Self-owned Tier II capital 35,979,971 35,502,812 26,740,812 capital Tier III capital - - - Self-owned capital 99,713,724 98,496,750 86,162,960 Standardized approach 679,825,048 679,515,233 607,210,536 Credit risk IRB - - - Securitization 725,766 725,766 1,158,501 Basic indicator approach - - - Standardized approach/ Risk-weighted Operation 39,101,650 39,101,650 36,814,913 assets risk optional standard Advanced internal-rating based - - - approach Market Standardized approach 27,256,763 27,255,700 30,257,750 price risk Internal model approach - - - Total 746,909,227 746,598,349 675,441,700 Capital Adequacy ratio 13.35% 13.19% 12.76% Tier I capital to risk-weighted assets ratio 8.53% 8.44% 8.80% Tier II capital to risk-weighted assets ratio 4.82% 4.75% 3.96% Tier III capital to risk-weighted assets ratio - - - Common stock equity to total assets ratio 4.37% 4.37% 4.75% Leverage ratio 6.15% 6.08% 6.25%

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, 2012 and 2011 are as follows:

2012 2011 Special purpose trust accounts - foreign and $ 134,843,353 $ 135,857,618 domestic investments Special purpose monetary fund - master 4,828,453 6,016,971 Special purpose monetary fund - stand-alone - 109,139 Special purpose cover fund - stand-alone 9,221,647 9,355,248 Specific monetary fund - stand-alone 8,740,675 8,079,614 Specific cover fund - stand-alone 20,297,844 14,738,474 Real estate securitization - 8,645,712 Real estate trust 8,991,768 9,552,878 Monetary mutual trust fund - 1,021,687 Securities under custody 31,036,445 28,220,801 $ 217,960,185 $ 221,598,142

181 i. Significant foreign-currency denominated financial assets and liabilities are summarized as follows:

(In Foreign Currency/In Thousands of New Taiwan Dollars) December 31 2012 2011 Foreign Exchange New Taiwan Foreign Exchange New Taiwan Currencies Rate Dollars Currencies Rate Dollars Financial assets Monetary items AUD $ 69,396 30.27 $ 2,100,269 $ 90,903 30.75 $ 2,795,583 RMB 644,390 4.68 3,015,573 677,030 4.77 3,232,541 EUR 35,861 38.61 1,384,633 33,611 39.20 1,317,495 HKD 1,178,031 3.76 4,427,816 802,507 3.90 3,128,678 JPY 23,885,244 0.34 8,060,243 23,503,001 0.39 9,175,830 USD 4,713,990 29.14 137,346,826 4,014,490 30.29 121,598,910 Nonmonetary items AUD 262,464 30.27 7,943,485 261,523 30.75 8,042,721 RMB 4,614,091 4.68 21,592,700 240,874 4.77 1,150,075 EUR 375,499 38.61 14,498,395 101,776 39.20 3,989,428 HKD 330,389 3.76 1,241,819 433,964 3.90 1,691,865 JPY 14,332 0.34 4,837 44,432,933 0.39 17,347,106 USD 1,245,186 29.14 36,279,747 2,297,592 30.29 69,594,059 ZAR 2,570,128 3.43 8,813,164 1,333,218 3.73 4,971,890

Financial liabilities Monetary items AUD 330,133 30.27 9,991,469 349,493 30.75 10,748,108 RMB 1,540,205 4.68 7,207,743 684,157 4.77 3,266,570 EUR 108,209 38.61 4,178,047 118,156 39.20 4,631,524 HKD 827,473 3.76 3,110,188 933,160 3.90 3,638,044 JPY 7,512,731 0.34 2,535,224 8,498,102 0.39 3,317,753 USD 5,720,927 29.14 166,684,918 5,126,610 30.29 155,285,014 ZAR 2,539,846 3.43 8,709,325 1,328,264 3.73 4,953,416 Nonmonetary items EUR 278,842 38.61 10,766,394 7,703 39.20 301,927 HKD 746,468 3.76 2,805,720 434,501 3.90 1,693,957 JPY 14,389,188 0.34 4,855,732 62,619,872 0.39 24,447,487 USD 210,303 29.14 6,127,385 1,147,286 30.29 34,751,306 RMB 3,705,444 4.68 17,340,476 2,919 4.77 13,937

182 X. Notes To Financial Statements 10

38. 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% 1 Table 1 of the paid-in 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 Receivables from related parties amounting to at least NT$300 million or 10% of the paid-in 5 None capital 6 Sale of NPL None Securitized instruments and related assets which are in accordance with the Statute for Financial 7 None Assets Securitization and the Statute for Real Estate Securitization Other transactions which may have significant impact on the decisions made by the financial 8 None statement users

b. Information on Taishin Bank’s Investees

No. Item Explanation 1 Names, locations, and related information of investees Table 2 2 Financings provided None 3 Endorsements/guarantees provided None 4 Marketable securities held as of December 31, 2012 Table 3 (Note) 5 Derivative transactions of investees None Marketable securities acquired or disposed of at costs or prices at least NT$300 million or 10% 6 Table 4 of the paid-in 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 12 None Assets Securitization and the Statute for Real Estate Securitization Other transactions which may have significant impact on the decisions made by the financial 13 None statement users

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.

39. SEGMENT INFORMATION

Segment information is disclosed for the management to make operating decisions in order to allocate resources to the segments and access their performances. Under the guidelines of the newly issued SFAS No. 41 “Operating Segments”, Taishin Bank’s reporting segments are separated into individual finance industry and corporation finance industry based on its market. The main business of the former includes deposit receipts, commercial lending, bankers acceptances, and finance management service while the latter includes, corporation lending, receivable factoring and offshore banking business.

Taishin Bank prepared consolidated financial statements, in which information of operating segments had been disclosed. Therefore, Taishin Bank’s individual financial statements would not disclose information related to operating segments.

183 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, 2012 (In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

Beginning of the Period Purchases Sales End of the Period Type and Name Buyer or Account Transaction Issuer’s Disposal of Marketable Shares Shares Shares Selling Carrying Shares Seller Recorded Party Relationship to the Buyer or Seller Amount Amount Gain Amount Security (Units) (Units) (Units) Price Value (Units) (Loss)

Shin Kong Mitsukoshi Related party in substance 28,400,001 $ 209,108 - $ - 17,380,000 $ 346,557 $ 89,400 $ 260,482 2,172,500 $ 10,445 Financial assets Taishin carried at cost (original International PayEasy Digital recorded as investment CyberSoft Digital Related party in substance (become non- - - 2,329,501 46,450 11,200 35,251 Bank accounted for by the Service related party on December 2012) equity method) Taishin Venture Capital Wholly owned by the same parent company - - 2,172,500 43,320 10,445 32,874 Taishin AMC 〃 - - 2,172,500 43,320 10,445 32,874 Other personal - - - 2,173,000 43,330 10,887 34,561

TAISHIN INTERNATIONAL BANK CO., LTD.

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES YEAR ENDED DECEMBER 31, 2012 (In Thousands, Except for Percentages and Shares)

184 X. Notes To Financial Statements 10

185 Recognized Sum of Ownership Ownership Unified Investment Investees’ Interest (%) Investment Total Business Investees’ Location Principal Business Activities Income (Loss) Imputed Note Names at Ending Book Value Current No. of Current Shares Ownership Balance Shares Shares Period (Note) Interest (%) Financial business Dah Chung Bills 89391748 11F, No. 116, Nanjing E. Rd., Sec. 2, Bills and finance 18.29% $ 913,641 $ - 79,182,224 - 81,393,984 18.80% Taipei, Taiwan Taipei Foreign 84703601 8F, No. 400, Bade Rd., Sec. 2, Taipei, Exchange trading, DEPOS, and swap 0.81% 1,600 - 160,000 - 860,000 4.34% Exchange Co., Ltd. Taiwan Taiwan Financial Asset 70820924 6F, No. 99, Ren Ai Rd., Sec. 2, Taipei, Auction assets of the recognition of an impartial third party 2.94% 50,000 - 5,000,000 - 10,000,000 5.88% Service Co., Ltd. Taiwan Taiwan Asset 70808864 11F and 12F, No. 85 and No. 87, Acquisition of delinquent loans, evaluation, auction, and 0.57% 100,000 - 10,000,000 - 210,000,000 11.92% Management Co., Ltd. Nanjing E. Rd., Sec. 2, Taipei, Taiwan management Taiwan Futures 16092130 13F, No. 102, and 14F, No. 100, Luossu Futures exchange and clearing mechanism 0.96% 19,250 - 2,681,396 - 5,885,142 2.11% Exchange Fu. Rd., Sec. 2, Taipei, Taiwan Financial Information 16744111 No. 81, Kang Ning Rd., Sec. 3, Taipei, Type II telecommunications business 2.28% 91,000 - 10,237,500 - 15,450,750 3.43% Service Co., Ltd. Taiwan Sunlight Asset 28008025 11F, No. 85 and No. 87, Nanjing E. Rd., Acquisition of delinquent loans, evaluation, auction, and 18.21% 10,923 - 1,092,317 - 1,134,085 18.90% Management Co., Ltd. Sec. 2, Taipei, Taiwan management PayEasy Digital 70553216 13F, No. 11, Jungshan N. Rd., Sec. 1, Investment and enterprise operating consultant, information 5.00% 10,445 ( 66,585 ) 2,172,500 - 6,525,854 15.02% Taipei, Taiwan software and data processing, advertising, international trade, agency and network services Master Card 0.01% 10,345 - 10,316 - 13,517 0.01% VISA Inc. 0.07% 777,033 - 584,124 - 609,144 0.08% Nonfinancial business Universal Venture 16446106 8F, No. 70, Nanjing E. Rd., Sec. 3, Investment start-up 1.49% 2,673 ( 7 ) 267,155 - 267,155 1.49% Fund Co., Ltd. Taipei, Taiwan Financial assets Da Chiang 97430717 15F, No. 109, Ren Ai Rd., Sec. 4, Taipei, Import and export trading 4.31% 70,625 - 8,620,690 - 8,620,690 4.31% carried at cost International Co., Taiwan Ltd. EasyCard Investment 28988941 6F, No. 236 Tun-Hua N. Rd., Taipei, IC card development & advance advertising service 2.40% 16,000 - 1,921,872 - 1,921,872 2.40% Holdings Co., Ltd. Taiwan Asia Pacific 70771579 16F, No. 277 Sung Ren Rd., Taipei, Type I & II telecommunications business 0.46% 15,000 - 15,000,000 - 30,017,250 0.91% Telecom Co., Ltd. Taiwan T.K Venture 70789542 10F, No. 76, Tun Hua S. Rd., Sec. 2, Investment start-up 3.33% 33,333 - 3,333,333 - 3,333,333 3.33% Capital Co., Ltd. Taipei, Taiwan Kaohsiung Rapid 70798839 No. 1, Chung An. Rd., Kaohsiung, Mass rapid transit operating 0.50% 50,000 - 5,000,000 - 5,000,000 0.50% Transit Corp. Taiwan Apex Venture 97176200 5F, No. 143 Min Sheng E. Rd., Sec. 2, Investment start-up 4.67% 3,768 - 2,009,346 - 2,009,346 4.67% Capital Co., Ltd. Taipei, Taiwan Concord VII 70767435 11F, No. 132, Min Sheng E. Rd., Sec. 3, Investment start-up 4.73% 9,906 - 2,324,000 - 2,324,000 4.73% Venture Capital Taipei, Taiwan Co., Ltd. Concord IV 16442880 11F, No. 132, Min Sheng E. Rd., Sec. 3, Investment start-up 5.00% 8,953 - 1,564,080 - 1,955,100 6.25% Venture Capital Taipei, Taiwan Co., Ltd. United Venture 70780113 4F, No. 9, Dehuei. St., Sec. 2, Taipei, Investment start-up 4.52% - 1,199 855,360 - 855,360 4.52% Capital Co., Ltd. Taiwan Lien An Co., Ltd. 97290477 5F, No. 126, Jianguo N. Rd., Sec. 1, Industrial and commercial services 5.00% 1,250 - 125,000 - 250,000 10.00% Taipei, Taiwan Harbinger Venture 70777004 7F, No. 187, Ti Titing Ta. Rd., Sec. 2, Investment start-up 3.35% 33,500 - 3,350,000 - 3,350,000 3.35% Capital Investment Taipei, Taiwan Co., Ltd. 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.

186 X. Notes To Financial Statements 10

Recognized Sum of Ownership Ownership Unified Investment Investees’ Interest (%) Investment Total Business Investees’ Location Principal Business Activities Income (Loss) Imputed Note Names at Ending Book Value Current No. of Current Shares Ownership Balance Shares Shares Period (Note) Interest (%) Financial business Dah Chung Bills 89391748 11F, No. 116, Nanjing E. Rd., Sec. 2, Bills and finance 18.29% $ 913,641 $ - 79,182,224 - 81,393,984 18.80% Taipei, Taiwan Taipei Foreign 84703601 8F, No. 400, Bade Rd., Sec. 2, Taipei, Exchange trading, DEPOS, and swap 0.81% 1,600 - 160,000 - 860,000 4.34% Exchange Co., Ltd. Taiwan Taiwan Financial Asset 70820924 6F, No. 99, Ren Ai Rd., Sec. 2, Taipei, Auction assets of the recognition of an impartial third party 2.94% 50,000 - 5,000,000 - 10,000,000 5.88% Service Co., Ltd. Taiwan Taiwan Asset 70808864 11F and 12F, No. 85 and No. 87, Acquisition of delinquent loans, evaluation, auction, and 0.57% 100,000 - 10,000,000 - 210,000,000 11.92% Management Co., Ltd. Nanjing E. Rd., Sec. 2, Taipei, Taiwan management Taiwan Futures 16092130 13F, No. 102, and 14F, No. 100, Luossu Futures exchange and clearing mechanism 0.96% 19,250 - 2,681,396 - 5,885,142 2.11% Exchange Fu. Rd., Sec. 2, Taipei, Taiwan Financial Information 16744111 No. 81, Kang Ning Rd., Sec. 3, Taipei, Type II telecommunications business 2.28% 91,000 - 10,237,500 - 15,450,750 3.43% Service Co., Ltd. Taiwan Sunlight Asset 28008025 11F, No. 85 and No. 87, Nanjing E. Rd., Acquisition of delinquent loans, evaluation, auction, and 18.21% 10,923 - 1,092,317 - 1,134,085 18.90% Management Co., Ltd. Sec. 2, Taipei, Taiwan management PayEasy Digital 70553216 13F, No. 11, Jungshan N. Rd., Sec. 1, Investment and enterprise operating consultant, information 5.00% 10,445 ( 66,585 ) 2,172,500 - 6,525,854 15.02% Taipei, Taiwan software and data processing, advertising, international trade, agency and network services Master Card 0.01% 10,345 - 10,316 - 13,517 0.01% VISA Inc. 0.07% 777,033 - 584,124 - 609,144 0.08% Nonfinancial business Universal Venture 16446106 8F, No. 70, Nanjing E. Rd., Sec. 3, Investment start-up 1.49% 2,673 ( 7 ) 267,155 - 267,155 1.49% Fund Co., Ltd. Taipei, Taiwan Financial assets Da Chiang 97430717 15F, No. 109, Ren Ai Rd., Sec. 4, Taipei, Import and export trading 4.31% 70,625 - 8,620,690 - 8,620,690 4.31% carried at cost International Co., Taiwan Ltd. EasyCard Investment 28988941 6F, No. 236 Tun-Hua N. Rd., Taipei, IC card development & advance advertising service 2.40% 16,000 - 1,921,872 - 1,921,872 2.40% Holdings Co., Ltd. Taiwan Asia Pacific 70771579 16F, No. 277 Sung Ren Rd., Taipei, Type I & II telecommunications business 0.46% 15,000 - 15,000,000 - 30,017,250 0.91% Telecom Co., Ltd. Taiwan T.K Venture 70789542 10F, No. 76, Tun Hua S. Rd., Sec. 2, Investment start-up 3.33% 33,333 - 3,333,333 - 3,333,333 3.33% Capital Co., Ltd. Taipei, Taiwan Kaohsiung Rapid 70798839 No. 1, Chung An. Rd., Kaohsiung, Mass rapid transit operating 0.50% 50,000 - 5,000,000 - 5,000,000 0.50% Transit Corp. Taiwan Apex Venture 97176200 5F, No. 143 Min Sheng E. Rd., Sec. 2, Investment start-up 4.67% 3,768 - 2,009,346 - 2,009,346 4.67% Capital Co., Ltd. Taipei, Taiwan Concord VII 70767435 11F, No. 132, Min Sheng E. Rd., Sec. 3, Investment start-up 4.73% 9,906 - 2,324,000 - 2,324,000 4.73% Venture Capital Taipei, Taiwan Co., Ltd. Concord IV 16442880 11F, No. 132, Min Sheng E. Rd., Sec. 3, Investment start-up 5.00% 8,953 - 1,564,080 - 1,955,100 6.25% Venture Capital Taipei, Taiwan Co., Ltd. United Venture 70780113 4F, No. 9, Dehuei. St., Sec. 2, Taipei, Investment start-up 4.52% - 1,199 855,360 - 855,360 4.52% Capital Co., Ltd. Taiwan Lien An Co., Ltd. 97290477 5F, No. 126, Jianguo N. Rd., Sec. 1, Industrial and commercial services 5.00% 1,250 - 125,000 - 250,000 10.00% Taipei, Taiwan Harbinger Venture 70777004 7F, No. 187, Ti Titing Ta. Rd., Sec. 2, Investment start-up 3.35% 33,500 - 3,350,000 - 3,350,000 3.35% Capital Investment Taipei, Taiwan Co., Ltd. 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.

187 TAISHIN INTERNATIONAL BANK CO., LTD.

MARKETABLE SECURITIES HELD BY SUBSIDIARIES DECEMBER 31, 2012 (In Thousands, Except for Percentages and Shares)

Type and Issuer/Name of Issuer’s Relationship to December 31, 2012 Owner Accounts Recorded Note Marketable Security the Owner Shares (Units) Carrying Value Ownership Interest (%) Market Value Taishin Insurance Stock Agency Taishin Insurance Brokers Parent and subsidiary Investment under equity method 6,000,000.00 $ 76,871 100.00 $ - Chi-Long Technology Co., Ltd. None Financial assets carried at cost 950,000.00 4,275 4.13 - Taishin Dah An Stock Leasing Yuan Tai Foreign Exchange Co., Financial assets carried at cost - The chairman of the Corporation 600,000.00 6,000 5.00 - Ltd. noncurrent Bon-Li International Technology None 〃 125,000.00 - 1.50 - Co., Ltd. Funds Issued by Shin Kong Securities Shin Kong Chi-Shin Fund Financial assets at FVTPL - current 1,114,173.02 16,778 - 16,778 Investment Trust Taishin Ta-Chong Money Market Issued by Taishin Investment Trust 〃 1,015,302.10 14,002 - 14,002 Fund Taishin Real-Estate Stock Metro Consulting Service The supervisors of the Corporation Financial assets carried at cost 300,000.00 3,000 6.00 3,000

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, 2012 (In Thousands Except for Percentages and Shares)

Issuer’s Beginning of the Period Purchases Sales End of the Period Account Buyer or Type and Name of Transaction Relationship Recorded Shares Shares Shares Selling Carrying Disposal Shares Seller Marketable Security Party to the Buyer or Amount Amount Amount Seller (Units) (Units) (Units) Price Value Gain (Loss) (Units) Taishin Financial assets at Securities Taishin 1699 Bond Fund Related party 768,869.99 $ 10,000 995,222.93 $ 13,000 1,682,947.50 $ 22,020 $ 21,940 $ 80 81,145.42 $ 1,060 FVTPL Investment Taishin Trust Real-Estate Taishin Taishin Ta-Chong Money Financial assets at Securities Related party 731,759.10 10,000 728,735.50 10,000 1,460,494.60 20,082 20,000 82 - - Market Fund FVTPL Investment Trust

188 X. Notes To Financial Statements 10

189