2011 Annual Report Taishin International Bank Co., Ltd

Stock Code : L5848 Publication date : June 2012 Company website : http://www.taishinbank.com.tw Market Observation Post System website : http://newmops.tse.com.tw

2011 Annual Report Taishin International Bank Co., Ltd. 2011 Annual Report Annual 2011 Ltd. Co., Bank International Taishin 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 headquarter and branches Headquarter: 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,Sec1,Jianguo N. Rd.,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: Yang Qinzhen , 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 2011 Annual Report

Date I. Message to Shareholders 2 Rating of latest Ratings results Agency rating II. Brief Introduction to The Bank 5

Issuer L-Term BBB+ III. Corporate Governance Report 7 Issuer S-Term F2 Fitch Outlook Stable IV. Fund Raising Activities 58 Ratings 2011/12/09 Individual C Support 3 National L-Term AA- (twn) V. Business Status 70 National S-Term F1+ (twn) VI. Financial Status 91 Issuer L-Term BBB Taiwan Issuer S-Term A-2 VII. Review and Analysis of Financial Status Ratings 2011/12/08 Outlook Stable National L-Term twA+ and Business Performance and National S-Term twA-1 Risk-Management Evaluation 98

VIII. Special Notes 113

IX. Directory of Head Office & Branches 123

X. Notes to Financial Statements 129 1

I. Message to Shareholders

After experiencing a brief robust rebound in the wake of the global financial tsunami, the global economic growth rate slackened to 3.7% in 2011. Major reasons include downturn of the global economy, Japan’s strong earthquake, and the Thai flood, which impacted the operation of the global industrial chain. The U.S. sovereign credit rating was downgraded and the European-debt crisis spread, weakening demand in the U.S. and European markets which dampened export growth of Asian countries. In addition, to counter inflation, mainland China embraced tightening policy, putting a damper on business expansion. Due to these factors, most stock markets dropped by 10-25% in 2011, except Dow Jones Industrial Average which rose 5%.

Taiwan’s economy had a relatively stable performance. It scored over 5% in the first half but slid in the second half, due to global economic downturn, racking up 3.45% in the third quarter and 1.89% in the fourth quarter. The growth rate for the whole year is estimated at 4.04%. Foreign trade advanced 12.2% to US$589.9 billion, a record high, but the expansion began to slacken, along with global economic downturn. The Cabinet-level Council for Economic Planning and Development flashed a blue light, signifying sluggish economy, for four consecutive months from November 2011 to February 2012 for Taiwan’s economy. The Directorate General of Budget, Accounting, and Statistics (DGBAS) predicted that the economy would bottom out in the first quarter of 2012. Due to the effect, Taiex index dropped to 7,072 as of the end of 2011, down 21% from a year earlier.

Under global economic slowdown and financial turmoil triggered by European-debt crisis, it is a good timing for Taiwan’s financial industry to carry out financial reform, should it be able to take advantage of related niches. As of the end of 2011, the domestic banks racked up non-performing loan rate of 0.43%, bad-debt coverage rate of 252%, and BIS (Bank of International Settlement) ratio 12.08%, underscoring a financial strength which is the best in the past 10 years. The quality status constitutes a strong backup for domestic banks to expand their business, enabling them to tap overseas markets. In addition, Taiwan has signed cross-Taiwan Strait Economic Cooperation Framework Agreement, paving the way for domestic financial institutions to foray into mainland Chinese and emerging markets.

For mainland the mainland Chinese market, the government opened up various business items in 2011, including the establishment of finance leading firms and venture capital firms by companies with risk-management mechanism; undertaking of renminbi-related businesses by overseas branches and offshore banking units (OBU), which are conducive for domestic banks to tap renminbi-related business opportunities. In addition, the government is pushing financial businesses with cross-Strait characteristics, including cross-Strait currency clearance mechanism, renminbi wealth-management business, and online payment platform, which will further boost the flexibility for the development of financial business and expand the scope of customer service.

In business performance, the bank raked in after-tax profit of NT$7.739 billion in 2011, equivalent to NT$1.61 of earnings per share (EPS). BIS ratio reached 12.76% and first-category capital ratio 8.8%, underscoring excellent performance in both profits and capital structure. In their credit-rating report in December 2011, Fitch Rating and Taiwan Rating both maintained the credit rating of Taishin Bank unchanged.

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

2 Wholesale Banking Group

Following the launch of renminbi business by the Hong Kong branch in 2010, offshore banking unit (OBU) also rolled out renminbi business in November 2011, not only providing offshore enterprises individuals deposit/loan service but also enabling them to engage in flexible renminbi-fund maneuvering and fund-flow management, which cuts cost and risk for trade-related remittances. In addition, thanks to relaxation of regulations by the regulator, overseas branches and OBU are able to invest in securities in mainland China, boosting the business niches of the bank.

Under the simultaneous care of risk management and business development, the bank extended NT$190.7 billion of outstanding corporate loans, up 20% than a year earlier. In addition, in line with the government’s policy of financing small and medium enterprises, the bank extended NT$54.6 billion of outstanding loans to small and medium enterprises as of the end of 2011, up 19% over a year earlier, compared with 11% growth of other domestic banks.

The bank undertook NT$297.1 billion of factoring business in 2011, ranking third place in the market, and outstanding amount of US$34.6 billion for derivative contracts, ranking fourth place. It undertook stock-affair service for 182 listed firms, ranking fourth place.

For corporate information service, Taishin Bank obtained 2011 IDC corporate innovation award with its unified facility and risk management system (UFRMS), following its winning of the award with its image process management in 2010. UFRMS aims to achieve “automated risk management for credit-extension risk,” “upgraded credit-extension operating flow,” and “integrated management of customer information.” The purpose is to automate various corporate-banking businesses, including reception of loan applications, quota management, and risk warning. In addition to rapid duplication of quota-control operating flow, it can instantly and effectively control various product risks, so as to enhance overall service standard of the bank and its market competitiveness.

Retail Banking Group

As of the end of 2011, outstanding amount of retail housing procures (including book-value loans) reached NT$266.1 billion, for market share of 4.6%; outstanding auto loans amounting to NT$15.7 billion, for market share of 22.4%, ranking first place in the market. The number of credit cards in circulation reached 2.96 million cards, for market share of 9%, ranking third place, and annual credit-card spending value reached 147.6 billion, for market share of 8.8%, ranking fourth place. The number of merchants hit 46,000 stores, for market share of 16.8%, ranking third place.

In November 2011, Taishin Bank and Ever Rich Duty Free Shop jointly issue co-branded credit card, which offers the benefits of free parking at international airport and free usage of VIP rooms at international airports in Greater China. Services for infinite cards are further upgraded, such as cooperation with China Airlines for unlimited upgrading of flight seats for card holders. In 2011, the bank rolled out “business-class ticket upgrading for high- speed” rail for holders of Taishin’s infinite cards.

3 In 2011, Taishin Bank launched “oral instruction” service, which is available for deposits, fund withdrawal, and fund transfer at counters. According to the oral instructions of customers, banking staffers would produce trading certificates for confirmation by customers to complete the transactions. In 2011, Taishin Bank received the awards of “Taiwan’s best retail bank” and the “best direct marketing in Asia,” granted by Asian Banking & Finance, as well as the 2011 “excellent service award,” granted by Global View Monthly.

2012 is the bank’s 20th anniversary. Faced with the challenge in the new era, the bank is carrying out corporate restructuring, ascertaining the three functions of customer management, channel management, and product R&D, as well as the concentration of operations and risk management, in the hope of upgrading service quality and employee productivity, so as to strengthen financial competitiveness. Meanwhile, every employee of the bank will adhere to the spirit of dedication and the bank will aspire to become the most “dedicated bank.”

For the purpose, the bank invited this year Dong Yangzi, a master calligrapher in Taiwan, to write down the two Chinese characters “Renzhen (dedication)” at the headquarters building of Taishin Financial Holding, to remind all employees of the spirits of “innovation” and “dedication,” and of the corporate core values of “integrity, commitment, innovation, and cooperation” (ICIC). We also encourage employees to fulfill the 3S (simple, sincere, and superior) professional services, so as to win the acknowledgement of customers and create profits for shareholders.

Thomas T.L. Wu

Chairman

Taishin International Bank

4 2

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

Headquarter address: 1st, fl ., and 1st basement, No. 44, Zhongshan N. Rd., Sec. 2,Taipei City

Tel.: 886-2-2568-3988

Business units: 101 units, including 97 domestic and overseas branches (including Hong Kong branch), trust department, overseas department, offshore banking units (OBU), and representative’s 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 noted 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.

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

5 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 101 domestic and overseas branches, testifying to extensiveness of its service network.

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

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

6 3

III. Corporate Governance Report

A. Organization System

a. Organizational Chart

Base date: April.1, 2012

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 III.Corporate Governance Report

b. Responsibilities of the bank’s major units

1. Corporate Planning Division (1) In charge of strategic planning, execution and evaluation of major strategic projects. (2) In charge of capital planning of the bank, analysis and management of BIS ratio and each 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 consumer banking and corporate banking.

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

8 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. (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.

9 III.Corporate Governance Report

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 corporate-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 corporate-banking business goal and strategy plan. (2) Cross-unit integration and coordination. (3) Integration and perform management of budget goals of corporate 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 corporate-banking service system. (8) Credit risk control. (9) Formulation of related business regulations and operating flow.

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

16. Global Trade Finance 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 corporate banking. (2) Inspection and review of corporate-banking credit-extension cases, and the management of the asset quality of corporate-banking credit extension, overdue loan and collection.

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 consumer banking.

11 III.Corporate Governance Report

20. Financial Products Division (1) Operation, management, maintenance, development, and adjustment of consumer-banking insurance products. (2) Development and management of consumer-banking wealth-management products and maintenance of the competitive edge of the bank’s wealth-management products. (3) Management of various property trust business and 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 consumer-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. (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 consumer banking.

12 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 consumer banking. (4) Strategic planning and enforcement management for retail banking.

13 III.Corporate Governance Report

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

a. Board directors and supervisors

1. Information on board directors and supervisors Base date:March.31, 2012

Stake of spouse and offspring Shareholding in Current shareholding before age the name of others Spouse or relatives within second-degree Shareholding upon (including common and of majority (including common Current kinship who serve managerial posts or seats of Date election Date of preferred shares) and preferred jobs with of first (including board directors/ supervisors of the bank Title Name getting Term shares) Education and working experience the bank getting common and elected and other elected preferred shares) companies Share Share Amount Amount Share Amount of Amount of Share of of of of of of Title Name Relationship shares shares stake stake stake shares shares stake

Taishin Financial Holding Co., Ltd. Three 2002.01.28 Director, First Bank, Supervisor, Hua Nan Bank Director Jui-Sung, Kuo Brother-in-law Chairman 2010.06.18 4,915,752,571 100% 4,915,752,571 100% 0 0% 0 0% Note 1 Representative: Thomas T.L. Wu years 2002.01.28 MBA, University of California, LA Supervisor Long-Su, Lin Brother-in-law Director, International Bank of Taipei. Professor, department of information Taishin Financial Holding Co., Ltd. Three 2002.01.28 Chairman Thomas T.L. Wu Brother-in-law Director 2010.06.18 4,915,752,571 100% 4,915,752,571 100% 0 0% 0 0% science, Business School, Soochow University Note 2 Representative: Jui-Sung Kuo years 2008.06.13 Supervisor Long-Su, Lin Brother-in-law Ph.D. in Physics, New Hampshire University Taishin Financial Holding Co., Ltd. Three 2002.01.28 Chairman, Taiwan Cooperative Bank, Bank of Taiwan Director 2010.06.18 4,915,752,571 100% 4,915,752,571 100% 0 0% 0 0% Note 3 Nil Nil Nil Representative: Teh-Nan Hsu years 2008.08.14 Banking department, National Chengchi University Independent director, First Bank. Chief secretary of the Ministry of Finance. Taishin Financial Holding Co., Ltd. Three 2002.01.28 Director 2010.06.18 4,915,752,571 100% 4,915,752,571 100% 0 0% 0 0% Master, public administration, National Chengchi University. Note 4 Nil Nil Nil Representative: Richard R.C. Liu years 2011.07.01 Master of Economics, San Francisco University. Taishin Financial Holding Co., Ltd. Three 2002.01.28 Standing Supervisor, Taishin Financial Holdings, Taishin Bank Director 2010.06.18 4,915,752,571 100% 4,915,752,571 100% 0 0% 0 0% Note 5 Nil Nil Nil Representative:Chu-Chan Wang years 2002.01.28 Pharmaceutical department, Kaohsiung Medical college Taishin Financial Holding Co., Ltd. Three 2002.01.28 Supervisor, Taishin Bank. Chairman, NSEnergy Director 2010.06.18 4,915,752,571 100% 4,915,752,571 100% 0 0% 0 0% Note 6 Nil Nil Nil Representative: Shang-Pin Wu years 2002.01.28 PhD in Applied Chemistry, Keio University (Japan) Independent Taishin Financial Holding Co., Ltd. Three 2002.01.28 Minister of Ministry of Economic Affairs. Chairman of TRITRA 2010.06.18 4,915,752,571 100% 4,915,752,571 100% 0 0% 0 0% Note 7 Nil Nil Nil director Representative: Chih-Kang Wang years 2007.06.15 PhD in Marketing, Texas A&M University Chairman, Taiwan Power Co. Independent Taishin Financial Holding Co., Ltd. Three 2002.01.28 2010.06.18 4,915,752,571 100% 4,915,752,571 100% 0 0% 0 0% Dean, College of Management at National Taiwan University Note 8 Nil Nil Nil director Representative: Neng-Pai Lin years 2007.06.15 PhD in Business, Ohio State University Standing director, Bank of Taiwan Standing Taishin Financial Holding Co., Ltd. Three 2002.01.28 2010.06.18 4,915,752,571 100% 4,915,752,571 100% 0 0% 0 0% Director, graduate school of accounting, National Taiwan University. Note 9 Nil Nil Nil Supervisor Representative: Yang-Tzong Tsay years 2010.06.18 Doctor of business management and commerce, U. of Maryland Taishin Financial Holding Co., Ltd. Three 2002.01.28 Director, Taishin Financial Holdings, Taishin Bank. Chairman Thomas T.L. Wu Brother-in-law Supervisor 2010.06.18 4,915,752,571 100% 4,915,752,571 100% 0 0% 0 0% Note 10 Representative: Long-Su Lin years 2002.01.28 Ph.D. in Chemistry, Virginia State University, Director Jui-Sung, Kuo Brother-in-law Taishin Financial Holding Co., Ltd. Three 2002.01.28 Standing Supervisor, Taishin Financial Holding, Director, Chang Hwa Bank Supervisor 2010.06.18 4,915,752,571 100% 4,915,752,571 100% 0 0% 0 0% Note 11 Nil Nil Nil Representative:Toney Chen years 2006.08.24 Department of accounting, National cheng Chi University

Note 1: Representative Thomas Wu, is concurrently acting as Chairman of Taishin Financial Holdings, 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, Supervisor 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, Supervisor 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 Holdings, 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, Supervisor of Taiwan Shin Kong Security, Supervisor of SerComm, Supervisor of Chun-Hsiang Enterprise Consultants. Note 3: Representative Hsu, The-Nan, no other job at the bank and other companies. Note 4: Representative Richard R.C. Liu, no other job at the bank and other companies. Note 5: Representative Chu-Chan Wang, is concurrently acting as Chairman of Pan City Co., Chairman of Hsien-Shun Enterprise, Director of Santo Arden Co., Director of Taishin Financial Holdings, Supervisor of The Great Taipei Gas, Supervisor of Tai-Wa Co. Note 6: Representative Shang-Pin Wu, is concurrently acting as Chairman of NSEnergy, Director of TASCO Chemical, Director of EXCEL Chemical, Director of Ming-Xing Chemical, Director of Taiwan Fieldrich Co., Director of Da-Chan Investment Co., Director of Tai-Ho Technology, Director of Tai-Ho Investment, Director of Ho-Shin Co., Director of Tuntex Petrochemical Inc., Director of SAFEWAY GAS Co., Director of Grand Cathay Venture Capita, Director of Ho-Cheng Co., Director of Global Securities Finance, Director of Chang- Fong Transportation, Director of TNS Logistics International.

14 Base date:March.31, 2012

Note 7: Representative Chih-Kang Wang, is concurrently acting as Chairman of Taiwan External Trade Development Council, Chairman of Taipei Word Trade Center, Chairman of The Shiner Education Foundation, Independent director of Taishin Financial Holdings, Independent director of Nan Ya Plastics, Independent director of Formosa Sumco Technology, Director of Straits Exchange Foundation, Executive commissioner of General Association of Chinese Culture. Note 8: Neng-Pai Lin, is concurrently acting as Independent director of Taishin Financial Holdings, Independent director of Darfon Electronics, Independent director RDC Semiconductor,、 Director of TECO Image Systems Note 9: Representative Tsay, Yang-Tzon, also an independent director of Hua Nan Property Insurance, and E-Ton solar tech Standing Supervisor of Taishin Financial Holdings Co., and supervisor of Kingpak Technology, Speed Tech, and SZS and Supervisor of Coremax Corp. Note 10: Representative Long-Su Lin, is concurrently acting as Chairman of Ennead Inc., Chairman of Ennead Leasing, Chairman of Ennead Investment, Chairman of Shi-Hong Enterprise, Chairman of MiTAC Construction and Development, Chairman of Chun-Ying Interior Design, Director of Shin Kong Chao Feng, Director of Cheng Xin Development, Director of Shi- Hong Investment, Director of Nica-Orient Development, Director of Virgin Enterprise, Director of Gyu-Kaku, Director of Toms World Amusement, Director of International Advanced Music , Director of music dake, Director of Ennead Agriculture & Animal husbandry, Supervisor of Taishin Financial Holdings, Supervisor of Konig Foods, Supervisor of Tai-Li-Ya Development. Note 11: Representative Toney Chen is currently acting as Chairman of Taishin Leasing and Financing Co.,Ltd

15 III.Corporate Governance Report

2. Major shareholders of institutional shareholders

Base date:April.24, 2012

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

TPG NEWBRIDGE TAISHIN HOLDINGS Ｉ , LTD. 4.93% Cathay Life Insurance Co.,Ltd. 3.69% Taishin Leasing & Financing Co.,Ltd 2.65% Ching-Wei Co.,Ltd. 2.33% Taiwan Life Insurance Co.,Ltd 1.78% TAISHIN CO-INVESTOR HOLDINGS Ｉ , LTD. 1.62% Taishin Financial Holding Co., Ltd Pan City Co., Ltd 1.34% Vanguard Emerging Markets Stock Index Fund, A Series of Vanguard International Equity Index Funds. 1.24% Farglory Life Insurance Co., Ltd 1.21% TASCO Chemical Corporation 1.20%

3. Major shareholders of major institutional shareholders

Base date:April.24, 2012

Names of Institutional Shareholders Major Shareholders of Institutional Shareholders

TPG NEWBRIDGE TAISHIN HOLDINGS Ｉ , LTD TPG NEWBRIDGE TAISHIN Ｉ , L.P. 100%

Cathay Life Insurance Co.,Ltd Cathay Financial Holdings. 100%

Pan Asia Polymer 30.00%, Yun-De 24.50%, Jui-Sin Enterprise 19.00%, Jui-Siang Investment 5.50%, Jia-Jia Investment 4.93%, Taishin Leasing & Financing Co.,Ltd Jia-Jia Investment 4.20%, Tong-Rong Investment 4.20%, Chang- Sheng Investment 4.20%, Yuan-Sheng Investment 3.47%

Ching-Wei Co.,Ltd. Thomas T.L. Wu 96.58% , Peng, Hsueh-Fen 3.42%

Long Bon International 26.15%, Bank of Taiwan 18.94%, Bao-Sheng Investment 11.34%, BankTaiwan Life Insurance 2.66%,Discretionary account for Labor Pension Fundn 1.8%, Taiwan Life Insurance Co.,Ltd Kangchao Co., Ltd. 0.92%, Taiwan Fire and Marine Insurance 0.37%, Discretionary account for HSBC (Taiwan Bank) 0.28%,Sun Wen-Xiong 0.22%, JPMorgan Chase Bank N.A. Taipei Branch in custody for Norges Bank 0.21%,

TAISHIN CO-INVESTOR HOLDINGS Ｉ , LTD TAISHIN CO-INVESTOR A, L.P. 100%

Minyuan Enterprise, 49.2%, Fengpu Investment 47.4%. Wang Pan City Co., Ltd Wei-ren, 1.7%. Wang Wei-hao, 1.7%

Vanguard Emerging Markets Stock Index Fund, A Series of Not applicable Vanguard International Equity Index Funds

Far Eastern Construction, 13.76%, Xinyu Investment 13.02%, Yuanjian Investment, 9.82%, Ruiqi International Investment 7.56%, Harvard International Investment 7.4%, Farglory Farglory Life Insurance Co., Ltd International Investment 7.09%, Chao Tung-hsiung, 7.05%, Yeh Chun-yao, 6.57%, Chao Yu-nu, 6.36%, Tungyuan Construction, 6.21%.

Taiho Investment, 58.07%, Hocheng Investment, 19.55%, Fengho Development 9.11%, Tachan Investment, 1.61%, Hofeng TASCO Chemical Corporation Investment 1.03%, Fengho Investment 0.99%, Wu Cheng-ching, 0.99%, Wu Shang-pin, 0.99%, Wu Pei-chuan 0.95%, Wu Pei- jung, 0.93%.

16 4. Information on board directors and supervisors

Base date:March.31, 2012

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

17 III.Corporate Governance Report

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

Base date:March.31 , 2012

Stake of spouse Shareholding Spouse or relatives within and offspring Shareholding in the name of second-degree kinship who before age of Date of election others Major education Current jobs with other serve managerial posts Title Name majority (appointment) (experience) companies Amount Share Amount Share Amount Share of of of of of of Title Name Relationship shares Stake shares Stake shares Stake Chairman of Dah An President Leasing Chief Executive and Chief Director of Taishin Officer of Taishin Executive Venture Capital Larry Bank Officer, 2012/3/21 0 0 0 0 0 0 Investment, Taishin Chung Graduate School of Wholesale Financial Leasing Economics, National Banking (China) Co.,Ltd, Dah Taiwan University Group Chung Bills Finance Co and TAMCO Director of Taishin Holdings Insurance Chief Vice President of Brokers Co., Ltd, Executive First Trust Taishin Insurance Officer, Spike, 2011/1/21 0 0 0 0 0 0 Department of Brokers Co.,Ltd, Taishin Retail C.W. Wu Economics, National Securities, Taishin Banking Taiwan University Insurance Agency, Group Lienan Service, and Easy Card Corp. Vice President of Taishin Bank Department Chief Y.H. 2010/7/21 0 0 0 0 0 0 of Electronic Auditor Wang Engineering , National Taiwan University Chief Accounting Officer Vice President of Taishin Financial Nil Senior of Royal Bank of Ann Holding Co, Supervisor Vice 2010/8/13 0 0 0 0 0 0 Scotland Cheng of Taishin Marketing President MBA, University of Consultant and Taishin New Haven Securities. Chief Financial Senior Officer & Senior Senior Vice President Melody Vice 2009/7/1 0 0 0 0 0 0 Vice President of of Taishin Financial Chien President KBC. MBA, National Holdings. Chengchi University Vice President of China Development Senior Johnny Industrial Bank. Vice 2009/7/14 0 0 0 0 0 0 Liu MBA, Massachusetts President Institute of Technology Director of Taishin Senior Vice President Senior Investment Trust, of ChinaTrust Bank Vice Sam Lin 2008/12/11 0 0 0 0 0 0 Yungsheng Trade, and Master of Accounting, President Chinjui International Claremont McKenna Financial Consulting Senior Vice President Chairman of Taishin Senior of Taishin Bank Amy Marketing Consultant. Vice 2012/1/1 0 0 0 0 0 0 Department of Law, Hsia Director of PayEasy President Chinese Culture travel service Co.,Ltd University

18 Stake of spouse Shareholding Spouse or relatives within and offspring Shareholding in the name of second-degree kinship who before age of Date of election others Major education Current jobs with other serve managerial posts Title Name majority (appointment) (experience) companies Amount Share Amount Share Amount Share of of of of of of Title Name Relationship shares Stake shares Stake shares Stake Chairman of Taishin Insurance Agency President of Taishin and Taishin Insurance Senior Insurance Agency Brokers Vice Jack Su 2011/1/1 0 0 0 0 0 0 Department of BA, Director of Taishin President Soochow University Holdings Insurance Brokers and Taishin Marketing Consultant. Senior Vice President Senior of Bank of America William Vice 2006/12/17 0 0 0 0 0 0 Engineering, Yao President Shanghai Machinery College Senior Vice President Vice President of of Taishin Financial Senior Wilson Cosmos Bank Holdings Vice 2011/12/22 0 0 0 0 0 0 Chou MBA, University of Director of Taishin President Dallas Securities Investment Advisory Vice President of ABN AMRO Vice Min- 2011/3/1 0 0 0 0 0 0 MBA, University Of President HsingLiu Illinois at Urbana Champaign

Vice President of KGI Chief Risk Officer Vice The University Of Jey chen 2011/6/3 0 0 0 0 0 0 of Taishin Financial President Texas At Austin, Nil Holdings Doctor of Philosophy

Director of Taishin Venture Capital Vice President of Invertment and Taishin Taishin Bank Insurance Agency and Vice Shawn Department of Dah An Leasing and 2011/3/1 0 0 0 0 0 0 President C.L Teng Economics, National Taishin Investment Trust Chung Hsing and Taishin Holdings University Insurance Brokers. Supervisor of Taishin Asset Management Vice President of Vice Chao- Taishin Bank Vice President of Taishin 2011/4/1 0 0 0 0 0 0 President Min Lin Department of Law, Financial Holdings Soochow University Vice President of Taishin Bank Vice Jai, Lu- Vice President of Taishin 2011/9/23 0 0 0 0 0 0 Department of Law, President June Financial Holdings National Taiwan University Vice President of Taishin Financial Vice Patrick Holdings Vice President of Taishin 2012/3/1 0 0 0 0 0 0 President Ling Department of BA, Financial Holdings Fu Jen Catholic University

19 III.Corporate Governance Report

Vice President of Vice Bermuda Investment Helen Liu 2008/7/28 0 0 0 0 0 0 President MBA, University Of Wisconsin-Madison, Nil 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 Chen, Li- at Dallas, Master Supervisor of Taishin 2011/3/1 0 0 0 0 0 0 President Tzu of Science in Investment Trust Management and Administration Sciences Vice President of Vice Phyllis Taishin Bank 2011/6/3 0 0 0 0 0 0 President Wang MBA, Kansas State University Manager of United Overseas Bank Vice Christy 2012/3/16 0 0 0 0 0 0 Western Michigan President Shyy University, Master of Science in Accounting Vice President of Taishin Bank Vice Robin 2012/1/1 0 0 0 0 0 0 Department of President Shieh Accounting, National ChengChi University

20 Stake of spouse Shareholding Spouse or relatives within and offspring Shareholding in the name of second-degree kinship who before age of Date of election others Major education Current jobs with other serve managerial posts Title Name majority (appointment) (experience) companies Amount Share Amount Share Amount Share of of of of of of Title Name Relationship shares Stake shares Stake shares Stake Vice President of Taishin Bank Tsai, Vice University of Texas, Shang- 2012/1/1 0 0 0 0 0 0 President El Paso, U.S.A., Ming Master of Business Administration Senior Manager, Royal Bank of Vice John Canada, Taipei 2012/2/17 0 0 0 0 0 0 President Chiu Branch. MAB, University of Dallas, U.S.A. Vice President of Taishin Bank Vice Wu, 2011/6/23 0 0 0 0 0 0 Graduate school President Ching-Yi of Marketing, Meiji University Assistant Vice President of Taishin Assistant Chen, Bank Vice Chun- 2011/2/1 0 0 0 0 0 0 Department of President Hsiu BA ,MingChuan University Assistant Vice President of Taishin Assistant Chen Bank Vice 2008/7/11 0 0 0 0 0 0 Yun-Nien Department of BA, President National Taiwan Nil University Manager of Taishin Bank Branch Lin,Chia Department of 2012/2/24 0 0 0 0 0 0 Manager Chen Banking insurance, Lingtung Business College Manager of Taishin Bank Liu, Branch Department of Hung- 2012/1/1 0 0 0 0 0 0 Manager industrial engineering Shin management, United Industrial College Manager of Taishin Chou, Bank Branch Shih- 2012/1/1 0 0 0 0 0 0 Department of BA, Manager Hung National Chung Hsin University Manager of Taishin Chang, Bank Branch Chih- 2012/1/1 0 0 0 0 0 0 Department of Manager Chieh Finance, National ChengChi University Kuo, Manager of HSBC Branch Wen- 2012/1/1 0 0 0 0 0 0 Department of BA, Manager Hsiang Soochow University

21 III.Corporate Governance Report

Stake of spouse Shareholding Spouse or relatives within and offspring Shareholding in the name of second-degree kinship who before age of Date of election others Major education Current jobs with other serve managerial posts Title Name majority (appointment) (experience) companies Amount Share Amount Share Amount Share of of of of of of Title Name Relationship shares Stake shares Stake shares Stake Manager of Taishin Bank Branch Fan, Chi- Department of 2012/1/1 0 0 0 0 0 0 Manager Cheng Machinery engineering,Minhsin Industrial College Manager of Taishin Bank Department of Branch Chen,Yu- 2012/1/1 0 0 0 0 0 0 Financial, Southern Manager Ching Taiwan University of Science and Technology Manager of Taishin Lu, Bank Branch Chun- 2012/1/1 0 0 0 0 0 0 Department of Manager Hung Economics, Chinese Culture University Manager of Cheng, China Leasing Branch Chien- 2012/1/1 0 0 0 0 0 0 Department of BA, Manager Liang National ChungHsin University Manager of Taishin Bank Branch Su, Pei- 2012/1/1 0 0 0 0 0 0 Department of Manager Shi Economics, Soochow University Nil Manager of Taishin Bank Hsiang, Branch Department of Chao- 2012/1/1 0 0 0 0 0 0 Manager International Trade, Chia National Taiwan University Manager of Taishin Branch Chen, Bank 2011/12/9 0 0 0 0 0 0 Manager Shu-Hua Department of BA, Aletheia University Manager of Taishin Bank Branch Lu,Yuh- Department of 2011/9/1 0 0 0 0 0 0 Manager Pei Banking insurance, Taipei Business College Manager of Taishin Bank Wang, Department Branch Yuan- 2011/9/1 0 0 0 0 0 0 of Financial Manager Hao Management, National Central University Manager of Taishin Branch Huang, Bank 2011/8/26 0 0 0 0 0 0 Manager Po-Yu Department of Law, Soochow University

22 Stake of spouse Shareholding Spouse or relatives within and offspring Shareholding in the name of second-degree kinship who before age of Date of election others Major education Current jobs with other serve managerial posts Title Name majority (appointment) (experience) companies Amount Share Amount Share Amount Share of of of of of of Title Name Relationship shares Stake shares Stake shares Stake Manager of Taishin Bank Chiu, Department of Branch Hsiao- 2011/8/26 0 0 0 0 0 0 Accounting, Southern Manager Chuan Taiwan University of Science and Technology Manager of EnTie Bank Branch Tuan, Department of 2011/8/5 0 0 0 0 0 0 Manager Chi-Sun Cooperation Economics, FengChia University Manger of Taishin Bank Yeh Branch Department of ,Hsin- 2011/7/1 0 0 0 0 0 0 Manager International trade, Hung Lunghua Business College Manager of Taishin Branch Lin Tien- 2011/7/1 0 0 0 0 0 0 Bank Manager Hao Keelung Senior High Manager of Chinatrust. Branch Kuo, 2011/7/1 0 0 0 0 0 0 Department of BA, Manager Shu-Hui Fu Jen Catholic University Manager of Taishin Chang, Nil Branch Bank Yung- 2011/7/1 0 0 0 0 0 0 Manager Department of BA, Chieh FengChia University Manager of Taishin Branch Lee, Pai- Bank 2011/7/1 0 0 0 0 0 0 Manager Shih MBA, Chinese Culture University Manager of Taishin Chien Bank Branch Shih 2011/7/1 0 0 0 0 0 0 Department of Manager Yang Finance, Tamkang University Manager of Chinatrust Branch Weng, 2011/7/1 0 0 0 0 0 0 Department of Manager Shou-Te Finance, Tamkang University Manager of Taishin Peng, Bank Branch Ching- 2011/7/1 0 0 0 0 0 0 Department of Manager Ching BA, Chungyou TechnologyCollege Assistant Vice President, Taishin Chen, Branch Bank Fang- 2011/7/1 0 0 0 0 0 0 Manager Department of BA, Tzu National Open University

23 III.Corporate Governance Report

Stake of spouse Shareholding Spouse or relatives within and offspring Shareholding in the name of second-degree kinship who before age of Date of election others Major education Current jobs with other serve managerial posts Title Name majority (appointment) (experience) companies Amount Share Amount Share Amount Share of of of of of of Title Name Relationship shares Stake shares Stake shares Stake Manager of Taishin Bank Teng, Department of Branch Hui- 2011/7/1 0 0 0 0 0 0 international trade, Manager Ching Fuhsing Industrial and Commercial College Manger of Taishin Bank Hsu, Branch Chemical Ming- 2011/6/28 0 0 0 0 0 0 Manager Department of Chu engineering, Shude College Manager of Taishin Bank Department of Branch Li, I Shan 2011/6/10 0 0 0 0 0 0 finance and risk Manager management, Shude Technology University Manager of Taishin Bank Branch Cho, 2011/6/10 0 0 0 0 0 0 Department of BA, Manager Yu-Lin Taichung Business College Manager of Taishin Chang, Bank Branch Yu- 2011/6/10 0 0 0 0 0 0 Department of Manager Chang Mathematics, Nil Soochow University Manger of JihSun Branch Liu, Yuan Bank 2011/6/10 0 0 0 0 0 0 Manager -Liang Department of BA, Tamkang University Manager of Taishin Bank Branch Fai-Yean Department of 2011/4/18 0 0 0 0 0 0 Manager Yu Accounting and Statistics, Ming Chuan college Manager of Taishin Bank Branch Hung, 2011/4/18 0 0 0 0 0 0 Department of Manager Jui-Pei Finance, Shih Chien University Manager of Taishin Bank Chang, Branch Chemical Chih- 2011/4/1 0 0 0 0 0 0 Manager Department of Chiang engineering, Eastern College Manager of Taishin Bank Branch Wang, Yi 2011/4/1 0 0 0 0 0 0 Department of Manager Fang Fu Jen Catholic University

24 Stake of spouse Shareholding Spouse or relatives within and offspring Shareholding in the name of second-degree kinship who before age of Date of election others Major education Current jobs with other serve managerial posts Title Name majority (appointment) (experience) companies Amount Share Amount Share Amount Share of of of of of of Title Name Relationship shares Stake shares Stake shares Stake Manager of Taishin Bank Branch Gina Easter Michigan 2011/4/1 0 0 0 0 0 0 Manager Shen University, Master of Business Administration Assistant Vice President of Far Yeh, Branch Eastern Investment Chu- 2011/4/1 0 0 0 0 0 0 Manager Trust, Deutsche Chun Bank MBA, YuanZe University Manager of Taishin Bank Branch Cho, Yu- 2011/4/1 0 0 0 0 0 0 Department of Manager Fen Economics, Chinese Culture University Manager of Taishin Bank Chou, Branch Department Shu- 2011/4/1 0 0 0 0 0 0 Manager of Industrial Fang management, Tamsui College Manager of Taishin Branch Lai,Chi- Bank 2011/4/1 0 0 0 0 0 0 Manager Hsiang MBA, FengChia University

Assistant Vice Nil President, Tai, Branch ChinaTrust Feng- 2011/4/1 0 0 0 0 0 0 Manager Department of BA, Ching National Open University Manager of ChinaTrust Branch Lin, Yu- Department of 2011/4/1 0 0 0 0 0 0 Manager Wen foreign trade, Chiaokuang Business College Manager of Taishin Liu, Bank Branch Chao- 2011/1/1 0 0 0 0 0 0 Department of BA, Manager Peng Chinese Culture University Manager of Taishin Bank Branch Vodak 2011/1/1 0 0 0 0 0 0 General Commerce Manager Hsu Division, YuDah High School of Commerce Manager of Taishin Bank Chang, Graduate School Branch Chin- 2011/1/1 0 0 0 0 0 0 of International Manager Tang Economics, National Chung Cheng University

25 III.Corporate Governance Report

Stake of spouse Shareholding Spouse or relatives within and offspring Shareholding in the name of second-degree kinship who before age of Date of election others Major education Current jobs with other serve managerial posts Title Name majority (appointment) (experience) companies Amount Share Amount Share Amount Share of of of of of of Title Name Relationship shares Stake shares Stake shares Stake Manager of Taishin Tsao, Bank Branch Hung- 2010/11/1 0 0 0 0 0 0 Department of Manager Jung Tourism , Chinese Culture University Manager of Taishin Bank Chou, Branch Department Ming- 2010/10/1 0 0 0 0 0 0 Manager of Agricultural Hwa Economy, National Taiwan University Manager of Taishin Bank Branch Chen, 2010/9/1 0 0 0 0 0 0 Department of Manager Mei-Ju Statistics, Tamkang University Manager of Taishin Bank Department of Branch Li, Li- 2010/9/1 0 0 0 0 0 0 Accounting and Manager Hua Statistics, Hsing Wu Institute of Technology Manager of Taishin Branch Tseng, Bank 2010/9/1 0 0 0 0 0 0 Manager Yu-Nhng Department of BA, Soochow University Manager of TaChong Bank Nil Department Branch Sandy 2010/8/30 0 0 0 0 0 0 of Accounting Manager Wang and Statistics, MingChuan University Manager of Taishin Bank Branch Tung, 2010/8/1 0 0 0 0 0 0 Department of Manager Ling-Ling Economics, National Taiwan University Manager of ABN AMRO Lee, Branch Department of Chen- 2010/5/17 0 0 0 0 0 0 Manager Cooperation Yuan Economics, Tamkang University Manager of Taishin Bank Branch Chen, General Commerce 2010/4/16 0 0 0 0 0 0 Manager Yu-Ni Division, National ChuTung Senior High School Manager of Taishin Bank Branch Chang, Department of 2010/4/16 0 0 0 0 0 0 Manager Wei-Jye International Trade, Ta Hwa Institute of Technology

26 Stake of spouse Shareholding Spouse or relatives within and offspring Shareholding in the name of second-degree kinship who before age of Date of election others Major education Current jobs with other serve managerial posts Title Name majority (appointment) (experience) companies Amount Share Amount Share Amount Share of of of of of of Title Name Relationship shares Stake shares Stake shares Stake Assistant Vice President of Taishin Branch Chen, Bank 2010/3/19 0 0 0 0 0 0 Manager Ling-Yin Southern Ontario College, Ministry of Education Manager of Taishin Bank Department Branch Chang, of Industrial 2010/3/5 0 0 0 0 0 0 Manager Chin-Mei management department, Kaohsiung Business College Assistant Vice President of TaiNan Branch Wang, Securities 2010/2/1 0 0 0 0 0 0 Director of Yuya Co. Manager Kuan-Ta Department of Bank Insurance, FengChia University Manager of Taishin Branch Lin, Hsiu- Bank 2010/2/1 0 0 0 0 0 0 Manager Chuan MBA, YuanZe University Manager of Taishin Chang, Bank Branch Chun- 2010/2/1 0 0 0 0 0 0 Department of BA, Manager Min Chungyou Business Nil College Manger of Taishin Bank Branch Nelson Department of 2010/2/1 0 0 0 0 0 0 Manager Kuo International Trade ,Providence University Manager, Hsinchu 10th Credit Tseng, Branch Cooperative, Jui- 2009/10/1 0 0 0 0 0 0 Manager Accounting section, Chueh Hsinchu Kuangfu Senior High Manager of Taishin Bank Department of Financial Branch Hsieh, 2009/9/1 0 0 0 0 0 0 management, Manager Hsin-Hua National Kaohsiung First University of Science and Technology Manager of Taishin Bank Branch Steven, 2009/9/1 0 0 0 0 0 0 Department of Law, Manager Lin Fu Jen Catholic University

27 III.Corporate Governance Report

28 Stake of spouse Shareholding Spouse or relatives within and offspring Shareholding in the name of second-degree kinship who before age of Date of election others Major education Current jobs with other serve managerial posts Title Name majority (appointment) (experience) companies Amount Share Amount Share Amount Share of of of of of of Title Name Relationship shares Stake shares Stake shares Stake Manager of Taishin Bank He, Financial department, Branch Gung- 2008/11/14 0 0 0 0 0 0 National Kaohsiung Manager Hsiang First University of Science and Technology Manager of Taishin Bank Branch Cheng, 2008/9/1 0 0 0 0 0 0 Section of foreign Manager Mei-O trade, Taiwan Business College Manager of Taishin Bank Branch Yu,Ya- Department of 2008/6/1 0 0 0 0 0 0 Manager Fang foreign trade, Takming Business College Manager of Taishin Bank Branch Lee, Pei- 2008/4/25 0 0 0 0 0 0 Department of Manager Ming Law,Soochow University Manager of Taishin Bank Department of Branch Liu, Li- Financial, advanced 2008/4/25 0 0 0 0 0 0 Nil Manager Hung study school, Kaohsiung University of Applied Science and Technology Manager of Taishin Bank Branch Wang, 2008/4/25 0 0 0 0 0 0 Department of Manager Fu-Chu Finance, Aletheia University Manager of Taishin Bank Branch Shine 2008/4/25 0 0 0 0 0 0 Division of Finance, Manager Pan National Taipei College of Business Senior deputy manager, Hualien Business Bank, Branch Chuang, 2008/4/25 0 0 0 0 0 0 Department of Manager Pei-Jan electrical engineering department, Fuhsing Business College Manager of Taishin Bank Branch Huang, Department of 2008/4/25 0 0 0 0 0 0 Manager Yu-Fang Cooperation Economics, Tamkang University

29 III.Corporate Governance Report

Stake of spouse Shareholding Spouse or relatives within and offspring Shareholding in the name of second-degree kinship who before age of Date of election others Major education Current jobs with other serve managerial posts Title Name majority (appointment) (experience) companies Amount Share Amount Share Amount Share of of of of of of Title Name Relationship shares Stake shares Stake shares Stake Manager of Taishin Bank Branch Melody 2008/2/22 0 0 0 0 0 0 Department of Manager Wei Finance, Tamkang University Manager of Dah An Bank Branch Su, Yih- 2008/2/22 0 0 0 0 0 0 Department of Manager Chen English, Fu Jen Catholic University Manager of Taishin Bank Branch Vigena 2008/2/22 0 0 0 0 0 0 Business section, Manager Yang Nanshan Business School Manager of Taishin Chen, Bank Branch Ping- 2008/2/22 0 0 0 0 0 0 Department of Manager Chang Economics, Tamkang University Manager of United National Bank Branch Hsieh, 2008/2/22 0 0 0 0 0 0 Department of BA, Manager Hai-Feng National ChungHsing University Assistant Vice President of Taishin Nil Branch Lin, Mei- Bank 2008/2/22 0 0 0 0 0 0 Manager Chao Graduate School of Economics, National ChengChi University Manager of Taishin Bank Kao, Branch Department of Hua- 2007/12/28 0 0 0 0 0 0 Manager Accounting, National Lung ChungHsing University Vice President of UBS Branch Li,Kuo- The Bernard M. 2007/12/28 0 0 0 0 0 0 Manager Jen Baruch College, U.S.A., Master of Science Manager of Taishin Bank Branch Liu, Su- 2007/12/28 0 0 0 0 0 0 Department of Manager Hung Financial Tax, MeiHo colleague Manager of Taishin Bank Branch Grace 2007/11/2 0 0 0 0 0 0 Business section, Manager Chen Nanying Business School

30 Stake of spouse Shareholding Spouse or relatives within and offspring Shareholding in the name of second-degree kinship who before age of Date of election others Major education Current jobs with other serve managerial posts Title Name majority (appointment) (experience) companies Amount Share Amount Share Amount Share of of of of of of Title Name Relationship shares Stake shares Stake shares Stake Manager of Taishin Bank Branch Tsai, 2007/11/2 0 0 0 0 0 0 Department of Manager Mei-I BA, Far Eastern Technology College Manager of Taishin Chang,, Branch Bank Wen - 2007/11/2 0 0 0 0 0 0 Manager Department of BA, Cheng Tamkang University Assistant Vice President Accounting and Huang, Branch statistics section, Bao- 2007/10/12 0 0 0 0 0 0 Manager correspondence Huey Nil school, National Chengkung University Assistant Vice President of Taishin Chen, Branch Bank Chung- 2009/7/1 0 0 0 0 0 0 Manager Department of Min Economics, Fu Jen Catholic University Manager of Taishin Bank Branch Tsao, 2011/3/4 0 0 0 0 0 0 Department of Manager Shu-Ling Bank,National ChengChi University

31 III.Corporate Governance Report

c. Compensations for board directors, supervisors, president, and vice presidents

1. Compensations for board director (including independent directors)

Base date: Dec.31, 2011;Unit:NT$1,000

Compensations for directors Compensations for other jobs with the company Share of combination of Share of combination of Compensations from A, B, C, and D in after- A, B, C, D, E, F and G Compensation Job-leaving and Expense for business Salary, bonus, and Job-leaving and Amount of shares for distribution of earnings tax net profit Employee dividend-sharing (G) in after-tax net profit (A) retirement payment (B) execution (D) special allowance (E) retirement payment (F) employee warrants (H) (C)

All companies in Invested Title Name All All All All All All All All All The company the consolidated business companies companies companies companies companies companies companies companies companies financial statement The in the The in the The in the The in the The in the The in the The in the The in the The in the company consolidated company consolidated company consolidated company consolidated company consolidated company consolidated company consolidated company consolidated company consolidated financial financial financial financial financial financial financial Cash Stock Cash Stock financial financial statement statement statement statement statement statement statement dividend dividend dividend dividend statement statement

Chairman Thomas T.L. Wu

Director Chu-Chan Wang

Director Shang-Pin Wu

Sherman Lee Director (2011/7/1 relief of duty) Lin,Keh-hsiao (2011/2/1 Director new appointment 2011/8/11 22,422 22,605 0 0 0 0 5,909 6,026 0.37% 0.37% 0 0 0 0 0 0 0 0 0 0 0.37% 0.37% 81 relief of duty)

Director Teh-Nan Hsu

Director Jui-Sung Kuo

Richard R.C. Liu Director (2011/7/1 new appointment) Independent Chih-Kang Wang Director Independent Neng-Pai Lin Director

Note 1: Compensation for chauffeurs reaches NT$889,000 Note 2: No actual collection of job-leaving or retirement payment

32 c. Compensations for board directors, supervisors, president, and vice presidents

1. Compensations for board director (including independent directors)

Base date: Dec.31, 2011;Unit:NT$1,000

Chairman Thomas T.L. Wu

Director Chu-Chan Wang

Director Shang-Pin Wu

Director Teh-Nan Hsu

Director Jui-Sung Kuo

Richard R.C. Liu Director (2011/7/1 new appointment) Independent Chih-Kang Wang Director Independent Neng-Pai Lin Director

Note 1: Compensation for chauffeurs reaches NT$889,000 Note 2: No actual collection of job-leaving or retirement payment

33 III.Corporate Governance Report

Compensation brackets

Base date: Dec.31, 2011

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 / Under NT$2 M. Sherman Lee/Neng- Sherman Lee/Neng- Sherman Lee/Neng- Sherman Lee/Neng- Pai Lin / Jui-Sung Pai Lin / Jui-Sung Pai Lin / Jui-Sung Pai Lin / Jui-Sung Kuo/ Richard R.C. Kuo/ Richard R.C. Kuo/ Richard R.C. Kuo/ Richard R.C. Liu/ Lin, Keh-Hsiao Liu/ Lin, Keh-Hsiao Liu/ Lin, Keh-Hsiao Liu/ Lin, Keh-Hsiao

NT$2 M. (inclusive)-NT$5 M. (exclusive) Teh-Nan Hsu Teh-Nan Hsu Teh-Nan Hsu Teh-Nan Hsu

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 10 10 10 10

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, 2011;Unit:NT$1,000

Compensations for supervisors Share of combination of A, B, Job-leaving or Compensations Expense for business C and D in after-tax Compensation (A) retirement payment from distribution of execution (D) net profit (B) earnings (C) Compensations from invested Title Name All All All companies other All companies companies companies All companies in companies than subsidiaries in the The in the The in the The The the consolidated The in the consolidated company consolidated company consolidated company company financial company consolidated financial financial financial statement financial statement statement statement statement

Yang- Standing Tzong Supervisor Tsay Long-Su 108,000 108,000 0 0 0 0 1,070 1,070 0.15% 0.15% Nil Supervisor Lin Toney Supervisor 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.

34 Compensation brackets

Base date: Dec.31, 2011

Names of supervisors

Combined amount of (A+B+C+ D) Compensation brackets for the company’s supervisors All companies in the consolidated The company 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 M. (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 incomes for income tax law and the figures are mainly for information disclosure and cannot be used as the basis for taxation.

35 III.Corporate Governance Report

3. Compensation for president and vice presidents

Base date: Dec.31, 2011;Unit: NT$1,000

Share of the combined value of Job-leaving or retirement Salary, bonus and special Salary (A) Employee dividend-sharing (D) A, B, C, and D (%) in after-tax Amount of employee warrants payment (B) allowance (C) net profit All companies in the Name All companies All companies All companies Title The company consolidated financial All companies in All companies in Invested business in the in the in the The The The statement the consolidated the consolidated consolidated consolidated consolidated The company The company company company company financial financial financial financial financial Cash Stock Stock Cash dividend statement statement statement statement statement dividend dividend dividend

President Justin Tsai (2011/12/1 relief of duty) Chief Executive Officer, Spike Wu Retail Banking Group Chief Auditor YH Wang Senior Vice President Loofei Huang (2011/6/3 relief of duty) Vice President Jey Chen (2011/6/3 new appointment) Senior Vice President Ann Cheng Vice President Shawn C.L Teng Welch Lin(2011/3/1 new appointment, Senior Vice President 2011/12/22 relief of duty) Wilson Chou(2011/12/22 new Senior Vice President appointment) Vice President Chao-Min Lin Vice President Jai, Lu-June (2011/3/1 new appointment) Vice President Patrick Ling Vice President Chris Chang Senior Vice President Ena Swei (2011/6/3 relief of duty) Vice President Jospehine Yang Vice President David Chang Senior Vice President Melody Chien Senior Vice President Larry Chung 96,041 100,281 1,419 1,419 109,085 109,919 0 0 0 0 2.67% 2.75% 0 0 562 Vice President Sam Chiang Vice President Monling Lee(2011/3/1 relief of duty) Vice President Min-Hsing Liu Vice President Helen Liu Senior Vice President Johnny Liu Vice President Charles Shieh Senior Vice President Sam Lin Vice President Jerry Yang Vice President Peter Tseng (2011/3/1 relief of duty) Vice President Ada Chen Senior Vice President Amy Hsia Senior Vice President Jack Su Senior Vice President Minna Chou (2011/9/27 relief of duty) Vice President Brenda Huang Vice President Phyllis Wang Christy Shyy (2011/9/16 new Vice President appointment) Vice President Alex Chang (2011/7/15 relief of duty) Senior Vice President William Yao

Note 1: Compensation for chauffeurs reaches NT$5,424,000 Note 2: No actual collection of job-leaving or retirement payment; the appropriation or provisions for job-leaving or retirement funds reached NT$1,419,000

36 3. Compensation for president and vice presidents

Base date: Dec.31, 2011;Unit: NT$1,000

37 III.Corporate Governance Report

Compensation brackets

Base date: Dec.31,2011

Names of president and vice president Compensations brackets for All companies in the consolidated financial presidents and vice presidents The company statement Loofei Huang/ Ann Cheng/ Welch Lin/ Patrick Loofei Huang/ Ann Cheng/ Welch Lin/ Patrick Under NT$2 M. Ling/ Monling Lee/ Peter Tseng/ Wilson Chou Ling/ Monling Lee/ Peter Tseng/ Wilson Chou YH Wang/ Jey Chen/ Chao-Min,Lin/ Jai, YH Wang/ Jey Chen/ Chao-Min,Lin/ Jai, Lu- Lu-June / Ena Swei/ Min-Hsing Liu/Helen NT$2 M.(inclusive)-NT$5 M. (exclusive) June / Ena Swei/ Min-Hsing Liu/Helen Liu/ Ada Liu/ Ada Chen/ Minna Chou/ Phyllis Wang/ Chen/ Minna Chou/ Phyllis Wang/ Christy Shyy Christy Shyy Justin Tsai/ Shawn C.L Teng/ Chris Chang/ Justin Tsai/ Shawn C.L Teng/ Chris Chang/ Josephine Yang/ David Chang/ Sam Chiang/ Josephine Yang/ David Chang/ Sam Chiang/ NT$5 M. (inclusive)-NT$10 M. (exclusive) Charles Shieh/ Jerry Yang/ Amy Hsia/ Jack Su/ Charles Shieh/ Jerry Yang/ Amy Hsia/ Jack Brenda Huang/ Alex Chang Su/ Brenda Huang/ Alex Chang Spike Wu/ Melody Chien/Larry Chung/ Johnny Spike Wu/ Melody Chien/Larry Chung/ NT$10 M. (inclusive)-NT$15 M. (exclusive) Liu/ Sam Lin Johnny Liu/ Sam Lin NT$15 M. (inclusive)-NT$30 M. (exclusive) William Yao William Yao

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

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

Over NT$100 M.

Total 36 36

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 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%. In 2010, total compensations for directors, supervisors, president, and vice presidents accounted for 3.24% of the after-tax net profit and the share listed in the consolidated financial statement was 3.22%. 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. 38 C. Status of Corporate Governance

a. Information on the operation of the board of directors

In the recent fiscal year, the board of directors convened 50 times and status of attendance by directors and supervisors follows:

Actual number Number of Actual rate of Title Name Note of attendance attendance by proxy attendance (%) Taishin Financial Holding Chairman 40 10 80.00% Representative: Thomas T.L. Wu Taishin Financial Holding Director 44 6 88.00% Representative: Jui-Sung Kuo Taishin Financial Holding Director 49 1 98.00% Representative: Teh-Nan Hsu Director Taishin Financial Holding Succeeded by Richard R.C. 16 8 66.67% (already left the post) Representative: Sherman Lee Liu on July 1, 2011. Taishin Financial Holding Director 26 0 100.00% Appointment on July.1, 2011 Representative: Richard R.C. Liu Taishin Financial Holding Director 45 5 90.00% Representative: Chu-Chan Wang Taishin Financial Holding Director 44 6 88.00% Representative: Shang-Pin Wu Appointment on February. Director Taishin Financial Holding 24 2 92.31% 1,2011; Dismissal on (already left the post) Representative: Lin, Keh-Hsiao August.12, 2011 Taishin Financial Holding Independent director 34 15 68.00% Representative: Chih-Kang Wang Taishin Financial Holding Independent director 46 3 92.00% Representative: Neng-Pai Lin Taishin Financial Holding Standing Supervisor 45 0 90.00% Representative: Tsay, Yang-Tzong Taishin Financial Holding Supervisor 13 0 26.00% Representative: Long-Su Lin Taishin Financial Holding Supervisor 49 0 98.00% 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.

39 III.Corporate Governance Report

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

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

2. 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.

40 3. Participation of supervisors in the operation of the board of directors. In the recent fiscal year the board of directors convened 50 times and status of attendance:

Actual number of Title Name Attendance rate (%) Note attendance

Standing Taishin Financial Holding 45 90.00% supervisor Representative: Tsay, Yang-Tzong

Taishin Financial Holding Supervisor 13 26.00% Representative: Long-Su Lin

Taishin Financial Holding Supervisor 49 98.00% 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). 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

41 III.Corporate Governance Report

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

Deviation from the guidelines of the Items Operating status practical corporate governance of the banking industry and reasons

1. Makeup of the bank’s shareholdings and (1) The bank has only one shareholder, Taishin (1) No deviation shareholders’ interest Financial Holding, whose stock-affairs unit handles (2) No deviation (1) The way the bank handles shareholders’ suggestion or disputes and makes (3) No deviation suggestions or disputes of necessary disclosures on its website as a channel shareholders. of communications with shareholders. (2) Grasp by the bank of the list of the (2) The bank has only one shareholder, Taishin bank’s major shareholders and Financial Holding, which owns 100% stake in the the ultimate controllers of major bank. shareholders. (3) The bank’s Risk Management Division is in charge (3) Risk management mechanism and of establishing the bank’s risk-management policy firewall vis-a-vis affiliates. 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 (1) The bank instituted two seats of independent board (1) No deviation of directors directors in 2007. (2) No deviation (1) The institution of independent board (2) The bank will evaluate the independence of certified directors by the bank. public accountants before signing the letter of (2) Periodic evaluation of the entrustment with them every year. independence of certified public accountants. 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 disclosed finance and business (1) The bank has installed corporate information on its website and undertaken the (1) No deviation website for the disclosure of the disclosure of major information and the application (2) No deviation company’s finance and corporate for online information publication. governance. (2) The bank conducts major information disclosure (2) The bank has also embraced other and application for online information publication information-disclosure methods and implements spokesman’s system, according to (such as the installation of English- the regulations of the Securities Transaction Law. language websites, the designation of staffers to handle information collection and disclosure, the implementation of spokesman’s system, and the posting of the videotaped process of investor conference on the website. 5. The institution and operation of (1) Taishin Financial Holding established salary and No deviation nomination or compensate committee compensations committee on Sept. 22, 2011, The existing “guidelines for the corporate according to related measures. governance of the banking industry” (2) According to the organizational charter of the doesn’t mandate the institution of the salary and compensations committee of Taishin committee and the bank will evaluate Financial Holding, the committee is in charge of the feasibility of its institution at proper screening the compensations policy of its subsidiary time. Taishin Bank. The committee will screen the policy, system, standards, and structure of salaries and compensations of the directors, supervisors, and managerial staffers of Taishin Bank. 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.

42 Deviation from the guidelines of the Items Operating status practical corporate governance of the banking industry and reasons

7. Other major information conducive to the understanding of the Bank's corporate governance (such as employee rights ,caring of employees ,investors relationship, stakeholder right ,the advanced study of directors and supervisors, attendance of the meetings of the board of directors by directors and supervisors , the execution of risk management policy and risk evaluation criteria, the execution of consumer protection and customer policy , and the avoidance of cases by board directors with related interest, and the taking out of liability insurance for directors and supervisors): (1) The bank has 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 ofTaiwan Stock Exchange according to the requirement. (2) The bank’s board directors and supervisors have avoided cases with related interests according to regulations. (3) The bank has instituted an independent risk-management unit and invested considerable resources in the establishment of risk- management mechanism, in order to implement risk-management policy and manage the bank’s overall credit, market, and operating risks according to a set method and set extent. (4) The bank properly handles customer complaints to uphold consumer interests. (5) The bank has taken out liability insurance for board directors and supervisors. 8. Description of results and major 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 Items Operating Status guidelines for the social responsibilities and reason

1. Implementation of corporate governance (1) The bank doesn’t establish set up a specialized unit for Not applicable (1) Banks formulate corporate social- pushing social-responsibility policy or system but various responsibility policy or system, units of the bank have been fulfilling corporate social and review the status of its responsibility, as description in the following table. implementation effect. (2) The bank has entrusted Taiwan Corporate Governance (2) Status of banks pushing social Association to organize classes and directors and responsibility via specialized or part- supervisors have complied with the requirement for time units. sufficient amount of class attendance. The bank has posted (3) Banks regularly hold education, the situation on the website of Taiwan Stock Exchange. trading, and promotion of corporate ethics for directors, supervisors, and employees, incorporate the events into the performance evaluation system for employees, and set up clear and effective rewarding and punitive system.

43 III.Corporate Governance Report

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

2. Development of sustainable environment (1) In its formal organizational structure, the bank has set up Not applicable (1) Banks dedicate to enhancing the labor security and sanitation section, which adheres to utilization efficiency for various the concept of “the premise for safety of environmental resources and utilized recycled design and priority of precautionary measures,” in order to products to lower the impact on the create a sanitary, safe, and healthy environment for Taishin environment. Bank. The labor security and sanitation section is in charge (2) Banks establish environmental of various tasks, including pushing of tobacco-hazard management system suited to their prevention law and maintenance of the quality of working industrial features. environment via semiannual inspection of operating (3) Set up specialized environmental environment. management unit or personnel for (2) For environmental protection and anti-global warming, the upholding of environment. Taishin Bank has dedicated to the environmental protection (4) Banks notice the effect of climate and energy conservation. During summertime, it pushes change on operation and formulate “Cool Biz” event, asking employees to shed garment the strategy for carbon abatement during office time and set air-conditioning temperature at and reduction of greenhouse gases. 26 Celsius degrees. In line with the measures of Taiwan power, 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 t 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. Uphold public benefits (1) The bank’s working rules have been approved by Not applicable (1) Banks comply with related labor the regulator and publicized. The personnel rules are laws/regulations, protect employee’s formulated according to the regulations of labor laws/ legal rights, and establish proper decrees, for the purpose of protecting the labor rights of management method and procedure. employees. Install employee-relationship mail box and (2) Banks provide employees a secure dedicated lines for employee care, so as provide internal and healthy workplace and conduct channel for employees to file their complaints and protect regular security and health education the privacy of employees. for employees. (2) The bank provide employees a safe and healthy working (3) Banks formulate and publicize environment, and carries out regular safety and health consumer right policy and provide education. transparent and effective consumer (3) The bank has disclosed related inquiry and service phone complaint procedure for its products numbers at its corporate website, enabling consumers and services. to reflect any problem concerning the bank’s products or (4) Banks cooperate with suppliers services. Related inquiry and service phone numbers: in fulfilling corporate social (a) Dedicated around-the-clock customer service line: responsibilities. (02)2655-3355 (5) Banks take part in events related to (b) Dedicated customer complaint line: (02)2700-3166 community development and charity/ (4) For the selection of suppliers and public bidding for various public benefit groups via commercial procurements, the bank follows the “measures governing activities, physical donation, procurement and supplier management,” so as to assure corporate volunteer service, and products have stable quality and meet the requirements. other free professional services. Suppliers meeting the conditions can undertake evaluation and register as the bank’s qualified suppliers to provide services or products to the bank. (5) 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.

4. Intensified information disclosure (1) The bank is a company with public share offering (stock (1) Method of the bank for disclosing code No. L5848), discloses its latest information on information related to relevant the Market Observation Post System of Taiwan Stock and reliable corporate social Exchange, and regularly files report on related financial responsibility. figures. (2) Bank compiles the book of corporate (2) The bank also regularly updates information on its website social responsibility to disclose according to legal requirement, so that customers can learn the satus of corporate social of the bank’s business performance via online inquiry. responsibility. The bank’s website is at http://www.taishinbank.com.tw/

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

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 theTaipei 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 ofTaipower, 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 – Taishin Charity Foundation 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. The first such event attracted the participation of 204 social-welfare groups, which jumped to 307 for the second event. A number of other public-service partners, such as Franz Collection, Advantech Foundation, and Chunghwa Telecom Foundation, also joined the event and the scope of donation recipients were expanded to culture and education, and digital learning. In addition, Taishin executives, colleagues, Yani Tseng, the world’s female golf champion, and other local people also donated to the foundation, boosting its scale from NT$4.3 million to over NT$10 million, with the number of recipient groups expanded from 31 to 64. Besides, Taishin Bank Public Service and Charity Foundation held the first exhibition for its achievements in 2011 and produced three- minute documentary for introducing each of the first recipient groups, so as help them face the public and solicit even more support from the latter. (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. 2011 marked the ninth 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, the world’s female golfing champion, the first Taiwanese financial institution to do so. 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

Note: Unlisted banks need not fill the the column “deviation from the guidelines for corporate social responsibilities of listed companies and reason.” g. Status of the company in fulfilling management of integrity and measures Since its establishment, the company has been dedicating to the commitment of continuous innovation, in order to achieve the financial success of consumers and shareholders and make Taishin the cash cow for customers. 1. The company materializes the management policy of integrity and adheres to the core values of “integrity, commitment, innovation, and cooperation.” It formulates “criteria for employee behaviors,” to prevent dishonest behaviors of employees and manifests their duty and obligation for informing. The criteria of employee behaviors include:

45 III.Corporate Governance Report

(1) Norm for work ethic: Formulate guidelines for employees in exercising their duties, for compliance by employees. (2) Maintenance of employee relationship: Maintain the privacy of employees, healthy working environment, and equal working environment. (3) 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. (4) Norm on gift and treatment: Employees should not receive finance or improper benefits with no or improper rewards. (5) Maintenance of client privacy: Employees should abide by operating procedure in exercising their duties and properly keep and maintain customers’ information. (6) Business information and maintenance of business secret: Employees should uphold the business secret, trademark, copyright, patent, and other intellectual properties. (7) Fair trade: Employees should not solicit clients with improper marketing method. (8) Anti-money laundering: Disclose regulations related to the prevention of money laundering and actively report related incidents. (9) Informing duty and obligation: Provide employees informing channel and protect informants. 2. The company periodically provides directors, supervisors, managerial staffers, employees, and actual controllers training courses on corporate governance, trend of financial market, legal norm, and countermeasures for corporate risks, so as to materialize the management policy of integrity. Meanwhile, to integrate the management policy of integrity and management strategy for human resources, the company incorporates the indictors of legal compliance in management, information of major abnormal incidents, business auditing, and financial status into the contents for performance evaluation.

3. Setup of legal compliance division

According to the internal control auditing system of the financial holding company and the bank, the company has established the system of chief for legal compliance and set up the division of legal compliance, which is in charge of the planning, management, and execution for the system of chief for legal compliance. The chief should report affairs concerning legal compliance to the board of directors and supervisors at least once semiannually. In addition, the company designates chiefs for legal compliance at various units and branches for engaging in the promotion of financial laws/regulations and criteria for behaviors related to the management of integrity. The arrangement will facilitates the conducting of financial transactions in a fair and transparent manner and assure managerial staffers can abide by laws/regulations in the execution of their duties.

4. Establish an effective accounting and internal-control system (1) Accounting system The company’s accounting system follows “commercial accounting law,” “guidelines for the compilation of financial statement of securities issuers,” “guidelines for the compilation of banks with public share offering,” and common accounting criteria, as well as “sample for banking

46 industry’s accounting system” issued by Bankers Association. It features faithful and complete chronicling of the company’s various operations, effectively manifests the function of international subversion, and mirror the company’s financial status and management results, so that it can serve as a reference for decision making. (2) Internal control system The company’s internal control system follows article 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. h. Banks with corporate-governance guidelines and related regulations must disclose their methods for inquiry

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

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

47 III.Corporate Governance Report

j. Status of the execution of internal control

1. Statement of internal control

Statement for the Internal-Control System of Taishin International Bank We hereby declare, on behalf of Taishin International Bank, that the bank did set up internal control system, carry out risk management, and have an independent auditing department undertake auditing works with the results being reported to the board of directors and supervisors regularly, in compliance with “enforcement measures for internal control and auditing systems of banks,” during the period from January 1, 2011 to December 31, 2011. 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 effectivenessof 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

March.15,2012

48 Items needing improvement in the internal control system of Taishin Bank and improvement plan

Base date: Dec. 31, 2011

Schedule for completing the Items needing improvement Improvement measures improvement

1. Management of compliance with law/regulation Revised related business management norm and organize Improvement completed. on marketing of insurance products. training courses, to strengthen legal compliance by employees.

2. Operating flow and security control for surrogate Revised operating flow and security control mechanism for Improvement completed. fund collection at counters. surrogate fund collection at counters.

3. Management of outsourcing work for document Revised operating mode and execution procedure for Improvement completed. destruction. outsourcing the destruction of documents.

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 Deloitte & Touche Taiwan

March 8, 2012

49 III.Corporate Governance Report

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

Disclosure items Cases and values Status of improvement

1. Indictment of executives When serving at Taiwan Securities Co., Ltd., former staffer Leng Leng already left the job from Taishin Bank on or staffers by prosecutors was indicted by the prosecutors of Taiwan Shilin district court Sept. 1, 2010. On Jan. 20, 2012, the Financial for job-related crimes on June 16, 2011 for violating Securities Transaction Law in Supervisory Commission order the bank to underwriting the stocks of a hi-tech company,. dismiss Leng for violation of securities 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 (1) The FSC inflicted a fine of NT$500,000 on the bank for Already reviewed and adjusted the management Supervisory Commission providing data on the deposits and loans of customers mechanism for the use of customer information (FSC) for violation of without their agreement to the financial holding companies for joint marketing. laws/regulations and subsidiaries for the purpose of joint marketing (FSC, No. 09900053443, July 6, 2010).

(2) The FSC inflicted fine of NT$2 million on the company for Already formulated management mechanism and engaging in transactions other than credit extension with operating flow for related transactions requiring parties specified in item 1, article 45, Financial Holding the submission of such transactions to the board Company Law without obtaining the approval of the board of of directors for approval in advance. directors in advance (FSC, No. 09960004101, Aug. 11, 2010).

(3) The FSC inflicted NT$500,000 of fine on the company No need of related debtor with associated for requiring co-issuer of promissory notes for auto loans liabilities for loans already secured by sufficient already secured sufficient chattel as collateral (FSC, No. chattel as collateral. 09900177531, Aug. 17, 2010).

(4) The FSC inflicted a fine of NT$6 million on the company and Already revised the bank’s measures governing suspended some businesses of the company as the following the management of subsidiaries and required for improper management of its subsidiary Taishin Insurance the subsidiary to revise its corporate charter and Agency (FSC, No. 09800575551, Aug. 27, 2010): measures governing authorization of expenses (a) Suspend application for investments specified in article 74, and outlays, so as to maintain the operation of an Banking Law, for one year, excluding ongoing investments effective and proper internal control system. already approved by the FSC. (b) Forbid mutual utilization of customer information with Taishin Insurance Agency and Taiwan Insurance Brokers, according to article 10, “measures governing joint marketing among subsidiaries of financial holding company.” (c) Stop signing new cooperative promotional contract or continued contract with Taishin Insurance Agency and Taishin Insurance Brokers according to “regulations on cooperation between banks, securities firms, and insurance firms for pushing products of other lines or providing related services.” (d) The restrictions of (2) and (3) can be removed only after the bank has owned 100% shares Taishin Insurance Agency and obtained the acknowledge of the FSC for rectifying related defects.

3. Defects severely rectified Nil by FSC

50 Disclosure items Cases and values Status of improvement

4. Penalties inflicted by FSC (1) Dismiss legal specialist Chen for embezzling provisions of (1) Collection of the guaranteed fund for court for violating item 1, article guaranteed fund for court provisional seizure under the order provisional seizure can be conducted only in 61, Banking Law of the FSC (FSC, No. 09900086771, April 6, 2010). the form of registered negotiable instruments payable to Taishin International bank or remittance, rather than cash. (2) regular rotation of persons in charge and cases undertaken, avoid monopoly of cases by the same person over a long term, to avoid irregularities. (3) regular check with the court in charge or custodian of provisions for long-term uncollected guaranteed fund, to ascertain the status the guaranteed fund for court provisional seizure and the progress of the case.

(2) The FSC rectified the bank for incident, in which the deposit (1) Add an text-message function for transaction of the bank’s customer was withdrawn by a staffer of a with accumulated value exceeding NT$10 securities firm with fake chop under the order of the FSC (FSC, million (inclusive). No. 09900235471, August 9, 2010). (2) Add a phone-confirming function for transactions of deposit withdrawal or transfer exceeding NT$10 million (inclusive) in accumulated value in one week.

(3) Inflicted NT$6 million and suspended some businesses for Similar to B-4. inadequate management of subsidiary Taishin Insurance Agency (similar to B-4).

(4) Bank officials contact offshore insurance agents in private Already revised related business regulation and for arranging seminars, a move which was rectified by the held educational training program to strengthen Financial Supervisory Commission (FSC, No. 10000032740, employee to follow the law compliance. May 9, 2011).

(5) Clerk Yieh embezzled funds of surrogated collection, which Already rectified the operating flow and security was rectified by the FSC with an order for the dismissal of control mechanism for surrogate fund collection at Yieh’s job (FSC, No. 10000331690, Nov 1, 2011). counters.

(6) The FSC rectified the mistake for outsourcing the destruction Already revised the operating mode and of documents (FSC, No. 10000371210, Dec. 9, 2011). execution procedure for outsourcing work for the destruction of documents.

5. Irregularities causing over Nil NT$50 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

6. Other items designated Nil by FSC for mandatory disclosure

51 III.Corporate Governance Report

l. Major resolutions of the shareholder’s meeting and the board of directors in the recent year and as of the date of the publication of the annual report. 2011.01.13 Approval of setting Jan. 22, 2011 as the base date for the merger of the bank and Taishin Bills Finance. 2011.02.24 Passage for the establishment of first-tier management unit Compliance Division and revision of organizational chart. 2011.03.24 Passage of the move of Minzu branch to 1-4 fl., No. 91, Wenxin Road, Section 2, Taichung City, which was renamed “City Hall Branch”. 2011.03.31 Passage of the move of Donggang branch to 1-2 fl., No. 23,25, Baoqiang Road, Xindian district, New Taipei city, which was renamed “North Xindian branch”. 2011.03.31 Passage of Lin, Chao-Min as compliance officer. 2011.05.05 Passage of the application for the setup of Singapore branch and Jesse Han as the assistant vice general manager and chief for the preparation office of the branch. 2011.06.02 Passage of employment of Jey Chen as the chief of the company’s risk management division. 2011.06.16 Passage of the acknowledgement of the company’s 2010 business report, earnings allocation, financial statement, and consolidated financial statement. 2011.06.16 Passage of assigning June 30, 2011 as the effective date for allocating 2010 earnings. 2011.07.07 Passage of participation in subscribing to the first unsecured convertible corporate bonds floated by Taiwan Hon Chuan Enterprise. 2011.07.14 Passage of the appointment of Spike Wu, as chief executive officer and chief of customer relationship division. 2011.07.21 Passage of the change of the address of Zhubei branch as 1fl.-4 fl, No. 331, Zhongzheng E. Road, Zhubei City, Hsinchu County. 2011.08.04 Passage of the appointment of Tai Kuo-ming, vice president, as the chief of capital market division. 2011.08.11 Passage of the change of the address of Wufu branch as basement 1, 1-2 fl., No. 116, Wufu Second Road, Xinxing District, Kaohsiung City. 2011.08.11 Passage of revision of article 6-3, article 17, article 32, article 44 of corporate charter, and addition of article 37-1. 2011.08.25 Passage of initiating “foreign-currency portfolio products, including option linking foreign- currency time deposit with foreign-currency interest rate, swap of foreign-currency interest rate, option for foreign-currency interest swap, and option for foreign-currency exchange rate”. 2011.09.01 Passage of continuing employment of Oliver Wyman Pte. Ltd. as consultant to strategic retail-banking project for three years. 2011.09.08 Passage of moving “county hall branch” to B1-2, No. 168, 1fl., No 166, Daxing West Road, Sec. 1, Taoyuan City, which was renamed “north Taoyuan branch”. 2011.09.08 Passage of applying for the initiation of “gold account business”.

52 2011.09.29 Passage of Spike Wu as chief executive officer and chief retail and wealth management channel division. 2011.10.06 Passage of apply for initiating “combination products of NT-dollar time deposits linking foreign commodity price/index option”. 2011.10.13 Passage of purchasing 200,000 common shares of Dah An Leasing, thereby making Dah An the company’s 100%-owned subsidiary. 2011.11.17 Passage of appointing Larry Chung, chief executive officer, as acting president (Justin Tsai resigned the pose from Dec. 1, 2011). 2011.12.22 Passage of changing first-tier (division level) management units and revising organizational charter, effective Jan. 1, 2012. 2011.12.22 Passage of appointing Amy Hsia, senior vice president, as chief of payment service division, and Jack Su, senior vice president, as chief of consumer finance division. 2011.12.22 Passage of appointing Wilson Chou as chief of corporate planning division. 2012.01.05 Passage upgrading representative’s office in Ho Chi Minh City, Vietnam, to a branch. 2012.02.16 Passage of appointing Wilson Chou, senior vice president, as the company’s spokesman, replacing Shawn Teng, vice president. 2012.03.29 Passage of moving Dongmen branch to fl. 1, No. 9-1, Dehui Street, Zhonghsan District, Taipei City, which was renamed “Zhongshan branch”.

m.Different opinions of directors or supervisors on record or in written statement on major resolutions passed by the board of directors in the recent year and as of the date of the publication of the annual report: Nil

n. Statement (including chairman, president, accounting chief, and internal chief auditing ) in the recent year and as of the date of the publication of the annual report:

Summary table of the resignation of dismissal of persons related to financial statement

Base date: April.15.2012

Reason for resignation or Title Name Date of assuming office Date of the relief of post dismissal

President Justin Tsai 2011.1.1 2011.12.01 Resign

Note: Persons related to financial statement refer to chairman, president, accounting chief, and internal auditing chief

53 III.Corporate Governance Report

D. Information on CPA fee

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

Non-auditing fee Whether the Name of auditing covers Name of Auditing accounting System Business Human Others the entire fiscal Note CPA fee Sub-total firm design registration resources (note 2) year or not (note 1)

NT$3.5 million for first-stage introduction of IFRS NT$3.11 million for the installation of information security management system and individual-capital consulting service Yang NT$1.3 million for tracking and Qinzhen follow up auditing of internal- control defects NT$600,000 for surrogate payment NT$560,000 for BIS reauditing fee NT$550,000 for checking the Deloitte & 2011.01.01~ 8,320,235 250,000 11,817,357 12,067,357 security level of electronic Touche 2011.12.31 certificate NT$530,000 for merger with Taihsin Bills Finance NT$440,000 for administrative relief for business income tax NT$300,000 for auditing impairment of assets Peter NT$250,000 for the expense Tsai of checking major bad-debt accounts NT$150,000 for auditing the adjustment table for the calculation of business tax NT$530,000 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.

54 E. Replacement of CPA:

a. Concerning former CPA

Replacement date April 28, 2011

Reason for replacement In line with the job rotation of Deloitte Accounting Firm, the CPAs for the bank’s financial statement were and explanation changed from Yang Qingzhen and Weng Rongsui to Yang Qingzhen and Peter Tsai

Status of related parties CPA Consigner Explain consigner or termination or refusal of Active terminate consignment Not applicable Not applicable consignment by CPA Refusal to accept (continue) Not applicable Not applicable consignment Certification auditing report other than report without reserved opinions Not applicable 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 Not applicable Others opinions with the bank Not applicable No Not applicable

Explanation

Other disclosed items (Items which should be disclosed according to Not applicable 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 who are required to report their shareholdings according to item 3, article 25, Banking Law, in the recent year and as of the date of the publication of the annual report:

55 III.Corporate Governance Report

a. Changes in shareholdings

2011 As of March.31 , 2012

Title Name Changes Changes Changes in Changes in in pledged in pledged shareholding shareholding shareholding shareholding

Director/ Supervisor Taishin Financial Holding Co., Ltd 0 0 0 0 (Major shareholder)

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, 2012

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

56 Base date: Dec.31, 2011 ;Unit:share,%

Investment by the company directly or indirectly controlled by the bank and the bank’s Investment by the bank General investment directors, supervisors, presidents, Equity investment vice presidents,assistant vice presidents, and branch chiefs

Amount of Share of Amount of Amount of Share of Share of stake shares stake shares shares stake

Taishin Dah An Leasing (Original is Dah An 20,000,000 100.00% 0 0.00% 20,000,000 100.00% Leasing)

Taishin Insurance Agency 262,204 87.40% 0 0.00% 262,204 87.40%

Payeasy Digital Integration 28,400,001 65.36% 8,354 0.02% 28,408,355 65.38%

Chang Hwa Bank 17,985,000 0.27% 1,526,006,350 22.55% 1,543,991,350 22.81%

Taishin Real Estate Management Co., Ltd 12,000,000 60.00% 0 0.00% 12,000,000 60.00%

An-Sin Real Estate Management 3,600,000 30.00% 0 0.00% 3,600,000 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% 159,764 0.04% 79,341,988 18.33%

Pacific Securities 11,537,469 2.77% 926,368 0.22% 12,463,837 2.99%

Taiwan Future Exchange Company 2,615,997 0.96% 0 0.00% 2,615,997 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 Corp. 5,000,000 2.94% 0 0.00% 5,000,000 2.94%

Apex Venture Capital 2,009,346 4.67% 0 0.00% 2,009,346 4.67%

Li Yu Venture Capital 314,991 1.49% 0 0.00% 314,991 1.49%

Harbinger Venture Capital 4,522,500 3.35% 0 0.00% 4,522,500 3.35%

United Venture Capital 1,440,000 4.52% 0 0.00% 1,440,000 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 1,872,000 2.40% 0 0.00% 1,872,000 2.40%

Kaohsiung Rapid Transit Co.Ltd 5,000,000 0.50% 0 0.00% 5,000,000 0.50%

Da Chiang International 8,620,690 4.31% 0 0.00% 8,620,690 4.31%

Lien An Service 125,000 5.00% 0 0.00% 125,000 5.00%

MasterCard Incorporated( note 2) 10,316 0.01% 0 0.00% 10,316 0.01%

Visa Incorporated(note 2) 584,124 0.07% 0 0.00% 584,124 0.07%

Taiwan High-Speed Rail Corp.(note 1) 30,000,000 0.28% 0 0.00% 30,000,000 0.28%

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

57 4

IV. Fund Raising Activities

A. Shares and dividends

a. Sources of capital

Base date: March.31, 2012; 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 capital MOEA No. 09901005390 2009.12 13.5 4,915,752,571 49,157,525,710 4,915,752,571 49,157,525,710 increment Jan.12,2010 (note)

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

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

Total 4,915,752,571shares 0shares 4,915,752,571shares

Information related to general application system: Not applicable

b. Makeup of shareholders (Common shares)

Base date: March.31, 2012

Makeup of Foreign shareholders Government Other institutions Financial institutions Individuals Total agencies institutions and 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)

Base date: March.31, 2012

Makeup of Foreign shareholders Government Financial Other institutions Individuals institutions and Total agencies 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%

58 c. Diversification of shareholding Diversification of shareholding (common shares) Base date:March.31, 2012;Face value per share: NT$10

Number of Grades of shareholding Amount of shares owned Share of stake shareholders

1 to 999 0 0 0% 1,000 to 5,000 0 0 0% 5,001 to 10,000 0 0 0% 10,001 to 15,000 0 0 0% 15,001 to 20,000 0 0 0% 20,001 to 30,000 0 0 0% 30,001 to 50,000 0 0 0% 50,001 to 100,000 0 0 0% 100,001 to 200,000 0 0 0% 200,001 to 400,000 0 0 0% 400,001 to 600,000 0 0 0% 600,001 to 800,000 0 0 0% 800,001 to 1,000,000 0 0 0% Own grading for 1,000,001 and more shares 1 4,727,517,277 100% Total 1 4,727,517,277 100%

Diversification of shareholding (C-type preferred shares) Base date:March.31, 2012;Face value per share: NT$10

Grades of shareholding Number of shareholders Amount of shares owned Share of stake

Own grading for 1,000,001 1 188,235,294 100% and more shares

Total 1 188,235,294 100%

d. List of major shareholders

Base date:March.31, 2012

Shares Amount of shares owned (including Share of stake common and preferred shares) 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.

59 I V. Fund Raising Activities

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

Unit: NT$

Year 2011 2010 March 31, 2012 Item

Highest Note 1 Note 1 Note 1 Market price per share lowest Note 1 Note 1 Note 1 (note 1) Average Note 1 Note 1 Note 1

Before dividend payout (NT$ ) 12.62 12.14 13.16 Book value per share (note 2) After dividend payout (NT$ ) Note 4 11.00 N/A

Weighted average amount of 4,727,517 4,727,517 4,727,517 Earnings per shares (1,000 shares) share Earning per share (NT$ ) 1.61 1.70 0.51

Cash dividend Note 4 1.14 N/A

Stock dividend from retained earnings Note 4 0 N/A Dividend per share Stock dividend from legal reserves Note 4 0 N/A

Accumulated retained dividend 120,000 - 149,836 (NT$1,000 ) (note 3)

P/E ratio (note 5) Note 1 Note 1 Note 1 Analysis of investment Price/earnings ratio (note 6) Note 1 Note 1 Note 1 returns Yield rate of cash dividend(note 7) Note 1 Note 1 Note 1

Note 1: Not applicable due to absence of market price for reference since the company is not listed on the centralized or over-the-counter market Note 2: On the basis of book value per share of common shares Note 3: Accumulated retained dividends for preferred shares Note 4: The board of directors has yet to approve, on behalf of shareholder’s meeting, the proposal for profit sharing for 2011

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, appropriate legal reserves and special legal reserves. For the balance, pay out stock dividend and bonus to preferred shares. Should there till 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.

60 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 also the policy of stable stock dividend and cash payout.

When the bank’s capital adequacy rate may fail to reach reasonable level, 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.

2. Status of execution

The board of directors will resolve to issue NT$120,000,000 of cash dividend for preferred shares, NT$5,310,475,000 of cash dividend for common shares, and NT$531,000 of employee bonus for 2011.

3. Adjustment of stock-dividend policy

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, appropriate legal reserves and special legal reserves. For the balance, pay out stock dividend and bonus to preferred shares. Should there till 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. 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, 30% of the amount should be appropriated for legal reserves and special legal reserves according to law regulation. The balance should be used in priority for dividend and bonus payout for preferred shares according to actual issuing prices. 0.01% of the remainder should be used for bonus payout for employees before being appropriated for retained earnings. The balance then should be

61 I V. Fund Raising Activities

combined with the retained earnings at the beginning of the said period for dividend and bonus payout for shareholders of common shares.

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) Share of proposed stock bonus payout for employees in capital increment from retained earnings: N/A (3) Earnings per share after the proposed payout of employee bonus and compensations for board directors and and supervisors: NT$1.61 per share. 4. Use of the earnings of the previous year for payout of employee bonus and compensations for board directors and supervisors:

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

62 B. Issuance of financial bonds

Types of financial bonds First issuance of subordinated financial bonds in Second issuance of subordinated financial bonds (note 1) 2005 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 March 4, 2005 April 28, 2005 Face value NT$500,000, NT$1 M., NT$10 M. NT$10 M. Issuing and trading place (note 2) ROC ROC

Denomination currency New Taiwan dollar New Taiwan dollar Issuing price Same as face value Same as face value Total amount NT$1.508 B. NT$3.3 B. Yea 1-7: fixed rate of 2.70%. Bond A: The bank’s posted floating rate of one-year Year 8-12: Should bond holders waive right to time savings deposit+0.30% for the first five years. execute put option in the year;the bank will give The bank’s posted floating rate of one-year time them 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 the Bond B:Fixed 2.25% for the first five years. The bank waive its right to execute redemption option bank’s posted floating rate of one-year time savings in the year, the bank will pay an interest markup deposit+0.75% from the sixth year. of 0.95% on its posted fixed rate of one-year time savings deposit, which should be reset per annum. 10 years from the issue date. Maturity on March 4, 12 years from the issue date. Maturity on April 28, Maturity 2015 2017 Status Subordinated Subordinated Guarantee institution Nil Nil Trustee Nil Nil Underwriter Nil Nil Certifying lawyer - - Certifying CPA (note 3) Peter Tsai Peter Tsai Certifying financial institution Taishin Bills Finance Taishin Bills Finance Appropriation of budget from business revenue or Appropriation of budget from business revenue or Repayment method issuance of new bonds issuance of new bonds Unpaid balance NT$1.508 B. NT$3.3 B. Paid-in capital in the previous year NT$31,753,524,000 NT$31,753,524,000 Post-final accounts book value in the NT$59,657,278,000 NT$59,657,278,000 previous year Status of contract performance Normal Normal

63 I V. Fund Raising Activities

Types of financial bonds First issuance of subordinated financial bonds in Second issuance of subordinated financial bonds (note 1) 2005 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 bank can redeem the entirety or part of the the bond holder may exercise put option and bond by repaying the principal, and interest since should the interest rate higher than 1.85%, the five years from the issue date on March 4, 2010 Stipulations for redemption or early bank may exercise call option. and the information will be posted on the bank’s liquidation 3. Put option by bond holders: Should bond website or in major daily newspapers in the place of holders intend to exercise put option, they the bank’s headquarters one month ago. should inform the bank their intension 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 exchange - - Restrictive stipulation (note 4) - - To support the actual need of medium- and long- To support the actual need of medium- and long- Fund utilization plan term loan term loan The total amount of the issuance and outstanding bonds in the percentage of 52.31 57.84 the book value of previous year (%) Eligible capital and type Yes, Tier II Yes, Tier II Name of rating agency, issue date, and - - the rating (note 5)

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

64 Types of financial bonds Third issuance of subordinated financial bonds in Fourth issuance of subordinated financial bonds in (note 1) 2005 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 (Note 2) ROC ROC Denomination currency New Taiwan dollar New Taiwan dollar Issuing price Same as face value Same as face value Total amount NT$5 B. NT$5.192 bn Bond A,B:Fixed rate 2.70% for the first seven years Year 1-7: The bank’s posted fixed rate for one-year and fixed rate 3.20% for the eighth through the 12th time savings deposit+0.80% year Coupon Year 8-12: The bank’s posted fixed rate for one-year Bond C:The bank’s posted floating rate for one-year time savings deposit+1.10% time savings deposit + 0.65%. The 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 - - Certifying CPA (Note 3) Peter Tsai Peter Tsai Certifying financial institution Taishin Bills Finance Taishin Bills Finance Appropriation of budget from business revenue or Appropriation of budget from business revenue or Repayment method issuance of new bonds issuance of new bonds Unpaid balance NT$5 B. NT$5.192 B. Paid-in capital in the previous year NT$31,753,524,000 NT$31,753,524,000 Post-final accounts book value in the NT$59,657,278,000 NT$59,657,278,000 previous year Status of contract performance Normal Normal The bank can redeem the entirety of part of the bond The bank can redeem the entirety of part of the by repaying the principal, plus interest, seven years bond by repaying the principal, plus interest, seven after the issuance of the bond (on May 18, 2012) years after the issuance of the bond (on June 6, Stipulations for redemption or early or on every interest payment date afterwards with a 2012) or on every interest payment date afterwards liquidation written notice issued seven business days before the with a written notice issued seven business days date, on any other day with a written notice issued before the date, on any other day with a written two months before the date. notice issued two months before the date. Conditions for conversion or exchange - - Restrictive stipulation (note 4) - - To support the actual need of medium- and long- To support the actual need of medium- and long- Fund utilization plan term loan term loan The total amount of the issuance and outstanding bonds in the percentage of 66.22 74.93 the book value of previous year (%) Eligible capital and type Yes, Tier II Yes, Tier II Name of rating agency, issue date, and - - the rating (note 5)

65 I V. Fund Raising Activities

Types of financial bonds (note 1) First issuance of subordinated financial bonds in 2010 Date and number of the approval document of FSC No. 09900101150, Mar.23,2010 the central regulator Issuing date April.12, 2010 Face value NT$ 50M Issuing and trading place (note 2) ROC Denomination currency New Taiwan dollar Issuing price Same as face value Total amount NT$10 bn Bond A:Fixed interest rate at 2.65% per annum Bond B:Interest rate is set at “the floating interest rate for one-year time savings deposit of Chunghwa Post Co., Ltd.” plus 1.5%. The paper rate will adjusted annually according to the Coupon following standard. “The floating rate for time savings deposit of Chunghwa Post Co., Ltd.” is based on the rate posted at the website of the Central Bank of China at 10:30 a.m., two days before the date for starting the calculation of interest. Maturity 7 years from the issue date. Maturity on April.12, 2017 Status Subordinated Guarantee institution Nil Trustee Nil Underwriter Nil Certifying lawyer - Certifying CPA (note 3) Yang, Qinzhen Certifying financial institution Not applicable Repayment method Appropriation of budget from business revenue or issuance of new bonds Unpaid balance NT$10 bn Paid-in capital in the previous year NT$49,157,525,000 Post-final accounts book value in the previous NT$53,433,376,000 year Status of contract performance Normal Stipulations for redemption or early liquidation Nil Conditions for conversion or exchange - Restrictive stipulation (note 4) - Fund utilization plan Improve financial structure and raise capital adequacy rate. The total amount of the issuance and outstanding bonds in the percentage of the book value of 46.79 previous year (%) Eligible capital and type Yes, Tier II Name of rating agency, issue date, and the rating “twA” set by Taiwan Ratings on April 6, 2010. (note 5)

66 C. Issuance of preferred shares

Issuing (undertaking) date (note 2) March 30, 2007 Item Preferred share C via private placement (note 3) Face value NT$10 Issuing price NT$17 per share Amount of shares 188,235,294 shares Total value NT$3,199,999,998

Dividend and bonus payout 3.75% per annum (non-cumulative)

Allocation of remaining property Preference over common shares Right and obligation No voting or election right at shareholders’ meeting but having the right of being elected and Exercise of voting right the voting right at the preferred C shareholders’ meeting. Entitled to subscription right for new shares at cash capital increment, same to common Others shares The amount of redemption or 0 conversion The amount of non- redemption or non- NT$3,199,999,998 conversion Outstanding Preferred shares Preferred share C may be converted to common share at 1:1 since March 22, 2009. Preferred share C is a perpetual security and the Redemption bank may redeem by earnings or issuing new shares since year 10 if or conversion and only if the bank’s capital adequacy ratio after redemption is above stipulation the regulator’s requirement and the bank receives an approval from the regulator Highest - 2009 Lowest - Average - Highest - 2010 Lowest -

Market price Average - per share Highest - 2011 Lowest - Average - Highest - Current year as of April.30, 2012 Lowest - (note 4) Average - The amount of conversion or subscription as of annual report Nil Other rights printed. Terms of conversion right or Refer to the company’s corporate charter subscription The impact on Preferred C shareholders, possibility Nil on dilution and the impact on current shareholders The impact on capital adequacy ratio after redemption Reduced by 0.79% approximately

Note 1: Preferred shares being handled include those to be issued via public or private placement. Public-placement preferred shares being handled referred to those approved by the commission, while private-placement preferred shares being handled referred to those approved by the board of directors. Note 2: The number of columns can be adjusted according to the number of cases. Note 3: Mark cases of private placement conspicuously. Note 4: Should fill in data of the current year until the date for the publication of the yearbook. Note 5: Preferred shares with share-subscription option should be filled in the following table.

67 I V. Fund Raising Activities

D. Issuance of overseas depository certificates: Nil

E. Issuance of stock options for employees: Nil

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

F. Acquisition of or sell to other 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.

Name of financial institution Taishin Bills Finance

Address 9th-10th fl., No. 118, Ren-ai Road, Sec. 4, Daan District, Taipei City

Chief Executive Helena Kuo

Paid in capital 5,140,000 Certification, underwriting, agency, dealership, guarantee, and endorsement of short- term bills, agent for call loans between financial institutions, agent and dealer for Major business items government bonds, financial bonds, and corporate bonds, and handling of derivatives approved by the regulator. Total assets 17,685,349

Total liabilities 11,789,937

Total equity 5,895,412

Financial data for Interest income 7,788 Jan.21, 2011 Net income 51,215

Business expense 14,106

After-tax net profit 18,721

Earnings per share $ 0.036

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: Not applicable.

68 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 financial bonds via public or private placement and there is no fund utilization plan in the recent three years whose execution has been completed but has yet to manifest its 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 financial bonds which has yet to be completed: Nil 2. Plan completed in recent three years which has yet to manifest its benefits: Nil 3. Changes in the contents of plan: Nil 4. Source and utilization of fund: Nil 5. Reasons for the changes: Nil 6. Benefits before and after the changes and date for the submission of the change to shareholders’ meeting: Nil 7. Posting of the information on the change on the designated website: Nil b. Status of execution

Fund utilization plan for the issuance of securities or financial bonds via public or private placement and issuance of financial bonds which had yet to be completed at the end of the quarter preceding the date of the publication of the annual report 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

69 5

V. Business Status

A. Business contents

a. Growth and change in various business items

1. Wealth Management

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

The bank’s wealth management operation covers sound financial planning, investment portfolio management, asset allocation recommendations and a broad range of 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. Consumer banking

The bank’s consumer-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. Corporate banking

The bank’s 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, financial advisory, asset securitization, and discretionary assets management, etc.

4. e- financial business

e-finance business includes ATM, the bank’s official website, online banking/online ATM, mobile banking, and payment platform. It can assist various business units to introduce products and e-service, and is in charge of evaluating the feasibility of applying domestic and overseas new technologies into financial service.

70 In order to further strengthen the brand image of Taishin Bank, the bank organized various artistic, cultural, and financial events, as well as a number of lively and innovative marketing activities. Meanwhile, it continued to push “around-the-clock convenient financial service,” encouraging customers to join online banking/mobile banking, so that members can enjoy plural, convenient, and innovative financial payment service. It also continuously organize various customer-group marketing events, to boost the trading adherence of existing members and attract more non-customers to interact with the bank via recommendation marketing, so as to make Taishin a leading financial brand.

2011 was an important year for the development of Taishin mobile banking. Many important functions can be accessed online, including inquiry of details of foreign exchange accounts, transfer of general NT dollar deposits to time deposit, non-designated fund transfer, and payment platform. The membership has exceeded 100,000 persons and trading volume has risen month by month. Certification service for mobile device in 2011 enabled Taishin mobile banking to carry out non- designated fund transfer. The function will also be available for fund trading and foreign-currency trading in 2012, making trading safer and more convenient.

5. Trust (Financial Products Division)

In addition to continuing the promotion of “planned money trust” and assisting customers in dealing with the tax saving and share borrowing of “securities trust. For planned trust business, the bank continued to push “money trust” and assist customers to undertake tax saving and lend stock holding via “securities trust.” In addition, to meet the diversified trust need of corporate customers, the bank will launch “employee shareholding trust” in the first half of 2012 and “employee savings trust” in the second half of 2012. 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.

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

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

71 V. Business Status

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

Net income share (%) 2011 2010

Retail banking 67% 67%

Wealth management 24% 21%

Consumption financing 24% 24%

Credit card 16% 17%

Cash card 3% 5%

Corporate banking 33% 33%

Total 100% 100%

b. Business plan for the current year

1. Wealth Management (1) Strengthen brand image, becoming the best wealth-management bank in the minds of customers. (2) Upgrade potential customer groups to wealth-management customer groups, deeply cultivate wealth-management customer groups, so as to increase the number of wealth-management customers and boost product penetration rate for customers. (3) Integrate customer-group analysis, provide member services from the angle of customers, consolidate various resources and products of Taishin Financial Holding, so as to provide customers one-stop-shopping service. (4) 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. (5) Provide unique Taishin products to strengthen the completeness of product lineup. (6) Enhance the growth rate of wealth-management and insurance businesses, expand the scale of deposits, enhance employee quality and customer satisfaction, and strengthen risk-management and crisis-handling capability. (7) Further develop non-branch sales channels and utilize Internet media to develop online banking customers. (8) 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.

2. Consumer Banking (1) Continue production innovation to strengthen core competitiveness and strengthen high-yield product management, so as to boost market share and effectively segregate market. (2) Manage niche-group business and deeply cultivate customer relationship, to satisfy various needs of customers and enhance their contribution.

72 (3) Strengthen the management of branch channel, materialize one-stop shopping service for clients, and enhance the extent of product penetration. (4) Utilize analytical model and channel platform of the financial holding firm, to aggressively cultivate potential customers and expand market scale. (5) Augment dynamic risk-management capability and strengthen assets quality. (6) Further improve workflow, enhance service efficiency, and cut operating cost.

3. Corporate banking (1) Integrate plural financial products of financial holding firm, carry out deep cultivation of different customer groups, and develop quality clients. (2) Expand trade-type financing and deepen cash management, so as to grasp fund flow of customers and alleviate the influence of fund cost. (3) Cautiously cope with murky international financial situation, improve credit-extension flow, and strengthen risk management, so as to maintain good assets quality. (4) Aggressively make overseas deployment, utilize leasing business platform in mainland China, accelerate the upgrading of representative’s office in Vietnam to branch, and prepare the establishment of Brisbane. (5) Materialize the cooperative mechanism between retail and corporate banking, meet the plural needs of customers, and manifest the management synergy of the financial holding company. (6) Continue upgrading and improvement of operating flow and system, so as to provide customers quality services.

4. e-financial business

In the year, except continuing adjustment of ATMs at convenience store, the bank will focus on deployment of online ATM deployment, and except continuing contact with small and medium enterprises, the bank will endeavor to forge third-party payment. It adds Smart Pay trading method to enhance the convenience of financial payment and pioneers the provision of international remittance service “Visa Money Transfer,” so as to complete fund transfer not only via online banking but also ATM. To materialize global financial service and provide even more convenient and smooth operation to customers, the bank has planned to overhaul banking website, online banking and ATM touch- screen operation, which will be completed in 2013.

Online security is a key issue for e-trading by customers. In the year, the bank will initiate encryption measure for e-bills, providing safer billing service. Except innovative service for various channels, the bank will formulate brand new “e-trading loyalty project,” enabling effective management and utilization of all e-trading record and conducting marketing activities via the platform, so as to induce customer trading.

To push its development, Taishin mobile banking will capitalize on the advantage of undertaking multi- currency and fund trading to roll out currency-swap and mutual-fund trading function. Along with the increasing enrichment of the functions of mobile banking, instant wealth-management will be an easy task. Meanwhile, to service the increasing tablet-PC users, Taishin mobile banking has launched iPad app in 2012.

73 V. Business Status

5. Trust (Financial Products Division) (1) Enhance “So Easy target wealth-management project,” to boost the scale of installment products and push installment payment products, so satisfy customer 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) Provide differentiated fund products to different customer groups, so as to meet the needs of various customers. (6) Provide tailor-made services to different kinds of customer groups. (7) Establish fund wealth-management network, to provide one-stop online wealth-management service. (8) Modify the product lineup of domestic and offshore funds, so as to satisfy the client’s needs about asset allocation planning. (9) Offer multi-theme overseas ETF (exchange traded fund) and satisfy customers’ need for investable targets under any market condition. (10) Offer quality corporate and overseas financial bonds. (11) Except two successful investments in offshore structured notes which can be invested by non- professional investors via the intermediation of banks, continue to accept entrustment by professional investors to invest in offshore structured notes limited to professional investors, so as to meet the need of professional investors with high assets.

c. Market analysis

1. Wealth Management (1) Status of market demand and supply and growth potential: █ In 2010, the number of rich persons in Taiwan jumped 42.3% and the total value of their wealth leapt 49.6% to US$264 billion, with both growth rates ranking third place in the Asia-Pacific region, trailing Hong Kong and India. █ Taiwan was hurt the least in Asia by the global financial tsunami. █ The stable cross-Taiwan Strait relationship and the signing of cross-Strait Economic Cooperation Framework Agreement (ECFA) creates a good domestic political and economic climate and prompts Taiwanese financial institutions to accelerate their cooperation with mainland Chinese counterparts. █ With the stabilization of domestic and foreign financial and stock markets, enterprises continuously render good business performance, which will lead to even more prosperous development of wealth-management business.

74 (2) The bank’s competitive niche: █ Under the customer-centered principle, continue to listen to the opinions of customers so as to provide them optimal services, thereby consolidating customer relationship. █ Continuous innovation of products and operating flow, good capability for self-made products, rapid adjustment to changes in market environment and customer needs. █ The core concept of “sincerity is the best service” into a built-in principle have won the bank acknowledgement from various domestic and foreign institutions in 2011. █ 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 seqment management (SM), product management (PM), and channel management (CM). █ 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. █ Professional team, coupled with the capability of systematic risk assessment and monitoring, responds to market changes rapidly and provides customers solutions. █ Cut resources waste via continuous inspection and improvement of operating flow. █ Provide customers optimal products via database marketing, by analyzing the types of existing customers and understanding deeply the needs of different customers.

(3) Favorable factors for development outlook: █ Thanks to stable cross-Taiwan Strait relationship, the signing of cross-Strait Economic Cooperation Framework Agreement, and the reduction of inheritance and gift tax, outflow funds begin to return to Taiwan. █ Leeway for the development of wealth-management business in Taiwan is very large. █ The government oversees the merger among financial institutions will further highlight the competitiveness of the bank. █ Business opportunities related to new pension system for private-school employees and self- selection investment targets for new labor pension system.

(4) Unfavorable factors for development outlook: █ The rigorous regulation and management of the regulator over structured notes and trust-type investment products runs counter to market opening. █ Large-scale increase in the need for domestic and foreign financial talents will accelerate the turnover of talents. █ Foreign firms acquire domestic banks to expand their business scale and introduce their operational mode into the nation, thereby augmenting overall banking competitiveness.

(5) The bank’s countermeasures: █ Provide optimal service in more efficient manner via continuous inspection and improvement of operating flow.

75 V. Business Status

█ Construct complete career plan and educational/training program for employees. █ Via continuing review and improvement of flow, provide optimal service in a more efficient manner. █ 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. █ Change product-oriented strategy to customer-oriented strategy and integrate customer-group analysis, so as to understand customer needs and provide them proper products.

2. Consumer Banking (1) Status of market demand and supply and growth potential: As the global economy continued to pick up in the first half of 2011, consumer confidence strengthened along with the upturn of the financial market and consumption outlays of retailing, dining, and autos spiked. In the second half of 2011, however, the deterioration of the debt problem in the U.S. and Europe impacted the global financial market, dampening stock trading and private consumption. The Directorate General of Budget, Accounting, and Statistics (DGBAS) publicized that the economic growth rate reached 4.04% in 2011 when outstanding amount of consumer loans inched up 1.2% and credit-card spending value rose 8.5%. In 2012, European-debt will also overshadow global economic recovery. Global Insight predicts that the global economy will grow 2.7% in the year. Due to the effect of global economic slowdown on global trade, the DGBAS predicts that Taiwan’s economy will grow 3.85% this year. However, along with improvement on the job market, gradual upturn of the domestic economy, and large-scale growth of mainland Chinese tourists, private consumption and momentum may improve, boosting the growth of consumer banking market.

(2) The bank’s competitive niche: █ Offer plural financial services for different customer groups, to meet the needs of customers in different aspects. █ Branches with competitiveness and automated channel, and e-banking service platform with complete function. █ Excellent risk management capability which takes care of business growth and assets quality simultaneously. █ Further improve workflow, enhance service efficiency, and cut operating cost. █ Marketing synergy via cross-selling overseen by the financial Holding company, stressing the provision of one-stop-shopping services.

(3) Favorable factors for development outlook: █ Stable development of cross-Taiwan Strait relationship and gradually liberalization of the financial policy. █ Further expansion of high-tier wealth-management market. █ Along with gradual upturn of the economy, financial market and private consumption momentum may expand simultaneously.

76 (4) Unfavorable factors for development outlook: █ European and U.S.-debt problem will still be major variables for global economic recovery. █ Price hike and inflationary pressure will constrain some consumption momentum. █ Acute price competition in consumer banking market will impact profit margin.

(5) The bank’s countermeasures: █ Further enhance product innovation capability and expand the management of niche products. █ Provide proper financial products and service for different customer groups and customers with different risk features, so as to deeply cultivate customer relationship. █ Utilize scientific analytical technique and mode to further expand customer-group basis and establish new product service and sales mode. █ In line with market and industrial changes, further strengthen the management mechanism for integrating risk and marketing strategy. █ Utilize new technology and creative marketing, to cultivate new clients and develop new channels. █ Continue improvement of flow and provide rapid and convenient all-round financial services.

3. Corporate Banking (1) Status of market demand and supply and growth potential: The uncertainty of the global financial climate resulting from the European-debt crisis dampens the strength of global economic recovery. In the domestic market, constrained by business overlapping and homogeneity, the environment of low interest spread will not improve in the short term, squeezing the profit margin of banks. Therefore, in addition to deep cultivation of existing clients, the bank will provide plural financial products and maintain long-term relationship via integrated marketing. In line with the government’s policy of assisting small and medium enterprises, it will also enhance interest spread and expand customer foundation. In line with the gradual liberation of cross-Strait financing, accelerate establishment of branches and leading firms by domestic financial institutions in mainland China, so as to expand customer groups and improve the overbanking problem at the domestic front.

(2) The bank’s competitive niche: █ Take advantage of the plural products of the financial holding company and integrate the abundant professional talent of corporate and retail banking and product line, to provide customers one-stop-shopping financial service. █ Gradually deployment cash-management infrastructural engineering, extending B2B business mode to B2C business. █ Maintain good assets quality via excellent risk-management mechanism, to pursue steady profit growth. █ Dedicate the innovation of financial products and services, so as to meet customers’ diversified financial needs.

77 V. Business Status

(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. █ Along with the liberalization of cross-Taiwan Strait financial policy, enhance financial services and business opportunities for Taiwanese-invested firms. █ 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.

(4) Unfavorable factors for development outlook: █ Over-banking status:homogeneous traditional financial products are difficult to create high profits. █ With domestic economy overshadowed by European-debt crisis, the Central Bank of China becomes conservative in interest-rate policy and the low-interest climate affects profits. █ Since measures for cross-Strait financial exchanges fail to relax the OCED condition for investments by domestic banks in mainland China, the process for domestic banks to establish branches in mainland China has been postponed. █ Overseas income is limited, since there is only one overseas business base.

(5) The bank’s countermeasures: █ Provide differentiated services and products to different client segments, so as to create service value. █ Deeply cultivate relationship with clients via single customer view approach. █ Take advantage of the leasing platform being established by the financial holding firm in mainland China, expand customer groups and consolidate existing customer relationship. █ Deploy in the Asia-Pacific market by accelerating the upgrading of representative’s office to Vietnam to branch and the preparation for the setup of Brisbane and Singapore branches.

d. R&D of financial products and business development status

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

Item 2010 2011

Mortgage Loan NT$252.6n NT$266.1bn

Auto Loan NT$13.73n NT$15.74bn

Other consumer loan NT$15.83bn NT$21.63bn

Credit card 3,003,000 cards 2,961,000 cards (1) As of the end of 2011, outstanding mortgages reached NT$266.1 billion, with market share of 4.6%; outstanding auto loans amounted to NT$15.74 billion, with market share of 22.4%, ranking first

78 place in the market; and outstanding amount of other consumer loans hit NT$21.63 billion, with market share of 2.9%.Outstadning amount of overall consumer loans grew 7.5% in the year. (2) As of the end of 2011, the bank’s credit cards in circulation numbered 2.961million cards, with market share of 9%, ranking third place in the market/ the number of effective cards amounted to 1.905million cards, with 9.2% market share, ranking fourth place; in the year, total credit-card spending value topped NT$147.6 billion, for market share of 16.8%, ranking third place. (3) 1n 2011, set up marketing alliance department under consumer-banking marketing division to develop auto-loan business via strategic alliance. As of the end of December 2011, outstanding loans reached NT$510 million.

2. Major financial products of corporate 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$190.7 billion at the end of 2011, up 20% over a year earlier, ranking 14th place among 37 domestic financial institutions, similar to the ranking a year earlier. (2) Outstanding loans for small and medium businesses In line with the government’s policy of providing the assistance of loaning to small and medium businesses and the purpose of expanding the bank’s customer group, the bank extended NT$54.6 billion of outstanding loans to small and medium businesses as of the end of 2011, up 19% over a year earlier, compared with the industry average of 11%. (3) L/C and export negotiation To grasp the fund flow of customers and strengthen trade financing business, issuance of L/Cs and undertaking of export negotiations topped US$984 million and US$1.322 billion, respectively, in 2011, up 4% and 9%. (4) Factoring business The bank was a market leader for factoring business in 2011 and undertook NT$297.1 billion of such business in 2011, declined 21%, with equal emphasis on the maintenance of customer relationship, pricing and risk.

3. Trust (Financial Products Division)

Unit: NT$ 1 million

Year 2010 AUM 2011 AUM

So Easy target wealth-management plan 6,614 6,167

Planned money trust 4,874 5,541

Securities trust 35,141 29,258

Structured notes 30,767 26,061

ETF offshore 1,964 2,083

Overseas bonds 1,346 1,184

Domestic and overseas funds 102,922 106,783

Taishin money-market mutual trust fund 1,076 1,018

Designated collective management account 1,105 435

79 V. Business Status

4. R&D achievements in recent two years (1) Launch Fish co-branded Easy Card, giving 0.2% automated refund for common card spending. (2) Launch titanium card, enhancing the benefit of concentrated consumption, step up the development of credit-card medium- and high-end consumer groups, and provide different payback to target customer groups, thereby augmenting profits. (3) Family Mart-Easy co-branded card hit the market, to tap the small-amount payment market. (4) Free choice card hit the market—The first card in the market allowing customers to freely choose card appearance, benefits, and payback program, as well as change related items according to life style, capable meeting all the needs of customers. (5) Ever Rich co-branded card hit the market—Issue co-branded card with Ever Rich Duty Free Shop, meeting the consumption needs of frequent overseas travelers. (6) Provide highly flexible mortgages, granting customers new options for repayment of mortgages, so as to meet the different needs of consumers. (7) Provide secondary-lien mortgages, with collaterals located at primary areas. (8) Launch of payment platform, enabling customers to make online payments with credit cards or financial cards for various bills, including telecom, utilities, cableTV, tuition, and credit-card debts.

5. Future R&D plan (1) Retail and consumer banking █ Via constant testing and improvement, establish effective marketing mode to create profits and competitive advantage. █ Capitalize on the popularity of cloud technology and mobile equipment to develop “mobile payment” business, offering consumers more options for payment. █ Maintain cooperative relationship with strategic joint marketing:develop new channels to solicit new customers. █ Further improve workflow , carrying out image platform and paperless process, enhanceservice efficiency, and cut operating cost.

(2) Corporate banking █ Strengthen development and price quoting capability for various derivative with linkage to credit, merchandise, energy and equity. █ Expand pluralized treasury product lineup via combination of interest rate, exchange rate, bond, bulk commodities, and equity. █ Integrate existing credit-line risk-management system and operating platform, so as to upgrade service 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. █ Push renminbi-related business via the Hong Kong platform. █ Expand the services of offshore banking units and overseas bases and strengthen the function of e-network trading platform, so as to satisfy customers’ need for cross-border fund maneuvering.

80 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. █ Strengthen the wealth management team, enhance employee’s expertise. █ Improve customer analytical ability, to provide proper 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. █ 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. Consumer banking (1) Short-term business development plan █ Expand the management of high-yield products. █ Maintain leading status for various products in the consumer-banking market. █ Strengthen unsecured business and loans for small and medium businesses and micro enterprises. █ Cultivate different potential customers via the strategies of mobile banking, online recommendation marketing, and community transmission. █ Continue strengthen brand image, boost brand visibility and favorable image. █ Continue enhancing the expertise and product knowledge of staffers.

(2) Long-term business development plan █ On the basis of customer needs, innovate new product functions and services, so as to establish differentiated market value. █ Continue customer group management and deepen customer relationship, so as to become the major corresponding bank of customers. █ Manifest synergy of the financial holding firm and provide convenient and plural financial services. █ Continue materializing the bank’s core value, cultivate all-round financial elites, and consolidate the foundation for future development. █ Expand overseas and cross-border retail business scope to China to increase bank’s competition.

81 V. Business Status

3. Corporate Banking (1) Short-term business development plan █ Materialize segmented customer group management and integrate marketing of plural products of the financial holding firm, so as to boost customer relationship. █ Segment groups and industries, to effectively control group/industry risks and resources allocation. █ Emphasize transactional banking products to grasp client’s cash flows and integrated business opportunities from customer side. █ Duplicate business mode of small and medium enterprises and cooperate with corporate/retail banking channels to expand potential customer groups among small and medium enterprises and business scale. █ Actively deploy overseas markets, accelerate the establishment of Singapore and Brisbane branches, and apply for the upgrading of the representative’s office in Vietnam to a branch. █ To accelerate internal talented people cultivation and retain a post to respond business growth.

(2) Long-term business development plan █ Strengthen and expand core business, continue deep-cultivation service for customer groups, establish long-term relationship with customers, and enhance the contribution of customers. █ Grasp the fund flow of customers and provide integrated marketing opportunities via utilization of the financial holding firm’s resources. █ 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.

4. Trust Investment (Financial Products Division) (1) Short-term business development plan █ Expand the assets of “So Easy” target wealth-management plan by pushing salary-transfer accounts and the sales of dollar-averaging mutual fund. █ Plan online marketing for “So Easy” target wealth-management plan, so as to develop massive online customer groups. █ Actively strive for money and securities trust of corporate banking and the business of “ Collective Investment Account for Mainland China or Overseas Foreign Employees ,” so as to expand the channel for corporate banking. █ Provide planning-type trust customers with systematized transaction and electronic service to satisfy customer’s need. █ Develop “employee welfare trust” business and provide corporate-banking customers diversified trust products, so as to develop personal wealth-management business for employees. █ Provide more convenient e-trading service function.

82 █ 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. █ Exploit new platform of overseas ETF by share placement, and offer multi-theme underlying to meet client’s needs arising from market change. █ Continue to provide quality overseas financial bonds and corporate bonds denominated in various foreign currencies, to help with the assets allocation of customers with preference for fixed yields. █ Continue join forces with various general agents to push offshore structured notes suited to common investors, so as to enhance customer service and provide more attractive investment products.

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

83 V. Business Status

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 31,2012

Current year as of Year 2010 2011 March.31, 2012 Total 6,290 6,279 6,075

Average age 34.4 35 35.4

Average service years 6.5 6.9 7.2

Doctor 0.05% 0.08% 0.08%

Master 14.66% 15.00% 15.36% Shares of education College 79.92% 79.77% 79.26% degrees Senior high 5.29% 5.06% 5.17%

Under Senior high 0.08% 0.08% 0.13%

Test for trust business 2,857 2,852 2,781

Basic test fro internal control 3,408 3,333 3,251

Qualification test for property insurance 2,946 3,096 2,990 staffers

Investment-type insurance policy staffers. 1,532 1,583 1,531

Kinds of professional Life insurance staffers 3,502 3,389 3,294 certificates owned by employees and their Future business staffers 510 475 472 numbers Securities investment analysis 20 20 17

Senior securities staffers 434 424 418

Investment trust and consulting staffers 352 340 336

B-type laws and regulations for investment trust and consulting (including professional 1,365 1,444 1,402 ethical code)

b. Employee training and development

To support continuous business growth, personal training and development has been the consistent insistence of Taishin Financial Holding. In 2011, the total number of trainees reached more than 150,000 people/attendances and the average annual training hours per person hit 48 hours. 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, 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.” In addition, gradually carry out credit-point system, certification system, and the design associated with career development of staffers.

84 2. Talented Accumulation Program Choosing and recruiting different levels of colleagues by the 360 evaluation mechanism and the committee, and developing MA, AMA, and TSP three-stratum talented accumulation program. Planning training for different levels of talents to reach the destination by the core value and strategy. From 2010, cooperate with National Taiwan University to incorporate EMBA courses into cultivation plan for talent bank. 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 participation 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 ethical code

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.

Public service and charity

1. “Care for Taiwan” series

From 2002, Taishin Financial Holding has joined hands with its affiliate PayEasy.com to carry out “Care for Taiwan” series events, 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 2011, Taishin Financial Holding sponsored the team to attend Singapore International Karate Tournament, World Youth Karate Tournament, and Asia Youth Karate Tournament, with excellent achievements. In the year, the team won 124 medals in domestic and overseas tournaments (including 43 gold medals, 36 silver medals, and 45 copper medals).

85 V. Business Status

In 2008, “Care for Taiwan” series extended its reach to rice plantation in Taiwan. In order to sustain Taiwan’s price 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 83 units, equivalent to 41.5 hectares of rice paddies. It has given 40,000 rice gift boxes to over 10,000 Taishin customers and staffers, which have eaten over 140,000 kilos of quality Taiwanese rice. In addition to benefiting rice farmers, it has also carried out excellent marketing for goodTaiwanese 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. The first such event attracted the participation of 204 social-welfare groups, which jumped to 307 for the second event. A number of other public-service partners, such as Franz Collection, Advantech Foundation, and Chunghwa Telecom Foundation, also joined the event and the scope of donation recipients were expanded to culture and education, and digital learning.

In addition, Taishin executives, colleagues, Yani Tseng, the world’s female golf champion, and other local people also donated to the foundation, boosting its scale from NT$4.3 million to over NT$10 million, with the number of recipient groups expanded from 31 to 64. Besides, Taishin Bank Public Service and Charity Foundation held the first exhibition for its achievements in 2011 and produced three-minute documentary for introducing each of the first recipient groups, so as help them face the public and solicit even more support from the latter.

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. In 2011, Taishin took part in various academic seminars, including summer national assembly of AIESEC, international seminar on corporate restructuring, 19th Asia-Pacific seminar on finance, economy, accounting, and management, NTU international seminar on economy, finance, and accounting, and international summit on corporate governance.

86 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. 2011 marked the ninth 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.

Sports sponsorship

In 2011, Taishin sponsored Yani Tseng, the world’s female golfing champion, the first Taiwanese financial institution to do so. 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.

Environmental Protection

For environmental protection and anti-global warming, 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. Meanwhile, it has pushed paperless office for a long time. In 2010, it responded to the “turn off light for one hour to reduce carbon emission” event organized by the Society of Wilderness, to educate the public the importance of energy conservation and carbon abatement.

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

Financial trading ■■MS Windows ■■Treasury financial and treasury trading 4 system ■■IBM X86 Server ■■SunGard ■■Trading risk management system (SUNGARD) ■■MS SQL

87 V. Business Status

Items Names of systems Hardware Software Business contents

Integrated data system ■■HP-UX ■■Operating database system(ODS) 5 ■■HP Superdome (DAI) ■■ORACLE ■■Informaion warehousing(DW/DM)

Automated ■■HP-UX ■■Instant customer browsing system(SCV) 6 sales application ■■HP Superdome ■■ORACLE ■■Automated sales operation system(SFA) system(SFA)

■■SUN Solaris ■■Transation services for NT-dollar, Consumer Internet 7 ■■SUN E6900 ■■Weblogic foreign exchange, funds and trusts, banking ■■ORACLE credit cards, insurance and stocks

■■IBM AIX ■■Corporate Internet banking systemfor 8 B2Bank ■■IBM RS/6000 ■■IBM Websphere NT-dollar, foreign exchange, e-collection ■■ORACLE and e-payment.

Trust Investment ■■MS Windows ■■Trading system of funds, trust loans, US 9 product system ■■IBM X86 Server ■■MS SQL bonds and ADR (TIPS)

Credit card acquire ■■SUN Solaris 10 frond-end system ■■SUN M5000 ■■Weblogic ■■ Credit card transaction switch (CPS) ■■ORACLE

New corporate banking ■■IBM RS/6000 ■■IBM AIX ■■Inquiry for NT dollar/foreign currency system ■■Weblogic trading, credit-line management, and 11 (WBS) ■■Oracle the management of guarantors and collateral.

Image process ■■Weblogic 12 management system ■■HP Unix ■■Oracle SOA ■■Image process management system (IPMS) ■■Oracle

Factoring management ■■IBM AIX 13 system ■■IBM RS/6000 ■■Web logic ■■Accounts receivable system (OAEFB) ■■Oracle

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

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. Utilize VDI service to provide employees link-up operation without the restriction of locations, so as to enhance the safety protection of data. 4. Prepare information system for overseas branches, including Brisbane and Singapore branches. 5. Strengthen the functional design of corporate-banking network, so as to enhance the utilization rate of global trade and small and medium enterprises, in addition to expanding the scope of the domestic market.

88 6. Continue undertaking corporate-banking core system, expand its application in overseas branches, and improve foreign-currency loaning and deposit operation and forex-product system. 7. Expand the development and application of mobile banking and further expand link-up application services for mobile devices, such as iPhone and iPad. 8. Establish integrated system for front-, medium-, and rear-end operations for financial-product trading, so as to enhance the market competitiveness for financial trading. 9. Establish customer credit-risk calculation system, so as to effective 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. Test environment-introduced information shield and conversion system, so as to strengthen information protection mechanism and enhance safety management. 3. Replace wireless network station and strengthen wireless encryption mechanism for mobile devices, so as to enhance the safety of wireless transmission. 4. Conduct application system business impact analysis (BIA) and address the contingency plan, so as to establish a backup system capable of meeting business need. 5. Recruit consultancy to analyze current security and privacy posture, as well as to provide recommendations for improvement. Indentify the merits and weakness of current security practices and provide a repeatable methodology to conduct periodic security assessments. 6. Protect data and enable business innovation with advanced solutions for data security, access and compliance.

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; employee bears 20%. (2) Health Insurance: The company bears 60% of insurance premium; employees bears 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 borne by the company.

89 V. Business Status

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 to 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 no loss resulting from labor- management dispute in recent years.

F. Important contract: Nil

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.

90 6

VI. Financial Status

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

Balance Sheet

Unit: NT$1,000

Year Financial information in recent five years Current year as of 2010 March.31, 2011 2009 2008 2007 Items (new compilation) 2012 Cash and cash equivalent, due from the 40,645,345 50,522,320 136,515,846 140,063,783 144,640,436 39,215,055 Central Bank and call loans to other banks Financial assets from changes at fair 40,781,549 36,979,776 24,907,554 45,859,862 26,103,651 38,029,310 value through profit or loss Bonds and securities purchased under 1,058,738 2,992,554 2,420,000 0 0 177,578 resell agreements Receivables, net 88,122,428 97,304,516 84,838,866 79,128,739 78,814,545 73,760,848 Loans, net 600,808,129 531,674,018 495,583,668 514,045,040 558,713,701 625,445,256 Available-for-sale financial assets 191,190,849 177,358,294 36,484,764 25,124,530 23,610,956 213,157,298 Held-to-maturity financial assets 2,421,241 3,312,094 6,214,140 8,102,021 15,658,652 2,089,847 Investments accounted for by the equity 1,939,912 1,861,285 1,281,667 1,440,756 2,227,146 1,936,423 method, net Other financial assets, net 2,893,816 2,941,610 2,873,039 3,083,144 2,399,698 2,878,589 Property and equipment, net 17,424,442 17,747,428 17,898,096 16,226,923 16,752,240 17,423,351 Intangible assets 1,921,980 2,079,117 1,605,915 0 0 1,865,739 Other assets, net 6,745,987 8,783,300 22,134,089 24,251,038 24,623,965 6,370,604 Total assets 995,954,416 933,556,312 832,757,644 857,325,836 893,544,990 1,022,349,898 Due to banks and Central bank 62,532,398 57,252,391 54,181,462 72,725,981 73,610,040 68,824,475 Financial liabilities at fair value through 8,353,108 16,202,864 16,990,037 37,848,640 16,000,476 7,958,013 profit or loss Bonds and securities sold under 43,486,925 32,611,770 7,239,422 11,780,535 19,244,688 50,689,176 repurchase agreements. Payables 22,379,981 27,040,897 18,956,708 22,271,480 27,335,247 19,349,831 Deposits 756,502,655 699,985,966 654,664,982 633,654,632 667,548,327 770,264,836 Bank debentures 25,000,000 25,000,000 25,000,000 36,100,000 40,100,000 25,000,000 Other financial liabilities 13,340,332 13,184,858 151,200 167,285 178,476 13,381,869 Other liabilities 1,377,985 1,584,681 2,140,457 911,917 1,345,616 1,311,487 Pre-payout 932,973,384 872,863,427 779,324,268 815,460,470 845,362,870 956,779,687 Total liabilities Post-payout Note 2 878,376,915 779,985,137 Note 1 847,184,166 Note 2 Capital stock 49,157,526 49,157,526 49,157,526 41,750,118 41,750,118 49,157,526 Capital surplus 3,197,017 3,169,946 3,193,573 3,806,630 3,806,630 3,215,341 Pre-payout 10,593,956 8,159,642 944,099 ( 3,210,060 ) 2,709,441 13,057,289 Retained earnings Post-payout Note 2 2,646,154 283,230 Note 1 888,145 Note 2 Unrealized revaluation increments on 6,093 0 0 0 0 4,388 property Unrealized gain(loss) on available for 27,334 206,290 138,235 ( 481,283 ) ( 75,313 ) 136,363 sale financial assets Cumulative translation adjustments ( 539 ) ( 519 ) ( 57 ) ( 39 ) ( 8,717 ) ( 696 ) Unrealized loss from price drop for long- ( 355 ) 0 0 0 ( 39 ) 0 term investment Total stockholder’s Pre-payout 62,981,032 60,692,885 53,433,376 41,865,366 48,182,120 65,570,211 equity Post-payout Note 2 55,179,397 52,772,507 Note 1 46,360,824 Note 2 Certifying CPA Yang Qinzhen Weng Rongsui Weng Rongsui Weng Rongsui Weng Rongsui Yang Qinzhen Certifying CPA Peter Tsai Yang Qinzhen Yang Qinzhen Yang Qinzhen Yang Qinzhen Peter Tsai Revision Standard Standard Standard Standard Standard Type of CPA’s auditing report without without without without without without reservation 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 2011 has yet to be approved by the board of directors. 91 VI. Financial Status

Brief Income Statement

Unit: NT$1,000

Year Financial information in recent five years Current year as of March.31, 2012 2011 2010 2009 2008 2007 Items (new compilation)

Net Interest Income 12,518,154 11,850,525 10,002,148 14,138,465 16,586,530 3,406,919

Net income and gains (losses) 12,042,587 12,895,822 9,202,859 9,446,541 11,460,311 2,482,912 other than interest income

Provision for Loan Losses ( 1,985,975 ) ( 1,211,169 ) ( 4,265,429 ) ( 15,584,932 ) ( 11,496,635 ) 214,966

Operating expenses ( 13,362,370 ) ( 12,391,889 ) ( 11,476,422 ) ( 13,922,650 ) ( 13,844,276 ) ( 3,259,604 )

Income (Loss) Before Income 9,212,396 11,143,289 3,463,156 ( 5,922,576 ) 2,705,930 2,845,193 Tax

Income (Loss) after Income Tax 7,739,100 8,172,742 821,279 ( 4,098,205 ) 2,719,653 2,463,333

Extraordinary Gain ( after tax) 0 0 122,820 0 0 0

Accumulated effect from change 0 0 0 0 0 0 in accounting principle (after tax)

Net Income ( Loss) 7,739,100 8,172,742 944,099 ( 4,098,205 ) 2,719,653 2,463,333

Basic Earnings ( Loss ) per 1.61 1.70 0.21 ( 1.03 ) 0.68 0.51 share ( New Taiwan dollars )

92 B. Financial analysis for recent five years

Financial Analysis

Unit:NT$1,000

Year Financial information in recent five years Current year as of March Items 2011 2010 2009 2008 2007 31, 2012

Deposit/loan ratio(%) 80.47 76.88 76.81 82.73 84.63 82.25

NPL ratio (%) 0.16 0.33 0.58 1.38 1.99 0.27 Management ability Interest income/average outstanding 0.95 0.73 1.18 2.61 2.44 0.26 deposit ratio (%) Interest income/average outstanding 3.39 3.23 3.43 5.71 5.89 0.87 loans ratio (%) Turnover rate of total assets ( times ) 2.47 2.65 2.31 2.75 3.14 0.58

Revenue per employee (NT$1,000) 3,912 3,934 3,281 3,890 3,990 970

Profit per employee (NT$1,000) 1,233 1,299 161 ( 676 ) 387 405 Profit-making Capability Returns on first-tier capital (%) 15.87 20.83 7.59 ( 13.80 ) 6.97 4.79

Returns on assets (%) 0.80 0.91 0.11 ( 0.47 ) 0.32 0.24

Returns on shareholder’s equity (%) 12.52 14.32 1.98 ( 9.10 ) 6.55 3.83

Net Profit rate (%) 31.51 33.03 4.92 ( 17.38 ) 9.70 41.82

Earnings per share(NT$1) 1.61 1.70 0.21 ( 1.03 ) 0.68 0.51 structure % Financial Liabilities/assets ratio 93.68 93.50 93.58 95.12 94.61 93.59

Fixed assets/shareholder’s equity 27.67 29.24 33.50 38.76 34.77 26.57 ratio

Annual analysis Growth rate data, not Assets growth 6.68 12.10 ( 2.87 ) ( 4.05 ) 8.58 applicable to quarterly report

Annual analysis data, not Profit growth ( 17.33 ) 221.77 158.47 ( 318.87 ) 110.22 applicable to quarterly report

Cash flow Cash flow ratio (%) 8.24 15.32 ( 0.10 ) 5.91 33.05 12.21

Propriety of cash flow ratio (%) 404.20 1,434.57 1,115.21 553.53 504.69 275.13

Cash-flow satisfaction ratio (%) ( 14.05 ) ( 24.46 ) ( 9.57 ) 21.16 ( 40.61 ) ( 37.99 )

Liquid reserve ratio 25.02 26.04 22.75 20.25 18.98 26.39

Secured loans for related parties (NT$1,000) 3,961,203 3,748,978 5,183,344 16,677,172 21,427,905 5,693,980

Share of outstanding secured loans for 0.59 0.61 0.91 2.83 3.40 0.83 related parties in total outstanding loans.

Business scale Market share of assets 2.64% 2.59% 2.49% 2.64% 2.95% 2.73%

Market share of book value 2.72% 2.77% 2.61% 2.18% 2.56% 2.71%

Market share of deposit 2.65% 2.62% 2.53% 2.61% 2.96% 2.68%

Market share of loans 2.67% 2.58% 2.58% 2.67% 2.98% 2.75%

Reasons for changes in various financial ratios in recent two years: 1. Profit-making and growth rate: After maintain assets quality, the bank racked up increase in the profits, as well as ratios related to profit-making capability, in the year than 2011. 2. Cash flow: Please refer to explanation for liquidity analysis for recent two years.

93 VI. Financial Status

Calculation formula:

1. Management capability (1) Deposit/loan ratio=total deposits/total loans (2) NPL ratio=Total NPL ratio/total loans (3) Ratio of interest outlay in average outstanding deposits=total interest outlay/annual average of outstanding deposits (4) Ratio of interest income in annual average of outstanding loans/Total interest income/annual average of outstanding loans (5) Turnover rate of assets=Net revenue/total assets value. (6) Revenue per employee (note 7) =net revenue/total number of employees (7) Profit per employee=After-tax net profit/total number of employees 2. Profit-making capability (1) Returns on first-category capital=pre-tax income/average value of first-category capital (2) Returns on assets=after-tax income/average value of assets (3) Returns on shareholders’ equity=after-tax income/average value of net shareholders’ equity (4) Net 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 94 business BIS Ratio (Capital Adequacy Ratio) Unit:NT$ 1 Million

BIS ratio in Year (note 1) BIS ratio in recent five years(note 2) current year as of March.31, Analytical Items 2011 2010 2009 2008 2007 2012(note5) Common shares 47,275 47,275 47,275 39,868 39,868 Perpetual non-accumulated preferred shares 1,882 1,882 1,882 1,882 1,882 Perpetual Non-accumulated subordinated debts Capital collected in advance Capital surplus (except surplus deriving from 3,197 3,214 3,194 3,807 3,807 value increment of fixed assets) Legal reserves 2,646 283 813 Tier I Special reserves 190 75 capital Accumulated profit/loss 7,758 7,876 944 ( 2,049 ) 2,709 Minority shareholding right Other items of shareholders’ equity ( 273 ) ( 157 ) ( 118 ) ( 797 ) ( 148 ) 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 2,101 2,525 1,712 1,490 2,069 Eligible Capital Total tier I capital 59,422 56,696 50,313 40,957 44,897 Perpetual accumulated preferred shares Perpetual non-accumulated subordinated debts Capital surplus from value increment of fixed 6 assets 45% of unrealized gain from available for sale 135 144 116 142 29 Convertible bonds Tier II General provisions 7,604 6,367 4,963 1,611 533 capital Long-term subordinated debts 21,097 22,058 19,939 20,478 22,448 Non-perpetual preferred shoes Need not disclose Combination of perpetual non-accumulated preferred shares and subordinated debts which exceeds 15% of tier I capital Minus: items for capital reduction 2,101 2,525 1,712 3,539 2,069 Total tier II capital 26,741 26,044 23,306 18,692 20,941 Short-term subordinated debts Tier III Non-perpetual preferred shares capital Total Tier III capital Eligible Capital 86,163 82,740 73,619 59,649 65,837 Standard approach 607,211 551,857 508,984 535,984 565,157 Credit Weighted risk assets Internal evaluation approach risk Securitized assets 1,158 1,514 620 806 641 Basic indicator approach Operating Standard approach /selective standard approach 36,815 34,888 38,272 45,552 59,291 risk Advanced measurement approach Market Standard approach 30,258 20,863 20,417 24,316 36,537 risk Internal model approach Total risk assets 675,442 609,122 568,293 606,658 661,626 BIS ratio 12.76% 13.58% 12.95% 9.83% 9.95% Ratio of tier I capital in risk weighted assets 8.80% 9.31% 8.85% 6.75% 6.79% Ratio of tier II capital in risk weighted assets 3.96% 4.27% 4.10% 3.08% 3.16% 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 4.75% 5.19% 5.68% 4.65% 4.46% 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.

95 VI. Financial Status

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.

BIS Ratio ( Combination ) Unit:NT$1 Million BIS ratio in BIS ratio in recent five years(note 2) Year (note 1) Current year as of Analytical Items 2011 2010 2009 2008 2007 March.31, 2012(note5) Common shares 47,275 47,275 47,275 39,868 39,868 Perpetual non-accumulated preferred shares 1,882 1,882 1,882 1,882 1,882 Perpetual Non-accumulated subordinated debts Capital collected in advance Capital surplus (except surplus deriving from Tier 1 capital 3,197 3,214 3,194 3,807 3,807 value increment of fixed assets) Legal reserves 2,646 283 813 Special reserves 190 75 Accumulated profit/loss 7,758 7,876 944 ( 2,049 ) 2,709 Minority shareholding right 367 414 344 543 1,157 Other items of shareholders’ equity ( 273 ) ( 157 ) ( 118 ) ( 797 ) ( 148 ) Minus: good will 1,152 1,152 1,152 1,152 1,152 Minus: unamortized loss from the sale of NPL

Eligible Capital Minus: items for capital reduction 1,528 1,886 1,347 1,391 2,069 Total tier 1 capital 60,362 57,749 51,022 41,599 46,054 Perpetual accumulated preferred shares Perpetual non-accumulated subordinated debts Capital surplus from value increment of fixed 6 assets

Tier II capital 45% of unrealized gain from available for sale 135 144 116 142 29 Convertible bonds General provisions 7,604 6,367 4,963 1,611 532 Long-term subordinated debts 21,097 22,058 19,939 20,799 22,448 Non-perpetual preferred shoes Combination of perpetual non-accumulated Need not preferred shares and subordinated debts which disclose exceeds 15% of tier I capital Minus: items for capital reduction 1,528 1,886 1,347 3,440 2,069 Total tier II capital 27,314 26,683 23,671 19,112 20,940 Short-term subordinated debts Tier III Non-perpetual preferred shares capital Total Tier III capital Eligible Capital 87,676 84,432 74,693 60,711 66,994

Weighted risk assets Standard approach 607,931 553,501 510,883 535,050 564,926 Credit Internal evaluation approach risk Securitized assets 1,158 1,514 620 806 641 Basic indicator approach Operating Standard approach /selective standard approach 36,815 34,888 38,272 45,552 59,291 risk Advanced measurement approach Market Standard approach 30,280 20,881 20,452 24,415 36,537 risk Internal model approach Total risk assets 676,184 610,784 570,227 605,823 661,395 BIS ratio 12.97% 13.82% 13.10% 10.02% 10.13% Ratio of tier I capital in risk weighted assets 8.93% 9.45% 8.95% 6.87% 6.96% Ratio of tier II capital in risk weighted assets 4.04% 4.37% 4.15% 3.15% 3.17% 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 4.75% 5.19% 5.67% 4.65% 4.46% Explain reasons for changes in BIS ration in recent two phases (no need of analysis for change under 20%) No need of analysis, s change in recent two phases is less than 20%. 96 C. Inspection report on the financial statement of the latest year by supervisors

Inspection report of supervisor Taishin International Bank Co., Ltd

Attached please find 2011 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 228 and 219, Company Law.

To Shareholder’s Meeting of Taishin International Bank:

Standing supervisor Tsay, Yang-Tzong

Supervisor Long-Su Lin

Supervisor Toney Chen

May.10, 2012

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 index 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.

97 7 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Evaluation

A. Financial status:

Main reasons for major changes in assets, liabilities, shareholders’ equity in recent years and effect

Unit: NT$1,000

Year Change 2010 2011 (New Compilation) Item Value % Asset Cash and cash equivalent, due from the Central 40,645,345 50,522,320 ( 9,876,975 ) -19.55% Bank and call loans to other banks Financial assets at fair value through profit or loss 40,781,549 36,979,776 3,801,773 10.28% Bonds and securities purchased under resell 1,058,738 2,992,554 ( 1,933,816 ) -64.62% agreements Available-for-sale financial assets 191,190,849 177,358,294 13,832,555 7.80% Loan, net 600,808,129 531,674,018 69,134,111 13.00% Receivable , net 88,122,428 97,304,516 ( 9,182,088 ) -9.44% Hold-to-maturity financial assets 2,421,241 3,312,094 ( 890,853 ) -26.90% Investments accounted for by the equity method, 1,939,912 1,861,285 78,627 4.22% net Property and equipment, net 17,424,442 17,747,428 ( 322,986 ) -1.82% Other financial assets 2,893,816 2,941,610 ( 47,794 ) -1.62% Goodwill and intangible assets 1,921,980 2,079,117 ( 157,137 ) -7.56% Other assets, net 6,745,987 8,783,300 ( 2,037,313 ) -23.20% Total assets 995,954,416 933,556,312 62,398,104 6.68% Liabilities Due to banks and Central Bank 62,532,398 57,252,391 5,280,007 9.22% Deposit 756,502,655 699,985,966 56,516,689 8.07% Financial liabilities at fair value through profit or 8,353,108 16,202,864 ( 7,849,756 ) -48.45% loss Bonds and securities sold under repurchase 43,486,925 32,611,770 10,875,155 33.35% agreements Payables 22,379,981 27,040,897 ( 4,660,916 ) -17.24% Bonds debentures 25,000,000 25,000,000 0 0.00% Other financial liabilities 13,340,332 13,184,858 155,474 1.18% Other liabilities 1,377,985 1,584,681 ( 206,696 ) -13.04% Total liabilities 932,973,384 872,863,427 60,109,957 6.89% Capital stock 49,157,526 49,157,526 0 0.00% Capital surplus 3,197,017 3,169,946 27,071 0.85% Retained earnings 10,593,956 8,159,642 2,434,314 29.83% Unrealized revaluation increments on property 6,093 0 6,093 - Unrealized gain (loss) on available for sale financial 27,334 206,290 ( 178,956 ) -86.75% assets Cumulative translation adjustments ( 539 ) ( 519 ) ( 20 ) 3.85% Other adjustment items in shareholders’ equity ( 355 ) 0 ( 355 ) 0.00% Total shareholders’ equity 62,981,032 60,692,885 2,288,147 3.77% 1. Cash, cash equivalent, deposits with the Central Bank of China, and inter-bank call loans decreased, due to reduced deposits with the Central Bank of China. 2. Available-for-sale financial assets increase due to increased holding of corporate bonds and government bonds 3. Discount and loan increase, mainly due to increase of long-term loans 4. Reduction of accounts receivable, mainly due to reduction of negotiable instrument and debt 5. Increase of deposit and remittance, mainly due to increase in time deposits and savings deposit 6. Increase in retained earnings, mainly due to increase in legal reserves

98 B. Management outcome:

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

Unit: NT$1,000

Year Change 2010 2011 (New Compilation) Item Value %

Net interest income 12,518,154 11,850,525 667,629 5.63%

Interest income 19,404,839 16,777,250 2,627,589 15.66%

Interest expense ( 6,886,685 ) ( 4,926,725 ) ( 1,959,960 ) 39.78%

Net Income and Gains (Losses) other 12,042,587 12,895,822 ( 853,235 ) -6.62% than interest income

Fee income, net 6,117,143 6,670,825 ( 553,682 ) -8.30%

Gain on financial assets and liabilities 291,413 1,301,972 ( 1,010,559 ) -77.62% at fair value from profit or loss

Realized gain (loss) on available-for- ( 48,257 ) 133,133 ( 181,390 ) -136.25% sale financial assets

Investment income recognized under 103,373 453,641 ( 350,268 ) -77.21% the equity method

Exchange gain, net 838,041 339,810 498,231 146.62%

Collection of bad debt and overdue 3,793,311 3,120,438 672,873 21.56% account

Other miscellaneous net income 947,563 876,003 71,560 8.17%

Provisions for loan losses ( 1,985,975 ) ( 1,211,169 ) ( 774,806 ) 63.97%

Operating expense ( 13,362,370 ) ( 12,391,889 ) ( 970,481 ) 7.83%

Income (Loss) before income tax 9,212,396 11,143,289 ( 1,930,893 ) -17.33%

Income tax (expenses) benefit ( 1,473,296 ) ( 2,970,547 ) 1,497,251 -50.40%

Income (Loss) before extraordinary 7,739,100 8,172,742 ( 433,642 ) -5.31% gain

Accumulated effect from change in 0 0 0 0.00% accounting principle (after tax)

Extraordinary gain (after tax) 0 0 0 0.00%

Net income (loss) 7,739,100 8,172,742 ( 433,642) -5.31%

1. Interest income increases than last year, mainly due to increased interest income from loans 2. Interest fees increases than last year, mainly due to increased income from deposit interests 3. Financial assets and benefits from liabilities, listed in gains/loss from change in fair value, decreases, due to reduced evaluation of bonds

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

C. Cash flow:

Unit: %

Year 2010 2011 Change Item (New Compilation)

Cash flow ratio(%) 8.24 15.32 -46.21%

Propriety ratio for cash flow (%) 404.20 1,434.57 -71.82%

Satisfaction ratio for cash flow (%) (14.05) (24.46) -42.56%

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 Million

Forecast net cash flow Value of anticipated Remedies for anticipated cash shortfall Cash balance at the Anticipated cash influx from business activities cash surplus (shortfall) start of the period A for the entire year C for the entire year B A+B+C Investment plan Funding plan

11,126 5,038 1,464 17,628 - -

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.

100 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 anticipated fund utilization Actual or planned Total funds Plan items planned funding completion needed sources 2007 2008 2009 2010 2011 2012 dates Land Own fund 2009 1,228,418 1,228,418 2009 572,211 572,211 Buildings Own fund 2010 22,742 22,742 2011 19,169 19,169 2007 60,242 60,242 2008 209,771 209,771

Machinery 2009 73,466 73,466 Own fund equipment 2010 225,642 225,642 2011 208,092 208,092 2012 432,444 432,444 2007 6,879 6,879 2008 13,827 13,827 Transportation equipment & 2009 5,988 5,988 Own fund miscellaneous 2010 24,158 24,158 equipment 2011 17,291 17,291 2012 13,357 13,357 2010 61,066 61,066 Leased assets Own fund 2011 55,591 55,591 Expected benefits Increased capital outlay in 2012 is mainly for procurement of machinery and equipment, including computer and information equipment, which can improve the environment for information operation and meet the expansion of various businesses, so as to enhance service quality.

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

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

101 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Evaluation

F. Analysis and evaluation of risk management

a. A series of qualitative and quantitative requirements for risk management:

1. Credit risk management system and accrued capital 2011 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 business strategy, 1. Credit risk adopt the following strategy to control credit risk: management 1. In evaluating credit-extension cases, emphasize cash flow as major repayment source and obtain proper strategy, goal, risk reward. policy 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. 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.

2. Credit risk Corporate Credit Management Division is the credit risk management unit for Corporate Banking Group. management It consists of credit management, screening, global trade, and asset management departments. Credit organization and extension management department is in charge of the planning of internal credit evaluation system, the structure monitoring of credit-extension position, the diversification of credit-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 corporate 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 3. Scope and features between risk and profits. Asset qualities and the characteristics of defaults are analyzed regularly to adjust risk of credit risk report management indicators and achieve the business goals. and evaluation For Corporate Banking Group, internal rating systemic used for measurement and management of credit risk. system 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, chattels, and and /or mitigating risk and strategies securities. Each of them has its own appraisal method and period. and processes The continuing effectiveness of hedges/mitigations is monitored by applying the internal credit rating system, for monitoring credit portfolio management and review, coupled with credit exposures diversification and credit limit setting. the continuing Strategies and processes for hedging and /or mitigating risk are reviewed and adjusted according to changes effectiveness of in factors such as marco economy or financial regime. hedges/mitigations. 5. Regulatory capital requirement Standardized approach methodology

102 Credit risk exposure value and capital requirement after mitigation on standardized method Dec. 31, 2011/unit: NT$1,000

Type of Risk Exposure Risk Exposure after Mitigation Capital Requirement Sovereigns 192,065,693 193,663 Non-central government public sector entities 1,288,983 20,624 Banks (including multilateral development bank) 29,492,651 976,737 Corporate (including securities and insurance 322,491,334 25,263,342 company) Retails 137,414,600 8,559,007 Residential properties 196,626,896 7,078,973 Equities 2,690,731 694,154 Other Assets 143,756,905 5,790,342 Total 1,025,827,793 48,576,842

2. Risk management system for securitized assets, risk exposure, and capital requirement 2011 Risk management system for securitized assets

Items Contents

1. Risk management strategy The bank’s assets securitization business aims to achieve optimal deployment of the bank’s assets and liabilities, as well as diversify assets and risks. 2. Risk management process The bank’s financial management division first analyzes the deployment status of the bank’s 1. Risk management strategy and assets and liabilities, before putting forth proposal for the securitization business according to process for securitized assets 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.

Board of directors

President

Finance Division Retail Banking Group Information Technology 2. Risk management organization Services Group and structure for securitized Planning, Provision of workflow assets financial information for the targets Provision of historical data for evaluation, and of securitized assets and its the targets of securitized assets the issuance accounting treatment. and information needed by process Risk management strategy consigned institutions. coordination. and mechanism for the targets of securitized assets

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

5. Regulatory capital requirement Standardized approach methodology

103 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Evaluation

Status of Securitized Assets Business: Nil (A) Risk exposure for securitized assets and capital requirement Base date: Dec. 31, 2011/unit: NT$1,000 Non-originating bank Originating bank

Risk Risk exposure value exposure Non assets-backed commercial paper Kinds of risk value for Capital Assets- exposure securitized Capital Traditional type Combination type requirement products requirement backed before No commercial bought or Retained Retained No retained securitization retained paper held by the position position position bank position Bank Type

Housing loan 5,792,506 92,680

Enterprise type

Total 5,792,506 92,680

(B) Information on securitized products (1) Summarized information on investment in securitized products Base date: Dec. 31, 2011/unit: NT$1,000

Evaluated Accumulated Original cost Value on book Items Listed accounting items accumulated reduction A D=A+(B+C) income B C

Financial assets ready for sale- 1 5,766,504 19,641 5,786,145 beneficiary certificates

Total 5,766,504 19,641 5,786,145

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 orAssets-backed securities ( RMBS), beneficiary certificates for securitized claims on commercial property-mortgaged loans orAssets-backed securitized (CMBS), collateralized mortgage obligation (CMO), and other realty-mortgage securities (2) Beneficiary certificates or assets-backed securities (ABS): including beneficiary certificates for corporate-loan claims or assets-backed securitized (collateralized loan, obligation, or CLO) beneficiary certificates for securitized bond assets or assets-backed securities (collateralized bond obligation , or CBO) beneficiary certificates for securitized claims on credit-card debts or assets-backed securities, beneficiary certificates by securitized claims on auto loans or assets-backed securities, beneficiary certificates for securitized claims on consumption loans/cash-card debts or assets-backed securities, beneficiary certificates for securitized leasing claims or assets-backed securities, and other securitized beneficiary certificates or assets-backed securities (3) (ABCP) Short-term beneficiary certificates or short-term assets-backed securities (assets-backed commercial paper) (4) Collateralized debt obligation(CDO) (5) Realty securitization: It refers to real estate asset trust (REAT) (6) Bills and bonds issued as structured investment vehicles(SIV) (7) Other securitized products Note 2: The table includes beneficiary certificates of asset-backed securities held by the bank with the bank serving as an originating institution.

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

Unit: NT$1,000 Payment Names of Listed Credit method for Unrealized Attachment Contents Denomination Issuer and Purchase Maturity Coupon Original Accumulated Book securities accounting rating principal profit & point of assets currency its location date date rate cost impairment value (note 2) item (note 3) and Loss (note 4) pool (note 5) interest Ginnie Mae Secured Available– mortgage loan, GNR 2010- for-sale GNMA MBS USD 2010/2/1 2025/2/1 Fixed 3% S&P AA+ Monthly 311,363 3,048 314,411 - Original cost= 25 AH financial POOL USD assets 10,279,404.85 deals﹕10pools Freddie Mac Secured FREDDIE Available– mortgage loan, MAC DUE for-sale FREDDIE Moody's USD 2010/10/29 2040/8/15 Fixed 2.5% Monthly 388,730 1,282 390,012 - Original cost= 15 AUG financial MAC Aaa USD 2040 assets 12,828,917.88, deals﹕35pools Ginnie Mae Secured Available– GNR DUE mortgage loan, for-sale GNMA MBS 1 * USD.1M. Moody's 16 MAR USD 2011/11/30 2034/3/16 Monthly 410,541 879 411,420 - Original cost= financial POOL LIBOR + 0.3% Aaa 2034 USD assets 13,553,681.95, deals﹕12pools Ginnie Mae Secured Available– GNR DUE mortgage loan, for-sale GNMA MBS 1 * USD.1M. Moody's 20 APR USD 2010/4/30 2040/4/20 Monthly 711,376 3,148 714,524 - Original cost= financial POOL LIBOR + 0.65% Aaa 2040 USD assets 23,485,514.1, deals﹕2pools Ginnie Mae Secured Available– GNR DUE mortgage loan, for-sale GNMA MBS 1 * USD.1M. Moody's 16 OCT USD 2011/11/15 2040/10/16 Monthly 415,772 5,289 421,061 - Original cost= financial POOL LIBOR + 0.43% Aaa 2040 USD assets 13,726,248.06, deals﹕17pools Note 1: The table includes domestic and foreign products Note 2: Full names should be provided for same securities product in difference issuance Note 3: Provide result of the latest credit rating Note 4: Attachment point refers to share of sub-issuance value with compensation priority lower than that for securities held by the bank in the Local issuance value of the securitized product. Assuming, for example, a bank purchase A security of a certain CDO (collateralized debt obligation) , the security has sub-security BBB and sub-equity security with compensation priority lower than A security. The total issuance value of BBB and Sub-equity security amounts to 12% of the total value of the CDO. Then the attachment point for A security is 12% Note 5: Assets pool refers to assets portfolio handed by originating institution to trustee or other company with a special purpose. Specify kind of assets In the portfolio (denote primary lien or subordinated status), detail, value on book in original currency and number.

105 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Evaluation

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

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

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

3. Operational risk management system 2011 Operational risk management system

Items Contents

Taishin Bank got the approval of FSC for the Standardized Approach in 2007. 1. Operational risk management strategy and However, we are planning to adopt the Advanced Measurement Approach in the process future. So far, we have developed systems and processes 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 that 2. Operational risk management organization staffers at various levels can follow consistent standards in identifying, evaluating, and structure 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 report The bank has established operating risk management system, including loss 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 and/or mitigating risk and strategies processes for monitoring The bank has instituted business continuity management (BCM) and/or taken out the continuing effectiveness of hedges/ insurance as the hedging tools mitigations.

5. Regulatory capital requirement methodology Standardized approach

Capital requirement for operational risk Dec.31, 2011, Unit: NT$1,000

Year Gross Income Capital Requirement

2009 19,692,558

2010 21,677,718

2011 24,801,302

Total 66,171,578 2,945,193

106 4. Market risk management system and capital requirement 2011 Market risk management system

Items Contents

Taishin market risk policy is meant to manage risk, in order to maximize shareholder’s value. We have established a risk management framework, including an independent risk management 1. Market risk strategy and department to maintain integrity of the risk control processes, clearly defined market risk process 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.

Our market risk team is responsible for daily management and control of our market risk exposures, 2. Market risk management ensuring our business activities adhere to our market risk policies. Duties are divided according to organization and structure function as follows: product control, system setup and maintenance by designated personnel, and quants.

Risk reporting is performed in a timely fashion and measurements are made at different levels, from products to trading desks. We seek to monitor and control our market risk exposures through a variety of separate but complementary financial/trading management and reporting systems. Qualitative tools: Our major objective is to promote risk transparency and risk awareness. We 3. Scope and features of market accomplish this through an independent risk management function, alone with the setup of risk risk report and evaluation policies and processes, including pricing verifications, benchmarking, model validation and a new system 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 and/or Market risk is managed by diversifying exposures, controlling position sizes and establishing mitigating risk and strategies economic hedges in related securities or derivatives. The ability to actively manage risk is related and processes for monitoring to its hedge strategy, and identifying adverse changes in the liquidity of an exposure or its related the continuing effectiveness hedge instrument and in the correlation of price movements between the two is essential to of hedges/ mitigations 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, 2011, Unit:NT$1,000

Type of Risk Capital Requirement Interest rate risk 2,122,289 Equity price risk 55,526 Currency rate risk 242,805 Commodity price risk 0 Total 2,420,620

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.

107 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Evaluation

(1) Analytical table for the structure of maturity dates for NT-dollar funds Dec.31, 2011;Unit:NT$1,000 Value for remaining period before maturity Item Total 181 days-one 1-30 days 31-90 days 91-180 days Over one year year Main fund inflow 869,504,187 205,737,709 165,612,383 44,864,429 73,665,202 379,624,464 upon maturity Main fund outflow 943,601,610 161,594,580 151,883,487 131,739,547 200,611,085 297,772,911 upon maturity Shortfall before ( 74,097,423 ) 44,143,129 13,728,896 ( 86,875,118 ) ( 126,945,883 ) 81,851,553 maturity

Note: The table contains only NT-dollar funds of headquarters and domestic branches (excluding foreign currency)

(2) Analytical table for the structure of maturity dates for US-dollar funds. Dec.31, 2011;Unit:US$1,000 Value for remaining period before maturity Item Total 181 days-one 1-30 days 31-90 days 91-180 days Over one year year

Asset 9,187,511 3,799,481 3,018,816 960,018 317,567 1,091,629

Liabilities 9,119,390 3,363,069 2,209,685 2,404,303 665,547 476,786

Shortfall 68,121 436,412 809,131 ( 1,444,285 ) ( 347,980 ) 614,843

Accumulated 68,121 436,412 1,245,543 ( 198,742 ) ( 546,722 ) 68,121 Shortfall 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 due obligations 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.

108 █ 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.

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 policies and law/regulations on the bank’s finance and countermeasures:

1. Article 12-1 and 12-2 of Banking Law:

The revised articles have affected the legality for the provision of guarantors for the bank’s own-residence loans and consumer loans. The bank has adjusted methods and documents in complying with law/regulation and the requirement of the regulator.

109 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Evaluation

2. Individual Information Protection Law: (1) The bank already adopted measures strengthening the security of computer mainframe and control of user right in 2009 and introduced the management system of ISO 27001 international information security management standards, obtaining the certification in 2010. (2) Since the new version of Individual Information Protection Law further emphasizes the protection of individual information and increases the penalties for violation, the bank introduced “BS 10012:2009” publicized by British Standard Institute (BSI) in June 2009 as the fundamental framework for individual information protection. In addition, in line with the systematic management method of PDCA (Plan-Do-Check-Act), the bank introduced individual information management system, which is expected to obtain BS10012 certification in the second half of 2012. (3) The bank adopts the following overall goal and concrete measures for individual information protection: a. Establish individual information protection system, in compliance with domestic laws/ regulations and the internal auditing and control system, so as to link up with international practice; b. Enhance organizational competitiveness and strengthen the awareness for individual information protection among colleagues; c. Establish a complete protection mechanism for identifying the bank’s individual information and formulate the life cycle for individual information; d. Establish the norm for the input and retrieval of individual information; e. Deploy proper information security tool and keep the record and track for various input and retrieval activities. 3. Financial Consumer Protection Law:

Since the law increases the duties and obligations of banks, the bank has adjusted related operations and norms accordingly.

4. FATAC Act (The U.S.):

The act requires global financial institutions, including Taiwan, to report United States accounts to the U.S. Internal Revenue Service. Those which fail to do so will be subject to extra 30% tax levy by IRS according to the regulation of FATCA. The bank will notice the contents of the act and adjust related operating procedure and norm according to the decision of the government concerning the enforcement policy.

c. Effect of technological and industrial changes on the finance of the financial holding company and countermeasures.

To cope with the new needs arising from various businesses, Taishin Bank has established advanced server virtual platform since 2009, with conspicuous results, enabling the bank to cut initial investment cost for information system and focus on business development and service standard. In 2012, the bank began to introduce cloud-end service technology, transforming VIP service in the direction of cloud-end digitalization and increasing the communications and information exchange between VIP clients and the bank. In addition to boosting the satisfaction of VIP clients, the effort has created a new marketing and sales channel, thereby boosting profit-making opportunities.

110 d. Effect of change in the corporate images of the financial holding company and its subsidiaries 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 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: There is no plan for the expansion of business offices in the recent year.

111 VII. Review and Analysis of Financial Status and Business Performance and Risk-Management Evaluation

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. 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

112 8

VIII. Special Notes

A. Information of affiliates

a. Consolidated financial statement with affiliates

The bank did not produced consolidated financial statement with affiliates in 2011, 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, 2011

Taishin International Bank

100% 65.36% 87.4% 60%

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

65.75% 100% 100%

Contact Digital PayEasy Travel Taishin Insurance Integration Service Co., Ltd Brokers Co., Ltd Co., Ltd

113 VIII. Special Notes

2. Business status of affiliates

Base date:Dec.31,2011;Unit: NT$1,000

Current After-tax Total Total Operating Operating Name of enterprises Capital Book Value Profit/loss Profit/loss Assets Liabilities revenue profit (after tax) Per share

Taishin Dah An Leasing 200,000 207,556 374 207,182 0 2,716 2,358 0.12

PayEasy Digital Integration 434,500 1,008,027 688,107 319,921 2,356,770 ( 208,577 ) ( 209,098 ) ( 4.81 )

PayEasy Travel 13,000 32,930 19,097 13,834 263,948 ( 13 ) 40 0.03

Contact Digital Integration 7,300 119,590 169,076 ( 49,486 ) 321,778 ( 48,441 ) ( 41,100 ) ( 56.30 )

Taishin Insurance Agency 3,000 1,234,467 161,623 1,072,844 1,590,119 286,954 217,776 725.92

Taishin Insurance Brokers 60,000 90,534 4,134 86,400 48,418 14,345 13,056 2.18 Taishin Real Estate 200,000 603,736 302,198 301,538 53,309 19,875 16,429 0.82 Management

Note 1: All affiliates, whatever their business scales, must disclose information. Note 2: In case an affiliate is a foreign company, related business figures should be converted to NT dollar to the exchange rate of the date of the report

3. Information on affiliates

Base date: Dec.31, 2011;Unit: NT$1,000

Date of Paid-in Name of enterprise Address Major business or product items establishment Capital

1.Investment consulting 2.Management consulting 3.Information software service 4.Data processing 5.E-information provision 6.Common advertisement PayEasy Digital 13th fl., No.11, Zhongshan 2000.04.27 434,500 7.Other general retail business 8.Department store Integration Co., Ltd N. Road, Sec.1, Taipei city 9.Brokerage 10. Online certification 11.Wholesale for medical equipment 12.Retailtor Medical equipment 13.Store less retail.

Taishin Insurance 3th fl., No.44, Zhongshan 1996.09.19 3,000 Agency for personal insurance Agency N. Road, Sec.2, Taipei city

Taishin Insurance 3th fl., No.44, Zhongshan 2002.07.24 60,000 Brokerage for property insurance Brokers Co., Ltd N. Road, 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 7.Retail of ship and Taishin Dah An 2th fl., No.9, Dehui Street, 1997.10.13 200,000 parts 8. Retail of flying devices and parts 9.Procurement of Leasing Co.,Ltd Taipei city 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 Taishin Real Estate 2th fl., No.9, Dehui Street, zone development 5.Investment and construction of public Management 1995.08.17 200,000 Taipei city construction projects 6.New town and new community Co., Ltd development 7.Agency for area expropriation and urban land rezoning 8.Urban renewal 9.Realty transaction 10.Realty leasing 11.Business credit investigation PayEasy Travel 13th fl., No.11, Zhongshan 2005.06.06 13,000 Travel business Service Co., Ltd N. Road, Sec.1, Taipei city 1.Investment consulting 2.Management consulting 3.Information software service 4.Data processing Contact Digital 12th fl., No.11, Zhongshan 2008.12.29 7,300 5. E-information provision 6.Common advertisement service Integration N. Road, Sec.1, Taipei city 7.Online certification 8.Department store 9.Store less retail 10.Other general retail business 11.Brokerage.

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

Base date: Dec.31, 2011; Unit: share;%

Shareholding (note 2) (note 3) Name of enterprise Title (note 1) Name or representative Shareholding Stake ( %) (share) Taishin Dah An Leasing Representative Taishin International Bank 20,000,000 100.00% Chairman Larry Chung Director Steve S.F. Shieh Director Shawn C.L. Teng Supervisor Welch Lin President Vincent Shieh PayEasy Digital Integration Representative Taishin International Bank 28,400,001 65.36% Chairman Daniel Tsai 53,000 0.12% Director Steve S.F. Shieh 52,000 0.12% Director Bill Lin 320000 0.74% Director dismissal Supervisor Welch Lin Representative Yungho Co.,Ltd. 3,767,173 8.67% Director Jeffrey Wu Director Vincent Chen 85,000 0.20% Representative PC Home Online 5,437,762 12.51% Director Hung Tze Jan President Bill Lin 320,000 0.74% PayEasy Travel Service Representative PayEasy Digital Integration 1,300,000 100.00% Chairman Bill Lin Director Steve S.F. Shieh Director Daniel Tsai Director Brenda Huang Supervisor Vincent Chen President Guo Weili Contact Digital Integration Representative PayEasy Digital Integration 480,000 65.75% Chairman Bill Lin Director Lu Jui-lu Director Wang Yu-hsiu Supervisor Daniel Tsai Representative Director/President Li Yi-teng 127,163 17.42% Taishin Insurance Agency Co.,Ltd Representative Taishin International Bank 262,204 87.40% Chairman Jack Su Director Shawn C.L. Teng Director Welch Lin Director Spike Wu Supervisor Jeffrey Wu President Andy An Taishin Insurance Brokers Co.,Ltd Representative Taishin Insurance Agency 6,000,000 100.00% Chairman Jack Su Director Welch Lin Director Spike Wu Director Steve S.F. Shieh Supervisor Jeffrey Wu President Andy An Taishin Real Estate Management Representative Taishin International Bank 12,000,000 60.00% Chairman Chen Lung-cheng Director Thomas T.L.Wu Director Temporarily vacant Supervisor Welch Lin Representative Taishin Asset Management 8,000,000 40.00% Director Jeffrey Wu President Liaw,Shean Yng Note 1: In case the affiliate is a foreign company, list position with corresponding ranking Note 2: In case the invested company is a company limited by share, please fill in the number of shares and sharehoding ratio. For others, please fill in contributed capital and ratio, with proof. Note 3: In case director or supervisor is a legal entity, disclose information on its representative.

115 VIII. Special Notes

c. Affiliate report

Statement

Taishin International Bank

Statement on Affiliation Report

The company’s affiliation report for fiscal 2011 ( Jan.1,2011-Dec.31, 2011) 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

May.4, 2012

116 CPA Inspection Opinion on Affiliation Report

Deloitte No.10104061 May.4, 2012

Recipient: Taishin International Bank Co., Ltd

Theme: Confirmation of the absence of major inadequacies in information contained in the 2011 affiliation report of your company

1. Your company issues a statement, as attached, expressing that your affiliation report for fiscal 2011(Jan.1, 2011-Dec.31, 2011) 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 2011, compiled according to “Guidelines for the Compilation of Consolidated Business Report, Consolidated Financial Statement, and Affiliation Report of Affiliates,” and the notes of your 2011 financial statement.

CPA Yang Qinzhen

CPA Peter Tsai

Deloitte & Touche Taiwan

117 VIII. Special Notes

d. Relationship between subordinated and controlling company

Base date: Dec.31,2011; Unit: share;%

Director, supervisor, or manager Controlling Shareholding and lien obligation of controlling company Controlling representating controlling company company reason name Shares owned Share of stake Shares with lien Title Name

Chairman Thomas T.L.Wu

Director Hsu Te-nan

Director Richard R.C, Liu

Director Kuo, Jui-Sung

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

Independent Lin, Neng-bai director

Standing Supervisor Tasy, Yang-Tzong

Supervisor Toney Chen

Supervisor Lin, Long-Su

e. Dealing between subordinated and controlling company

1. Dealing for purchase and sale:Nil

2. Property dealing:Nil

3. Fund lending:Nil

4. Asset leading:

118 Unit:NT$1,000 Type of Method of Amount Other Target Nature Comparison Collection dealing rental of agreed Lease Period of Lease Basis for rental with common of current (Rental out collection current conditions Name Address (note 1) rental level rental or On lease) (payment) rental (note 2) Fl. 13, No. 118, Renai Road, Business Set on reference Monthly Similar to Rental out 2007.05.01 2012.04.30 832 Normal Deposit of 138 Sec. 4, Taipei lease of market price collection market price Fl. 16, No. 118, Renai Road, Business Set on reference Monthly Similar to Rental out 2010.11.01 2015.10.31 7,449 Normal Deposit of 1,832 Sec. 4, Taipei lease of market price collection market price

Fl. 15, 17, 19, No. 118, Renai Business Set on reference Monthly Similar to Rental out Financial 2010.03.01 2013.02.28 16,171 Normal Deposit of 4,042 Road Sec. 4, Taipei lease of market price collection market price Holding Building Business Set on reference Monthly Similar to Rental out Fl., 12, 13, 16, 20, 21,22, 23, 2011.01.01 2011.08.31 7,927 Normal Deposit of 2,972 lease of market price collection market price No. 118, Renai Road, Sec. 4, Business Set on reference Monthly Similar to Rental out Taipei 2011.09.01 2015.12.31 3,922 Normal Deposit of 2,941 lease of market price collection market price Fl. 18, No. 118, Renai Road, Business Set on reference Monthly Similar to Rental out 2011.03.17 2016.03.16 1,326 Normal Deposit of 412 Sec. 4, Taipei lease of market price collection market price

B1, No. 96, Jianguo N. Road, Business Set on reference Monthly Similar to Rental out 2010.09.01 2012.08.31 289 Normal Deposit of 72 Sec. 1, Taipei lease of market price collection market price Taiwan Fl. 12, No. 96, Jianguo N. Business Set on reference Monthly Similar to Rental out Securities 2010.05.01 2015.04.30 4,070 Normal Deposit of 1,017 Road, Sec. 1, Taipei lease of market price collection market price Building Fl.13, No. 96, Jianguio N. Business Set on reference Monthly Similar to Rental out 2010.12.01 2015.04.30 7,928 Normal Deposit of 1,981 Road, Sec. 1, Taipei lease of market price collection market price Business Set on reference Monthly Similar to Rental out Fl. 2, No,. 44, Zhongshan N. 2009.12.01 2012.11.30 9,419 Normal Deposit of 2,354 lease of market price collection market price Road, Sec. 2, Zhongshan Business Set on reference Monthly Similar to Rental out Chung District, Taipei 2010.11.01 2012.11.30 1,116 Normal Deposit of 278 lease of market price collection market price Shan Business Set on reference Monthly Similar to Rental out Building Fl. 3, No,. 44, Zhongshan N. 2009.08.01 2011.09.30 8,533 Normal Deposit of 1,896 lease of market price collection market price Road, Sec. 2, Zhongshan Business Set on reference Monthly Similar to Rental out District, Taipei 2011.10.01 2014.07.31 2,568 Normal Deposit of 2,567 lease of market price collection market price Bade Fl. 6, No. 111, Bade Road, Business Set on reference Monthly Similar to Rental out 2011.09.01 2014.08.31 505 Normal Deposit of 379 Building Sec. 4, Taipei lease of market price collection market price Fl. 6, No. 207, Jiuzhong Road, Business Set on reference Monthly Similar to Rental out 2011.01.01 2011.08.31 129 Normal Deposit of 48 Sec. 2, Neihu District, Taipei lease of market price collection market price Fl. 5, No. 207, Jiuzhong Road, Business Set on reference Monthly Similar to Rental out 2011.09.01 2012.12.31 146 Normal Deposit of 109 Sec. 2, Neihu District, Taipei lease of market price collection market price Neihu Fl. 6, No. 207, Jiuzhong Road, Business Set on reference Monthly Similar to Rental out 2010.01.01 2012.12.31 396 Normal Deposit of 99 Building Sec. 2, Neihu District, Taipei lease of market price collection market price Fl. 5, No. 207, Jiuzhong Road, Business Set on reference Monthly Similar to Rental out 2011.06.01 2012.05.31 364 Normal Deposit of 156 Sec. 2, Neihu District, Taipei lease of market price collection market price Fl. 1, No. 207, Jiuzhong Road, Business Set on reference Monthly Similar to Rental out 2011.07.01 2011.12.31 5 Normal Deposit of 0 Sec. 2, Neihu District, Taipei lease of market price collection market price Zhubei Fl., 5, No. 331, Zhongzheng E. Business Set on reference Monthly Similar to Rental out 2008.09.01 2011.10.31 265 Normal Deposit of 52 Building Road, Zhubei City, Hsinchu lease of market price collection market price Fl. 3, No. 187, Dongxing Road, Sec. Business Set on reference Monthly Similar to Rental out 2010.06.01 104.05.31 1,124 Normal Deposit of 281 2, Nantun District, Taichung City lease of market price collection market price Nantun Fl. 6, No. 187, Dongxing Road, Sec. Business Set on reference Monthly Similar to Rental out 2010.07.01 2011.11.15 195 Normal Deposit of 55 Building 2, Nantun District, Taichung City lease of market price collection market price Fl. 2, No. 187, Dongxing Road, Sec. Business Set on reference Monthly Similar to Rental out 2011.11.15 2015.05.31 49 Normal Deposit of 97 2, Nantun District, Taichung City lease of market price collection market price Fl., 3, No. 116, Wufu 2nd Road, Business Set on reference Monthly Similar to Rental out Wufu 3F. 2011.08.12 2014.08.11 265 Normal Deposit of 176 Xinxing District, Kaohsiung City lease of market price collection market price B.1, fl. 1, No. 150, Nanjing E. Business Set on reference Monthly Similar to guarantee deposits & On lease 2011.04.16 2016.04.15 9,120 Normal Road, Sec. 2, Taipei City lease of market price collection market price margins paid 2,280 1F fl.1, No. 95, Wenchang Business Set on reference Monthly Similar to guarantee deposits & On lease 2010.10.01 2012.09.30 151 Normal Road, Shilin District, Taipei lease of market price collection market price margins paid 0 No. 44, Zhongshan N. Road, Sec. Business Set on reference Monthly Similar to guarantee deposits & On lease 2010.11.01 2012.10.31 605 Normal 2, Taipei City lease of market price collection market price margins paid 0 Fl. 31, No. 66, Zhongxiao W. Business Set on reference Monthly Similar to guarantee deposits & On lease 2010.10.01 2012.09.30 126 Normal Road, Sec. 1, Taipei lease of market price collection market price margins paid 54 Fl., 4-1, 4-2, No. 207, Fuxing Road, Business Set on reference Monthly Similar to guarantee deposits & On lease 2011.09.01 2013.08.31 1,701 Normal Taoyuan City, Taoyuan County lease of market price collection market price margins paid 446 Business Set on reference Monthly Similar to guarantee deposits & On lease ATM* 20 Shin Kong Mitsukoshi 2012.01.01 2012.12.31 1,260 Normal lease of market price collection market price margins paid 0 Fl. 14-1, No. 205, Fuxing Road, Business Set on reference Monthly Similar to guarantee deposits & On lease 2012.03.01 2014.02.28 289 Normal Taoyuan City, Taoyuan County lease of market price collection market price margins paid 59

Note 1: Explain whether it belongs to capital lease or capital lease Note 2: Make notes for the setup of other rights, such as superfices right. 119 VIII. Special Notes

5. Other important dealings: As of Dec.31, 2011, the bank had NT$301,337,000 of collectible fund for linked taxation under consolidated final account.

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

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

Information on Private-Placement Securities-1

First issuance of private placement 2006(note 1) First issuance of private placement 2007(note 1) Items Issuance date: Dec.27, 2006 Issuance date: March.30, 2007 Type of security Common share Common share (note 2) Date and amount approved by Dec.21, 2006 March.27, 2007 shareholder’s meeting (note 3)

Price rationale Price to Book Value Ratio Price to Book Value Ratio

Method for selection of specific Parent company which 100% owns the bank Parent company which 100% owns the bank subscriber (note 4) Reason Strengthen financial structure and avoid causing impact on current Strengthen financial structure and avoid causing impact on for private shareholders, in addition to time efficiency, simplicity and cost current shareholders, in addition to time efficiency, simplicity and placement efficiency and so on. cost efficiency and so on. Deadline for subscription Dec.27, 2006 March 30, 2007 payment Partici- Partici- Relation- Relation- Qualifi- pation Qualifi- pation Target ship Target ship cations Amount in cations Amount in (note 5) with (note 5) with (note 6) the (note 6) the bank bank bank bank Information Item on Item Parent Parent 1-1,article subscribers 1-1,article 43, company Taishin company Taishin 43, Securities 305,555,555 500,000,000 which Financial which 100% Yes Financial Securities Yes and shares shares 100% Holding owns the Holding and Exchange owns the bank Exchange Act bank Act Actual subscription NT$ 18 per share NT$ 17 per share ( or conversion) price (note 7)

120 Difference between actual subscription (or conversion) In the reference price range (NT$15.32-19.91) In the reference price range (NT$14.71-17.96) price and reference price (note 7) Impact on shareholders (such as Increase shareholder’s equity by NT$5.5bn Increase shareholder’s equity by NT$8.5bn increase of accumulated loss) Utilization of fund from private placement Implementation completed in the fourth quarter 2006 Implementation completed in the first quarter 2007 and the implementation of the plan Manifestation of the benefits Increase BIS ratio by 1.32% approximately Increase BIS ratio by 2.13% approximately of private placement

Note 1: The number of columns can be adjusted according the number of private placements and a private placement undertaken in several issuances should be specified respectively Note 2: Specify kinds of private-placement securities, including common shares, preferred shares, convertible preferred shares, preferred shares with share right, common financial bonds, subordinated financial bonds, convertible financial bonds, financial bonds with share right, overseas convertible financial bonds, overseas depository certifications, and employee warrants. Note 3. For private placement financial bonds which don’t need the approval of shareholder’s meeting, fill in the date of approval by the board of directors and the value of the bonds Note 4: For undergoing private-placement cases with determined subscribers, specify the name of subscribers and their relationship with the bank. Note 5: The number of columns can be adjusted according to actual need. Note 6: Fill in the legal basis for the approval of the application for fund raising. Note 7: Actual subscription (or conversion) price refers to the subscription (or conversion) price set upon the issuance of private-placement securities.

Information on Private-Placement Securities-2

Second issuance of private placement 2007 (note 1) First issuance of private placement 2009 Items Issuance date: March.30 , 2007 Issuance date: December.30 , 2009

Type of security (note 2) C-type preferred shares Common shares

Date and amount approved by shareholder’s meeting March.27, 2007 November 12, 2009 (note 3)

Price rationale Price to Book Value Ratio Price to Book Value Ratio

Method for selection of Parent company which 100% owns the bank Parent company which 100% owns the bank specific subscriber (note 4) Strengthen financial structure and avoid causing impact on Strengthen financial structure and avoid causing impact on Reason for private placement current shareholders, in addition to time efficiency, simplicity current shareholders, in addition to time efficiency, simplicity and cost efficiency and so on. and cost efficiency and so on. Deadline for subscription March.30 ,2007 December, 30, 2009 payment Partici- Partici- Relation- Relation- Qualifi- pation Qualifi- pation Target ship Target ship cations Amount in cations Amount in (note 5) with (note 5) with (note 6) the (note 6) the bank bank bank bank Item Item Information on subscribers Parent Parent 1-1,article 1-1,article company company Taishin 43, Taishin 43, 188,235,294 which 740,740,740 which Financial Securities Yes Financial Securities Yes shares 100% shares 100% Holding and Holding and owns the owns the Exchange Exchange bank bank e Act Act

121 VIII. Special Notes

Actual subscription( or NT$17 per share NT$ 13.5 per share conversion) price (note 7) Difference between actual subscription (or conversion) In the reference price range (NT$14.71-17.96) Lower the reference price by NT$0.12 price and reference price (note 7) Impact on shareholders (such as increase of accumulated Increase shareholder’s equity by NT$3.2bn Increase shareholder’s equity by NT$10bn loss) Utilization of fund from private placement and the Implementation completed in the first quarter 2007 Implementation completed in the fourth quarter 2009 implementation of the plan Manifestation of the benefits Increase BIS ratio by 0.8% approximately Increase BIS ratio by 1.76% approximately of private placement

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

122 9

IX. Directory of Head Office & Branches

Greater Taipei Area

Business units Address Telephone

1F.2F No.88, Sec.6 ,Jhongshan N. Rd., Jhongshan District, Taipei Tienmou Branch (02) 2836-3988 City104, Taiwan (R.O.C.)

No.202, Sec. 2, Yanping N. Rd., Datong District, Taipei City 103, Taiwan Yanping Branch (02) 2557-9155 (R.O.C.)

No.118, Sec. 4, Ren-ai Rd., Da-an District, Taipei City 106, Taiwan Dunnan Branch (02) 2326-8899 (R.O.C.)

No.238, Sec. 1, Heping E. Rd., Da-an District, Taipei City 106, Taiwan Heping Branch (02) 2368-5589 (R.O.C.)

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, Jhongsiao Branch (02) 6636-9999 Taiwan (R.O.C.)

Daan 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, (02) 2568-3988 Department Taiwan (R.O.C.)

No.118, Sec. 4, Ren-ai Rd., Da-an District, Taipei City 106, Taiwan Trust Department (02) 2326-8899 (R.O.C.)

Dazhi Branch No.645, Bei-an Rd., Jhongshan District, Taipei City 104, Taiwan (R.O.C.) (02) 8509-6858

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

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

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

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

No.150, Fusing N. Rd., Jhongshan District, Taipei City 104, Taiwan Fusing Branch (02) 2713-7666 (R.O.C.)

No.55, Sec. 1, Nanchang Rd., Jhongjheng District, Taipei City 100, Nanmen Branch (02) 2397-2588 Taiwan (R.O.C.)

123 IX. Directory of Head Ofﬁce & Branches

Greater Taipei Area

Business units Address Telephone

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

No.62, Sec. 1, Sinsheng S. Rd., Jhongjheng District, Taipei City 100, Sinsheng Branch (02) 2395-2888 Taiwan (R.O.C.)

No.28, Sec. 3, Roosevelt Rd., Jhongjheng District, Taipei City 100, Taiwan Kuting Branch (02) 2364-6888 (R.O.C.)

Neihu Branch No.358, Sec. 1, Neihu Rd., Neihu District, Taipei City 114, Taiwan (R.O.C.) (02) 2659-9966

No.49,51, Sec. 2, Shihpai Rd., Beitou District, Taipei City 112, Taiwan Shihpai Branch (02) 5581-5052 (R.O.C.)

No.208,210, Sec. 3, Bade Rd., Songshan District, Taipei City 105, Taiwan Taipei Branch (02) 2579-8989 (R.O.C.)

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

No.289, Sec. 3, Nanjing E. Rd., Songshan District, Taipei City 105, Nantung Branch (02) 2546-1068 Taiwan (R.O.C.)

No.92, Sec. 5, Nanjing E. Rd., Songshan District, Taipei City 105, Taiwan South Songshan Branch (02) 2528-6188 (R.O.C.)

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

No.183, Sec. 4, Sanhe Rd., Sanchong Dist., New Taipei City 241, Taiwan Sanhe Branch (02) 2287-7979 (R.O.C.)

No.116, Jhengyi N. Rd., Sanchong Dist., New Taipei City 241, Taiwan Sanchong Branch (02) 2983-6100 (R.O.C.)

No.634-9, Jingping Rd., Jhonghe Dist., New Taipei City 235, Taiwan Jingping Branch (02) 2242-8989 (R.O.C.)

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

124 Greater Taipei Area

Business units Address Telephone

Sijhih Branch No.135, Jhongsing Rd., Sijhih Dist., New Taipei City 221, Taiwan (R.O.C.) (02) 2694-5133

No.176, Jhongjheng Rd., Banciao Dist., New Taipei City 220, Taiwan Banciao Branch (02) 2965-8888 (R.O.C.)

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

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

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

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

No.75, Sec. 2, Jhonghua Rd., Sinjhuang Dist., New Taipei City 242, Sinjhuang Branch (02) 2998-0888 Taiwan (R.O.C.)

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

No.76, Zhongshan Rd., Danshui Dist., New Taipei City 251, Taiwan Danshui Branch (02) 2626-8689 (R.O.C.)

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

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

Taoyuan, Hsinchu, Miaoli Area

Business units Address Telephone

No.369, Jhongfong Rd., Jhongli City, Taoyuan County 320, Taiwan Nanli Branch (03) 427-3377 (R.O.C.)

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

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

125 IX. Directory of Head Ofﬁce & Branches

Taoyuan, Hsinchu, Miaoli Area

Business units Address Telephone

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

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

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

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

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

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

Greater Taichung Area

Business units Address Telephone

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

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

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

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

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

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

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

126 Greater Taichung Area

Business units Address Telephone

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

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

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

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

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

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

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

Chiayi-Tainan Area

Business units Address Telephone

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

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

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

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

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

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

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

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

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

127 IX. Directory of Head Ofﬁce & Branches

Kaohsiung-Pingtung Area

Business units Address Telephone

No.98, Jhonghua 3rd Rd., Cianjin District, Kaohsiung City 801, Taiwan Kaohsiung Branch (07) 282-4300 (R.O.C.) No.309,311, Jiansing Rd., Sanmin District, Kaohsiung City 807, Taiwan East Kaohsiung Branch (07) 380-1500 (R.O.C.) No.360, Bo-ai 2nd Rd., Zuoying District, Kaohsiung City 813, Taiwan North Kaohsiung Branch (07) 550-9900 (R.O.C.) No.260, Jhongshan 2nd Rd., Cianjhen District, Kaohsiung City 806, Linya Branch (07) 537-5537 Taiwan (R.O.C.) No.386, Cisian 1st Rd., Sinsing District, Kaohsiung City 800, Taiwan Cisian Branch (07) 238-8545 (R.O.C.) No.116, Wufu 2nd Rd., Sinsing District, Kaohsiung City 800, Taiwan Wufu Branch (07) 216-8855 (R.O.C.) No.750, Houchang Rd., Nanzih District, Kaohsiung City 811, Taiwan Youchang Branch (07) 365-2200 (R.O.C.) No.95, Weiren Rd., Gangshan Township, Kaohsiung County 820, Taiwan Gangshan Branch (07) 621-9677 (R.O.C.) No.105, Jhongshan W. Rd., Fongshan City, Kaohsiung County 830, Fongshan Branch (07) 719-9999 Taiwan (R.O.C.) No.9, Wujia 3rd Rd., Fongshan City, Kaohsiung County 830, Taiwan Wujia Branch (07) 813-1168 (R.O.C.) No.75-2, 75-3, Ren-ai Rd., Pingtung City, Pingtung County 900, Taiwan Nanping Branch (08) 733-7575 (R.O.C.) No.103, Guangdong Rd., Pingtung City, Pingtung County 900, Taiwan Pingtung Branch (08) 721-7777 (R.O.C.) Hualien-Taitung Area

Business units Address Telephone

No.153, Gongjheng Rd., Luodong Township, Yilan County 265, Taiwan Luodong Branch (03) 953-3366 (R.O.C.) No.183, Jhongjheng Rd., Hualien City, Hualien County 970, Taiwan Hualien Branch (03) 834-5930 (R.O.C.)

Overseas Business Offices

Overseas units

Business units Address Telephone

6/F, Sun Life Tower, The Gateway, 15 Canton Road, Tsimsbatsui, Hong Kong Branch 852-22349009 Kowloon, Hong Kong Osic Building 7Fl., No.8 , Nguyen Hue Street, District 1, Ho Chi Minh City Ho Chi Minh City R.O. 84-8-38228375 Vietnam

128 Appendix one

X. Notes To Financial Statements

INDEPENDENT AUDITORS’ REPORT

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

We have audited the accompanying balance sheets of Taishin International Bank Co., Ltd. (“Taishin Bank,” a subsidiary of Taishin Financial Holding Co., Ltd.) as of December 31, 2011 and 2010, and the related statements of income, changes in stockholders’ 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, 2011 and 2010, 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. In addition, based on 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 both entities had been merged within the year.

We have also audited Taishin Bank’s separately prepared consolidated financial statements for the years ended December 31, 2011 and 2010, on which we have issued an unqualified opinion in our report dated March 8, 2012.

March 8, 2012

129 X. Notes To Financial Statements

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.

130 TAISHIN INTERNATIONAL BANK CO., LTD. BALANCE SHEETS

DECEMBER 31, 2011 AND 2010 (In Thousands of New Taiwan Dollars) Percentage 2010 2011 Increase (Restated Note 35) (Decrease)

ASSETS Amount Amount % Cash and cash equivalents (Note 4) $ 11,125,892 $ 12,895,603 ( 14 ) Due from the Central Bank and call loans to other banks (Note 5) 29,519,453 37,626,717 ( 22 ) Financial assets at fair value through profit or loss (Notes 2 and 6) 40,781,549 36,979,776 10 Bonds and securities purchased under resell agreements (Note 2) 1,058,738 2,992,554 ( 65 ) Receivables, net (Notes 2, 3, 7 and 8) 88,122,428 97,304,516 ( 9 ) Loans, net (Notes 2, 3, 8 and 32) 600,808,129 531,674,018 13 Available-for-sale financial assets (Notes 2, 9 and 25) 191,190,849 177,358,294 8 Held-to-maturity financial assets (Notes 2 and 10) 2,421,241 3,312,094 ( 27 ) Investments accounted for by the equity method, net (Notes 2, 11 1,939,912 1,861,285 4 and 26) OTHER FINANCIAL ASSETS, NET Financial assets carried at cost (Notes 2 and 12) 2,377,454 2,428,175 ( 2 ) Other miscellaneous financial assets (Notes 2, 3, 8 and 13) 516,362 513,435 1 Other financial assets, net 2,893,816 2,941,610 ( 2 )

PROPERTY AND EQUIPMENT (Notes 2 and 14)

Cost Land 10,606,688 10,610,422 - Buildings 7,791,798 8,602,784 ( 9 ) Machinery equipment 1,385,691 4,049,257 ( 66 ) Transportation equipment 49,515 295,246 ( 83 ) Miscellaneous equipment 123,367 540,508 ( 77 ) Leased assets 162,809 337,185 ( 52 ) 20,119,868 24,435,402 ( 18 ) Accumulated depreciation ( 2,708,877 ) ( 6,734,820 ) ( 60 ) 17,410,991 17,700,582 ( 2 ) Prepayments for buildings and equipment 13,451 46,846 ( 71 ) Property and equipment, net 17,424,442 17,747,428 ( 2 )

GOODWILL AND INTANGIBLE ASSETS (Notes 2 and 15) 1,921,980 2,079,117 ( 8 ) OTHER ASSETS Prepayments (Note 27) 456,106 443,580 3 Refundable deposits 779,093 1,904,056 ( 59 ) Deferred income tax assets (Notes 2 and 30) 5,482,805 6,349,464 ( 14 ) Other miscellaneous assets (Notes 2 and 16) 27,983 86,200 ( 68 ) Other assets, net 6,745,987 8,783,300 ( 23 )

TOTAL $ 995,954,416 $ 933,556,312 7

131 X. Notes To Financial Statements

Percentage 2010 2011 Increase (Restated Note 35) (Decrease)

LIABILITIES AND STOCKHOLDERS’ EQUITY Amount Amount % LIABILITIES Due to banks and Central Bank (Notes 17 and 32) $ 62,532,398 $ 57,252,391 9 Financial liabilities at fair value through profit or loss (Notes 2, 6 and 32) 8,353,108 16,202,864 ( 48 ) Bonds and securities sold under repurchase agreements 43,486,925 32,611,770 33 (Notes 2 and 32) Payables (Notes 2 and 18) 22,379,981 27,040,897 ( 17 ) Deposits (Notes 19 and 32) 756,502,655 699,985,966 8 Bank debentures (Note 20) 25,000,000 25,000,000 - Other financial liabilities (Note 21) 13,340,332 13,184,858 1 Other liabilities (Notes 2 and 22) 1,377,985 1,584,681 ( 13 )

Total liabilities 932,973,384 872,863,427 7

STOCKHOLDERS' 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 3,145,166 ( 2 ) Other capital surplus (Note 2) 107,980 24,780 336 Retained earnings (Note 25) Legal reserve 2,646,154 283,230 834 Special reserve 189,981 - - Unappropriated earnings 7,757,821 7,876,412 ( 2 ) Unrealized revaluation increment 6,093 - - Cumulative translation adjustments (Note 2) ( 539 ) ( 519 ) 4 Unrealized gains or losses on financial instruments (Notes 2 and 27,334 206,290 ( 87 ) 26) Net loss not recognized as pension cost ( 355 ) - -

Total stockholders' equity 62,981,032 60,692,885 4

TOTAL $ 995,954,416 $ 933,556,312 7

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 8, 2012)

132 TAISHIN INTERNATIONAL BANK CO., LTD. STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2011 AND 2010 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Percentage 2010 2011 Increase (Restated Note 35) (Decrease)

Amount Amount % INTEREST INCOME (Notes 2 and 32) $ 19,404,839 $ 16,777,250 16 INTEREST EXPENSE ( 6,886,685 ) ( 4,926,725 ) 40 NET INTEREST INCOME 12,518,154 11,850,525 6 NET INCOME AND GAINS (LOSSES) OTHER THAN INTEREST INCOME Fee income, net (Notes 2, 28 and 32) 6,117,143 6,670,825 ( 8 ) Gain on financial assets and liabilities at fair value through profit or loss (Notes 2 and 6) 291,413 1,301,972 ( 78 ) Realized gain on available-for-sale financial assets(Note 2) ( 48,257 ) 133,133 ( 136 ) Investment income recognized under the equity method 103,373 453,641 ( 77 ) (Notes 2 and 11) Exchange gain, net (Note 2) 838,041 339,810 147 Other non-interest net income and gains (losses) Gain on collection of nonperforming loans (Note 2) 3,793,311 3,120,438 22 Other miscellaneous net income (Note 2) 947,563 876,003 8 GROSS INCOME 24,560,741 24,746,347 ( 1 ) PROVISION FOR LOAN LOSSES (Notes 2 and 8) ( 1,985,975 ) ( 1,211,169 ) 64 OPERATING EXPENSES (Notes 29 and 32) Personnel expenses ( 7,455,755 ) ( 6,590,411 ) 13 Depreciation and amortization ( 952,400 ) ( 1,166,527 ) ( 18 ) Others ( 4,954,215 ) ( 4,634,951 ) 7 Total operating expenses ( 13,362,370 ) ( 12,391,889 ) 8

INCOME BEFORE INCOME TAX $ 9,212,396 $ 11,143,289 ( 17 ) INCOME TAX EXPENSE (Notes 2 and 30) ( 1,473,296 ) ( 2,970,547 ) ( 50 ) NET INCOME $ 7,739,100 $ 8,172,742 ( 5 )

2010 2011 (Restated Note 35)

Pretax After-tax Pretax After-tax BASIC EARNINGS PER SHARE (Note 31) $ 1.92 $ 1.61 $ 2.33 $ 1.70 DILUTED EARNINGS PER SHARE (Note 31) $ 1.87 $ 1.57 $ 2.27 $ 1.66

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 financial 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 and 2010, the net income of Taishin Bank included the net income of Taishin Bills Finance of $18,721 and net income $296,330, respectively.

The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated March 8, 2012) (Concluded)

133 X. Notes To Financial Statements

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

YEARS ENDED DECEMBER 31, 2011 AND 2010 (In Thousands of New Taiwan Dollars) Issued and Outstanding Capital Stock Capital Surplus Retained Earnings Unrealized Gains Unrealized Cumulative or Losses on Net Loss Not Additional Employee Stock Other Capital Unappropriated Revaluation Translation Financial Recognized as Common Stock Preferred Stock Paid-in Capital Options Surplus Legal Reserve Special Reserve Earnings Increment Adjustments Instruments Pension Cost Total BALANCE, JANUARY 1, 2010 $ 47,275,173 $ 1,882,353 $ 3,073,271 $ - $ 4,411 $ - $ - $ 944,099 $ - ( $ 57 ) $ 254,126 $ - $ 53,433,376 Retroactive adjustments arising from 5,140,000 - - 380 - 377,676 - 296,330 - - 43,616 - 5,858,002 a merger (Note) Appropriation of the 2009 earnings Legal reserve - - - - - 283,230 - ( 283,230 ) - - - - - Preferred cash dividends ------( 120,000 ) - - - - ( 120,000 ) Cash dividends ------( 540,869 ) - - - - ( 540,869 ) Employee stock-based compensation - - - 20,369 ------20,369 Cumulative translation adjustments ------( 462 ) - - ( 462 ) Unrealized gain on available-for-sale ------( 47,836 ) - ( 47,836 ) financial assets Net income for the year ended ------8,172,742 - - - - 8,172,742 December 31, 2010 Effects of cash merger with Taishin ( 5,140,000 ) - 71,895 ( 380 ) - ( 377,676 ) - ( 592,660 ) - - ( 43,616 ) - ( 6,082,437 ) Bills Finance (Note) BALANCE, DECEMBER 31, 2010 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 5,140,000 - - 478 - 377,676 48,568 277,609 - - 51,081 - 5,895,412 a merger (Note) 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 ------141,413 - - - - - 141,413 to special reserve Employee stock-based compensation - - - 83,200 ------83,200 Unrealized revaluation increment on ------6,093 - - - 6,093 land Cumulative translation adjustments ------( 20 ) - - ( 20 ) Unrealized gain on available-for-sale ------( 178,956 ) - ( 178,956 ) financial assets Net loss not recognized as pension ------( 355 ) ( 355 ) cost Net income for the year ended ------7,739,100 - - - - 7,739,100 December 31, 2011 Effects of cash merger with Taishin ( 5,140,000 ) - ( 56,129 ) ( 478 ) - ( 377,676 ) - ( 258,888 ) - - ( 51,081 ) - ( 5,884,252 ) Bills Finance (Note) 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

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

(With Deloitte & Touche audit report dated March 8, 2012)

134 Issued and Outstanding Capital Stock Capital Surplus Retained Earnings Unrealized Gains Unrealized Cumulative or Losses on Net Loss Not Additional Employee Stock Other Capital Unappropriated Revaluation Translation Financial Recognized as Common Stock Preferred Stock Paid-in Capital Options Surplus Legal Reserve Special Reserve Earnings Increment Adjustments Instruments Pension Cost Total BALANCE, JANUARY 1, 2010 $ 47,275,173 $ 1,882,353 $ 3,073,271 $ - $ 4,411 $ - $ - $ 944,099 $ - ( $ 57 ) $ 254,126 $ - $ 53,433,376 Retroactive adjustments arising from 5,140,000 - - 380 - 377,676 - 296,330 - - 43,616 - 5,858,002 a merger (Note) Appropriation of the 2009 earnings Legal reserve - - - - - 283,230 - ( 283,230 ) - - - - - Preferred cash dividends ------( 120,000 ) - - - - ( 120,000 ) Cash dividends ------( 540,869 ) - - - - ( 540,869 ) Employee stock-based compensation - - - 20,369 ------20,369 Cumulative translation adjustments ------( 462 ) - - ( 462 ) Unrealized gain on available-for-sale ------( 47,836 ) - ( 47,836 ) financial assets Net income for the year ended ------8,172,742 - - - - 8,172,742 December 31, 2010 Effects of cash merger with Taishin ( 5,140,000 ) - 71,895 ( 380 ) - ( 377,676 ) - ( 592,660 ) - - ( 43,616 ) - ( 6,082,437 ) Bills Finance (Note) BALANCE, DECEMBER 31, 2010 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 5,140,000 - - 478 - 377,676 48,568 277,609 - - 51,081 - 5,895,412 a merger (Note) 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 ------141,413 - - - - - 141,413 to special reserve Employee stock-based compensation - - - 83,200 ------83,200 Unrealized revaluation increment on ------6,093 - - - 6,093 land Cumulative translation adjustments ------( 20 ) - - ( 20 ) Unrealized gain on available-for-sale ------( 178,956 ) - ( 178,956 ) financial assets Net loss not recognized as pension ------( 355 ) ( 355 ) cost Net income for the year ended ------7,739,100 - - - - 7,739,100 December 31, 2011 Effects of cash merger with Taishin ( 5,140,000 ) - ( 56,129 ) ( 478 ) - ( 377,676 ) - ( 258,888 ) - - ( 51,081 ) - ( 5,884,252 ) Bills Finance (Note) 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

135 X. Notes To Financial Statements

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

YEARS ENDED DECEMBER 31, 2011 AND 2010 (In Thousands of New Taiwan Dollars)

2010 2011 (Restated Note 35) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 7,739,100 $ 8,172,742 Provision for loan loss 1,989,284 1,193,310 Provision (reversal) for guarantees ( 3,309 ) 17,859 Compensation cost of employee stock options 82,094 19,878 Provision for reserve for trading loss - 18,702 Recovery of loans written off 489,514 199,142 Depreciation 616,890 838,090 Amortization 335,510 328,437 Unrealized valuation gain of financial assets and liabilities 1,317,954 264,428 Amortization of premium or discount on investment in bonds 369,831 163,979 Reversal for impairment loss on assumed collaterals and residuals ( 133,792 ) ( 182 ) (Gain) loss on disposal of investment 84,559 ( 127,930 ) Investment income recognized under the equity method, net ( 103,373 ) ( 453,641 ) Cash dividends received from equity-method investees 32,508 49,077 Deferred income tax benefit 1,076,812 2,856,021 Others 10,524 5,381 Net changes in operating assets and liabilities Financial assets held for trading ( 5,119,727 ) 7,326,410 Accounts receivable 9,184,040 ( 7,199,030 ) Other financial assets ( 284,321 ) ( 826,763 ) Other assets - others 981,526 15,522,935 Financial liabilities held for trading ( 7,849,756 ) ( 1,719,770 ) Accounts payable 324,944 1,446,237 Other financial liabilities 177,884 ( 6,943,435 ) Other liabilities ( 52,414 ) ( 764,110 ) Net cash provided by operating activities 11,266,282 20,387,767 CASH FLOWS FROM INVESTING ACTIVITIES Decrease in due from the Central Bank and call loans to other banks $ 8,107,264 $ 90,252,600 (Increase) decrease in bonds and securities purchased under resell 1,933,816 ( 8,775 ) agreements Increase in loans (including delinquent loans) ( 71,333,466 ) ( 36,869,698 ) Acquisition of available-for-sale financial assets ( 927,705,805 ) ( 971,309,140 )

(Continned)

136 2010 2011 (Restated Note 35) Proceeds from disposal of available-for-sale financial assets 914,002,834 836,454,350 Proceeds from received from maturity of held-to-maturity financial 983,226 2,518,601 assets Acquisition of investments accounted for by the equity method ( 2,070 ) - Return on liquidation of financial assets carried at cost 46,186 24,520 Acquisition of property and equipment ( 303,748 ) ( 338,880 ) Proceeds from disposal of property and equipment 5,431 771 Net payment for acquiring other company ( 5,895,412 ) ( 4,090,570 ) Net cash used in investing activities ( 80,161,744 ) ( 83,366,221 ) CASH FLOWS FROM FINANCING ACTIVITIES Increase in due to the Central Bank and other banks 5,280,007 1,120,929 Increase in deposits 56,516,689 65,349,452 Decrease in guarantee deposits received ( 10,202 ) ( 26,095 ) Increase in bonds and securities sold under repurchase agreements 10,875,155 2,152,513 Cash dividends distributed ( 5,513,488 ) ( 824,784 ) Repayment of bank debentures - ( 10,000,000 ) Issue of bank debentures - 10,000,000 Others ( 22,410 ) ( 37,404 ) Net cash provided by financing activities 67,125,751 67,734,611 NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 1,769,711 ) 4,756,157 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 12,895,603 8,139,446 CASH AND CASH EQUIVALENTS, END OF YEAR $ 11,125,892 $ 12,895,603 SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 6,418,547 $ 4,724,783 Income tax paid $ 691,856 $ 169,540 Taishin Bank acquired the credit card department of Chinfon Bank during the year ended December 31, 2010. The fair values of the assets and liabilities acquired were as follows: Cash $ 7,430 Receivables 3,615,883 Other financial assets 47,202 Property and equipment 11,111 Intangible assets 672,969 Other assets 59,873 Payables ( 316,468 ) Total cost of acquisition 4,098,000 Less: Balance of cash ( 7,430 ) Net payment for the acquisition $ 4,090,570

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 values of both entities’ assets and liabilities. In addition, based on 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 carrying values of the assets, liabilities, income and expense of Taishin Bank and Taishin Bills Finance were included in these financial statements.

The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche audit report dated March 8, 2012) 137 X. Notes To Financial Statements

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

YEARS ENDED DECEMBER 31, 2011 AND 2010 (RESTATED Note 35) (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, 2011 and 2010, Taishin Bank had 6,279 and 6,290 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, 2011 and 2010. 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.

138 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:

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. Shareholders’ 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 shareholders’ 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 shareholders’ 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.

139 X. Notes To Financial Statements

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 Instrurments 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.

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.

140 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.

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

141 X. Notes To Financial Statements

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

142 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.

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.

143 X. Notes To Financial Statements

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.

Property and Equipment

Property and equipment are stated at cost 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. An impairment loss is charged to earnings unless the asset is carried at a revalued amount, in which case the impairment loss is treated as a deduction to the unrealized revaluation increment.

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

144 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.

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

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.

145 X. Notes To Financial Statements

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.

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

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 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.

146 Reserve for Trading Losses

Under the Regulations Governing Securities Firms, securities proprietary traders are required to provide 10% of their monthly net dealing gain as reserve for security dealing losses until the reserve reaches $200,000 thousand. Reserve may be used only to offset the dealing losses in excess of dealing gains.

The FSC issued on January 11, 2011 Order No. Financial-Supervisory-Securities-Firms 09900738571 to delete articles 11 and 12 of the amended Regulations Governing Securities Firms. As a result, the accumulated trading loss reserve and default reserve are reclassified to special reserve. The special reserve shall not be used for purposes other than covering the losses of the company or, when the special reserve reaches 50 percent of the amount of paid-in capital, half of it may be used for capitalization.

Reclassifications

Certain accounts in the consolidated financial statements as of and for the year ended December 31, 2010 have been reclassified to conform to the presentation of the consolidated financial statements as of and for the year ended December 31, 2011.

3. EFFECTS OF CHANGES IN ACCOUNTING PRINCIPLES

Financial Instruments

On January 1, 2011, Taishin Financial Holding and subsidiaries 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 Financial Holding and subsidiaries’ chief operating decision maker in order to allocate resources to the segments and assess their performance. This statement supersedes SFAS No. 20, “Segment Reporting.” For this accounting change, Taishin Bank restated the segment information as of and for the year ended December 31, 2010 to conform to the disclosures as of and for the year ended December 31, 2011.

147 X. Notes To Financial Statements

4. CASH AND CASH EQUIVALENTS

December 31 2011 2010 Cash on hand $ 5,864,434 $ 4,945,991 Checks for clearing 1,701,611 853,430 Due from banks 1,712,160 5,793,372 Others 1,847,687 1,302,810 $ 11,125,892 $ 12,895,603

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

December 31 2011 2010 Reserve for checking account $ 7,682,795 $ 7,321,168 Reserve for demand account 17,774,148 15,997,400 Reserve for foreign deposit 15,145 45,221 Call loans to banks 3,847,298 13,862,425 Certificate of deposits issued by the Central Bank - 200,000 Others 200,067 200,503 $ 29,519,453 $ 37,626,717

Taishin Bank is required to maintain reserve balances in the Central Bank. These reserves amounted to $25,472,088 thousand and $23,363,789 thousand as of December 31, 2011 and 2010, respectively.

6. FINANCIAL INSTRUMENTS AT FVTPL

December 31 2011 2010 Financial assets at FVTPL Investment in Bills $ 20,752,480 $ 12,057,018 Quoted stocks and mutual funds 48,423 1,042,450 Government bonds 2,977,651 1,394,437 Corporate bonds, financial debentures and other bonds 8,332,770 8,337,080 Futures 32,108 193,753 Forward exchange contracts 382,144 1,582,560 Currency swaps 1,683,493 2,107,760 Interest rate swaps 4,009,205 7,027,122 Cross-currency swaps 1,062,038 2,048,818 Equity-linked swaps 200,720 26,897 Currency options 949,930 693,627 Interest rate options 1,386 19,260

148 December 31 2011 2010 Equity-linked options 241,062 370,826 Credit default swaps 18,022 15,837 Future options - 189 Commodity swaps 20,220 1,942 Commodity options 26,625 2,819 Fixed-rate commercial paper 22,978 17,052 Asset-based commercial paper 20,294 40,329 $ 40,781,549 $ 36,979,776 Financial liabilities at FVTPL Stock borrowings $ 54,469 $ 44,690 Bond borrowings - 52,486 Forward exchange contracts 505,101 1,292,555 Currency swaps 1,394,062 3,730,813 Interest rate swaps 4,167,772 7,065,027 Cross-currency swaps 1,054,910 2,650,824 Equity-linked swaps 200,720 26,890 Credit default swaps 18,022 16,340 Commodity swaps 20,220 1,942

Currency options 776,522 473,222 Interest rate options 5,760 30,596 Equity-linked options 111,671 550,461 Commodity options 26,625 2,819 Futures - 1,342 Put options - 232,789 Asset-based commercial paper 17,254 30,068 $ 8,353,108 $ 16,202,864 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. Investment in bills, place as reserves for clearing at the Central Bank was $1,001,936 thousand as of December 31, 2010. Please refer to Note 33, for relevant information regarding bonds pledged as collaterals. c. The aggregate par values of bond investments classified as financial assets at FVTPL and used for transactions under repurchase agreements were $16,086,300 and $10,741,500 thousand as of December 31, 2011 and 2010, respectively. d. Gain or loss of financial assets and liabilities for trading purpose as of December 31, 2011 and 2010 were as follows:

149 X. Notes To Financial Statements

Years Ended December 31 2011 2010 Financial Assets Financial Liabilities Financial Assets Financial Liabilities Gain (loss) on valuation $ 7,504,423 ($ 8,822,377 ) $ 11,420,296 ( $ 11,684,724 ) Gain on disposal 1,565,895 3,242 1,415,967 123,913 Dividend revenue 40,230 - 26,520 - $ 9,110,548 ( $ 8,819,135 ) $ 12,862,783 ( $ 11,560,811 )

The nominal principal amounts of outstanding derivative contracts as of December 31, 2011 and 2010 were as follows: 2011 2010 Hold for trading Forward exchange contracts $ 96,832,219 $ 120,320,200 Currency swaps 321,081,584 201,643,129 Interest rate swaps 416,362,928 512,311,917 Cross-currency swaps 26,243,432 39,871,351 Futures - 904,156 Future options - 340,340 Currency options 163,910,601 80,280,201 Interest rate options 4,330,000 12,481,000 Equity-linked options 9,400,191 5,060,912 Commodity options 469,653 679,326 Credit default swaps 1,164,772 2,607,197 Equity-linked swaps 4,081,581 2,230,893 Commodity swaps 442,540 76,920 Floating-rate commercial paper - 950,000 Fixed-rate commercial paper 3,030,000 630,000 Asset-based commercial paper 3,391,500 4,170,500

7. RECEIVABLES, NET

December 31 2011 2010 Notes and accounts receivable $ 77,554,622 $ 86,178,107 Revenue receivable 85,072 60,926 Interest receivable 1,877,812 1,384,735 Acceptance receivable 1,601,907 2,094,535 Tax refund receivable 60,887 172,787 Installment payment receivable 6,314,123 6,441,427 Other receivables 755,861 714,175 Asset-based commercial paper 699,449 1,410,120 Less: Allowance for receivables ( 827,305 ) ( 1,152,296 ) $ 88,122,428 $ 97,304,516

150 8. LOANS, NET

a. The details of loans are as follows: December 31 2011 2010 Negotiated $ 3,793,118 $ 869,768 Overdraft 4,542,054 2,865,088 Short-term loans 132,244,276 123,477,799 Medium-term loans 187,778,122 139,799,381 Long-term loans 278,391,606 268,180,174 Delinquent loans 1,528,252 2,295,625 Adjustments for discount or premium ( 250,681 ) - 608,026,747 537,487,835 Less: Allowance for loan losses ( 7,218,618 ) ( 5,813,817 ) $ 600,808,129 $ 531,674,018

b. Allowances for receivables and loan losses were as follows: Year Ended December 31, 2011 Receivables Loans Other Financial Assets Total Balance, January 1, 2011 $ 1,152,296 $ 5,813,817 $ 320,077 $ 7,286,190 Provision for loan losses ( 5,322 ) 1,744,981 249,625 1,989,284 Loans written off ( 323,039 ) ( 794,554 ) ( 358,821 ) ( 1,476,414 ) Recovery of loans written off 3,370 454,374 31,770 489,514 Balance, December 31, 2011 $ 827,305 $ 7,218,618 $ 242,651 $ 8,288,574

Year Ended December 31, 2010 Receivables Loans Other Financial Assets Total Balance, January 1, 2010 $ 2,271,916 $ 6,903,207 $ 482,574 $ 9,657,697 Increase by acquiring Chinfon credit card - 540,576 - 540,576 department Provision for loan losses 133,689 361,394 698,227 1,193,310 Loans written off ( 1,240,477 ) ( 2,122,699 ) ( 941,359 ) ( 4,304,535 ) Recovery of loans written off 3,680 114,827 80,635 199,142 Reclassification ( 16,512 ) 16,512 - - Balance, December 31, 2010 $ 1,152,296 $ 5,813,817 $ 320,077 $ 7,286,190

c. The details of bad debt expenses for 2011 and 2010 are as follows: December 31 2011 2010 Provision for receivable and loan losses $ 1,989,284 $ 1,193,310 Provision for guarantees ( 3,309 ) 17,859 $ 1,985,975 $ 1,211,169

d. Details for receivables and allowance for loan accounts for the as of December 31, 2011 were as follows:

151 X. Notes To Financial Statements

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

Total Receivable Total Allowance Item December 31, 2011 December 31, 2011

Individual assessment of impairment $ 1,006,555 $ 458,523 Objective evidence of impairment Combined assessment of impairment 3,288,894 396,848

No objective evidence of impairment Combined assessment of impairment 82,201,465 214,585

Total $ 86,496,914 $ 1,069,956

Loans

Total Loans Total Allowance Item December 31, 2011 December 31, 2011

Individual assessment of impairment $ 10,199,582 $ 2,945,780 Objective evidence of impairment Combined assessment of impairment 8,284,387 1,486,145

No objective evidence of impairment Combined assessment of impairment 589,793,459 2,786,693

Total $ 608,277,428 $ 7,218,618

9. AVAILABLE-FOR-SALE FINANCIAL ASSETS

December 31 2011 2010 Investment in bills $ 140,430,090 $ 138,910,330 Domestic quoted stock 2,127,296 795,614 Mutual funds 1,341,453 1,033,151 Government bonds 20,744,511 14,651,861 Corporate bonds 10,898,381 5,636,283 Financial debentures 9,862,973 8,904,725 Asset-based securities 5,786,145 7,426,330 $ 191,190,849 $ 177,358,294

a. Investment in bills placed as reserves for clearing at the Central Bank was $7,000,000 thousand as of December 31, 2011 and 2010. b. Bonds pledged as collaterals to court as of December 31, 2011 and 2010 amounted to $599,570 thousand and $978,258 thousand, respectively. Please refer to Note 33 for relevant information regarding bonds pledged as collaterals. c. The aggregate par values of the bonds classified as available-for-sale financial assets and used in transactions under repurchase agreements were $27,860,119 thousand and $20,510,044 thousand as of December 31, 2011 and 2010, respectively.

152 10. HELD-TO-MATURITY FINANCIAL ASSETS

December 31 2011 2010 Investment in bills $ 272,903 $ 273,462 Government bonds - 643,954 Financial bonds 2,148,338 2,377,087 Asset-based securities - 17,591 $ 2,421,241 $ 3,312,094

The aggregate par values of bonds classified as held-to maturity financial assets and used in transactions under repurchase agreements were $1,060,150 thousand and $1,297,264 thousand as of December 31, 2011 and 2010, respectively.

11. INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD

December 31 2011 2010 Carrying Ownership Carrying Ownership Value Interest (%) Value Interest (%) Quoted stocks Chang Hwa Commercial Bank Co., Ltd. (“Chang Hwa Bank”) $ 345,220 0.27 $ 321,358 0.27 Unquoted stocks PayEasy Digital Integration Co., Ltd. (“PayEasy Digital”) 209,108 65.36 348,309 65.36 Taishin Real-Estate Management Co., Ltd. (“Taishin Real- 180,923 60.00 182,466 60.00 Estate”) Taishin Insurance Agency Co., Ltd. (“Taishin Insurance Agency”) 937,680 87.40 747,036 87.40 Taishin Dah An Leasing Co., Ltd. (Dah An Leasing Co., Ltd. changed the Company name at December 30, 2011, “Taishin 207,181 100.00 202,776 99.00 Dah An Leasing”) An Hsin Real-Estate Management Co., Ltd. (“An Hsin Real- 59,800 30.00 59,340 30.00 Estate”) $ 1,939,912 $ 1,861,285

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, 2011 and 2010 were as follows:

2011 2010 Chang Hwa Bank $ 295,853 $ 427,350

Movements of the difference between the cost of investment and Taishin Bank’s share in investees’

153 X. Notes To Financial Statements

net assets allocated to depreciable and non-depreciable assets for the years ended December 31, 2011 and 2010 were as follows:

Depreciable Assets Non-depreciable Assets 2011 Balance, beginning of year $ - $ 15,543 Movements - - Balance, end of year $ - $ 15,543

2010 Balance, beginning of year ($ 10 ) $ 15,545 Movements 10 ( 2 ) Balance, end of year $ - $ 15,543

Goodwill amounted to $75,438 thousand as of December 31, 2011 and 2010. a.Investment incomes (loss) recognized under the equity method was as follows: 2011 2010 Investment Income Investment Income Individual Net Income Recognized Individual Net Income Recognized PayEasy Digital ( $ 209,098 ) ( $ 136,671 ) $ 5,325 $ 3,480 Taishin Real-Estate 16,429 9,857 20,524 12,315 Taishin Insurance Agency 217,776 190,340 453,321 396,208 An Hsin Real-Estate 46,062 13,818 60,592 18,178 Taishin Dah An Leasing 2,358 2,336 2,430 2,407 Chang Hwa Bank 9,042,355 23,693 7,940,600 21,053 $ 103,373 $ 453,641

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.

154 Effective January 1, 2006, under the revised SFAS No. 5, Taishin Bank will no longer amortize goodwill arising from mergers and will instead test goodwill for impairment every year. In this test, CHB was taken as one cash-generating unit (CGU) on the basis of consolidated financial statements. Thus, CHB’s operating assets, including Taishin Financial Holding’s goodwill from the merger, the investments accounted for by the equity method and other non-operating assets are evaluated using estimated recoverable amounts determined as the higher of the value in use and fair value less costs to sell. The major assumptions in estimating the value in use are based on the historical 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, 2011.

12. FINANCIAL ASSETS CARRIED AT COST

December 31 2011 2010 Domestic unlisted common stocks $ 1,590,076 $ 1,640,797 Overseas unlisted common stocks - US$25,756 thousand as of December 31, 2011 and 2010 787,378 787,378 $ 2,377,454 $ 2,428,175

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.

13. OTHER MISCELLANEOUS FINANCIAL ASSETS

December 31 2011 2010 Delinquent loans reclassified from other items (excluding $ 459,013 $ 533,352 loans) Less: Allowance for bad debts ( 242,651 ) ( 320,077 ) Bond investment without active market 300,000 300,000 Others - 160 $ 516,362 $ 513,435

155 X. Notes To Financial Statements

14. PROPERTY AND EQUIPMENT

December 31 2011 2010 Accumulated Carrying Carrying Cost Depreciation Value Value Land $ 10,606,688 $ - $ 10,606,688 $ 10,610,422 Buildings 7,791,798 ( 1,719,113 ) 6,072,685 6,301,921 Machinery equipment 1,385,691 ( 812,443 ) 573,248 633,378 Transportation equipment 49,515 ( 35,624 ) 13,891 20,069 Miscellaneous equipment 123,367 ( 81,401 ) 41,966 54,607 Leasehold improvement 162,809 ( 60,296 ) 102,513 80,185 Prepayments for building and equipment 13,451 - 13,451 46,846 $ 20,133,319 ( $ 2,708,877 ) $ 17,424,442 $ 17,747,428

15. GOODWILL AND INTANGIBLE ASSETS

December 31 2011 2010 Goodwill (Note 1) $ 1,152,274 $ 1,152,274 Intangible assets - customer value 426,214 560,807 Intangible assets - computer software 343,492 366,036 $ 1,921,980 $ 2,079,117

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 2011 2010 Assumed collaterals and residuals, net $ 6,546 $ 67,856 Others 21,437 18,344 $ 27,983 $ 86,200

156 17. DUE TO THE CENTRAL BANK AND OTHER BANKS

December 31 2011 2010 Due to other banks $ 36,485,717 $ 42,939,635 Call loans from other banks 25,336,986 13,901,684 Bank overdraft 709,695 411,072 $ 62,532,398 $ 57,252,391

18. PAYABLES

December 31 2011 2010 Notes and accounts payable $ 12,733,355 $ 12,399,012 Accrued expenses 3,026,803 2,741,516 Interest payable 1,959,002 1,492,032 Acceptance payable 1,601,907 2,094,535 Exchange note payable 1,688,621 826,862 Tax payable 604,952 795,881 Receipts under custody payable 302,021 300,475 Payable on cash merger (Note 1) - 5,850,002 Other payables 463,320 540,582 $ 22,379,981 $ 27,040,897

19. DEPOSITS

December 31 2011 2010 Checking deposits $ 4,892,117 $ 3,414,158 Demand deposits 127,158,916 129,606,272 Time deposits 260,538,369 227,652,297 Negotiable certificates of deposit 9,025,100 6,543,000 Savings deposits 354,260,057 331,878,745 Remittances and drafts issued 628,096 891,494 $ 756,502,655 $ 699,985,966

20. FINANCIAL DEBENTURES

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

157 X. Notes To Financial Statements

December 31 2011 2010 Subordinated financial debentures - 2005 (I) $ 1,508,000 $ 1,508,000 Subordinated financial debentures - 2005 (II) 3,300,000 3,300,000 Subordinated financial debentures - 2005 (III) 5,000,000 5,000,000 Subordinated financial debentures - 2005 (IV) 5,192,000 5,192,000 Subordinated financial debentures - 2010.04.12 10,000,000 10,000,000 $ 25,000,000 $ 25,000,000

a. Under the approval of the Financial Supervisory Commission, Executive Yuan in 2004, Taishin Bank was authorized to issue $20 billion financial debentures, as follows: Taishin Bank made a first issue of financial debentures amounting to $5 billion in 2004, as follows: Financial Maturity Issue Redemption Method Issue Date Term Interest Rate Face Value Debenture Date Amount and Interest Payment Interest is accruable at a simple rate and payable annually Taishin Bank’s floating interest rate from the issue date. for one-year time deposit plus 0.85% Additional interest from the first to the fifth year and is not accruable if 2004, first Taishin Bank’s floating interest rate 2004.12.15 2014.12.15 10 years $5 billion $100 million principal and interest issue for one-year time deposit plus 1.85% are withdrawn after since the sixth year. The floating the interest date. rate is provided by the Central Bank Debentures are on the reset day at 10:30 a.m. redeemable at par value in cash on the maturity date. Redemption policy: Taishin Bank can redeem all or part of the debentures on each interest payment date at the principal value plus interest after the fifth anniversary (December 15, 2009) by notifying the holders in written form seven days before redemption. Taishin Bank can also redeem all or part of the debentures on the noninterest date at the principal value plus the interest after the fifth anniversary by notifying the holders in writing two months before redemption. Taishin Bank redeemed these financial debentures on March 10, 2010.

b. Taishin Bank made a first issue of financial debentures amounting to $1,508 million in 2005, as follows: Redemption Financial Maturity Issue Date Term Issue Amount Interest Rate Face Value Method and Debentures Date Interest Payment Taishin Bank’s floating interest rate for one-year time deposit plus 0.30% Debentures are from the first to the fifth year and A 2005.03.04 2015.03.04 $1,287.5 million redeemable at Taishin Bank’s floating interest rate par value in cash $500 thousand, for one-year time deposit plus 0.50% on the maturity $10 million, 10 years since the sixth year. date. Interest is and $1 million, accruable and 2.25% fixed interest rate from the respectively first to the fifth year and Taishin payable annually B 2005.03.04 2015.03.04 $220.5 million Bank’s floating interest rate for one- from the issue year time deposit plus 0.75% since date. 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. 158 c. Taishin Bank made a second issue of financial debentures amounting to $3,300 million in 2005, as follows: Financial Redemption Method and Issue Date Maturity Date Term Issue Amount Interest Rate Face Value Debentures Interest Payment 2.70% fixed interest rate from the first to the seventh year. Interest is accrued at From the eighth to twelfth a simple rate and paid year, if the holder does not annually from the issue exercise the put option, the date. Additional interest rate will be Taishin Bank’s is not accrued if principal 2005, interest rate for one-year time and interest are withdrawn second 2005.04.28 2017.04.28 12 years $3,300 million $10 million deposit plus 0.80%; if Taishin after the interest date. issue Bank does not exercise the Debentures are redeemable redemption right, the rate will at par value in cash on the be Taishin Bank’s interest maturity date, unless the rate for one-year time deposit redemption or put option is plus 0.95%. The interest rate exercised. is recalculated annually. 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. d. Taishin Bank made a third issue of financial debentures amounting to $5 billion in 2005, as follows: Financial Redemption Method and Interest Issue Date Maturity Date Term Issue Amount Interest Rate Face Value Debentures Payment Taishin Bank’s fixed Interest is accrued at a simple interest rate for one-year rate and paid annually from the time deposit plus 0.80% issue date. Additional interest from the first to the is not accrued if principal and seventh year and Taishin interest are withdrawn after the 2005, third 2005.05.18 2017.05.18 12 years $5 billion Bank’s fixed interest rate $100 million interest date. Debentures are issue for one-year time deposit redeemable at par value in cash plus 1.10% from the on the maturity date, unless the eighth year. The interest redemption is exercised. rate is recalculated annually.

159 X. Notes To Financial Statements

Redemption policy: Taishin Bank can redeem all or part of the debentures on each interest payment date at the principal value plus interest after the seventh anniversary (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.

e. Taishin Bank made a fourth issue of financial debentures amounting to $5,192 million in 2005, as follows:

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

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

f. Taishin Bank made a first issue of financial debentures amounting to $10 billion on April 12, 2010, as follows: Financial Maturity Issue Face Redemption Method and Issue Date Term Interest Rate Debentures Date Amount Value Interest Payment A 2010.04.12 2017.04.12 $4,500 million 2.65% fixed interest rate Interest is accrued at “Floating rate of one-year time a simple rate and paid deposit of Chunghwa Post Co., Ltd.” annually from the issue posted on Central Bank’s website date. Additional interest is not accrued if principal 7 years at 10:30 am of two business days $50 million B 2010.04.12 2017.04.12 $5,500 million prior to the interest calculation period and interest are withdrawn plus 1.5%. The interest rate is after the interest date. recalculated annually. The floating Debentures are redeemable rate is provided by the Central Bank at par value in cash on the on the reset day at 10:30 a.m. maturity date.

21. OTHER FINANCIAL LIABILITIES

December 31 2011 2010 Principal of structured products $ 13,254,742 $ 13,071,062 Appropriated loan fund 85,590 113,796 $ 13,340,332 $ 13,184,858 160 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 2011 2010 Unearned revenues $ 342,895 $ 317,467 Unearned interest revenues 94,947 84,127 Reserve for guarantee liabilities 219,511 222,266 Reserve for trading losses - 189,338 Guarantee deposits 72,383 83,090 Deferred income 9,675 9,675 Reserve for other losses 392,147 451,583 Others 246,427 227,135 $ 1,377,985 $ 1,584,681

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, 2011, Taishin Bank’s authorized capital was $49,157,526 thousand (4,915,753 thousand shares); registered capital is $49,157,526 thousand, divided into 4,727,517 thousand common shares and 188,235 thousand preferred shares at NT$10.00 par value.

Details of outstanding capital stock as of December 31, 2011 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 surplus 9,521,440 - 9,521,440 transferred to common stock Redemption of preferred stock A - ( 3,000,000 ) ( 3,000,000 ) Preferred stock B transferred to common stock 4,000,000 ( 4,000,000 ) - Less: Cancellation of treasury stock ( 985,820 ) - ( 985,820 ) Less: Cancellation of parent company’s stock ( 2,541,314 ) - ( 2,541,314 ) $ 47,275,173 $ 1,882,353 $ 49,157,526 As of December 31, 2011, 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. 161 X. Notes To Financial Statements

b. On March 27, 2007, Taishin Bank’s board of directors 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. Ten years after the issuance date, Taishin Bank has the right to redeem preferred stock - C at the issue price; otherwise, the dividend rate will increase to 4.75% per annum for the unredeemed part. d. On November 12, 2009, Taishin Bank’s board of directors modified its Articles of Incorporation to raise authorized capital. On December 30, 2009, Taishin Bank issued 740,741 thousand common shares at NT$13.5 per share, amounting to approximately $10,000,000 thousand. The department of commerce under the Ministry of Economic Affairs approved this change on January 12, 2010.

24. OTHER PAID -IN CAPITAL

Under the Company Law, capital surplus can only be used to offset a deficit. However, the capital surplus from shares issued in excess of par (additional paid-in capital from issuance of common shares, conversion of bonds and treasury stock transactions) and donations may be capitalized, which however is limited to a certain percentage of the Company’s paid-in capital. Under the revised Company Law issued on January 4, 2012, the aforementioned capital surplus also may be distributed in cash.

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 $82,094 thousand and $19,878 thousand for the years ended December 31, 2011 and 2010, respectively.

162 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: 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, 2011 and 2010, the bonus to employees was $531 thousand and $539 thousand, respectively. The bonus to employees was based on the percentage described above of the net income (net of the bonus to employees) and based on past experiences. If the actual amounts subsequently resolved by the Board of Directors on behalf of the shareholders differ from the proposed amounts, the differences are recorded as a change in accounting estimate in the year the Board of Directors made the resolution on behalf of the shareholders. If bonus shares are resolved to be distributed to employees, the number of shares is determined by dividing the amount of bonus by the closing price (after considering the effect of cash and stock dividends) of the shares of the day preceding the shareholders’ meeting.

Based on a directive issued by the Securities and Futures Bureau, an amount equal to the net debit balance of certain stockholders’ equity accounts - 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.

Legal reserve shall be appropriated until it has reached Taishin Bank’s paid-in capital. This reserve may be used to offset a deficit. Under the revised Company Law issued on January 4, 2012, when 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 2010 and 2009 had been approved by the board of directors on behalf of the shareholders on June 16, 2011 and May 27, 2010, respectively. The appropriations and dividend per shares were as follows:

163 X. Notes To Financial Statements

Appropriation of Earnings Dividends Per Share (Dollars)

2010 2009 2010 2009 Preferred stock dividends $ 120,000 $ 120,000 $ 0.64 $ 0.64

Common stock dividends 5,393,488 540,869 1.14 0.11

The appropriations of earnings for 2010 and 2009 had been approved by the board of directors on June 16, 2011 and May 27, 2010, and the amount was $539 thousand and $54 thousand, respectively. The differences ($10 thousand) 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 year ended December 31, 2009 were primarily due to changes in estimates had been adjusted in profit and loss for the year ended December 31, 2010.

Information about the earnings appropriation for bonus to employees, directors and supervisors is available on the Market Observation Post System website of the Taiwan Stock Exchange.

26. UNREALIZED GAIN OR LOSS ON FINANCIAL INSTRUMENTS

For the years ended December 31, 2011 and 2010, movements of unrealized gain or loss on financial instruments were as follows:

Available-for- sale Financial Assets Equity-method Investments Total 2011 Balance, January 1, 2011 $ 206,221 $ 69 $ 206,290 Recognized in stockholders’ equity ( 92,624 ) ( 1,773 ) ( 94,397 ) Transferred to profit or loss ( 84,559 ) - ( 84,559 ) Balance, December 31, 2011 $ 29,038 ( $ 1,704 ) $ 27,334

2010 Balance, January 1, 2010 $ 253,656 $ 470 $ 254,126 Recognized in stockholders’ equity 80,495 ( 401 ) 80,094 Transferred to profit or loss ( 127,930 ) - ( 127,930 ) Balance, December 31, 2010 $ 206,221 $ 69 $ 206,290

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 $259,513 thousand and $251,840 thousand for the years ended December 31, 2011 and 2010, respectively.

164 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 $21,036 thousand and $79,775 thousand (paid in cash $1,769 thousand) for the years ended December 31, 2011 and 2010, respectively.

Other information on the defined benefit plan is as follows:

a. Components of net pension cost: Years Ended December 31 2011 2010 Service cost $ 20,531 $ 23,300 Interest cost 26,955 25,953 Actual return on plan assets ( 16,443 ) ( 22,260 ) Loss on plan assets ( 10,007 ) ( 5,002 ) Amortization of net transitional obligation - 147 Amortization of pension loss (gain) - ( 278 ) Effect of transferor on pension cost - 56,146 Net pension cost $ 21,036 $ 78,006 b. Reconciliation of funded status of the plan and accrued pension cost as of December 31, 2011 and 2010: 2011 2010 Benefit obligation Vested benefit obligation ( $ 109,280 ) ( $ 78,339 ) Non-vested benefit obligation ( 791,514 ) ( 786,153 ) Accumulated benefit obligation ( 900,794 ) ( 864,492 ) Additional benefit based on future salaries ( 460,671 ) ( 506,481 ) Projected benefit obligation ( 1,361,465 ) ( 1,370,973 ) Fair value of plan assets 1,366,775 1,365,209 Funded status 5,310 ( 5,764 ) Unrecognized net loss 36,754 50,666 Prepaid pension cost $ 42,064 $ 44,902

Vested benefit ( $ 132,846 ) ( $ 97,156 ) c. Actuarial assumptions as of December 31, 2011 and 2010: 2011 2010 Discount rate used in determining present values 2.00% 2.00% Future salary increase rate 3.00% 3.00% Expected rate of return on plan assets 2.00% 2.00%

165 X. Notes To Financial Statements

2011 2010 d. Contributions to the fund $ - $ 354

e. Payments from the fund $ 10,936 $ 20,345

According to the order of Bei-Shi-Lao-Yi No. 09837119200, No. 09940317000 and No. 10037554900, the allocation of workers’ retirement reserve fund has been suspended from September 1, 2009 to August 31, 2012.

28. FEE INCOME, NET

Years Ended December 31 2011 2010 Fee income Fees from imports and exports $ 155,320 $ 161,765 Interbank service fees 542,890 509,065 Fees from loans 337,952 610,063 Fees from guarantees 122,510 154,291 Underwriting commission 34,762 79,639 Factoring fees 387,511 394,964 Fees from the trustee business 1,497,045 1,781,949 Fees from the trustee associate business 35,425 31,671 Agency fees 1,973,752 1,380,095 Credit card fees 2,661,627 3,061,015 Others 205,204 265,202 7,953,998 8,429,719 Fee expense Credit card fees ( 895,987 ) ( 815,033 ) Interbank service fees ( 93,631 ) ( 80,890 ) Fees from the trustee business ( 63,541 ) ( 63,083 ) Fees from outsourcing collection service ( 168,266 ) ( 158,796 ) Agency fees ( 45,352 ) ( 35,019 ) Fees from marketing ( 365,058 ) ( 409,903 ) Others ( 205,020 ) ( 196,170 ) ( 1,836,855 ) ( 1,758,894 ) Fee income, net $ 6,117,143 $ 6,670,825

166 29. PERSONNEL, DEPRECIATION, DEPLETION AND AMORTIZATION EXPENSES

Years Ended December 31 2011 2010 Personnel expenses Salary $ 6,466,752 $ 5,648,457 Labor/health insurance 444,632 398,507 Pension 280,549 331,615 Others 263,822 211,832 Depreciation 616,890 838,090 Amortization 335,510 328,437

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 2011 2010 Income tax expense at the 17% statutory rate $ 1,566,107 $ 1,894,359 Tax effect of adjusting items: Permanent differences Tax-exempt income ( 261,433 ) ( 297,223 ) Others 71,321 59,467 Temporary differences ( 142,967 ) ( 544,847 ) Loss carryforward used ( 897,940 ) ( 994,787 ) Current income tax expense 335,088 116,969 Deferred income tax expense Temporary differences 178,872 544,847 Loss carryforwards 897,940 994,787 Effect of tax law changes on deferred income tax - 1,316,387 Tax separately levied on interest from short-term bills - 1,834 Adjustment for prior year’s tax 57,060 ( 4,277 ) Overseas income tax expense 4,336 - $ 1,473,296 $ 2,970,547

In May 2010, the Legislative Yuan passed the amendment of Article 5 of the Income Tax Law, which reduces a profit-seeking enterprise’s income tax rate from 20% to 17%, effective 2010.

167 X. Notes To Financial Statements

b. Details of deferred income tax assets and liabilities were as follows: December 31 2011 2010 Assets Allowance for bad debts in excess of tax limit $ 1,175,114 $ 987,267 Loss carryforwards 4,409,011 5,258,898 Excess of reserve for guarantee liabilities 10,969 15,719 Unrealized loss on financial instruments 16,910 168,476 Unrealized loss on assumed collaterals and residuals 9 23,144 Reserve for compensation on consigned structured notes 66,638 76,914 Unrealized exchange loss (gain) - 14,892 Others 41 41 5,678,692 6,545,351 Liabilities Amortization of goodwill ( 195,887 ) ( 195,887 )

Deferred income tax assets, net $ 5,482,805 $ 6,349,464

The movements of deferred income tax assets (liabilities) were as follows: Year Ended December 31, 2011 Receivables from Balance, January 1, Recognized in Taishin Financial Balance, December 2011 Income Statement Holding 31, 2011 Temporary differences Allowance for bad debts in excess of tax $ 987,267 $ 187,847 $ - $ 1,175,114 limit Loss carryforwards 5,258,898 ( 1,060,040 ) 210,153 4,409,011 Unrealized loss on assumed collaterals and 23,144 ( 23,135 ) - 9 residuals Reserve for compensation on consigned 76,914 ( 10,276 ) - 66,638 structured notes Excess of reserve for guarantee liabilities 15,719 ( 4,750 ) - 10,969 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

168 Year Ended December 31, 2010 Receivables from Balance, January 1, Recognized in Taishin Financial Balance, December 2010 Income Statement Holding 31, 2010 Temporary differences Allowance for bad debts in excess of tax $ 1,800,221 ($ 812,954 ) $ - $ 987,267 limit Loss carryforwards 6,900,254 ( 2,029,825 ) 388,469 5,258,898 Unrealized loss on assumed collaterals and 27,264 ( 4,120 ) - 23,144 residuals Reserve for compensation on consigned 228,982 ( 152,068 ) - 76,914 structured notes Excess of reserve for guarantee liabilities 10,908 4,811 - 15,719 Unrealized (gain) loss on financial 73,603 94,873 - 168,476 instruments Unrealized exchange loss 6,198 8,694 - 14,892 Amortization of goodwill ( 230,455 ) 34,568 - ( 195,887 ) Others 41 - - 41 $ 8,817,016 ( $ 2,856,021 ) $ 388,469 $ 6,349,464

Loss carryforwards as of December 31, 2011 comprised of: Unused Amount Expiry Year 2016 $ 3,559,430 2017 430,233 2018 419,348 $ 4,409,011 c. The estimated payables to Taishin Financial Holding due to the adoption of the linked-tax system were as follows: December 31 2011 2010

Payables to Taishin Financial Holding $ 301,337 $ 373,517 d. Information on the integrated income tax was as follows: December 31 2011 2010 Balance of imputation credits accounts (ICA) $ 27,951 $ 29,495 Unappropriated earnings generated on and after January $ 7,757,821 $ 7,876,412 1, 1998

The creditable ratio for distribution of earnings of 2011 and 2010 was 0.36% (estimate) and 0.48%, respectively. For distribution of earnings generated on and after January 1, 1998, the ratio for the imputation credits allocated to stockholders of Taishin Bank is based on the balance of the ICA as of the date of dividend distribution. The expected creditable ratio for the 2010 earnings may be adjusted, depending on the ICA balance on the date of dividend distribution.

169 X. Notes To Financial Statements

e. The income tax returns through 2006 had been assessed by the tax authorities. f. In regard to the goodwill amortization of $632,098 thousand, $758,518 thousand, $758,518 thousand, $758,518 thousand and $758,518 thousand from the merger of Dah An Bank reported in the 2002, 2003, 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 resulted from negotiations of the dealing parties rather than a purchase from open market. Taishin Bank is filing an appeal to a high court. 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 an appeal to a high court.

31. EARNINGS PER SHARE (“EPS”)

Year Ended December 31, 2011 Shares Earnings Per Share (In Amounts (Numerator) (Denominator) 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 common $ 9,092,396 $ 7,619,100 4,727,517 $ 1.92 $ 1.61 stockholders 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 stockholders plus effect of dilutive potential $ 9,212,396 $ 7,739,100 4,915,793 $ 1.87 $ 1.57 common stock

170 Year Ended December 31, 2010 Shares Earnings Per Share (In Amounts (Numerator) (Denominator) Dollars)

Pretax After-tax (In Thousands) Pretax After-tax Net income $ 11,143,289 $ 8,172,742 Less: Preferred dividends ( 120,000 ) ( 120,000 ) Net income $ 11,023,289 $ 8,052,742

Basic EPS Income for the year attributable to $ 11,023,289 $ 8,052,742 4,727,517 $ 2.33 $ 1.70 common stockholders Effect of dilutive potential common stock Convertible preferred shares 120,000 120,000 188,235 Bonus to employees - - 44 Diluted EPS Income for the year attributable to common stockholders plus effect of $ 11,143,289 $ 8,172,742 4,915,796 $ 2.27 $ 1.66 dilutive potential common stock

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 B Co., Ltd. (“Taishin Securities B”) Same as above Taishin Securities Investment Trust Co., Ltd. Same as above Taishin Securities Investment Advisory Co. Under control by the same parent company 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 Shin Kong Recreation Co., Ltd. Its chairman is a relative within the first degree of Taishin Bank’s chairman Shin Kong Life Insurance Co., Ltd. (“Shin Kong Life Insurance”) Its chairman is a relative within the second degree of Taishin Bank’s chairman Shin Kong Synthetic Fibers Co., Ltd. (“Shin Kong Synthetic Fibers”) Same as above Shin Kong Financial Holding Co., Ltd. (“Shin Kong Financial Holding”) Same as above Shin Kong Engineering Co., Ltd. (“Shin Kong Engineering”) Same as above Jiouru Co., Ltd. (“Jiouru”) Same as above Jiouru Investment Co., Ltd. (“Jiouru Investment”) Same as above Anlon Co., Ltd. (“Anlon”) Same as above

(Continued)

171 X. Notes To Financial Statements

Related Party Relationship with Taishin Bank Shin Jui Assets Management Co., Ltd. “Dissolved on October 6, 2010) Wholly owned by Taishin AMC UBright Optronics Corporation Its chairman is a relative within the second degree of Taishin Bank’s chairman PayEasy Travel Agency Co., Ltd. Wholly owned by PayEasy Digital Contect Digital Integration Co., Ltd. 65.75% owned by PayEasy Digital Taishin Insurance Broker Co., Ltd. Wholly owned by Taishin Insurance Agency CHB Life Insurance Agency Co., Ltd. Wholly owned by Chang Hwa Bank CHB Insurance Brokerage Co., Ltd. Same as above Shin Kong Commercial Bank Co., Ltd. (“Shin Kong Bank”) Wholly owned by Shin Kong Financial Holding 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 Dah Chung Bills Finance Co., Ltd. (“Dah Chung Bills”) Taishin Bank serves as its corporate director Ming Huang International Property Co., Ltd. (“Ming Huang International Taishin Financial Holding’s supervisor Property”) Taishin International Investment Development Co., Ltd. Taishin Financial Holding’s supervisor Peng Cheng Co., Ltd. (“Peng Cheng”) Taishin Financial Holding’s corporate director CyberSoft Digital Service Co., Ltd. (“CyberSoft Digital Service”) Related party in substance Miniatures Museum of Taiwan (“Miniatures Museum”) Its chairman is a relative within the second degree of Taishin Financial Holding’s general manager (become non-related party on August 2011)

(Concluded)

Material Transactions with Related a. Loans, deposits and guaranteed loans Percentage of Interest Rate Loan to Related Parties Ending Balance Loans (%) (Per Annum %) Interest Revenue Year ended December 31, 2011 $ 1,241,692 0.20% 0.0001-12.50 $ 19,381 Year ended December 31, 2010 1,228,386 0.23% 0.08-18.25 20,179

Year Ended December 31, 2011 Ending Highest Non- Loans to Related Parties Balance Amount Normal Loans performing Loans Collateral Consumer loans 54 accounts $ 112,391 $ 136,520 $ 112,391 $ - Land, building, 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

172 Year Ended December 31, 2010 Non- Loans to Related Parties Ending Balance Highest Amount Normal Loans performing Loans Collateral Consumer loans 52 accounts $ 71,651 $ 80,413 $ 71,651 $ - Land, building Self-used residence mortgage loans 70 accounts 389,235 443,609 389,235 - Land, building Other loans Jiouru Investment 58,500 58,500 58,500 - Land, building Jiouru 65,000 65,000 65,000 - Land, building Ming Huang International Property 200,000 200,000 200,000 - Land, building Peng Cheng 86,000 110,000 86,000 - Land, building Shin Kong Engineering 13,000 43,000 13,000 - Stocks Shin Kong Synthetic Fibers 300,000 372,563 300,000 - Land, building Miniatures Museum 45,000 45,000 45,000 - Land, building $ 1,228,386 $ 1,228,386

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

Year Ended December 31, 2010 Interest and Service Reserve for Guarantee for loans of related parties Charge Rate (Per Guarantee Ending Balance Highest Amount Annum %) Liabilities Collateral Shin Kong Synthetic Fibers $ 1,189 $ 6,156 0.05 $ - Stock, chattels PayEasy Digital 4,058 4,613 0.80 - Certificate deposit

Year Ended December 31, 2011

Deposits from related parties Ending Balance Interest Rate (Per Annum %) Interest Expense Taishin Financial Holding $ 17,759,020 0.12-1.36 ( $ 120,444 ) Dah Chung Bills 421,405 0.00-1.00 ( 3,119 ) Taishin Insurance Agency 1,024,058 0.00-0.17 ( 1,490 ) Taishin AMC 512,671 0.00-0.65 ( 779 ) Others 3,346,499 ( 17,288 ) $ 23,063,653 ( $ 143,120 )

173 X. Notes To Financial Statements

Year Ended December 31, 2010

Deposits from related parties Ending Balance Interest Rate (Per Annum %) Interest Expense Taishin Financial Holding $ 19,875,925 0.10-0.50 ( $ 80,651 ) Dah Chung Bills 422,862 0.00-0.60 ( 1,595 ) Taishin Insurance Agency 830,931 0.00-0.12 ( 619 ) Others 2,980,614 ( 11,749 ) $ 24,110,332 ( $ 94,614 )

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

b. Call loans to banks and call loans from banks Year Ended December 31, 2011 Interest Interest Revenue Related Party Item Balance Highest Amount Rate % (Expense) Chang Hwa Bank Call loans to banks $ - $ 1,604,575 0.20-0.26 $ 42

Year Ended December 31, 2010 Interest Interest Revenue Related Party Item Balance Highest Amount Rate % (Expense) Dah Chung Bills Call loans to banks $ - $ 500,000 0.21 $ 14 Shin Kong Bank Call loans from banks 150,000 300,000 0.26-0.47 ( 544 ) All transactions with related parties are made under arm’s length terms in compliance with normal policies.

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

Year Ended December 31, 2010 Interest Interest Revenue Related Party Item Balance Highest Amount Rate % (Expense) Chang Hwa Bank Due from banks $ 497 $ 1,731 - - All transactions with related parties are made under arm’s length terms in compliance with normal policies.

d. Trading of securities Year Ended December 31, 2011 Repurchase Agreements Resell Agreements Purchase Price Sales Price (Accumulated (Accumulated Interest Rate Interest Rate Related Party Amount) Amount) Ending Balance (Per Annum %) Ending Balance (Per Annum %) Taishin Financial Holding $ - $ - $ 1,964,264 0.40﹣0.72 $ - - 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 - - $ 1,865,539 $ 2,973,787 $ 3,963,730 $ -

174 Year Ended December 31, 2010 Repurchase Agreements Resell Agreements Purchase Price Sales Price (Accumulated (Accumulated Interest Rate Interest Rate Related Party Amount) Amount) Ending Balance (Per Annum %) Ending Balance (Per Annum %) Chang Hwa Bank $ 3,137,606 $ 5,741,686 $ - - $ - - Dah Chung Bills 3,380,475 3,953,508 - - - - Shin Kong Life Insurance - - 200,000 0.30﹣0.44 - - Taishin Financial Holding - - 1,877,201 0.14﹣0.40 - - Taishin Securities B - - 176,820 0.30﹣0.47 - - $ 6,518,081 $ 9,695,194 $ 2,254,021 $ - All transactions with related parties are made under arm’s length terms in compliance with normal policies. e. Derivative transactions Year Ended December 31, 2011 Derivative Nominal Principal Unrealized Gain Related Party Period Account Balance Contracts Amount (Loss) Dah Chung Bills Interest rate 2008.04.17- $ 1,500,000 $ 1,633 Financial liabilities at ( $ 9,483 ) swaps 2016.08.22 FVTPL

Year Ended December 31, 2010 Derivative Nominal Principal Unrealized Gain Related Party Period Account Balance Contracts Amount (Loss) Shin Kong Life Interest rate 2006.12.18- $ 250,000 ( $ 3,567 ) Financial liabilities at ( $ 1,942 ) Insurance swaps 2011.6.18 FVTPL Dah Chung Bills Interest rate 2008.4.17- 600,000 ( 93 ) Financial liabilities at ( 11,116 ) swaps 2015.11.11 FVTPL All transactions with related parties are made under arm’s length terms in compliance with normal policies. f. Other material transactions Years Ended December 31

2011 2010

Item Amount Item Amount Taishin Insurance Agency Fee income $ 719,697 Fee income $ 868,089 Taishin Holding Insurance Brokers Fee income 741,603 - Cybersoft Digital Service Operating expense 531,950 Operating expense 449,622 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

2011 2010 Salaries $ 233,442 $ 119,919 Pensions 1,419 18,901 Incentives 109,085 154,976 $ 343,946 $ 293,796

175 X. Notes To Financial Statements

33. MORTGAGED OR PLEDGED ASSETS

December 31

Mortgaged or Pledged Assets Description 2011 2010

Financial assets at FVTPL Certificate of deposits $ - $ 1,001,936

Available for sale financial assets Certificate of deposits and bonds 7,599,570 7,978,258 Refundable deposits Cash and certificate of deposits 779,093 1,904,056

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, 2011 and 2010: 2011 2010 Guarantees $ 15,707,401 $ 20,076,727 Letters of credit 5,080,798 6,487,169 Trust liabilities 221,598,142 222,627,730 Unpaid equipment purchase contracts 290,067 568,451 Unused loan commitments (excluding credit card) 84,137,768 95,911,601 Unused loan commitments (credit card only) 411,994,680 438,621,284

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, 2011 and 2010 Trust assets 2011 2010 Trust liabilities 2011 2010 Deposit $ 11,617,121 $ 4,664,055 Payables $ 39,713 $ 130,408 Financial assets Tax payable 149 - Self-valuation securities Bonds 27,244,798 32,112,327 28,220,801 28,035,267 under custody Common stocks 26,274,145 40,443,832 Other liabilities 446,325 64,450 Mutual funds 112,762,884 111,355,611 Trust capital 194,700,887 190,909,474 Bonds and securities Reserves and purchased under retained earnings resell agreements 658,321 200,462 ( 1,809,733 ) 3,488,131 Derivatives 3 - Receivables and prepaid 21,272 175,597 Real estate 11,096,377 4,926,868 Securities under custody 28,220,801 28,035,267 Others 3,702,420 713,711

$ 221,598,142 $ 222,627,730 $ 221,598,142 $ 222,627,730

176 Trust Income Statements Years Ended December 31 2011 and 2010 2011 2010 Revenues Interest $ 33,009 $ 16,724 Rent 175,501 181,318 Cash dividends 1,451,195 1,208,047 Fund distribution 53,582 70,735 Gain from property transaction 3,418,093 - Others 83,525 66,320 5,214,905 1,543,144 Expenses Administration fees ( 75,406 ) ( 85,104 ) Custodian fees ( 3,278 ) ( 3,952 ) Service fees ( 34,181 ) ( 28,903 ) Repair ( 4,704 ) ( 4,711 ) Interest ( 494 ) ( 378 ) Taxes ( 14,105 ) ( 12,926 ) Insurance ( 2,025 ) ( 2,109 ) Professional service fees - CPA ( 1,191 ) ( 1,035 ) Professional service fees - lawyer ( 1,088 ) - Others ( 36,406 ) ( 25,080 ) ( 172,878 ) ( 164,198 ) Net income $ 5,042,027 $ 1,378,946

Trust Asset Summary December 31, 2011 and 2010 2011 2010 Deposit $ 11,617,121 $ 4,664,055 Financial assets Bonds 27,244,798 32,112,327 Common stocks 26,274,145 40,443,832 Mutual funds 112,762,884 111,355,611 Bonds and securities purchased under resell agreements 658,321 200,462 Structural notes 3 - Receivables and prepayments 21,272 175,597 Real estate 11,096,377 4,926,868 Securities under custody 28,220,801 28,035,267 Others 3,702,420 713,711 $ 221,598,142 $ 222,627,730

177 X. Notes To Financial Statements

According to the General Agreement, the net assets value denominated in U.S. dollar should be translated into New Taiwan dollar at the settlement rate of New Taiwan dollar against U.S. dollar announced by Taipei Forex Brokerage Co., Ltd. for the day on a net basis. If foreign exchange rates are not available, the last known rate should be used.

c. Taishin Bank enters into operating leases for its domestic branches, and main provisions of the contracts are as follows: 1) The lease period ranges from one to five years. Rental payments are made annually. 2) As of December 31, 2011, the estimated future lease payments under the building lease contracts are as follows: Year Amount 2012 $ 351,000 2013 294,464 2014 247,046 2015 189,205 2016 79,875 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. RESTATEMENT OF FINANCIAL STATEMENTS

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:

178 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.

36. FINANCIAL INSTRUMENTS

a. Fair value 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

179 X. Notes To Financial Statements

December 31, 2010 Carrying Value Fair Value Financial assets Cash and cash equivalents $ 12,895,603 $ 12,895,603 Due from the Central Bank and call loans to other banks 37,626,717 37,626,717 Financial assets at FVTPL 36,979,776 36,979,776 Bonds and securities purchased under resell agreements 2,992,554 2,992,554 Receivables 97,304,516 97,304,516 Loans 531,674,018 531,674,018 Available-for-sale financial assets 177,358,294 177,358,294 Held-to-maturity financial assets 3,312,094 3,383,778 Bond investment without active market 300,000 300,000 Other financial assets 213,435 213,435 Financial liabilities Due to banks and Central Bank 57,252,391 57,252,391 Financial liabilities at FVTPL 16,202,864 16,202,864 Bonds and securities sold under repurchase agreements 32,611,770 32,611,770 Payables 27,040,897 27,040,897 Deposits 699,985,966 699,985,966 Bank debentures 25,000,000 25,000,000 Other financial liabilities 13,184,858 13,184,858

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, due to banks and Central Bank, payables, remittances, and bonds and securities sold under repurchase agreements. 2) Fair values of financial instruments at FVTPL and available-for-sale or held-to-maturity financial assets are based on their quoted prices in an active market. For those instruments with no quoted market prices, their fair values are determined using valuation techniques incorporating estimates and assumptions consistent with those generally used by other market participants to price 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.

180 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) Financial assets carried at cost and investments under equity method, including non-public stocks and stocks traded in the Emerging Stock Market, are equity instruments with fair values that cannot be measured reliably. Fair values of these instruments should be determined at their carrying values. Information of investments by the equity method is shown in Note 10. 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, 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

December 31, 2010

Quoted Market Prices Valuation Techniques Financial assets Financial assets at FVTPL $ 22,224,105 $ 14,755,671 Available-for-sale financial assets 157,600,445 19,757,849 Held-to-maturity financial assets - 3,383,778 Financial liabilities Financial liabilities at FVTPL 6,216 16,196,648 d. Valuation gains (losses) arising from changes in fair value of financial instruments determined using quoted market prices losses $1,125,081 thousand in 2011 and gains $72,519 thousand in 2010. On financial instruments with fair value determined using valuation techniques, there were valuation losses of $192,873 thousand in 2011 and $336,947 thousand in 2010.

181 X. Notes To Financial Statements

e. The interest income (expense) associated with financial assets (liabilities) other than those at FVTPL were as follows: Years Ended December 31

2011 2010 Total interest income $ 19,204,645 $ 16,424,477 Total interest expense 6,886,685 4,926,725

f. Fair value input levels December 31, 2011 Fair Value Measurement of Financial Instruments Level 1 Level 2 Level 3 Total Non-derivative financial products Assets Financial assets at FVTPL Stocks and mutual funds $ 48,423 $ - $ - $ 48,423 Bond investment 11,300,959 9,462 - 11,310,421 Others - 20,752,480 - 20,752,480 Available-for-sale financial assets Stock investment 2,127,296 - - 2,127,296 Bond investment 7,708,342 33,797,523 - 41,505,865 Others 1,341,453 143,570,099 2,646,136 147,557,688 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 32,108 6,979,739 1,658,378 8,670,225 Liabilities Financial liabilities at FVTPL - 7,336,000 962,639 8,298,639 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.

182 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:

Valuation Increase Decrease Beginning Ending Item Gains Sell or Balance Buy or Issue Transfer in Transfer out Balance (Losses) Disposal

Financial assets at FVTPL $ 1,618,593 ($ 350,657 ) $ 762,079 $ - ($ 371,637 ) $ - $ 1,658,378

Available-for-sale financial assets 3,965,582 ( 997 ) 1,646,558 - ( 2,965,007 ) - 2,646,136 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:

Valuation Increase Decrease Beginning Ending Item Gains Sell or Balance Buy or Issue Transfer in Transfer out Balance (Losses) Disposal

Financial liabilities at FVTPL $ 785,389 ( $ 193,046 ) $ 752,511 $ - ($ 382,215 ) $ - $ 962,639 g. Financial risk 1) Market risk Taishin Financial Holding and subsidiaries engage 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 Financial Holding’s requirement, approved the authorization limits on market risk, and ensured all trading engaged within authorization limits. Taishin Financial Holding and subsidiaries use 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

183 X. Notes To Financial Statements

interest rate, exchange rate, price of equity instruments and commodity prices. The market risk factor sensitivity of Taishin Financial Holding and subsidiaries 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. 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 Financial Holding and subsidiaries engage 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 2011 2010 Exchange rate risk value EUR $ 295 $ 10,425 JPY ( 3,075,662 ) ( 2,580,520 ) USD ( 21,806 ) ( 62,425 ) Others (Note) 644,840 1,836,282 Interest rate sensitivity DV01 Interest curve of bonds TWD ( 10,121 ) ( 6,334 ) USD ( 81 ) ( 136 ) Others (Note) ( 590 ) ( 128 ) Interest curve of IRS TWD 3,713 4,762 USD 28 5 Others (Note) 425 ( 101 ) Equity securities risk value TWD 3,288,104 3,826,919 USD 560 2,079 Others USD 41,898 31,322 Note: Presented as NT 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

184 68.09% and 69.59% of the total loans as of December 31, 2011 and 2010, 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, 2011 and 2010 were as follows:

Financial Instrument Type 2011 2010 Guarantees $ 15,707,401 $ 20,076,727 Letters of credit 5,080,798 6,487,169 Unused loan commitments (excluding credit card) 84,137,768 95,911,601 Unused loan commitments (credit card only) 411,994,680 438,621,284 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

2011 2010

Industry Type Carrying Value Percentage of Item Carrying Value Percentage of Item Manufacturing $ 129,854,589 21.35 $ 99,166,069 18.45 Wholesale and retailing 33,091,780 5.44 20,341,384 3.78 Finance and insurance 51,518,906 8.47 43,560,982 8.10 Real estate and leasing 23,461,021 3.86 19,595,577 3.65 Service 7,333,517 1.21 8,557,943 1.59 Individuals 341,117,005 56.07 326,911,197 60.82 Others 21,900,610 3.60 19,354,683 3.61 $ 608,277,428 $ 537,487,835

185 X. Notes To Financial Statements

December 31

2011 2010

Geographic Location Carrying Value Percentage of Item Carrying Value Percentage of Item Asia $ 574,796,514 94.49 $ 510,463,098 94.97 Europe 1,819,307 0.30 2,765,431 0.51 North America 661,662 0.11 472,037 0.09 Others 30,999,945 5.10 23,787,269 4.43 $ 608,277,428 $ 537,487,835

3) Liquidity risk Taishin Bank’s ratios of liquidity reserves were 25.02% and 26.04% as of December 31, 2011 and 2010, 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:

December 31, 2011 Over Three Over Six Over One Less Than One Month to Months to Six Months to A Year to Five Over Five Financial Instrument One Month Three Months Months Year Years Years Total Assets Cash and cash equivalents $ 11,125,892 $ - $ - $ - $ - $ - $ 11,125,892 Due from the Central Bank and 13,950,805 2,645,596 2,568,242 4,971,278 5,383,532 - 29,519,453 Call loans to other banks Financial assets at FVTPL 32,713,663 1,502,282 902,283 1,795,697 3,486,139 381,485 40,781,549 Bonds and securities purchased 1,058,738 1,058,738 under resell agreements - - - - -

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

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

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

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

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

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

186 December 31, 2011 Over Three Over Six Over One Less Than One Month to Months to Six Months to A Year to Five Over Five Financial Instrument One Month Three Months Months Year Years Years Total

Liabilities

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

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

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

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

December 31, 2010 One Month Over Three Over Six Over One Less Than to Three Months to Months to A Year to Five Over Five Financial Instrument One Month Months Six Months Year Years Years Other Total

Assets

Cash and cash equivalents $ 12,952,576 $ - $ - $ - $ - $ - ($ 56,973 ) $ 12,895,603

Due from the Central Bank and Call 24,000,844 2,304,823 2,416,744 4,027,105 5,220,721 - ( 343,520 ) 37,626,717 loans to other banks

Financial assets at FVTPL 10,637,928 6,410,896 2,438,050 4,090,274 12,917,183 ( 137,817 ) 623,262 36,979,776

Bonds and securities purchased under 2,992,554 ------2,992,554 resell agreements

Receivables (excluding allowance) 75,354,915 5,464,785 7,749,425 8,115,339 3,817,366 - ( 2,045,018 ) 98,456,812

Loans (including delinquent loans) 86,404,290 58,106,045 13,585,802 14,635,808 85,619,051 281,197,982 ( 2,061,143 ) 537,487,835 (excluding allowance)

Available-for-sale financial assets 115,490,672 21,573,408 5,248,372 2,622,172 25,784,894 7,406,484 ( 767,708 ) 177,358,294

Held-to-maturity financial assets - 151,976 130,764 976,480 2,172,293 - ( 119,419 ) 3,312,094

Investments under equity method - - - - - 1,861,285 - 1,861,285

Financial assets carried at cost - - - - - 2,428,175 - 2,428,175

Other miscellaneous financial assets 167 - - - 300,000 533,352 ( 7 ) 833,512 (excluding allowance)

Total assets 327,833,946 94,011,933 31,569,157 34,467,178 135,831,508 293,289,461 ( 4,770,526 ) 912,232,657

Liabilities

Due to the Central Bank and other 17,201,291 6,890,180 11,384,940 22,187,381 - - ( 411,401 ) 57,252,391 banks

Financial liabilities at FVTPL 1,270,736 2,307,258 1,595,214 1,858,152 7,157,094 179,747 1,834,663 16,202,864

Bonds and securities sold under 32,012,988 920,564 77,077 - - - ( 398,859 ) 32,611,770 repurchase agreements

Payables 25,038,240 728,887 930,396 880,138 46,765 - ( 583,529 ) 27,040,897

Deposits 104,179,997 174,006,220 89,716,661 141,715,951 158,807,517 36,394,219 ( 4,834,599 ) 699,985,966

Bank debentures - - - - 1,508,000 23,492,000 - 25,000,000

Other financial liabilities 2,827,553 993,397 971,113 2,869,440 3,672,442 2,163,625 ( 312,712 ) 13,184,858

Total liabilities 182,530,805 185,846,506 104,675,401 169,511,062 171,191,818 62,229,591 ( 4,706,437 ) 871,278,746

Net current gap $ 145,303,141 ($ 91,834,573 ) ($ 73,106,244 ) ($ 135,043,884 ) ($ 35,360,310 ) $ 231,059,870 ($ 64,089 ) $ 40,953,911

187 X. Notes To Financial Statements

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, 2011 and 2010, 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, 2011 Over Three Over Six Over One Less Than One Month to Months to Six Months to A Year to Five Over Five Financial Instrument One Month Three Months Months Year Years Years Total

Assets

Due from the Central Bank and $ 7,959,100 $ 2,649,176 $ 2,571,718 $ 4,978,007 $ 5,390,819 $ - $ 23,548,820 call loans to other banks

Financial assets at FVTPL 33,024,177 1,502,282 902,283 1,795,697 3,486,139 381,485 41,092,063

Available-for-sale financial 68,315,388 57,795,507 11,912,437 10,660,881 35,911,927 5,326,254 189,922,394 assets

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 deposits from 68,206,201 10,875,530 8,329,827 17,106,083 1,525,000 23,577,590 129,620,231 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 ($ 41,786,455 ) ($ 58,961,565 ) ($ 139,161,886 ) $ 122,930,773 $ 121,406,581 $ 34,595,176

188 December 31, 2010 One Month Over Three Over Six Over One Less Than to Three Months to Months to A Year to Five Over Five Financial Instrument One Month Months Six Months Year Years Years Other Total

Assets

Due from the Central Bank and $ 22,541,187 $ 2,304,823 $ 2,416,744 $ 4,027,105 $ 5,220,721 $ - ($ 394,980 ) $ 36,115,600 call loans to other banks

Financial assets at FVTPL 10,860,421 6,410,896 2,438,050 4,090,274 12,917,186 411,178 628,156 37,756,161

Available-for-sale financial assets 114,539,472 21,573,408 5,248,372 2,622,172 25,784,896 7,406,484 ( 733,381 ) 176,441,423

Held-to-maturity financial assets - 151,976 130,764 976,480 2,172,293 - ( 119,419 ) 3,312,094

Loans 323,179,090 70,382,044 11,666,055 9,643,243 76,019,803 46,344,694 ( 2,042,719 ) 535,192,210

Others 241,515 600,000 - - - 73,201,744 - 74,043,259

Total assets 471,361,685 101,423,147 21,899,985 21,359,274 122,114,899 127,364,100 ( 2,662,343 ) 862,860,747

Liabilities

Deposits 100,354,005 177,428,628 86,294,253 141,715,951 158,807,517 36,394,219 ( 5,104,649 ) 695,889,924

Borrowings (including deposits from 33,448,224 8,473,872 22,592,737 21,108,681 3,300,000 9,005,796 ( 810,261 ) 97,119,049 post office)

Others 12,018,655 2,037,620 23,329,106 17,867,266 21,676,189 1,906,171 1,834,663 80,669,670

Total liabilities 145,820,884 187,940,120 132,216,096 180,691,898 183,783,706 47,306,186 ( 4,080,247 ) 873,678,643

Interest sensitivity gap $ 325,540,801 ($ 86,516,973 ) ($ 110,316,111 ) ($ 159,332,624 ) ($ 61,668,807 ) $ 80,057,914 $ 1,417,904 ($ 10,817,896 ) b) Effective interest rate (excluding financial assets at FVTPL) As of December 31, 2011 and 2010, the effective interest rate of financial instruments held or issued by the Bank grouping based on main currencies are as follows: Effective Interest Rate (%)

2011 2010

NTD USD NTD USD Bonds and securities sold under repurchase 0.87-0.89 - 0.20-0.55 - agreements Available-for-sale financial assets 0.72-5.13 0.00-8.75 0.32-4.62 0.37-6.00 Held-to-maturity financial assets - 3.75-7.38 - 0.53-7.38 Loans 0.0001-20.00 0.10-6.30 0.08-20.00 0.65-6.20 Bonds and securities sold under repurchase 0.58-0.89 0.28-0.87 0.22-0.55 - agreements Deposits 0.00-4.00 0.01-2.38 0.00-4.00 0.01-4.20 Bank debentures 1.70-2.76 - 0.65-4.45 -

189 X. Notes To Financial Statements

37. OTHER DISCLOSURES REQUIRED FOR OF FINANCIAL INSTITUTIONS

a. Asset quality

Item December 31, 2011 December 31, 2010

Non- Non- Allowance Coverage Non- Non- Allowance Coverage performing Loans performing for Loan Ratio performing Loans performing for Loan Ratio Business Type Loans Loans Ratio Loans Loans Ratio (Note a) (Note b) Losses (Note c) (Note a) (Note b) Losses (Note c)

457,798 119,038,390 0.38% 2,672,076 583.68% 492,591 100,610,328 0.49% 1,217,497 247.16% Corporate Secured finance Unsecured 6,306 160,303,167 - 1,309,832 20,771.91% 484,347 128,152,874 0.38% 1,588,312 327.93%

Mortgage loans 179,343 206,149,360 0.09% 1,102,819 614.92% 269,382 203,730,649 0.13% 709,909 263.53% (Note d) Cash cards 78,474 8,189,094 0.96% 671,787 856.06% 138,243 10,870,988 1.27% 975,749 705.82% Consumer Credit loans 150,513 23,447,039 0.64% 806,301 535.70% 236,009 21,637,759 1.09% 1,062,488 450.19% finance (Note e)

48,035 88,834,441 0.05% 424,571 883.88% 78,645 70,833,163 0.11% 71,107 90.42% Others Secured (Note f) Unsecured 48,222 2,315,937 2.08% 231,232 479.51% 82,334 3,713,217 2.22% 200,498 243.52%

Subtotal 968,691 608,277,428 0.16% 7,218,618 745.19% 1,781,551 539,548,978 0.33% 5,825,560 326.99%

Others (Note h) ------( 2,061,143 ) - ( 11,743 ) -

Total 968,691 608,277,428 0.16% 7,218,618 745.19% 1,781,551 537,487,835 0.33% 5,813,817 326.99%

Credit card 94,686 33,613,235 0.28% 488,089 515.48% 142,169 34,118,130 0.42% 662,455 465.96%

Accounts receivable factoring - 49,576,406 - 105,891 - - 59,809,857 - - - with no recourse (Note g) Note a: Nonperforming loans are in accordance with the Regulations of the Procedures for Banking Institutions to Evaluate Assets and Deal with Past Due/Non-performing Loans and Bad Debts issued by MOF. Non-performing loans of credit cards are defined in the Letter issued by the Banking Bureau on July 6, 2005 (Ref. No. Jin- Guan-Yin (4)0944000378). Note b: Nonperforming loans ratio = Nonperforming loan ÷ Loans Nonperforming loans of credit card ratio = Nonperforming loans of credit cards ÷ Accounts receivable Note c: Coverage ratio of allowances for loan losses = Allowances for loan losses ÷ Nonperforming loans Coverage ratio of allowance for loan losses of credit card = Allowance for loan losses of credit card ÷ Nonperforming loans of credit cards Note d: Mortgage loans are for borrowers to build or repair buildings, providing the borrowers, spouse or minor children to fully collaterize their buildings and install the right on mortgage to financial institutions. Note e: Credit loans are to fit in the Letter issued by the Banking Bureau on December 19, 2005 (Ref. No. Jin - Guan - Yi (4) 09440010950), excluding credit loans of credit cards and cash cards. Note f: The others of consumer financial business are defined as secured or unsecured consumer financial business, excluding mortgage loans, cash cards, credit loans and credit cards. Note g: In accordance with the Letter issued by the Banking Bureau on July 19, 2005 (Ref. No. Jin - Guan - Yin (5) 094000494) accounts receivable factoring with no recourse are defined as non-performing loans within three months from the date that factors or insurance companies ascertain not to compensate the loss. Note h: In accordance with the Letter issued on February 18, 2011 (Ref. No. Ji-Mi 46), the spot exchange rate on the balance sheet date should be used for foreign currency translation. The total loan amount and allowance for bad debt in U.S. dollars is translated by using the Central Bank’s closing spot exchange rate of NT$29.152 to US$1.00 at 15:30 on December 31, 2011.

190 December 31, 2011 December 31, 2010 Item Exempted from Exempted from Exempted from Exempted from Report as Non- Report as Non- Report as Non- Report as Non- Business Type performing performing performing performing Loans Receivables Loans Receivables Negotiated amount performed in accordance with the agreement (Note a) $ 5,279,584 $ 1,667,299 $ 6,944,337 $ 2,218,997 Loans executed in accordance with debt clearing and renewal regulations (Note b) 2,079,662 1,367,876 2,262,556 1,356,840 Total 7,359,246 3,035,175 9,206,893 3,575,837 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, 2011 December 31, 2010

As Proportion Rank Transaction Party Loans As Proportion of Transaction Party Loans of Net Equity (Note a) (Note b) (Note c) Net Equity (%) (Note b) (Note c) (%) A Group (012641 liquid crystal panel A Group (012641 liquid crystal panel and 1 15,444,056 24.52% and components manufacturing 8,306,003 13.69% components manufacturing industry) industry) K Group (014641 whole-sale of B Group (012641 liquid crystal panel and 2 7,734,083 12.28% computers and computer peripheral 7,195,589 11.86% components manufacturing industry) equipment and software) B Group (012641 liquid crystal panel C Group (016499 other financial 3 7,565,729 12.01% and components manufacturing 6,928,369 11.42% intermediation not elsewhere classified) industry) D Group (011850 synthetic fiber J Group (012712 monitors and 4 6,553,605 10.41% 5,524,651 9.10% manufacturing industry) terminals manufacturing industry) E Group (016499 other financial H Group (012711 computer 5 6,279,800 9.97% 4,196,167 6.91% intermediation not elsewhere classified) manufacturing industry) L Group (012641 liquid crystal panel F Group (015232 ocean freight 6 5,908,179 9.38% and components manufacturing 4,127,730 6.80% transportation forwarding services) industry) G Group (012711 computer manufacturing F Group (015232 ocean freight 7 5,611,510 8.91% 3,902,886 6.43% industry) transportation forwarding services) E Group (016499 other financial H Group (012711 computer manufacturing 8 5,415,622 8.60% intermediation not elsewhere 3,610,172 5.95% industry) classified) I Company (012630 printed circuit board M Co., Ltd. (012613 semi-conductors 9 5,172,356 8.21% 3,583,027 5.90% manufacturing industry) packing and testing industry) J Group (012712 monitors and terminals D Group (011850 man-made fibers 10 4,868,214 7.73% 3,253,107 5.36% manufacturing industry) manufacturing industry) Note a: Sorted by the balance of loans on December 31, 2011 and 2010, excluding government or state-owned business. If the borrower belongs to the same business group, the aggregated credit amount of the business group is disclosed, and code and industry additionally disclosed. If the borrower is a business group, the industry with the largest risk exposures in the business group is disclosed. The industry disclosure should follow the guidelines of Directorate- General of Budget, Accounting and Statistics. Note b: Transaction party is in accordance with the article 6 of the Supplementary Provisions to the Taiwan Stock Exchange Corporation Criteria for Review of Securities Listings. Note c: Loans include import and export bill negotiations, bills discounted, overdraft, short-term loan, short-term secured loan, receivable financing, medium-term loan, medium-term secured loan, long-term loan, long-term secured loan, delinquent loans, inward remittances, factoring without recourse, acceptance, and guarantee.

191 X. Notes To Financial Statements

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, 2011 and 2010 were as follows: 2011

Average Value Average Interest Rate % Assets Due from banks and call loans to banks $ 28,054,773 0.62 Financial assets at FVTPL 26,531,008 0.75 Bonds and securities purchased under resell agreements 1,940,882 0.71 Receivables 47,753,379 4.89 Loans 577,811,944 2.51 Available-for-sale financial assets 187,696,707 1.09 Held-to-maturity financial assets 3,056,223 3.15 Liabilities Due to banks and call loans from banks 55,419,826 1.13 Bonds and securities sold under repurchase agreements 34,711,459 0.60 Demand deposits 299,036,422 0.24 Time deposits 427,750,415 1.05 Bank debentures 25,000,000 2.46 Other financial liabilities 14,142,116 1.60

2010

Average Value Average Interest Rate % Assets Due from banks and call loans to banks $ 37,605,391 0.51 Financial assets at FVTPL 40,452,659 0.51 Bonds and securities purchased under resell agreements 1,239,965 0.38 Receivables 46,155,089 4.67 Loans 515,760,698 2.41 Available-for-sale financial assets 150,371,232 0.97 Held-to-maturity financial assets 4,303,545 2.96 Liabilities Due to banks and call loans from banks 58,318,335 0.91 Bonds and securities sold under repurchase agreements 42,246,813 0.34 Demand deposits 264,890,364 0.17 Time deposits 384,930,487 0.77 Bank debentures 23,712,329 2.41 Other financial liabilities 16,916,403 1.42

192 d. Interest rate sensitivity

December 31, 2011 Item 1-90 Days 91-180 Days 181 Days-1 Year More Than 1 Year Total 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%

December 31, 2010 Item 1-90 Days 91-180 Days 181 Days-1 Year More Than 1 Year Total Interest-sensitive assets $ 526,221,728 $ 19,385,551 $ 16,365,261 $ 135,625,292 $ 697,597,832 Interest-sensitive liabilities 279,296,907 95,096,096 121,258,346 198,384,858 694,036,207 Interest sensitivity gap 246,924,821 ( 75,710,545 ) ( 104,893,085 ) ( 62,759,566 ) 3,561,625 Net equity 60,618,990 Ratio of interest-sensitive assets to liabilities 100.51% Ratio of interest sensitivity gap to net equity 5.88% Note a: The amounts listed above include amounts in N.T. dollars only (i.e., excluding foreign currency) for both head office and domestic branches. Note b: Interest-sensitive assets and liabilities are interest-earning assets and interest-bearing liabilities with income or cost affected by interest rate fluctuations. Note c: Interest sensitivity gap = Interest-sensitive assets - Interest - sensitive liabilities Note d: Ratio of interest-sensitive assets to interest-sensitive liabilities =Interest-sensitive assets÷Interest-sensitive liabilities(N.T. dollars only)

(In Thousands of U.S. Dollars) December 31, 2011 Item 1-90 Days 91-180 Days 181 Days-1 Year More Than 1 Year Total 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% )

(In Thousands of U.S. Dollars) December 31, 2010 Item 1-90 Days 91-180 Days 181 Days-1 Year More Than 1 Year Total Interest-sensitive assets $ 2,344,727 $ 631,153 $ 482,195 $ 1,585,462 $ 5,043,537 Interest-sensitive liabilities 2,669,341 2,684,371 248,514 544,467 6,146,693 Interest sensitivity gap ( 324,614 ) ( 2,053,218 ) 233,681 1,040,995 ( 1,103,156 ) Net equity 13,712 Ratio of interest-sensitive assets to liabilities 82.05% Ratio of interest sensitivity gap to net equity ( 8,045.19% ) Note a: The amounts listed above include amounts in U.S. dollars only for domestic branches, OBU, and overseas branches, excluding contingent assets and contingent liabilities. Note b: Interest-sensitive assets and liabilities are interest-earning assets and interest-bearing liabilities with income or cost affected by interest rate fluctuations. Note c: Interest sensitivity gap = Interest-sensitive assets - Interest-sensitive liabilities Note d: Ratio of interest-sensitive assets to interest-sensitive liabilities =Interest-sensitive assets÷Interest-sensitive liabilities(U.S. dollars only)

193 X. Notes To Financial Statements

e. Profitability

December 31 Item 2011 2010

Pretax 0.95 1.24 Return on total assets After tax 0.80 0.91

Pretax 14.90 19.53 Return on net equity After tax 12.52 14.32

Profit margin 31.51 33.03 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: Profit margin =Income after tax÷Net revenue Note d: Profitability presented above is cumulative from January 1 to December 31 of 2011 and 2010, respectively.

f. Maturity analysis of assets and liabilities

December 31, 2011

Period Remaining until Due Date and Amount Due Item Total More Than 1 1-30 Days 31-90 Days 91-180 Days 181 Days-1 Year 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

December 31, 2010

Period Remaining until Due Date and Amount Due Item Total More Than 1 1-30 Days 31-90 Days 91-180 Days 181 Days-1 Year Year Major maturity cash inflows $ 770,074,334 $ 237,483,195 $ 89,050,617 $ 26,826,242 $ 25,910,246 $ 390,804,034

Major maturity cash outflows 865,518,809 116,563,606 123,150,966 162,037,638 176,984,707 286,781,892

Gap ( 95,444,475 ) 120,919,589 ( 34,100,349 ) ( 135,211,396 ) ( 151,074,461 ) 104,022,142 Note:The amounts listed above include accounts in N.T. dollars only (i.e., excluding foreign currency) for both head office and domestic branches. (In Thousands of U.S. Dollars)

December 31, 2011

Period Remaining until Due Date and Amount Due Item Total More Than 1 1-30 Days 31-90 Days 91-180 Days 181 Days-1 Year 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

194 (In Thousands of U.S. Dollars)

December 31, 2010

Period Remaining until Due Date and Amount Due Item Total 181 Days-1 Year More Than 1 1-30 Days 31-90 Days 91-180 Days Year Major maturity cash inflows $ 9,599,997 $ 4,346,156 $ 1,569,387 $ 907,250 $ 796,198 $ 1,981,006

Major maturity cash outflows 9,596,624 3,046,733 1,060,168 2,891,581 551,292 2,046,850

Gap 3,373 1,299,423 509,219 ( 1,984,331 ) 244,906 ( 65,844 ) Note:The amounts listed above include accounts in U.S. dollars for head office, domestic branches, and OBU. g. Capital adequacy

Year Consolidated Taishin Bank

December 31, December 31, December 31, Item 2011 2011 2010 Tier I capital 60,362,134 59,422,148 56,696,260

Self-owned Tier II capital 27,314,206 26,740,812 26,043,686 capital Tier III capital - - - Self-owned capital 87,676,340 86,162,960 82,739,946 Standardized approach 607,930,747 607,210,536 551,856,662 Credit risk IRB - - - Securitization 1,158,501 1,158,501 1,514,031 Basic indicator approach - - - Risk- Standardized approach/ weighted Operation risk 36,814,913 36,814,913 34,888,200 optional standard assets Advanced internal-rating based approach - - -

Market price Standardized approach 30,280,313 30,257,750 20,863,325 risk Internal model approach - - - Total 676,184,474 675,441,700 609,122,218 Capital Adequacy ratio 12.97% 12.76% 13.58% Tier I capital to risk-weighted assets ratio 8.93% 8.80% 9.31% Tier II capital to risk-weighted assets ratio 4.04% 3.96% 4.27% Tier III capital to risk-weighted assets ratio - - - Common stock equity to total assets ratio 4.75% 4.75% 5.19% Leverage ratio 6.35% 6.25% 6.53% 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

195 X. Notes To Financial Statements

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, 2011 and 2010 are as follows: 2011 2010 Special purpose trust accounts - foreign and domestic investments $ 135,857,618 $ 137,737,804 Special purpose monetary fund - master 6,016,971 7,013,808 Special purpose monetary fund - stand-alone 109,139 153,508 Special purpose cover fund - stand-alone 9,355,248 12,975,945 Specific monetary fund - stand-alone 8,079,614 2,584,508 Specific cover fund - stand-alone 14,738,474 27,467,453 Real estate securitization 8,645,712 4,749,333 Real estate trust 9,552,878 1,160,044 Monetary mutual trust fund 1,021,687 750,060 Securities under custody 28,220,801 28,035,267 $ 221,598,142 $ 222,627,730

i. Significant foreign-currency denominated financial assets and liabilities are summarized as follows: (In Foreign Currency/In Thousands of New Taiwan Dollars)

December 31

2011 2010 Exchange Exchange Foreign Currencies Rate New Taiwan Dollars Foreign Currencies Rate New Taiwan Dollars Financial assets Monetary items AUD $ 90,903 30.75 $ 2,795,583 $ 39,025 30.94 $ 1,207,519 RMB 677,030 4.77 3,232,541 121,886 4.61 561,606 EUR 33,611 39.20 1,317,495 262,762 40.58 10,662,265 GBP 895 46.75 41,845 81,466 47.05 3,833,014 HKD 802,507 3.90 3,128,678 696,186 3.91 2,719,723 JPY 23,503,001 0.39 9,175,830 15,962,397 0.37 5,959,497 USD 4,014,490 30.29 121,598,910 3,695,818 29.15 107,740,479 Nonmonetary items AUD 261,523 30.75 8,042,721 250,847 30.94 7,761,702 RMB 240,874 4.77 1,150,075 - - - EUR 101,776 39.20 3,989,428 204,690 40.58 8,305,842 HKD 433,964 3.90 1,691,865 395,523 3.91 1,545,151 JPY 44,432,933 0.39 17,347,106 10,856,170 0.37 4,053,107 NZD 28,594 23.41 669,414 47,802 23.51 1,123,862 USD 2,297,592 30.29 69,594,059 1,916,467 29.15 55,868,837 ZAR 1,333,218 3.73 4,971,890 634,923 4.58 2,905,283

196 December 31

2011 2010 Exchange Exchange Foreign Currencies Rate New Taiwan Dollars Foreign Currencies Rate New Taiwan Dollars Financial liabilities Monetary items AUD $ 349,493 30.75 $ 10,748,108 $ 173,622 30.94 $ 5,372,215 RMB 684,157 4.77 3,266,570 60,699 4.61 279,678 EUR 118,156 39.20 4,631,524 291,814 40.58 11,841,166 GBP 12,418 46.75 580,503 23,618 47.05 1,111,248 HKD 933,160 3.90 3,638,044 1,122,053 3.91 4,383,419 JPY 8,498,102 0.39 3,317,753 4,995,046 0.37 1,864,880 NZD 29,526 23.41 691,238 48,500 23.51 1,140,277 USD 5,126,610 30.29 155,285,014 5,051,007 29.15 147,246,964 ZAR 1,328,264 3.73 4,953,416 633,806 4.58 2,900,171 Nonmonetary items AUD 1,540 30.75 47,369 121,738 30.94 3,766,820 EUR 7,703 39.20 301,927 164,983 40.58 6,694,619 GBP 3 46.75 127 58,764 47.05 2,764,884 HKD 434,501 3.90 1,693,957 - - - JPY 62,619,872 0.39 24,447,487 24,376,551 0.37 9,100,888 USD 1,147,286 30.29 34,751,306 518,712 29.15 15,121,502

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% of the paid-in 1 None capital

2 Acquisition of real estate at cost of at least NT$300 million or 10% of the paid-in capital None

3 Disposal of real estate at cost of at least NT$300 million or 10% of the paid-in capital None

4 Discount on service fee for related parties of at least NT$5 million None

5 Receivables from related parties amounting to at least NT$300 million or 10% of the paid-in capital None

6 Sale of NPL None

Securitized instruments and related assets which are in accordance with the Statute for Financial Assets 7 None Securitization and the Statute for Real Estate Securitization

8 Other transactions which may have significant impact on the decisions made by the financial statement users None

197 X. Notes To Financial Statements

b. Information on Taishin Bank’s Investees

No. Item Explanation

1 Names, locations, and related information of investees Table 1

2 Financings provided Table 2

3 Endorsements/guarantees provided None

4 Marketable securities held as of December 31, 2010 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% of the paid-in 6 Table 4 capital by subsidiaries

7 Acquisition of real estate at cost at least NT$300 million or 10% of the paid-in capital None

8 Disposal of real estate at cost at least NT$300 million or 10% of the paid-in capital None

9 Discount on service fee for related parties at least NT$5 million None

10 Receivables from related parties at least NT$300 million or 10% of the paid-in capital None

11 Sale of NPL by subsidiaries None

Securitized instruments and related assets which are in accordance with the Statute for Financial Assets 12 None Securitization and the Statute for Real Estate Securitization

13 Other transactions which may have significant impact on the decisions made by the financial statement users None Note:It’s not required to disclose if the investee is a bank, insurance or security company.

c. Information on the investment in Mainland China: None.

198 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 had provided combined financial statements, in which information of operating segments had been disclosed. Therefore, Taishin Bank’s individual financial statement will not disclose information related to operating segments.

199 X. Notes To Financial Statements

TAISHIN INTERNATIONAL BANK CO., LTD. INFORMATION OF INVESTEES’ NAMES, LOCATIONS, ETC.

YEAR ENDED DECEMBER 31, 2011 (In Thousands, Except for Percentages and Shares)

Sum of Ownership Ownership Recognized Unified Interest (%) Investment Book Investment Total Investees’ Names Investees’ Location Principal Business Activities Imputed Shares Note Business No. at Value Income (Loss) Current Shares Ending Balance of Current Period (Note) Ownership Shares Interest (%) Financial business Leasing and retailing of machinery, mobile, aircraft, marine Taishin Dah An Leasing 16094812 2F1.-2, No. 9, Dehuei St., Taipei, Taiwan 100.00% $ 207,181 $ 2,336 20,000,000 - 20,000,000 100.00% and components 3F1., No. 236 and No. 238, Jianguo N. Taishin Insurance Agency 97125786 Life insurance agency 87.40% 937,680 190,340 262,204 - 262,204 87.40% Rd., Sec. 2, Taipei, Taiwan Investment and enterprise operating consultant, information 13Fl., No. 11, Jungshan N. Rd., Sec. 1, Taipei, PayEasy Digital 70553216 software and data processing, advertising, international 65.36% 209,108 ( 136,671 ) 28,400,001 - 28,400,355 65.38% Taiwan trade, agency and network services Investments under equity method No. 38, Tsu Yu Rd., Sec. 2, Taichung, Chang Hwa Bank 51811609 Commercial bank business, trust, and offshore banking 0.27% 345,220 23,693 17,985,000 - 1,543,985,000 22.81% Taiwan Nonfinancial business 2Fl., No. 9 Dehuei St., Sec. 2, Taipei, Taishin Real-Estate 89597170 Audit and consulting of construction plan, contract witness 60.00% 180,923 9,857 12,000,000 - 20,000,000 100.00% Taiwan 9F1., No. 100, Sinyi Rd., Sec. 5, Taipei, An Hsin Real-Estate 89458276 Construction consultation, real estate appraisement 30.00% 59,800 13,818 3,600,000 - 3,600,000 30.00% Taiwan Financial business 11F1., No. 116, Nanjing E. Rd., Sec. 2, Dah Chung Bills 89391748 Bills and finance 18.29% 913,641 - 79,182,224 - 81,501,617 18.83% Taipei, Taiwan 13Fl., No. 200, Chung Shiao E. Rd., Sec. Pacific Security Co., Ltd. 22957533 Security and futures 2.77% 112,030 - 11,537,469 - 12,463,837 2.99% 4, Taipei, Taiwan 8Fl., No. 400, Bade Rd., Sec. 2, Taipei, Taipei Foreign Exchange Co., Ltd. 84703601 Exchange trading, DEPOS, and swap 0.81% 1,600 - 160,000 - 860,000 4.34% Taiwan Taiwan Financial Asset Service Co., 6Fl., No. 99, Ren Ai Rd., Sec. 2, Taipei, 70820924 Auction assets of the recognition of an impartial third party 2.94% 50,000 - 5,000,000 - 10,000,000 5.88% Ltd. Taiwan Taiwan Asset Management Co., 11Fl. and 12Fl., No. 85 and No. 87, Nanjing Acquisition of delinquent loans, evaluation, auction, and 70808864 0.57% 100,000 - 10,000,000 - 210,000,000 11.92% Financial assets carried Ltd. E. Rd., Sec. 2, Taipei, Taiwan management at cost 13Fl., No. 102, and 14Fl., No. 100, Taiwan Futures Exchange 16092130 Futures exchange and clearing mechanism 0.96% 19,250 - 2,615,997 - 5,741,603 2.11% Luossu Fu. Rd., Sec. 2, Taipei, Taiwan Financial Information Service Co., No. 81, Kang Ning Rd., Sec. 3, Taipei, 16744111 Type II telecommunications business 2.28% 91,000 - 10,237,500 - 15,450,750 3.43% Ltd. Taiwan Sunlight Asset Management Co., 11Fl., No. 85 and No. 87, Nanjing E. Rd., Acquisition of delinquent loans, evaluation, auction, and 28008025 18.21% 10,923 - 1,092,317 - 1,134,085 18.90% Ltd. Sec. 2, Taipei, Taiwan management MasterCard Incorporated 0.01% 10,345 - 10,316 - 13,517 0.01% VISA Inc. 0.07% 777,033 - 584,124 - 609,144 0.07% (Continued)

200 TAISHIN INTERNATIONAL BANK CO., LTD. INFORMATION OF INVESTEES’ NAMES, LOCATIONS, ETC.

YEAR ENDED DECEMBER 31, 2011 (In Thousands, Except for Percentages and Shares)

201 X. Notes To Financial Statements

Sum of Ownership Ownership Recognized Unified Interest (%) Investment Book Investment Total Investees’ Names Investees’ Location Principal Business Activities Note Business No. at Value Income (Loss) Imputed Shares Current Shares Ownership Ending Balance of Current Period (Note) Shares Interest (%) Nonfinancial business 8Fl., No. 70, Nanjing E. Rd., Sec. 3, Taipei, Universal Venture Fund Co., Ltd. 16446106 Investment start-up 1.49% $ 3,150 $ - 314,991 $ - 314,991 1.49% Taiwan 15Fl., No. 109, Ren Ai Rd., Sec. 4, Taipei, Da Chiang International Co., Ltd. 97430717 Import and export trading 4.31% 70,625 - 8,620,690 - 8,620,690 4.31% Taiwan 6Fl., No. 236 Tun-Hua N. Rd., Taipei, EasyCard Investment Holdings Co., Ltd. 28988941 IC card development & advance advertising service 2.40% 16,000 - 1,872,000 - 1,872,000 2.40% Taiwan 16Fl., No. 277 Sung Ren Rd., Taipei, Asia Pacific Telecom Co., Ltd. 70771579 Type I & II telecommunications business 0.46% 15,000 - 15,000,000 - 30,000,000 0.91% Taiwan 10Fl., No. 76, Tun Hua S. Rd., Sec. 2, T.K Venture Capital Co., Ltd. 70789542 Investment start-up 3.33% 33,333 - 3,333,333 - 5,000,000 3.33% Taipei, Taiwan

Kaohsiung Rapid Transit Corp. 70798839 No. 1, Chung An. Rd., Kaohsiung, Taiwan Mass rapid transit operating 0.50% 50,000 - 5,000,000 - 5,000,000 0.50% Financial assets carried at 5Fl., No. 143 Min Sheng E. Rd., Sec. 2, cost Apex Venture Capital Co., Ltd. 97176200 Investment start-up 4.67% 3,768 - 2,009,346 - 2,009,346 4.67% Taipei, Taiwan 11Fl., No. 132, Min Sheng E. Rd., Sec. 3, Concord VII Venture Capital Co., Ltd. 70767435 Investment start-up 4.73% 3,240 - 2,324,000 - 2,324,000 4.73% Taipei, Taiwan 11Fl., No. 132, Min Sheng E. Rd., Sec. 3, Concord IV Venture Capital Co., Ltd. 16442880 Investment start-up 5.00% 15,641 - 1,564,080 - 1,955,100 6.25% Taipei, Taiwan 4Fl., No. 9, Dehuei. St., Sec. 2, Taipei, United Venture Capital Co., Ltd. 70780113 Investment start-up 4.52% 14,400 - 1,440,000 - 1,440,000 4.52% Taiwan 5F1., No. 126, Jianguo N. Rd., Sec. 1, Lien An Co., Ltd. 97290477 Industrial and commercial services 5.00% 1,250 - 125,000 - 250,000 10.00% Taipei, Taiwan Harbinger Venture Capital Investment 7F1., No. 187, Ti Titing Ta. Rd., Sec. 2, 70777004 Investment start-up 3.35% 45,225 - 4,522,500 - 4,522,500 3.35% Co., Ltd. Taipei, Taiwan

Note: Imputed shares are considered if equity securities such as convertible bond, warrant, etc., or derivative contract such as stock options, are converted to shares.

202 Sum of Ownership Ownership Recognized Unified Interest (%) Investment Book Investment Total Investees’ Names Investees’ Location Principal Business Activities Note Business No. at Value Income (Loss) Imputed Shares Current Shares Ownership Ending Balance of Current Period (Note) Shares Interest (%) Nonfinancial business 8Fl., No. 70, Nanjing E. Rd., Sec. 3, Taipei, Universal Venture Fund Co., Ltd. 16446106 Investment start-up 1.49% $ 3,150 $ - 314,991 $ - 314,991 1.49% Taiwan 15Fl., No. 109, Ren Ai Rd., Sec. 4, Taipei, Da Chiang International Co., Ltd. 97430717 Import and export trading 4.31% 70,625 - 8,620,690 - 8,620,690 4.31% Taiwan 6Fl., No. 236 Tun-Hua N. Rd., Taipei, EasyCard Investment Holdings Co., Ltd. 28988941 IC card development & advance advertising service 2.40% 16,000 - 1,872,000 - 1,872,000 2.40% Taiwan 16Fl., No. 277 Sung Ren Rd., Taipei, Asia Pacific Telecom Co., Ltd. 70771579 Type I & II telecommunications business 0.46% 15,000 - 15,000,000 - 30,000,000 0.91% Taiwan 10Fl., No. 76, Tun Hua S. Rd., Sec. 2, T.K Venture Capital Co., Ltd. 70789542 Investment start-up 3.33% 33,333 - 3,333,333 - 5,000,000 3.33% Taipei, Taiwan

Note: Imputed shares are considered if equity securities such as convertible bond, warrant, etc., or derivative contract such as stock options, are converted to shares.

203 X. Notes To Financial Statements

TAISHIN INTERNATIONAL BANK CO., LTD. FINANCINGS PROVIDED YEAR ENDED DECEMBER 31, 2011 (In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

Financial Reason for Maximum Balance for Type of Transaction Allowance for Collateral Financing Limit for Each Financing Company’s No. Financing Company Counter-party Statement Ending Balance Interest Rate Short-term the Year Financing Amount Bad Debt Borrowing Company Financing Amount Limit Account Financing Item Value PayEasy Digital Contect Digital Integration Operating 1 Other receivable $ 50,000 $ 50,000 3.2%~3.3% 2 N/A $ - None None $ 31,992 $ 127,968 Integration Co., Ltd. Co., Ltd. turnover

Note 1: Financing provided is numbered as follow: (1) Transactions: 1 (2) Short-term financing: 2 Note 2: The total amount for lending to a company for a short-term period shall not exceed ten percent (10%) of the net worth of financing company. In addition, the total amount lendable to any borrower shall be no more than forty percent (40%) of the borrower’s net worth. Note 3: The total amount available for lending purpose shall be calculated based on the latest financial statement audited by the CPA. Note 4: The maximum balance available for expenditure is the same as the actual amount spent.

204 TAISHIN INTERNATIONAL BANK CO., LTD. FINANCINGS PROVIDED YEAR ENDED DECEMBER 31, 2011 (In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

205 X. Notes To Financial Statements

TAISHIN INTERNATIONAL BANK CO., LTD. MARKETABLE SECURITIES HELD BY SUBSIDIARIES DECEMBER 31, 2011 (In Thousands, Except for Percentage and Shares)

Type and Issuer/Name of Marketable Issuer’s Relationship to December 31, 2011 Owner Accounts Recorded Note Security the Owner Shares (Units) Carrying Value Ownership Interest (%) Market Value Taishin Insurance Agency Stock Taishin Insurance Brokers Parent and subsidiary Investment under equity method 6,000,000.00 $ 86,400 100.00 $ 86,400 Chi-Long Technology Co., Ltd. None Financial assets carried at cost 950,000.00 4,275 4.13 4,275 PayEasy Digital Stock PayEasy Travel Agency Co., Ltd. Parent and subsidiary Investment under equity method 1,300,000.00 13,834 100.00 13,834 Contect Digital Integration Co., Ltd. ″ ″ 480,000.00 ( 49,486 ) 65.75 ( 49,486 ) Taishin Dah An Leasing Stock Pacific Security Co., Ltd. None Financial assets carried at cost 926,368.00 6,374 0.22 6,374 Yuan Tai Foreign Exchange Co., Ltd. ″ Other liabilities 600,000.00 6,000 5.00 6,000 Bon-Li International Technology Co., Ltd. ″ ″ 125,000.00 - 1.50 - Funds Shin Kong Chi-Shin Fund None Financial assets at FVTPL 1,114,173.02 16,628 - 16,658 Taishin Real-Estate Stock The supervisors of the Metro Consulting Service Financial assets carried at cost 300,000.00 3,000 6.00 3,000 Corporation Funds Taishin 1699 Money Market Fund Issued by Taishin Investment Financial assets at FVTPL 768,869.99 10,019 - 10,019 Trust Taishin Ta-Chong equity fund ″ ″ 731,759.10 10,018 - 10,018 FSITC Taiwan Money Market Fund None ″ 170,970.53 2,520 - 2,520

206 TAISHIN INTERNATIONAL BANK CO., LTD. MARKETABLE SECURITIES HELD BY SUBSIDIARIES DECEMBER 31, 2011 (In Thousands, Except for Percentage and Shares)

207 X. Notes To Financial Statements

TAISHIN INTERNATIONAL BANK CO., LTD. ACCUMULATED PURCHASES AND SALES OF SPECIFIC MARKETABLE SECURITIES OVER NT$300 MILLION OR 10% OF OUTSTANDING CAPITAL

YEAR ENDED DECEMBER 31, 2011 (In Thousands Except for Percentages and Shares)

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

Taishin Fund Available- - - 4,992,660.80 $ 50,000 - $ - 4,992,660.80 $ 50,231 $ 50,000 $ 231 - $ - Insurance FSITC for-sale Agency Taiwan financial Bond assets - Fund noncurrent

Taishin Taishin Financial Taishin Wholly 389,292.89 5,000 1,539,975.14 20,000 1,160,398.04 15,051 15,000 51 768,869.99 10,000 Real- 1699 assets at Securities owned by Estate Bond FVTPL Investment Taishin Fund Trust Financial Holding

208 44 Chung-Shan North Road, Section 2, Taipei Taiwan R.O.C. Te l : 886-2-2568-3988 Fax : 886-2-2511-1987 http://www.taishinbank.com.tw