105Annualreporte.Pdf

Ⅰ . Names, titles, phone numbers, and e-mail addresses of spokesman and acting Spokesman Spokesman: Welch Lin Title: Chief Financial Officer from Taishin Financial Holding Company, Senior Vice President Tel: 886-2-5576-1888 E-mail address : [email protected]

Acting spokesman: David Lee Title: Vice President Tel: 886-2-5576-2112 E-mail address: [email protected]

Ⅱ . Addresses and phone number of head office and branches Head office: 1F, and B1, No. 44, Sec. 2, Jhongshan N. Rd., Taipei City 104, Taiwan (R.O.C) Tel: 886-2-2568-3988 Addresses and phone numbers of branches: see the chapter 9 of the annual report.

Ⅲ . Name, address, website, and phone number of the institution for handling stock register Name: Affairs Stock Agency Department of Taishin International Commercial Bank Address: B1, No. 96, Sec.1, Jianguo N. Rd., Jhonghsan Dist.,Taipei City 104, Taiwan (R.O.C) 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: Rm 1306, 13F, No.205, Dunhua N. Rd., Songshan Dist., Taipei City 105, Taiwan (R.O.C) Website: http://www.fitchratings.com.tw Tel: 886-2-8175-7600

Name: Taiwan Ratings Address: 49F, No. 7, Sec. 5, Xinyi Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C) Website: http://www.taiwanratings.com.tw 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: Tza Li Gung / Qinzhen Yang Name of accounting firm: Deloitte & Touche Address: 12F, No. 156, Sec. 3, Minsheng E. Rd., Songshan Dist., Taipei City 105, Taiwan (R.O.C) 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: None. Contents

Rating Agency Date Ratings I. Message to Shareholders 2

II. Brief Introduction to The Bank 6 Issuer L-Term BBB+ III. Corporate Governance 8 Issuer S-Term F2 IV. Fund-Raising Activities 72 Outlook Stable Fitch Ratings 2016.10.12 Support 3 V. Operating Status 84

National L-Term AA- (twn) VI. Financial Status 112

National S-Term F1+ (twn) VII. Financial Status, Review of Business Performance, 126 and Risk Management

VIII. Special Notes 142

Issuer L-Term BBB IX. Directory of Head Office & Branches 151

Issuer S-Term A-2 Appendix I. Financial Statements and Independent 156 Taiwan Ratings 2016.11.21 Outlook Stable Auditors' Report National L-Term twA+ Appendix II. Consolidated Financial Statements and 260 National S-Term twA-1 Independent Auditors' Report I. Message to Shareholders

Dear Shareholders,

The global economy showed signs of a turnaround in 2016. Economic growth in the first half of 2016 was hampered by slowing international trade and diminishing effects of QE programs in major economies. Fortunately, the global economy showed positive signs in the second half of the year when the U.S. economy recovered, global commodity prices rose, and economic conditions improved in the eurozone. The annual GDP growth was 1.6% in the United States, 1.7% in the eurozone, and 1% in Japan. The annual GDP growth in China was 6.7%. Most countries had underperformed compared to last year.

Recovery is slowly taking place around the world while many challenges remain. Since the U.S. Federal Reserve started raising interest rates in late 2015, there has not been as many rate increases as expected. The market is watching closely to see if the Fed will pick up the pace. Meanwhile, China's gentle push for economic transformation with an emphasis on deleveraging and risk prevention continues with unabated momentum. Furthermore, the United Kingdom's Brexit vote and Trump winning the U.S. presidential election are sending shock waves through the political establishments. International markets reacted with short term shocks but managed to recover. However, everyone is still cautiously waiting to see the impact of rising anti-globalization sentiments and whether Asia exports would continue to grow in the face of China-U.S. trade issues.

Taiwan, also following the ups and downs of the global economy, appeared to be improving from the worst in 2016 with the second half of the year outperforming the first half. As of December 2016, the domestic economy flashed the 6th straight green light, signaling a recovery. The economic growth for the year was 1.5%. The latest in the string of rate cuts by the central bank in an attempt to stimulate the economy took place in June 2016. There had not been more since the effects started to show. The stock market, in response to the economic factors, fell before rising again, and closed at 9,254 at the end of the year, 11% up from 8,338 in the previous year.

Regarding the financial sector in Taiwan, RMB depreciation and penalties imposed by the U.S. government on one of Taiwan's state owned banks led to smaller profits for all overseas branches of domestic banks and OBUs in 2016. The earnings before tax of domestic banks fell to NT$300.1 billion, a decrease of 6% compared to the previous year, while the return on assets (ROA) and the return on equity (ROE) were 0.68% and 9.24%, respectively. While domestic banks kept asset quality at the same level, the overall average nonperforming loan ratio at the end of 2016 was 0.27%, and the coverage ratio was 503%.

We followed our operating budgets closely in 2016. The core business grew at a steady pace, leading to consistent profit growth. The after-tax earnings totaled NT$9.5 billion in the year, and the after-tax EPS was NT$1.64. Asset quality was good. The nonperforming loan ratio was 0.26% and the coverage ratio 549% at the end of 2016. In terms of capital structure, we were able to improve the capital adequacy ratio from 12.49% at the end of 2015 to 14.21% at the end of 2016. The Tier 1 capital ratio was a healthy 10.64% at the end of 2016.

In October 2016, we were granted global long- and short-term credit ratings of BBB+ and F2, respectively, in a report of the international credit rating agency Fitch Ratings. The national long- and short-term credit ratings were AA-(twn) and F1+ (twn), respectively, and the outlook was "Stable". In November 2016, we were granted international long- and short-term ratings of BBB and A-2, respectively, and domestic long-and short-term ratings of twA+ and twA-1, respectively, in a report of the credit rating agency Taiwan Ratings. The outlook was also "Stable".

2 Message to Shareholders 01

With respect to overseas expansion, the Tokyo Branch in Japan celebrated its grand opening in October 2016. It is the first time that we opened a branch in an OECD member country. It is also our third overseas branch after the Hong Kong Branch and the Singapore Branch. Looking forward, the Brisbane Branch in Australia is expected to open in 2017, and the application for the Long An Branch in Vietnam has been submitted to the local authorities. With respect to local offices, besides the Ho Chi Minh City office in Vietnam, the Yangon office in Myanmar was established in January 2016. In the future, we will continue to expand our overseas presence, offering more comprehensive and higher quality international financial services to customers.

Our businesses mainly comprise a retail banking segment and a wholesale banking segment. Below is a summary of how the two segments performed over the past year:

1. Retail Banking

As of the end of 2016, the size of our mortgage portfolio stood at NT$418.7 billion, representing more than 7% in YOY growth; the auto loan balance amounted to NT$37.5 billion, representing a 10% YOY growth, placing us again on top of the financial industry; we had 3.78 million credit cards outstanding, ranking 4th with a 9% market share; lastly, Taishin Bank had 103,000 card accepting merchants nationwide, ranking first with a 21% market share. In response to the rise of fintech, Taishin Bank had four new utility model patents granted for its innovative services. 01 We were also the first bank to launch a new digital banking brand, Richart, to offer a range of friendly online financial services. The brand held a 60% market share in digital accounts in less than six months since its launch. Meanwhile, internet banking and mobile banking are advancing rapidly. The number of customers is growing at 13% per year given the range of services and the number of promotional campaigns. The transaction volume is also growing every year.

Regarding the investment in mobile payment services, Taishin Bank was first to be approved by the competent authority to support international mobile payment tools such as Apple Pay, Android Pay, and Samsung Pay. We were first to launch the service on March 29, 2017. Customers are now able to make payments with Taishin credit cards and Apple Pay. In addition, we offer SIM credit cards supported by host card emulation (HCE) technology that enable customers to use their mobile phones to quickly pay for their shopping. We have designed an app exclusively for Taishin cardholders. With the new CARDaily app (for credit cards), customers are able to check their credit card accounts in real time. Furthermore, Taishin Bank is going to introduce e-Payments that will offer a payment experience combining social media and payments. In addition to targeting micro or proprietary businesses, we will also team up with large merchants to promote the services. Regarding cross border O2O services, Taishin Bank is teaming up with Alipay of China. We currently have the large number of points of service accepting Alipay in Taiwan.

Our credit card services aim to cater to different customer groups at the same time. We have been introducing new products since 2016. Examples include the @GoGo VISA Signature card for online shoppers, the limited edition crystal encrusted Wealth Visa Infinite card, and the Mercuries Life cobranded card. The @GoGo card offers high cash back, and cash back is credited to a Richart digital banking account. This idea of saving while spending makes the card widely known as the best card for online shopping. Both the number of cards issued and the total card spending have exceeded expectations. The Wealth Visa Infinite card targets top-tier customers. The unprecedented Swarovski crystal encrusted design is more than a token of exclusivity as it is also accompanied by a range of benefits designed specifically for our wealth management customers. The Mercuries Life cobranded card offers high cash back on preauthorized premium payments and a zero interest installment plan. It is a welcome addition to Taishin Bank's growing array of cobrand cards.

3 Our wealth management services received international recognition and many awards in 2016. The list of awards includes Asian Banker's Best Wealth Management Business and Best Customer Relationship Management and Private Banker International's Highly Commended: Outstanding Private Bank, Asia Pacific. Taishin Bank offers a variety of services for different customer segments such as individuals, households, and business owners. The process always starts with understanding customers' needs and proceeds by utilizing our three advantages, which are a team of professional specialists, a diverse range of products, and excellent benefits for top-tier customers. Examples of this approach include the "Safeguarding Assets and Health Campaign", where we became the first bank to offer 5-star physical examinations for customers who had NT$10 million or more in their portfolios with us. We work to develop closer ties with our wealth management customers and reach out to potential customers by offering real benefits and personalized financial planning services.

2. Wholesale Banking Services

With respect to corporate lending, loan balances owed from state-owned and private institutions totaled NT$210.6 billion at the end of 2016, 15th among the 39 local banks. In support of the government's credit extension policy for small and medium enterprises and as a result of its success in expanding the customer base, Taishin Bank's lending to SMEs grew by 8.3% to NT$107.6 billion by the end of 2016, which exceeded the peer average growth of 5%.

With respect to wholesale banking services, Taishin Bank remained in the lead in factoring services, with volume totaling NT$213.0 billion in 2016. Taishin Bank provided share administration services to a total of 189 companies traded on the TWSE/TPEx and the Emerging Stock Market, which ranked it 4th among peers.

With respect to new services, domestic banking units (DBU and OBU) started offering foreign currency negotiable certificates of deposit (NCD) in August 2015 and May 2016 as another investment vehicle for corporations and individuals. As deregulation continues, Taishin Bank will endeavor to satisfy the investment needs of local and international customers.

With respect to system implementation, Taishin Bank's foreign currency systems are built around the "Foreign Currency Import/Export Trading and Loan System" and the "Deposit and Transfer System". Both have been serving the customers and operating with much improved efficiency since launch. In 2016, Taishin Bank received another two international awards, The Asset's Core Banking Project of the Year-Asia Pacific and Asian Banking & Finance's Domestic Technology & Operations Bank of the Year.

Furthermore, the Taishin Wholesale Internet Banking app (mobile version of the Wholesale Internet Banking Services) for wholesale banking clients was launched in August 2016. The app allows wholesale banking clients to link all accounts within the same group, check TWD and foreign currency accounts, look up interest rates and exchange rates, change passwords, and set up push notification. Other features to be supported in the future include payment approval and release and push notification for account related activities. Wholesale banking clients will be able to access banking services on their mobile devices and monitor their accounts and cash flows at any time.

Following China's structural reform, regional economic integration among the ASEAN countries, and rising popularity of Fintech, the government has responded by launching a campaign to call on the financial sector to support the real economy and by helping financial institutions explore expansion into Southeast Asia and offering financial support for Taiwanese businesses. The government encourages development of Fintech. It has also lowered the bar on investing in financial technology firms and startup industries for financial institutions. Furthermore, for the purpose of encouraging sound business practices and development in the financial sector, the government has included stricter anti-money laundering regulations and compliance on its list of priorities.

4 Message to Shareholders 01

Looking forward to 2017, we will devote our efforts to achieve business growth and keep driving the momentum in main lines of business while supporting government policies and complying with applicable regulations and risk management requirements. Consistent growth is expected in certain lines of business, including value-added mortgages, personal loans, corporate loans, SME loans, and wealth management services. Meanwhile, we will continue to expand our overseas network and invest in digital finance. In 2017, in addition to the Brisbane Branch in Australia, which is under preparation and expected to open this year, we will focus on developing new features on Richart, the digital banking brand that was launched only last year but has quickly established itself as the industry leader. We will also advance at full speed in mobile payment services.

Taishin employees have long dedicated themselves to delivering the best banking services with "integrity, commitment, innovation and cooperation" in mind. Even in the pursuit of profitability, Taishin Bank has been able to demonstrate the innovation and customer-centric values that have helped shape Taiwan's banking industry as a whole and reflected the Bank's corporate social responsibility. Taishin Bank will adhere to the same mission while continuing to deliver comprehensive services and maximizing profits to benefit the shareholders, customers, the community and employees alike.

Chairman 01 Taishin International Bank

April, 2017

5 II. Brief Introduction to The Bank

A. Introduction

Date of establishment: Feb. 25, 1992

Date of inauguration: March 23, 1992

Registered capital: NT$70,000,000,000

Paid-in capital: NT$68,845,983,170

Headquarter address: 1st fl. and B1, No. 44, Jhongshan N. Rd., Sec. 2, Taipei City

Tel: 886-2-2568-3988

Business units: 106 units, including 103 domestic and overseas branches (Including the Hong Kong branch and the Singapore branch and the Japan branch), trust department, overseas department and offshore banking units (OBU).

B. History

1. The bank was founded by Mr. Tong Liang 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 Holdings, with similar management concept and corporate culture, both companies 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 service role for the supply and demand of funds in the society, so as to support economic prosperity.

3. The board of director of the bank oversees the Audit Division and Secretariat Division. The headquarters oversees Human Resources Division, Finance Division, Corporate Planning Division, Legal & Compliance Division, Information Technology Services Division, Administration & 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 19 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 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 opening

6 Brief Introduction to The Bank 02

of Tasihin's Singapore Branch on June 24, 2014, has not only been a new milestone for the group's overseas deployment, but also serves as an important gateway to the regional and global economy.The Taishin Bank Yangon Representative Office in Myanmar officially opened for business on January 21, 2016. It is the Bank's second overseas representative office following the establishment of the Ho Chi Minh City Representative Office in Vietnam. The Yangon Office will be upgraded to a branch location in the future when deemed appropriate.The Tokyo Branch opened on October 27, 2016. Together with the branches in two other financial hubs, Hong Kong and Singapore, the Tokyo Branch provides a financing platform for Taiwanese businesses and customers in China, Hong Kong, and Taiwan operating or investing in Japan.

4. The bank's major business items include deposit reception, loan extension, export/import foreign exchange, foreign-currency deposits, discount of negotiable instruments, currency conversion, guarantee, surrogate collection/payment, custody, trust, credit card, trading in derivatives, brokerage of short-term bills, securities dealer, certification and underwriting, factoring, securities investment and underwriting, offshore banking, issuance of financial bonds, wealth management, life insurance brokerage, property and casualty insurance brokerage, and sale of gold bullion, gold and silver coins.

5. The bank's affiliates include Xiang-An Life Insurance Agency Co., Ltd. Taishin D. A.Finance Co., Ltd. and Taishin Real Estate Management Co., Ltd.

7 III. Corporate Governance

A. Organization System

a. Organizational Chart

Mar. 1, 2017 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 Legal Human Administration Corporate Finance Technology Service Management Management Compliance Resources & Services Planning Division Services Division Division Division Division Division Division Division Division

Retail Banking Group Wholesale Banking Group

Wholesale Banking Retail Banking Payment Service Commercial Banking Administration Credit Division Division Division Division

Retail Banking Non Performing Consumer Merchant Banking Global Trade Asset Recovery Finance Division Division Finance Division Division

Strategic Planning Retail & Wealth Financial Market Overseas Business Division of Retail Management Division Division Banking Business Channel Division

Wholesale Credit Digital Innoviation Financial Products Corporate Banking Administration Division Division Division Division

Segmentation Service Industry Wholesale Banking Division Division Product Division

8 Corporate Governance 03

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. (7) Planning, execution, and management of business relating to corporate image and public affairs. (8) Followup on progress of strategy implementation. (9) Coordinates and supervises corporate governance practices across the company and subsidiaries.

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) Occupational health and safety operations and oversight and execution of the bank's guards and security systems.

3. Information Technology Services Division

(1) Management and maintenance of the bank's computer systems, central equ ipment office, and equipments. (2) The formulation and execution of information security system. (3) The pushing of information programs. (4) Evaluation of need, planning and analysis, and evaluation, change, and maintenance of programs for the information systems of retail banking and corporate banking.

4. Performance Management Division

(1) Management, analysis of, and recommendations for business performance. (2) Budget planning and execution and management of business targets. (3) Planning and management of performance management information system (MIS, budget (predicted)) and activity based costing/management system (ABC/M). (4) Planning and management of accounting and taxation affairs. (5) Compilation, analysis and reporting of financial information.

5. Legal & Compliance Division

(1) Legal Department: a. Drafting, formulation, and execution of legal affairs related regulations and policies. b. In charge of whole bank legal consulting. c. Inspection and supervision of various contracts and other legal documents.

9 (2) Compliance Department: a. Drafting, formulation, and execution of regulations and policy for compliance with law and regulation. b. Study, transmission, inquiry, coordination, and communications for compliance with laws and regulations by the bank. c. Execution, supervision, and evaluation for compliance with laws and regulations.

6. 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. (5) Formulation, execution and management of human resources contracts involving foreign matters and other documents.

7. 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. (3) Planning, management and overall risk control of AML/CTF operations.

8. Finance Division

(1) Planning and management of the bank's liquidity risk and bankbook interest risk. (2) In charge of planning and management of assets/liabilities, 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. 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.

10. Wholesale Banking Product Division

In charge of corporate banking cash management, trade financing, planning and pushing of syndicated loans and structured funding.

11. Corporate Banking Division

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

10 Corporate Governance 03

12. 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.

13. Wholesale Banking Administration Division

(1) Planning, execution and management of corporate banking business goals and strategy plans. (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) Execution and management of international banking business. (6) Delivery and clearance of financial products. (7) Planning and management of corporate banking service systems. (8) Credit risk control. (9) Formulation of related business regulations and operating flow. (10) Planning, Building, Maintaining, Optimizing wholesale banking core and management systems.

14. Financial Market Division

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

15. Global Trade Division

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

16. Overseas Business Division

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

17. Wholesale Credit Administration Division

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

11 18. Merchant Banking Division

Offering to medium and large enterprises onshore and cross border projects of short and medium term interim financing, merger financing, and planning services for project financing and corporate financing as well as financial consulting services.

19. Commercial Banking Division

Provide cash management services, trade services, loans, foreign exchange and other financial services and CRM planning services for medium sized Taiwanese companies and SMEs and corporate clients in emerging markets.

20. Retail and Wealth Management Channel Division

(1) In charge of planning and management of the business and channel of branches. (2) Deployment and management of branches. (3) Enforcement, pushing, and management for the operation and service quality of branches. (4) Operational management and sales promotion of retail banking. (5) Execution, facilitation and management of customer service center operations and service quality. (6) Product planning, sales promotion, channel development, and performance management for state owned banks and payroll accounts.

21. Financial Products Division

(1) Oversee life insurance brokerage services and P&C insurance brokerage services provided throughout the bank. (2) Coordinate product development, policy administration, and business development under insurance brokerage operations. (3) Development and management of retail banking wealth management products and maintenance of thecompetitive edge of the bank's wealth management products. (4) Management of various property trust business and afflicted business. (5) The development of new trust products and service. (6) Planning and management of short-term securities and mutual fund investments by subsidiaries. (7) Integrate market trend and product feature, and offer analytical report and consulting for investments in domestic and foreign securities.

22. Consumer Finance Division

(1) Development, design, management, and promotion of retail banking products. (2) Development, management and promotion of business banking products. (3) The development, operating management, sales promotion, credit investigation, auditing, and customer maintenance for auto loans and products with repo condition.

23. Payment Service Division

(1) In charge of planning and development, business management, marketing and sales, and customer maintenance of credit cards, debit cards, cash flows of business clients, and new payment services (including mobile payment services). (2) Management and promotion of consumer banking products.

12 Corporate Governance 03

24. Retail Banking Credit Division

(1) In charge of the formulation of the credit policy to retail banking products. (2) Construction and utilization of retail banking credit risk models. (3) Risk management, estimate and management of bad debts and provisions. (4) Credit investigation and credit extension management for retail banking products. (5) Collateral appraisal management for retail banking real estate.

25. Retail Banking Non-Performing Asset Recovery Division

The management of NPL (non-performing loan) collection, protection of non-performing assets, write-off of bad debts, and outsourcing of debt collection.

26. Segmentation Division

(1) Analysis of customer groups, construction of statistical models, and testing of marketing campaigns. (2) The development, planning and trial execution of event marketing. (3) Integrating the marketing and media resources within the Bank. (4) Management of customer relation management and core technology R&D and marketing platform.

27. Strategic Planning Division of Retail Banking Business

(1) Handling of first and second tier customer complaints. (2) Upgrade service quality and push overhaul of operating flow, so as to establish a continuously improving quality culture. (3) In charge of back-office and planning affairs for chief executive officer of retail banking. (4) Strategic planning and enforcement management for retail banking. (5) Personal finance budget planning and execution and management of business targets. (6) Management, analysis of, and recommendations for personal finance business performance.

28. Digital Innovation Division

(1) Planning and execution of business strategies, targets, and plans of digital finance. (2) Planning, design, and maintenance of digital finance services and platforms. (3) Promotion and management of digital financial services. (4) Planning, management and execution of marketing campaigns for digital finance. (5) Planning, promotion and coordination of integration of real and virtual channels. (6) Research, planning and promotion of new technologies and innovative applications.

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

a. Board directors and supervisors

1. Information on board directors and supervisors (I)

Feb. 28, 2016 Spouse or relatives within second-degree Shareholding Shareholding Current kinship who serve managerial posts or in the name of Current Date upon election shareholding seats of board directors/ supervisors of the Country or Date of others jobs with of first bank Title place of Name Gender getting Term Education and working experience the bank getting Share Share Share registration elected Amount and other elected Amount of of Amount of of of of companies title name Relationship shares stake shares stake stake shares (%) (%) (%) Chairman of Taishin Financial Holdings,Shinkong Synthetic Fibers Corporation.; Taishin Financial Holding Vice Chairman of TECO Electric and Machinery.; 2015 Three 2002 Director Jui-Sung Kuo Brother-in-law Chairman R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Director of First Commercial Bank, Taipei Business Bank.; Note 1 07.01 years 01.28 Director Long-Su Lin Brother-in-law Tong-Liang Wu Supervisor of Hua Nan Bank.; Managing Director of Shin Kong Life Insurance.; Shinkong Insurance MBA, University of California, LA. Chairman of TECO Technology Foundation; Taishin Financial Holding 2015 Three 2002 Director of Taishin Financial Holdings,International Bank of Taipei.; Chairman Tong-Liang Wu Brother-in-law Director R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Note 2 07.01 years 01.28 Professor,Department of Information Science, Business School.;, Director Long-Su Lin Brother-in-law Jui-Sung Kuo Soochow University, Ph.D. in Physics, New Hampshire University. Practicing Accountant; Chairman of Taishin Asset Management,Taishin Real-Estate Management, TaishinVenture Capital, and MiTAC Construction and Development.; Taishin Financial Holding 2015 Three 2002 Supervisor of Taishin Securities, Taishin Insurance Brokers.; Director R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Note 3 None None None 07.01 years 01.28 Resident Supervisor of TECO Image Systems.; Tong-Shung Wu Director of Taishin Financial Holdings, Shin Kong Wu Ho-Su Memorial Hospital.; Department of Accounting and Statistics, National Chengchi University. Honorary Consul to Nicaragua, Delegate to the National Assembly.; Associated Professor of Institute of Biochemical Sciences, National Taishin Financial Holding 2015 Three 2002 Taiwan University.; Chairman Tong-Liang Wu Brother-in-law Director R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Note 4 07.01 years 01.28 Chairman of Konig Foods.; Director Jui-Sung Ku Brother-in-law Long-Su Lin Directo of Taishin Financial Holdings.; Ph.D. in Chemistry, Virginia State Univer. Director of Shin Kong Investment Trust, Taiwan Shin Kong Security, Taishin Financial Holding 2015 Three 2002 Jubang Venture Capital,and Taishin Financial Holdings.; Director R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Note 5 None None None 07.01 years 01.28 Director and Supervisor of The Great Taipei Gas Co.,; Chu-Chan Wang Kaohsiung Medical College Pharmaceutical epartment. Chairman of NSEnergy.; CEO of Tuntex Petrochemical Inc.; Taishin Financial Holding Director of TASCO Chemical Corporation and Grand Cathay 2015 Three 2002 Director R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Venture Capital.; Note 6 None None None 07.01 years 01.28 Shang-Pin Wu Supervisor of Petrochemical Industry Association of Taiwan,; Supervisor of Taishin Bank.; Ph.D. in Applied Chemistry, Keio University (Japan). Chairman of Taiwan Cooperative Bank, Bank of Taiwan Banking Taishin Financial Holding 2015 Three 2002 department.; Director R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Note 7 None None None 07.01 years 01.28 Chairman of Bankers Association of the Republic of China.; Teh-Nan Hsu National Chengchi University.

14 Corporate Governance 03

15 Chairman, Taiwan Power Co.,; Independent director of Taishin Financial Holdings.; Dean, College of Management at National Taiwan University Taishin Financial Holding Independent 2015 Three 2002 Professor of nstitute of Health Policy and Management, National R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Note 8 None None None Director 07.01 years 01.28 Taiwan University.; Neng-Pai Lin National Policy Advisor to the President.; Minister Without Portfolio of Executive Yuan.; Ph.D. in Business, Ohio State University.; Independent director of Taishin Financial Holdings.; Minister of Ministry of Economic Affairs.; Taishin Financial Holding Standing Representative of WTO.; Independent 2015 Three 2002 R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Advisor of Chinese National Association of Industry and Commerce, Note 9 None None None Director 07.01 years 01.28 Yi-Fu Lin Taiwan Minister Without Portfolio of Executive.; Yuan Department of Accounting and Statistics, National Chengchi University Minister Without Portfolio of Executive Yuan.; Director, Graduate School of Accounting, National Taiwan.; Standing Director of Bank of Taiwan Bank.; Taishin Financial Holding Standing Supervisor of Taishin Financial Holdings.; Standing 2015 Three 2002 R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Supervisor of Chang Hwa Bank and Taiwan Business Bank.; Note 10 None None None Supervisor 07.01 years 01.28 Yang-Tzong Tsay Certified Internal Auditor, USA.; University,Ph.D. in Business Management and Commerce, U. of Maryland.; Chairman of I-Mei Foods, Dah An Commercial Bank, and An-Sin Real Estate Management.; Taishin Financial Holding Resident Supervisor of Chang Hwa Bank.; 2015 Three 2002 Supervisor R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Supervisor of Taishin Financial Holdings and Formosa International Note 11 None None None 07.01 years 01.28 Chih-Shang Kao Hotel.; M.A., School of Public Administration, San Francisco State University, USA. Supervisor of Taishin Financial Holdings.; Director of Hwa Bank.; Taishin Financial Holding 2015 Three 2002 The Top Consultant of Want Want China Times Group.; Supervisor R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Note 12 None None None 07.01 years 01.28 Taishin Bank Culture and Arts Foundation.; Chia-Chung Cheng Chairman of CtiTV.; Master in Economics, National Taiwan University.

Note 1: Representative Tong-Liang Wu is concurrently acting as Chairman of Taishin Financial Holdings, Chairman of Taishin Charity Foundation, Director of Taishin Real Estate Management, Director of Taishin Asset 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 Taiwan Shin Kong Security, Director of Hsien-Shun Enterprise, Director of Shin-Yun Enterprise, Director of Jui-Siang Investment, Director of Kuei-Yuan Investment,Director of Yung-Kuang, Director of Beitou Hotel, Director of Shin Kong, Director of Shin Kong Chao Feng, Director of Ner Victory, Director Supervisor of Bo-Rui, Supervisor of Shin Kong Agriculture & Animal husbandry, Supervisor of Shin Kong Hae-Yang, Supervisor of Chin-Shan Investment. Note 2: Representative Jui-Sung Kuo is concurrently acting as Chairman of Jui-Fang Co., Chairman of TECO Technology Foundation, Director of Taishin Financial Holdings, Director of An-Long En- terprise, Director of Tung-Yu Technology , Director of Century Development, Director of Shin Hai Gas, Hsin An Investment, Supervisor of Sercomm. Note 3: Representative Tong-Shung Wu is concurrently acting as Chairman of Taishin Asset Management, Chairman of Taishin Real-Estate Management, Chairman of MITAC Construction and Development, Director of Taishin Financial Holdings, Director of AN-SIN Real Estate Management, Director of Xiang-An Life Insurance Agency, Supervisor of Taishin Venture capital, Supervisor of Taishin Securities, Supervisor of Tung-Yu Technology . Note 4: Representative Long-Su Lin is concurrently acting as Chairman of Chun-Ying Interior Design, Director of Taishin Financial Holdings, Director of MITAC Constructionand Development, Director of Nica-Orient Development, Director of Virgin Enterprise, Director of Gyu-Kaku, Director of International Advanced Music,Director of Music Duck, Chairman of Ennead Inc., Chairman of Ennead Leasing. Note 5: Representative Chu-Chan Wang, is concurrently acting as Chairman of Pan City Co., Chairman of Hsien-Shun Enterprise, Chairman of Santo Arden Co.,Director of Taishin Financial Holdings, Supervisor of Tai-Wa Co., Supervisor of the Great Taipei Gas Co.

16 Corporate Governance 03

Chairman, Taiwan Power Co.,; Independent director of Taishin Financial Holdings.; Dean, College of Management at National Taiwan University Taishin Financial Holding Independent 2015 Three 2002 Professor of nstitute of Health Policy and Management, National R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Note 8 None None None Director 07.01 years 01.28 Taiwan University.; Neng-Pai Lin National Policy Advisor to the President.; Minister Without Portfolio of Executive Yuan.; Ph.D. in Business, Ohio State University.; Independent director of Taishin Financial Holdings.; Minister of Ministry of Economic Affairs.; Taishin Financial Holding Standing Representative of WTO.; Independent 2015 Three 2002 R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Advisor of Chinese National Association of Industry and Commerce, Note 9 None None None Director 07.01 years 01.28 Yi-Fu Lin Taiwan Minister Without Portfolio of Executive.; Yuan Department of Accounting and Statistics, National Chengchi University Minister Without Portfolio of Executive Yuan.; Director, Graduate School of Accounting, National Taiwan.; Standing Director of Bank of Taiwan Bank.; Taishin Financial Holding Standing Supervisor of Taishin Financial Holdings.; Standing 2015 Three 2002 R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Supervisor of Chang Hwa Bank and Taiwan Business Bank.; Note 10 None None None Supervisor 07.01 years 01.28 Yang-Tzong Tsay Certified Internal Auditor, USA.; University,Ph.D. in Business Management and Commerce, U. of Maryland.; Chairman of I-Mei Foods, Dah An Commercial Bank, and An-Sin Real Estate Management.; Taishin Financial Holding Resident Supervisor of Chang Hwa Bank.; 2015 Three 2002 Supervisor R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Supervisor of Taishin Financial Holdings and Formosa International Note 11 None None None 07.01 years 01.28 Chih-Shang Kao Hotel.; M.A., School of Public Administration, San Francisco State University, USA. Supervisor of Taishin Financial Holdings.; Director of Hwa Bank.; Taishin Financial Holding 2015 Three 2002 The Top Consultant of Want Want China Times Group.; Supervisor R.O.C Co., Ltd. Representative: Male 5,475,562,622 100 6,884,598,317 100 0 0 Note 12 None None None 07.01 years 01.28 Taishin Bank Culture and Arts Foundation.; Chia-Chung Cheng Chairman of CtiTV.; Master in Economics, National Taiwan University.

Note 6: Representative Shang-Pin Wu, is concurrently acting as Chairman of NSEnergy, Director of TASCO Chemical, Director of EXCEL Chemical, Director of Ming-Xing Chemical, Director of Taiwan Fieldrich Co., Director of Da-Chan Investment Co., Director of Tai-Ho Technology, Director of Tai-Ho Investment,Director of Ho-Shin Co., Director of Tuntex Petrochemical Inc., Director of SAFEWAY GAS Co., Director of Grand Cathay Venture Capital, Director of Ho-Cheng Co., Director of Chang-Fong Transportation, Director of TNS Logistics International, Director of the Orient Golf and Country Club. Note 7: Representative Teh-Nan Hsu is not concurrently acting in any other capacity regarding the Bank or any other company. Note 8: Representative Neng-Pai Lin is concurrently acting as Independent Director of Taishin Financial Holdings, Independent Director of Darfon Electronics, Independent Director of Wistron NeWeb Corporation, Director of of Tung-Yu Technology . Note 9: Representative Yi-Fu Lin is concurrently acting as Independent Director of Taishin Financial Holdings, Independent Director of Swissray Global Healthcare Holding,Independent Director of Nanya Technology Corp,. Note10: Representative Yang-Tzong Tsay is concurrently acting as Independent Director of E-Ton Solar Technology Corp, Independent Director of CyberLink Corp,Independent Director of Yung Zip Chemica ,Supervisor of Shin Zu Shing, Supervisor of Coremax Corporation. Note 11: Representative Chih-Shang Kao is concurrently the Chairman of I-Mei Foods, Chairman of I-Mei, Chairman of I-Mei Organic Food, Chairman of Fu May, Chairman of Xiong May Food, Chairman of Ming Huang International Logistics, Chairman of Chi-tun Inc., Chairman of Golden Saddle Machinery, Chairman of An-Sin Real Estate Management, Chairman of Tai-Yue Technical Advising, Chairman of Ray Ten Asset Management, Chairman of San Ho May Enterprise, Chairman of Chi Yue Investment, Chairman of Yu Ching Investment, Chairman of I-Mei Biomedicine ,Director of Kun Chi Venture Capital, Director of Pizzavest, Director of An-Sin Real Estate Management, Director of AVIS Taiwan, Supervisor of For- mosa International Hotel, Supervisor of Van Den Invest, Supervisor of I-Mei Dairy. Note 12: Representative Chia-Chung Cheng is concurrently acting as Chairman of Taishin Bank Foundation for Arts and Culture, Executive Director of Taishin Charity Foundation, Director of Jen Trend.

17 2. Major shareholders of institutional shareholders

April 18, 2017 Names of Institutional shareholders Major shareholders of institutional shareholders Cathay Life Insurance Co., Ltd. 3.06% Taishin Leasing & Financing Co., Ltd. 2.88% Pau Jar Asset Management Co., Ltd. 1.74% Vanguard Emerging Markets Stock Index Fund, A Series Of Vanguard International Equity Index Funds 1.58% Taishin Financial Holding Co., Ltd. China Life Insurance Company 1.56% TASCO Chemical Corporation 1.47% Emerging Markets Value Fund 1.29% Shinkong Synthetic Fibers Corporation 1.22% Tong Shan Investment Co., Ltd. 1.18% Designated Account for Norges Bank under the custody of Citibank Taiwan Ltd. 1.08%

3. Major shareholders of major institutional shareholders April 18, 2017 Names of Institutional shareholders Major Shareholders of Institutional Shareholders Cathay Life Insurance Co., Ltd. Cathay Financial Holdings 100.00% Yun Teh Industrial Co., Ltd. 40.60%, Tong Shan Investment Co., Ltd. 26.00%, Taishin Leasing & Financing Co., Ltd. Pan Asian Plastics Corp 22.20%, Ruey-Shin Enterprise Co., Ltd. 7.06%, Ruey-Shiang Invest Co., Ltd. 4.07%, Chao Heng Enterprise Co., Ltd. 0.07% He Yang Management Consulting Co., Ltd. 94.95%, Herzu Investment Co. 5.00%, Pau Jar Asset Management Co., Ltd. Nick & Ziv Capital Ltd. 0.05% Vanguard Emerging Markets Stock Index Fund, A Series Of Vanguard N/A International Equity Index Funds KGI Securities Co., Ltd. 9.66%, Government of Singapor 2.89%, Videoland Television Network 2.35%, Designated Account for New York City Group Trust under the custody of Deutsche Bank AG Taipei Branch 2.13%, Designated Account for Saudi Arabian Monetary Authority under the custody of JPMorgan Chase Bank Taipei Branch 2.08%, Discretionary Account for Fubon Life Insurance Co., Ltd. managed by SinoPac SITC 1.91%, Designated Account China Life Insurance Company for Abu Dhabi Investment Authority under the custody of JPMorgan Chase Bank Taipei Branch 1.66%, Designated Account for Mars Investment Limited under the custody of Bank of Taiwan Co., Ltd. 1.59%, Designated account for Vanguard Emerging Markets Stock Index under the custody of Standard Chartered Bank 1.51%, Designated account for Credit Suisse Securities (Europe) Limited under the custody of Standard Chartered Bank 1.24% Taiho Investment 58.20%, He-Cheng Invest Co., Ltd. 19.55%, Fong-He Developmen Co., Ltd. 9.11%, Da-Jan Invest Development Co., Ltd. 1.61%, TASCO Chemical Corporation He-Fong Invest Co., Ltd. 1.07%, Fong-He Invest Co., Ltd. 0.99%, Cheng-Ching Wu 0.99%, Shang-Pin Wu 0.99%, Pei-Jyuan Wu 0.95%, Pei-Rong Wu 0.93% Dimensional Emerging Markets N/A Value Fund Shin Kong Life Insurance Co., Ltd. 5.80%, Shin Kong Company Ltd. 5.22%, Invest Co., Ltd. 4.98%, Trust Account under the custody of Hwatai Bank Ltd. 4.66%, Shinkong Synthetic Fibers Shin Kong Textile Co.,Ltd. 3.47%, Shin Kong Insurance Co., Ltd. 3.04%, Corporation Julian Invest Co., Ltd. 2.37%, Toray Industries Inc. 2.20%, Yuan Bao Co., Ltd. 2.18%, Ruey-Shin EnterpriseCo., 1.98% Ruey-Shin Enterprise Co., Ltd. 78.75%, Guei-Lan Wu(Note)3.125%, Eugene Wu 3.125%, Anthony Wu 3.125%, Thomas T.L.Wu 3.125%, Tong Shan Investment Co., Ltd. Hsien-Hsien Hsu 2.50%, Ruo-Nan Sun 2.50%, Hsing-Hua Ho 1.875%, Eric Wu 1.875% Designated Account for Norges Bank under the custody of Citibank Taiwan N/A Ltd. Note: Guei-Lan Wu passed away on March 30, 2016

18 Corporate Governance 03

4. Information on board directors and supervisors (II)

Feb 28, 2017 possession of over five-year working experience Qualifications Compliance with independence ( Note) and the following professional qualifications Number of other

Instructor or companies Judge, prosecutor, Working higher teaching of public lawyers, experience in positions offering public certified commerce, at college where accountant, or legal affairs, departments of the board other finance, commerce, legal 1 2 3 4 5 6 7 8 9 10 director or professionals accounting, affairs, finance, supervisor or technicians with or other fields accounting, or serves as national licenses related to others related independent related to the the bank's to the bank's director Name bank's operation operation operation Tong-Liang Wu P P P P P 0 Jui-Sung Kuo P P P P P P 0 Tong-Shung Wu P P P P P P P P 0 Long-Su Lin P P P P P P 0 Chu-Chan Wang P P P P P P P 0 Shang-Pin Wu P P P P P P P P P 0 Teh-Nan Hsu P P P P P P P P P 0 Neng-Pai Lin P P P P P P P P P 2 Yi-Fu Lin P P P P P P P P 2 Yang-Tzong Tsay P P P P P P P P 3 Chih-Shang Kao P P P P P P P 0 Chia-Chung Cheng P P P P P P 0 Note : Mark with a check (P) under the code number for conformance to the following conditions: (1) Not an employee of another bank or its affiliates. (2) Not a director or supervisor of another bank or its affiliates. (3) Not owning, along with his/her spouse and offspring before the age of majority or in others' names, over 1% stake in another bank including stake in others' names, or one of the 10 largest individual shareholders in the bank. (4) Not a spouse, relative within second-degree kinship, or relative within fifth-degree kinship of direct lineage of the persons specified in the three items above. (5) Not a director, supervisor, or employee of an institutional shareholder with over 5% stake in another bank or being one of the five largest institutional shareholders in the bank. (6) Not a director, supervisor, manager, or shareholder with over 5% stake of a company or institution which has financial or business exchange with another bank. (7) Not a professional, or owner, partner, director, supervisor, manager, or spouse of one with such position of companies or institutions offering business, legal, financial, accounting, or consulting services to another bank or its affiliates; however, this excludes remuneration committee members who exercise their duties in accordance with Article 7 of Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter. (8) Not a spouse or a relative within second-degree kinship of one of other directors. (9) Not an offender of items stipulated in article 30 of the Company Law. (10) Not a representative of government or corporate body elected via method specified in article 27 of Company Law.

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

Feb 28, 2017

President Director of Taishin Venture and Chief Chief Executive Capital Investment, Taishin Executive Officer of Taishin Bank, Larry Securities Investment Trust Officer, R.O.C Male 2012.03.21 0 0 0 0 0 0 Graduate School of None Chung Co., Ltd. Dah Chung Bills Wholesale Economics, National Finance Co. Banking Taiwan University Group

Director of Taishin Chief Securities Investment Executive Vice President of First Advisory Co.,Ltd. Officer, Spike, Trust, Department of R.O.C Male 2011.01.21 0 0 0 0 0 0 Supervisor of Xiang-An Life None Retail C.W. Wu Economics, National Insurance Agency Co., Ltd. Banking Taiwan University Lien An Service and Metro Group Consultant Service Co.,Ltd. Senior Vice Presi- dent of Taishin Chief Pao-Yin R.O.C Male 2015.02.09 0 0 0 0 0 0 Bank, Department of None Auditor Chen Accounting, Soochow University President of UBS Global Director of Taishin Asset Management, Senior Vice Investment Trust, R.O.C Sam Lin Male 2006.08.01 0 0 0 0 0 0 Claremont McKenna None President Yungsheng Trade, Jin Ming College, Master of Investment Ltd. Accounting Chief Financial Officer & Senior Vice Melody Vice Presi- dent of KBC. R.O.C Female 2007.02.09 0 0 0 0 0 0 None President Chien MBA, National Chengchi University Vice President of Chang Hwa Commercial Bank Chief Finance Officer of Chief Investment Officer Taishin Financial Holding of Taishin Financial Holding Senior Vice Chao-Yin R.O.C Female 2017.01.20 0 0 0 0 0 0 Co.,Ltd. Co.,Ltd. None President Lai Department of Director of Taishin Accounting of College of Securities Cc.,Ltd. Management, National Taiwan University Senior Vice President of Supervisor of Taishin- Royal Bank of Scotland, Senior Vice Ann Securities Co., Ltd. Chief R.O.C Female 2010.08.13 0 0 0 0 0 0 University of New Haven, None President Cheng Accounting Officer of Master of Business Taishin Holding Co., Ltd. Administration

Senior Vice President of Senior Vice Wilson Cosmos Bank, University R.O.C Male 2011.12.22 0 0 0 0 0 0 None President Chou of Dallas, Master of Business Administration

20 Corporate Governance 03

Senior vice president of Senior Vice Phyllis Taishin Bank, Kansas R.O.C Female 2006.09.21 0 0 0 0 0 0 None President Wang State University,Master of Business Administration

Senior Vice President of ABN AMRO Bank, Member of Remuneration Senior Vice R.O.C Helen Liu Female 2008.07.28 0 0 0 0 0 0 University Of Wisconsin- Committee for Amtran Co., None President Madison, Master of Ltd. Business Administration Supervisor of Sunlight Senior Vice President Asset Management Co., of Taishin Bank, Ltd. Chairman, Consumer Senior Senior Vice Jerry You-Qing R.O.C Male 2008.12.11 0 0 0 0 0 0 Department of Finance Unsecured Debt Vice Spouse President Yang Xuan International Trade, Restructuring Program President Tamkang University Committee, Bankers Association of the R. O. C. Senior Vice President of Taishin Financial Holdings, Supervisor of Hsiang Senior Vice President Chao Investment, Weifeng Senior Vice David of Taishin Financial Investment, Chiahao R.O.C Male 2009.11.18 0 0 0 0 0 0 None President Chang Holdings, MBA, National Investment, Yiheng Chung Hsing University Investment, Chingwei Co.,Ltd. Director of Xiang- An Life Insurance Agency Co., Ltd. Senior Vice President of Taishin Bank, University Senior Vice Director of Taishin R.O.C Ada Chen Female 2011.03.01 0 0 0 0 0 0 of Texas at Dallas, None President Investment Trust Co., Ltd. Master of Science in Accounting

21 Stake of Spouse or relatives spouse and Shareholding within second-degree Shareholding offspring in the name of Country or Date of kinship who serve before age of others Major education Current jobs with Title place of Name Gender election managerial posts majority (experience) other companies registration (appointment) Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Vice President of ABN AMRO, Senior Vice Min-Hsing University of Illinois at R.O.C Male 2011.03.01 0 0 0 0 0 0 None President Liu Urbana-Champaign, Master of Business Administration Senior Vice President of KGI, The University Senior Vice Chief Risk Officer of Taishin R.O.C Jey Chen Male 2011.06.03 0 0 0 0 0 0 of Texas At Austin, None President Financial Holding Co., Ltd. Doctor of Philosophy in mathematics Senior Vice President of Taishin Bank, Senior Vice Adeline Senio Vice President of R.O.C Female 2011.09.23 0 0 0 0 0 0 Department of Law, None President Jai Taishin Financial Holdings National Taiwan University Senior Vice President of Taishin Bank, University Senior Vice Shang- R.O.C Male 2012.01.01 0 0 0 0 0 0 of Texas, El Paso, U.S.A., None President Ming Tsai Master of Business Administration Senior Vice President of Taishin Bank, Senior Vice Robin R.O.C Male 2012.01.01 0 0 0 0 0 0 Department of None President Shieh Accounting, National ChengChi University Senior Manager, Royal Director of Taishin Bank of Canada, Taipei Securities Investment Senior Vice John Branch. R.O.C Male 2012.02.17 0 0 0 0 0 0 Advisor Co., Ltd. None President Chiou University of Dallas, Director of Financial Asset Texas, U.S.A., Master of Service Business Administration Manager of United Overseas Bank, Western Senior Vice Christy R.O.C Female 2012.03.16 0 0 0 0 0 0 Michigan University, None President Shyy Master of Science in Accounting Executive Vice President of Citybank, Senior Vice Vivian R.O.C Female 2012.09.28 0 0 0 0 0 0 Stanford University, None President Chou Master of Science in Statistics Senior Vice President of Taishin Bank, Master of Senior Vice Shouna Management Program R.O.C Female 2013.05.01 0 0 0 0 0 0 None President Liu Management and Global Trade Group National ChengChi University Senior Vice president of Senior Vice IBM china, Department R.O.C Steve Sun Male 2014.01.17 0 0 0 0 0 0 None President of computer science at Soochow University

22 Corporate Governance 03

Stake of Spouse or relatives spouse and Shareholding within second-degree Shareholding offspring in the name of Country or Date of kinship who serve before age of others Major education Current jobs with Title place of Name Gender election managerial posts majority (experience) other companies registration (appointment) Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Senior Vice President of Taishin Bank, Director of Taishin Senior Vice R.O.C Kevin Lin Male 2014.03.14 0 0 0 0 0 0 St. John's University, Securities Investment Trust None President New York, Master of Co., Ltd. Finance Senior Vice President of Taishin Bank, University Senior Vice President of Senior Vice Janice R.O.C Female 2014.03.28 0 0 0 0 0 0 of Southern California, Taishin Financial Holding None President Liang USA, Master of Science Co., Ltd. in Education Senior Vice President of Taishin Bank, Senior Vice Kuo-Lin R.O.C Male 2015.05.14 0 0 0 0 0 0 Department of None President Fang Economics, Tunghai University Senior Vice President of Taishin Bank, University Senior Vice President of Senior Vice R.O.C Frank Lin Male 2015.05.14 0 0 0 0 0 0 of Southern California, Taishin Financial Holding None President USA, Master of Public Co., Ltd. Administration Senior Vice President of Taishin Bank, Senior Vice Director, Trust Association R.O.C Elaine Wu Female 2011.06.23 0 0 0 0 0 0 Graduate school None President of R.O.C. of Marketing, Meiji University Senior Vice President of Taishin Bank, General Senior Vice R.O.C Janet Chu Female 2015.05.14 0 0 0 0 0 0 Business Department, None President JinouVocational High School Senior Vice President of Senior Vice Chin-Ne- Taishin Bank, Sergeant R.O.C Male 2015.05.14 0 0 0 0 0 0 None President ng Chen Class, Cen- tral Police University Senior Vice President of Taishin Bank, Senior Vice Mei-Mong R.O.C Female 2015.05.14 0 0 0 0 0 0 Department of None President Liu International Business, Tunghai University Senior Vice President Senior Vice Hui Fang of Taishin Bank, R.O.C Female 2015.05.14 0 0 0 0 0 0 None President Wu Department of Law, National Chung Hsing Senior Vice President Senior Vice Szu Ching of Taishin Bank, EMBA R.O.C Male 2015.05.14 0 0 0 0 0 0 None President Chen -Finance, National Chengchi University Senior Vice President Wen- of Taishin Bank, EMBA Senior Vice R.O.C Chung Male 2015.05.14 0 0 0 0 0 0 - Advanced Finance, None President Wang National Chengchi University

23 Stake of Spouse or relatives spouse and Shareholding within second-degree Shareholding offspring in the name of Country or Date of kinship who serve before age of others Major education Current jobs with Title place of Name Gender election managerial posts majority (experience) other companies registration (appointment) Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Senior Vice President Senior Vice Laing-Min of Taishin Bank, MBA, R.O.C Male 2015.05.14 0 0 0 0 0 0 None President Wu National Chung Cheng University Senior Vice President of Taishin Bank, Senior Vice Gwo-Yi R.O.C Female 2015.05.14 0 0 0 0 0 0 San Francisco State None President Pao University, Master of Business Administration Senior Vice President of Taishin Bank, Senior Vice Department of R.O.C Jolene Ma Female 2015.05.14 0 0 0 0 0 0 None President International Trade, Chinese Culture University Senior Vice President of Senior Vice Ahsien Taishin Bank, EMBA in R.O.C Male 2015.05.14 0 0 0 0 0 0 None President Chang International Finance, National Taipei University Senior Vice President of Senior Vice Mei-Ling Taishin Bank, College of Shareholder, Xiang Yuan R.O.C Female 2015.05.14 0 0 0 0 0 0 None President Chang Management, National Technology Co., Ltd. Chung Hsing University Senior Vice President Senior Vice Mao- of Taishin Bank, EMBA R.O.C Male 2015.05.14 0 0 0 0 0 0 None President Yuan Yen -Senior Management, Feng Chia University Senior Vice President Kuo- of Taishin Bank, Senior Vice R.O.C Cheng Male 2015.05.14 0 0 0 0 0 0 Department of Math None President Chen and Statistics, Tamkang University Senior Vice President of Taishin Bank, Senior Vice Lewis R.O.C Male 2015.05.14 0 0 0 0 0 0 Department of Computer None President GUO Science, Feng Chia University Senior Vice President of Taishin Bank, Rensselaer Shareholder, Hong Ye Senior Vice Jui-Yang R.O.C Male 2015.05.14 0 0 0 0 0 0 Polytechnic Institute Gardening Supplies and None President Liu Master of Business Gifts Co., Ltd. Administration Senior Vice President of Taishin Bank, Graduate Senior Vice Da-Shenp R.O.C Male 2015.05.14 0 0 0 0 0 0 Program, Department None President Chiu of Economics, National Chengchi University

24 Corporate Governance 03

Stake of Spouse or relatives spouse and Shareholding within second-degree Shareholding offspring in the name of Country or Date of kinship who serve before age of others Major education Current jobs with Title place of Name Gender election managerial posts majority (experience) other companies registration (appointment) Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Shareholder, De Zhi Investment Co., Ltd. Shareholder, Upwoodsy Co., Ltd. Senior Vice President Director, Jade Limited of Taishin Bank, Senior Vice Kuo-Ming Company Independent R.O.C Male 2015.05.14 0 0 0 0 0 0 Department of None President Tai Director, Golden Accountancy, National Biotechnology Corp. Cheng Kung University CEO of Xiang-An Life Insurance Agency Co., Ltd. Independent Director of Gia-Tzoong Enterprise Senior Vice President of Taishin Bank, Senior Vice Andy R.O.C Male 2015.05.14 0 0 0 0 0 0 Department of Computer None President Chao Science, Tamkang University Senior Vice President of Taishin Bank, Master of Electronic Engineering Senior Vice Chih-Tsao R.O.C Male 103.06.24 0 0 0 0 0 0 and Master of Business None President Han Administration, State University of New York at Stony Brook, USA Senior Vice President of Taishin Bank, EMBA- Senior Vice Samantha R.O.C Female 2015.05.14 0 0 0 0 0 0 International Business None President Wei Management, National Taiwan University Senior Vice President of Senior Vice Wei-Chih Taishin Bank, College R.O.C Male 2015.05.14 0 0 0 0 0 0 None President Hsiao of Accounting, National Chung Hsing Vice President of ANZ Bank Senior Vice R.O.C Jian-Ye Li Male 2017.02.06 0 0 0 0 0 0 Saint John's University None President Master of Business Administration Senior Vice President of Taishin Bank, EMBA Senior Vice Dennis R.O.C Male 2015.08.01 0 0 0 0 0 0 - International Business None President Chiang Management, National Taiwan University Senior Vice President of Taishin Bank, Senior Vice Chung- R.O.C Male 2015.05.14 0 0 0 0 0 0 Department of None President Min Chen Economics, Fu Jen Catholic University Senior Vice President Xing- Senior Vice of Taishin Bank R.O.C Zheng Male 2017.02.01 0 0 0 0 0 0 None President ,Department of Tourism, Wei Providence University

25 Stake of Spouse or relatives spouse and Shareholding within second-degree Shareholding offspring in the name of Country or Date of kinship who serve before age of others Major education Current jobs with Title place of Name Gender election managerial posts majority (experience) other companies registration (appointment) Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake CEO of Taishin Insurance Brokers , Senior Vice President of Senior Senior Vice You-Qing Jerry R.O.C Female 2016.06.23. 0 0 0 0 0 0 Department of Xiang-An Life Insurance Vice Spouse President Xuan Yang International Business, Agency Co., Ltd. President Tamkang University Senior Vice President of Taishin Bank, Senior Vice Chi- Ying R.O.C Female 2016.02.01 0 0 0 0 0 0 Department of Business None President Sheng, Mathematics, Soochow University Vice President of Vice Vanessa, Taishin Bank, EMBA - R.O.C Female 2008.07.11 0 0 0 0 0 0 None President Y.N. Chen Accounting, National Taiwan University Assistant Vice President of Taishin Bank, Vice Jun-Ping R.O.C Male 2014.01.01 0 0 0 0 0 0 Department of Business None President Hsu Management, Tatung University Senior Vice President of Taishin Bank, London Branch Michio Japan Male 2015.10.19 0 0 0 0 0 0 Business School Master None Manager Komori of Science in Business Administration Senior Vice President of Taishin Bank, Chun- Branch University of Texas at R.O.C Ming Male 2015.05.14 0 0 0 0 0 0 None Manager Arlington, Chang Master of Business Administration Senior Vice President Independent Director Branch Li-Cheng of Taishin Bank, EMBA, R.O.C Male 2015.01.01 0 0 0 0 0 0 of Phoenix Tours None Manager Kuo National Sun Yat-Sen International, Inc University (EMBA) Vice President of Taishin Branch Shu-Ling Bank, Department R.O.C Female 2011.03.04 0 0 0 0 0 0 None Manager Tsao of Banking, National Chengchi University Assistant Vice President Branch Mei-O of Taishin Bank, R.O.C Female 2008.09.01 0 0 0 0 0 0 None Manager Cheng Section of foreign trade, Taiwan Business College Assistant Vice President of Taishin Bank, Branch Yu-Chang R.O.C Male 2005.01.01 0 0 0 0 0 0 Department of None Manager Chang Mathematics, Tunghai University Assistant Vice President Branch Hsiu- R.O.C Female 2007.05.25 0 0 0 0 0 0 of Taishin Bank , None Manager Chuan Lin MBA, YuanZe University

26 Corporate Governance 03

Stake of Spouse or relatives spouse and Shareholding within second-degree Shareholding offspring in the name of Country or Date of kinship who serve before age of others Major education Current jobs with Title place of Name Gender election managerial posts majority (experience) other companies registration (appointment) Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Assistant Vice President Branch Hsin- of Taishin Bank, R.O.C Male 2007.08.24 0 0 0 0 0 0 None Manager Chan Wu MBA, National Taipei University Vice President of Taishin Branch Mei-Chao Bank, Graduate School R.O.C Female 2007.10.12 0 0 0 0 0 0 None Manager Lin of Economics, National ChengChi University Vice President of Taishin Bank, Accounting Branch Bao-Huey and statistics section, R.O.C Female 2007.10.12 0 0 0 0 0 0 None Manager Huang correspondence school, National Chengkung University Assistant Vice President Branch Yuan- of JihSun Bank, R.O.C Male 2007.10.12 0 0 0 0 0 0 None Manager Liang Liu Department of BA, Tamkang University Assistant Vice President Branch Grace of Taishin Bank, Female 2007.11.02 0 0 0 0 0 0 None Manager R.O.C Chen Business Section, Nanying Business School Assistant Vice President Branch Su-Hung of Taishin Bank, R.O.C Female 2007.12.28 0 0 0 0 0 0 None Manager Liu Department of Financial Tax, MeiHo Colleague Chih- Manager of Taishin Bank, Branch R.O.C Yuan Male 2008.02.22 0 0 0 0 0 0 Master of management, None Manager Kang Chiayi University Assistant Vice President Branch Melody of Taishin Bank, Supervisor of YunHwa Co., R.O.C Female 2008.02.22 0 0 0 0 0 0 None Manager Wei Department of Finance, Ltd. Tamkang University Assistant Vice President of Taishin Bank, Branch Fai-Yean Department of R.O.C Female 2008.02.22 0 0 0 0 0 0 None Manager Yu Accounting and Statistics, Ming Chuan College Assistant Vice President of Taishin Bank, Branch Yu-Fen R.O.C Female 2008.02.22 0 0 0 0 0 0 Department of None Manager Cho Economics, Chinese Culture University Assistant Vice President of Taishin Bank, Branch Pei-Shi R.O.C Male 2008.02.22 0 0 0 0 0 0 Department of None Manager Su Economics, Tunghai University

27 Stake of Spouse or relatives spouse and Shareholding within second-degree Shareholding offspring in the name of Country or Date of kinship who serve before age of others Major education Current jobs with Title place of Name Gender election managerial posts majority (experience) other companies registration (appointment) Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Assistant Vice President Yung- of Taishin Bank, Branch R.O.C Chieh Male 2008.04.25 0 0 0 0 0 0 Master of International None Manager Chang Finance, National Taipei University Assistant Vice President Branch Pei-Ming of Taishin Bank, R.O.C Female 2008.04.25 0 0 0 0 0 0 None Manager Lee Department of Law, Soochow University Manager of Taishin Bank, Branch Fu-Chu R.O.C Male 2008.04.25 0 0 0 0 0 0 Department of Finance, None Manager Wang Aletheia University Manager of Taishin Bank, Branch Pei-Jan Department of Electrical R.O.C Male 2008.04.25 0 0 0 0 0 0 None Manager Chuang Engineering, Fuhsing Business College Manager of Taishin Bank, Branch Pai-Shih R.O.C Male 2008.12.05 0 0 0 0 0 0 MBA, Chinese Culture None Manager Lee University Manager of Standard Branch Hua-Nung Chartered Bank, R.O.C Female 2008.12.05 0 0 0 0 0 0 None Manager Huang Department of BA, MingChuan University Manager of Taishin Bank, Department of Applied Branch Yi-Ting R.O.C Male 2009.03.01 0 0 0 0 0 0 Science, correspondence None Manager Lin school, Taichung Technological College Assistant Vice President of Taishin Bank, Branch Wei-Jye Department of R.O.C Male 2009.09.01 0 0 0 0 0 0 None Manager Chang International Trade, Ta Hwa Institute of Technology Manager of Taishin Bank, Branch Chun-Min Department of BA, R.O.C Female 2010.02.01 0 0 0 0 0 0 None Manager Chang Chungyou Business College Manager of Taishin Bank, Branch Hung- Department of Tourism, R.O.C Male 2010.11.01 0 0 0 0 0 0 None Manager Jung Tsao Chinese Culture University Manager of Taishin Bank, Graduate School of Branch Chin-Tang R.O.C Male 2011.01.01 0 0 0 0 0 0 International Economics, None Manager Chang National Chung Cheng University Vice President of Taishin Branch Shu-Fang Bank, Department of R.O.C Female 2011.04.01 0 0 0 0 0 0 None Manager Chou Industrial management, Tamsui College

28 Corporate Governance 03

Stake of Spouse or relatives spouse and Shareholding within second-degree Shareholding offspring in the name of Country or Date of kinship who serve before age of others Major education Current jobs with Title place of Name Gender election managerial posts majority (experience) other companies registration (appointment) Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Manager of Taishin Bank Branch Yi-Fang , R.O.C Female 2011.04.01 0 0 0 0 0 0 None Manager Wang Department of BA, Fu Jen Catholic University Assistant Vice President of Taishin Bank, Branch Gina R.O.C Female 2011.04.01 0 0 0 0 0 0 Easter Michigan None Manager Shen University, Master of Business Administration Assistant Vice President of Taishin Bank, Branch Yu-Lin R.O.C Female 2011.06.10 0 0 0 0 0 0 Department of BA, None Manager Cho Taichung Business College Assistant Vice President of Taishin Bank, Branch Ming-Chu R.O.C Female 2011.06.28 0 0 0 0 0 0 Master of CTSP Senior None Manager Hsu Management, National Chung Hsing University Manger of Taishin Bank, Department of Branch Hsin- R.O.C Female 2011.07.01 0 0 0 0 0 0 International trade, None Manager Hung Yeh Lunghua Business College Assistant Vice President of Taishin Bank, Ching- MBA, Department Branch R.O.C Ching Female 2011.07.01 0 0 0 0 0 0 of Shipping and None Manager Peng Transportation Management, National Taiwan Ocean University Manager of Taishin Bank, Department of Branch Hui-Ching R.O.C Female 2011.07.01 0 0 0 0 0 0 International Trade, None Manager Teng Fuhsing Industrial and Commercial College Assistant Vice President Branch Po-Yu of Taishin Bank, R.O.C Male 2011.08.26 0 0 0 0 0 0 None Manager Huang Department of Law, Tunghai University Vice President of Taishin Bank, Department of Branch Hungshin R.O.C Male 2012.01.01 0 0 0 0 0 0 Industrial Engineering None Manager Liu Management, United Industrial College Assistant Vice Presi- dent of Taishin Bank, Branch Chun- R.O.C Male 2012.01.01 0 0 0 0 0 0 Department of None Manager Hung Lu Economics, Chinese Culture University

29 Stake of Spouse or relatives spouse and Shareholding within second-degree Shareholding offspring in the name of Country or Date of kinship who serve before age of others Major education Current jobs with Title place of Name Gender election managerial posts majority (experience) other companies registration (appointment) Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Manager of Taishin Bank, MBA, Department Branch Pei-Fen of Shipping & R.O.C Female 2012.05.01 0 0 0 0 0 0 None Manager Wu Transportation Management, National Taiwan Ocean University Vice President of Taishin Branch Alan Bank, Department of R.O.C Male 2012.08.17 0 0 0 0 0 0 None Manager Chung International Trade, Fu Jen Catholic University Manager of Taishin Bank, Master of Commerce, Branch Ming-Yi R.O.C Male 2012.08.17 0 0 0 0 0 0 National Kaohsiung None Manager Chou University of Applied Sciences Manager of Taishin Bank, Master's Degree, Branch Shan-Yu Institute of Finance and R.O.C Female 2012.11.02 0 0 0 0 0 0 None Manager Huang Information, National Kaohsiung University of Applied Sciences Vice President of Taishin Bank, Rensselaer Pau- Branch Polytech- nic Institute R.O.C Chung Male 2013.01.01 0 0 0 0 0 0 None Manager Master of Business Hung Administra- tion in Management Manager of Taishin Bank, Branch Yueh-Yun Department of R.O.C Female 2013.03.01 0 0 0 0 0 0 None Manager Lee International Trade, Ming Chuan University Manager of Taishin Bank, Branch Ju-Yin Department of R.O.C Female 2013.03.01 0 0 0 0 0 0 None Manager Tsai Economics, National Chung Hsing University Assistant Vice Presi- Branch Wei-Feng dent of Taishin Bank, R.O.C Male 2013.03.15 0 0 0 0 0 0 None Manager Hsu Department of Finance, Ming Chuan University Manager of Taishin Bank, Management Department Branch Hsieh- R.O.C Male 2013.05.17 0 0 0 0 0 0 of Real None Manager Ching Yu Estate Management, Rucker School Manager of Taishin Bank, Che- Branch Department of BA, R.O.C Hsiang Male 2013.05.24 0 0 0 0 0 0 None Manager Chinese Culture Chang University Manager of Taishin Bank, Branch Kang EMBA, National Taiwan R.O.C Male 2013.06.21 0 0 0 0 0 0 None Manager Chang University of Science and Technology

30 Corporate Governance 03

Stake of Spouse or relatives spouse and Shareholding within second-degree Shareholding offspring in the name of Country or Date of kinship who serve before age of others Major education Current jobs with Title place of Name Gender election managerial posts majority (experience) other companies registration (appointment) Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Manager of Taishin Bank, Branch Pu-Wen Master of Urban Plan- R.O.C Male 2013.12.01 0 0 0 0 0 0 None Manager Tang ning Institute, National Chung Hsing University Manager of Taishin Bank, Shareholder, Mu Chuan Branch Tsung- University of Illinois at Fast Food Co.,Ltd. R.O.C Male 2013.12.01 0 0 0 0 0 0 None Manager Han Mu Urbana-Champaign, Shareholder, The Royal Master of Finance Restaurant Manager of Taishin Bank, Branch Department of Inter- R.O.C Fan Kung Male 2013.12.01 0 0 0 0 0 0 None Manager national Trade, Shih Chien University Manager of Taishin Bank, Branch Department of R.O.C Yu-I Chin Male 2013.12.20 0 0 0 0 0 0 None Manager Theatricals, Chinese Culture University Manager of Taishin Bank, Branch Department of Business R.O.C I-Lon Li Female 2014.06.01 0 0 0 0 0 0 None Manager Management, Chinese Culture University Manager of Taishin Bank, Master of Management, Shi- Department of Money Branch R.O.C Shiang Male 2014.06.01 0 0 0 0 0 0 and Banking, National None Manager Lin Kaohsiung First University of Science and Technology Manager of Taishin Bank, Branch Chin- R.O.C Male 2014.07.16 0 0 0 0 0 0 Department of Finance, None Manager Hung Yu Chung Hua University Manager of Taishin Bank, Branch Sun-Yun Department of Chinese R.O.C Male 2014.07.16 0 0 0 0 0 0 None Manager Ken Literature, Chinese Culture University Manager of Taishin Bank, Branch Hsiao-Yun Department of Tourism R.O.C Female 2014.08.22 0 0 0 0 0 0 None Manager Chang Management, Chinese Culture University Manager of Taishin Bank, Shun- Branch Department of Business R.O.C Cheng Female 2014.09.12 0 0 0 0 0 0 None Manager Administration, Cheng Liao Shiu University Manager of Taishin Bank, Department of Applied Branch Su-Chen Business, Open College R.O.C Male 2014.09.26 0 0 0 0 0 0 None Manager Tsai Affiliated with National Taipei University of Business Manager of Taishin Bank, Branch Kang-Po R.O.C Male 2014.11.14 0 0 0 0 0 0 Department of History, Fu None Manager Lin Jen Catholic University

31 Stake of Spouse or relatives spouse and Shareholding within second-degree Shareholding offspring in the name of Country or Date of kinship who serve before age of others Major education Current jobs with Title place of Name Gender election managerial posts majority (experience) other companies registration (appointment) Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Manager of Taishin Bank, Master's Degree, Shu- Branch Institute of Finance and R.O.C Ching Female 2014.11.14 0 0 0 0 0 0 None Manager Information, National Tien Kaohsiung University of Applied Sciences Manager of Taishin Bank, Department of Branch Po-Chia R.O.C Male 2014.12.04 0 0 0 0 0 0 International Trade, None Manager Chen National Taichung Institute of Technology Assistant Vice Presi- dent of Taishin Bank, Branch Yuan-Hao R.O.C Male 2014.12.04 0 0 0 0 0 0 Department of Finance, None Manager Wang National Central University Vice President of Taishin Bank, Chieh- The Bernard M. Ba- Branch R.O.C Shun Male 2014.12.04 0 0 0 0 0 0 ruch College, the City None Manager Hong University of New York Master of Business Administration Manager of Taishin Bank, The University Of New Branch Yu-Ping R.O.C Female 2014.12.04 0 0 0 0 0 0 South Wales, Master None Manager Cheng of Commerce in Funds Management Manager of Taishin Bank, Department of International Trade, Branch Huei-Wen R.O.C Female 2014.12.26 0 0 0 0 0 0 China Junior None Manager Chiu College of Industrial and Commercial Management Senior Manager of HSBC Branch Yu-Lin Department of R.O.C Male 2015.02.13 0 0 0 0 0 0 None Manager Kuo Architecture Tamkang University Manager of Taishin Bank, Branch Pai-Hui Department of Business R.O.C Female 2015.12.01 0 0 0 0 0 0 None Manager Kao Administra- tion, Tunghai University Manager of Taishin Bank, Branch Kun-Li R.O.C Male 2015.12.01 0 0 0 0 0 0 Department of Insurance, None Manager Hsueh Shih Chien University Manager of Taishin Bank, Branch Po-Chuan Department of R.O.C Male 2015.12.01 0 0 0 0 0 0 None Manager Chang Economics, National Chengchi University

32 Corporate Governance 03

Stake of Spouse or relatives spouse and Shareholding within second-degree Shareholding offspring in the name of Country or Date of kinship who serve before age of others Major education Current jobs with Title place of Name Gender election managerial posts majority (experience) other companies registration (appointment) Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Manager of Taishin Bank, Department of Business Branch Ming-Chi R.O.C Male 2015.12.01 0 0 0 0 0 0 Administration, Southern None Manager Liao Taiwan University of Science and Technology Manager of Taishin Bank, Branch Shang- Department of Industrial R.O.C Male 2015.09.01 0 0 0 0 0 0 None Manager Jung Tsai Engineering, Yuan Ze University Assistant Vice Presi- dent of Taishin Bank, Branch Zen-Yen R.O.C Male 2015.09.01 0 0 0 0 0 0 Master of Finance None Manager Tsang and Risk Management, Shu-Te University Manager of Taishin Bank, Branch Han-Chin R.O.C Male 2015.09.01 0 0 0 0 0 0 MBA, Chung Hua None Manager Chen University Manager of Taishin Bank, Branch Chien-Te Department of Business R.O.C Male 2015.08.01 0 0 0 0 0 0 None Manager Hsu Administration, Leader University Manager of Taishin Bank Branch Tzu-Hui Drexel University R.O.C Female 2015.06.19 0 0 0 0 0 0 None Manager Lu Master of Business Administration Manager of Taishin Bank, Branch Ming-Lun Department of R.O.C Male 2015.06.19 0 0 0 0 0 0 None Manager Chuang Economics, National Chung Cheng University Manager of Taishin Bank, Master's Degree, Branch Wan-Ling Institute of Finance and R.O.C Female 2015.06.19 0 0 0 0 0 0 None Manager Cheng Information, National Kaohsiung University of Applied Sciences Manager of Taishin Bank, Department of Business Branch Ching-Hui R.O.C Female 2015.06.19 0 0 0 0 0 0 Administra- tion, National None Manager Tseng Yunlin University of Science and Technology Manager of Taishin Bank Branch Chi-Fan University of Glasgow,UK R.O.C Male 2015.05.01 0 0 0 0 0 0 None Manager Lu Master of Finance in International Manager of Taishin Bank, Branch Tso-Ming Master of Finance, R.O.C Male 2015.05.01 0 0 0 0 0 0 None Manager Huang Chao Yang University of Technology Manager of Taishin Bank, Branch R.O.C Hong-Ghi Male 2015.04.01 0 0 0 0 0 0 MBA, National Chiayi None Manager Shen University

33 Stake of Spouse or relatives spouse and Shareholding within second-degree Shareholding offspring in the name of Country or Date of kinship who serve before age of others Major education Current jobs with Title place of Name Gender election managerial posts majority (experience) other companies registration (appointment) Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Manager of Taishin Bank, Department of Banking Branch Hui-Fen R.O.C Female 2017.02.01 0 0 0 0 0 0 and Insurance, China None Manager Kuo Junior College of Technology Manager of Taishin Bank, Department of Branch Xian-Wen Accounting and R.O.C Male 2017.01.01 0 0 0 0 0 0 None Manager Zhuang Statistics, Ling Tung Junior College of Accounting Manager of Taishin Bank, Branch Min-Hua Department of Banking R.O.C Male 2017.01.01 0 0 0 0 0 0 None Manager Hung and Insurance, Shih Chien University Manager of Taishin Bank, Branch Qi-Xiang EMBA, Senior R.O.C Male 2017.01.01 0 0 0 0 0 0 None Manager Lai Management, Feng Chia University Manager of Taishin Bank, Branch Pao-Yang R.O.C Male 2017.01.01 0 0 0 0 0 0 MBA, Ming Chuan None Manager Chen University Vice President of Taishin Bank, EMBA, Institute of Branch Jin-Jin R.O.C Female 2017.01.01 0 0 0 0 0 0 Finance and Information, None Manager Kuo National Kaohsiung University of Applied Sciences Manager of Taishin Bank, Zhong- Branch EMBA, Senior R.O.C Hua Male 2017.01.01 0 0 0 0 0 0 None Manager Management, Feng Chia Huang University Vice President of Taishin Bank Graduate Institute Branch Mei-Ru R.O.C Female 2016.08.12 0 0 0 0 0 0 of Management, National None Manager Chen Taiwan University of Science and Technology Manager of Taishin Bank, Department of Risk Management & Branch Jian-Bin R.O.C Male 2016.08.12 0 0 0 0 0 0 Insurance, National None Manager Su Kaohsiung First University of Science and Technology Manager of Taishin Bank, Management Stream, Department of Industrial Branch Yi-Feng Engineering and R.O.C Male 2016.08.12 0 0 0 0 0 0 None Manager Lin Management, Auxiliary Industrial Institute of Provincial Taipei Institute of Technology

34 Corporate Governance 03

Stake of Spouse or relatives spouse and Shareholding within second-degree Shareholding offspring in the name of Country or Date of kinship who serve before age of others Major education Current jobs with Title place of Name Gender election managerial posts majority (experience) other companies registration (appointment) Amount Share Amount Share Amount Share Amount Share of of of of of of Title of of shares Stake shares Stake shares Stake shares Stake Manager of Taishin Bank, Branch Yu-Hong R.O.C Male 2016.08.12 0 0 0 0 0 0 Department of Sociology, None Manager Pan Soochow University Manager of Taishin Bank, Branch Ying-You R.O.C Male 2016.08.12 0 0 0 0 0 0 MBA, Ming Chuan None Manager Chen University Manager of Taishin Bank, Branch Sui-Mei Master of Finance Senior R.O.C Female 2016.08.12 0 0 0 0 0 0 None Manager Chen Management, National Chung Hsing University Manager of Taishin Bank, Department of Finance, Branch Ming- R.O.C Female 2016.07.01 0 0 0 0 0 0 Tamsui Institute of None Manager Tong Lu Industrial & Business Administration Manager of Taishin Bank, Branch Ming-De R.O.C Male 2016.07.01 0 0 0 0 0 0 Master of Finance, Ming None Manager Zhang Chuan University Manager of Taishin Bank, Department Branch Fan-Zhi R.O.C Male 2016.07.01 0 0 0 0 0 0 of Information None Manager Ceng Management, Chinese Culture University Manager of Taishin Bank, Branch Zheng- R.O.C Male 2016.07.01 0 0 0 0 0 0 MBA, Tamkang None Manager Xing Peng University Manager of Taishin Bank, Department of Industrial Branch Zhong- R.O.C Male 2016.06.01 0 0 0 0 0 0 Engineering, College of None Manager Hua Yang Engineering, Yuan Ze University Manager of Taishin Bank, Branch Yang-Qi Department of French R.O.C Female 2016.05.27 0 0 0 0 0 0 None Manager Wang Language, Tamkang University -

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

1. Compensations for board director (including independent directors) Dec. 31, 2016; Unit: NT$1,000

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

Chairman Tong-Liang Wu

Director Jui-Sung Kuo

Director Tong-Shung Wu

Director Long-Su Lin

Director Chu-Chan Wang 18,514 18,644 0 0 0 0 5,338 5,423 0.25% 0.25% 22,157 22,157 108 108 0 0 0 0 0.48% 0.49% None

Director Shang-Pin Wu

Director Teh-Nan Hsu

Independent Neng-Pai Lin Director

Independent Yi-Fu Lin Director

Note 1: Compensation for chauffeurs reaches NT$2,168,000 Note 2: No actual retirement payment, the appropriation or provions for job-leaving or retirement funds reached NT$108,000. All companies in the financial statement is the same. Note 3: Except as disclosed above, remuneration received by directors in the latest year for on-balance sheet services (e.g. acting as an non-employee consultant in the latest year) rendered to the Company: None.

36 Corporate Governance 03

Dec. 31, 2016; Unit: NT$1,000

Chairman Tong-Liang Wu

Director Jui-Sung Kuo

Director Tong-Shung Wu

Director Long-Su Lin

Director Chu-Chan Wang 18,514 18,644 0 0 0 0 5,338 5,423 0.25% 0.25% 22,157 22,157 108 108 0 0 0 0 0.48% 0.49% None

Director Shang-Pin Wu

Director Teh-Nan Hsu

Independent Neng-Pai Lin Director

Independent Yi-Fu Lin Director

37 Compensation brackets of board directors Dec. 31, 2016 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 Jui-Sung Kuo / Jui-Sung Kuo / Jui-Sung Kuo / Jui-Sung Kuo / Tong-Shung Wu / Tong-Shung Wu / Long-Su Lin / Long-Su Lin / Long-Su Lin / Long-Su Lin / Chu-Chan Wang / Chu-Chan Wang / Chu-Chan Wang / Chu-Chan Wang / Shang-Pin Wu / Shang-Pin Wu / Lower than NT$2M. Shang-Pin Wu / Shang-Pin Wu / Neng-Pai Lin / Neng-Pai Lin / Teh-Nan Hsu / Teh-Nan Hsu / Yi-Fu Lin Yi-Fu Lin Neng-Pai Lin / Neng-Pai Lin / Yi-Fu Lin Yi-Fu Lin NT$2M. (inclusive)-NT$5M. (exclusive)

NT$5M. (inclusive)-NT$10M. (exclusive) Teh-Nan Hsu Teh-Nan Hsu

NT$10M. (inclusive)-NT$15M (exclusive) Tong-Shung Wu Tong-Shung Wu

NT$15M. (inclusive)-NT$30M. (exclusive) Tong-Liang Wu Tong-Liang Wu Tong-Liang Wu Tong-Liang Wu

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

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

Over NT$100M.

Total 9 9 9 9

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

2. Compensations for supervisors Dec. 31, 2016; Unit: NT$1,000

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

Yang- Standing Tzong Supervisor Tsay

Chih- Superviso Shang 9,240 9,240 0 0 0 0 1,170 1,170 0.11% 0.11% None Kao

Chia- Superviso Chung Cheng

Note: No actual collection of job-leaving or retirement payment.

38 Corporate Governance 03

Compensation brackets for the company's supervisors Dec. 31, 2016

Names of supervisors

Compensation brackets for Combined amount of (A+B+C+D) the company's supervisors All companies in the financial The Bank statement Under NT$2 M. Chia-Chung Cheng Chia-Chung Cheng

NT$2 M.(inclusive)-NT$5 M. (exclusive) Chih-Shang Kao Chih-Shang Kao

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

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

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

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

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

Over NT$100 M.

Total 3 3

Note: 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.

39 3. Compensation for president and vice presidents Dec. 31, 2016; Unit: NT$1,000

Bonus and special Employee dividend-sharing(D) Share of the combined Job-leaving or retirement Salary(A) allowance (C) value of A.B. C and D in Compensations payment (B) All companies in the The Bank after-tax net profit(%) from invested financial statement Title Name companies All All other than All companies All companies companies in Cash Stock Cash Stock companies in subsidiaries The Bank in the financial The Bank in the financial The Bank The Bank the financial dividend dividend dividend dividend the financial statement statement statement statement President and Chief Executive Officer, Larry Chung Wholesale Banking Group Chief Executive Officer, Spike,C.W. Wu Retail Banking Group Chief auditor Pao-Yin Chen Senior vice president Johnny Liu (105.07.01 relief of duty) Senior vice president Samuel Chiang Senior vice president Sam Lin Senior vice president B.R. Ho Senior vice president Amy Hsia Senior vice president Ann Cheng Senior vice president Dennis Chiang Senior vice president Tuan-Wen Wu (105.07.01 on board) Senior vice president Kevin Lin Senior vice president John Chiou Senior vice president Helen Liu Senior vice president Min-Hsing Liu 211,206 211,206 9,788 9,788 187,604 187,700 0 0 0 0 4.28% 4.29% 589 Senior vice president Shang-Ming Tsai Senior vice president Robin Shieh Senior vice president Michio Komori Senior vice president Hui-Fang Wu Senior vice president Da-Shenp Chiu Senior vice president Chun-Ming Chang Senior vice president Li-Cheng Kuo Senior vice president Chung-Ming Chen Senior vice president Jui-Hui Chen(105.09.15 relief of duty) Senior vice president Szu-Ching Chen Senior vice president Mei-Mong Liu Senior vice president Jui-Yang Liu Senior vice president Chih-Tsao Han Senior vice president Kuo-Lin Fang Senior vice president Phyllis Wang

40 Corporate Governance 03

3. Compensation for president and vice presidents Dec. 31, 2016; Unit: NT$1,000

41 Senior vice president Christy Shyy Senior vice president Wilson Chou Senior vice president Vivian Chou Senior vice president Ada Chen Senior vice presiden Jerry Yang Senior vice presiden Shouna Liu Senior vice presiden Wen-Chung Wang Senior vice presiden Gwo-Yi Pao Senior vice presiden Janet Chu Senior vice president Laing-Min Wu Senior vice president Elaine Wu Senior vice president You-Qing Xuan (105.06.23 on board) Senior vice president Jolene Ma Senior vice president Ahsien Chang Senior vice president Mei-Ling Chang Senior vice president Chi-Ying Sheng (105.02.01 on board) Senior vice president Wei-Chih Hsiao 211,206 211,206 9,788 9,788 187,604 187,700 0 0 0 0 4.28% 4.29% 589 Senior vice president Kuo-Ming Tai Senior vice president Mao-Yuan Yen Senior vice president Samantha Wei Senior vice president Frank Lin Senior vice president Steve Sun Senior vice president David Chang Senior vice president Janice Liang Senior vice president Jey Chen Senior vice president Li-Wen Chen (105.07.25 on board) Senior vice president Adeline Jai Senior vice president Melody Chien Senior vice president Lewis GUO Senior vice president Chin-Neng Chen Senior vice president Kuo-Cheng Chen Senior vice president Peter Tseng (105.03.01 relief of duty) Senior vice president Andy Chao

Note: The Bank and the companies reported in the financial statements paid a total pension benefit of NT$6,013,000, and contributed NT$3,775,000 to the pension plan.

42 Corporate Governance 03

Senior vice president Christy Shyy Senior vice president Wilson Chou Senior vice president Vivian Chou Senior vice president Ada Chen Senior vice presiden Jerry Yang Senior vice presiden Shouna Liu Senior vice presiden Wen-Chung Wang Senior vice presiden Gwo-Yi Pao Senior vice presiden Janet Chu Senior vice president Laing-Min Wu Senior vice president Elaine Wu Senior vice president You-Qing Xuan (105.06.23 on board) Senior vice president Jolene Ma Senior vice president Ahsien Chang Senior vice president Mei-Ling Chang Senior vice president Chi-Ying Sheng (105.02.01 on board) Senior vice president Wei-Chih Hsiao 211,206 211,206 9,788 9,788 187,604 187,700 0 0 0 0 4.28% 4.29% 589 Senior vice president Kuo-Ming Tai Senior vice president Mao-Yuan Yen Senior vice president Samantha Wei Senior vice president Frank Lin Senior vice president Steve Sun Senior vice president David Chang Senior vice president Janice Liang Senior vice president Jey Chen Senior vice president Li-Wen Chen (105.07.25 on board) Senior vice president Adeline Jai Senior vice president Melody Chien Senior vice president Lewis GUO Senior vice president Chin-Neng Chen Senior vice president Kuo-Cheng Chen Senior vice president Peter Tseng (105.03.01 relief of duty) Senior vice president Andy Chao

43 Compensation brackets Dec. 31, 2016 Names of president and vice president Compensations brackets for presidents All companies in the consolidated and vice presidents The company financial statement Below NT$2,000,000 Pao-Yin Chen / Tuan-wen wu / Pao-Yin Chen / Tuan-wen wu / Da Shenp Chiu / Jui-Hui Chen / Da Shenp Chiu / Jui-Hui Chen / Szu-Ching Chen / Kuo-Lin Fang / Szu-Ching Chen / Kuo-Lin Fang / Jerry Yang / Wen-Chung Wang / Jerry Yang / Wen-Chung Wang / Gwo-Yi Pao / Janet Chu / Gwo-Yi Pao / Janet Chu / Laing-Min wu / Elaine Wu / Laing-Min wu / Elaine Wu / NT$2,000,000(inclusive)~5,000,000(exclusive) You-Qing Xuan / Jolene Ma / You-Qing Xuan / Jolene Ma / Chi-Ying Sheng / Wei-Chih Hsiao / Chi-Ying Sheng / Wei-Chih Hsiao / Kuo-Ming Tai / Mao-Yuan Yen / Kuo-Ming Tai / Mao-Yuan Yen / Samanthe Wei / Li-Wen Chen / Samanthe Wei / Li-Wen Chen / Lewis GUO / Kuo-Cheng Chen / Lewis GUO / Kuo-Cheng Chen / Andy Chao Andy Chao Johnny Liu / Samuel Chiang / Johnny Liu / Samuel Chiang / B.R. Ho / Amy Hsia / Ann Cheng / B.R. Ho / Amy Hsia / Ann Cheng / Dennis Chiang / Keving Lin / Dennis Chiang / Keving Lin / John Chiou / Helen Liu / Min-Hsing Liu / John Chiou / Helen Liu / Shang-Ming Tsai / Robin Shieh / Min-Hsing Liu / Shang-Ming Tsai / Michio Komori / Hui-Fang Wu / Robin Shieh / Michio Komori / Chun-Ming Chang / Li-Cheng Kuo / Hui-Fang Wu / Chun-Ming Chang / Chung-Min Chen / Mei-Mong Liu / Li-Cheng Kuo / Chung-Min Chen / NT$5,000,000(inclusive)~10,000,000(exclusive) Jui-Yang Liu / Chih-Tsao Han / Mei-Mong Liu / Jui-Yang Liu / Phyllis Wang / Christy Shyy / Chih-Tsao Han / Phyllis Wang / Vivian Chou / Ada Chen / Shouna Liu / Christy Shyy / Vivian Chou / Ahsien Chang / Chang Mei-Ling / Ada Chen / Shouna Liu / Frank Liu / Steve Sun / David Chang / Ahsien Chang / Chang Mei-Ling / Janice Liang / Jey Chen / Adeline Jai / Frank Liu / Steve Sun / David Chang / Peter Tseng Janice Liang /Jey Chen / Adeline Jai / Peter Tseng Larry Chung / Spike, C.W. Wu / Larry Chung / Spike, C.W. Wu / NT$10,000,000(inclusive)~15,000,000(exclusive) Wilson Chou / Melody Chien / Wilson Chou / Melody Chien / Chin-Neng Chen Chin-Neng Chen NT$15,000,000(inclusive)~30,000,000(exclusive) Sam Lin Sam Lin NT$30,000,000(inclusive)~50,000,000(exclusive) NT$50,000,000(inclusive)~100,000,000(exclusive) Over NT$100,000,000 Total 63 63

Note: 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: None.

c. 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 2016, total compensations for directors, supervisors, president, and vice presidents accounted for 4.88% of the after-tax net profit and the share listed in the consolidated financial statement was 4.89%. In 2015, total compensations for directors, supervisors, president, and vice presidents accounted for 4.38% of the after-tax net profit and the share listed in the consolidated financial statement was 4.41%

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2. The company's compensation policy

Item Directors / Supervisors The Management Position Various factors and reference points may The responsibilities of each manager, the company's be considered in determining the standards results and each individual's performance, and the link for actual allowances and remuneration between the market rates for similar positions and future on an annual basis. This includes the risks are the main factors to be considered in order to remuneration standards of managers of the attract top managers by providing competitive benefits company, degree of salary adjustments, and compensation. generally accepted industry practices, whether there have been any major changes Remuneration in the company's business situation and/ policy or performance level, the seniority of the corporate representative of the director or supervisor in question, technical ability, extent of participation in the management of the company's operations, and the value of their contributions and amount of assumed risk. Any adjustment to the aforesaid standards must be approved by the board of directors before taking effect. Remuneration for directors and supervisors is Remuneration for managers is described as follows: described as follows: 1. Salary: to be determined by responsibilities and market 1. Remuneration: to be received for per- rates. forming the duties of a director or super- 2. Bonus: to be divided into a Chinese New Year bonus visor of the bank. and a yearend bonus. The size of a bonus depends 2. Business expenses: to be received mainly on the company's results, the corresponding to compensate for expenses incurred division's results, and the individual's performance during business activities, including travel evaluation. expenses for personally attending or be 3. Employee benefits: include the pension plan, the structure present at board meetings. employee shareholding trust program, physical examinations and allowances. 4. Long term incentive plan: To avoid putting too much emphasis on short term performance and to encourage employees to develop long term relationships with the company and enjoy long term growth together, the company has designed a long term incentive plan that offers "employee stock options" and the "Taishin Stock Appreciation Rights Plan" as a means of employee retention.

C. Status of Corporate Governance

a. Information on the operation of the board of directors

1.1. In the recent fiscal year (2016), the board of directors convedned 48 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 Holdings Chairman 42 6 87.50 Representative: Tong-Liang Wu Taishin Financial Holdings Director 46 2 95.83 Representative: Jui-Sung Kuo Taishin Financial Holdings Director 43 5 89.58 Representative: Tong-Shung Wu Taishin Financial Holdings Director 44 4 91.67 Representative: Long-Su Lin

45 Actual number Number of Actual rate of Title Name Note of attendance attendance by proxy attendance (%) Taishin Financial Holdings Director 46 2 95.83 Representative: Chu-Chan Wang Taishin Financial Holdings Director 45 3 93.75 Representative: Shang-Pin Wu Taishin Financial Holdings Director 47 1 97.92 Representative: Teh-Nan Hsu Independent Taishin Financial Holdings 44 4 91.67 Director Representative: Neng-Pai Lin Independent Taishin Financial Holdings 46 2 95.83 Director Representative: Yi-Fu Lin Standing Taishin Financial Holdings 40 0 83.33 Supervisor Representative: Yang-Tzong Tsay Taishin Financial Holdings Supervisor 36 0 75.00 Representative: Chih-Shang Kao Taishin Financial Holdings Supervisor 38 0 79.17 Representative: Chia-Chung Cheng

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

Other items of mandatory registration

(1) In the event of any of the circumstances occurring while the Board of Directors conducts its activities, details including the date, session, and agenda of the board meeting, all opinions of the independent directors, and the Company's responses to the independent directors' opinions should be provided.

(a) For items listed in Article 14-3,

Opinions of all Company's response Board of Agenda independent to independent Directors directors directors' opinions 2016.01.28 Approved the number of months paid to directors and None Not applicable 10-31 supervisors in 2015 2016.02.04 Reduced the area of the Bank's property leased to Taishin None Not applicable 10-32 Insurance Agency Co., Ltd. Proposed to commission Fuh Hwa Securities Investment Trust 2016.02.18 and Taishin Securities Investment Trust to handle discretionary None Not applicable 10-33 investments. 2016.02.25 Approved the evaluation of performance of directors and None Not applicable 10-34 supervisors in 2015 Appointment and remuneration of auditors of the Bank's 2016 None Not applicable 2016.03.17 financial statements 10-37 The Bank's 2015 Statement on the Internal Control System None Not applicable Amendment of the Bank's Internal Control Procedure Manual 2016.03.24 and termination of the Taishin Internal Control System for None Not applicable 10-38 Securities Dealers. 2016.04.07 Amendment of the Bank's Internal Control System for None Not applicable 10-40 Shareholder Agency Services. 2016.04.21 The Bank issued new ordinary shares by means of private None Not applicable 10-42 placement. 2016.05.26 Replaced the institutional director appointed to the subsidiary None Not applicable 10-47 Taishin Insurance Agency Co., Ltd.

46 Corporate Governance 03

Opinions of all Company's response Board of Agenda independent to independent Directors directors directors' opinions 2016.06.16 Donation to Taishin Bank Foundation for Arts and Culture None Not applicable 10-49 2016.09.29 Amendment of the Bank's Procedures for Conducting Financial None Not applicable 10-63 Derivatives Business. 2016.11.03 The Bank issued new ordinary shares by means of private None Not applicable 10-67 placement. 2016.12.15 Purchase of Shin Kong Mitsukoshi gift certificates from Shin None Not applicable 10-73 Kong Mitsukoshi Department Store Co., Ltd.

(b) In addition to matters above, other objections or qualified opinions from the independent directors to resolutions made by the Board of Directors on-record or in writing: None.

(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:

Details of directors absenting themselves due to conflict of interest in 2016 Reason for conflict of Date Agenda Director Name Voting result interest Where there exists a Directors with conflict of conflict of interest interest excused themselves in Approved the number of between the agenda accordance with the law, and the 2016.01.28 months paid to directors Tong-Liang Wu and a director, Article remaining attending directors and supervisors in 2015 206 of the Company approved the proposals with a Act shall apply and the unanimous vote. direct shall excuse Directors with conflict of him/herself from the Reduced the area of the interest excused themselves in meeting in accordance Bank's property leased to accordance with the law, and the 2016.02.04 Tong-Shung Wu with Article 178 of the Taishin Insurance Agency remaining attending directors same act. Co., Ltd. approved the proposals with a unanimous vote. Directors with conflict of Commissioned Fuh Hwa interest excused themselves in Securities Investment Trust accordance with the law, and the 2016.02.18 and Taishin Securities Tong-Shung Wu remaining attending directors Investment Trust to handle approved the proposals with a discretionary investments. unanimous vote. Directors with conflict of interest excused themselves from Tong-Liang Wu / Jui-Sung Kuo / discussions involving their Approved the evaluation of Tong-Shung Wu / Long-Su Lin / own performance evaluation 2016.02.25 performance of directors Chu-Chan Wang / Shang-Pin Wu / in accordance with the law; and supervisors in 2015 Teh-Nan Hsu / Neng-Pai Lin / and the remaining attending Yi-Fu Lin directors approved the proposal with a unanimous vote. Directors with conflict of Replaced the institutional interest excused themselves in director appointed to the accordance with the law, and the 2016.05.26 subsidiary Taishin Tong-Shung Wu remaining attending directors Insurance Agency Co., approved the proposals with a Ltd. unanimous vote. Directors with conflict of Purchased Shin Kong interest excused themselves in Mitsukoshi gift certificates accordance with the law, and the 2016.12.15 Tong-Liang Wu from Shin Kong Mitsukoshi remaining attending directors Department Store Co., Ltd. approved the proposals with a unanimous vote.

47 (3) Targets for strengthening the function of the board of directors in current year and the recent year 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/supervisors, instituted independent directors since 2007, and took out liabilities insurance for board directors/supervisors 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.

1.2 Evaluation of individual director/supervisor performance: The bank evaluates the effectiveness of the board of directors, the overall performance of the organization, and performance of individual directors and supervisors in accordance with the Performance Evaluation Guidelines for Employees Reassigned to Subsidiaries every year. The results will have to be presented to the Remuneration Committee of Taishin FHC after they are approved by the board of directors.

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 directors with in-house chief auditor and CPA (including communications regarding important matters with respect to the Bank's finance and business activities, means and results). Status of communication between independent directors and in-house chief auditor:

(1) The Bank's independent directors hold periodic communication meetings with the chief auditor (at least once a year). The 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 to the board of directors each months, with the contents of the report including the conducting of auditing operation and major audited items, both internal and external ones. Attending independent directors, 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 directors 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.

48 Corporate Governance 03

3. Participation of supervisors in the operation of the board of directors. In the recent fiscal year (2016) the board of directors convened 48 times and status of attendance

Actual number of Attendance rate Title Name Note attendance (%) Standing Taishin Financial Holdings 40 83.33 supervisor Representative: Yang-Tzong Tsay Taishin Financial Holdings Supervisor 36 75.00 Representative: Chih-Shang Kao Taishin Financial Holdings Supervisor 38 79.17 Representative: Chia-Chung Cheng

Note: The attendance rate (%) of a director/supervisor is calculated by his/her actual number of attendance and the number of meetings of the board of direc tors during his/her term.Other items which should be recorded:

Other items which should be recorded:

(1) The makeup and responsibilities of supervisors: (a) Communication between supervisors and employees/shareholders: 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. (b) Status of the communication of supervisors with in-house chief auditor and CPA. a. Status of the communication between supervisors and in-house chief auditor i. The Bank's supervisors hold periodic communication meetings with the chief auditor (at least once a year). The meeting minutes are submitted to the board of directors. ii. Supervisors and chief auditor of the bank attend the board of directors and communicate with directors during and before the meetings over various affairs of the bank. iii. The bank's auditing division regularly submits Auditing report to the board of directors each 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. iv. The auditing reports for the bank and its subsidiaries of the bank's auditing division are submitted to supervisors for inspection. v. Investigation reports on major incidents of the bank (such as irregularities, natural disaster, and major losses) are all submitted to supervisors. vi. 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 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: None. c. Items disclosed comply with 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

49 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 Operating status guidelines of the practical Items corporate governance of Yes No Explanation the banking industry and reasons 1. Shareholding structure and shareholders' rights within the bank (1) Has the bank implemented a set P (1) The bank has only one shareholder, If there are any Although there is no of internal procedures to process suggestions, queries, disputes or litigations, they internal procedure shareholders' suggestions, will be handled immediately. available, the Bank does queries, disputes and litigations? not have any problem in communicating or handling shareholder's queries or suggestions because the Bank has only one shareholder. (2) Is the bank constantly informed P (2) The bank has only one shareholder, Taishin No deviation of the identities of its major Financial Holdings, which owns 100% stake in the shareholders and the controlling bank. stakeholder? P (3) The Bank has implemented a risk management No deviation (3) Has the bank established and policy and mechanism in accordance with the implemented risk management Banking Act to ensure an effective risk management and firewalls in companies? and firewall mechanism.

2. Constitution and obligations of the board of directors (1) Apart from the Remuneration P (1) Under the supervision of its board of directors, the Committee and Audit Committee, Bank has established other functional committees has the bank assembled other to supervise and review various operational functional committees at its own procedures within the company, including discretion? the Occupational Health and Safety Strategy Committee, Trust Asset Review Committee, Personnel Review Committee, Credit Assets Committee, and Credit Review Committee. No deviation (2) Does the bank conduct P (2) On a yearly basis, the Company evaluates the regular assessments on the independence and adequacy of the certified public independence of its financial accountants by reviewing their resumes; checking statement auditors? whether they have any conflict of interest in the company; and whether they have received disciplinary actions in the past. Concurrently, a confirmation of independence must be obtained from the CPA . The appointment of a CPA is subject to approval by the Board of Directors. 3. For banks that are exchange-or The Bank has the Corporate Planning Division OTC-listed, does the Company to oversee all corporate governance matters have a unit or staff that specializes and supervise practices of all relevant units. The (or is involved) in corporate appropriate units will provide assistance in providing governance (including but not information necessary for directors and supervisors to limited to providing information perform their duties, organizing board meetings and necessary for directors and P general meetings, handling business registration and No deviation supervisors to perform their any change of registration, and compiling minutes of duties, organizing board meetings board meetings and general meetings. and general meetings, handling business registration and any change of registration, and compiling minutes of board meetings and general meetings)?

50 Corporate Governance 03

Deviation from the Operating status guidelines of the practical Items corporate governance of Yes No Explanation the banking industry and reasons 4. Has the bank established any P (1) The bank's parent company has implemented a communication channels with "Stakeholder Information System" in which the stakeholders? (including but company and its subsidiaries create stakehold- not limited to shareholders, er profiles and make them available for inquiry. employees, and clients) Stakeholders are also reminded on a regular basis to verify the correctness of their information. (2) The bank's parent company complies with laws in the disclosure of financial, business and material information in the Market Observation Post System. This information is made publicly available simultaneously on the company's website. The No deviation company also has a designated spokes-person and investor relations mailbox available to serve as communication channels with stakeholders. (3) The bank's parent company has completed the Stakeholders Section on its website in 2015 as a means to communicate and consolidate queries from stakeholders (e.g. employees, suppliers, consumers and customers), so that the company can gain a better understanding of stake-holders' expectations and needs. 5. Disclosure of information (1) Has the bank established a P (1) website that discloses financial, a. The bank has disclosed finance, business business and corporate information and corporate governance on its governance-related information? website and disclose major information on Market Observation Post System. b. The bank has established an English website and assigned various departments to gather and disclose information on a regular basis. In addition, a public information reporting system has also been created with personnel assigned to gather and disclose information via the system. (2) Has the bank adopted other P (2) means to disclose information a. The bank has a spokesperson mechanism in (e.g. English website, assignment place to facilitate external communications. No deviation of specific personnel to All material information relevant to investors' collect and disclose corporate interests is announced using the Market information, implementation Observation Post System and press releases. of a spokesperson system, The spokesperson provides further elaboration broadcasting of investor confer- where deemed necessary. ences via the company website)? b. The bank's parent company prepares its corporate social responsibility report in both Chinese and English. This report has been made accessible at the company's website and on Market Observation Post System (MOPS). c. The bank's parent company holds quarterly investor conferences; conference proceedings are recorded and uploaded onto the company's website and MOPS on the same day.

51 Deviation from the Operating status guidelines of the practical Items corporate governance of Yes No Explanation the banking industry and reasons 6. Does the bank have other P (1) The bank offers competitive remuneration packages information that enables a better and benefits to retain talented employees. The bank understanding of the company's also organizes team-building activities and works corporate governance practices with the Teacher Chang Foundation to provide including but not limited to employees with a joyful and healthy workplace. employee rights, employee care, Taishin Bank respects employees' opinions and (investor relations, stakeholders' uses morning meetings and employee opinion rights, continuing education surveys as a means of communication. of directors / supervisors, (2) In addition to organizing quarterly corporate implementation of risk investors' conference and participating in domestic management policies and risk and overseas investor forums and road shows measurements, mplementation of from time to time, the Bank's parent company customer policy, insuring against also, through its Investor Rela- tions Department, liabilities of company directors communicate with the investors via various and supervisors, and donation channels including e-mail, telephone or face-to- to political parties, stake-holders face meetings. Information disclosure is made and charity organizations) through the company's website in the meantime. (3) The bank's directors and supervisors have all achieved the required number of training hours and announced the progress of their training on the Market Observation Post System. No deviation (4) The bank has independent risk management units in place; it has also committed substantial resources to developing risk management systems, and managing credit, market and operational risks using both qualitative and quantitative means. (5) The bank has adopted stringent measures to protect customers' information and has implemented personal information management policies, information security policies, firewalls, and customer information confidentiality measures in accordance with the Financial Holding Company Act, Guidelines for Cross Marketing among Subsidiaries of Financial Holding Company, the Personal Information Protection Act and other relevant regulations stipulated by the competent authority. (6) The bank has taken out liability insurance for board directors and supervisors. 7. Please described improvements P The Bank's parent company was ranked among Top in terms of the results of the 5% of TWSE-listed companies by TWSE in the 2nd Corporate Governance Evaluation Corporate Governance Evaluation in April 2016. In System in recent years and addition, the Bank received CG6010(2015) Certification propose areas to be given priority - Excellent on December 22, 2016. The certificate is No deviation where improvement will be between December 22, 2016 and December 21, 2018. needed (Optional for companies included in the evaluation.)

e. The information of duty and component on the operation of salary committee:

1. The parent company of Taishin International Bank, Taishin Financial Holding Company, has assembled its own Re-muneration Committee in accordance with the "Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter" on September 22, 2011. 2. Any matter regarding the remuneration of the directors, supervisors, and management of Taishin Bank that has to be approved by the board of directors of Taishin Holdings according to the rules regarding authority levels must be submitted to the Remuneration Committee of Taishin Holdings for review before being submitted to the board of directors of Taishin Holdings for discussion.

52 Corporate Governance 03

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.

Operating status Deviation from the guidelines for the social Items responsibilities and Yes No Explanation reason 1. Implementation of corporate governance (1) Does the company have a P (1) Following the principles of implementing corporate corporate social responsibility governance, contributing to the development policy or system in place? Is of sustainable environment, supporting public progress reviewed on a regular interest and charity activities, and disclosing basis? information on corporate social responsibility, the Bank complies with the Corporate Social Responsibility Best Practice Principles established by its parent company. The Bank organizes campaigns that encompass economic, societal, and ecoenvironmental aspects such as stakeholder communication, corporate social responsibility, arts promotion, environmental conservation, energy management, creation of green space, employee welfare, employee training, workplace health and safety, and supplier management. Details are included in the parent company's Annual CSR Reports. Meanwhile, the Bank also complies with the parent company's Corporate Governance Code of Conduct, established in 2014, and implement effective corporate governance practices. (2) Does the bank organize social P (2) The bank arranges for its directors, supervisors, responsibility training on a regular accounting, finance and audit personnel to attend basis? corporate governance courses both on a regular and irregular basis. Courses on corporate ethics, banking regulations and code of conduct are mandatory to attend for all new recruits. No deviation (3) Does the bank have a unit that P (3) In 2014, the Bank's parent company had developed specializes (or is involved) in the Guidelines for Establishment of the Corporate CSR practices? Is the CSR unit Sustainability Committee and established the run by senior management and Corporate Sustainability Committee to specialize reports its progress to the board in the oversight and making of corporate social of directors? responsibility related decisions. The committee is chaired by the president of the parent company. President of the Bank is one of the five executive members. The Bank's executive officers are made members of six functional teams by type of business to perform the Bank's duties as a responsible corporate citizen. The Corporate Sustainability Committee, of which President of the Bank is a member, held four meetings in 2016 to discuss corporate governance and CSR related proposals, and presented information on relevant businesses and proposals to the Board of Directors as needed. (4) Has the bank implemented a P (4) The bank offers comprehensive and competitive reasonable remuneration system remuneration that aims to deliver higher corporate that com- mensurate employees' performance, shareholder returns, and employee performance appraisals with welfare. Taishin Financial Holdings was included as CSR? Is the remuneration one of the compositions of "Taiwan High Compen- system supported by an effective sation 100 Index;" this demonstrates the company's reward/discipline system? commitment to share its success with employees. In addition, the bank has included CSR as part of employees' appraisal criteria, and assesses it on a yearly basis to ensure that CSR policies are soundly implemented from the top-down.

53 Operating status Deviation from the guidelines for the social Items responsibilities and Yes No Explanation reason 2. Development of sustainable environment (1) Is the bank committed to P (1) Taishin Bank has dedicated to push e-office achieving efficient use of and paperless office; install stationery collection resources, and using renewable boxes to achieve more efficient utilization of materials that produce less resources. Promote "using love as energy" event, impact on the environment? urging employees to ride bicycles, take public transportation vehicles, and embrace carpooling, 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." (2) Has the bank developed an P (2) In its formal organizational structure, the bank has appropriate environmental set up labor security and sanitation section, which management system, given its adheres to the concept of "the premise for safety of distinctive characteristics? environmental design and priority of precautionary measures" in order to create a sanitary, safe, and healthy environment for Taishin Bank. The labor security and sanitation section is in charge of No deviation various tasks, including pushing of tobacco-hazard prevention law and maintenance of the quality of working environment via semiannual inspection of operating environment. (3) Is the bank aware of how climate P (3) For environmental protection and anti-global changes affect its business warming, Taishin Bank has dedicated to the activities? Are there any actions environmental protection and energy conservation. taken to measure and reduce During summertime, it pushes "Cool Biz" event, greenhouse gas emission and asking employees to shed garment during office energy use? time and set air conditioning temperature at 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 to 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. 3. Uphold public benefits (1) Has the bank developed its P (1) The bank's working rules have been approved policies and procedures in by the regulator and publicized. The personnel accordance with laws and the rules are formulated according to the regulations International Bill of Human of labor laws/decrees, for the purpose of pro- Rights? tecting the labor rights of employees. In addition to offering fair compensation, recruitment, training and promotion opportunities and introducing safety measures for female employees, the company No deviation has issued declarations over the intranet with regards to workers' rights and human rights, and organized physical as well as online training to raise employees' awareness on work-life balance. (2) Does the bank have means P (2) The bank has implemented mail boxes (physical and through which employees may e-mail) and phone lines exclusively for processing raise complaints? Are employee employees' complaints. These complaints are complaints being handled handled by dedicated employee relations officers. properly?

54 Corporate Governance 03

Operating status Deviation from the guidelines for the social Items responsibilities and Yes No Explanation reason (3) Does the bank provide P (3) The bank has a safety and health policy in place employees with a safe and that complies with relevant laws. Safety of the work healthy work environment? Are place is inspected twice a year, fire equipment employees trained regularly on and exits are serviced yearly, and public safety is safety and health issues? inspected regularly. First-aid kits, certified medical staff, as well as health and safety supervisors have been deployed throughout the business premises. With regards to regular health checks, the company offers benefits that exceed legal requirement standards, and subsidizes health checkups once every two years for general staff and once per year for managerial staff. In terms of training, all new recruits are required to undergo safety and health orientation upon arrival, whereas existing employees need to be retrained once every three years. (4) Does the bank have channels to P (4) The company has appointed representatives as communicate with employees on required by law to hold regular employer-employee a regular basis, and inform them meetings. In addition, it publishes details of internal of operational changes that may communication onto the intranet to keep employees be of a significant impact? informed of management decisions that may be of significant impact to them. Meanwhile, employee mail boxes and hotlines have been made available as a private means to express opinions. (5) Has the bank implemented an P (5) New recruits are given a complete orientation upon effective training program that arrival; Subsequently, each division will arrange helps employees develop skills respective courses and training that employees are over the course of their career? expected to attend. For career development, the No deviation bank has an individual development program (IDP) and a training credit system that employees may utilize to improve the skills required. (6) Has the bank implemented P (6) The Bank has an entire chapter in its internal consumer protection and operations manual dedicated to confidentiality and grievance policies with regards protecting consumer interests. All loan agreements to its research, development, of the bank have been drawn according to the procurement, production, authority's standard terms, guidelines and the operating and service activities? Consumer Protection Law, which state clearly all rights and obligations between the counterparties. The company has set up a consumer protection system supported by grievance procedures and a complaint department specialized in handling such affairs. They exist to serve as channels through which consumers may communicate about products and services offered by the company. The relevant disclosures are stated below: a. dedicated around-the-clock customer service line: (02)2655-3355 b. Head office dedicated customer complaint line: (02)2700- 3166 and 0800-079-885, Business hours Monday to Friday 09:00-12:00, 13:30-17:30 c. Fax number for complaints: (02)5571-9396 (7) Has the bank complied with P (7) The Bank has implemented Advertising, Solicitation laws and international standards and Promotion Policies to guide its operations with regards to the marketing since December 2011 based on the authority's and labeling of products and "Guidelines on Advertising, Business Solicitation services? and Promotion for Financial Service Providers."

55 Operating status Deviation from the guidelines for the social Items responsibilities and Yes No Explanation reason (8) Does the bank evaluate suppliers' P (8) Supplier selection and the tender process at the environmental and social Bank are governed by the Supplier Maintenance conducts before commencing and Management Guidelines to ensure products business relationships? and quality consistently meet the requirements. Regarding the selection of suppliers in major procurement projects, the Company may take into consideration a supplier's promise and fulfillment of its CSR commitments. In addition, the Company may ask suppliers to complete a self assessment questionnaire to provide a basis for evaluation. Only suppliers that conform with the Company's requirements can be certified and registered to provide services or products to the Company. No deviation (9) Is the bank entitled to terminate P (9) The Company has implemented a set of "Supplier thesupply agreement at any Management Guidelines" and CSR commitments. time with a major supplier, if Procurement contracts now include a Supplier's the supplier is found to have Declaration clause that require suppliers sign a violated its corporate social CSR Declaration. Suppliers will be required to responsibilities and caused sign a CSR Declaration upon entering into a new significant impacts to the contract or exchanging contracts to ensure that environment or the society? suppliers do comply and fulfill their corporate social responsibilities in terms of worker respects, law compliance, and environmental-friendly and sustainable production, which are all take into consideration when the Company is evaluating or selecting a particular supplier 4. Intensified information disclosure P The bank's parent company has created a CSR section Has the bank disclosed relevant on its website, where related activities and progresses and reliable CSR information on have been disclosed. The CSR report has also been its website and at the Market made available at the company's website and MOPS, No deviation Observation Post System? where employees, customers, shareholders and the general public may download to learn about. nonfinancial aspects of the company. 5. Description of deviation of the self-made guidelines for corporate social responsibilities from the "Guidelines for corporate social responsibilities of listed firms" : N/A 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 Taishin Bank continues the commitment to creating and supporting a smoke-free workplace. The TFH Building is certified for tobacco hazard prevention under the Health Promotion Administration's voluntary healthy workplace certification system. In compliance with tobacco hazard prevention and Taishin Bank's no smoking policy, smoking is prohibited in all workplaces across the country for employees and affiliated vendors in these workplaces. (2) Environmental protection For environmental protection and anti-global warming, Taishin Bank, in line with the planning of Taishin Financial Holdings, has dedicated to the environmental protection and energy conservation. During summertime, it pushes "Cool Biz" event, asking employees to shed garment during office time and set air-conditioning temperature at 26 Celsius degrees. In line with the measures of Taipower, terminate the function of air conditioning irregularly and regularly check the contract power capacity of various office buildings. During off hours, control the use of elevators at one side at various buildings, to cut power consumption. Install T5 energy-saving lighting fixtures for office lighting and regional power circuit, to reduce power consumption and achieve the goal of environmental protection. Support the Bureau of Energy of Ministry of Economic Affairs' energy conservation policy by taking the oath to become an Energy Saving Company. Start installing solar power systems in the company's own buildings and explore renewable energy in order to establish a model of green business. 。 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 public transportation vehicles, and embrace car pooling, so as to reduce carbon emission, enhance health, and fulfill the commitment to environment 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."

56 Corporate Governance 03

Operating status Deviation from the guidelines for the social Items responsibilities and Yes No Explanation reason (3) Public benefits and charity 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 mprove 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 the "Power of Love" event, the first online public-service event in Taiwan. In the event, small and medium social-welfare institutions were invited to put forth proposals online for voting by online social groups, in deciding the recipients of donations. A total of 1,536 proposals were received over the six years it was held, and we invited public-service partners, such as "Advantech Foundation", "Chunghwa Telecom Foundation", "Yueh-Lan Wang Charitable Foundation", and the "Vision Project" to join the event the scope of donation recipients were expanded from "Social welfare" to "Culture education", "Digital learning", and "Agricultural Social Enterprises". The 6th "Power of Love" event received overwhelming response as 230,000 online voters casted more than 940,000 votes in total. In addition to the public service partners mentioned above, the event also received donations from Taishin managers, employees, clients, and the general public, which boosted the charity fund to over NT$21.80 million and benefited a total of 437 charity organizations over the six years. After its establishment, the foundation rolled out "Power of Love" event, the first online public-service event in Taiwan. Under the event, small and medium social-welfare institutions were invited to put forth proposals online for voting by online social groups, in deciding the recipients of donations. A total of 1,817 proposals were received over the seven years it was held, and we invited public-service partners, such as "Advantech Foundation" and "Chunghwa Telecom Foundation", Yueh-Lan Wang Charitable Foundation, the Doers Cultural and Educational Foundation, and the Vision Project to join the event the scope of donation recipients were expanded from "Social welfare" to "Culture education", "Digital learning", and "Agricultural Social Enterprises". The 7th "Power of Love" event received overwhelming response as 320,000 online voters casted more than 1.20 million votes in total. In addition to the public service partners mentioned above, the event also received donations from Taishin managers, employees, clients, and the general public, which boosted the charity fund to over NT$24.45 million and benefited a total of 554 charity organizations over the seven years. Taishin Bank is a follower of the idea of "giving back to the community" and a socially responsible company. The bank is always quick to offer much needed support after major disasters. In February 2016, Tainan had a major earthquake, and the Bank's parent company promptly gathered resources within the group. In addition to a NT$10 million donation to the Tainan City Government, the Bank mobilized branches in Tainan to help provide assistance for disaster victims and work with charitable organizations on supplies for the area. Furthermore, the Bank donated 10 million Japanese yens in support of disaster relief to the Kumamoto Prefecture in response to the local earthquake in April 2016. Other donations were made to disasters such as the Formosa Fun Coast explosion in 2015, the Typhoon Morakot in 2009, Typhoon Jangmi in 2008, the Sichuan earthquake in 2008, the South Asian tsunami in 2005, the Typhoon Mindulle in 2004, and the 921 earthquake in 1999. In addition to "Power of Love", the Taishin Charity Foundation takes advantage of a platform to combine and connect resources under Taishin Financial Holdings and partners interested in offering resources. Starting in 2014, the Taishin Bank Culture and Art Foundation and the Taishin Charity Foundation teamed up to launch the "Together in Charity" campaign, and invited artists interested in charity work and advertising firms or students with arts skills to join the projects to improve product designs and paint for charity. Taishin Bank will continue to visit local social welfare groups and try to connect opportunities and community resources in an effort to help small and medium sized social welfare groups achieve self sustainability. Taishin Bank is a follower of the idea of "giving back to the community" and a socially responsible company. The bank is always quick to offer much needed support after major disasters. For example, in support of exhausted doctors and nurses responding to the Formosa Fun Coast dust explosion, the bank started the FFC medical worker care program and supported the medical workers with action. Other donations were made to disasters such as the Kaohsiung gas explosion in 2014, the Typhoon Morakot in 2009, Typhoon Jangmi in 2008, the Sichuan earthquake in 2008, the South Asian tsunami in 2005, the Typhoon Mindulle in 2004, and the 921 earthquake in 1999. (4) Art and Culture Taishin Bank donated to establish "Taishin Bank Culture and Art Foundation" in 2001, with the theme of "Promoting cultural life quality and strengthening the 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" rewarding modern artistic creativity in various fields in Taiwan that demonstrates growth potential and reflects the society and local cultures. 2015 marked the 13th edition of the award. It rewards modern artistic creativity in various fields in Taiwan that inspires interest in culture and reflects the time while demonstrating artistic mastery and technical excellence. The Award entered its 14th year in 2016. To encourage communication and exchange among artists, the Taishin Bank Culture and Art Foundation created the online commentary platform, ARTalks, in 2013. The platform is based on the idea, "A New Relationship with Art", and invites submissions in forms of short film and animation. Members of the public are welcome to showcase their interpretation of life and art and find inspiration in each other. Taishin Bank has also been sponsoring arts events for years in order to bring art closer to the public. Such events include Kusama Yayoi's "A Dream I Dreamed" Asia Tour in 2015. The exhibition helped place the works of a pioneering female contemporary artist and serious modern woman in front of the public. In the same year, Taishin Bank also sponsored a performance by two jazz heavyweights, Herbie Hankcock and Chick Corea. It was the first Taishin Jazz night in 37 years and a night to remember for jazz fans.

57 Operating status Deviation from the guidelines for the social Items responsibilities and Yes No Explanation reason (5) Sports sponsorship In 2011, Taishin sponsored Yani Tseng, LPGA female golfing champion, the first Taiwanese financial institution to do so. Taishin had also mobilized its customers and employees to cheer for the champion using banners, online messages etc, while some had even paid their visits to the LPGA Tour in Taiwan. It also invited Yani Tseng to become the endorser of Taishin Charity Foundation, to help with promoting the "Your ballot decides the strength of love" event, so as to augm Taishin's social influence. In an attempt to nurture a greater number of sporting talents, Taishin has extended its sports sponsorship since September 2013 to new golf talents including Babe Liu, Chien Pei-Yun, Shih Huei-Ju, Chuang Hsin-Yun, Pan Yen-Ling, Tsai Pei-ying and Hsuan-Ping Chang. In the meantime arranged for golf superstar Yani Tseng to provide personal guidance to these rising talents. Taishin also sponsors ladies golf tours organized by the LPGA of Taiwan, which create a stage for players by hosting tournaments. 7. Description of corporate social responsibility report which have been certified by international certification bodies: Taishin Holdings' latest CSR report had been certified by British Standards Institution (BSI) in May 2017 to pass AA1000 and GRI Standards guidelines, and was given an assurance level of A+. Deloitte Taiwan also issued an opinion of limited assurance in accordance with ISAE3000 standard for assurance in May 2017, making the Company the first financial institution in Taiwan to receive both assurance certification for three consecutive years. The Independent Limited Assurance Report was also disclosed in the Company's 2016 CSR Report.

g. Status of the company in fulfilling management of integrity and measures

Operating status Deviation from the guidelines for the social Items responsibilities and Yes No Explanation reason 1. Policies and schemes established to ensure business integrity (1) Has the bank stated in its P (1) In order to develop a corporate culture based on Memorandum or external honesty and integrity, the Bank's parent company correspondence about the has stablished the "Taishin Financial Holding Co., polices and practices it Ltd. – Ethical Corporate Management Best Practice implements to maintain business Principles", which applies to the financial holding integrity? Are the board of company as well as all of its subsidiaries. The directors and the management Principles have been disclosed publicly. committed in fulfilling this commitment? (2) Does the bank have any mea- P (2) The Bank adheres to its core values of "Integrity, sures in place against dishonest Commitment, Innovation, and Cooperation" and conducts? Are these measures observes the "Ethical Corporate Management supported by proper procedures, Best Practice Principles" established by its No deviation behavioral guidelines, disciplinary parent company. In addition, the Bank has fully actions and complaint systems? implemented all relevant guidelines for preventing dishonest conduct, including operational procedures, code of conduct, disciplinary rules, and employee grievance systems. (3) Has the bank taken steps to P (3) To ensure full implementation of the "Ethical prevent against occurrences Corporate Management Best Practice Principles" listed in Article 7, Paragraph 2 of set forth by its parent company, the Bank has "Ethical Corporate Management established relevant codes of conduct and Best Practice Principles for prevention measures for business activities that TWSE/GTSM-Listed Companies" are more likely to involve dishonest conduct, e.g., or business conducts that are offering or taking of bribes; making illegal political prone to integrity risks? donations, inadequate sponsorship or charity donations; and providing or receiving improper gifts, treatments, or other unjustified benefits.

58 Corporate Governance 03

Operating status Deviation from the guidelines for the social Items responsibilities and Yes No Explanation reason 2. Implementation of integrity Management (1) Does the bank evaluate the P (1) For the selection of suppliers and public bidding integrity of all counterparties it for various procurements, the bank follows the has business relationships with? "measures governing procurement and supplier Are there any integrity clauses management," so as to assure products have stable in the agreements it signs with quality and meet the requirements. Suppliers meet- business partners? ing the conditions can undertake evaluation and register as the bank's qualified suppliers to provide services or products to the bank. (2) Does the bank have a unit that P (2) The Bank observes the "Ethical Corporate specializes (or is involved) in Management Best Practice Principles" set forth by business integrity? Does this unit its parent company. The Compliance Department report its progress to the board of is designated to handle the planning, management, directors on a regular basis? and execution of all issues related to compliance and other matters pertaining to ethical corporate management. The Compliance Department also reports to the Board of Directors and supervisors at least once every six months on the implementation status of all relevant business. (3) Does the bank have any policy P (3) The bank establishes the guidelines for avoiding that prevents conflict of interest, conflict of interest in compliance with the parent and channels that facilitate the company's Employee Code of Conduct, and has report of conflicting interests? reporting channels in place to accept verbal and written reports of violations. (4) Has the bank implemented P (4) effective accounting and internal a. Accounting System control systems for maintaining The bank's accounting system follows "Securities business integ-rity? Are these and Ex-change Act" "Commercial Accounting systems reviewed by internal or Law, "Guidelines for The Compilation of Financial No deviation external auditors on a regular Statement of Securities Issuers," Guidelines basis? for The Compilation of Banks with Public Share Offering," and common accounting criteria, as well as Sample for Banking Industry's Accounting System" issued by Bankers Association. It features faithful and complete chronicling of the bank's various operations, effectively manifests the function of international subversion, and mirror the bank's financial status and management results, so that it can serve as a reference for decision making. b. Internal control system The bank's internal control system follows article 45-1 of the "Bank Law" and article 6 of "the Measures Governing Internal Control and Auditing System of Financial Holding Company and Banking Industry". The system covers the company's business activities, formulation and proper revision of the corporate charter, and organizational charter and various business norms and handling manuals. For major irregularities resulting from violation of the regulations of the system or coverage auditing results due to inadequate internal management, related persons should bear the responsibility or be penalized, in serious cases, according to proper procedure.

59 Operating status Deviation from the guidelines for the social Items responsibilities and Yes No Explanation reason (5) Does the bank organize internal P (5) Each year, the Bank arranges regular or ad or external training on a regular hoc training courses on corporate governance basis to maintain business for its directors, supervisors, risk management, integrity? accounting/finance staff and auditors. Mandatory courses for new employees include corporate ethics, banking regulations and code of conduct, etc. 3. Reporting of malpractice (1) Does the bank provide incentives P (1) In its parent company's "Employee Code of and means for employees to Conduct", the Bank clearly delineates convenient report malpractices? Does the channels and relevant procedures for reporting company assign dedicated instances of malpractice. An informer may be personnel to investigate the rewarded by a designated business unit in reported malpractices? accordance with the parent company's "Employee Reward and Discipline Guide- lines". Any employee of the company or external party who discovers any illegal or unethical conduct shall report the discovery to the management and relevant units of the company or through appropriate reporting channels provided by the company. a. Reporting hotline: (02)5576-3000 b.Reporting mailbox: [email protected] c. By mail: Complaints can be sent by mail or by email to the human resource unit. No deviation (Required details: name of complainant, unit and title/name of complainee, unit and title/date and description of incident) (2) Has the bank implemented P (2) A designated business unit is responsible to any standard procedures or submit the reported case to the Personnel Review confidentiality measures for Committee in accordance with the relevant handling reported malpractices? procedural guidelines. The Personnel Review Committee will proceed with the disciplinary actions accordingly. The identity of the informer and the contents of the report will be kept in strict confidence. (3) Does the company assure P (3) The Bank will enforce protective measures to employees who reported on assure that the informer, as well as the employees malpractices that they will not engaged in the investigation process, will not be be prosecuted for making such retaliated against. reports? 4. Strengthen information disclosure The "Taishin Financial Holding Co., Ltd.-Ethical Has the bank disclosed its integrity Corporate Man-agement Best Practice Principles"" principles and progress onto its P are accessible through website of bank's parent No deviation website and MOPS? company and MOPS.

5. Description of deviation of the self-made guidelines for integrity management from the "Guidelines for corporate integrity management of listed firms": N/A. 6. Other key information conductive to the understanding of the implementation of integrity management (e.g.: declaration of the bank's commitment to business integrity to vendors, policies and training programs, reviews over the bank's business integrity principles etc): None.

h. Banks with corporate-governance guidelines and related regulations must disclose their methods for inquiry: Please visit the bank's parent company's website or the Market Observation Post System for more information.

i. Other important information conducive to the understanding of the corporate governance of the bank Please refer to the explanation of item d "Status of the bank's governance and its deviation from the guidelines for the practical corporate governance of the banking industry and reasons."

60 Corporate Governance 03

j. Status of the execution of internal control

1. Statement of internal control

Statement for the Internal-Control System of Taishin International Bank

On behalf of Taishin Financial Holding Co., Ltd.(the Company), we hereby declare that, for the fiscal year of 2016, the Company have established internal control system and implemented risk management system in accordance with the "Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries". The system and practices were also inspected by the independent Audit Division which reported regularly to the Company's Board of Directors and Audit Committee. Following our prudent assessment, we concluded that the Company's internal control, legal and compliance practices for the fiscal year of 2016 were implemented effectively, except for the items listed on the attachment. This statement will constitute part of the Company’s annual report and prospectus and will be publicly disclosed. We understand that we are legally bound to the “Securities and Exchange Act" Articles 20, 32, 171, and 174.

Sincerely yours.

Chairman

President

Chief Auditor

Compliance Officer

March 16, 2017

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

Dec. 31, 2016; Unit: NT$1,000 Items for Improvement Improvement Measures Scheduled Date of Completion Defects were present in the business Improvement was made and filed with the operations of derivative transactions. Banking Bureau on December 26, 2016. The lending procedures did not contain The procedures were reviewed and Full improvement was completed by January control mechanisms on the borrower's controls implemented. Training was 2017. actual purpose of financing, and failed provided to raise employee awareness. to implement limit control as required. Defects were present in the sales of A consulting firm was hired to audit the The consulting firm expects to complete the audit investment products at the Hong Kong processes. report by May 17, 2017. The schedule will be Branch. decided when the audit results become available. Mis-selling of non-performing cash card The procedures were improved. loans was identified.

61 Statement for the Internal-Control System of Taishin International Bank

March 16, 2017 The following statements are based on the results of a self-assessment of the bank's internal control system for the period between January 1, 2016 and December 31, 2016. I. The bank understands that it is the responsibility of the board of directors and the management to establish, operate and maintain the internal control system, which the bank has established accordingly. The purpose is to provide reasonable assurance regarding accomplishment of goals including soundness of business processes, reliability of reports, and regulatory compliance. II. An internal control system is subject to inherent limitations. An effective internal control system, regardless of design, is able to provide only reasonable assurance regarding accomplishment of the three goals above. Moreover, the effectiveness of an internal control system may vary with changes in the environment or in the circumstances. Nevertheless, the bank's internal control system is equipped with self monitoring mechanisms so that the bank will take action to correct any error as soon as it is identified. III. The bank determines the effectiveness of the design and execution of its internal control system in accordance with the rules under the Regulations Governing the Implementation of Internal Control and Audit System and Business Solicitation System of Insurance Agent Companies and Insurance Broker Companies (the "Regulations") established by the Financial Supervisory Commission. The criteria for an effective internal control system, according to the Regulations, shall contain at least the following components: (1) control environment; (2) risk assessment; (3) control activities; (4) information and communications; and (5) monitoring activities. IV. The bank has examined the effectiveness of its design and execution against the criteria above for an internal control system. V. Based on the results of the examination above, the bank thinks the design and execution of the internal control system (including awareness of soundness of business processes, reliability of reports, and regulatory compliance), for the aforesaid period, was effective and able to reasonably ensure accomplishment of the goals above. VI. This declaration constitutes part of the Company’s annual report and prospectus, and shall be disclosed to the public. Any illegal misrepresentation or omission relating to the public statement above is subject to the legal consequences under Articles 20, 32, 171, and 174 of the Securities and Exchange Act or other regulations related to the act. VII. This statement has been passed by the board of directors of the bank. 0 out of the 9 attending directors objected to the statement and the others unanimously agreed to the content herein.

Sincerely yours.

Chairman

President

Chief Auditor

Compliance Officer

62 Corporate Governance 03

2. Auditing report of certified public accountant

Auditing 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 andits and certifies the annual financial statement of bank, the bank shoule 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 auditing 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-Tza Li Gung

Deloitte & Touche Taiwan

March 16, 2017

63 Auditing Report of Certified Public Accountant

Attached is a statement regarding effectiveness of the design and execution of its internal control system (including reports filed with the Taiwan Insurance Institute pursuant to the Regulations Governing the Implementation of Internal Control and Audit System and Business Solicitation System of Insurance Agent Companies and Insurance Broker Companies) as of December 31, 2016 provided by the Insurance Broker Division (the "Division") of Taishin International Bank Co., Ltd. (the "Insurance Broker Division of Taishin Bank") on March 16, 2017. We have audited part of this company's compliance system (regarding whether to appoint compliance officers and the adequacy of such appointments). It is the management's responsibility to establish and maintain an effective internal control system and evaluate its effectiveness. Our responsibility is to provide an auditor's opinion on effectiveness of a company's internal control system and the aforesaid statement on internal control according to the results of our audit.

We conducted our audit in accordance with the Regulations Governing the Implementation of Internal Control and Audit System and Business Solicitation System of Insurance Agent Companies and Insurance Broker Companies. The procedure involved understanding the company's internal control system, evaluating the management's process of evaluating overall effectiveness of the internal control system, testing and assessing effectiveness of the design and execution of the internal control system, and performing other audit procedures that we deemed necessary. We believe that the audit procedures provide a reasonable basis for our opinion.

An internal control system is always subject to inherent limitations. Therefore, the possibility remains that the aforesaid internal control system implemented by the Insurance Broker Division of Taishin Bank are unable to prevent or detect an error or fraud that has already occurred. Furthermore, circumstances may change in the future and render compliance with the internal control system less effective. Therefore, it does not necessarily follow that an internal control system that is effective in the current period will be effective in the future.

In our opinion, according to the criteria for effective design and execution of an internal control system under the Regulations Governing the Implementation of Internal Control and Audit System and Business Solicitation System of Insurance Agent Companies and Insurance Broker Companies, the design and execution of the internal control system regarding the Insurance Broker Division of Taishin Bank and its financial reporting (including reports filed with the Taiwan Insurance Institute pursuant to the Regulations) and asset protection (to prevent assets from being acquired, used and disposed without authorization) can remain effective in all material respects as of December 31, 2016. The statement that the design and execution of the aforesaid financial reporting and asset protection related internal controls (including reports filed with the Taiwan Insurance Institute pursuant to the Regulations and compliance measures) have been evaluated and deemed effective as of December 31, 2016 provided by the Insurance Broker Division of Taishin Bank on March 16, 2017 is a fair representation in all material respects.

Certified Public Accountant-Tza Li Gung

Deloitte & Touche Taiwan

March 16, 2017

64 Corporate Governance 03

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

Disclosure items Cases and values Status of improvement 1. Indictment of executives or staffers by None None prosecutors for job-related crimes. 2. Fines inflicted by Financial The case involved misconduct in derivatives The bank has submitted the improvement, Supervisory Commission (FSC) for products, for which the bank was fined deadline and complaint resolution plans violation of laws/ regulations NT$8 million dollars by FSC under Letter regarding misconduct in derivatives No. Financial-Supervisory-Banking- products to the 73rd meeting of the 10th Control-10560005751 on 2016.12.2. board of directors on December 15, 2016, and filed the same with the FSC on December 26, 2016 in the Letter to FSC numbered Taishin-Product-Strategy No. 10500010009. 3. Penalties inflicted by FSC for violating (1) This case involved mis-selling of non- The processes and systems have been item 1, article 61, Banking Law performing cash card loans, for which modified. the bank was corrected by FSC under Letter No. Financial-Supervisory- Banking-Control-10500161550 dated 2016.12.5. (2) This case involved loan related All processes have been reviewed and misconduct, for which the bank was effective improvements been formulated in corrected by FSC under Letter No. detail, which have also been listed as key Financial-Supervisory-Banking- points of internal audit in order to ensure Control-10560005740 dated 2016.12.12 rigorous audits. (3) This case involved small loan related (1) The appropriate inspection mechanisms misconduct, for which the bank was have been implemented to ensure the corrected by FSC under Letter No. loan pricing principles are followed. Financial-Supervisory-Banking- (2) The appropriateness of the small loan Control-10500229260 dated 2017.1.23. procedures and their management has been reviewed. The definition of violation has been approved by the board of directors. (3) Asset quality in violation cases has been made to be listed in quarterly reports for auditing purpose. Regarding cases where late payments occur soon after loans are issued, the risk management unit will investigate each case to enhance both depth and width of the audit process. (4) All risk management mechanisms for products have been reviewed and reported to the board of directors. (4) This case involved errors in the KYC (1) The process of completing the KYC procedure after fund subscriptions, for Personal Information Form has been which the bank was corrected by FSC modified. In addition, process controls under Letter No. Financial-Supervisory- have been implemented and are Banking-Control-10500312860 dated expected to be completed in 2017 Q1. 2017.1.23. (2) All employees have been made aware of the case. (5) This case involved misconduct in loans The employees have been informed to to Ting Sing Trading or its affiliates, for continue to make KYC in the credit check which the bank was corrected by FSC procedures more effective. under Letter No. Financial-Supervisory- Banking-Control-1050029666E dated 2017.2.9.

65 Disclosure items Cases and values Status of improvement 4. For individual or combined loss exceeding NT$50 million in value which results of personnel corruption, major incidents (fraud, burglary, embezzlement and stealth of assets, fraudulent transaction, forged certificates and securities, collection of feedback, damage of natural disaster, None None damage of external force, hacker attack and stealth of information, and leakage of confidential business and customer information) or security incidents resulting from failing to abide by guidelines for security maintenance of financial institutions 5. Other items designated by FSC for None None mandatory disclosure

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

2016.02.25 It was resolved that the board of directors should, on behalf of the shareholders' meeting, make partial amendment on the Bank's "Articles of Incorporation".

2016.03.17 Passed the Bank's 2015 financial statements.

2016.03.31 It was resolved that the board of directors should, on behalf of the shareholders' meeting, approve distribution of employees' remuneration for 2015.

2016.04.21 It was resolved that the board of directors should, on behalf of the shareholders' meeting, make partial amendment on the Bank's "Articles of Incorporation" and approve a cash issue of 363,636,364 ordinary shares by private placement.

2016.05.26 It was resolved that the board of directors should, on behalf of the shareholders' meeting, approve the 2015 financial statements, business report, and earnings appropriation.

2016.06.30 Hiring of Mr. Tuan-Wen Wu as the head of Financial Markets Division.

2016.07.21 Hiring of Mr. Li-Wen Chen as the head of Risk Management Division.

2016.08.04 Passed the application to the Central Bank for permission to offer foreign securities investment through foreign currency discretionary investment trusts.

2016.08.11 Passed the addition of the Jingmei Branch to the Bank's domestic network.

2016.11.03 It was resolved that the board of directors should, on behalf of the shareholders' meeting, make partial amendment on the Bank's "Articles of Incorporation" and approve a cash issue of 909,090,910 ordinary shares by private placement.

2016.12.15 Passed the application for new electronic payment services, including reload processing, fund transfers between electronic payment accounts, and O2O third party payment services.

2016.12.22 Passed the Bank's 2017 operating plans and budgets.

2016.12.22 Passed the addition of the Digital Finance Division under the Retail Banking Group and the appointment of Xiao-Ping Shi as the head of the Digital Finance Division.

2016.12.29 Passed the addition of the Xiongke Branch to the Bank's domestic network.

66 Corporate Governance 03

2017.01.19 Hiring of Ms. Chao-Yin Lai as a senior vice president.

2017.01.26 Passed the application to the competent authority for partnership with "China's Tenpay Payment Technology Co., Ltd." and "South Korea's KEB Hana Card Co., Ltd." or for facilitating these companies to operate as inbound electronic payment service providers in Taiwan.

2017.01.26 Passed the addition of the Commercial Finance Division under the Wholesale Banking Group and the appointment of Jian-Ye Li as the head of the Commercial Finance Division.

2017.02.16 Passed the Bank's 2016 financial statements.

2017.03.23 It was resolved that the board of directors should, on behalf of the shareholders' meeting, approve distribution of employees' remuneration for 2016.

2017.02.23 Hiring of Mr. Yu-Yi Ceng as the head of IT Services Division.

m. Different opinions of directors or supervisors on record or in written statement on major resolutions passed by the board of directors in the recent year and as of the date of the publication of the annual report: None.

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

D. Information on CPA fee

Name of accounting firm Name of CPA Audit period Note

Deloitte &Touche Tza Li Gung Qinzhen Yang 2016.01.01-2016.12.31 None

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

1 Uunder NT$2M

2 NT$2M(inclusive)~NT$4M

3 NT$4M(inclusive)~NT$6M

4 NT$6M(inclusive)~NT$8M

5 NT$8M(inclusive)~NT$10M 

6 Over NT$10M(inclusive)  

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

Non-auditing fee Whether the Name of auditing covers Name Auditing accounting the entire fiscal Note of CPA fee System Business Human Others firm Sub-total year or not design registration resources (note 2) (note 1) NT$5.3 million IT security review program NT$1.74 million filing of electronic payment service providers NT$1.49 million legal services on electronic Tza Li payment specific laws Gung NT$1.2 million Deloitte 2016.01.01~ 9,130,000 610,000 11,042,606 11,652,606 internal audits & Touche 2016.12.31 Qinzhen NT$0.58 million tax- Yang related service fee NT$0.15 million audit fees on large nonperforming loans NT$0.1 million reading of annual report NT$0.49 million audit of travel expenses

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: N/A.

c. Auditing fee decrease over 15% from the previous year which requires mandatory disclosure of the reduction amount, percentage, and reason: N/A.

68 Corporate Governance 03

E. Replacement of CPA

a. Concerning former CPA

Replacement date April 1, 2016 In line with the job rotation of Deloitte &Touche Accounting Firm, the CPAs for the bank's financial Reason for replacement statement were changed from Peter Tsai and Qingzhen Yang to Tza Li Gung and Qinzhen Yang and explanation Since first quarter in 2016.

Status of related parties CPA Consigner Explain consigner or termination or refusal of Active terminate consignment N/A N/A consignment by CPA Refusal to accept (continue) consignment N/A N/A Certification auditing report other than report without reserved opinions N/A in the recent two years and reason

N/A Accounting principle or practical affairs

N/A Disclosure of financial report

N/A Auditing scope or procedure Yes Existence of different N/A Others opinions with the bank N/A

Other disclosed items (Items which should be disclosed according to item 5-1-4, article 10 of the criteria

b. Concerning succeeding CPA: N/A.

c. Reply of former CPA to item 5-1 and item 5-2-3, article 10 of the criteria

F. Chairman, presidents, and financial or accountant managers who served at the accounting firm of the CPAs or its affiliates within the recent year: None.

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

a. Changes in shareholdings

2016 As of Feb 28 , 2017 Changes Changes Title Name Changes in Changes in in pledged in pledged shareholding shareholding shareholding shareholding

Director/ Supervisor Taishin Financial 1,272,727,274 0 0 0 (Major shareholder) Holding Co., Ltd.

b. Information of shareholding transfer : None.

c. Information of shareholding pledge: None.

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

Feb. 28, 2017 Names and relationship of the 10 largest shareholders Shareholding of who are related parties Total spouse according to Financial shareholding Own shareholding and offspring Accounting Criteria in the names before the age No.6 or who are spouses of others Name of majority or relatives with Note second-degree or closer kinship Number Number Number Share of Share Share of of Name Relationship of shares stake of stake of stake shares shares Taishin Financial Holding Co., Ltd. 6,884,598,317 100 0 0 0 0 None None Representative: Thomas T.L. Wu

70 Corporate Governance 03

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.

Dec.31, 2016; unit: share / % Investment by the company directly or indirectly controlled by the bank and the bank's Investment by the bank directors, supervisors, General investment Equity investment presidents, vice presidents,assistant vice presidents, and branch chiefs Amount of Share of Amount of Share of Amount of Share of shares stake shares stake shares stake

Taishin D.A. Finance Co., Ltd. 80,000,000 100.00% 0 0.00% 80,000,000 100.00%

Xiang-An Life Insurance Agency Co., Ltd. 2,622,040 87.40% 0 0.00% 2,622,040 87.40%

Chang Hwa Commercial Bank 23,821,427 0.27% 2,021,278,528 22.55% 2,045,099,955 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 4,500,000 30.00% 0 0.00% 4,500,000 30.00%

Sunlight Asset Management 1,092,317 18.21% 0 0.00% 1,092,317 18.21%

Dah Chung Bills Finance 82,428,695 18.29% 0 0.00% 82,428,695 18.29%

Taiwan Future Exchange Company 2,945,249 0.96% 0 0.00% 2,945,249 0.96%

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

Financial Information Service 11,875,500 2.28% 0 0.00% 11,875,500 2.28%

Taiwan Asset Management 7,500,000 0.57% 0 0.00% 7,500,000 0.57%

Taiwan Financial Asset Service Co., Ltd. 5,000,000 2.94% 0 0.00% 5,000,000 2.94%

Taiwan Mobile Payment Co., Ltd. 1,800,000 3.00% 0 0.00% 1,800,000 3.00%

Li Yu Venture Capital 189,627 1.49% 0 0.00% 189,627 1.49%

Harbinger Venture Capital 1,139,000 3.35% 0 0.00% 1,139,000 3.35%

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

Kun Chi Venture Capital 160,650 3.33% 0 0.00% 160,650 3.33%

Easy Card Investment Holding 2,499,874 2.40% 0 0.00% 2,499,874 2.40%

Kaohsiung Rapid Transit Co., Ltd. 643,031 0.23% 0 0.00% 643,031 0.23%

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

Alliance Digital Tech Co., Ltd. 900,000 2.16% 0 0.00% 900,000 2.16%

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

71 IV. Fund-Raising Activities

A. Capital and Shares

a. Sources of capital

Feb. 28, 2017; 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 Common shares Common shares MOEA No. 10501135700 2016.07 22 6,000,000,000 60,000,000,000 capital 5,975,507,407 59,755,074,070 Jul.28, 2016 (Note 1) increment

Cash Common shares Common shares MOEA No. 10601002780 2017.01 22 7,000,000,000 70,000,000,000 capital 6,884,598,317 68,845,983,170 Jan .16, 2017 (Note 2) increment

Note 1: The bank's registered capital has been increased to NT$60,000,000,000; The bank issued 363,636,364 common shares by private placement, with a face value of NT$10, at NT$22 per share. NT$8,000,000,000 was raised by private placement. Note 2: The bank's registered capital has been increased to NT$70,000,000,000; The bank issued 909,090,910 common shares by private placement, with a face value of NT$10, at NT$22 per share. NT$20,000,000,020 was raised by private placement.

Feb. 28, 2017; Unit: share

Registered capital Type of share Note Outstanding shares Unissued shares Total

Common shares 6,884,598,317 115,401,683 7,000,000,000 Unlisted shares

b. Shareholders' structure Feb. 28, 2017; Unit: share Makeup of Foreign shareholders Government Financial Other Individuals institutions and Total agencies institutions institutions foreigners Amount

Number 0 1 0 0 0 1

Amount of shares 0 6,884,598,317 0 0 0 6,884,598,317

Share of stake(%) 0 100 0 0 0 100

72 Fund-Raising Activities 04

c. Distribution of shareholding

1. Ordinary shares at a face value of NT$10 Feb. 28, 2017; Unit: share / % Grades of shareholding Number of shareholders Amount of shares owned Share of stake (%)

1 to 999 0 0 0

1,000 to 5,000 0 0 0

5,001 to 10,000 0 0 0

10,001 to 15,000 0 0 0

15,001 to 20,000 0 0 0

20,001 to 30,000 0 0 0

30,001 to 50,000 0 0 0

50,001 to 100,000 0 0 0

100,001 to 200,000 0 0 0

200,001 to 400,000 0 0 0

400,001 to 600,000 0 0 0

600,001 to 800,000 0 0 0

800,001 to 1,000,000 0 0 0

Over 1,000,001 1 6,884,598,317 100

Total 1 6,884,598,317 100

2. Preferred shares: None d. List of major shareholders

Feb. 28, 2016; Unit: share Shares Amount of shares owned Share of stake (%) Names of major shareholders

Taishin Financial Holding Co., Ltd. 6,884,598,317 100

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

73 e. Information on market price, net worth per share, earnings, and dividends in the most recent fiscal two years

Year 28 Feb., 2017 2014 2015 Item (Note 5) Market Highest N/A N/A N/A price lowest N/A N/A N/A per share (note 1) Average N/A N/A N/A Book value Weighted average shares (1,000 shares) 15.99 17.44 17.73 per share (note 2) Earning per share (NT$) 14.80 (Note 4) N/A

Earnings Weighted average shares (1,000 shares) 5,480,233 5,814,554 6,884,598 per share Earning per share (NT$) 1.64 2.06 0.26 Cash dividend (NT$) 1.19 (Note 4) N/A Allotment by retained earnings (NT$) - (Note 4) N/A Dividend per share Allotment by legal reserves (NT$) 0 (Note 4) N/A Accumulated undistributed dividend - - - (NT$1,000) (Note 3) Analysis of Price to earnings ratio N/A N/A N/A investment Price to dividends ratio N/A N/A N/A returns (note1) Cash dividend yield N/A N/A N/A Note 1: Due to unlisted bank, there is no market price. Note 2: On the basis of net worth per share of common shares. Note 3: Accumulated undistributed dividends for preferred shares. Note 4: The board of directors has not adopted, on behalf of shareholder's meeting, the proposal for distribution of 2016 profits. Note 5: Financial figures as of Feb. 28, 2017 are not certified by CPA.

f. Dividend policy and the status of implement

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 tocover loss of previous year first. If there is still surplus, the company shall either provide a legal reserve and a special earnings reserve from the surplus, or reverse existing special earnings reserves into the opening balance of undistributed earnings. For the balance, pay out stock dividend and bonus to preferred shares. 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.

As a subsidiary of Taishin Financial Holdings, 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 pay-out for common shareholders should be made in the form of cash dividend in principle. The company should keep the policy of stock dividend and cash payout in stable.

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

74 Fund-Raising Activities 04

2. Status of implement

The dividend of 2016 proposed to distribute is NT$6,249,409,326. In which cash dividend on common stock is NT$6,249,409,326 g. The effects of stock dividends proposed by shareholders' meeting, on the operational performance and earning per share: None. h. Compensations for employees, directors and supervisors

1. Percentages and scope of compensations for employees, directors and supervisors:

0.01% of any profit made by the bank in a year shall be allocated as employee bonus, and the board of directors shall decide to distribute the bonus as shares or cash, which can also be distributed to employees of affiliated companies that meet the criteria specified in the Company Act.

However, a sum shall be set aside in advance to pay down any outstanding cumulative losses before employee bonus can be allocated according to the above percentage.

Employee bonus proposals shall be presented to the shareholders meeting.

2. Basis for estimating the amount of remuneration of employees, directors and supervisors, basis for calculating the number of shares to be distributed as employee bonus and the actual distributed amount for the current period.

The accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated amount.

Employee bonuses for the current period have been estimated based on the criteria laid out in the bank's Articles of Incorporation. Should the actual amount differ from the amount estimated, the difference will be treated as changes in accounting estimates. The estimated amount of employee bonus for the current period does not deviate from the actual amount decided by the board of directors.

3. Remuneration distribution passed by the board of directors

(1) Employee, director and supervisor remuneration will be distributed in cash or stocks. In case of any discrepancy between the amounts and the amortized estimates for the year, the differences, reasons, and responses should be disclosed. Employee bonus is NT$1,104,000. The estimated amount of employee bonus for the current period does not deviate from the actual amount decided by the board of directors. (2) The amount of employee bonus to be paid in stocks out of the current company-level financial statement in terms of the sum of net profit after tax and employee bonus: Not applicable as the board of directors has decided to distribute employee bonus in cash this time. 4. Remuneration report and results at the shareholders meeting: On February 23, 2017, the Bank had, in accordance with Article 128-1 of the Company Act, requested that the 82nd meeting of the 10th board of directors be authorized to act on behalf of shareholders. The request was passed by a unanimous vote..

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

The employee bonus of the previous year was NTD1,163,000. There is no difference between the actual amount of employee bonus and the recognized amount.

i. Repurchase of the bank's shares: None.

B. Issuance of bank debenture

Issuance of bank debenture - 1 Dec. 31, 2016 Types of bank debentures 2nd of subordinated bank debenture in 2005 1st of subordinated bank debenture in 2010 Date and Number of the approval FSC No. 0930031635, Nov. 9, 2004 FSC No. 09900101150, Mar. 23, 2010 document of the central regulator Issuing date April 28, 2005 April 12, 2010

Face value NT$10 M NT$ 50 M

Issuing and trading place ROC ROC

Denomination currency New Taiwan dollar New Taiwan dollar

Issuing price At par value At par value NT$10 bn Total amount NT$3.3 bn (Bond A: NT$4.5 bn; Bond B: NT$5.5 bn) Year 1-7: fixed rate at 2.70%. Bond A: Fixed interest rate at 2.65% per Year 8-12: annum Should bond holders waive right to execute Bond B: Interest rate is set at the floating put option in the year; the bank will give them interest rate for one-year time savings an interest markup of 0.8% on its posted fixed deposit of Chunghwa Post Co., Ltd. plus rate of one-year time savings deposit. Should 1.5%. The paper rate will adjusted annu- Coupon the bank waive its right to execute redemption ally according to the following standard. option in the year, the bank will pay an interest The floating rate for time savings deposit of markup of 0.95% on its posted fixed rate of Chun-ghwa Post Co., Ltd. is based on the one year time savings deposit, which should rate posted at the website of the Central be reset per annum. Bank of China at 10:30 a.m., two days before the date for starting the calculation of interest. 12 years from the issue date. Maturity 7 years from the issue date. Maturity Maturity on April 28, 2017 on April 12, 2017 Status Subordinated Subordinated

Guarantee institution None None

Trustee None None

Underwriter None None

Certifying lawyer None None

Certifying CPA Peter Tsai Yang, Qinzhen

Certifying financial institution Taishin Bills Finance N/A By self-owned capital or refinancing bank By self-owned capital or refinancing bank Repayment method debentures debentures

76 Fund-Raising Activities 04

Types of bank debentures 2nd of subordinated bank debenture in 2005 1st of subordinated bank debenture in 2010 Unpaid balance NT$3.3 bn NT$10 bn

Paid-in capital in the previous year NT$31,753,524 (thousand) NT$49,157,525 (thousand) Post-final accounts book value in NT$59,657,278 (thousand) NT$53,433,376 (thousand) the previous year Status of contract performance Normal Normal 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. Conditions for the exercise of put and call option: The interest rate is based on the fixed rate for one-year time savings deposit posted by the bank on the website of the Central Bank of China on 10:30 a.m. of March 10 of 2012, 2013, 2014, 2015, and 2016 (if it's a non-business day, it will be postponed to the next business day). Should the interest rate stand at 1.85% or less, the bond holder may exercise put option and should the interest rate higher than 1.85%, the bank may exercise The terms and conditions for call option. None redemption or early liquidation Put option by bond holders: Should bond holders intend to exercise put option, they 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. 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. Even if only some bond holders exercise the above put option, the bond will be defined as matured entirely and delisted in OTC Conditions for conversion or N/A N/A exchange Restrictive terms None None To support the business of medium- and long- Improve financial structure and enhance Use of proceeds term loan growth. capital adequacy rate. The total amount of the issuance and outstanding bonds in the 57.84 46.79 percentage of the book value of previous year (%) Eligible capital and type Yes, Tier II Yes, Tier II Name of rating agency, issue date, None Taiwan Ratings, April 6, 2010, twA. and the rating

77 Issuance of bank debenture - 2 Dec. 31, 2016 Types of bank debentures 1st subordinated bank debenture in 2005 2nd subordinated bank debenture in 2005 Date and serial No. approved by FSC No. 10100301840, September 24, FSC No. 10100301840, September 24, 2012 authority 2012 Issuing date October 19, 2012 December 14, 2012 Face value NT$ 50 M NT$ 50 M Issuing and trading ROC ROC Currency New Taiwan dollar New Taiwan dollar Issuing price At par value At par value NT$5.6 bn NT$6.1 bn Total amount (Bond A:NT$1.1 bn; Bond B: NT$4.5 bn) (Bond A:NT$3.8 bn; Bond B: NT$2.3 bn) Bond A: Fixed interest rate at 1.53% per Bond A: Fixed interest rate at 1.53% per annum annum Coupon Bond B: Fixed interest rate at 1.65% per Bond B: Fixed interest rate at 1.65% per annum annum Bond A: 7 years from the issue date. Maturity Bond A: 7 years from the issue date. on October 19, 2019 Maturity on December 14, 2019 Maturity Bond B: 10 years from the issue date. Maturity Bond B: 10 years from the issue date. on October 19, 2022 Maturity on December 14, 2022 Rank Subordinated Subordinated Guarantor None None Trustee None None Underwriter None None Certified lawyer None None Certified CPA Yang, Qinzhen Yang, Qinzhen Certified financial institution N/A N/A By self-owned capital or refinancing bank By self-owned capital or refinancing bank Repayment debentures debentures Outstanding balance NT$ 5.6 bn NT$ 6.1 bn Paid-in capital in the previous year NT$49,157,526 (thousand) NT$49,157,526 (thousand) Net book value on the date of balance sheet in NT$57,550,558 (thousand) NT$57,550,558 (thousand) the previous fiscal year Default status Normal Normal The terms and conditions for None redemption or early liquidation None Conditions for conversion or N/A N/A exchange Restrictive terms None None Strengthen capital structure, improve capital Strengthen capital structure, improve capital Use of proceeds adequacy ratio and redeem financial bonds adequacy ratio and redeem financial bonds issued earlier. issued earlier. The total amount of the issuance and outstanding bonds in the 53.17 63.77 percentage of the book value of previous year (%) Eligible capital and type Yes, Tier II Yes, Tier II Name of rating agency, issue date, "A+(twn)" issued by Fitch Ratings, Taiwan "A+(twn)" issued by Fitch Ratings, Taiwan and the rating Branch on October 9, 2012. Branch on December 7, 2012.

78 Fund-Raising Activities 04

Issuance of bank debenture - 3 Dec. 31, 2016 1st Perpetual Non-Cumulative 2nd Perpetual Non-Cumulative Unsecured Subordinated Unsecured Subordinated 3rd subordinated financial Types of bank debentures Debentures of Taishin Debentures of Taishin bonds in 2014 International Bank in 2014 International Bank in 2014 Date and serial No. FSC No. 10300054050, FSC No. 10300054050, FSC No. 10300054050, approved by authority March 10, 2014 March 10, 2014 March 10, 2014 Issuing date April 16, 2014 May 9, 2014 May 16, 2014

Face value NT$ 50 M NT$ 50 M NT$ 50 M

Issuing and trading ROC ROC ROC

Currency New Taiwan dollar New Taiwan dollar New Taiwan dollar

Issuing price AT par value At par value At par value

Total amount NT$3 bn NT$2 bn NT$3 bn

Coupon Fixed rate at 4.1% per annum Fixed rate at 4.1% per annum Fixed rate at 1.95% per annum 10 years from the issue date. Maturity Prepetural (issuer with call right) Prepetural (issuer with call right) Maturity on May 16, 2024 Subordinated to holders of Tier- Subordinated to holders of Tier- Rank 2 capital, deposit holders and 2 capital, deposit holders and Subordinated other general creditors other general creditors Guarantor None None None

Trustee None None None

Underwriter None None None

Certified lawyer None None None

Certified CPA Peter Tsai Peter Tsai Peter Tsai

Certified financial institution N/A N/A N/A By self-owned capital or By self-owned capital or By self-owned capital or Repayment refinancing bank debentures refinancing bank debentures refinancing bank debentures Outstanding balance NT$3 bn NT$2 bn NT$3 bn Paid-in capital in the NT$49,157,526 (thousand) NT$49,157,526 (thousand) NT$49,157,526 (thousand) previous year Net book value on the date of balance sheet in the NT$61,067,093 (thousand) NT$61,067,093 (thousand) NT$61,067,093 (thousand) previous fiscal year Default status Normal Normal Normal Taishin Bank may redeem Taishin Bank may redeem the debts in whole at their the debts in whole at their aggregate principal amount, aggregate principal amount, The terms and conditions together with any interest pay- together with any interest pay- for redemption or early ment five years after the issuing ment five years after the issuing None liquidation date subject to regulators' date subject to regulators' approval, provided that the approval, provided that the bank's post-redemption BIS is bank's post-redemption BIS is above legal requirement. above legal requirement. Conditions for conversion or N/A N/A N/A exchange

79 1st Perpetual Non-Cumulative 2nd Perpetual Non-Cumulative Unsecured Subordinated Unsecured Subordinated 3rd subordinated financial Types of bank debentures Debentures of Taishin Debentures of Taishin bonds in 2014 International Bank in 2014 International Bank in 2014 1. The bank may not pay 1. The bank may not pay interest if there is no earnings interest if there is no earnings and dividends in previous and dividends in previous year (including cash and year (including cash and stock dividends); however stock dividends); however this restriction does not apply this restriction does not apply in circumstances where in circumstances where the balance of cumulative the balance of cumulative undistributed earnings less undistributed earnings less amortized losses on sale amortized losses on sale of non-performing loans is of non-performing loans is greater than the amount greater than the amount of payable interest, and of payable interest, and provided that the payment provided that the payment results in no changes to results in no changes to the terms of interest. Non- the terms of interest. Non- Restrictive terms None payment of interest due to payment of interest due to the above will not be accu- the above will not be accumulated or deferred in later mulated or deferred in later periods. periods. 2. The bank shall defer interest 2. The bank shall defer interest and principal payments in and principal payments in situations where its capital situations where its capital adequacy ratio fails to meet adequacy ratio fails to meet the minimum level specified the minimum level specified in Article 5, Paragraph 1 of in Article 5, Paragraph 1 of the Regulations Governing the Regulations Governing the Capital Adequacy and the Capital Adequacy and Capital Category of Banks; Capital Category of Banks; in which case, deferred in which case, deferred interest may not accrue any interest may not accrue any late interest. late interest. Strengthen capital structure, Strengthen capital structure, Strengthen capital structure, Use of proceeds enhance the Capital Adequacy nhance the Capital Adequacy enhance the Capital Adequacy Ratio. Ratio. Ratio. The total amount of the issuance and outstanding bonds in the percentage of 45.85 45.85 45.85 the book value of previous year (%) Eligible capital and type Yes, Tier I Yes, Tier I Yes, Tier II

Name of rating agency, "twBBB-" issued by Taiwan "twBBB-" issued by Taiwan "twA-" issued by Taiwan issue date, and the rating Ratings on Sep 30, 2014. Ratings on Sep 30, 2014. Ratings on May 5, 2014.

80 Fund-Raising Activities 04

Issuance of bank debenture - 4 Dec. 31, 2016 Types of bank 1st subordinated financial 2nd subordinated financial 3rd subordinated financial debentures bonds in 2015 bonds in 2015 bonds in 2015 Date and serial No. FSC No. 10400093940, FSC No. 10400093940, FSC No. 10400093940, approved by authority May 07, 2015 May 07, 2015 May 07, 2015 Issuing date Jun. 10, 2015 Sep. 18, 2015 Sep. 22, 2015

Face value NT$ 50 M NT$ 50 M NT$ 50 M

Issuing and trading ROC ROC ROC

Currency New Taiwan dollar New Taiwan dollar New Taiwan dollar

Issuing price AT par value At par value At par value NT$9.1 bn NT$4.9 bn Total amount (Bond A: NT$4.25 bn; Bond B: NT$6 bn (Bond A: NT$0.7 bn; Bond B: NT$4.85 bn) NT$4.2) Bond A: Fixed interest rate at Bond A: Fixed interest rate at 2.15% per annum 2.15% per annum Coupon Fixed rate at 2.25% per annum Bond B: Fixed interest rate at Bond B: Fixed interest rate at 2.45% per annum 2.45% per annum Bond A: 10 years from the issue Bond A: 10 years from the issue date. Maturity on Jun. 10, 2025 12 years from the issue date. date. Maturity on Sep. 22, 2025 Maturity Bond B: 15 years from the issue Maturity on Sep. 18, 2027 Bond B: 15 years from the issue date. Maturity on Jun. 10, 2030 date. Maturity on Sep. 22, 2030 Rank Subordinated Subordinated Subordinated

Guarantor None None None

Trustee None None None

Underwriter None None None

Certified lawyer None None None

Certified CPA Peter Tsai Peter Tsai Peter Tsai Certified financial N/A N/A N/A institution By self-owned capital or By self-owned capital or By self-owned capital or Repayment refinancing bank debentures refinancing bank debentures refinancing bank debentures Outstanding balance NT$ 9.1 bn NT$ 6 bn NT$ 4.9 bn Paid-in capital in the NT$52,025,626 (thousand) NT$52,025,626 (thousand) NT$52,025,626 (thousand) previous year Net book value on the date of balance sheet in NT$82,083,307 (thousand) NT$82,083,307 (thousand) NT$82,083,307 (thousand) the previous fiscal year Default status Normal Normal Normal The terms and conditions for redemption or early None None None liquidation Conditions for conversion N/A N/A N/A or exchange Restrictive terms None None None

81 Types of bank 1st subordinated financial 2nd subordinated financial 3rd subordinated financial debentures bonds in 2015 bonds in 2015 bonds in 2015 Strengthen capital structure, Strengthen capital structure, Strengthen capital structure, Use of proceeds enhance the Capital Adequacy nhance the Capital Adequacy enhance the Capital Adequacy Ratio. Ratio. Ratio. The total amount of the issuance and outstanding bonds in the percentage 51.29 58.60 64.57 of the book value of previous year (%) Eligible capital and type Yes, Tier II Yes, Tier II Yes, Tier II "AA-(twn)" issued by Fitch "AA-(twn)" issued by Fitch "AA-(twn)" issued by Fitch Name of rating agency, Ratings, Taiwan Branch on Ratings, Taiwan Branch on Ratings, Taiwan Branch on issue date, and the rating Nov. 17, 2014. Nov. 17, 2014. Nov. 17, 2014.

C. Issuance of preferred shares: None.

D. Issuance of global depository receipt: None.

E. Issuance of employees' stock option and restricted right shares

1. issuance of employees' stock option for employees: None. 2. issuance of employees' restricted right shares for employees: None.

F. Merger or transfer 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: N/A 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: N/A 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: None. 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 onthe financial institutions in the recent year and as of the date of the publication of the annual report: None. 5. 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: None.

82 Fund-Raising Activities 04

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 bond debentures either by 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: None. 2. Plan completed in recent three years which has yet to manifest its benefits: None. 3. Changes in the contents of plan: None. 4. Source and utilization of fund: None. 5. Reasons for the changes: None. 6. Benefits before and after the changes and date for the submission of the change to shareholders' meeting: None. 7. Posting of the information on the change on the designated website: None.

b. Status of execution

Fund utilization plan for the issuance of securities or financial bonds via public or private placement and issuance of financial bonds which had yet to be completed at the end of the quarter preceding the date of the publication of the annual report (end of March 2009) or fund utilization plan in the recent three years whose execution has been completed but has yet to manifest its benefits or which fails to achieve the goal in execution schedule or benefits: None. 1. Effect on shareholders' interest and improvement plan: None. 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: None. 3. Explanation of the effect of plan involving equity investment in other companies on the company's business performance or investment gain/loss: None. 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: None.

83 V. Operating Status

A. Business Contents

a. Growth and change in various business items

1. Wealth Management

The bank's wealth management operation offers a variety of services for different customer segments such as individuals, households, and business owners. Tailored financial planning and consulting services are available as a combination of TWD and foreign currency deposits, investment products, short- and medium term insurance policies, and consumer loans and one-stop tax and asset allocation advisory services, all of which are aimed at building stronger customer relationships. The approach of market segmentation and diversification has enabled the wealth management operation to be recognized with many awards in Taiwan and overseas every year. For example, Taishin has been named one of The Banker's Top 50 Private Banking Brands (and the only financial institution from Taiwan) and recognized for Outstanding Wealth Management Service for the Affluent Segment by Private Banker International (PBI). The number of customers has been growing steadily from year to year. The number of individual customers grew by 6% in 2015, and the number of business owners by 8%.

2. Retail Banking

The bank's retail banking operations cover consumer loans (mortgage, auto loan, unsecured loan, and subordinated mortgage), micro corporate loans, and credit card for individual customers and e-money services for small and medium enterprises. The development of financial products follows market differentiation and the needs of various customer groups.The outstanding balance of retail loans increased by 8.1% in 2016, and the number of credit cards in circulation increased by 6%.

3. Wholesale Banking

Wholesale banking operation provides an array of financial products and services to various institutional clients, including corporations, government-owned companies and financial institutions. The business scope includes the businesses of commercial and investment bank, such as deposits, short-and long-term financing, guarantee, trade finance, syndicated loans, bond transaction, short-term paper, factoring, cash management, e-banking for corporate financial network, foreign exchange and interest-rate derivatives, underwriting, stock affairs financial advisory, merger and acquisition (M&A) consulting service, asset securitization, and discretionary assets management, etc.

4. Digital Finance

In a constantly changing, perfectly competitive financial market, the bank was first in adopting the agile development process. The new Richart digital financial services were launched in 2016 to provide services that cater to the needs and preferences of younger customers. Richart is a range of digital financial services designed to combine deposit, expense, and investment under one account. A customer can sign up to the services simply by sliding a finger. The concept behind Richart is a simple, flexible and easy to use design that provides transparency and understands its customers. The new financial service model has turned the traditional banking model upside down. Richart, soon after it was launched, was named Most Innovative

84 Operating Status 05

Digital Solution-Consumer and Best Digital Marketing Campaign by 2016 Cards & Electronic Payments International (CEPI) Asia Awards. The Richart launch ad had nearly 1.3 million views. Richart's LINE account also collected close to 3.2 million friends in three short months since its launch. Interaction with fans on Facebook was also 108% higher than the market average. Richart's interaction with customers and active presence on the internet has proved itself very popular.

While Richart wins over younger customers, the internet banking services have had new functions and campaigns added to drive the number of transactions up. In 2016, the number of users exceeded 1.45 million at an annual growth of 20%. Meanwhile, the number of mobile banking customers is growing at close to 20% a year and the number of transactions at 51%. To track user experience on an ongoing basis, the bank conducts satisfaction surveys every year. In 2016, customer satisfaction with "function availability", "transaction security", and "lag free screens" reached 80%. While reporting significant in the virtual channels, the bank also listens to customers' voices coming through the real channels. The bank was first in introducing the interbank deposit service on ATMs. Customers who wish to make deposits into their accounts, regardless of their banks, can do so in five easy steps on any Taishin Bank ATM that accepts deposits. The deposits will be credited instantly to the accounts, and the customers will receive text messages to confirm their transactions. With this service, consumers can make deposits without having to visit a branch during the banking hours. The service proved to be hugely popular with the customers when it was launched. Use of the service showed an explosive increase of 110% in 2016. Taishin ATMs have created synergy across real and virtual channels, and enabled the bank to make effective use of more than 2,700 ATMs in convenience stores and shopping malls across Taiwan. As part of its ongoing commitment to satisfy the needs of online customers, the bank launched the innovative card-free withdrawal service in 2016. Card-free withdrawal was well received as soon as it was launched. It also became the template for other banks. Customers who have linked their mobile devices to their accounts will be able to withdraw cash without a card at any time. In order to provide full interbank withdrawals, the bank is in the process of assessing the feasibility of card-free interbank withdrawal. The bank is constantly tracking the customer experience in order to introduce new services and make plans for digital services that satisfy real customer needs.

5. Trust Financial service

With respect to structured trust services, money trusts remain the star product for high net worth clients, and securities trust will serve to satisfy clients in need of tax planning or income generated by lending shares. In addition, Taishin Bank also offers property trusts that help to provide care for seniors and the physically chal- lenged so that personal banking customers can have access to a complete line of trust planning services. To satisfy wholesale banking customers' diverse needs for trust services, the bank has also been active in promoting trust services as solutions to employee remuneration, such as trusts for shares, employee stocks, restricted shares, and employee welfare and savings to help companies retain their top talents.

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

Net income share 2015 2016 Retail banking 59% 64% wealth management 28% 33% consumer finance 23% 23% credit card 8% 8% Wholesale banking 41% 36% Total 100% 100%

85 b. Business plan for the current year

1. Wealth Management

(1) The Taishin Bank brand is built on "Dedication" and “Professionalism". The bank offers a diverse range of localized/personalized customer services. Taishin Bank is constantly in pursuit of innovation and stronger customer relationships, aided by its outstanding digital services that establish the bank as an Intelligent Partner of its customers. (2) As part of its commitment to sustainable development and customer-centric values, Taishin Bank offers appropriate asset allocation, regular investment checkups, and after-sales services in risk management and market analysis reports, all of which are designed to help customers achieve consistent returns and asset growth regardless of market outlook. (3) To meet the need for integrated services among customers, including personal accounts and household accounts, as well as client business and business owners who wish to combine services and benefits under personal/wholesale banking accounts, Taishin Bank has introduced the family-based wealth management service. The feature extends the scope of personal wealth management to include a household, and offers financial advice for members of the household at different stages and benefits for the entire household. It is an excellent choice for customers with inheritance concerns. (4) The wealth management operation is also investing in the development of automated channels and full integration of virtual channels (i.e. Internet banking, mobile banking, and ATMs) and branch services. The reach of virtual services is extended into the everyday life. For example, the Taishin mobile banking app offers a variety of everyday deals and services, transfer by cellphone number, and the Financial Advisor App, which helps financial advisors to work more efficiently. All of these elements are aimed to create a more user friendly and more relevant financial experience.

2. Retail Banking

(1) Applying database and data analysis to identify potential customer needs and to improve discrimination of the customer models for the purpose of increasing penetration of consumer banking products among Taishin FHC customers and utilizing the bank's resources to create synergy. (2) Continuing to optimize online access to loan applications and to launch new products under Richart: Richart loans. (3) Following deregulation to develop new products and services. (4) Increasing market penetration through product development and customer screening, stronger channel partnerships, and a greater emphasis on micro corporate loans. (5) Building a case submission system to optimize the processes of submission, review, and allocation for better performance. (6) Securing renewal of the existing cobrand license agreements while continuing to approach potential cobrand candidates; keeping building up the brand image of the Rose Card and Taishin credit cards by adding appeals (e.g. @GoGo card); and creating new premium credit cards (e.g. Wealth Visa Infinite card) to increase penetration of premium cards among wealth management customers. (7) Providing a diverse range of customized mobile payment services for merchants, and combining mobile marketing technologies (e.g. beacon) to help merchants with precision marketing in order to increase merchant stickiness. (8) Increasing the percentage of electronic payments and investing more in the development of contactless card terminals in response to progress in mobile payment tools. (9) Credit card apps and a mobile version of the website (mSite) are created to use mobile payment to combine credit card products/benefits. (10) Launching a separate credit card app (CARDaily) and a mobile website (mSite). number of individual visitors and high end groups from China.

86 Operating Status 05

3. Wholesale Banking

(1) Enrich product line through product innovation; anchor customer relationship by offering more variety of solutions. (2) Introduce integrated NTD and foreign currency cash management; promote cash services (collection and payment) as means of sourcing current deposits; anchor customer relationship and minimize credit risks. (3) Take advantage of local branches to develop close ties with local customers; trying to expand the SME customer base; and target high net worth customers in Taiwan, China and Hong Kong. (4) Target more on niche export businesses and high net worth enterprises with an emphasis on asset products and financial planning services in order to build an image of a regional bank. (5) Increase the number of branches in China and Asia. Following the opening of the Singapore Branch in 2014, the Yangon Branch in Myanmar opened in January 2016, while preparations are currently underway for the Tokyo Branch in Japan, the Brisbane Branch in Australia and the Long An Branch in ietnam. (6) Explore collaborative opportunities with Chinese banks on trade financing services. Actively establish a plat-form of cooperation with Chinese banks. (7) Increase the number of branches in China and Asia. Following the opening of the Singapore Branch in 2014, the Yangon Branch in Myanmar opened in January 2016 and the Tokyo Branch in Japan in October 2016, while preparations are currently underway for the Brisbane Branch in Australia and the Long An Branch in Vietnam. (8) Develop a comprehensive talent training system to support growing businesses; build the bank's overseas talent pool through regular job rotation.

4. Digital Finance

(1) Richart digital banking The Richart brand and financial services continue to receive positive feedback from younger customers. A 60% market share in digital banking makes Richart the leader in digital services in the financial sector. The product, designed to be simple and easy to understand, has established a new blue ocean strategy in the business. To ensure the uniqueness of the brand and services, the brand is trademarked. In particular, there are three innovative features that have been granted new utility model patents by the Intellectual Property Office. The three features are "pre-login preview", which enables customers to quickly view their accounts and credit cards; "card free withdrawal", which is a breakthrough in convenience that replaces debit cards with mobile phones, and "money saving credit card", which is designed for small account holders as cash back is credited directly to a digital account to enjoy higher interest rates. Easy Transfer is a first-of-its-kind feature that is popular with customers. It makes interbank transfers easier and smarter by accepting mobile phone numbers or emails to complete the transactions. When a Richart user scans the other party's QR code while on the transfer screen, the other party's account number will be displayed automatically. The user has only to enter the amount to complete the transfer. To stay always one step ahead of its competitors, the bank will continue to invest in new services and apply for patents. In addition, the bank will be introducing financial services designed for social media platforms, financial planning robots, and different types of financial products, and working with startups in other industries. Always have an understanding of customer needs, and breaks down barriers in existing financial services to provide most suitable digital services.

87 (2) New payment service models The bank plans to introduce Taishin e-Payments that will offer a payment experience combining social media and payments. In addition to targeting micro/proprietary businesses, the bank will also team up with large merchants to promote electronic wallets. Regarding cross-border payment services, the bank will continue to work with large chains and introduce the service to major shopping districts. The bank will also continue to partner with cross-border third party payment service providers. In addition to Alipay of China, the list is expected to include WeChat Pay in the future. Meanwhile, the bank is also exploring other opportunities in Japan and South Korea. Regarding mobile payment services, the bank takes an active approach to adopting mainstream payment models (e.g. Apple Pay, Android Pay, and Samsung Pay). It also forms strategic alliances with electronic commerce/third party/electronic payment service providers in developing money service tools. (3) Electronic banking services The nighttime foreign exchange services are made available via internet banking and mobile banking in order to provide more flexibility in the foreign exchange services. Customers who wish to purchase foreign currencies or make exchange as part of their portfolio planning will have real-time access to latest developments in global markets and foreign currencies so transactions can be made as needed. Furthermore, the bank has launched first-of-its-kind services, "Mobile Easy Transfer" and "Shake & Transfer". These services enable mobile banking users to initiate a transfer by choosing a preferred communication app (LINE or WhatsApp), mobile telephone number, or email. A Transfers can be completed without the recipient's account number. What is more, when both the transferor and the transferee are mobile banking users, they can turn on bluetooth on their mobile phones and use "Shake & Transfer" to complete transfers over short distances without having to enter any account number. Both features will save customers a trip to a branch or ATM and eliminate the need to know the recipient's account number.

5. Trust financial service

(1) 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. (2) Introduce “customized money trust" services that can be tailored to satisfy a broad variety of needs such as children's education, business ventures, retirement planning, and care of disadvantaged families. (3) The employee welfare trust is developed for businesses looking to retain or reward their employees. It helps the bank develop stronger relationships with wholesale banking customers and adds to the diversity of trust products. It also offers a means to explore employees' needs for wealth management services. (4) The bank offers custody services for foreign/Chinese employee investment accounts. Meanwhile, Taiwanese businesses are finding successes and expanding their networks to different places around the world. In response to the government's policy to encourage overseas Taiwanese businesses to obtain primary listing in Taiwan and to the fact that more and more Taiwanese businesses are operating in more than one country, the bank is targeting these businesses and their foreign or Chinese employees around the world, and is working with the wholesale banking team to explore the target market of foreign/ Chinese employee investment accounts. (5) Incorporate market information and product information services into the online trading platform, thereby of fering customers greater convenience in fund selections. (6) Promote funds with a variety of themes; provide custom-tailored services to customers of different profiles and segments. (7) The line of onshore/offshore funds has been extended to better reflect changes in market dynamics. Taishin Bank is the first to introduce long short equity funds that are required to be filed under new category in Tai- wan to meet customer needs for asset allocation.

88 Operating Status 05

(8) Fund apps are developed for digital banking, which also significantly lowers the investment threshold for certain funds, thereby attracting more customers with more user friendly functions. (9) Explore mutual fund opportunities through offshore banking units (OBU); introduce hedge funds not yet filed with the competent authority in the Republic of China. (10) Special discounts for certain funds are offered from time to time to attract more investors. (11) Introduce multi-themed ETFs, thereby offering customers suitable instruments to invest in under any market condition. (12) The bank is developing a real-time trading system for securities on foreign exchanges so to provide customers a more instant, easy to use, and more responsive trading platform. (13) Various types of bonds are available, including premium overseas bank debenture and corporate bonds in different currencies and different maturities. (14) The bank continues to accept trade orders from professional investors for offshore structured products available only to professional investors. In addition to traditional long term principal protected products, the bank will keep launching short term equity linked products without principal protection to satisfy the needs of high net worth professional investors. c. Market analysis

1. Wealth Management

(1) Status of market demand and supply and growth potential: ██New data related technologies show rapid development. There are a large number of external data sources and the data collection barriers have become lower. ██Customer behaviors are changing as the female customer base and new customer groups become very active. There are also a growing number of aboriginal customers on the Internet. (2) The bank's competitive niche: ██Family-based wealth management services have been introduced as an excellent choice for customers with inheritance concerns and address personal and household financial planning needs at the same time. ██A complete line of products is available to customize financial plans and asset allocation advice to suit each customer's needs. ██The advantages of quick and efficient response to market development and experienced marketing and analysis experts are deployed in combination with integrated databases and big data analytics in order to analyze customer behaviors by CRM. The results are an extensive knowledge of the needs of different customers and the ability to provide personalized services. ██The Bank continues to win more awards than competitors by maintaining advantages in professionalism and innovation. The awards also reflect an excellent brand image and reputation. (3) Favorable factors for development outlook: ██The big data platform offers insight into market movements and customer demand. ██Integration of virtual channels and physical branch services creates a services platform that offers more business advantages and higher efficiency. (4) Unfavorable factors for development outlook: ██Customers at the top of the pyramid are the targeted base for wealth management services. Their needs are complex and unpredictable, making it more challenging to manage the business. ██Competitors are investing more and more resources, such as technology, big data platform, and data mining experts, into the area, creating an increasingly competitive market.

89 (5) The bank's countermeasures: ██The personal advisory service enables timely response to market movements and develops financial plans best suited for the customers. ██The Bank maintains strong customer relationship with consumer households and business owners and continues to refine its data mining capabilities. The Bank also explores potential customer bases by following customers' needs and business activities more closely. ██A peer support system is implemented to keep training new talent and to strengthen professional training. ██The virtual platform offers a variety of innovative services and analytics technology in order to create more contact points and expand the customer base. ██The Bank deploys innovative services and creative marketing strategies to enhance its reputation by utilizing the advantages of social media.

2. Retail Banking

(1) Status of market demand and supply and growth potential: 【Loans】 The CIER's estimate of Taiwan's economic growth in 2017 is1.73%. The growth is mainly created and supported by domestic demand. Private spending is expected to grow by 1.7%, slightly lower than 1.95% in 2016. Meanwhile, the global economy is undergoing a restructuring process, which has a significant impact on economic development in Taiwan. On the whole, despite the room for growth in consumer loans, the risks have to be assessed with care and caution. In addition, the growing tension in the cross- strait relationship and the decline in Chinese tourists are having an impact on industries such as tourism, transportation and retail that rely on domestic demand. The risk in micro corporate loans has become higher.

【Credit cards】 ██As of the end of December 2016, there were 36 card issuers in the market with a total of 40.70 million cards in circulation and a total of 27.02 million active cards.The average is more than 4 cards per capita, indicating a mature and saturated market. ██The average is more than 4 cards per capita, indicating a mature and saturated market. ██The cumulative annual spending in 2016 increased by NT$190.4 billion on an year-over-year basis, which translated to a 8.5% growth rate. Consumer spending continued to grow at a steady pace. ██Major co-brand channels remained in the hands of the six largest card issuing banks. ██While CTBC Bank and Cathay United Bank fight to be the market leader, certain banks start offering high cash back to attract frugal customers. ██More electronic ticketing operators have entered the market to compete in the areas of cross industry small payment services and transportation applications. As of the end of December 2016, there were 4 specialized electronic ticketing operators and 2 banks offering electronic ticketing services. There were a total of 80.58 million cards in circulation (compared to 67.48 million cards in the same period of the previous year). The monthly spending was NT$6.8 billion (compared to NT$5.8 billion in the same period of the previous year), and the total prepaid balance was NT$7.0 billion (compared to NT$6.0 billion in the same period of the previous year). The small payment services market continued to grow. (2) The bank's competitive niche : ██Online digital analysis to combine digital resources within Taishin and effectively engage the digital customer base. ██A wide range of channels and a diverse sales team that create the channels' advantages through collaboration between loan salespersons as well as branches, customer service resources and a variety of departments.

90 Operating Status 05

██Quotations that are based on the loan quality of each channel or customer segment and the risk pricing approach. ██System design is reinforced by combining database and market information analysis with a continuing focus on precision marketing and risk controls. Omnichannel services are deployed to develop stronger relationships with micro business accounts. ██Integrated services made possible by access to resources under Taishin FHC and aimed at establishing partnerships with leaders in other industries. (3) Favorable factors for development outlook: ██Taishin FHC takes an active approach to overseas expansion and tries to create more room for loan related products. ██Fast growing Fintech combined with a fast growing amount of open data is creating more possibilities in analysis and application, and makes it easier to establish the direction for customer services and business development. ██The current policies encourage financial institutions to issue loans to micro businesses and facilitate growth. ██The FSC has announced its support the development of electronic payment services and expects 52% of the transactions in Taiwan will be made by electronic payment tools (including credit cards and stored value cards) by 2020. (4) Unfavorable factors for development outlook: ██A stagnant domestic economy leads to a slump in the housing market. Falling price and volume are driving the number of buyers and mortgage sales down. ██The central bank maintains a low interest rate policy. As a result, the money supply is large in the market and competition is fierce, which cuts into profit margins. ██Micro businesses are more prone to create credit risk when global economic conditions are volatile due to their disadvantages in financial position and scale of operation. ██A saturated credit card market and competitive marketing campaigns have an impact on profits. ██The risk in merchant management increases as the number of competitors increases. Fees appear to be falling due to market competition, which hampers fee income growth. (5) The bank's countermeasures: ██Bring together resources under Taishin FHC and work with different channels to increase penetration of consumer banking products while maintaining relationships with existing customers to increase customer satisfaction. ██Monitor regularly loan quality and develop differentiated products to maintain product growth while balancing revenue and risk management. ██Invest in development of new types of products, such as reverse mortgage, beneficiary rights of special-purpose money trusts to be pledged for loans, and Hong Kong securities financing, in order to provide suitable products for different customers. ██Continue to ensure effective KYC procedures and, provided the appropriate risk controls are in place, issue loans to micro businesses. ██Respond to market changes and modify benefits for credit cardholders according to customers' needs. Review the advantages and resource allocation on a regular basis. ██Form strategic alliances with department stores, wholesalers, convenience stores, and transport payment service providers to continue to increase the number of credit cardholders. ██Start with customers' needs and market trends and engage customers in popular shopping categories, such as travel, department stores, online shopping, insurance, wholesale, and gas stations.

91 3. Wholesale Banking

(1) Status of market demand and supply and growth potential: Looking forward to 2017, the global economy starts showing signs of recovery and the U.S. continues to raise rates at a cautious pace. Major economies are replacing the monetary easing policy with the expansionary fiscal policy. Nevertheless, it is important to remain alert to uncertainties, such as the economic and trade policies of the new U.S. administration, changes in Europe's economic and political landscape, the debt crisis in emerging markets, and a larger-than-expected slowdown in China, and their impact on the global economy. Regarding the domestic market, the central bank's low interest rate policy is drawing to a close. Given interest rates posed to rise and slowly declining house prices, investors are likely to look in different directions. In addition, given a market occupied by a large number of banks operating in a highly homogeneous field in Taiwan, banks would find it hard to maintain profit growth in such a competitive environment. Furthermore, the government is actively encouraging deregulation and innovation of financial services and supporting banks to enter emerging countries in Southeast Asia and expand their overseas network. Such expansion will help banks increase the percentage of overseas profits and diversify their profit sources. (2) The bank's competitive niche: ██Ability to integrate a multitude of products offered under the financial holding group; commitment to financial product/service innovation; attention to customers' multidimensional needs; and the ability to deliver one-stop financial shopping experience. ██Outstanding cash management and E-banking platforms that can be used to offer cash collection/ payment services. ██Excellent risk control mechanisms help ensure sound asset quality. (3) Favorable factors for development outlook: ██China's ongoing financial reforms and RMB internationalization will give rise to many innovative services and products, and the government's policy on featured financial services will help boost financial activity between China and Taiwan. ██Given the ongoing liberalization and rapid economic growth of Asian emerging markets, there is going to be substantial growth in demand for overseas banking services. ██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. ██The bank still has only a few branches overseas; its global network remains sub-optimal. ██Financial supervision has become more stringent than ever. The implementation of Basel III accord will put further strains on the bank's capital and liquidity. All of which present added costs and risks. (5) The bank's countermeasures: ██Make proper use of group resources. Provide differentiated services and products to different client segments, so as to create service value. ██The Bank continues to expand its business abroad while developing domestic and international customer bases. ██ Preparation for opening of the Tokyo Branch in Japan and the Brisbane Branch in Australia and for application for the Long An Branch in Vietnam is gaining momentum. The branches are part of the expansion in Asia Pacific and expected to boost overseas profits.

92 Operating Status 05

4. Digital finance

(1) Status of market demand and supply and growth potential: ██There are more than 16 million mobile device users in Taiwan with more than 70% of the population own a smartphone. It is inevitable that banking services will be able to be accessed via the Internet, cellphone, or ATM or any other automated facility in the future. (2) The bank's competitive niche: ██Instead of having to assemble a financial portfolio for themselves under traditional financial services, customers of the digital services are provided with a complete portfolio offering NTD current deposit accounts, investment, and payment services. ██The stream of invitations to speak about digital finance at universities help with promoting the concept and making the brand more recognizable among students. ██Build on advantages of merchants affiliated with the bank and strength in the number of card accepting merchants and play an active role in the government's pilot programs for new payment tools in order to identify customers' needs before competitors. (3) Favorable factors for development outlook: ██The financial regulator's sandbox policy facilitates development of digital finance. (4) Unfavorable factors for development outlook: ██Current regulations do not yet allow all financial services to be offered over the internet . ██There are currently a large number of payment programs(e.g. NFC, barcode, bluetooth, voice recognition, and biometrics) and the product life cycle is getting shorter. It is not yet clear which will become mainstream in the future, and so more resources have to be invested in IT development and marketing. (5) The bank's countermeasures: ██The bank continues to engage the digital customer base via virtual channels and to organize marketing campaigns in response to popular topics on the internet. ██Nonfinancial big data are introduced in combination with internal behavior analysis to correctly predict customers' needs and recommend suitable products. ██The bank works with startups to branch out into different industries.

5. Trust financial service

(1) Status of market demand and supply and growth potential: ██According to SITCA statistics, subscriptions of onshore and offshore funds through special-purpose money trusts continue to increase and have consistently shown positive growth in the last five years. It suggests that more consumers are paying attention to financial planning. In addition, the Internet is making real time market information more readily available, and banks are improving their investment platforms to cater to more investors. ██The FSC has allowed beneficiary rights to special-purpose money trusts provided by banks to be pledged for interbank loans, including mutual funds, bonds and overseas stocks. It is expected that pledging for intrabank loans will be made available this year. This is an important policy for investors looking to extend their lines of credit. It is expected that NTD 500 billion in new funds will become available in the market and generate momentum in fund investment under wealth management services.

93 ██Offering products that satisfy customer needs is a crucial part of the wealth management services.An increasingly diversified and aging society means that more and more customers are looking toinclude trusts in their portfolios. Customers who have family members suffering from bad physical or mental health or have reached an age to find it difficult to care for themselves would particularly benefit from making plans for keeping their assets secure and receiving sufficient care in the long term. Therefore, consumers are becoming more open to care trusts that are aimed to provide care for specific beneficiaries. (2) The bank's competitive niche: ██Personalized financial services are offered to different customer groups based on different characteristics. Products with various themes are introduced in response to market trends. ██The line of onshore/offshore funds has been extended. The Bank, by careful screening, is the first to introduce new and innovative products with specific focuses. ██Database analysis helps the Bank get a deep understanding of needs of different customers so that the Bank can provide personalized services and send updates on market development to customers. ██Market information and product information services are incorporated into the online fund trading platform. ██Innovative fund apps are developed to significantly lower the investment threshold for certain funds, thereby attracting more customers with more user friendly functions. ██The Bank has extensive experience in trust services. Customers only need to complete the simplest process possible to set up customized trust plans and asset allocation. (3) Favorable factors for development outlook: ██The competent authority is actively supporting the digital finance policy. The younger generations are having more influence and depending more on social media, leading to the growth of automated channels and a higher frequency of self directed investing. ██The competent authority has relaxed the laws on pledging mutual fund shares, prompting investors to invigorate their assets and pay more attention to financial planning. ██An increasingly diversified and aging society and policy support will contribute to development of structured trust services. (4) Unfavorable factors for development outlook: ██Products are highly similar with little differentiation. Competitors continue to open more overseas branches to gain larger market shares. ██The demand for financial professionals will continue to grow while the cost of training and employee turnover will be higher. ██Persistent low oil prices and China's slowing economic growth create unfavorable conditions for international financial markets this year. This year is expected to be a year of low interest rates, low growth, and low inflation. Increased volatility in international financial markets is creating a more challenges in investing. ██Structured trust services cannot be offered without an investment of trained professionals and systems, but generate limited fee income. (5) The bank's countermeasures: ██Service quality is enhanced for both physical branches and digital channels in order to create an integrated business model and explore innovative cross industry alliances. ██To better reflect changes in market dynamics, the Bank is the first to introduce long short equity funds, which are required to be filed under new category in Taiwan, and customized OBU products to meet customer needs for asset allocation.

94 Operating Status 05

██The Bank endeavors to build strong relationships with wealth management customers. Honesty, integrity, and sincerity are the Bank's watchwords in understanding customer needs and providing suitable products. ██Resources under Taishin FHC are combined to achieve synergy through cross selling. The Bank provides one-stop services so that customers are able to make complete various transactions under one roof. ██Professional trust services are one of the cornerstones of the wealth management business. These services are aimed to satisfy the demand for trust services and generate investment income. d. R&D of financial products and business development status

1. Major financial products and scale of retail banking

(1) Home purchase and renovation loans have an outstanding balance of NTD 418.7 billion, representing a 7.2% YoY growth. (2) Car loans have an outstanding balance of NTD 3.75 billion, representing a 10% YoY growth, placing it again on top of the financial industry. (3) Other consumer loans have an outstanding balance of NTD 48.8 billion, 9%over a year earlier. (4) The outstanding balance of micro corporate loans reaches NT$5.1 billion and is growing at 18.6% per year. (5) Credit cards: ██3.78 million credit cards outstanding, ranking fourth with a 9.3% market share. ██2.64 million active credit cards, ranking fourth with a 9.8% market share. ██210.3 billion in annual card purchases, ranking fifth with a 8.7% market share. ██100,000 card accepting merchants in total, ranking third with a market share of 20.5%. ██There are 1.2 million premium credit cards, ranking third with a 11.2% market share. (Premium credit cards include World MasterCard and Titanium MasterCard and VISA Infinite and VISA Signature.) (Credit card data source: FSC and National Credit Card Center, as of December 2016)

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

(1) Outstanding of loans extended by domestic branches to state and private enterprises. With equal emphasis on risk management and business development, the bank's outstanding of loans for state and private enterprises reached NT$210.6 billion at the end of 2016, ranking 15th place among 39 domestic financial institutions and represented a 3.4% growth over the previous year, compared to the peer average growth of 3.6%. (2) Outstanding of loans for small and medium enterprises In line with the government's policy of providing the assistance of loaning to small and medium businesses and the purpose of expanding the bank's customer group, the bank extended NT$107.6 billion of outstanding loans to small and medium businesses as of the end of 2016, up 8.3% over a year earlier. This improvement had far exceeded the peer average of 5%. (3) L/C and export negotiation Due to increasing varieties of trade financing options available and changes in commercial practices, the total amount of export in 2016 reached US$1.32 billion, declined 16% than previous year. (4) Factoring business The bank is still a market leader for factoring business and undertook NT$213.0 billion of such business in 2016, declined 0.2% than previous year, with equal emphasis on the maintenance of customer relationship, pricing and risk.

95 3. Major financial products and scale of E-Financial Business in recent two years

(1) In 2016, the focus was on the customer group aged 20 to 40. Richart was launched to provide digital banking services. The mobile first app interface received a lot of positive feedback. A 60% market share in digital banking makes Richart the e leader in digital services in the financial sector. The product, designed to be simple and easy to understand, has established a new blue ocean strategy in the business. (2) With the addition of new functions and campaigns, in 2016, the number of users exceede ded 1.45 million at an annual growth of 20%. The number of mobile banking customers is ers is growing at close to 20% a year and the number of transactions at 51%. In 2016, the ban klaunched the innovative card- free withdrawal service. 4. Major financial products and scale of trust financial business in recent two years Dec. 31, 2016 Year 2015 AUM 2016 AUM Special-purpose money trusts investing in domestic/ 126,894 136,210 foreign securities Collective investment trust account 1,219 720

Securities trust 28,952 32,769

Other money trusts 7,939 14,165

Real estate trust 16,433 19,000

74 272

Securities investment trust funds under administration 44,208 57,936

5. R&D achievements in recent two years

(1) Credit cards ██The Taishin 777 Campaign targets bank card customers and advertises on the exclusive availability to VIP customers. NT$777 is the minimum credit card spending to participate in the campaign, which offers other incentives to spend more. The campaign takes place on an ongoing basis so to be memorable. 200,000 customers register for the campaign every year. ██Taishin credit cardholders enjoy 34% off movie tickets at seven major cinema chains across the country on Monday through Thursday. An online film competition on June 6 attracted media coverage and 70,000 internet users who cast votes, both of which created more exposure for the Taishin brand. ██Business Visa Platinum cards were upgraded to VISA Signature cards. Cash back on foreign transactions was raised to 2.5%. ██The Bank increased exposure of the Rose Card brand with the message - "Dedication Makes a Woman Beautiful." ██Taishin is the only bank to have its credit cards accepted to make tax/fee payments at FamilyMart. Card purchases at FamilyMart jumped by 971% as a result. ██Taishin Bank was first to take an innovative approach to bonus redemption by creating Richi, a program offering redemption for goods from other countries. ██The Bank worked with travel agencies and offered more card purchase gifts at the autumn travel fair. The campaign succeeded into creating the highest redemption number and an increase in spending. ██An interest-free installment plan up to 12 months is available on premium payments regardless of the insurance company. This plan breaks down the barrier usually imposed by credit cards cobranded with certain insurers.

96 Operating Status 05

██The @GoGo card was launched on April 13, 2016. It is a credit card tailored to customers preferring digital transactions. It offers up to 3.5% cash back on digital spending and 1.5% cash back on regular transactions. Cash back is credited to the cardholder's Richart account to accumulate at preferred interest rates. ██The Wealth Visa Infinite card was launched on May 3, 2016 and is available exclusively to Taishin wealth management customers. Customers who apply for the card in the first year since its launch will be issued Swarovski crystal encrusted cards as a token of exclusivity for our wealth management customers. ██The mobile version of the credit card site (mSite) was launched on September 29, 2016. It provides information on the credit cards offered by the bank. The online card application screen is also optimized for a better experience. ██The Mercuries Life cobranded card was launched on October 26, 2016. It offers 1.2% cash back on premium payments made to Mercuries Life. An interest-free installment plan up to 12 months is provided. Four free door-to-door airport rides are available when the annual spending reaches NT$180,000. ██Application for the iCash card was open on November 25, 2016. The first Taishin card to offer the iCash feature is the @GoGo VISA Signature card, which offers 3.5% cash back on digital spending. The card also comes with a LED design that lights up when the contactless feature is in use. The design has attracted a lot of attention. (2) Digital finance ██Partner with Alipay to offer inbound cross border online services. ██Approved by the competent authority to offer electronic payment services. ██In 2016, the bank worked with 17Life to accept payments by prepaid account. Then in the same year, the bank teamed up with Chunghwa Telecom to provide smart payment services, which accept payments for water, electricity, and telephone bills. ██The first electronic wallet to combine payments and social media by supporting payment transfers/ splits. It enables customers to pay by credit card at well known vendors. Taishin is also the first bank to team up with Taipei Medical University Hospital to allow outpatient charges to be paid by mobile payment tools. ██Partner with Alipay to offer inbound O2O services. The bank has the large number of points of service accepting Alipay in Taiwan. ██Work with TWMP to launch OTA credit cards and t wallet+. As of December 2016, the bank has issued more HCE credit cards than any of its peers in Taiwan. ██Work with MasterCard to launch the MasterPass, a payment service that makes online shopping easy. ██The bank was first to offer online card free transfer and payment services. It works with AllPay, an electronic payment service provider, to support the services in more than 20,000 stores across the country.

6. Future R&D plan

(1) Wealth Management ██The Bank combines resources under Taishin FHC and focuses on serving individuals, households, and business owners by providing a complete line of financial planning services and increasing customer satisfaction toward wealth management services. ██The Bank invests in fintech and applies big data analytics and CRM techniques on an integrated real and virtual platform in order to manage customer relationships more effectively.

97 (2) Retail banking ██Invest in the development of digital financial products and services; build up an online customer base; and provide online applications for mortgage and auto loans on the official website. In addition to online applications, mobile applications are also being developed in order to extend the reach of the loan services over the internet. ██Develop digital products and projects in support of Taishin FHC's policy. Provide different loan products to different customer groups as appropriate in order to better satisfy customer needs and make the bank more competitive. ██Taishin Bank was first to explore and provide financial services for micro businesses. ██Develop new card terminals to provide merchants a wider range of money services. (3) Wholesale banking ██Expand pluralized treasury product lineup via combination of interest rate, exchange rate, bond, bulk commodities, and equity. ██Establish new financial trading system to accommodate the rollout of new diversified products in the future, and improve trading flow and enhance trading capability. ██Focus on launching RMB business in light of current round of deregulations. ██The bank received FSC approval for issuing foreign currency negotiable certificates of deposit (NCD) in May 2016. ██Expand offshore financing and the number of overseas branches, strengthen the function of e-network trading platform, so as to satisfy customers' need for cross-border fund maneuvering. (4) E-Financial Business ██Expand the line of digital financial services by responding to market demand (e.g. Apple Pay, Android Pay, and Samsung Pay) and revolutionizing existing financial and payment services. ██Design a smart customer services system and a robot financial planner to provide instant replies to customers' questions and applications and offer financial planning advice 24 hours a day.

e. Short-and long-term business development plans

1. Wealth management

(1) Short-term business development plan ██Apply precision data analysis and integrate resources throughout Taishin FHC to enable customized marketing and maximize cost effectiveness. Provide customers with tailor-made finance and debt solutions which in turn result in greater satisfaction and higher AUM. ██Serve the needs of individuals, households, and business owners with consistent financial planning across physical and digital channels; and provide a complete line of wealth management services. ██Build customer relationships as a local business and assign customers to nearby branches by work address. Observe customers' transactions on a regular basis and change the corresponding branches accordingly. ██The rise of a new generation makes it necessary to follow changes in younger customers' behaviors, revamp financial services and create a new customer service experience in order to effectively attract younger generations. ██An aging society prompts the bank to provide personalized wealth management advice and services for retired seniors with financial planning needs.

98 Operating Status 05

(2) Long-term business development plan ██A well established digital banking system is constructed by collecting external data from various sources, improving CRM modeling techniques, and achieving more precise segmentation with an integrated real and virtual platform. ██Integrate real and virtual channels, including internet banking services, mobile banking services, official websites, customer service centers, ATMs, and branches, to provide a premium financial service experience. ██Continue to build a stronger team and a wider range of products; and provide premium benefits and one-stop wealth management services for VIP customers.

2. Retail Banking

(1) Short-term business development plan ██Approach customer relationship management by segmentation in order to increase the percentage of high margin customer segments and improve product profitability. ██Invest more to develop digital channels in order to increase the percentage of online loan applications; and provide products and plans available exclusively through the digital channels. ██Combine resources across different departments and improve discrimination of the models for credit card and branch customers in order to increase penetration of consumer banking products. ██Strengthen risk management and combine channel resources within the bank to provide flexible quotes and standard operating procedures for faster growth in micro business accounts. ██The Bank endeavors to ensure renewal of the existing cobrand license agreements while approaching potential cobrand candidates of certain sizes. ██Optimize and simplify the Sun/Rose Card customization mechanism to cater to digital customers. ██Design exclusive premium cards for wealth management customers. ██Taishin Bank credit cards can be linked to shopping accounts on more e-commerce platforms. ██Encourage high fee transactions in order to increase revenue from card transactions. ██Work with e-payment service providers, third party payment service providers, and POS service providers to gain a larger share of the invoice market.. ██Service quality is enhanced to maintain the existing level of customer satisfaction. (2) Long-term business development plan ██Continue to invest in digital finance and apply digital footprint analysis to develop new customer solicitation models on an ongoing basis; and assess the feasibility of partnering with online lending platforms. ██The Bank is a leader of micro corporate loans by keeping investing in product development, customer analysis, and distributor relationship management. ██Use electronic systems to redesign processes; build a complete case submission/review system; and improve data storage, analysis and application to achieve the two-way benchmark for sales growth and risk management. ██The Rose Card and other card products are aligned to reinforce the image of Taishin Bank credit cards. ██Analyze a massive amount of data to helps guide customers to affiliated merchants and increase stickiness with these merchants, which will lead to purchase of other financial products and generate more income for the bank.Potential customers are explored in an attempt to increase utilization of and spending on Taishin Bank credit cards in order to improve the Bank's wallet share. ██Increase penetration of premium cards among wealth management customers.

99 ██Explore customer groups with medium to high purchasing power in an attempt to increase utilization of and spending on Taishin Bank credit cards in order to improve the bank's wallet share. ██Customers are encouraged to set up auto-debit of utility bills, which will contribute to long term customer stickiness and secure a basic level of spending.

3. Wholesale Banking

(1) Short-term business development plan ██Implement customer relationship management by segmentation, improve product dimensions, and strengthen relationships with customers. ██Enforce group-wide limit control to ensure optimal allocation of credit risk among subsidiaries. ██Expand relationships with securities customers through cash flow services and demand deposit privileges; increase the percentage of customers' demand deposits for lower funding costs. ██Combine channel resources within the bank; cater to local customers and expand the SME customer base; and focus equally on profitability and quality. ██Increase the number of branches in China and Asia and build an integrated cross border platform that embodies the policy to serve Taiwanese businesses worldwide and position the bank as a global business. ██Build the bank's overseas talent pool through regular job rotation, in order to accommodate growing businesses. ██Support the government's "five plus two" innovative industries policy, which includes the Asian Silicon Valley project, intelligent machinery, biomedicine, green energy technology, national defense and aerospace, a circular economy, and a new agricultural paradigm, and provide financing for potential businesses, while in the meantime paying close attention to risk control. (2) Long-term business development plan ██Enhance service capabilities and product innovation; anchor customer relationship and aim to raise customers' satisfaction and contribution. ██Allocate group resources with greater efficiency; deliver all-round financial services through synergistic ██use of existing product lines. ██Actively explore overseas markets; increase profit contributions from overseas and broaden the bank's presence in China and the Asia Pacific region. ██Continue recruitment and cultivation of overseas talents to support the medium and long-term development of overseas business.

4. E-Financial Business

(1) Short-term business development plan ██A number of financial/nonfinancial features have been added to the Richart App in response to internal and external customer demands. The process is also constantly being optimized. ██In support of the FSC's strategies regarding Fintech, the bank is making plans to adopt Apple Pay, Android Pay, Samsung Pay and other token technologies. ██Electronic payment services are made available to SMEs and micro or proprietary companies for fast, easy integrated payment solutions. ██The bank tries to form stronger strategic alliances with electronic commerce/third party/electronic payment service providers in developing money service tools.

100 Operating Status 05

(2) Long-term business development plan ██An automated sales and financial planning robot is being developed to help investors modify their portfolios in response to market changes according to their own personality types and traits. Such modification is made possible via secure biometrics and a complete line of innovative online financial planning services. ██The bank works with startups to branch out into different industries. ██Mobile payment technologies are analyzed according to customer needs and latest technologies.

5. Trust Financial Services

(1) Short-term business development plan ██The bank tries to expand the wholesale banking customer base by offering wholesale banking customers money trust, employee stock trust, employee share trust, employee welfare trust, and restricted share trust. The bank will also incorporate restricted share trust services into custody services for foreign/Chinese employee investment accounts so that foreign companies seeking primary listing in Taiwan and overseas subsidiaries/branches of domestic companies listed in Taiwan will be able to provide better remuneration plans for foreign/Chinese employees. ██The Bank tries to expand the wholesale banking customer base by offering wholesale banking customers money trust, employee stock trust, employee share trust, employee welfare trust, restricted share trust, and custody services for foreign/Chinese employee investment accounts. ██Customers of structured trust services are provided with easy-to-use transactions and electronic services to suit every need. ██The employee welfare trust is developed as another trust option for wholesale banking customers and to explore employees' needs for wealth management services. ██The Bank has developed a digital banking environment with more convenient services such as electronic account opening and transaction services. ██The Bank increases product sales and total AUM by advertising the idea of asset allocation. Customers are encouraged to place limited overseas ETF orders via online banking, which can be made by number of shares. ETFs following specific sectors will be introduced regularly to help customers respond more quickly to market development. ██International premium bank debentures and corporate bonds in various currencies (including RMB) will be offered on an ongoing basis to satisfy local/international customers who prefer to hold fixed income in their portfolios. ██The Bank will continue to offer offshore structured investments suited for professional investors and OBU customers as part of the commitment to improve customer service and provide more attractive investment products. ██Potential customer bases are explored and offered financial publication and information. Investment seminars and promotional events are organized to increase AUM. ██The Bank, by careful screening, is the first to introduce new products with specific focuses to suit different financial planning and asset allocation needs. ██A rich variety of online financial information is available for one-stop online financial planning services. ██The idea of regular fixed-amount investment is matched to investment objectives of customers at various stages of their lives to encourage customers to accumulate wealth, thereby increasing AUM for the Bank.

101 (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. ██The bank continues to work with the wholesale banking division, the payroll division, and Taishin Securities to design employee welfare trusts and construct a complete employee welfare trust platform. Another platform will be constructed at the same time to allow employee welfare trust holders to make investment choices in response to the Labor Pension Plan, now allowing workers to select their own investment options. ██Continue concerning about change in regulations, so as to develop new trust business. ██In promoting financial product, it is necessary to periodically review new or revised announced by the government. Continue track and develop risk-management indices, so as to grasp product performance and risk for customers. ██Continue introducing pluralized new products and business, in order to bring steady returns to investors in both bullish and bearish markets. ██Promote the proper idea of asset allocation; aim to increase the number of products sold and the amount of assets under management. ██Track product performance regularly; develop risk indicators that can be used to monitor product performance and risks. Continue introducing a variety of new funds and innovative means of investment to deliver customers' expectations.

102 Operating Status 05

B. Employee

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

February 28, 2017; Units: years / people Current year as of Year 2015 2016 February 28, 2017 Male 2,798 2,897 2,847 Numbers of female 4,137 4,255 4,242 employee Total 6,935 7,152 7,089 Average age 36.7 37.3 37.5 Average service years 8.0 8.2 8.3 Doctor 0.09% 0.08% 0.08% Master 18.01% 17.94% 18.00% Shares of education College 76.48% 75.61% 75.71% degrees Senior high 5.32% 6.29% 6.11% Under Senior high 0.10% 0.08% 0.10% Test for trust business 3,753 3,934 3,918 Basic test fro internal control 3,284 3,436 3,431 Qualification test for property insurance staffers 3,188 3,480 3,465

Kinds of Investment-type insurance policy staffers. 1,692 1,763 1,736 professional Life insurance staffers 3,421 3,707 3,667 certificates owned by Future business staffers 473 463 452 employees and their Securities investment analysis 14 18 18 numbers Senior securities staffers 448 456 445 Investment trust and consulting staffers 432 464 445 B-type laws and regulations for investment trust and consulting (including professional ethical 1,798 1,905 1,893 code)

b. Employee Training and development

To support continuous business growth, personal training and development has been the consistent insistence of Taishin Group. In 2016, the company's training efforts received the highest level of subsidy from the Ministry of Labor under its "Corporate Talent Improvement Program."The total number of trainees reached more than 300,000 people/attendances and the average annual training hours per person reached more than 55.8 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, each of the courses offered had been associated to various managerial roles and general roles within the organization, 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."

103 As the corporate culture shifts toward a global focus, employees involved in overseas operations were tested for English proficiency in 2016. The information and corresponding training plans were given to middle and senior managers. In addition, several digital banking seminars and big data courses were offered as part of the digital finance campaign.

2. Talent Accumulation Program

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

Following the project which sent several of the Bank's lecturers to obtain MTP Lecturer Certification by the Japan Industrial Training Association (JITA) in 2014, plans are being made for a complete training course for the management.2015 and 2016 Continuously promote complete training in management.

3. Individual Development Program

Confirm the personal ability gap with unified MBO and the ultimate position by training, rotating, senior counselor's assisting, attending meetings and participating in development projects. Being with superior is the most suitable way to advance the development. Meanwhile, establish training deposit book system, under which the company appropriates 10,000 points of training resources annually for every staffer, as subsidy for staffers to obtain professional certificates, cultivate second expertise, and enhance foreign- language and computer skill, so as to integrate personal development and corporate objective, thereby boosting the overall competiveness of the organization.

C. Corporate Responsibility and Code of Ethics

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

a. Public service and charity

1. "Care for Taiwan" series

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

Since 2005, "Care for Taiwan" series has targeted "Kuohsing-village karate teenager team," helping those teenagers raise training funds via the establishment of a themed website and the utilization of media reporting. In 2016, Taishin continued its sponsorship of Taiwanese athletes in representing Taiwan in Karate 1 Youth World Cup in Croatia and major competitions, 2016 National High School Athletic Games

104 Operating Status 05

and National Chung Cheng Cup Karate Tournament, in Taiwan with excellent performances. In particular, Zheng-Zhong Shi won gold in male cadet -63kg kumite at the Karate 1 Youth World Cup in Croatia, and Xiao-Shuang Gu won gold in female aged 16-17 -53kg kumite at the National Chung Cheng Cup Karate Tournament in Taiwan. In addition, the team swept four categories, which were male junior, female junior, male senior, and female senior, by winning 9 gold medals at the 2016 National High School Athletic Games. Taishin FHC was very proud and applauded such achievements.

In 2008, "Care for Taiwan" series extended its reach to rice plantation in Taiwan. In order to sustain Taiwan's rice plantation and enable people to each pure Taiwanese rice, Taishin Financial Holdings 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 Holdings has sponsored rice procurement for over 137 units, equivalent to 70 hectares of rice paddies. It has given more than 66,000 rice gift boxes to over 10,000 Taishin customers and staffers, which have eaten over 240,000 kilos of quality Taiwanese rice. In addition to benefiting rice farmers, it has also carried out excellent marketing for good Taiwanese rice.

2. Taishin Charity Foundation

In 2010, Taishin Bank set up “Taishin Charity Foundation," mainly for engagement in public-service andcharity 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." A total of 1,817 proposals were received over the seven years it was held, and we invited public-service partners, such as "Advantech Foundation" and "Chunghwa Telecom Foundation", Yueh-Lan Wang Charitable Foundation, the Vision Project, and the Doers Cultural and Educational Foundation to join the event the scope of donation recipients were expanded from "Social welfare" to "Culture education", "Digital learning", "Cultural and Creative Social Enterprises", and "Agricultural Social Enterprises". In 2014, Taishin Bank Foundation for Arts and Culture joined Taishin Charity Foundation in launching an “Arts for Charity" campaign that invited artists, advertising companies and students to participate in product designs, improvements and public art productions. In the future, the foundation will continue visiting welfare groups within each community, and try to match them with resources available in the society to become self- dependent.

3. Emergency aid

In February 2016, a major earthquake took place in Tainan, and Taishin promptly initiated a care project. In addition to a NT$10 million donation to the Tainan City Government, Taishin mobilized branches in Tainan to help provide assistance for disaster victims and work with charitable organizations on supplies for the area. Furthermore, Taishin donated 10 million Japanese yens in support of disaster relief to the Kumamoto Prefecture in response to the local earthquake in April 2016. Other donations were made to disasters such as the Formosa Fun Coast explosion in 2015, the Kaohsiung gas explosion in 2014, the Typhoon Morakot in 2009, Typhoon Jangmi in 2008, the Sichuan earthquake in 2008, the South Asian tsunami in 2005, the Typhoon Mindulle in 2004, and the 921 earthquake in 1999.

105 b. Academics and Art and Culture

1. Academic promotion

Taishin is actively involved in major academic events. By engaging industry, government and academia representatives in discussions, we hope to contribute our efforts to the development of Taiwan's financial environment. Academic events that we previously participated in include: International Conference on Economics, Finance and Accounting, Cross-strait Banking Forum, AIESEC International Congress, Taiwan Finance Association Annual General Meeting & International Academic Forum, Corporate Governance Summit Forum, Conference on Theories and Practices of Securities and Financial Markets, Banking Policy Forum, Cross-Strait Conference on Turnaround Management, Cross-Strait Banking Forum, Conference on Cross-Strait Financial Development, FinTech Forum and NCTU International Finance Conference. Conference on Cross-Strait Financial Development...Taishin also organizes cross-strait exchanges of academic talents, which help build financial expertise in Taiwan.

2. Art and culture

Taishin Bank donated to establish “Taishin Bank Culture and Art Foundation" in 2001, 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 Taishin Arts Award was created by the foundation and rewards modern artistic creativity in various fields in Taiwan that demonstrates growth potential and reflects the society and local cultures. The Award entered its 13th year in 2015. To encourage communication and exchange among artists, the Taishin Bank Foundation for Arts and Culture created the online commentary platform, ARTalks, in 2013. The platform is based on the idea, "A New Relationship with Art", and invites submissions in forms of short film and animation. Members of the public are welcome to showcase their interpretation of life and art and find inspiration in each other.

Taishin Bank has also been sponsoring arts events for years in order to bring art closer to the public. Such events include Kusama Yayoi's "A Dream I Dreamed" Asia Tour in 2015. The exhibition helped place the works of a pioneering female contemporary artist and serious modern woman in front of the public. In the same year, Taishin Bank also sponsored a performance by two jazz heavyweights, Herbie Hancock and Chick Corea. It was the first Taishin Jazz night in 37 years and a night to remember for jazz fans. Taishin Bank has also been sponsoring arts events for years in order to bring art closer to the public. Such events include "The Classics Berliner Philharmoniker - Beethoven's Symphony No. 9 Choral" in 2016. Taishin Bank also sponsored "Pixar: 30 Years of Animation", where visitors explored the creation process of well known characters, in the same year.

c. Sports sponsorship

Taishin has been supporting LPGA champion Yani Tseng with real action since 2011. It is the first financial institution to sponsor Yani Tseng. The Bank has been calling on customers and employees to show support Yani Tseng by sending cards or online messages or attending LPGA tournaments in Taiwan. Taishin also invites Yani Tseng to support charitable causes so to bring celebrity inspiration to the campaign.

In an effort to nurture a greater number of sporting talents, Taishin has extended its sports sponsorship since September 2013 to new golf talents including Chien Pei-Yun, Tsai Pei-Ying, and Chen Meng-Chu. Taishin also sponsors TLPGA in organizing women's golf tournaments, giving players a place to compete and hone their skills.

106 Operating Status 05

d. Environmental Protection

In terms of environmental efforts and fighting against global warming, Taishin Bank continues to support its parent company, Taishin FHC, and campaign for environmental conservation. Since the launch of its campaign to practice "Environmental Protection through Energy Saving" in 2009, the Bank has been urging its employees to support environmental efforts. Moreover, the Bank took the initiative to implement the ISO50001 energy management system in 2015 and promote the ISO14064-1 greenhouse gas inventory system in 2016. In addition to the purchase of renewable energy in 2016, the Bank also demonstrated its support for renewable energy by installing solar power panels on its own buildings in Neihu. Meanwhile, the Bank is investing in green services, and has incorporated processes, such as teller transactions, online loan application, and card terminal application for merchants, into the image process management system. The Bank is also devoted to the development of digital finance with the aim of reducing paper use and carbon footprint at the same time.

D. Number of non-managerial staff, average employee welfare expenses, and differences from the previous year.

Unit:NT$1,000 / people Number of non-managerial staff Average employee welfare expenses

2016 2015 2016 2015

6,169 5,887 1,201 1,223

E. Information system

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 AIX ■ ATM front-end handling system 2 ATM system(FEP) ■ IBM MQ ■ IBM RS/6000 ■ Financial clearance system ■ ORACLE Integrated data system ■ HP-UX ■ Operating database system(ODS) 3 ■ HP Superdome (ODS) ■ ORACLE ■ Information warehousing(DW/DM) ■ HP-UX Automated sales ■ Solaris ■ HP Superdome ■ Automated sales operation system(SFA) 4 application ■ Weblogic ■ Oracle SUN T4-4 ■ Financial planning system system (SFA) ■ ORACLE ■ MS SQL ■ Solaris ■ Transaction services for NT-dollar, foreign Consumer Internet ■ Oracle SUN T5-2 & 5 ■ Weblogic exchange, funds and trusts, credit cards, banking T3-2 &T5-1 ■ ORACLE insurance and stocks

■ IBM AIX ■ Richart digital banking ■ IBM RS/6000 6 Digital banking ■ Weblogic ■ E-wallet system ■ X86 Server ■ ORACLE ■ OTP electronic platform

■ IBM AIX ■ Corporate Internet banking system for NT- 7 B2Bank ■ IBM RS/6000 ■ IBM Websphere dollar, foreign exchange, e-collection ande- ■ ORACLE payment, cash machine

107 Items Names of systems Hardware Software Business contents ■ Trading system of funds, ETF, A trading Trust Investment product ■ MS Windows 8 ■ IBM X86 Server system for offshore structured instruments, system (TIPS) ■ MS SQL offshore bonds, ADR, and preferred shares Credit card acquire ■ Oracle M5000 ■ Oracle Solaris 9 ■ Credit card transaction switch frond-end system (CPS) ■ Oracle T5240 ■ ORACLE ■ Inquiry for NT dollar/foreign currency trading, credit- line management, and the ■ IBM AIX Wholesales business management of guaran- tors and collateral. 10 ■ IBM RS/6000 ■ Weblogic system (WBS) and deposit and remittance ■ Oracle ■ Import/export/loan ■ Price negotiation/Media reporting ■ Management of image processes such as NT$ services (account/ remittance/ applications/account opening/ negotiable ■ Weblogic instruments/ KYC/CIF update/official Image process ■ HP Unix ■ Oracle SOA correspondence), merchant application, 11 management system ■ Oracle Solaris ■ Oracle UCM debt collection (attestation letters/property (IPMS) ■ Oracle ownership/household transcript/collection documents), retail mortgage/ unsecured credit, corporate banking (debt entitlement certificates/scorecards) etc. Factoring management ■ IBM AIX 12 system ■ Weblogic ■ Accounts receivable system ■ IBM RS/6000 (OAEFB) ■ Oracle Corporate-banking ■ MS Windows 13 credit review system ■ IBM X86 Server ■ Corporate banking credit review system ■ MS SQL (OAECR) ■ MS Windows ■ DCI/ELI transactions Structured product sales ■ Oracle Forms 14 ■ Dell 2950 Server ■ SI transactions system (SDS) and Reports ■ Spot orders server Singapore Trade ■ MS Windows ■ Credit assessment system used in 15 Finance System ■ IBM X86 Server ■ MS SQL Singapore (SGFITAS) Singapore Wholesale ■ Import/export/currency exchange/deposits/ ■ IBM OS400 16 Banking System ■ IBM AS/400 loans ■ FITAS (SGWBS) ■ SWIFT Singapore Wholesale ■ IBM AIX ■ CIF, limit control, guarantor and collateral 17 Banking System ■ Weblogic ■ IBM RS/6000 management (SGWBS) ■ Oracle Japan Wholesale ■ IBM AIX ■ Limit control, guarantor and collateral ■ IBM RS/6000 18 Banking System ■ Weblogic management (JPWBS) ■ Oracle ■ Import/Export/Loan/Deposit/Remittance Bankwide anti-money ■ MS Windows laundering control ■ MS SQL ■ Anti-money laundering control systems for 19 ■ HP DL380 Server system ■ PATRIOT head office and overseas branches (AML) ■ OFFICER

b. Future development or installation plan

1. Apply cloud technology to achieve resource integration; maximum use of IT resources to improve servicequality. Create a cloud-based mobile office and software development tools with enhanced data protectionto effectively support business and management activities. 2. Aim to build new Tier III (international grade) computer servers for optimal stability and security.

108 Operating Status 05

3. Assist with construction of IT systems for overseas branches - Brisbane Branch in Australia, Manila Branch in Philippines, and Long An Branch in Vietnam. 4. Construct the universal system, gWBS, for Hong Kong and overseas branches, and relocating the IT system at Hong Kong and related branches back to the head office for maintenance in order to keep the operations competitive and ensure stable system services. 5. Construct a new generation of wholesale banking website - The global digital banking network improves on the quality of online wholesale banking services, responds to market trends, and complies with internal and external IT regulations. 6. Explore mobile banking applications for iPhone, iPad, Android and other mobile devices. 7. Integrate front-end, mid-end and back-end of the treasury system for greater competitiveness in treasurytransactions. 8. Upgrade the customer credit risk assessment system for more effective control over customers' defaultrisks. 9. Build a dual core structure into NCPS to make the payment system more usable. 10.Acquire new ATM models and replace outdated equipment. Offer services such as foreign currency withdrawals and inter-bank cash deposits. 11. The operational data store (ODS) and data warehouse (DW) system are enhanced to build a high stability system. 12. The wholesale banking network is extended to include connection by mobile device. 13. wholesale banking network is extended to include connection by mobile device. 14. Build a new credit card information system with an open structure in anticipation of new types of businesses and technological advancement in the future. 15. Make plans for features to accept applications for wholesale banking services and new credit card applications with images. 16. Implement offshore private banking systems. 17. Launch the 5-in-1 system service enhancement project for trust asset utilization and management systems. 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. Comply with ISO27001 ISMS standards. Ensure proper protection to data operations and information systems. Prevent incidents such as data corruption, theft, leakage, alteration, abuse, and infringement. Enhance the confidentiality, completeness and usability of stored information. 3. Introduce the use of infiltration tools to scan for network weaknesses. 4. Enhance current information protection mechanisms for better security management. 5. Understand the needs of an off-site support and enhance the off-site system accordingly. 6. Develop an information security action plan. 7. Build network access control (NAC) for better network access security. 8. Create an ATM white list management system for better ATM security. 9. Taishin Bank assesses computer system security by following the Security Guidelines on Computer Systems for Financial Institutions in order to improve security of its computer system and website. 10. The onsite and offsite backup facilities will be constantly reinforced, and a twin-server operations center will be constructed.

109 F. 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 bear 20%. (2) Health Insurance: The company bears 60% of insurance premium; employees bear 30%. (3) Group Insurance: Employees are entitled to the coverage of association life insurance, accident insurance, medical insurance, surgery and injury medical service insurance, anti-cancer healthy insurance, and vocational disaster insurance, whose premiums are born by the company. (4) Travel safety insurance: Employees traveling abroad for company affairs are covered by travel safety insurance, whose premiums are born by the company.

2. Employee Welfares:

(1) The company has instituted "employee welfare measures" and "employee welfare committee" to facilitate the promotion of employee welfare. Employees are entitled to marriage subsidy, birth subsidy, funeral subsidy, hospitalization subsidy, festival subsidy, birthday subsidy, travel subsidy, club subsidy, and educational subsidy for offspring. In addition to various subsidies provided by employee welfare committee, the company also provides employee stock ownership trust, 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). (2) 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) With regards to employee health management, the company hires professional nurses on-site to perform a variety of tasks such as promoting health awareness, hosting seminars, and performing health checkups. In addition, the company has stationed physicians available to provide medical consultation and workplace inspection services.

3. Employee Retirement System

The company has instituted "employee retirement measures" according to which pensions for retirees arepaid according to the labor pension system and related laws/regulations.

4. Annual Leaves

The number of leave days are adjusted according to job grades, and exceed stipulated standards under the law.

5. The authority has not taken any disciplinary action against the company for results of labor inspections in the latest year or at time of printing of this annual report. However, disciplinary actions have been taken against its subsidiaries for results of labor inspections, which included violations of Article 24, Article 30, Paragraph 5, Article 32, and Article 36 of the Labor Standards Act. The subsidiaries were fined a total of NT$230,000.

6. There is no other important agreement.

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b. Specify loss resulting from labor-management disputes in the recent year and as of date of the publication of the annual report and disclose the value of current and possible future loss and countermeasures, as well as reasons for inability to estimate loss.

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

G. Important contract

Nature of Starting and expiry Restrictive Participants Main contents Contract dates of contract clauses Procurement Acer Inc. 2015/01/01~2017/12/31 Microsoft EA large account procurement None contract Procurement Credit card information system and CyberSoft Digital Services Corp. 2011/04/01~2016/03/31 None contract outsourced data processing Procurement Procurement of credit card information CyberSoft Digital Services Corp. 2015/06/25~2017/03/31 None contract systems Procurement Lian An Services (Ltd.) Anfeng 2015/01/16~2016/12/31 ATM cash security services None contract Enterprise (Ltd.) Procurement Procurement of automated service Mercuries Data Systems Ltd. 2012/08/24~2017/08/23 None contract equipment Procurement Procurement of automated service Mercuries Data Systems Ltd. 2015/07/01~2021/06/30 None contract equipment Procurement Procurement of automated service Mercuries Data Systems Ltd. 2017/10/01~2022/06/30 None contract equipment

H. Approval of applications for securitized products according to the statute for the securitization of financial assets or th e 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.

111 VI. Financial Status

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

Brief Balance Sheet (Single)–ROC GAPP Unit: NT$1,000 year 2012 items Cash and cash equivalent, Due from the Central Bank and call loans to other banks 45,625,606 Financial assets at fair value through profit or loss 49,231,145 Bonds and securities purchased under resell agreements 4,269,494 Receivables, net 86,077,469 Loans, net 658,454,135 Available-for-sale financial assets 207,278,563 Held-to-maturity financial assets 1,917,473 Investments accounted for by the equity method, net 1,785,834 Other financial assets, net 2,910,429 Property and equipment, net(note3) 17,475,160 Goodwill and intangible assets 1,688,796 Other assets, net 5,525,686 Total assets 1,082,239,790 Due to banks and Central bank 52,366,146 Financial liabilities at fair value through profit or loss 9,114,382 Bonds and securities sold under repurchase agreements. 53,499,333 Payables 21,425,730 Deposits 826,959,852 Bank debentures 36,700,000 Other financial liabilities 13,670,671 Other liabilities 1,384,159 Pre-payout 1,015,120,273 Total liabilities Post-payout 1,021,172,696 Capital stock 49,157,526 Capital surplus 3,269,423 Pre-payout 13,809,799 Retained earnings Post-payout 7,757,376 Unrealized revaluation increments 207,232 Unrealized gain or loss on financial instruments 677,524 Cumulative translation adjustments ( 820 ) Other adjustment items in shareholder's equity ( 1,167 ) Total stockholder's Pre-payout 67,119,517 equity Post-payout 61,067,094 Certifying CPA Qinzhen Yang Certifying CPA Peter Tsai Type of CPA's auditing report Standard without reservation Note: According to "the equalization of land rights act", the bank revaluated the value of land in 2012, the amount of land appreciation is NT$244,624,000.

112 Financial Status 06

Brief Balance Sheet (Consolidated)–IFRS Unit: NT$1,000 Year 2012 2013 2014 2015 2016 items Cash and cash equivalent, Due from the Central Bank and call 45,615,916 52,936,412 56,453,560 67,333,755 95,564,241 loans to banks Financial assets at fair value through profit or loss 49,238,953 40,725,756 80,842,681 117,151,300 84,377,363 Available-for-sale financial assets, net 210,147,891 214,044,825 244,237,901 290,112,152 301,621,372 Securities purchased under resell agreements 4,269,494 1,942,716 0 2,951,852 5,286,859 Receivables, net 86,051,781 83,128,989 92,267,169 93,843,583 103,755,849 Current tax assets 129,233 175,641 571,978 654,270 536,714 Loans, net 658,454,135 703,149,360 805,752,729 834,615,345 877,359,379 Held-to-maturity financial assets 1,917,473 1,953,739 2,540 5,110 6,126 Investments accounted for using the equity method, net 643,570 642,284 464,633 482,479 504,794 Other Financial Asset, net 2,218,331 6,281,570 10,651,238 9,573,092 11,430,723 Property and equipment, net 17,534,672 17,464,449 17,667,967 17,935,313 18,213,805 Investment property, net 266,825 251,328 188,592 185,854 183,117 Intangible assets, net 1,689,475 1,541,406 1,508,252 1,530,414 1,730,704 Deferred tax assets 4,990,097 4,490,988 3,957,820 3,307,001 2,777,930 Other assets 1,071,808 3,679,319 20,196,937 26,675,272 14,902,193 Total Asset 1,084,239,654 1,132,408,782 1,334,763,997 1,466,356,792 1,518,251,169 Due to the Central Bank and banks 52,366,146 49,834,471 56,003,848 64,689,878 46,966,461 Financial liabilities at fair value through profit or loss 9,114,382 14,522,005 34,921,514 49,883,193 35,424,460 Securities sold under repurchase agreements 53,499,333 33,433,856 75,040,882 93,484,280 68,974,177 Payables 20,182,036 19,576,004 21,176,754 20,846,823 28,326,140 Current tax liabilities 739,864 1,843,047 998,433 319,437 647,435 Deposits and remittances 825,897,146 879,515,069 974,217,499 1,041,190,752 1,112,601,800 Bank debentures 36,700,000 25,000,000 33,000,000 53,000,000 53,000,000 Other financial liabilities 13,687,671 32,131,475 53,644,660 49,618,902 48,109,339 Reserve for liabilities 744,050 722,565 764,993 990,150 1,119,785 Deferred tax liabilities 631,051 249,439 83,425 53,552 125,121 Other liabilities 1,698,056 1,895,770 2,596,277 2,305,123 2,682,820 Pre-distribution 1,015,259,735 1,058,723,701 1,252,448,285 1,376,382,090 1,397,977,538 Total liabilities Post-distribution 1,021,312,158 1,067,177,704 1,261,535,513 1,383,064,705 Note 1 Equity attributable to shareholders of the parent 68,717,481 73,434,185 82,083,307 89,736,518 120,036,647 Capital stock 49,157,526 49,157,526 52,025,626 56,118,710 68,845,983 Capital surplus 3,310,519 3,362,989 5,412,397 8,698,829 23,974,285 Retained Pre-distribution 13,825,716 19,921,242 24,448,993 25,232,822 27,493,301 earnings Post-distribution 7,773,293 11,467,239 15,361,765 18,500,207 Note 1 Other equity 2,423,720 992,428 196,291 ( 313,843 ) ( 276,922 ) Non-Controlling Interest 262,438 250,896 232,405 238,184 236,984 Total Pre-payout 68,979,919 73,685,081 82,315,712 89,974,702 120,273,631 stockholder's equity Post-payout 62,927,496 65,231,078 73,228,484 83,292,087 Note 1 CPA Peter Tsai Peter Tsai Peter Tsai Peter Tsai Tza Li Gung CPA Qinzhen Yang Qinzhen Yang Tza Li Gung Tza Li Gung Qinzhen Yang Standard without Standard without Standard without Standard without Standard without Type of CPA's auditing report reservation reservation reservation reservation reservation Note 1: At the time this annual report was published, the board of directors had yet to convene a meeting to resolve the 2016 earnings appropriation on behalf of shareholders. Note 2: The above financial statements have been prepared according to FSC-recognized International Financial Reporting Standards, international accounting standards and any interpretations thereof. Note 3: At the time this annual report was published, no audited financial data for 2017 were available.

113 Brief Balance Sheet (Single)–IFRS Unit: NT$1,000 Year 2012 2013 2014 2015 2016 items Cash and cash equivalent, Due from the CentralBank and call 45,615,606 52,935,921 56,330,133 67,467,439 95,474,231 loans to banks Financial assets at fair value through profit orloss 49,237,888 40,717,742 80,831,117 117,151,300 84,377,363 Available-for-sale financial assets 210,147,891 214,044,825 244,237,901 290,112,152 301,621,372 Securities purchased under resell agreements 4,269,494 1,942,716 0 2,951,852 5,286,859 Receivables, net 85,994,142 83,029,535 90,722,938 90,856,182 99,160,343 Current tax assets 128,229 174,636 571,874 645,698 528,014 Loans, net 658,454,135 703,149,360 805,759,004 834,625,647 877,369,739 Held-to-maturity financial assets 1,917,473 1,953,739 0 0 0 Investments accounted for using the equitymethod, net 1,785,303 1,692,659 2,054,542 2,085,112 2,083,553 Other Financial Asset, net 2,151,056 6,214,295 10,388,063 9,470,121 11,127,387 Property and equipment, net 17,475,160 17,404,330 17,587,386 17,861,834 18,144,670 Intangible assets, net 1,688,796 1,541,000 1,505,828 1,529,378 1,726,210 Deferred tax assets, net 4,953,398 4,454,289 3,900,771 3,250,685 2,730,930 Other assets 818,683 3,427,580 19,898,649 26,335,185 14,540,215 Total Asset 1,084,637,254 1,132,682,627 1,333,788,206 1,464,342,585 1,514,170,886 Due to the Central Bank and banks 52,366,146 49,834,471 56,003,848 64,689,878 46,966,461 Financial liabilities at fair value through profit or loss 9,114,382 14,522,005 34,921,514 49,883,193 35,424,460 Securities sold under repurchase agreements 53,499,333 33,433,856 75,040,882 93,484,280 68,974,177 Payables 20,086,471 19,290,731 20,825,562 20,741,461 28,187,912 Current tax liabilities 721,349 1,822,269 985,450 314,486 636,309 Deposits and remittances 826,959,852 880,624,807 975,005,037 1,042,220,301 1,113,184,637 Bank debentures 36,700,000 25,000,000 33,000,000 53,000,000 53,000,000 Other financial liabilities 13,670,671 32,131,475 52,744,269 47,180,126 44,114,738 Reserve for liabilities 744,050 722,565 764,993 990,150 1,119,680 Deferred tax liabilities 631,051 249,439 83,425 53,552 125,121 Other liabilities 1,426,468 1,616,824 2,329,919 2,048,640 2,400,744 Pre-distribution 1,015,919,773 1,059,248,442 1,251,704,899 1,374,606,067 1,394,134,239 total liabilities Post-distribution 1,021,972,196 1,067,702,455 1,260,792,127 1,381,288,682 Note 1 Equity attributable to shareholders of the parent 68,717,481 73,434,185 82,083,307 89,736,518 120,036,647 Capital stock 49,157,526 49,157,526 52,025,626 56,118,710 68,845,983 Capital surplus 3,310,519 3,362,989 5,412,397 8,698,829 23,974,285 Retained Pre-distribution 13,825,716 19,921,242 24,448,993 25,232,822 27,493,301 earnings Post-distribution 7,773,293 11,467,239 15,361,765 18,550,207 註 1 Other equity 2,423,720 992,428 196,291 ( 313,843 ) ( 276,922 ) Total Pre-distribution 68,717,481 73,434,185 82,083,307 89,736,518 120,036,647 stockholder's equity Post-distribution 62,665,058 64,980,182 72,996,079 83,053,903 Note 1 CPA Peter Tsai Peter Tsai Peter Tsai Peter Tsai Tza Li Gung CPA Qinzhen Yang Qinzhen Yang Tza Li Gung Tza Li Gung Qinzhen Yang Standard without Standard without Standard without Standard without Standard without Type of CPA's auditing report reservation reservation reservation reservation reservation Note 1: At the time this annual report was published, the board of directors had yet to convene a meeting to resolve the 2015 earnings appropriation on behalf of shareholders. Note 2: The above financial statements have been prepared according to FSC-recognized International Financial Reporting Standards, international accounting standards and any interpretations thereof. Note 3: At the time this annual report was published, no audited financial data for 2016 were available.

114 Financial Status 06

Brief Income Statement (Single)–ROC GAAP Unit: NT$1,000 Year 2012 items Net Interest Income 13,874,234 Net income other than interest income 9,930,615 (Provisions for) Reversed of bed debts expenses 617,039 and guarantee liability Operating expenses ( 14,078,952 ) Income Before Income Tax 10,342,936 Income Before Extraordinary Gain 8,646,318 Extraordinary Gain (after tax) 0 Accumulated effect from change in accounting principle (after tax) 0 Net Income 8,646,318 Basic Earnings per share (NT$) 1.80

Brief Comprehensive Income Statements (Consolidated)–IFRS Unit: NT$1,000 Year 2012 2013 2014 2015 2016 items Interest revenues 22,026,032 22,968,633 26,004,220 28,405,763 27,769,691 Interest expenses ( 8,342,357 ) ( 8,550,010 ) ( 10,084,911 ) ( 11,088,630 ) ( 10,211,298 ) Net interest income 13,683,675 14,418,623 15,919,309 17,317,133 17,558,393 Net Income other then net 10,957,268 15,693,419 15,529,266 16,518,263 14,542,534 interest income Net revenue and gains 24,640,943 30,112,042 31,448,575 33,835,396 32,100,927 (Provisions for) Reversed of bad debts expense and guarantee 637,279 ( 113,327 ) 292,747 ( 2,550,270 ) ( 3,137,392 ) liability Operating expenses ( 14,901,008 ) ( 15,672,185 ) ( 17,204,792 ) ( 18,169,027 ) ( 17,880,897 ) Income before income tax 10,377,214 14,326,530 14,536,530 13,116,099 11,082,638 Income tax expense ( 1,722,278 ) ( 2,147,437 ) ( 1,502,029 ) ( 1,788,145 ) ( 1,533,153 ) Net income from continuing 8,654,936 12,179,093 13,034,501 11,327,954 9,549,485 operations Net Income 8,654,936 12,179,093 13,034,501 11,327,954 9,549,485 Other comprehensive income 1,223,536 ( 1,464,669 ) ( 857,265 ) ( 748,523 ) ( 163,633 ) (net of tax) Total Comprehensive Inome 9,878,472 10,714,424 12,177,236 10,579,431 9,385,852 Net income attributable to 8,680,109 12,181,273 13,042,838 11,306,462 9,535,626 owners of parent Net income attributable to Non- ( 25,173 ) ( 2,180 ) ( 8,337 ) 21,492 13,859 controlling interests Comprehensive Inome 9,903,925 10,716,657 12,185,617 10,557,289 9,370,935 attributable to owners of parent Comprehensive Inome attributable to Non-controlling ( 25,453 ) ( 2,233 ) ( 8,381 ) 22,142 14,917 interests Earnings per share (NT$) 1.81 2.46 2.48 2.06 1.64 Note 1: The above financial statements have been prepared according to FSC - recognized International Financial Reporting Standards, international accounting standards and any interpretations thereof. Note 2: At the time this annual report was published, no audited financial data for 2017 were available.

115 Brief Comprehensive Income Statement (Single)–IFRS Unit: NT$1,000 Year 2012 2013 2014 2015 2016 items Interest revenues 22,023,627 22,967,849 25,928,721 28,211,310 27,401,213 Interest expenses ( 8,344,498 ) ( 8,551,868 ) ( 10,074,023 ) ( 11,070,553 ) ( 10,197,247 ) Net interest income 13,679,129 14,415,981 15,854,698 17,140,777 17,203,966 Net Income otherthen net 10,253,208 15,125,084 14,793,303 15,928,280 14,404,606 interest income Net revenue and gains 23,932,337 29,541,065 30,648,001 33,069,057 31,608,572 (Provisions for) Reversed of bad debts expense and guarantee 617,039 ( 114,212 ) 328,611 ( 2,500,896 ) ( 3,036,866 ) liability Operating expenses ( 14,173,446 ) ( 15,124,609 ) ( 16,431,117 ) ( 17,487,376 ) ( 17,528,778 ) Income before income tax 10,375,930 14,302,244 14,545,495 13,080,785 11,042,928 Income tax expense ( 1,695,821 ) ( 2,120,971 ) ( 1,502,657 ) ( 1,774,323 ) ( 1,507,302 ) Net income from continuing 8,680,109 12,181,273 13,042,838 11,306,462 9,535,626 operations Net Income 8,680,109 12,181,273 13,042,838 11,306,462 9,535,626 Other comprehensive income 1,223,816 ( 1,464,616 ) ( 857,221 ) ( 749,173 ) ( 164,691 ) (net of tax) Total Comprehensive Inome 9,903,925 10,716,657 12,185,617 10,557,289 9,370,935 Earnings per share (NT$) 1.81 2.46 2.48 2.06 1.64 Note 1: The above financial statements have been prepared according to FSC-recognized International Financial Reporting Standards, international accounting stan-dards and any interpretations thereof. Note 2: At the time this annual report was published, no audited financial data for 2017 were available.

B. Financial analysis for recent five years

Financial Analysis (Single)–ROC GAAP

Year 2012 items Deposit/loan ratio(%) 80.67 NPL ratio(%) 0.14 Interest income/average outstanding deposit ratio(%) 1.07 Management Interest income/average outstanding loans ratio(%) 3.50 ability Turnover rate of total assets ( times ) 2.20 Revenue per employee (NT$1,000) 3,846 Profit per employee (NT$1,000) 1,397 Returns on tier 1 capital (%) 16.90 Returns on assets (%) 0.83 Profit-making Returns on shareholder's equity (%) 13.29 capability Net Profit rate (%) 36.32 Earnings per share (NT$1) 1.80 Financial Liabilities/assets ratio (%) 93.80 structure Fixed asset/shareholder's equity ratio (%) 26.04

116 Financial Status 06

Year 2012 items Asset growth(%) 8.66 Growth rate Profit growth(%) 12.27 Cash flow rate(%) 5.34 Cash flow Propriety of cash flow ratio(%) 177.41 Cash-flow satisfaction ratio(%) ( 8.82 ) Liquid reserve ratio(%) 24.37 Secured loans for related parties(NT$1000) 8,033,236 Share of outstanding secured loans for related parties in total 1.10 outstanding loans(%) Market share of asset(%) 2.78 Business Market share of book value(%) 2.66 Scale Market share of deposit(%) 2.79 Market share of loans(%) 2.83

Calculation formula:

1. Management capability (1) Deposit / loan ratio=total deposits / total loans (2) NPL ratio=Total NPL ratio / total loans (3) Ratio of interest outlay in annual average of outstanding deposits=total interest outlay / annual average of outstanding deposits (4) Ratio of interest income in annual average of outstanding loans / Total interest income / annual average of outstanding loans (5) Turnover rate of assets=Net revenue/total assets value. (6)Revenue per employee =net revenue/total number of employees (7)Profit per employee=After-tax net profit/total number of employees 2. Profit-making capability (1) Returns on Tier1 capital=pre-tax income/average value of Tier1 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

117 6. Liquid reserves ratio=liquid assets required by the Central Bank of China/required liquid reserves for various liabilities 7. Analysis of business scale (1) Market share of assets=total assets/total assets of financial institutions capable of undertaking deposit/ loan business (2) Market share of book value=book value/total book value of financial institutions capable of undertaking deposit/loan business (3) Market share of deposits=total deposits/total deposits of financial institutions capable of undertaking deposit/ loan business (4) Market share of loans=total loans/total loans of financial institutions capable of undertaking deposit/loan business

Financial analysis (Consolidated)–IFRS

Year 2013 2014 2015 2016 items Deposit/loan ratio (%) 81.06 83.93 81.44 80.17 NPL ratio (%) 0.15 0.14 0.13 0.26 Interest income/average outstanding 1.00 1.09 1.10 0.95 deposit ratio (%) Management Interest income/average outstanding ability 3.33 3.40 3.41 3.20 loans ratio (%) Turnover rate of total assets (times) 2.66 2.36 2.42 2.11 Revenue per employee (NT$1,000) 4,599 4,630 4,655 4,386 Profit per employee (NT$1,000) 1,860 1,919 1,559 1,305 Returns on tier 1 capital (%) 21.55 19.02 15.00 10.42 Returns on assets (%) 1.10 1.06 0.81 0.64 Profit- making Returns on shareholder's equity (%) 17.14 16.77 13.16 9.09 capability Net Profit rate (%) 41.24 41.45 34.19 30.17 Earnings per share (NT$1) 2.46 2.48 2.06 1.64

Financial Liabilities/assets ratio (%) 93.49 93.83 93.86 92.08 structure Fixed asset/shareholder's equity ratio (%) 23.70 21.46 19.93 15.14 Asset growth (%) 4.44 17.87 9.84 3.54 Growth rate Profit growth (%) 38.06 1.47 ( 16.52 ) ( 15.50 ) Cash flow rate (%) 15.02 ( 4.06 ) ( 5.89 ) 5.14 Cash flow Propriety of cash flow ratio (%) 185.00 74..12 4.69 27.92 Cash-flow satisfaction ratio (%) ( 3,905.10 ) 1,044.58 1,920.72 ( 500.32 ) Liquid reserve ratio (%) 24.74 21.95 24.52 24.77 Secured loans for related parties (NT$1,000) 7,771,046 6,980,509 8,002,805 7,777,825 Share of outstanding secured loans for related parties in 1.01 0.79 0.88 0.81 total outstanding loans (%) Market share of asset (%) 2.65 2.94 3.11 3.07

Business Market share of book value (%) 2.70 2.71 2.72 3.44 Scale Market share of deposit (%) 2.79 2.91 2.91 2.98 Market share of loans (%) 2.86 3.09 3.13 3.20 Reasons for changes in various: financial ratios in recent two years 1.profit-making capabitility and growth rate: It was the result of the 2016 after-tax earnings being lower than the 2015 after-tax earnings. 2.Cash flow:Please refer to explanation of liquidity analysis for recent two years. Note: The above financial statements have been prepared according to FSC-recognized International Financial Reporting Standards, international accounting standards and any interpretations thereof.

118 Financial Status 06

Financial analysis (Single)–IFRS

Year 2013 2014 2015 2016 items Deposit/loan ratio (%) 80.96 83.86 81.36 80.13 NPL ratio (%) 0.15 0.14 0.13 0.26 Interest income/average outstanding 1.00 1.09 1.10 0.95 deposit ratio (%) Management Interest income/average outstanding 3.33 3.39 3.39 3.15 ability loans ratio (%) Turnover rate of total assets (times) 2.61 2.30 2.36 2.12 Revenue per employee (NT$1,000) 4,601 4,668 4,654 4,420 Profit per employee (NT$1,000) 1,897 1,986 1,591 1,333 Returns on tier 1 capital (%) 21.74 19.23 15.12 10.47 Returns on assets (%) 1.10 1.06 0.81 0.64 Profit- making Returns on shareholder's equity (%) 17.14 16.77 13.16 9.09 capability Net Profit rate (%) 41.24 42.56 34.19 30.17 Earnings per share (NT$1) 2.46 2.48 2.06 1.64

Financial Liabilities/assets ratio (%) 93.52 93.85 93.87 92.07 structure Fixed asset/shareholder's equity ratio (%) 23.70 21.43 19.90 15.12 Asset growth (%) 4.43 17.75 9.77 3.40 Growth rate Profit growth (%) 37.84 1.70 ( 16.80 ) ( 5.09 ) Cash flow rate (%) 15.05 ( 3.32 ) ( 5.15 ) 5.99 Cash flow Propriety of cash flow ratio (%) 183.15 107.75 14.54 38.57 Cash-flow satisfaction ratio (%) ( 3,810.73 ) 397.90 1,497.78 ( 572.24 ) Liquid reserve ratio (%) 24.74 21.95 24.52 24.77 Secured loans for related parties (NT$1,000) 7,771,046 6,980,509 8,002,805 7,777,825 Share of outstanding secured loans for related parties in 1.01 0.79 0.88 0.81 total outstanding loans (%) Market share of asset (%) 2.65 2.94 3.11 3.07

Calculation formula: 1. Management capability (1) Deposit / loan ratio=total deposits / total loans (2) NPL ratio=Total NPL ratio / total loans (3) Ratio of interest outlay in annual average of outstanding deposits=total interest outlay / annual average of outstanding deposits

119 (4) Ratio of interest income in annual average of outstanding loans / Total interest income / annual average of outstanding loans (5) Turnover rate of assets=Net revenue/total assets value. (6) Revenue per employee =net revenue/total number of employees (7) Profit per employee=After-tax net profit/total number of employees 2. Profit-making capability (1) Returns on Tier1 capital=pre-tax income/average value of Tier1 capital (2) Returns on assets=after-tax income/average value of assets (3) Returns on shareholders' equity=after-tax income/average value of net shareholders' equity (4) Net profit rate=after-tax income/net revenue (5) Earnings per share=(after-tax net profit-dividend for preferred shares/weighted average of issued shares 3. Financial structure (1) Ratio of liabilities in assets=total liabilities/total assets (2) Ratio of fixed assets in book value=net value of fixed assets/net shareholders' equity 4. Growth rate (1) Assets growth rate= (total assets in current year-total assets in previous year)/total assets in previous year (2) Profit growth= (Pre-tax income in current year-pre-tax income in previous year)/pre-tax income in previous year 5. Cash flow (1) Cash flow ratio=net cash flow for business activities/(call loans and overdraft of bank and peers + promissory notes payable + financial liabilities from change in fair value + liabilities of repot bills and bonds + accounts payable due in one year) (2) Propriety ratio of net cash flow=net cash flow for business activities in recent five years/(capital outlay +cash dividend) in recent five years (3) Satisfactory rate for cash flow=net cash flow for business activities/net cash flow for investments 6. Liquid reserves ratio=liquid assets required by the Central Bank of China/required liquid reserves for various liabilities 7. Analysis of business scale (1) Market share of assets=total assets/total assets of financial institutions capable of undertaking deposit/loan business (2) Market share of book value=book value/total book value of financial institutions capable of undertaking deposit/ loan business (3) Market share of deposits=total deposits/total deposits of financial institutions capable of undertaking deposit/ loan business (4) Market share of loans=total loans/total loans of financial institutions capable of undertaking deposit/loan business

120 Financial Status 06

BIS Ratio (Single)–Basel II Unit: NT$million Year 2012 Analytical Items Common shares 47,275 Perpetual non-accumulated preferred shares 1,882 Perpetual non-accumulated subordinated debts - Capital collected in advance - Capital surplus (except surplus deriving from value increment of fixed assets) 3,269 Legal reserves 4,974 Special reserves 190 Tier I Capital Accumulated profit/loss 8,646 Non-controlling interests - Other items of shareholders' equity ( 84 ) Minus: good will 1,152 Minus: unamortized loss from the sale of NPL - Minus: items for capital reduction 2,006 Total tier I capital 62,994 Eligible Perpetual accumulated preferred shares - Capital Perpetual non-accumulated subordinated debts - Capital surplus from value increment of fixed assets 207 45% of unrealized gain from available for sale 342 Convertible bonds - Tier II General provisions 8,503 capital Long-term subordinated debts 28,457 Non-perpetual preferred shares -

Combination of perpetual non-accumulated preferred shares and subordinated - debts which exceeds 15% of Tier I capital Minus: items for capital reduction 2,006 Total Tier II capital 35,503 Short-term subordinated debts - Tier III - capital Non-perpetual preferred shares Total Tier III capital - Eligible Capital 98,497 Standard approach 679,515 Credit - risk Internal evaluation approach Securitized assets 726 Basic indicator approach - Weighted Operating 39,101 risk assets risk Standard approach /selective standard approach Advanced measurement approach -

Market Standard approach 27,256 risk Internal model approach - Total risk assets 746,598

121 BIS ratio 13.19% Ratio of Tier I capital in risk weighted assets 8.44% Ratio of Tier II capital in risk weighted assets 4.75% Ratio of Tier III capital in risk weighted assets 0.00% Ratio of common shares in total assets 4.37% 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

BIS Ratio (Single)–Basel III Unit: NT$million Year 2013 2014 2015 2016 Analytical Items Common shares equity 67,392 76,555 84,258 95,433

Eligible Other Tier I 1,173 6,122 6,057 25,144 Capital Tier II capital 21,730 23,098 43,231 40,443 Eligible Capital 90,295 105,775 133,546 161,020 Standard approach 753,874 882,415 979,839 1,037,488 Credit Internal evaluation - - - - risk approach Securitized assets 421 333 379 152 Basic indicator - - - - approach Standard approach Weighted Operating /selective stan- 42,495 46,130 50,386 52,386 risk assets risk dard approach Advanced measurement - - - - approach Standard approach 28,685 31,528 38,971 42,767 Market Internal model risk - - - - approach Total weighted risk assets 825,475 960,405 1,069,575 1,132,793 BIS ratio 10.94% 11.01% 12.49% 14.21% Ratio of tier I capital in risk weighted assets 8.31% 8.61% 8.44% 10.64% Ratio of common shares in total assets 8.16% 7.97% 7.88% 8.42% Leverage Ratio 4.08% 4.28% 5.66% 7.34% 1. Eligible capital ＝ Common shares equity ＋ other tier 1 ＋ tier II 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 ＝ (Common shares equity ＋ Other Tier1) ／ total weighted risk assets 5. Ratio of Common shares equity in risk assets ＝ common-share equity capital ／ total weighted risk assets 6. Leverage Ratio ＝ tier I capital / total risk exposure

122 Financial Status 06

BIS Ratio (Consolidated)–Basel II Unit: NT$million Year 2012 Analytical Items Common shares 47,275 Perpetual non-accumulated preferred shares 1,882 Perpetual non-accumulated subordinated debts - Capital collected in advance - Capital surplus (except surplus deriving from value increment of fixed assets) 3,269 Legal reserves 4,974 Special reserves 190 Tier I Capital Accumulated profit/loss 8,646 Non-controlling interests 263 Other items of shareholders' equity ( 84 ) Minus: good will 1,152 Minus: unamortized loss from the sale of NPL - Minus: items for capital reduction 1,529 Total tier I capital 63,734 Eligible Perpetual accumulated preferred shares - Capital Perpetual non-accumulated subordinated debts - Capital surplus from value increment of fixed assets 207 45% of unrealized gain from available for sale 342 Convertible bonds - Tier II General provisions 8,503 capital Long-term subordinated debts 28,457 Non-perpetual preferred shares - Combination of perpetual non-accumulated preferred shares and subordinated - debts which exceeds 15% of Tier I capital Minus: items for capital reduction 1,529 Total Tier II capital 35,980 Short-term subordinated debts - Tier III Non-perpetual preferred shares - capital Total Tier III capital - Eligible Capital 99,714 Standard approach 679,825 Credit Internal evaluation approach - risk Securitized assets 726 Basic indicator approach - Weighted Operating Standard approach /selective standard approach 39,101 risk assets risk Advanced measurement approach -

Market Standard approach 27,257 risk Internal model approach - Total risk assets 746,909

123 BIS ratio 13.35% Ratio of Tier I capital in risk weighted assets 8.53% Ratio of Tier II capital in risk weighted assets 4.82% Ratio of Tier III capital in risk weighted assets 0.00% Ratio of common shares in total assets 4.37% 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

BIS Ratio (Consolidated)–Basel III Unit: NT$million Year 2013 2014 2015 2016 Analytical Items Common shares equity 67,857 77,118 84,831 96,005

Eligible Other Tier I 1,388 6,469 6,406 25,484 Capital Tier II capital 22,161 23,792 43,930 41,124 Eligible Capital 91,406 107,378 135,167 162,613 Standard approach 753,908 883,869 982,034 1,040,903 Credit Internal evaluation - - - - risk approach Securitized assets 421 333 379 152 Basic indicator - - - - approach Standard approach Weighted Operating /selective stan- 42,495 46,130 50,386 52,386 risk assets risk dard approach Advanced measurement - - - - approach Standard approach 28,701 31,551 38,971 42,767 Market Internal model risk - - - - approach Total weighted risk assets 825,525 961,883 1,071,770 1,136,208 BIS ratio 11.07% 11.16% 12.61% 14.31% Ratio of tier I capital in risk weighted assets 8.39% 8.69% 8.51% 10.69% Ratio of common shares in total assets 8.22% 8.02% 7.92% 8.45% Leverage Ratio 4.12% 4.31% 5.71% 7.37% 1. Eligible capital ＝ Common shares equity ＋ other tier 1 ＋ tier II 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 ＝ (Common shares equity ＋ Other Tier1) ／ total weighted risk assets 5. Ratio of Common shares equity in risk assets ＝ common-share equity capital ／ total weighted risk assets 6. Leverage Ratio ＝ tier I capital / total risk exposure

124 Financial Status 06

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

Taishin International Bank Co., Ltd (Inspection report of supervisor)

The Bank's 2016 business report, financial statements and earnings distribution have been approved by the board of directors. The financial statements have been audited by CPAs Tza Li Gung and Qinzhen Yang of Deloitte Taiwan, which they considered to present a fair view of the bank’s 2016 financial performance, cash flows, and financial position as at December 31, 2016.

The supervisors have audited the aforementioned items according to Articles 219 and 228 of the Company Act, and found no inconsistencies.

To Shareholder's Meeting of Taishin International Bank:

Standing supervisor Yang-Tzong ,Tsay

Supervisor Jui-Sung,Kuo

Supervisor Toney Chen

May 4, 2017

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

E. Consolidated financial statements of the latest year audited by CPAs: Refer to appendix 2.

F. Should there occur financial insolvency of the bank and its affiliates in the recent year and as of the date of the publication of the annual report, specify its effect on the bank’s finance: None.

125 VII. Financial Status, Review of Business Performance, and Risk Management

A. Financial status

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

Unit: NT$1,000 year change 2015 2016 item value % Asset Cash and cash equivalent 20,626,538 18,576,538 ( 2,050,000 ) ( 9.94% ) Due from the Central Bank and call loans to other banks 46,840,901 76,897,693 30,056,792 64.17% Financial assets at fair value through profit or loss 117,151,300 84,377,363 ( 32,773,937 ) ( 27.98% ) Securities purchased under resell agreements 2,951,852 5,286,859 2,335,007 100.00% Receivables, net 90,856,182 99,160,343 8,304,161 9.14% Current tax assets 645,698 528,014 ( 117,684 ) ( 18.23% ) Loans, net 834,625,647 877,369,739 42,744,092 5.12% Available-for-sale financial assets, net 290,112,152 301,621,372 11,509,220 3.97% Investments accounted for using the equity method, net 2,085,112 2,083,553 ( 1,559 ) ( 0.07% ) Other financial assets 9,470,121 11,127,387 1,657,266 17.50% Property and equipment, net 17,861,834 18,144,670 282,836 1.58% Intangible assets, net 1,529,378 1,726,210 196,832 12.87% Deferred tax assets 3,250,685 2,730,930 ( 519,755 ) ( 15.99% ) Other assets, net 26,335,185 14,540,215 ( 11,794,970 ) ( 44.79%) Total Assets 1,464,342,585 1,514,170,886 49,828,301 3.40% Liability Due to the Central Bank and banks 64,689,878 46,966,461 ( 17,723,417 ) ( 27.40% ) Financial liabilities at fair value through profit or loss 49,883,193 35,424,460 ( 14,458,733 ) ( 28.99% ) Securities sold under repurchase agreements 93,484,280 68,974,177 ( 24,510,103 ) ( 26.22% ) Payables 20,741,461 28,187,912 7,446,451 35.90% Current tax liabilities 314,486 636,309 321,823 102.33% Deposits and remittances 1,042,220,301 1,113,184,637 70,964,336 6.81% Bank debentures 53,000,000 53,000,000 0 0.00% Reserve for liabilities 990,150 1,119,680 129,530 13.08% Other financial liabilities 47,180,126 44,114,738 ( 3,065,388 ) ( 6.50% ) Deferred tax liabilities 53,552 125,121 71,569 133.64% Other liabilities 2,048,640 2,400,744 352,104 17.19% Total liabilities 1,374,606,067 1,394,134,239 19,528,172 1.42% Capital stock 56,118,710 68,845,983 12,727,273 22.68%

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year change 2015 2016 item value % Capital surplus 8,698,829 23,974,285 15,275,456 175.60% Retained earnings 25,232,822 27,493,301 2,260,479 8.96% Other equity ( 314,843 ) ( 276,922 ) 37,921 ( 12.04% ) Total equity 89,735,518 120,036,647 30,301,129 33.77% Explain of variations： 1. Increases in deposits at the Central Bank and loans to peer banks were mainly attributable to additional interbank loans. 2. Increase in financial assets at fair value through profit and loss was mainly the result of increase in derivative instruments. 3. Increase in repurchase bills and bonds was mainly the result of repurchase bills and bonds reaching maturity last year. 4. Increases in other assets mainly comprised of guarantee deposits paid. 5. Increase in financial liabilities at fair value through profit and loss was mainly the result of derivative instruments. 6. Increase in repurchase bills and bonds was mainly the result of increase in bond trading. 7. Increase in bank debentures payable was mainly the result of bank debentures issued last year. 8. Increase in liability reserve was mainly the result of increase in employee welfare provisions. 9. Increases in share capital and capital reserves were mainly the result of cash issue and capitalized earnings. 10. Decreases in other equity items were mainly attributed to the reduction of unrealized gains on available-for-sale financial assets.

B. Management outcome

Main reasons for major changes in interest income 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 item 2015 2016 value % Net interest income 17,140,777 17,203,966 63,189 0.37% Interest revenues 28,211,330 27,401,213 ( 810,117 ) ( 2.87% ) Interest expenses ( 11,070,553 ) ( 10,197,247 ) 873,306 ( 7.89% ) Net income other than net interest income 15,928,280 14,404,606 ( 1,523,674 ) ( 9.57% ) Net service fee and commissions income 10,616,315 10,349,159 ( 267,156 ) ( 2.52% ) Gain on financial assets and liabilities at fair 4,449,061 2,846,762 ( 1,602,299 ) ( 36.01% ) value through profit or loss Realized gain on available-for-sale financial 393,711 287,053 ( 106,658 ) ( 27.09% ) assets Share of (loss) profit of subsidiaries, associates and joint ventures accounted for using equity 75,600 35,898 ( 39,702 ) ( 52.52% ) method Impairment loss on assets ( 9,457 ) ( 1,571 ) 7,886 100.00% Foreign exchange losses ( 159,826 ) 343,610 503,436 314.99% Net other non-interest income 562,876 543,695 ( 19,181 ) ( 3.41% ) Reversed of bad debts expenses and guarantee ( 2,500,896 ) ( 3,036,866 ) ( 535,970 ) 21.43% liability operating expenses ( 17,487,376 ) ( 17,528,778 ) ( 41,402 ) 0.24% Income before income tax 13,080,785 11,042,928 ( 2,037,857 ) ( 15.58% ) income tax expense ( 1,774,323 ) ( 1,507,302 ) 267,021 ( 15.05% ) Net income 11,306,462 9,535,626 ( 1,770,836 ) ( 15.66% ) Explain of variations： 1. Decrease in gains on financial assets and liabilities at fair value through profit and loss was mainly contributed by decrease in gains on valuation of derivative instruments. 2. Decrease in realized gains on available-for-sale financial assets was mainly contributed to by loss on shares disposed. 3. Increase in shares of subsidiary, associated enterprise, and joint venture profits were mainly the result of increased profits recognized from Xiang-An Life Insurance Agency Co., Ltd. 4. Increase in asset impairment was mainly attributed to the additional impairment loss recognized for Kun Chi Venture Capital. 5. Increase in gains on exchange was mainly the result of higher amounts recognized on spot and forward derivative contracts.

127 C. Cash flow

Liquidity Analysis for the Recent Two Years Unit: % Year 2015 2016 Change Item Cash flow ratio ( 5.57 ) 5.99 207.54% Propriety ratio for cash flow 11.72 37.01 215.78% Satisfaction ratio for cash flow 1,624.61 ( 572.24 ) ( 135.22% ) 1. Increases in interest income were mainly the result of additional interest received from loans. 2. Increases in interest expenses were mainly the result of additional interest paid for structured instruments. 3. Decreases in realized gains on available-for-sale financial assets were mainly contributed to by lower gains from share disposal.

Cash Flow Analysis for the Coming One Year Unit: NT$1,000 Forecast net cash Remedies for anticipated Anticipated cash Value of anticipated Cash balance at the flow from business cash shortfall influx for the entire cash surplus start of the period A activities for the year C (shortfall) A+B+C entire year B Investment plan Funding plan 50,575 14,266 ( 6,616 ) 58,225 - - The company expects that increased deposits partlry resulting from the rollout of new deposit produts and cash inflow deriving from steady profit growth in the coming year will be sufficient to fund new loans and investment for new equipment. Thefore, the will be no cash shortfall.

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

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

Actual or Actual or anticipated fund utilization Actual or planned Total funds Plan items planned funding completion dates needed sources 2013 2014 2015 2016 2017 2013 19,308 19,308 2014 21,253 21,253 Buildings Own fund 2015 22,050 22,050 2016 36,831 36,831 2017 84,001 84,001 2013 237,895 237,895 2014 477,921 477,921 Machinery Own fund 2015 646,430 646,430 equipment 2016 852,401 852,401 2017 1,055,725 1,055,725 2013 50,793 50,793 Transportation 2014 42,099 42,099 Equipment & Own fund 2015 53,142 53,142 Miscellaneous Equipment 2016 33,761 33,761 2017 7,014 7,014 2013 36,704 36,704 2014 50,108 50,108 Leased assets Own fund 2015 55,017 55,017 2016 29,752 29,752 2017 135,879 135,879

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To accommodate new business initiatives in 2017, the bank has committed in a number of system developments, upgrades, and procurements at home and abroad. These projects were aimed to enhance the current operating environment and raise customer loyalty with more product variety and higher quality services.

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

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

F. Analysis and evaluation of risk management

a. A Series of Qualitative and Quantitative Requirements for Risk Management:

1. Credit Risk Management System and Accrued Capital

2016 Credit Risk Management System

Items Contents Credit Risk Management aims at protecting the interests of shareholders by maximizing profits under reasonable risk appetite. As the basis for adjustments in credit policy and collection policy, changes in net cash flow are regularly monitored to catch the trend in asset qualities. Under the prerequisite to comply with laws and regulations, credit risk 1. Credit Risk Management management, follows predetermined business goals, should adopt the following strategies: Strategy, goal, policy, and 1. To emphases cash flow as the main source of payments while earning appropriate returns Process on risk for credit extension; 2. To strengthen credit risk measurement, monitoring and management via various systems, analytical tools and monitoring reports; and 3. To review and adjust credit monitoring methodology and tolerance limits according to the movements of the macro economic situation, the international financial market and so on. In addition to the credit management units under Retail and Wholesale Banking Groups, there is an independent credit risk management unit to coordinate and facilitate the credit portfolio management for the whole bank. Retail Banking Credit Division is in charge of the setting and management of credit policy for Retail Banking Group. Retail business units evaluate and review cases based on the credit policy. Retail Banking Non-Performing Asset Recovery Division is responsible for collection and management of delinquent cases. Retail Banking Credit Division and other Retail business units are parallel units within 2. Credit Risk Management organization. Wholesale Credit Administration Division is the credit risk management unit for Organization and Structure Wholesale Banking Group. It consists of credit administration, credit risk management and special asset management departments. Credit administration department is responsible for the establishment of internal credit rating system, the monitoring of credit risk positions and diversification status, the planning of management measurement, the appraisal of real estate, planning and recheck of loan reviews and examinations, and etc. Credit Risk Management Departments is responsible for loan evaluation and credit extension. Special asset management department is responsible for collection and management of delinquent cases and bad loans, provisioning assessment and loan asset measurement.

129 Items Contents For Retail Banking Group, setting appropriate credit policy based on business goals, by utilizing Applica- tion Scoring System, Behavior Scoring System, Collection/Recovery Scoring System, and Credit Bureau Scoring System and applying multi-dimension risk grading on customers. Coupled with product profit models, customers are grouped into test and champion according to various credit criteria as to strike the best balance between risk and profits. Asset qualities and the characteristics of defaults are analyzed regularly to 3. Scope and features of adjust risk management indicators and achieve the business goals. credit risk report and For Wholesale Banking Group, internal rating system is used for measurement and evaluation system management of credit risk. All cases should be rated during application, and tracked and reviewed afterwards. The internal rating system has two dimensions, Obligor Risk Rating (ORR) and Facility Risk Rating (FRR). ORR applies statistical model and scorecards. FRR analyzes collaterals, claim seniority and product types for limit settings. Internal rating system is re-assessed every year to test its stability and performance. Migration analysis and scenario analysis are also conducted under stress testing framework. Taking collaterals is the main credit risk mitigation technique. Collaterals include real 4. Policies for hedging and/ estate, chattels, and securities. Each of them has its own appraisal method and period. The or mitigating risk and continuing effectiveness of hedges/mitigations is monitored by applying the internal credit strategies and processes rating system, credit portfolio management and review, plus credit exposures diversification for monitoring the and credit limit setting. Strategies and processes for hedging and/or mitigating risk are continuing effectiveness of reviewed and adjusted according to changes in factors such as macro economy or financial hedges/ mitigations. regime. 5. Regulatory Capital Standardized Approach Requirement Methodology

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

Dec. 31, 2016; Unit: NT$1,000

Type of Risk Exposure Risk Exposure after Mitigation Capital Requirement

Sovereigns 268,419,485 9,733

Non-central government public sector entities 206,210 3,754

Banks (including multilateral development bank) 110,279,640 3,402,276

Corporate (including securities and insurance company) 488,370,949 36,982,733

Retails 191,996,038 11,832,347

Residential properties 405,199,397 27,379,161

Equities 3,629,503 914,992

Other Assets 41,423,193 2,312,968

Total 1,509,524,415 82,837,964

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

2016 Securitization Risk Management System

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

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

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

Status of Securitized Business: None.

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

Dec. 31, 2016; Unit: NT$1,000 Exposure type Conventional Synthetic total

Exposure Exposure Capital Capital Capital Capital Exposure Book Type of assets requirement requirement requirement Retained or requirement (5)= type Retained or Liquidity Credit Subtotal (6)= before (2) acquired (4) (1)+(3) Bank acquired facility enhancement (1) (2)+(4) securitization role (3) Mortgage- Banking backed 762,571 762,571 12,201 762,571 12,201 book security Non- Originating bank Trading book

Sub-total 762,571 762,571 12,201 762,571 12,201

Banking book Originating bank Trading book

Sub-total

Total 762,571 762,571 12,201 762,571 12,201

Information on Securitized Products

(1) Summarized Information on Investment in Securitized Products Dec 31, 2016; 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

1 Available–for-sale financial 756,356 5,800 762,156 Total assets–beneficiary certificates 756,356 5,800 762,156 Note 1: This table contains domestic and foreign securitized products, which are registered according to the following categories and listed accounting items: (1) Mortgage-backed securities (MBS): including beneficiary certificate for securitized claims on housing-mortgaged loans or asset-backed securities (RMBS) beneficiary certificates for securitized claims on commercial property-mortgaged loans or asset-backed securitized(CMBS), collateralized mortgage obligation (CMO), and other realty-mortgage securities. (2) Beneficiary certificates or asset-backed securities (ABS): including beneficiary certificates for corporate-loan claims or asset- backed securitized (collateralized loan, obligation, or CLO) beneficiary certificates for securitizedbond assets or asset- backed securities (collateralized bond obligation , or CBO) beneficiary certificates for securitized claims on creditcard debts or asset-backed securities, beneficiary certificates by securitized claims on auto loans or asset-backed securities, beneficiary certificates for securitized claims on consumption loans/cash-card debts or asset-backed securities, beneficiary certificates for securitized leasing claims or assets-backed securities, and other securitized beneficiary certificates or asset-backed securities (3) (ABCP) Short-term beneficiary certificates or short-term asset-backed securities (asset-backed commercial paper) (4) Collateralized debt obligation (CDO). (5) Realty securitization: It refers to real estate asset trust (REAT). (6) Bills and bonds issued as structured investment vehicles (SIV). (7) Other securitized products. Note 2: The table includes beneficiary certificates of asset-backed securities held by the bank with the bank serving as an originating institution.

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(2) Mandatory information disclosure for investment in securitized products with original cost exceeding NT$300 million. (excluding those held for credit enhancement with the bank serving as an originator) : None. (3) Mandatory information disclosure for position of securitized products held by the bank for credit enhancement with the bank serving as an originator: None. (4) Mandatory information disclosure for the bank serving as buyer or position-squaring buyer of securitized assets with impaired credit: None. (5) Mandatory information disclosure for the bank serving as guarantor for securitized products or liquid credit line provided by the bank: None.

3. Operational risk Management system

2016 Operational Risk Management System

Items Contents Taishin Bank got the approval of FSC for the Standardized Approach in 2007. 1. Operational Risk Management Strategy So far, we have developed systems and processes to comprehensively and Process identify, monitor, measure, mitigate, manage and report operational risks. Taishin Bank has set up a operating-risk management framework including the following tools and mechanisms: 1. Loss Event Database (LED) All business and support units are required to report any loss events into the LED system in a timely, accurate manner and to take remedial actions, where necessary, to prevent recurrence of the events. 2. Operational Risk Management 2. Risk Control Self-Assessment (RCSA) Organization and Structure. Front-line personnel are required to perform RCSA for both current and potential risks and to follow up on the risk control weaknesses monthly forenhancements. 3. Key Risk Indicators (KRIs) KRIs have been defined by each business unit as an early warning to alert appropriate management to significant risks faced by the Bank. The scope of operating risk is defined as "risks triggered by improprieties or mistakes of internal flow, staffers, systems, or external incidents, including 3. Scope and features of operational risk legal risk but ex-cluding strategic risk and reputation risk." Meanwhile, the report and evaluation system ORM system has set up to evaluate and monitor the action plan of operational loss event. 4. Policies for hedging or mitigating risk and strategies processes for monitoring The bank has instituted Business Continuity Management (BCM) and taken the continuing effectiveness of hedges/ out insurance as the hedging tools. mitigations. 5. Regulatory Capital Requirement Standardized Approach Methodology

Capital Requirement for Operational Risk Dec. 31, 2016; Unit: NT$1,000

Year Gross Income Capital Requirement 2014 29,500,101

2015 30,972,014 –

2016 31,581,724

Total 92,053,839 4,190,882

133 4. Market risk management system and capital requirement

2016 Market Risk Management System

Items Contents 1. Market Risk Strategy and Taishin market risk policy is meant to manage risk, in order to maximize shareholder's Process value. We have established a risk management framework, including an independent risk management department to maintain integrity of the risk control processes, clearly defined market risk management policies and procedures, and a set of risk limits, which are regularly reviewed to ensure that Taishin's risk taking is consistent with its business strategy, capital structure and current market conditions. 2. Market Risk Management Our market risk team is responsible for daily management and control of our market Organization and Structure risk exposures, ensuring our business activities adhere to our market risk policies. The market risk management team comprises of: a limit control unit responsible for monitoring the use of risk limits approved by board and preparing daily trade profit and lost an IT unit responsible for system development and maintenance, and a Quant Team responsible for VaR calculations, product pricing, stress-testing, model development and validation, and analyzing non-vanilla type derivatives. There is also a finance team responsible for handling settlements and bookkeeping. 3. Scope and features of market Risk reporting is performed in a timely fashion and measurements are made at risk report and evaluation system 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 accomplish this through an independent risk management function, alone with the setup of risk policies and processes, including pricing verifications, benchmarking, model validation and a new product review/ approval mechanism. Quantitative tools: We manage our market risk exposures using a number of quantitative tools, including risk limits, stress tests & scenario analysis, and Value-at- Risk( VaR). Our feature goal is to gain approval from the regulator to use our own internal VaR model in calculating regulatory market risk capital for our general and specific market risks. 4. Policies for hedging or Market risk is managed by diversifying exposures, controlling position sizes and mitigating risk and strategies establishing economic hedges in related securities or derivatives. The ability to and processes for monitoring actively manage risk is related to its hedge strategy, and identifying adverse changes the continuing effectiveness of in the liquidity of an exposure or its related hedge instrument and in the correlation of hedges/ mitigations price movements between the two is essential to effective hedging. We have policies and procedures in place to ensure active and efficient hedges. 5. Regulatory Capital Requirement Standardized Approach Methodology

Capital Requirement for Operational Risk Dec. 31, 2016; Unit: NT$1,000

Type of Risk Capital Requirement

Interest rate risk 2,563,671

Equity securities risk 177,976

Currency rate risk 679,673

Commodity price risk 0

Total 3,421,320

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

(1) Analytical table for the structure of maturity dates for NT-dollar funds Dec. 31, 2016; Unit: NT$1,000 Value for remaining period before maturity Total 181 days- Over one 0 -10 days 11 -30 days 31- 90 days 91-180 days one year year Main fund inflow upon 1,565,786,073 255,333,986 257,195,383 203,322,035 118,162,681 124,800,062 606,971,926 maturity Main fund outflow upon 1,907,497,207 130,688768 176,857,659 306,755,904 280,042,345 362,282,108 650,870,423 maturity Shortfall before ( 341,711,134 ) 124,645,218 80,377,724 ( 103,433,869 ) ( 161,879,664) ( 237,482,046 ) ( 43,898,497 ) maturity

(2) Analytical table for the structure of maturity dates for US-dollar funds. Dec. 31, 2016; Unit: US$1,000 Value for remaining period before maturity Total 181 days-one 0- 30 days 31- 90 days 91-180 days Over one year year Main fund inflow upon 29,640,795 6,764,523 5,783,562 7,146,448 5,173,698 4,772,564 maturity Main fund outflow upon 29,437,817 5,956,678 6,121,748 9,332,673 4,321,409 3,075,309 maturity Shortfall before 202,978 807,845 ( 338,186 ) ( 2,186,225 ) 852,289 1,067,255 maturity

(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 ful-fill guarantee and commitment for credit extension. ██Carry out fund maneuvering at reasonable market prices. ██Meet liquidity need for business growth. Basic principles for funding liquidity-risk management include: ██Principle of diversification: Finance division must avoid over-concentration in fund maneuvering, in terms of maturity date, maneuvering tools, currency, place, funding source, and trading partners. ██Principle of stability: Finance division follows the strategy of fund stability to reduce the reliance on unstable funding sources and avoid the effect of market swing on funding sources. ██Principle of maintaining adequate assets liquidity: As the status of market liquidity will indirectly affect funding liquidity, the bank must assure that total assets are sufficient to cover total liabilities and keep a certain share of assets with good liquidity or good for use as collaterals, capable of meeting need of working capital in emergency and short-term liabilities. ██Principle of matching of assets and liabilities on maturity. ██Pay attention to payment commitment resulting from credit-extension business.

135 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 utiliza- tions. 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. Changes during the year are first verified by the Risk Management Division then escalated by the Financial Management Division to the proper level of approval authority.

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

Name of law/regulations Effect of the bank countermeasures Regarding expansion of eligibility for online loan services, in addition to existing deposit account holders and loan account holders, credit Electronic Banking Security Systems and business practices are modified cardholders and customers of other banks are Guidelines in response to deregulation. now also eligible. The expansion will strengthen existing customer relationships while extending the reach of the loan services. The FSC has allowed The Bank works quickly to develop the beneficiary rights to systems and introduce beneficiary rights to special-purpose money More opportunities to undertake new businesses TWD or foreign currency denominated special- trusts provided by banks and more variety in loan products. purpose money trusts provided by banks to be to be pledged for interbank pledged for interbank loans. The feature offers loans. greater A number of services offered by the Bank can be completed online. While the initial investment Building new systems for new services The on the systems is large, the services offer existing forms, receipts and regulations are Digital Finance 3.0 diversity and convenience, which can entice modified in response to new systems and new new customers to make transactions with the processes. Bank and thereby create stronger relationships between the Bank and existing customers.

136 Financial Status, Review of Business Performance, and Risk Management 07

While Taiwan has not promised to comply with the OECD Common Report Standard, all countries/regions in which the banking Organization for Economic subsidiary has established overseas branches Outside consulting firms were fired to help the Cooperation and are complying with the standard and have banking subsidiary's overseas branches to Development Common amended their regulations accordingly. The implement appropriate measures to comply Report Standard overseas branches are required to examine with the regulations of respective countries/ (OECD Common Report their forms and receipts and modify their regions in which they operate. Standard) regulations and guidelines as well as system implementation to comply with the regulations of respective countries/regions in which they operate In response to the amendment of the Labor Standards Act, one fixed day off and one flexible day off each week will come into effect on December 23, 2016. A sharp increase in To ensure compliance with the applicable labor overtime pay on vacation days is driving the laws, the Company made an announcement company's overtime expenses up. Starting in to inform the workforce in late 2016, and Labor Standards Act 2017, in addition to the increase in the number the human resources guidelines have been of vacation days and the addition of the rules amended according to the law. The human for converting unused vacation days to cash, resources system have been modified by a changes are made to the right to negotiate hired outside vendor. and the right to initiate vacation days, and the Company will raise the management cost of vacation days. c. Effect of technological and industrial changes on the finance of the bank and countermeasures.

1. Impact and response to technological changes (1) Cloud-end service technology

To cope with the new needs arising from various businesses, Taishin Bank has established advanced server virtual platform since 2009, enabling the bank to cut initial investment cost for information system. The bank began to introduce cloud-end service technology since 2012, transforming VIP service in the direction of cloud-end digitalization and increasing the communications and information exchange between VIP clients and the bank. To meet the needs of the bank's offshore branches and chinese offices, the IT department will, beginning in 2013, integrate resources within the bank to enhance customer information management, while achieving simplified work flows and resource sharing that improve the bank's productivity, competitiveness, and management efficiency as a whole, and accomplish our goal to implement smart corporate management without boundaries.

The bank has been planning for the development of a cloud-based environment since 2014, where IT per-sonnel and contractors may work together on software development. Develop concentrated management of needed resources. Doing so not only reduces the cost of PC hardware, but also ensures better security in the development and testing environment.

Cloud technology and security management were combined in 2015 to enable wholesale banking salespersons to access the system while visiting clients away from the office. Salespersons can access client files at any time in order to provide comprehensive financial planning services and shorten the process.

The growing popularity of financial technology (Fintech) is starting a revolution in the banking sector. Taishin takes the initiative to understand and get involved in the lawmaking process. Taishin effectively combines technology and new market trends and sets the goal at "meeting customer demand for personalization and differentiation at the right time".

137 Interaction between customers and Taishin is tracked by big data analytics across the virtual world and the real one. The approach provides an insight into customer needs and identifies financial planning needs or exclusive offers for each individual. As a result, financial services have truly become integral part of the everyday life. Furthermore, following another step of deregulation embodied by the Bank 3.0 policy, Taishin has constructed an online loans platform that moves customer solicitation and various operating procedures further into the digital world.

(2) Mobile payment In light of the latest Internet and cell phone technologies, the bank will commit more resources to develop platforms, apps, and new ideas that can be used for mobile payments, thereby giving us the ability to serve customers anytime, anywhere. (3) Plans for big data development In response to the rise of big data analytics and the growing demand of increasingly diversified data sources and formats and the need for instant processing, investment has been made to explore the following areas for potential commercial applications. ██Open government data: to increase data diversity and explore new approaches to data analysis. ██Text mining techniques: to listen to clients' voice on the outside. ██Visual analytical tools: to facilitate more efficient interpretation and reduce cost of communication. ██Digital channel visitor ● tracker collection and analysis: to get a better understanding of customer behavior. ● Real-time scenario marketing: Providing personalized contact and offers through appropriate channels at the appropriate time. ██Leased cloud service platform: Computing resources can be shared without large setup expenses. There is saving to be made on future maintenance and management, and software services can be installed as needed. ● Building a knowledge graph to identify relations. ● Implement content desensitization for better cloud security. ● Use deep learning to enhance model forecasts. ● Promote self-service analytics for better application performance. ██Collection of new data formats ● Voice recognition at the call center ● Cloud based geographic information and graphs

(4) Development of digital finance: As more and more people have mobile phones and access to mobile broadband, more and more people are starting to use mobile phone apps, which in turn fuels progress in new payment tools. According to the FSC's Fintech White Paper, the government will proceed in multiple directions to promote electronic payment services. The target is to increase the percentage of electronic payments out of total spending in Taiwan to 52% by 2020. In particular, the FSC will focus its campaign for electronic payment services on government departments, hospitals and other medical institutions, night markets and other small vendors. The support of government policy will have a positive effect on the development of new payment tools. Taishin will continue to invest in the R&D and system design in the area. The Bank plans to introduce Taishin e-Payments that will offer a payment experience combining social media and payments. In addition to targeting micro/proprietary businesses, the bank will also team up with large merchants to promote electronic wallets. Regarding cross-border payment services, the bank will continue to work with large chains and introduce the service to major shopping districts. Regarding mobile payment services, the Bank takes an active approach to adopting mainstream payment models (e.g. Apple Pay, Android Pay, and Samsung Pay). It also forms strategic alliances with electronic commerce/third party/ electronic payment service providers in developing money service tools and seeking new opportunities in the mobile payment market.

138 Financial Status, Review of Business Performance, and Risk Management 07

Furthermore, to win over younger customers who prefer digital channels, Taishin launched Richart digital banking. It offers a range of digital financial services designed to combine deposit, expense, and investment under one account. The concept behind Richart is a simple, flexible and easy to use design that provides transparency and understands its customers, which has turned the traditional banking model upside down. In particular, the three innovative features, "pre-login preview", "card free withdrawal", and "money saving credit card" have been granted patents. In addition, Easy Transfer is a first-of-its-kind feature that is popular with customers. The innovative services offered by Richart, in addition to responding to customer needs, adopt two-factor authentication and biometrics for better transaction security and peace of mind for the customers. The Bank will continue to introduce different digital financial services and endeavor to stay always ahead of the competition in the digital era.

2. Impact and response to industry changes

In response to a rapidly changing banking industry, the bank has incorporated resources to provide up-to- date industry analysis so as to improve the quality of its credit assessments. Furthermore, the bank has set risk limits on various industries, and on the group as a whole, to monitor the latest industry developments and how they affect the bank's credit risks. d. Effect of change in the corporate images of the bank and countermeasures.

In addition to the painstaking management for the financial business, Taishin Financial Holdings, 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) Make the bank's service and product portfolio more comprehensive therefore providing customers with greater variety and meeting their needs to drive revenue growth. (2) Ability to serve customers through a more tightly integrated platform, thereby giving them more convenience and facilitating expansion of the bank's financial services. (3) Potential to integrate information systems, marketing resources and operating platforms, while making more efficient use of the company's resources at lower costs.

2. Possible risks for acquisition

Risks associated with mergers and acquisitions lie in execution and integration. Only when businesses, personnel, resources and corporate culture are integrated as planned can mergers deliver the hoped for synergies.

3. Countermeasure: The bank will develop effective management practices and open communication channels to ensure thesmoothness of merger transitions, and ultimately achieve the expected synergies.

139 f. Anticipated benefits from the expansion of business offices, possible risk, and countermeasures:

1. In 2016, the bank was approved for an additional branch, which would open at No. 11-1, Cheqian Rd., Wenshan Dist, Taipei City, and be named Jingmei Branch. The branch opened on October 7, 2016.

2. The Bank's selection of branch location is always preceded by a complete market survey and assessment, which gathers information on local wealth concentration, growth, and business activities. Meanwhile, the Bank starts with a branch network and the idea of balanced development to increase the width of customer services provided by the Bank. The mission is to deliver on the expected benefits including becoming more competitive in the market, increasing the number of wealth management accounts, and providing customers easier, faster, better quality services. The Bank relies on its extended branch network to facilitate the development of the Bank's service network.

3. Expanding branch coverage may result in a number of risks such as over supply of services in the nearby area, over-competition for the same customers etc.

4. The Bank conducts thorough assessments before committing to any new branch establishments. It also adjusts business strategies and risk management policies where appropriate to respond to the risks it encounters.

g. Risk associated with business concentration

1. Backup mechanism

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

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: None.

i. Impact on the Bank and risk and response measures as a result of change of any major shareholder with more than 1% ownership interest or of large transfer/exchange of equity: The Bank is a wholly owned subsidiary of Taishin Financial Holding Co., Ltd.

140 Financial Status, Review of Business Performance, and Risk Management 07

j. Litigation and non-litigation incident:

Major Amount Parties nonlitigation Fact in contention Start date Status (Unit: NT$/1,000) involved event KIFA COMPANY LIMITED(KIFA) The Bank, on KIFA COMPANY LIMITED (KIFA) December 16, 2016, failed to perform its obligations USD30 million KIFA received the result Promissory note regarding financial products, and in promissory 2016.12.08 COMPANY of promissory notes adjudication the bank filed an application for notes LIMITED adjudication, but has adjudication of promissory notes not received the final issued by KIFA. confirmation.

k. Other major risks and countermeasures: None.

Following the pace of overseas expansion and implementation of international standards, Taishin reiterates its risk based approach and the extension of its anti-money laundering and counter terrorist financing practices into new areas as businesses expand. In 2016, Taishin refined its outsourced anti-money laundering system. Databases are linked to facilitate monitoring and ensure effective management mechanisms.

Regarding overseas branches, the Singapore Branch and the Japan Branch are now open. The anti-money laundering controls have been incorporated into the daily routines. The Hong Kong Branch is in the process of upgrading its system. A project has been created to hire professional consultants to perform an institutional risk assessment. Anti-money laundering guidelines will be established for other regions as new branches open.

In addition, Taishin complied with the competent authority's requirement and created a full-time unit to check risk data for more coordinated management. Taishin's anti-money laundering practices are improved with a risk analysis oriented management style.

G. Crisis response mechanism:

Taishin Bank has formulated the policy of“Business Continuity Management" (BCM) to assure the continuity of the company's essential business activities. Based on the BCM policy, all units in Taishin set up their BCP to ensure that the essential operations can be maintained or recovered in a timely fashion in the event of a disruption. Its purpose is to minimize the operational, financial, legal, disruption. A BCM system has been built to summarize relevant information for more systematic management.

H. Other important affairs: None.

141 VIII. Special Notes

A. Information of affiliates

a. Consolidated financial statement with affiliates

In 2016, the affiliated enterprises subject to the preparation of consolidated business reports in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Fi- nancial Statements of Affiliated Enterprises," were identical to the affiliated companies subject to the preparation of consolidated financial statements under under the Statement of Financial Accounting Standards No. 27. All mandatory disclosure of the consolidated business reports has already been executed in the consolidated financial statements, therefore no separate consolidated business report was prepared.

b. Consolidated financial statement with affiliates

1. Organizational chart of affiliates

Taishin International Bank Organizational chart of affiliates

(Base date: Dec 31, 2016)

Taishin International Bank

100% 87.4% 60%

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

Note: Taishin Insurance Agency Co., Ltd. was renamed Xiang-An Life Insurance Agency Co., Ltd. on August 2, 2016.

142 Special Notes 08

2. Business status of affiliates Dec. 31, 2016; Unit: NT$1,000 Current After-tax Total Total Book Operating Operating Name of enterprises Capital Profit/loss Profit/loss Assets Liabilities Value revenue profit (after tax) Per share Taishin D.A. Finance 800,000 4,799,203 4,097,938 701,265 394,828 13,668 8,367 0.10 Xiang-An Life Insurance 30,000 844,944 81,905 763,039 111,197 30,473 27,234 9.08 Agency Co., Ltd. Taishin Real Estate 200,000 616,740 260,485 356,255 86,813 61,080 55,395 2.56 Management Note 1: All affiliates, regardless of size, are required to make the disclosure. Note 2: Affiliates that are foreign companies shall show all figures in TWD by converting them at the exchange rates applicable on the report date. Note 3: Taishin Insurance Agency Co., Ltd. was renamed Xiang-An Life Insurance Agency Co., Ltd. on August 2, 2016.

3. Information on affiliates Dec. 31, 2016; Unit: NT$1,000 Name of Date of Paid-in Address Major business or product items enterprise establishment Capital Xiang-An 3th fl., No.44 LifeInsurance Jhongshan N. 1996.09.19 30,000 Agency for personal insurance. Agency Road, Sec.2, Co., Ltd. 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 parts. Taishin D.A. 1st Floor, No. 211, 8. Retail of flying devices and parts. Finance 1997.10.13 Sec Road, Taipei 800,000 9. procurement of money debt claim of financial institutions. Co.,Ltd. Neihu Jiuzong 10. Management consulting. 11. Information software service. 12. Information processing service. 13. Other business services. 14. In addition to the licensed activities, the company may also engage in other business activities that are not prohibited or restricted by law. 1. Construction management industry. 2. Residence and office building development and leasing. 3. Development and leasing of industrial factories. 4. Specific professional zone development. 5. Investment and construction of public construction projects. Taishin 6. New town and new community development. 2th fl., No.9, Real Estate 7. Agency for area ex propriation and urban land rezoning. 1995.08.17 DehuiStreet, 200,000 Management 8. Urban renewal. Taipei city Co., Ltd. 9. Realty transaction. 10. Realty leasing. 11. Business credit investigation. 12. In addition to the licensed activities, the company may also engage in other business activities that are not prohibited or restricted by law. Note: Taishin Insurance Agency Co., Ltd. was renamed Xiang-An Life Insurance Agency Co., Ltd. on August 2, 2016.

143 4. Information on directors, supervisors, and presidents

Dec.31, 2016; Unit: shares Shareholding Name of enterprise Title Name or representative Shareholding Stake (Representative) Taishin International Bank 80,000,000 100.00% Chairman Li-Hsiung Chen Director Oliver Shang Taishin D.A. Finance Director Joseph Jao Director Steve S.F. Shieh Supervisor Welch Lin President Chih-Fang, Tsai - - (Representative) Taishin International Bank Steve 2,622,040 87.40% Chairman S.F. Shieh Director David Chang

Xiang-An Life Director Welch Lin Insurance Agency Co., Ltd. Director Jeffrey Wu (Natural Person) Supervisor Spike Wu President Guo-Ming Dai - - (Representative) Taishin International Bank 12,000,000 60.00% Chairman Jeffrey T.S. Wu Director Thomas T.L. Wu Taishin Real Estate Director Shean Yng Liaw Management (Representative) Taishin Asset Management 8,000,000 40.00% Supervisor Welch Lin President Shean Yng Liaw - - Note1: Affiliates that are foreign companies should list persons in equivalent positions. Note2: Subsidiaries that are companies limited by shares should provide the number of shares and percentage of shareholding; and other subsidiaries should provide the amount and percentage of investment and appropriate proof. Note3: Institutional directors and supervisors should also provide information on their representatives. Note4: Taishin Insurance Agency Co., Ltd. was renamed Xiang-An Life Insurance Agency Co., Ltd. on August 2, 2016

144 Special Notes 08

c. Affiliate report

Statement

Taishin International Bank Statement on Affiliation Report

The company's affiliation report for fiscal 2016 (Jan.1, 2016-Dec. 31, 2016) was compiled according to guidelines for Compilation of Consolidated Business Report, Consolidated Financial Statement, and Affiliation Report of Affili-ates, 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

Wu, Tong-Liag Chairman

Feb. 16, 2017

145 CPA Inspection Opinion on Affiliation Report

April 20, 2017

Taishin International Bank Co.,Ltd.

Gentlemen: NO SIGNIFICANT DEFICIENCIES BETWEEN THE INFORMATION WITHIN THE 2016 AFFILIATION REPORT AND TE NOTES OF 2016 FINANCIAL STATEMENTS

1. Your company has issued a statement, as attached, indicating your 2016 affiliation report for the period from January 1, 2016 to December 31, 2016 was complied with“Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises". The statement also indicated the information within the 2016 affiliation report has no significant differences from the related notes of your 2016 financial statements.

2. we have reviewed and compared the information within your 2016 affiliation repor and the notes of your 2016 financial statements. Based on our procedures, we did not find any significant deficiencies.

Very truly yours

Deloitte & Touche Taiwan Certified Public Accountant-Tza Li Gung

Certified Public Accountant-Qinzhen Yang

146 Special Notes 08

d. Relationship between subordinated and controlling company

Dec.31, 2016; Unit: share / % Shareholding and lien obligation of controlling Director, supervisor, or manager Controlling Controlling company representating controlling company company name Reason Shares owned Share of stake Shares with lien Title Name

Chairman Tong-Liang Wu Director Tong-Liang Wu Director Teh-Nan Hsu Director Jui-Sung Kuo Director Shang-Pin Wu

Own 100% of Director Chu-Chan Wang Taishin the shares with Financial voting right 6,884,598,317 100.00% - Director Long-Su Lin Holding issued by the Independent Co., Ltd. Yi-Fu Lin bank director Independent Neng-Pai Lin director Standing Yang-Tzong Tsay Supervisor Supervisor Chih-Shang Kao Supervisor Chia-Chung Cheng

e. Dealing between subordinated and controlling company

1. Dealing for purchase and sale: None. 2. Property dealing: None. 3. Fund lending: None. 4. Asset leading Unit:NT$1,000

Type of Target Method Amount Comparison Collection Other dealing Nature of rental of Lease Period Basis for rental with common of current agreed (Rental out of Lease collection current Name Address rental level rental conditions or On lease) (payment) rental

Fl. 13, No. 118, Renai Road, Business Set on reference Monthly Similar to Deposit of Rental out 2012.05.01 2017.04.30 925 Normal Sec. 4, Taipei lease of market price collection market price 225 Fl. 13, No. 118, Renai Road, Business Set on reference Monthly Similar to Deposit of Rental out 2012.07.01 2017.06.30 164 Normal Sec. 4, Taipei lease of market price collection market price 40 Fl. 16, No. 118, Renai Road, Business Set on reference Monthly Similar to Deposit of Rental out 2015.11.01 2020.10.31 7,429 Normal Financial Sec. 4, Taipei lease of market price collection market price 1,832 Holding Fl. 17, 19, No. 118, Business Set on reference Monthly Similar to Deposit of Rental out Building 2013.03.01 2018.02.28 13,826 Normal Renai Road Sec. 4, Taipei lease of market price collection market price 3,217 Fl. 12, 13, 16, 20, 21,22,23, No. 118, Business Set on reference Monthly Similar to Deposit of Rental out 2016.01.01 2020.12.31 6,258 Normal Renai Road, Sec. 4, Taipei lease of market price collection market price 2,114 Fl. 18, No. 118, Renai Road, Business Set on reference Monthly Similar to Deposit of Rental out 2011.03.17 2016.03.16 1,769 Normal Sec. 4, Taipei lease of market price collection market price 412 Taiwan Fl. 12, 13, No. 96, Business Set on reference Monthly Similar to Deposit of Rental out Securities 2015.05.01 2020.04.30 11,763 Normal Jianguo N. Road, Sec. 1, Taipei lease of market price collection market price 2,841 Building

147 Type of Target Method Amount Comparison Collection Other dealing Nature of rental of Lease Period Basis for rental with common of current agreed (Rental out of Lease collection current Name Address rental level rental conditions or On lease) (payment) rental

Fl. 2, No,. 44,Jhongshan N. Road, Sec. Business Set on reference Monthly Similar to Deposit of Rental out 2012.12.01 2017.11.30 9,419 Normal 2, Jhongshan District, Taipei lease of market price collection market price 2,355 Zhung Fl. 2, No,. 44,Jhongshan N. Road, Sec. Business Set on reference Monthly Similar to Deposit of Rental out 2015.05.01 2017.11.30 5,300 Normal Shan 2, Jhongshan District, Taipei lease of market price collection market price 1,708 Building Fl. 3, No,. 44, Business Set on reference Monthly Similar to Deposit of Rental out Jhongshan N. Road, Sec. 2, 2014.08.01 2019.07.31 4,342 Normal lease of market price collection market price 891 Jhongshan District, Taipei Fl. 1, No. 211, Jiuzhong Road, Sec. Business Set on reference Monthly Similar to Deposit of Rental out 2013.09.01 2018.08.31 4,455 Normal 2, Neihu District, Taipei lease of market price collection market price 1,271 Fl. 6, No. 207, Jiuzhong Road, Sec. Business Set on reference Monthly Similar to Deposit of Rental out 2013.01.01 2017.12.31 437 Normal Neihu 2, Neihu District, Taipei lease of market price collection market price 109 Building Fl. 5, No. 207, Jiuzhong Road, Sec. Business Set on reference Monthly Similar to Deposit of Rental out 2013.01.01 2017.12.31 2,289 Normal 2, Neihu District, Taipei lease of market price collection market price 572 Fl. 5, No. 207, Jiuzhong Road, Sec. Business Set on reference Monthly Similar to Deposit of Rental out 2013.06.01 2016.05.31 208 Normal 2, Neihu District, Taipei lease of market price collection market price 156 Nantun Fl. 2,3, No. 187,Dongxing Road, Business Set on reference Monthly Similar to Deposit of Rental out 2015.06.01 2020.05.31 1,515 Normal Building Sec. 2, Nantun District, Taichung City lease of market price collection market price 379 Yongfu Fl.5, No.150, Sec.2, Yongfu Rd., Business Set on reference Monthly Similar to Deposit of Rental out 2013.12.01 2018.11.30 301 Normal Building West Central Dist., Tainan City lease of market price collection market price 75 Wufu Fl.3, No.116, Wufu 2nd Rd., Business Set on reference Monthly Similar to Deposit of Rental out 2013.12.01 2018.11.30 347 Normal Building Xinxing Dist., Kaohsiung City lease of market price collection market price 87 Lingya 3F.-1, No.260, Zhongshan 2nd Rd., Business Set on reference Monthly Similar to Deposit of On lease 2012.12.01 2017.09.30 1,952 Normal Building Qianzhen Dist., Kaohsiung City lease of market price collection market price 460 guarantee Fl.1, No. 95, Wenchang Road, Business Set on reference Monthly Similar to deposits On lease 2016.10.01 2018.09.30 151 Normal Shilin District, Taipei lease of market price collection market price & margins paid 0 guarantee Business Set on reference Monthly Similar to deposits On lease ATM Shin Kong Mitsukoshi 2016.01.01 2016.12.31 1,386 Normal lease of market price collection market price & margins paid 0 guarantee deposits Fl.1, b1, No. 150, Nanjing E. Road, Business Set on reference Monthly Similar to On lease 2016.04.16 2021.04.15 9,120 Normal & margins Sec. 2, Taipei lease of market price collection market price paid 2,280 guarantee deposits F1.1, No. 66-3, Sanchong Rd., Business Set on reference Monthly Similar to On lease 2013.05.01 2018.07.31 6,372 Normal & margins Nangang Dist., Taipei lease of market price collection market price paid 1,463 guarantee B2, No. 44, Jhongshan Business Set on reference Monthly Similar to deposits On lease 2015.03.01 2016.02.28 44 Normal N. Road, Sec. 2, Taipei (208.209) lease of market price collection market price & margins paid 0 guarantee B2, No. 44, Jhongshan Business Set on reference Monthly Similar to deposits On lease N. Road, Sec. 2, Taipei City 2016.03.01 2017.02.28 221 Normal lease of market price collection market price & margins (208.209) paid 22 guarantee B3, No. 44, Jhongshan Business Set on reference Monthly Similar to deposits On lease N. Road, Sec. 2, Taipei City 2015.11.01 2016.10.31 110 Normal lease of market price collection market price & margins (338) paid 0 guarantee B3, No. 44, Jhongshan Business Set on reference Monthly Similar to deposits On lease 22 Normal N. Road, Sec. 2, Taipei City(221) lease of market price collection market price & margins 2016.11.01 2017.10.31 paid 11

148 Special Notes 08

guarantee Fl., 4-1, 4-2, No. 207, Fuxing Road, Business Set on reference Monthly Similar to deposits On lease 2015.09.01 2016.08.31 1,142 Normal Taoyuan City, Taoyuan County lease of market price collection market price & margins paid 0 guarantee Fl. 4-1, 4-2, No. 207, Fuxing Road, Business Set on reference Monthly Similar to deposits On lease 2016.09.01 2018.08.31 571 Normal Taoyuan City, Taoyuan County lease of market price collection market price & margins paid 446

5. Other important dealings: None.

f. Mutual endorsement or guarantee between subordinated company and controlling company: None.

B. Securities and financial bonds issuance via private placement in 2016 and as of February 28, 2017:

2016 First Private Placement Item Date of issue: June 16, 2016 Type of privately placed securities Ordinary shares Date of shareholder meeting and amount Date of shareholder meeting: Apr 21,2016 approved Quantity: 363,636,364 shares Pricing basis and rationality The pricing basis was the net stock prices of other financial holding companies. The issued shares were100% subscribed by the bank's shareholder - Taishin Selection of specific subscribers Financial Holdings Reasons for private placement To maintain the bank's single-shareholder structure Payment completion date June 16, 2016 Involvement Subject of private Amount Relationship Eligibility in The Bank's placement subscribed to The Bank management Subscriber's background Article 43-6, The bank's entire Paragraph 1, board of directors Taishin Financial Parent Subparagraph 1 of 100% are appointed Holding Co., Ltd. company the Securities and by the parent Exchange Act company Actual subscription (or conversion) price NT$22 per share Difference between the actual There was a NT$6.01 difference between the reference price, NT$15.99, subscription (or conversion) price and and the actual subscription price NT$22. the reference price Impacts to shareholders' equity following the private placement (e.g.: increase in No impacts to shareholders' equity. accumulated losses etc.) Planned and actual usage of privately The raise of capital was completed on June 16, 2016 raised capital The private cash issue had the effect of strengthening the bank's capital structure and Benefits of the private equity placement increasing its capital adequacy ratio.

149 2016 second Private Placement Item Date of issue: Dec 30, 2016 Type of privately placed securities Ordinary shares Date of shareholder meeting and amount Date of shareholder meeting:Nov 3,2016 approved Quantity: 909,090,910 shares Pricing basis and rationality The pricing basis was the net stock prices of other financial holding companies. The issued shares were100% subscribed by the bank's shareholder - Taishin Selection of specific subscribers Financial Holdings Reasons for private placement To maintain the bank's single-shareholder structure Payment completion date Dec 30, 2016 Involvement Subject of private Amount Relationship Eligibility in The Bank's placement subscribed to The Bank management Subscriber's background Article 43-6, The bank's entire Paragraph 1 , board of directors Taishin Financial Parent Subparagraph 1 100% are appointed Holding Co., Ltd. company of the Securities by the parent and Exchange Act company Actual subscription (or conversion) price NT$22 per share Difference between the actual There was a NT$5.75 difference between the reference price, NT$16.25, subscription (or conversion) price and and the actual subscription price NT$22. the reference price Impacts to shareholders' equity following the private placement (e.g.: increase in No impacts to shareholders' equity. accumulated losses etc.) Planned and actual usage of privately The raise of capital was completed on Dec 30, 2016 raised capital The private cash issue had the effect of strengthening the bank's capital structure and Benefits of the private equity placement increasing its capital adequacy ratio.

C. Holding or disposal of the bank's shares by subsidiaries in the recent year and as of the date of the publication of the annual report: None.

D. Other necessary supplementary explanation: None.

150 Directory of Head Office & Branches 09

IX. Directory of Head Office & Branches

Business units Address Telephone

Greater Taipei Area Head Office & Business No.44, Sec. 2, Jhongshan N. Rd., Jhongshan District, Taipei City, Taiwan (R.O.C.) (02) 2568-3988 Department

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

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

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

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

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

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

International Department 2F.,6F No.17, Sec. 2, Jianguo N. Rd., Jhongshan District, Taipei City, Taiwan (R.O.C.) (02) 2505-6966

Lujhou Branch No.265, Minzu Rd., Luzhou District, New Taipei City, Taiwan (R.O.C.) (02) 2848-5858

Tienmou Branch No.88, Sec. 6, Jhongshan N. Rd., Shilin Dist., Taipei City, Taiwan (R.O.C.) (02) 2836-3988

Offshore Banking Unit 2F.,6F No.17, Sec. 2, Jianguo N. Rd., Jhongshan District, Taipei City, Taiwan (R.O.C.) (02) 2505-6966

Jhonghe Branch No.341, Jhonghe Rd., Yonghe District, New Taipei City, Taiwan (R.O.C.) (02) 2232-7788

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

Da-an Branch No.118, Sec. 3, Sinyi Rd., Da-an District, Taipei City, Taiwan (R.O.C.) (02) 2700-9388

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

Jianciao Branch No.150, Sec. 2, Nanjing E. Rd., Jhongshan Dist., Taipei City, Taiwan (R.O.C.) (02) 2508-1899

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

South Sinjhuang Branch No.58, Fuguo Rd., Xinzhuang District, New Taipei City, Taiwan (R.O.C.) (02) 2906-8868

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

Yonghe Branch No.195, Jhulin Rd., Yonghe District, New Taipei City, Taiwan (R.O.C.) (02) 8928-0588

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

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

151 Business units Address Telephone

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

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

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

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

Bannan Branch No.41, Guancian E. Rd., Banqiao District, New Taipei City, Taiwan (R.O.C.) (02) 2956-6789

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

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

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

Keelung Rd. Branch No.55, Sec. 2, Keelung Rd., Xinyi District, Taipei City, Taiwan (R.O.C.) (02) 2735-2567

Sindian Branch No.114,JianguoRd., Sindian District, New Taipei City, Taiwan (R.O.C.) (02) 2915-7766

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

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

Songjiang Branch No.236, Songjiang Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.) (02) 2523-7166

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

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

South Songshan Branch No.108, Sec. 5, Nanjing E. Rd., Songshan District, Taipei City, Taiwan (R.O.C.) (02) 2528-6188

Danshui -Branch No.76, Jhongshan Rd., Tamsui District, New Taipei City, Taiwan (R.O.C.) (02) 2626-8689

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

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

Peishih Branch No.347,Sec.2,HepingE.Rd.,Da-anDistrict,TaipeiCity, Taiwan(R.O.C.) (02) 2705-8588

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

Songde Branch No.408, Sec. 5, Zhongxiao E. Rd., Xinyi Dist., Taipei City, Taiwan (R.O.C.) (02) 8789-5788

Nangang Branch No.66-3, Sanchong Rd., Nangang Dist., Taipei City, Taiwan (R.O.C.) (02) 2655-9988

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

Wenshan Branch No.9, Baoyi Rd., Wenshan Dist., Taipei City, Taiwan (R.O.C.) (02) 2938-2323

Sinyi Branch No.1, Songgao Rd., Xinyi Dist., Taipei City, Taiwan (R.O.C.) (02) 2723-0088

152 Directory of Head Office & Branches 09

Business units Address Telephone

Minsheng Branch No.88, Sanmin Rd., Songshan Dist., Taipei City, Taiwan (R.O.C.) (02) 8787-2680

Fuduxin Branch No.150, Zhongyuan Rd., Xinzhuang Dist., New Taipei City, Taiwan (R.O.C.) (02) 8521-1388

Jingmei Branch No.11-1, Cheqian Rd., Wenshan Dist., Taipei City (02) 2930-3013

Taoyuan, Hsinchu, Miaoli Area

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

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

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

Longtan Branch No.176, Jhongjheng Rd., Longtan Dist., Taoyuan City, Taiwan (R.O.C.) (03) 499-3800

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

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

Nankan Branch No.68, Zhongzheng Rd., Luzhu Dist., Taoyuan City, Taiwan (R.O.C.) (03) 321-5999

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

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

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

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

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

Zhunan Branch No.61, Minzu St., Jhunan Township, Miaoli County, Taiwan (R.O.C.) (03) 746-8777

Greater Taichung Area

Taichung Branch No.416, Sec. 2, Taiwan Blvd., West Dist., Taichung City, Taiwan (R.O.C.) (04) 2328-5577

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

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

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

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

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

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

153 Business units Address Telephone

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

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

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

Wunsin Branch No.218, Sec. 1, Wenxin Rd., Nantun Dist., Taichung City, Taiwan (R.O.C.) (04) 2473-6767

Daya Branch No.242, Zhongqing E. Rd., Daya Dist., Taichung City, Taiwan (R.O.C.) (04) 2565-2299

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

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

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

Chiayi-Tainan Area

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

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

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

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

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

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

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

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

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

Jiali Branch No.290, Yanping Rd., Jiali Distrcit, Tainan City, Taiwan (R.O.C.) (06) 722-6655

Kaohsiung-Pingtung Area

Kaohsiung Branch No.10, Mingcheng 4th Rd.,Gushan Dist., Kaohsiung City 80457, Taiwan (R.O.C.) (07) 553-6653

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

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

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

Wujia Branch No.734 Wujia 2nd Rd., Fengshan Dist., Kaohsiung City, Taiwan (R.O.C.) (07) 813-1168

154 Directory of Head Office & Branches 09

Business units Address Telephone

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

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

Sanmin Branch No.573, Chengqing Rd., Sanmin Dist., Kaohsiung City, Taiwan (R.O.C.) (07) 398-7111

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

Gangshan Branch No.95, Weiren Rd., Gangshan District, Kaohsiung City, Taiwan (R.O.C.) (07) 621-9677

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

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

Hualien-Taitung Area

Hualien Branch No.408-9, Jhongjheng Rd., Hualien City, Hualien County, Taiwan (R.O.C.) (03) 834-5930

Luodong Branch No.153, Gongjheng Rd., Luodong Township, Yilan County, Taiwan (R.O.C.) (03) 953-3366

Overseas unit

Singapore Branch 61 ROBINSON ROAD, #15-01,ROBINSON CENTRE,SINGAPORE 068893 (65) 6224-0888

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

Tokyo Branch in Japan 8F, Meiji Yasuda Life Insurance Bldg.,2-1-1 Marunouchi, Chiyoda-ku, Tokyo 100-0005 (81) 3-3212-6668

HO CHI MINH CITY R.O. Osic Building 7Fl., No.8 , Nguyen Hue Street, District 1, Ho Chi Minh CityVietnam (84) 838228375

422, Strand Road (Corner of Botahtaung Pagoda Road), #03-01, Botahtaung Township, Yangon Office, Myanmar (95) 1203409 Yangon, Myanmar

155 Appendix I. Financial Statements and Independent Auditors' Report

INDEPENDENT AUDITORS' REPORT

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

Opinion

We have audited the financial statements of Taishin International Bank Co., Ltd. (the Company), which comprise the balance sheets as of December 31, 2016 and 2015, and the statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2016 and 2015, and the notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2016 and 2015, and its financial performance and its cash flows for the years ended December 31, 2016 and 2015, in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks and the Regulations Governing the Preparation of Financial Reports by Securities Firms, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements of Financial Institutions by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2016. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

The following were the description of key audit matters in the audit of the financial statements of the Company for the year ended December 31, 2016:

156 Appendix I. Financial Statements and Independent Auditors' Report 10

Impairment of Loans and Receivables from Defaulted Financial Instruments

The core businesses of the Company are commercial loans and issuing of various financial instruments. Loans are a significant account because it accounted for 58% of total assets at December 31, 2016. Financial instruments are also significant because they are susceptible to market exchange rate or interest rate volatility and exposed to counterparty default credit risk. The Company assesses loans, and receivables from defaulted financial instruments for impairment in accordance with IAS 39 "Financial Instruments: Recognition and Measurement". Please refer to Notes 5, 10 and 11 to the consolidated financial statements for relevant information. The above mentioned impairment assessment is made by management using judgments and assumptions. Please refer to Note 6 to the consolidated financial statements for additional information. Therefore, we consider impairment of loans, and receivables from defaulted financial instruments as a key audit matter.

We tested the design and operating effectiveness of controls and procedures for identifying loans and advances exposed to impairment and for ensuring that provisions against those assets are made. We identified loans and checked from public information whether the borrowers were possibly problematic companies, or already included in the companies under evaluation for credit limits. We assessed the reasonableness of the effective interest rate used in estimating future cash flows and the value of collaterals to confirm whether the Company has properly evaluated the provision for bad debts of problematic credit loans. We also evaluated whether the assumptions used in the impairment assessment model of the Company were reasonable in view of the current economic condition and actual situation of the loans and based on the occurrence rate and recovery rate of impairment in the past. Simultaneously, we checked the Company's compliance with regulations on assessment of impairment and we verified consistency of impairment calculation models.

We tested the design and operating effectiveness of the related controls in the Company's valuation of receivables from defaulted financial instruments. We also reviewed sample data on impairment assessment of receivables from defaulted financial instruments. Moreover, we verified whether impairment loss was recognized in accordance with IAS 39 and related regulations and whether payments were received after the date of financial statements.

Accuracy of Loans' Interest Revenue Recognition

For the year ended December 31, 2016, loans interest revenues were $21,728,946 thousand, accounting for 68% of net revenue and gains; thus, a very significant account in the financial statements and a key audit matter. Please refer to Notes 5 and 28 to the consolidated financial statements for related information.

Loans interest revenue is mainly calculated by the information system which uses data inputs and system parameters and arithmetic logic. We tested the design and operating effectiveness of the related controls over the system. The audit procedures included tests of accuracy of loans interest revenue recognized, and tests whether controls over the authorities of responsible personnel who operate the system are effective. We selected and recalculated one month data from the annual interest revenue recognized using the information system and confirmed the amount to the carrying amount in the books.

Others

On April 24, 2016, the Company merged with Taishin Holdings Insurance Brokers Co., Ltd. which was held by Taishin Financial Holding, please refer to Notes 1 and 44. This consolidation is reorganization under common control. According to IFRS Q&A and interpretation issued by ARDF, when the Company prepared comparative financial statements, the financial statements were retroactively restated to reflect the merger assuming both entities had merged.

157 Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks, the Regulations Governing the Preparation of Financial Reports by Securities Firms, International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including the supervisors, are responsible for overseeing the Company's financial reporting process.

Auditors' Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with the auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.

3.Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

158 Appendix I. Financial Statements and Independent Auditors' Report 10

exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements for the year ended December 31, 2016 and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors' report are Tza Li Gung and Ching Cheng Yang.

February 16, 2017

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

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

159 TAISHIN INTERNATIONAL BANK CO., LTD.

BALANCE SHEETS DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Par Value)

2015 2016 (Restated - Note 44) ASSETS Amount % Amount % Cash and cash equivalents (Notes 5, 7 and 40) $ 18,576,538 1 $ 20,626,538 2 Due from the Central Bank and call loans to banks (Note 8) 76,897,693 5 46,840,901 3 Financial assets at fair value through profit or loss (Notes 5, 9 and 84,377,363 6 117,151,300 8 40) Securities purchased under resell agreements (Notes 5 and 40) 5,286,859 - 2,951,852 - Receivables, net (Notes 5, 10 and 11) 99,160,343 7 90,856,182 6 Current tax assets (Notes 5 and 34) 528,014 - 645,698 - Loans, net (Notes 5, 6, 11, 39 and 40) 877,369,739 58 834,625,647 57 Available-for-sale financial assets, net (Notes 5 and 12) 301,621,372 20 290,112,152 20 Investments accounted for using the equity method, net (Notes 5 2,083,553 - 2,085,112 - and 13) OTHER FINANCIAL ASSETS, NET Financial assets carried at cost, net (Notes 5 and 14) 1,305,133 - 1,314,619 - Other miscellaneous financial assets , net (Notes 5, 11 and 15) 9,822,254 1 8,155,502 1 Other financial assets, net 11,127,387 1 9,470,121 1 Property and equipment, net (Notes 5 and 16) 18,144,670 1 17,861,834 1 Intangible assets, net (Notes 5 and 17) 1,726,210 - 1,529,378 - Deferred tax assets (Notes 5 and 34) 2,730,930 - 3,250,685 - Other assets, net (Note 18) 14,540,215 1 26,335,185 2 TOTAL $ 1,514,170,886 100 $ 1,464,342,585 100

160 Appendix I. Financial Statements and Independent Auditors' Report 10

2015 2016 (Restated - Note 44) LIABILITIES AND EQUITY Amount % Amount % Due to the Central Bank and banks (Note 19) $ 46,966,461 3 $ 64,689,878 5 Financial liabilities at fair value through profit or loss (Notes 5, 9 and 35,424,460 2 49,883,193 3 40) Securities sold under repurchase agreements (Notes 5 and 40) 68,974,177 5 93,484,280 6 Payables (Notes 3 and 20) 28,187,912 2 20,741,461 2 Current tax liabilities (Notes 5 and 34) 636,309 - 314,486 - Deposits and remittances (Notes 21 and 40) 1,113,184,637 72 1,042,220,301 71 Bank debentures (Note 22) 53,000,000 4 53,000,000 4 Other financial liabilities (Note 24) 44,114,738 3 47,180,126 3 Reserve for liabilities (Notes 5 and 23) 1,119,680 - 990,150 - Deferred tax liabilities (Notes 5 and 34) 125,121 - 53,552 - Other liabilities (Notes 5 and 25) 2,400,744 - 2,048,640 - Total liabilities 1,394,134,239 91 1,374,606,067 94 EQUITY (Note 27) Capital stock Common stock 68,845,983 5 56,118,710 4 Capital surplus 23,974,285 2 8,698,829 - Retained earnings Legal reserve 18,046,383 1 15,085,066 1 Special reserve 503,824 - 276,698 - Unappropriated earnings 8,943,094 1 9,871,058 1

Other equity ( 276,922 ) -( 313,843 ) - Total equity 120,036,647 9 89,736,518 6 TOTAL $ 1,514,170,886 100 $ 1,464,342,585 100

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

161 TAISHIN INTERNATIONAL BANK CO., LTD.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Percentage 2015 2016 Increase (Restated - Note 44) (Decrease) Amount % Amount % % INTEREST INCOME (Notes 5, 28and 40) Interest revenues $ 27,401,213 87 $ 28,211,330 85 ( 3 ) Interest expenses ( 10,197,247 ) ( 33 ) ( 11,070,553 ) ( 33 ) ( 8 ) Net interest income 17,203,966 54 17,140,777 52 - NET INCOME OTHER THAN NET INTEREST INCOME Net service fee income (Notes 5, 29 and 40) 10,349,159 33 10,616,315 32 ( 3 ) Gain on financial assets and liabilities at fair 2,846,762 9 4,449,061 13 ( 36 ) value through profit or loss (Notes 5, 30 and 40) Realized gain on available-for-sale financial assets 287,053 1 393,711 1 ( 27 ) (Notes 5 and 31) Share of profit of subsidiaries, associates and joint ventures accounted for using the equity 35,898 - 75,600 - ( 53 ) method (Note 5) Foreign exchange gains (losses)(Note 5) 343,610 1 ( 159,826 ) - 315 Impairment loss on assets (Note 14) ( 1,571 ) - ( 9,457 ) - ( 83 ) Net other non-interest income 543,695 2 562,876 2 ( 3 ) Net income other than net interest income 14,404,606 46 15,928,280 48 ( 10 ) NET REVENUE AND GAINS 31,608,572 100 33,069,057 100 ( 4 ) (PROVISIONS FOR) REVERSED OF BAD DEBTS EXPENSES AND GUARANTEE LIABILITY (Notes 5 ( 3,036,866 ) ( 10 ) ( 2,500,896 ) ( 8 ) 21 and 11) OPERATING EXPENSES Employee benefits expenses (Notes 5, 26, 32 ( 9,837,896 ) ( 31 ) ( 9,756,769 ) ( 30 ) 1 and 40) Depreciation and amortization expenses (Note 33) ( 908,739 ) ( 3 ) ( 808,936 ) ( 2 ) 12 Other general and administrative expenses (Note ( 6,782,143 ) ( 21 ) ( 6,921,671 ) ( 21 ) ( 2 ) 40) Total operating expenses ( 17,528,778 ) ( 55 ) ( 17,487,376 ) ( 53 ) - INCOME BEFORE INCOME TAX 11,042,928 35 13,080,785 39 ( 16 ) INCOME TAX EXPENSE (Notes 5and 34) ( 1,507,302 ) ( 5 ) ( 1,774,323 ) ( 5 ) ( 15 ) NET INCOME 9,535,626 30 11,306,462 34 ( 16 )

162 Appendix I. Financial Statements and Independent Auditors' Report 10

TAISHIN INTERNATIONAL BANK CO., LTD.

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Percentage 2015 2016 Increase (Restated - Note 44) (Decrease) Amount % Amount % % OTHER COMPREHENSIVE INCOME Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans ( $ 253,108 ) ( 1 ) ( $ 293,306 ) ( 1 ) ( 14 ) Share of the other comprehensive income of associates and joint ventures accounted for 8,468 - 4,405 - 92 using the equity method Income tax relating to items that will not be 43,028 - 49,862 - ( 14 ) reclassified subsequently to profit or loss Items that may be reclassified subsequently to profit or loss: Unrealized gain (loss) on available-for-sale 24,348 - ( 519,218 ) ( 2 ) 105 financial assets Share of the other comprehensive income (loss) of associates and joint ventures accounted for ( 1,312 ) - 1,438 - ( 191 ) using the equity method Income tax relating to items that may be 13,885 - 7,646 - 82 reclassified subsequently to profit or loss Other comprehensive loss for the year, net of ( 164,691 ) ( 1 ) ( 749,173 ) ( 3 ) ( 78 ) income tax TOTAL COMPREHENSIVE INCOME $ 9,370,935 29 $ 10,557,289 31 ( 11 ) NET PROFIT ATTRIBUTABLE TO: Owner of parent $ 9,144,706 29 $ 10,106,358 30 ( 10 ) Equity attributable to former owner of business 390,920 1 1,200,104 4 ( 67 ) combination under common control $ 9,535,626 30 $ 11,306,462 ( 34 ) ( 16 ) TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owner of parent $ 8,980,015 27 $ 9,360,924 27 ( 4 ) Equity attributable to former owner of business 390,920 1 1,196,365 4 ( 67 ) combination under common control $ 9,370,935 28 $ 10,557,289 31 ( 11 ) EARNINGS PER SHARE (Note 35) Basic $ 1.64 $ 2.06 Diluted $ 1.64 $ 2.06

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

163 TAISHIN INTERNATIONAL BANK CO., LTD.

STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

Other Equity Equity Exchange Unrealized Gains Attributable to Capital Stock Capital Surplus Retained Earnings Differences (Losses) on Former owner of on Translating Available- Business Additional Paid-in Stock-based Unappropriated Foreign for-sale Financial Combination Common Stock Legal Reserve Special Reserve Capital in Excess of Par Compensation Earnings Operations Assets under Common Control (Note 44) Total Equity BALANCE AT JANUARY 1, 2015 $ 52,025,626 $ 5,202,662 $ 209,735 $ 11,190,540 $ 276,698 $ 12,981,755 $ 801 $ 195,490 $ - $ 82,083,307 Retrospective adjustment of equity attributable to former owner due to reorganization of entities under ------1,097,852 1,097,852 common control BALANCE AT JANUARY 1, 2015 AS RESTATED 52,025,626 5,202,662 209,735 11,190,540 276,698 12,981,755 801 195,490 1,097,852 83,181,159 Appropriation of 2014 earnings Legal reserve - - - 3,894,526 - ( 3,894,526 ) - - - - Cash dividends on common stock - - - - - ( 7,724,145 ) - - ( 971,715 ) ( 8,695,86 ) Stock dividends on common stock 1,363,084 - - - - ( 1,363,084 ) - - - - Net income for the year ended December 31, 2015 - - - - - 10,106,358 - - 1,200,104 11,306,462 Other comprehensive income for the year ended December 31, 2015, net of tax - - - - - ( 235,300 ) ( 45 ) ( 510,089 ) ( 3,739 ) ( 749,173 ) Total comprehensive income for the year ended December 31, 2015 - - - - - 9,871,058 ( 45 ) ( 510,089 ) 1,196,365 10,557,289 Issue of common shares for cash 2,730,000 3,275,118 ------6,005,118 Share-based payments - 17,752 ( 6,438 ) - - - - - 16 11,330 Corporate restructuring (Note 44) ------( 1,322,518 ) ( 1,322,518 ) BALANCE AT DECEMBER 31, 2015 56,118,710 8,495,532 203,297 15,085,066 276,698 9,871,058 756 ( 314,599 ) - 89,736,518 Retrospective adjustment of equity attributable to former owner due to reorganization of entities under - ( 48 ) 48 - - - - - 1,322,518 1,322,518 common control BALANCE AT JANUARY 1, 2016 AS RESTATED 56,118,710 8,495,484 203,345 15,085,066 276,698 9,871,058 756 ( 314,599 ) 1,322,518 91,059,036 Appropriation of 2015 earnings Legal reserve - - - 2,961,317 - ( 2,961,317 ) - - - - Special reserve - - - - 227,126 ( 227,126 ) - - - - Cash dividends on common stock - - - - - ( 6,682,615 ) - - ( 1,196,365 ) ( 7,878,980 ) Net income for the year ended December 31, 2016 - - - - - 9,144,706 - - 390,920 9,535,626 Other comprehensive income for the year ended December 31, 2016, net of tax - - - - - ( 201,612 ) ( 2,383 ) 39,304 - ( 164,691 ) Total comprehensive income for the year ended December 31, 2016 - - - - - 8,943,094 ( 2,383 ) 39,304 390,920 9,370,935 Issue of common shares for cash 12,727,273 15,271,382 ------27,998,655 Share-based payments - 21,451 ( 17,377 ) - - - - - 14 4,088 Corporate restructuring (Note 44) ------( 517,087 ) ( 517,087 ) BALANCE AT DECEMBER 31, 2016 $ 68,845,983 $ 23,788,317 $ 185,968 $ 18,046,383 $ 503,824 $ 8,943,094 ($ 1,627 ) ($ 275,295 ) $ - $ 120,036,647

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

164 Appendix I. Financial Statements and Independent Auditors' Report 10

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

165 TAISHIN INTERNATIONAL BANK CO., LTD.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

2015 2016 (Restated - Note 44) CASH FLOWS FROM OPERATING ACTIVITIES Net income before income tax $ 11,042,928 $ 13,080,785 Adjustments: Adjustment to reconcile profit or loss Depreciation expenses 734,780 647,386 Amortization expenses 173,959 161,550 Provision for bad debts expenses 2,998,258 2,558,491 Provision for (reverse of) guarantee liability 38,608 ( 57,595 ) Net gain on financial assets and liabilities at fair value through ( 2,846,762 ) ( 4,449,061 ) profit or loss Interest expenses 10,197,247 11,070,553 Interest income ( 27,401,213 ) ( 28,211,330 ) Dividend income ( 186,029 ) ( 221,170 ) Share-based (reversed) payments 24,981 ( 22 ) Share of loss of subsidiaries, associates and joint ventures ( 35,898 ) ( 75,600 ) accounted for using the equity method Gain on disposal of investments ( 187,899 ) ( 267,370 ) Impairment loss on financial assets 1,571 9,457 Other adjustments 3,530,862 762,980 Total adjustment ( 12,957,535 ) ( 18,071,731 ) Changes in operating assets and liabilities Due from the Central Bank and call loans to banks ( 16,449,556 ) 412,984 Financial assets at fair value through profit or loss 58,598,415 ( 5,014,087 ) Securities purchased under resell agreements ( 1,023,568 ) ( 24,939 ) Receivables ( 10,308,485 ) ( 1,948,608 ) Loans ( 44,231,716 ) ( 29,350,363 ) Available-for-sale financial assets ( 15,009,742 ) ( 46,911,244 ) Other financial assets ( 1,527,516 ) 790,409 Other assets 11,794,904 ( 6,431,695 ) Due to the Central Bank and banks ( 1,604,742 ) ( 1,042,240 ) Financial liabilities at fair value through profit or loss ( 37,873,702 ) ( 12,418,352 ) Securities sold under repurchase agreements ( 24,510,103 ) 18,443,398 Payables 8,843,199 ( 1,469,689 ) Deposits and remittances 70,964,336 68,300,423 Other financial liabilities ( 3,065,388 ) ( 5,564,143 ) Other liabilities 307,644 ( 86,659 ) Cash flows used in operations ( 7,010,627 ) ( 27,305,751 )

(Continued)

166 Appendix I. Financial Statements and Independent Auditors' Report 10

TAISHIN INTERNATIONAL BANK CO., LTD.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

2015 2016 (Restated - Note 44) Interest received $ 28,225,803 $ 28,307,586 Dividend received 242,125 277,783 Interest paid ( 10,292,391 ) ( 11,053,737 ) Income taxes refund $ 187,249 $ 273,219 Income taxes paid ( 606,693 ) ( 2,273,334 ) Net cash flows generated from (used in) operating activities 10,745,466 ( 11,774,234 ) CASH FLOWS FROM INVESTING ACTIVITIES Decrease in debt investments without active market - 300,000 Capital reduction of financial assets at cost 18,850 15,550 Acquisition of property and equipment ( 1,048,118 ) ( 920,186 ) Proceeds from disposal of property and equipment 39,355 843 Acquisition of intangible assets ( 370,791 ) ( 182,318 ) Net cash outflow on acquisition of corporation ( 517,087 ) - Net cash flows used in investing activities ( 1,877,791 ) ( 786,111 )

CASH FLOWS FROM FINANCING ACTIVITIES (Decrease) increase in due to the Central Bank and call loans from ( 16,118,675 ) 9,728,270 banks Issuance of bank debentures - 20,000,000 Cash dividends distributed ( 7,878,980 ) ( 8,695,860 ) Issuance of common stock for cash 27,998,655 6,005,118 Net cash flows generated from financing activities 4,001,000 27,037,528 NET INCREASE IN CASH AND CASH EQUIVALENTS 12,868,675 14,477,183 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 37,706,072 23,228,889 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 50,574,747 $ 37,706,072

RECONCILIATION OF CASH AND CASH EQUIVALENTS

Cash and cash equivalents in balance sheet $ 18,576,538 $ 20,626,538 Due from central bank and call loans to banks qualifying as cash and cash equivalents 27,759,857 14,152,621 Securities purchased under resell agreements qualifying as cash and 4,238,352 2,926,913 cash equivalents Cash and cash equivalents at end of the year $ 50,574,747 $ 37,706,072

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

167 TAISHIN INTERNATIONAL BANK CO., LTD.

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars)

TAISHIN INTERNATIONAL BANK CO., LTD.

NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. ORGANIZATION AND OPERATIONS

Taishin International Bank Co., Ltd. ("the Company") incorporated in the Republic of China ("ROC") is a public 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. as well as (b) various financial instruments - letters of credit, bankers' acceptances, checking and savings accounts, credit cards, derivative instruments, etc. The Company was set up at B1 and 1F., No. 44, Zhongshan N. Rd., Sec. 2, Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.). The main operation office of the Company is at No. 118, Ren'Ai Rd., Sec. 4, Da' An Dist., Taipei City 106, Taiwan (R.O.C.).

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.

In order to integrating group resources and effectively utilizing operational capital to advance operational performance, Taishin Financial Holding conducted group internal restructure. Taishin Financial Holding had the Company merge Taishin Holdings Insurance Brokers Co., Ltd. ("Taishin Holdings Insurance Brokers"). On October 29, 2015, the board of the Company (acting as shareholders of the Company) resolved that the surviving company is the Company and the dissolved company is Taishin Holdings Insurance Brokers. The merging base date is April 24, 2016. Please refer to Note 44.

The parent company and the final parent company of Taishin Bank is Taishin Financial Holding, which had a 100% equity interest in Taishin Bank as of December 31, 2016 and 2015.

2. STATEMENT OF COMPLIANCE

The financial statements were prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks, the Regulations Governing the Preparation of Financial Reports by Securities Firm, International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretation of IAS (SIC) permitted by the Financial Supervisory Commission ("FSC-recognized IFRSs").

3. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Board of Directors and authorized for issue on February 16, 2017.

168 Appendix I. Financial Statements and Independent Auditors' Report 10

4. APPLICATION OF NEW, AMENDMENTS AND REVISED AND STANDARDS INTERPRETATIONS

a. Amendments to the Regulations Governing the Preparation of Financial Reports by Public Banks, International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) endorsed by the FSC for application starting from 2017.

Rule No. 1050026834 issued by the FSC endorsed the following IFRS, IAS, IFRIC and SIC (collectively, the "IFRSs") for application starting from 2017.

The company has not applied the following new IFRSs issued by the IASB.

New, Amended or Revised Standards and Interpretations Effective Date (the "New IFRSs") Announced by IASB (Note 1) Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014 Annual Improvements to IFRSs 2012-2014 Cycle January 1, 2016 (Note 3) Amendments to IFRS 10, IFRS 12 and IAS 28 "Investment Entities: Applying the January 1, 2016 Consolidation Exception" Amendment to IFRS 11 "Accounting for Acquisitions of Interests in Joint January 1, 2016 Operations" IFRS 14 "Regulatory Deferral Accounts" January 1, 2016 Amendment to IAS 1 "Disclosure Initiative" January 1, 2016 Amendments to IAS 16 and IAS 38 "Clarification of Acceptable Methods of January 1, 2016 Depreciation and Amortization" Amendments to IAS 16 and IAS 41 "Agriculture: Bearer Plants" January 1, 2016 Amendment to IAS 19 "Defined Benefit Plans: Employee Contributions" July 1, 2014 Amendment to IAS 36 "Impairment of Assets: Recoverable Amount Disclosures for January 1, 2014 Non-financial Assets" Amendment to IAS 39 "Novation of Derivatives and Continuation of Hedge January 1, 2014 Accounting" IFRIC 21 "Levies" January 1, 2014

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates. Note 2: The amendment to IFRS 2 applies to share-based payment transactions with grant date on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations with acquisition date on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014. Note 3: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

According to Rule No. 10510005570 draft issued by the FSC, the Company will adopt the Regulations Governing the Preparation of Financial Reports by Public Banks after the Rule was announced.

Based on the Company's assessment, as of the date the financial statements were authorized for issue, the Company continues assessing other possible impacts that application of the aforementioned amendments and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers will have on the Company's financial position and financial performance, and will disclose these other impacts when the assessment is completed.

169 b. New IFRSs in issue but not yet endorsed by the FSC

The Company has not applied the following IFRSs issued by the IASB but not yet endorsed by the FSC.

The FSC announced that amendments to IFRS 15 will take effect starting January 1, 2018. As of the date the financial statements were authorized for issue, the FSC has not announced the effective dates of other new IFRSs.

Effective Date New IFRSs Announced by IASB (Note 1) Annual Improvements to IFRSs 2014-2016 Cycle Note 2 Amendment to IFRS 2 "Classification and Measurement of Share-based Payment January 1, 2018 Transactions" Amendments to IFRS 4"Applying IFRS 9 Financial Instruments with IFRS 4 Insurance January 1, 2018 Contracts" IFRS 9 "Financial Instruments" January 1, 2018 Amendments to IFRS 9 and IFRS 7 "Mandatory Effective Date of IFRS 9 and January 1, 2018 Transition Disclosures" Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets between an To be determined by IASB Investor and its Associate or Joint Venture" IFRS 15 "Revenue from Contracts with Customers" January 1, 2018 Amendments to IFRS 15 "Clarifications to IFRS 15 Revenue from Contracts with January 1, 2018 Customers" IFRS 16 "Leases" January 1, 2019 Amendment to IAS 7 "Disclosure Initiative" January 1, 2017 Amendments to IAS 12 "Recognition of Deferred Tax Assets for Unrealized Losses" January 1, 2017 Amendments to IAS 40 "Transfers of investment property" January 1, 2018 IFRIC 22 "Foreign Currency Transactions and Advance Consideration" January 1, 2018

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates. Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, 2018.

The initial application of the above New IFRSs, whenever applied, would not have any material impact on the Company's accounting policies, except for the following:

1) IFRS 9 "Financial Instruments"

With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 "Financial Instruments: Recognition and Measurement" are subsequently measured at amortized cost or fair value. Under IFRS 9, the requirement for the classification of financial assets is stated below.

For the Company's debt instruments that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, their classification and measurement are as follows:

a) For debt instruments, if they are held within a business model whose objective is to collect the contractual cash flows, the financial assets are measured at amortized cost and are assessed for impairment continuously with impairment loss recognized in profit or loss, if any. Interest revenue is recognized in profit or loss by using the effective interest method;

b) For debt instruments, if they are held within a business model whose objective is achieved by both the collecting of contractual cash flows and the selling of financial assets, the financial assets are measured at fair value through other comprehensive income (FVTOCI) and are assessed for impairment. Interest

170 Appendix I. Financial Statements and Independent Auditors' Report 10

revenue is recognized in profit or loss by using the effective interest method, and other gain or loss shall be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When the debt instruments are derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

Except for the above, all other financial assets are measured at fair value through profit or loss. However, the Company may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.

IFRS 9 requires impairment loss on financial assets to be recognized by using the "Expected Credit Losses Model". The credit loss allowance is required for financial assets measured at amortized cost, financial assets mandatorily measured at FVTOCI, lease receivables, contract assets arising from IFRS 15 "Revenue from Contracts with Customers", certain written loan commitments and financial guarantee contracts. A loss allowance for the 12-month expected credit losses is required for a financial asset if its credit risk has not increased significantly since initial recognition. A loss allowance for full lifetime expected credit losses is required for a financial asset if its credit risk has increased significantly since initial recognition and is not low. However, a loss allowance for full lifetime expected credit losses is required for trade receivables that do not constitute a financing transaction.

For purchased or originated credit-impaired financial assets, the Company takes into account the expected credit losses on initial recognition in calculating the credit-adjusted effective interest rate. Subsequently, any changes in expected losses are recognized as a loss allowance with a corresponding gain or loss recognized in profit or loss.

Financial instruments that have been derecognized prior to the effective date of IFRS 9 cannot be reversed to apply IFRS 9 when it becomes effective. Under IFRS 9, the requirements for classification, measurement and impairment of financial assets are applied retrospectively with the difference between the previous carrying amount and the carrying amount at the date of initial application recognized in the current period and restatement of prior periods is not required.

2) IFRS 16 "Leases"

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations.

Under IFRS 16, if the Company is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the balance sheets except for low-value and short-term leases. The Company may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. On the statements of comprehensive income, the Company should present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method.

The application of IFRS 16 is not expected to have a material impact on the accounting of the Company as lessor.

171 When IFRS 16 becomes effective, the Company may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this Standard recognized at the date of initial application.

As of the date the independent financial statements were authorized for issue, the Company is continuingly assessing the possible impact that the application of the above New IFRSs will have on the Company's financial position and operating result, and will disclose the relevant impact when the assessment is complete.

5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

According to Rule No. 1030029342 and No. 1030010325 issued by the FSC, the Company would apply IFRSs 2013 edition and related modified Regulations Governing the Preparation to Financial Reports by Securities Issuers approved by the FSC since 2015.

Basis of Preparation

The financial statements have been prepared on the historical cost basis except for certain properties and financial instruments that are measured at revalued amounts or fair values (refer to the summary of accounting policies below). Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The functional currency of the Company is New Taiwan dollars. Thus, the financial statements are presented in New Taiwan dollars.

When preparing its parent company only financial statements, the Company used equity method to account for its investment in subsidiaries, associates and jointly controlled entities. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in the parent company only financial statements to be the same with the amounts attributable to the owner of the Company in its consolidated financial statements, adjustments arising from the differences in accounting treatment between parent company only basis and consolidated basis were made to investments accounted for using equity method, share of profit or loss of subsidiaries, associates and joint ventures, share of other comprehensive income of subsidiaries, associates and joint ventures and related equity items, as appropriate, in the parent company only financial statements.

The Company categorized economic activities into operating, investing, and financing activities. The statements of cash flows reported the change of cash and cash equivalents in the current period based on operating, investing, and financing activities. Please refer to Note 7 for the components of cash and cash equivalents. The cash flow of operating activities was reported by using indirect method. Under the indirect method, profit or loss is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows. Interest paid and interest and dividends received are classified as operating cash flows. Dividends paid are classified as financing cash flow because they are cost of obtaining financial resources.

When preparing the financial report in accordance with the IFRSs, the Company has to make certain significant accounting assumptions and estimates based on professional judgements to determine its accounting policies. Change in assumptions may result in significant effects on financial report. The Company believes that the financial report are reported based on appropriate assumptions. For items that required management's most difficult or complex judgements, or assumptions and estimates that significantly affect the financial report, please refer to Note 6.

172 Appendix I. Financial Statements and Independent Auditors' Report 10

Classification of Current/Noncurrent Assets and Liabilities

Because of banking business characteristics, classification of assets and liabilities according to the nature and the sequence of liquidity can provide more reliable and relevant information. Therefore, those assets and liabilities are not classified as current or noncurrent, but classified according to the nature and sequence of liquidity.

Foreign Currencies

In preparing the financial statements of the Company, the currency of the primary economic environment in which the Company operates (the "functional currency") is used. Transactions in currencies other than the Company's functional currency are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. When several exchange rates are available, the rate used is that at which the future cash flows, represented by the transaction amount or balance, could have been settled if those cash flows had occurred at the measurement date. Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising from settlement are recognized in profit or loss in the period in which they arise. Exchange differences on monetary items arising from translation are recognized in profit or loss in the period in which they arise except items that qualify as hedging instruments in a cash flow hedge are recognized initially in other comprehensive income to the extent that the hedge is effective. Exchange differences arising on the retranslation of non-monetary assets (such as equity investment) or liabilities measured at fair value are included in profit or loss for the period at the rates prevailing at the end of reporting period except for exchange differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

Cash and Cash Equivalents

Cash and cash equivalents are cash in vault, cash in banks, short-term time deposits and short-term financial instruments that must be readily convertible to a known amount of cash or time deposits subject to an insignificant risk of changes in value. For the statement of cash flows, cash and cash equivalents are cash and cash equivalents on the balance sheet, due from the Central Bank and call loans to financial institution and securities purchased under resell agreements that are in conformity with the definition of cash and cash equivalents in the FSC-recognized IAS 7.

Investment Accounted for Using Equity Method

Investments in subsidiaries and associates are accounted for using equity method. a. Investment in subsidiaries

Subsidiaries (including structured entities) are the entities controlled by the Company.

Under the equity method, the investment is initially recognized at cost and the carrying amount is increased or decreased to recognize the Company's share of the profit or loss and other comprehensive income of the subsidiary after the date of acquisition. Besides, the Company also recognizes the Company's share of the change in other equity of the subsidiary.

173 Changes in the Company's ownership interests in subsidiaries that do not result in the Company's loss of control over the subsidiaries are accounted for as equity transactions. Any difference between the carrying amounts of the investment and the fair value of the consideration paid or received is recognized directly in equity.

When the Company's share of losses of a subsidiary equals or exceeds its interest in that subsidiary (which includes any carrying amount of the investment in subsidiary accounted for by the equity method and long- term interests that, in substance, form part of the Company's net investment in the subsidiary), the Company continues recognizing its share of further losses.

The acquisition cost in excess of the acquisition-date fair value of the identifiable net assets acquired is recognized as goodwill. Goodwill is not amortized. The acquisition-date fair value of the net identifiable assets acquired in excess of the acquisition cost is recognized immediately in profit or loss.

When the Company ceases to have control over a subsidiary, any retained investment is measured at fair value at that date and the difference between the previous carrying amount of the subsidiary attributable to the retained interest and its fair value is included in the determination of the gain or loss. Furthermore, the Company accounts for all amounts previously recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required if the Company had directly disposed of the related assets or liabilities.

When the Company transacts with its subsidiaries, profits and losses resulting from the transactions with the subsidiaries are recognized in the Company' financial statements only to the extent of interests in the associate that are not related to the Company.

b. Investment in associates

An associate is an entity over which the Company has significant influence that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee without having control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Under the equity method, an investment in an associate is initially recognized at cost and adjusted thereafter to recognize the Company's share of the profit or loss and other comprehensive income of the associate. The Company also recognizes its share in the changes in the equity of associates.

When the Company subscribes for additional new shares of the associate, at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company's proportionate interest in the associate. The Company records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus. If the Company's ownership interest is reduced due to the additional subscription of the new shares of associate, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate is reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient, the shortage is debited to retained earnings.

When the Company's share of losses of an associate equals or exceeds its interest in that associate (which includes any carrying amount of the investment accounted for by the equity method and long-term interests that, in substance, form part of the Company's net investment in the associate), the Company discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Company has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.

174 Appendix I. Financial Statements and Independent Auditors' Report 10

Any excess of the cost of acquisition over the Company's share of the net fair value of the identifiable assets and liabilities of an associate recognized at the date of acquisition is recognized as goodwill, which is included in the carrying amount of the investment and is not amortized. Any excess of the Company's share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

The requirements of FSC-recognized IAS 36 "Impairment of Assets" are applied to determine whether it is necessary to recognize any impairment loss with respect to the Company's investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognized is deducted from the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with FSC-recognized IAS 36 "Impairment of Assets" to the extent that the recoverable amount of the investment subsequently increases.

The Company discontinues the use of the equity method from the date it ceases to have significant influence over the associate. Any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Company accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities.

When the Company transacts with its associate, profits and losses resulting from the transactions with the associate are recognized in the Company' financial statements only to the extent of interests in the associate that are not related to the Company.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and accumulated impairment loss. Cost is capitalized when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably.

Freehold land is not depreciated.

Depreciation is recognized so as to write off the cost of the assets less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis in accordance with FSC-recognized IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors".

Assets held under finance leases are depreciated over the shorter of the lease term and their useful lives using the straight-line method.

An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

175 Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss.

For the purpose of impairment testing, goodwill is allocated to each of the Company's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

If goodwill has been allocated to a cash-generating unit and the entity disposes of an operation within that unit, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal, and is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Intangible Assets (Except Goodwill)

Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimates accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss.

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately.

Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

Impairment of Non-financial Assets (Except Goodwill)

At the end of each reporting period, the Company reviews the carrying amounts of its non-financial assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to the individual cash-generating units; otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

176 Appendix I. Financial Statements and Independent Auditors' Report 10

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.

When an impairment loss subsequently is reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

Bonds and Securities Purchased/Sold under Specific Agreements

Bonds and securities purchased under resell agreements are recorded at purchase price and are accounted for as financing transactions. Bonds and securities sold under repurchase agreements are recorded at sale price. Interest revenue and expenses recognized from the transactions mentioned above are recorded on accrual basis.

Financial Instruments

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. a. Measurement category

Financial assets are classified into the following specified categories: Financial assets at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. The categories of financial assets held by the Company are financial assets at fair value through profit or loss, held-to-maturity investment, available-for-sale financial assets and loans and receivables.

1) Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or it is designated as at fair value through profit or loss.

A financial asset is classified as held for trading if:

a) It has been acquired principally for the purpose of selling it in the near term; or

177 b) On initial recognition it is part of a portfolio of identified financial instruments that a company manages together and has a recent actual pattern of short-term profit-taking; or

c) It is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at fair value through profit or loss upon initial recognition when doing so results in more relevant information and if:

a) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

b) The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company's documented risk management or investment strategy, and information about the companying is provided internally on that basis.

In addition, if a contract contains one or more embedded derivatives, the entire combined contract (asset or liability) can be designated as at fair value through profit or loss.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the other gains and losses line item. Fair value is determined in the manner described in Note 38.

2) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Company has the positive intent and ability to hold to maturity other than those that the entity upon initial recognition designates as at fair value through profit or loss, or designates as available for sale, or meet the definition of loans and receivables.

Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.

3) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Fair value is determined in the manner described in Note 38.

Changes in the carrying amount of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and accumulated under the heading of investments revaluation reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss that was previously accumulated in the investments revaluation reserve is reclassified to profit or loss.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company's right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any identified impairment loss at the end of each reporting period and are recognized in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in other comprehensive income on financial assets.

178 Appendix I. Financial Statements and Independent Auditors' Report 10

4) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including receivables, loans, delinquent loans and investments of debt instrument with no active market) are measured at amortized cost using the effective interest method, less any impairment. In accordance with the "Regulations Governing the Preparation of Financial Reports by Public Banks" Rule No. 10 Item 7 and Item 10, if the effect of discount is insignificant, loans and receivables can be measured at their original amounts.

According to the Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans, loans or other extensions of credit which are overdue but not repaid, and have been authorized by the board, shall be transferred to the non-accrual loans item together with interest accrued.

The non-accrual loans transferred from loans are reported under loan whereas those not transferred from loans are reported under other miscellaneous financial assets. b. Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the holder of the asset about the following loss events:

1) Significant financial difficulty of the issuer or obligor;

2) A breach of contract, such as a default or delinquency in interest or principal payments;

3) The lender, for economic or legal reasons relating to the borrower's financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;

4) It becoming probable that the borrower will enter bankruptcy or other financial reorganization;

5) The disappearance of an active market for that financial asset because of financial difficulties; or

6) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the Company, including:

a) Adverse changes in the payment status of borrowers in the Company; or

b) National or local economic conditions that correlate with defaults on the assets in the Company.

For certain categories of financial assets, such as loans and receivables, assets are assessed for impairment on a collective basis even if they were not any objective evidence.

If there is objective evidence that an impairment loss on financial assets carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate.

The assessment procedures above classified loans in accordance with the Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans. Normal credit assets are classified as "Category One" and set aside loss provision at 1% of the outstanding

179 balance (excluding assets that represent claims against an ROC government agency). Loans other than "Category One" are classified into "special mentioned (Category Two)", "substandard (Category Three)", "doubtful (Category Four)", and "losses (Category Five)" based on the status of credit, the length of time overdue, and the status of the loan collaterals. Loss provisions should be made at 2%, 10%, 50%, and 100% for each loan category, respectively.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

The carrying amount of accounts receivable is reduced through the use of an allowance account. When accounts receivable are considered uncollectible, they are written off against the allowance account. Recoveries of amounts previously written off are credited to the allowance account. Changes in the carrying amount of the allowance account are recognized as bad debt in profit or loss.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income and accumulated under the heading of investments revaluation reserve. In respect of available-for-sale debt securities, impairment loss are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

For financial assets carried at cost, the amount of impairment loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

c. Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.

Equity instruments

Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

180 Appendix I. Financial Statements and Independent Auditors' Report 10

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.

Repurchase of the Company's own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments.

Financial liabilities a. Subsequent measurement

Except the following situation, all the financial liabilities are measured at amortized cost using the effective interest method.

1) Financial liabilities at fair value through profit or loss

Financial liabilities are classified as at fair value through profit or loss when the financial liability is either held for trading or it is designated as at fair value through profit or loss.

A financial liability is classified as held for trading if:

a) It has been acquired principally for the purpose of repurchasing it in the near term; or

b) On initial recognition it is part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or

c) It is a derivative that is not designated and effective as a hedging instrument.

A financial liability other than a financial liability held for trading may be designated as at fair value through profit or loss upon initial recognition when doing so results in more relevant information and if:

a) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

b) The financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company's documented risk management or investment strategy, and information about the companying is provided internally on that basis.

In addition, if a contract contains one or more embedded derivatives, the entire combined contract (asset or liability) can be designated as at fair value through profit or loss.

Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability and is included in the other gains and losses line item. For a financial liability designated as at fair value through profit or loss, the amount of changes in fair value attributable to changes in the credit risk of the liability is presented in other comprehensive income. If this accounting treatment related to credit risk would create an accounting mismatch or loan commitments and financial commitments contracts, all changes in fair value of the liability are presented in profit or loss. Fair value is determined in the manner described in Note 38.

2) Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.

181 Financial guarantee contracts issued by the Company are initially measured at their fair values and, if not designated as at fair value through profit or loss, are subsequently measured at the higher of the following and should be coped with based on the Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans:

a) The amount of the obligation under the contract, as determined in accordance with FSC-recognized IAS 37 "Provisions, Contingent Liabilities and Contingent Assets"; and

b) The amount initially recognized less, where appropriate, cumulative amortization recognized in accordance with FSC-recognized IAS 18 the revenue recognition policies.

3) Commitments to provide a loan at a below-market interest rate

Commitments to provide a loan at a below-market interest rate issued by the Company are initially measured at their fair values and, if not designated as at fair value through profit or loss, are subsequently measured at the higher of:

a) The amount of the obligation under the contract, as determined in accordance with FSC-recognized IAS 37 "Provisions, Contingent Liabilities and Contingent Assets"; and

b) The amount initially recognized less, where appropriate, cumulative amortization recognized in accordance with FSC-recognized IAS 18 the revenue recognition policies.

b.Derecognition of financial liabilities

The Company derecognizes financial liabilities when, and only when, the Company's obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

Derivative financial instruments

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. When the fair value of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instruments is negative, the derivative is recognized as a financial liability.

Derivatives embedded in non-derivative host contracts are recognized as host contracts and embedded derivative instruments, respectively, when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the contracts are not measured at fair value through profit or loss, unless the hybrid contracts are designated as assets or liabilities at fair value through profit or loss.

Financial instruments offsetting

Financial assets and financial liabilities are allowed to be offset and express in the net amount in balance sheets when amounts are 1) provided with statutory forces to offset, and 2) intended to execute net settlement, or liquidate assets and discharge liabilities.

182 Appendix I. Financial Statements and Independent Auditors' Report 10

Provisions, Contingent Liabilities and Contingent Assets

A provision shall be recognized when: a. An entity has a present obligation (legal or constructive) as a result of a past event; b. It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and c. A reliable estimate can be made of the amount of the obligation.

The Company does not recognize provisions for future operating losses. Where there are a number of similar obligations, the probability that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Although the likelihood of outflow for any one item may be small, it may well be probable that some outflow of resources will be needed to settle the class of obligations as a whole. If that is the case, a provision is recognized.

Provisions are subsequently measured by the present value of the expected expenditures to settle the obligations. Discount rate is the pre-tax discount rate and is adjusted in time to reflect current market assessments of the time value of money and the risks specific to the liability.

A contingent liability is either a possible liability that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity, or a present liability but payment is not probable or the amount cannot be measured reliably. The Company does not recognize a contingent asset. A contingent liability is disclosed appropriately in accordance with related guidelines.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. The Company does not recognize a contingent asset. A contingent asset is disclosed appropriately in accordance with related guidelines, where an inflow of economic benefits is probable.

Income Recognition a. Interest income

Except for financial assets at FVTPL, interest income of all financial instruments is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, and recognized in the statements of comprehensive income. 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 stopped. Interest income will be recognized when the delinquent interest is collected. 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. b. Service fee and commissions income

Service revenue and real estate management service revenue are recognized at once after providing loans or other services. If the service revenue belongs to several significant items, it is recognized when the significant items accomplished, such as the service revenue which the lead arranger bank of syndication loan received. If the service revenue is for further loan service and of significant amount, it is allocated during the period of the service or included in the base of calculation the effective interest rate of loans and receivables.

183 The Company's customer loyalty program provides customers with award credits, which are handled through diverse factors of revenue transactions. The fair value of the consideration received or receivable in respect of the initial sale shall be allocated between the award credits and the other components of the sale. The consideration allocated to the award credits shall be measured by reference to their fair value, i.e. the amount for which the award credits could be sold separately. The consideration is not recognized as income in the initial sale and is deferred. The Company shall recognize the consideration allocated to award credits as income when award credits are redeemed and it fulfills its obligations to supply awards.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

a. The Company as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Contingent rents arising under operating leases are recognized as income in the period in which they are realized.

Lease incentives included in the operating lease are recognized as an asset. The aggregate cost of incentives is recognized as a reduction of rental income on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern over which the benefit of the leased asset is diminished.

b. The Company as lessee

Assets held under finance leases are initially recognized as assets of the Company at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheets as a finance lease obligation.

Minimum lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Company's general policy on borrowing costs. Contingent rents are recognized as expenses in the periods in which they are incurred.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term. Contingent rents arising under operating leases are recognized as an expense in the period in which they are incurred.

c. Leasehold land and building for own use

When a lease includes both land and building elements, the Company assesses the classification of each element as a finance lease or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Company. Specifically, the minimum lease payments are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of the lease.

184 Appendix I. Financial Statements and Independent Auditors' Report 10

Employee Benefits a. Retirement benefits costs

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting period.

The retirement benefit obligation recognized in the balance sheets represents the present value of the defined benefit obligation and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the present value of available refunds and reductions in future contributions to the plan.

Net defined benefit liability (asset) remeasurement comprises 1) actuarial gains and losses on the defined benefit obligation; 2) return on plan assets, excluding the net interest on the net defined benefit liability (asset); and 3) any changes in the effect of the limit involving surplus in a defined benefit plan, excluding the net interest on the net defined benefit liability (asset). Moreover, the net defined benefit liability (asset) remeasurements are recognized in other comprehensive income; these remeasurements should be transferred immediately to retained earnings, and will not be reclassified to profit or loss. Significant unrecognized past service cost is immediately recognized retrospectively in profit or loss. If the defined benefit retirement plan is curtailed or settled, the gain or loss on curtailment or settlement is recognized.

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year, adjusted for significant market fluctuations since that time and for significant curtailments, settlements, or other significant one-time events. b. High-yield savings account for employee

The Company provides employees with high-yield savings account. The premium interest rate applies to a fixed amount of principal. The difference between the premium rate and the market rate is classified as employee benefits.

Share-based Payment Arrangements

Equity-settled share-based payment

The fair value determined at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Company's estimate of employee share options that will eventually vest, with a corresponding increase in capital surplus - employee share options. The fair value determined at the grant date of the employee share options is recognized as an expense in full at the grant date when the share options granted vest immediately.

The grant date of employee share options, which are reserved when the Taishin Bank's parent company Taishin Financial Holding issues new shares, is the date when the number of employee subscription is confirmed. The Company recognized an expense and capital surplus at the fair value of the share options determined at the grant date.

185 Cash-settled share-based payment

For cash-settled share-based payments, a liability is recognized for the goods or services acquired, measured initially at the fair value of the liability incurred. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognized in profit or loss.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

a. Current tax

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.

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

b. Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Land revaluation increment tax accrued from the Company's land revaluation increment in accordance with related regulations is a taxable temporary difference and shall be recognized as a deferred tax liability. Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carryforward, research and development expenditures, and personnel training expenditures to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in subsidiaries acquisition) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

A deferred tax asset shall be recognized for the unused loss carryforward and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be realized.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

The Company does not offset deferred tax assets and deferred tax liabilities from different taxation authorities.

c. Current and deferred tax for the period

Current tax and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current tax and deferred tax are also recognized in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from the initial accounting from subsidiaries, the tax effect is included in the accounting for investment in subsidiaries.

186 Appendix I. Financial Statements and Independent Auditors' Report 10

Taishin Bank, its parent company Taishin Financial Holding, and other more than 90% owned subsidiaries adopt the linked-tax system for tax filings. 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 reimbursement and appropriation are recognized as receivables or payables.

6. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

The Company's accounting policies, accounting assumptions and estimates have significant impact on the financial statements. Accordingly, the management exercised appropriate professional judgment in the preparation of the financial statements.

The assumptions and estimates involve significant risks that significant adjustments might result in changes in the carrying amounts of assets and liabilities in the next fiscal year. The assumptions and estimates made were the best estimates based on the FSC-recognized IFRSs. The estimates and assumptions are based on historical experience and other factors, including future expectations and are continuously assessed. The accounting policies and management's judgment that could have significant impact on the financial statements were as follows:

Impairment of Loans

Occurrence of objective evidence of impairment loss on loans will impact the assumptions on cash flows. The amount of impairment loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit loss that had not yet happened) discounted at its original effective interest rate.

Please refer to Note 11 for the carrying amounts of loans and doubtful debts as of December 31, 2016 and 2015.

7. CASH AND CASH EQUIVALENTS

December 31 2016 2015 Cash on hand $ 9,681,136 $ 8,402,137 Checks for clearing 1,931,711 715,279 Due from banks 3,994,348 8,319,021 Others 2,969,343 3,190,101 $ 18,576,538 $ 20,626,538

Due from banks include time deposits that have a maturity of three months or less from the date of acquisition, are readily convertible to a known amount of cash, and are subject to an insignificant risk of change in value; these were held for the purpose of meeting short-term cash commitments.

Please refer to the statement of cash flows for the reconciliation information as of December 31, 2016 and 2015.

187 8. DUE FROM CENTRAL BANK AND CALL LOANS TO BANKS

December 31 2016 2015 Deposit reserve in Central Bank Reserve for checking account $ 22,024,238 $ 7,524,570 Reserve for demand account 26,031,359 24,032,745 Reserve for foreign deposit 67,284 113,238 Deposit transfer to Central Bank 14,873 17,418 48,137,754 31,687,971 Call loans to banks 27,759,857 14,152,621 Fund of interbank clearing 1,000,082 1,000,309 $ 76,897,693 $ 46,840,901

9. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

December 31 2016 2015 Financial assets held for trading Derivative instrument Futures $ 91,410 $ 37,977 Forward exchange contracts 2,210,489 3,081,180 Currency swaps 14,277,945 15,829,491 Interest rate swaps 10,970,092 14,111,708 Cross-currency swaps 582,229 661,506 Equity-linked swaps 19,692 323,238 Foreign-exchange options 8,448,826 14,422,955 Equity-linked options - 4,543 Commodity price swaps - 30,932 Commodity options 348 9,468 Non-derivative financial assets Investment in bills 28,140,543 25,117,908 Domestic and overseas stocks and beneficiary 164,311 280,544 certificates Government bonds 15,705,327 38,788,944 Corporate bonds, bank debentures and other 3,766,151 4,450,906 bonds Financial assets at FVTPL $ 84,377,363 $ 117,151,300

Financial liabilities held for trading Derivative instrument Forward exchange contracts $ 2,389,041 $ 2,887,870 Currency swaps 12,301,154 16,436,370 Interest rate swaps 11,096,015 14,590,020 Cross-currency swaps 447,831 645,797

188 Appendix I. Financial Statements and Independent Auditors' Report 10

December 31 2016 2015 Equity-linked swaps 19,691 323,161 Commodity price swaps - 31,197 Foreign exchange options 8,399,316 14,785,472 Equity-linked options 314,289 171,662 Commodity options 348 9,431 Futures 2,800 2,213 Non-derivative financial liabilities Bonds margin trading 453,975 - Financial liabilities at FVTPL $ 35,424,460 $ 49,883,193

a. The Company engaged in various derivative instruments in the years ended December 31, 2016 and 2015 to fulfill customers' needs, as well as to manage its asset and liability positions and risk.

b. The Company's financial assets at FVTPL were not pledged as collaterals as of December 31, 2016 and 2015.

c. The nominal principal amounts of outstanding derivative contracts were as follows:

December 31 2016 2015 Forward exchange contracts $ 110,851,747 $ 223,288,630 Currency swaps 1,188,153,400 1,326,457,441 Interest rate swaps 1,054,363,854 689,859,436 Cross-currency swaps 16,800,076 27,517,129 Futures 408,419 978,350 Foreign-exchange options 342,720,614 834,915,748 Interest rate options - 1,328,000 Equity-linked options 2,261,000 3,948,300 Commodity options 441,901 690,114 Equity-linked swaps 508,247 2,059,884 Commodity price swaps - 157,288 Fixed rate commercial papers 10,200,000 9,200,000

10. RECEIVABLES

December 31 2016 2015 Notes and accounts receivable $ 56,006,667 $ 53,114,367 Credit card receivable 41,743,767 36,789,967 Interest receivable 2,445,041 2,799,380 Due from asset-based commercial papers 387,962 394,960 Other receivables 856,402 913,855 101,439,839 94,012,529 Less: Allowance for receivables ( 2,279,496 ) ( 3,156,347 ) $ 99,160,343 $ 90,856,182

189 11. LOANS

a. The details of loans were as follows:

December 31 2016 2015 Import and export negotiated $ 1,325,135 $ 1,971,855 Discounts 11,151 5,132 Overdrafts 1,822,509 1,016,939 Short-term loans 195,674,072 193,177,913 Medium-term loans 293,813,213 279,863,197 Long-term loans 396,126,499 369,852,085 Delinquent loans $ 2,195,087 $ 1,368,841 Adjustment for discount ( 651,913 ) ( 661,515 ) 890,315,753 846,594,447 Less: Allowance for loan losses ( 12,946,014 ) ( 11,968,800 ) $ 877,369,739 $ 834,625,647

b. Movements of allowance for loan losses were as follows:

For the Year Ended December 31, 2016 Other Receivables Loans Miscellaneous Total Financial Assets Balance, January 1, 2016 $ 3,156,347 $ 11,968,800 $ 146,918 $ 15,272,065 Provision for (reverse of) loan losses 1,649,872 1,487,623 ( 139,237 ) 2,998,258 Loans written off ( 2,528,066 ) ( 1,947,912 ) ( 279,697 ) ( 4,755,675 ) Recovery of loans written off 1,343 1,437,503 458,993 1,897,839 Balance, December 31, 2016 $ 2,279,496 $ 12,946,014 $ 186,977 $ 15,412,487

For the Year Ended December 31, 2015 Other Receivables Loans Miscellaneous Total Financial Assets Balance, January 1, 2015 $ 1,000,657 $ 10,814,768 $ 160,385 $ 11,975,810 Provision for (reverse of) loan losses 2,166,854 483,720 ( 92,083 ) 2,558,491 Loans written off ( 14,294 ) ( 1,123,750 ) ( 419,005 ) ( 1,557,049 ) Recovery of loans written off 3,130 1,794,062 497,621 2,294,813 Balance, December 31, 2015 $ 3,156,347 $ 11,968,800 $ 146,918 $ 15,272,065

190 Appendix I. Financial Statements and Independent Auditors' Report 10

c. Details of reversed (provisions) allowance for loan losses and liability guarantee for the years ended December 31, 2016 and 2015 were as follows:

2016 2015 Provision for losses of receivables, loans and other ($ 2,998,258 ) ($ 2,558,491 ) miscellaneous financial assets (Provision for) reverse of loss on guarantee liability ( 38,608 ) ( 57,595 ) ($ 3,036,866 ) ($ 2,500,896 ) d. Details of assessed impairment of receivables (including other miscellaneous financial assets) and loans were as follows:

Receivables (including delinquent loans reclassified from other items (excluding loans) and inward remittances)

Total Receivables Item December 31, 2016 December 31, 2015

Objective evidence of Individual assessment of impairment $ 2,133,147 $ 3,371,349 impairment Combined assessment of impairment 2,251,364 2,450,564 Nonobjective evidence of Combined assessment of impairment 97,354,616 88,505,401 impairment Total $ 101,739,127 $ 94,327,314

Total Allowance Item December 31, 2016 December 31, 2015 Objective evidence of Individual assessment of impairment $ 1,970,666 $ 2,821,176 impairment Combined assessment of impairment 342,616 361,775 Nonobjective evidence of Combined assessment of impairment 153,191 120,314 impairment Total $ 2,466,473 $ 3,303,265

Loans

Total Loans Item December 31, 2016 December 31, 2015 Objective evidence of Individual assessment of impairment $ 6,644,606 $ 5,296,537 impairment Combined assessment of impairment 9,062,226 9,162,987 Nonobjective evidence of Combined assessment of impairment 875,260,834 832,796,438 impairment Total $ 890,967,666 $ 847,255,962

Total Allowance Item December 31, 2016 December 31, 2015 Objective evidence of Individual assessment of impairment $ 5,178,475 $ 4,160,937 impairment Combined assessment of impairment 3,060,786 2,884,399 Nonobjective evidence of Combined assessment of impairment 4,706,753 4,923,464 impairment Total $ 12,946,014 $ 11,968,800

191 12. AVAILABLE-FOR-SALE FINANCIAL ASSETS

December 31 2016 2015 Investment in bills $ 207,400,055 $ 182,544,058 Domestic and overseas stocks 3,300,074 2,297,612 Beneficiary certificates 156,873 850,376 Government bonds 37,863,851 48,581,490 Corporate bonds 23,179,784 27,707,263 Bank debentures 28,958,579 26,236,698 Beneficiary's securities 762,156 1,894,655 $ 301,621,372 $ 290,112,152

a. Please refer to Note 38 (financial instrument) for the determination of fair values of available-for-sale financial assets.

b. The Company recognized asset securitization commodity $762,156 thousand and $1,894,655 thousand related to non-subsidiaries' composition individual interests on December 31, 2016 and 2015, respectively. Those individuals' funds were from the Company and the third parties. The objective of the Company's investment is to obtain investment interests. The maximum losing amounts are carrying amounts of assets held. The Company did not offer any financial supports to engage the asset securitization commodity of non-subsidiaries' composition individuals of the years ended December 31, 2016 and 2015, respectively.

c. Investment in bills placed as reserves for clearing at the Central Bank and the USD settlement account of Mega Bank were both $14,700,000 thousand as of December 31, 2016 and 2015. Please refer to Note 41 for information relating to investment in bills pledged as collaterals.

d. Bonds pledged as collaterals for courts, financial institutions, OTC, government bonds and securities dealers were $688,965 thousand and $644,150 thousand as of December 31, 2016 and 2015, respectively. Please refer to Note 41 for information relating to bonds pledged as collaterals.

13. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

December 31 2016 2015 Investments in subsidiaries $ 1,578,759 $ 1,602,633 Investments in associates 504,794 482,479 $ 2,083,553 $ 2,085,112

192 Appendix I. Financial Statements and Independent Auditors' Report 10

a. Investments in subsidiaries

December 31 2016 2015 Ownership Ownership Carrying Value Interest and Carrying Value Interest and Voting Rights Voting Rights Unlisted shares

Taishin Real-Estate Management Co., Ltd. $ 211,256 60.00 $ 204,989 60.00 ("Taishin Real-Estate")

Xiang An Life Insurance Agency Co., Ltd. ("Xiang 666,141 87.40 704,907 87.40 An Insurance Agency") (Note)

Taishin D.A.Finance Co., Ltd. ("Taishin D.A. 701,362 100.00 692,737 100.00 Finance") $ 1,578,759 $ 1,602,633

Note: Taishin Insurance Agency Co., Ltd. was established in September 1996 and changed the name as Xiang An Insurance Agency Co., Ltd. on August 19, 2016.

The summarized financial information in respect of the subsidiaries was set out below:

For the Year Ended December 31 2016 2015 Net income $ 10,997 ( $ 57,250 ) Other comprehensive income $ 9,526 $ 6,066 Comprehensive income $ 20,523 ( $ 51,184) b. Investments in associates

December 31 2016 2015 Ownership Ownership Carrying Value Interest and Carrying Value Interest and Voting Rights Voting Rights Listed shares Chang Hwa Commercial Bank Co., Ltd. ("Chang $ 428,376 0.27 $ 405,426 0.27 Hwa Bank") Unlisted shares An Hsin Real-Estate Management Co., Ltd. ("An $ 76,418 30.00 $ 77,053 30.00 Hsin Real-Estate") $ 504,794 $ 482,479

Fair value of investment in associate for which there are public price quotation are summarized as follow, based on the closing price of this investment at the balance sheet date:

December 31 2016 2015 Chang Hwa Bank $ 408,537 $ 352,827

193 The summarized financial information in respect of the Company's associates was set out below:

December 31 2016 2015 Total assets $ 2,005,389,392 $ 1,907,328,573 Total liabilities $ 1,867,642,463 $ 1,777,597,759

For the Year Ended December 31 2016 2015 Net income $ 12,095,313 $ 11,689,419 Other comprehensive income ( $ 1,077,376 ) $ 171,234 Comprehensive income $ 11,017,937 $ 11,860,653

The Company received cash dividends from Chang Hwa Bank in the amounts of $7,866 thousand and $4,201 thousand for the years ended December 31, 2016 and 2015, respectively.

c. The reconciliation of the significant associate's book value to the carrying amount of the Company's interests.

For the Year Ended December 31 2016 2015 Book Value of Chang Hwa Bank $ 137,523,525 $ 129,474,959 Amount owned by the Company $ 365,431 $ 344,045 Goodwill and other adjustments $ 62,945 $ 61,381 Investment in Chang Hwa Bank $ 428,376 $ 405,426

d. Investments accounted for using the entity method were not pledged as collaterals as of December 31, 2016 and 2015.

14. FINANCIAL ASSETS CARRIED AT COST

December 31 2016 2015 Domestic and overseas unlisted stocks $ 1,305,133 $ 1,314,619 Classified according to financial asset measurement category Available-for-sale financial assets $ 1,305,133 $ 1,314,619

Management believed that the fair value of the above unlisted equity investments held by the Company cannot be reliably measured due to the very wide range of reasonable fair value estimates; therefore, they were measured at cost less impairment at the end of reporting period.

The Company's domestic and overseas unlisted stocks were financial assets carried at cost, including investments in stocks of T.K. Venture Capital Co., Ltd. and Universal Venture Fund Co., Ltd. The investment value has been impaired and possibility of restoration was very small; thus, the Company had recognized impairment loss of $1,571 thousand and $9,457 thousand for the years ended December 31, 2016 and 2015, respectively.

Financial assets carried at cost were not pledged as collaterals as of December 31, 2016 and 2015.

194 Appendix I. Financial Statements and Independent Auditors' Report 10

15. OTHER MISCELLANEOUS FINANCIAL ASSETS

December 31 2016 2015 Delinquent loans reclassified from other items $ 299,288 $ 314,785 (excluding loans) Less: Allowance for bad debt ( 186,977 ) ( 146,918 ) Gold account 301,050 197,789 Time deposit with original maturity more than 3 9,408,893 7,789,846 months $ 9,822,254 $ 8,155,502

16. PROPERTY AND EQUIPMENT

December 31 2016 2015 Land $ 10,812,599 $ 10,835,529 Buildings 5,172,534 5,303,197 Machinery equipment 1,745,142 1,265,375 Transportation equipment 60,394 61,598 Miscellaneous equipment 64,371 64,771 Leased assets 12,652 - Leasehold improvement 228,044 240,268 Prepayments for buildings and equipment 48,934 91,096 $ 18,144,670 $ 17,861,834

195 Prepayment Transporta- Miscella- Machinery Leased Leasehold for Buildings Land Buildings tion neous Total Equipment assets Improvement and Equipment Equipment Equipment Cost Balance, January 1, 2015 $ 10,835,529 $ 7,716,415 $ 1,527,986 $ 70,761 $ 96,791 $ - $ 367,465 $ 53,499 $ 20,668,446 Additions - 22,050 646,430 27,112 26,030 - 55,017 143,547 920,186 Disposals - ( 22,742 ) ( 147,803 ) ( 375 ) ( 8,599 ) - ( 71,285 ) - ( 250,804 ) Reclassification - 30,265 5,402 - - - 70,283 ( 105,950 ) - Balance, December 31, 2015 $ 10,835,529 $ 7,745,988 $ 2,032,015 $ 97,498 $ 114,222 $ - $ 421,480 $ 91,096 $ 21,337,828

Balance, January 1, 2016 $ 10,835,529 $ 7,745,988 $ 2,032,015 $ 97,498 $ 114,222 $ - $ 421,480 $ 91,096 $ 21,337,828 Additions 4,619 36,831 852,401 15,409 18,352 16,443 29,752 74,311 1,048,118 Disposals ( 27,549 ) ( 55,777 ) ( 239,745 ) ( 7,006 ) ( 15,209 ) - ( 53,268 ) - ( 398,554 ) Reclassification - 61,266 10,591 - - - 41,507 ( 116,473 ) ( 3,109 ) Balance, December 31, 2016 $ 10,812,599 $ 7,788,308 $ 2,655,262 $ 105,901 $ 117,365 $ 16,443 $ 439,471 $ 48,934 $ 21,984,283

Accumulated depreciation Balance, January 1, 2015 $ - $ 2,239,561 $ 610,292 $ 22,110 $ 39,031 $ - $ 167,961 $ - $ 3,078,955 Depreciation - 225,972 303,800 14,162 18,916 - 84,536 - 647,386 Disposals - ( 22,742 ) ( 147,452 ) ( 372 ) ( 8,496 ) - ( 71,285 ) - ( 250,349 ) Balance, December 31, 2015 $ - $ 2,442,791 $ 766,640 $ 35,900 $ 49,451 $ - $ 181,212 $ - $ 3,475,994

Balance, January 1, 2016 $ - $ 2,442,791 $ 766,640 $ 35,900 $ 49,451 $ - $ 181,212 $ - $ 3,475,994 Depreciation - 226,038 386,200 16,611 18,657 3,791 83,483 - 734,780 Disposals - ( 53,055 ) ( 238,918 ) ( 7,004 ) ( 15,114 ) - ( 53,268 ) - ( 367,359 ) Reclassification - - ( 3,802 ) - - - - - ( 3,802 ) 1Balance, December 31, 2016 $ - $ 2,615,774 $ 910,120 $ 45,507 $ 52,994 $ 3,791 $ 211,427 $ - $ 3,839,613

The above items of property and equipment were depreciated on a straight-line basis at the following rates per annum:

Buildings 36-55 years Machinery equipment 2-9 years Transportation equipment 4-6 years Miscellaneous equipment 5-6 years Leased assets 3-6 years Leasehold improvements 3-6 years

No impairment assessment was performed for the years ended December 31, 2016 and 2015 as there was no indication of impairment.

196 Appendix I. Financial Statements and Independent Auditors' Report 10

17. INTANGIBLE ASSETS

December 31 2016 2015 Goodwill $ 1,152,274 $ 1,152,274 Computer software 573,936 377,104 $ 1,726,210 $ 1,529,378

Goodwill Customer Value Computer Software Total Balance, January 1, 2015 $ 1,152,274 $ 22,432 $ 333,904 $ 1,508,610 Additions - - 182,318 182,318 Amortization - ( 22,432 ) ( 139,118 ) ( 161,550 ) Balance, December 31, 2015 $ 1,152,274 $ - $ 377,104 $ 1,529,378

Balance, January 1, 2016 $ 1,152,274 $ - $ 377,104 $ 1,529,378 Additions - - 370,791 370,791 Amortization - - ( 173,959 ) ( 173,959 ) Balance, December 31, 2016 $ 1,152,274 $ - $ 573,936 $ 1,726,210

The goodwill included the Company merged with Dah An Bank through a share swap in February 18, 2002, in which the Company issued new shares to acquire the total assets and liabilities with excess difference. The unamortized excess difference as of December 31, 2016 and 2015 was $884,937 thousand with no material impairment loss noted. In addition, the Company merged with the 10th Credit Cooperative of Hsin-Chu in October 2004, in which the Company paid in cash to acquire the total assets and liabilities with excess difference. The unamortized excess difference as of December 31, 2016 and 2015 was $267,337 thousand with no material impairment loss noted.

To increase the number of customers, credit card usage, revolving balance, and increase profits by enhancing the operation efficiency, the Company acquired the net assets of Chinfon Bank's credit card business valued at $672,969 thousand as of the base date, March 6, 2010. The amount of monthly amortization was $11,216 thousand.

18. INTANGIBLE ASSETS

December 31 2016 2015 Prepayments $ 567,038 $ 575,995 Refundable deposits 13,915,793 25,708,952 Operating guarantee deposits and settlement 28,232 24,796 funds Others 29,152 25,442 $ 14,540,215 $ 26,335,185

197 19. DUE TO CENTRAL BANK AND BANKS

December 31 2016 2015 Due to other banks $ 27,314,076 $ 29,037,670 Call loans from other banks 19,014,342 34,517,789 Bank overdraft 519,190 1,134,419 Due to the Central Banks 118,853 - $ 46,966,461 $ 64,689,878

20. PAYABLES

December 31 2016 2015 Notes and accounts payable $ 18,410,912 $ 11,076,946 Accrued expenses 4,151,313 4,172,674 Interest payable 2,050,711 2,145,857 Check for clearance payable 1,929,388 693,633 Other tax payable 273,429 328,338 Dividend payable 3,247 3,098 Collection payable 567,361 403,997 Other payables 801,551 1,916,918 $ 28,187,912 $ 20,741,461

As of December 31, 2015, other payables included $1,322,518 thousand due to reorganization and merger with Taishin Holdings Insurance Brokers Co., Ltd. Please refer to Note 44.

21. DEPOSITS AND REMITTANCES

December 31 2016 2015 Checking deposits $ 6,645,906 $ 5,039,165 Demand deposits 228,745,766 222,665,706 Time deposits 318,377,427 298,391,962 Negotiable certificates of deposit 12,632,400 1,010,074 Savings deposits $ 542,458,847 $ 514,215,958 Public treasury deposits 3,066,204 - Remittances 1,258,087 897,436 $ 1,113,184,637 $ 1,042,220,301

198 Appendix I. Financial Statements and Independent Auditors' Report 10

22. BANK DEBENTURES

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

December 31 2016 2015 Subordinated Bank Debentures - 2005 (II) $ 3,300,000 $ 3,300,000 Subordinated Bank Debentures - 2010 (I) 10,000,000 10,000,000 Subordinated Bank Debentures - 2012 (I) 5,600,000 5,600,000 Subordinated Bank Debentures - 2012 (II) 6,100,000 6,100,000 Subordinated Bank Debentures - 2014 (I) 3,000,000 3,000,000 Subordinated Bank Debentures - 2014 (II) 2,000,000 2,000,000 Subordinated Bank Debentures - 2014 (III) 3,000,000 3,000,000 Subordinated Bank Debentures - 2015 (I) 9,100,000 9,100,000 Subordinated Bank Debentures - 2015 (II) 6,000,000 6,000,000 Subordinated Bank Debentures - 2015 (III) 4,900,000 4,900,000 $ 53,000,000 $ 53,000,000

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

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

1) Put option and redemption policies

On the seventh, eighth, ninth, tenth and eleventh anniversaries of the debentures issue, if the terms of exercising put option or redemption rights are satisfied, and if the holders exercise the put option or Taishin Bank exercises the redemption rights, the debentures will expire on current interest payment date. Taishin Bank will repay the holders 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.

199 3) Exercise of put option by the holders

If the terms of exercising put option are satisfied and the 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 the 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.

b. Taishin Bank made first issue of $10,000 million in bank debentures in 2010 as follows:

The Method of Bank Maturity Face Issue Date Term Issue Amount Interest Rate Redemption and Debentures Date Value Interest Payment A 2010.04.12 2017.04.12 $4,500 million 2.65% fixed rate Interest is accrued at a simple rate and paid "Floating rate of one annually from the issue year time deposit of date. Additional interest Chunghwa Post Co., is not accrued if principal Ltd." posted on Central and interest are 7 Bank's website at 10:30 $50 million B 2010.04.12 2017.04.12 $5,500 million withdrawn after the years a.m. of two business interest date. days prior to the interest Debentures are calculation period plus redeemable at par 1.5%. The interest rate is value in cash on the recalculated annually. maturity date.

c. Taishin Bank made first issue of $5,600 million in bank debentures in 2012, as follows:

Bank Maturity Face The Method of Redemption Issue Date Term Issue Amount Interest Rate Debentures Date Value and Interest Payment 7 Interest is accrued at a simple A 2012.10.19 2019.10.19 $1,100 million 1.53% fixed rate years rate and paid annually from the issue date. Additional interest is not accrued if $50 million principal and interest are 10 B 2012.10.19 2022.10.19 $4,500 million 1.65% fixed rate withdrawn after the interest years date. Debentures are redeemable at par value in cash on the maturity date.

d. Taishin Bank made second issue of $6,100 million in bank debentures in 2012, as follows:

Bank Maturity Issue Face The Method of Redemption Issue Date Term Interest Rate Debentures Date Amount Value and Interest Payment 7 $3,800 Interest is accrued at a simple A 2012.12.14 2019.12.14 1.53% fixed rate years million rate and paid annually from the issue date. Additional interest is not accrued if principal and $50 million 10 $2,300 interest are withdrawn after B 2012.12.14 2022.12.14 1.65% fixed rate years million the interest date. Debentures are redeemable at par value in cash on the maturity date.

200 Appendix I. Financial Statements and Independent Auditors' Report 10

e. Taishin Bank made first issue of $3,000 million in unsecured, no-maturity, non-cumulative bank debentures in 2014 as follow

Bank Maturity Face The Method of Redemption Issue Date Term Issue Amount Interest Rate Debentures Date Value and Interest Payment Interest is accrued according to nominal interest rate and actual days, and calculated No at a simple rate and paid No maturity. maturity. annually on July 1 from the 2014, first (Issuer has 4.10% fixed 2014.04.16 (Issuer has $3,000 million $50 million issue date. Additional issue redemption interest rate redemption interest is not accrued if right.) right.) principal and interest are withdrawn after the interest date. The debentures have no maturity.

1) Dividend distribution

Taishin Bank may not distribute the dividend or pay the interest if it had no earnings during the previous fiscal year and did not distribute common stock dividends. Where the balance of accumulated undistributed earnings after deducting the unamortized loss on the disposal of non-performing loans exceeds the interest payment and such payment does not alter the originally agreed conditions for interest payment, distribution is allowed. The dividends not distributed should not be accumulated or deferred.

Taishin Bank shall defer the payment of principal and interest if the ratio of regulatory capital to risk- weighted assets does not meet the minimum requirements in Regulations Governing the Capital Adequacy and Capital Category of Banks Paragraph 1 of Article 5; the deferred payment of principal or interest shall not be imposed further with interest.

2) Redemption policy

After five years of issuance, if the ratio of regulatory capital to risk-weighted assets after redemption will meet the minimum rate and the redemption has an approval from the competent authority, the debts may be redeemed earlier by Taishin Bank. f. Taishin Bank made second issue of $2,000 million in unsecured, no-maturity, non-cumulative bank debentures in 2014 as follows:

Bank Maturity Face The Method of Redemption Issue Date Term Issue Amount Interest Rate Debentures Date Value and Interest Payment Interest is accrued according to nominal interest rate and actual days, and calculated at a simple rate and paid No maturity. No maturity. 2014, annually on July 1 from the (Issuer has (Issuer has 4.10% fixed second 2014.05.09 $2,000 million $50 million issue date. Additional redemption redemption interest rate issue interest is not accrued if right.) right.) principal and interest are withdrawn after the interest date. The debentures have no maturity.

201 1) Dividend distribution

2) Redemption policy

g. Taishin Bank made third issue of $3,000 million in unsecured bank debentures in 2014 as follows:

Bank Maturity Face The Method of Redemption Issue Date Term Issue Amount Interest Rate Debentures Date Value and Interest Payment Interest is accrued according to nominal interest rate and actual days, and calculated at a simple rate and paid annually from the issue date. 2014, third $3,000 1.95% fixed 2014.5.16 2024.5.16 10 years $50 million Additional interest is not issue million interest rate accrued if principal and interest are withdrawn after the interest date. Principal will be repaid on maturity date.

h. Taishin Bank made first issue of $9,100 million in unsecured bank debentures in 2015 as follows:

Bank Maturity Issue Face The Method of Redemption Issue Date Term Interest Rate Debentures Date Amount Value and Interest Payment 10 $4,250 2.15% fixed Interest is accrued at a simple A 2015.6.10 2025.6.10 years million interest rate rate and paid annually from the issue date. Additional interest is not accrued if $50 million principal and interest are 15 $4,850 2.45% fixed B 2015.6.10 2030.6.10 withdrawn after the interest years million interest rate date. Debentures are redeemable at par value in cash on the maturity date.

i. Taishin Bank made second issue of $6,000 million in unsecured bank debentures in 2015 as follows:

Bank Maturity Face The Method of Redemption Issue Date Term Issue Amount Interest Rate Debentures Date Value and Interest Payment Interest is accrued at a simple rate and paid annually from the issue date. Additional interest 2015, $6,000 2.25% fixed is not accrued if principal and second 2015.9.18 2027.9.18 12 years $50 million million interest rate interest are withdrawn after issue the interest date. Debentures are redeemable at par value in cash on the maturity date.

202 Appendix I. Financial Statements and Independent Auditors' Report 10

j. Taishin Bank made third issue of $4,900 million in unsecured bank debentures in 2015 as follows:

Bank Maturity Issue Face The Method of Redemption Issue Date Term Interest Rate Debentures Date Amount Value and Interest Payment 10 2.15% fixed Interest is accrued at a simple A 2015.9.22 2025.9.22 $700 million years interest rate rate and paid annually from the issue date. Additional interest is not accrued if principal and $50 million 15 $4,200 2.45% fixed interest are withdrawn after B 2015.9.22 2030.9.22 years million interest rate the interest date. Debentures are redeemable at par value in cash on the maturity date.

23. RESERVE FOR LIABILITIES

December 31 2016 2015 Reserve for guarantee liabilities $ 208,610 $ 169,988 Reserve for employee benefits (Note 26) 786,577 544,742 Other reserves 124,493 275,420 $ 1,119,680 $ 990,150

Reserve for Other Reserves Total Guarantee Liabilities Balance, January 1, 2015 $ 227,393 $ 278,182 $ 505,575 Provision (reverse) ( 57,595 ) 252 57,343 Payment - ( 3,014 ) ( 3,014 ) Exchange differences 190 - 190 Balance, December 31, 2015 $ 169,988 $ 275,420 $ 445,408

Balance, January 1, 2016 $ 169,988 $ 275,420 $ 445,408 Provision (reverse) 38,608 ( 149,767 ) ( 111,159 ) Payment - ( 613 ) ( 613 ) Exchange differences 14 ( 547 ) ( 533 ) Balance, December 31, 2016 $ 208,610 $ 124,493 $ 333,103

Referring to the result of the review of structured notes by the Association of Banks and based on other cases, the Company has provided reserve for compensation of consigned structured notes issued by international institutions.

24. OTHER FINANCIAL LIABILITIES

December 31 2016 2015 Principal of structured products $ 43,773,110 $ 46,855,955 Appropriations for loan fund 21,927 128,975 Gold account 306,346 195,196 Lease payable 13,355 - $ 44,114,738 $ 47,180,126

203 25. OTHER LIABILITIES

December 31 2016 2015 Unearned revenue $ 467,883 $ 359,553 Unearned interest 248,594 204,135 Guarantee deposits 682,664 405,693 Deferred income 666,298 667,817 Temporary credits 335,305 411,442 $ 2,400,744 $ 2,048,640

26. POST-EMPLOYMENT BENEFIT PLANS

Defined Contribution Plans

The Company adopted a pension plan under the Labor Pension Act (the "LPA"), which is a state-managed defined contribution plan. Based on the LPA, the Company makes monthly contributions to employees' individual pension accounts at 6% of monthly salaries and wages.

Defined Benefit Plans

The Company also has defined benefit plan under the Labor Standards Law (the "LSL"). 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. The Company contributes amounts is within 2%-15% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee's name. Before the end of each year, the Company assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Company is required to fund the difference in one appropriation that should be made before the end of March of the next year.

The plan assets are invested in domestic (foreign) equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of Bureau of Labor Funds, Ministry of Labor or under the mandated management. However, in accordance with Enforcement Rules of the Labor Pension Act, the return generated by employees' pension contribution should not be below the interest rate for a 2-year time deposit with local banks.

The actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out by qualifying actuaries. The principal assumptions used for the purposes of actuarial valuations were as follows:

December 31 2016 2015 Discount rate 1.250% 1.500%~1.625% Expected rate of salary increase 3.000% 2.000%~3.000%

204 Appendix I. Financial Statements and Independent Auditors' Report 10

Amounts recognized in profit or loss in respect of these defined benefit plans are as follows:

December 31 2016 2015 Current service cost $ 21,360 $ 20,920 Net interest cost 7,733 4,596 $ 29,093 $ 25,516

Net remeasurement of defined benefit liability (after tax) recognized in other comprehensive income for the years ended December 31, 2016 and 2015 were $210,080 thousand and $243,444 thousand, respectively. The cumulative amount of net remeasurement of defined benefit liability recognized in other comprehensive income as of December 31, 2016 and 2015 were $650,514 thousand and $440,434 thousand, respectively.

The amounts included in the balance sheet arising from the Company's obligation in respect of its defined benefit plans were as follows:

December 31 2016 2015 Present value of funded defined benefit obligation $ 2,299,964 $ 2,025,715 Fair value of plan assets ( 1,513,387 ) ( 1,480,973 ) Deficit 786,577 544,742 Net liability arising from defined benefit obligation $ 786,577 $ 544,742

Movements in the present value of the defined benefit obligation were as follows:

For the Year Ended December 31 2016 2015 Opening defined benefit obligation $ 2,025,715 $ 1,716,339 Current service cost 21,360 20,920 Interest expense 30,228 32,189 Net remeasurement of defined benefit liability Actuarial (gain) loss - changes in demographic 102,965 106,420 assumptions Actuarial (gain) loss - changes in financial 66,322 86,735 assumptions Actuarial (gain) loss - experience adjustments 75,087 111,140 Benefits paid ( 21,713 ) ( 48,028 ) Closing accrued pension liabilities $ 2,299,964 $ 2,025,715

Movements in the fair value of the plan assets were as follows:

For the Year Ended December 31 2016 2015 Opening fair value of plan assets $ 1,480,973 $ 1,451,086 Interest income 22,495 27,593 Net remeasurement of defined benefit liability Expected return on plan assets ( 8,736 ) 10,988 Contribution from employers 40,368 39,334 Benefits paid ( 21,713 ) ( 48,028 ) Closing fair value of plan assets $ 1,513,387 $ 1,480,973

205 For information about the categories and percentages, etc. of the composition of the fair value of plan assets as of December 31, 2016 and 2015, please refer to the authorities' public information about Labor Pension Funds.

As of December 31, 2016, the significant actuarial assumptions used of the sensitivity analysis of the present value of the defined obligation were as follows:

Impact on the Present Value of the Defined Obligation Change in Actuarial Positive Change in Actuarial Negative Change in Actuarial Assumptions % Assumptions Assumptions Discount rate used in 3.06% decrease in the present 3.19% increase in the present 0.25% increase/decrease determining present values value of the defined obligation value of the defined obligation Expected rate of salary 3.07% increase in the present 2.96% decrease in the present 0.25% increase/decrease increase value of the defined obligation value of the defined obligation

The sensitivity analysis presented above applied when the change in assumptions would occur in isolation and all other assumptions remain constant. Practically, the above assumptions is unlikely to occur and each actuarial assumptions may be correlated. The calculation method of the movements in the present value of the defined benefit obligation also adopts projected unit credit method.

The Company expects to make a contribution of $40,331 thousand and $37,453 thousand to the defined benefit plans within one year beginning from December 31, 2016 and 2015, respectively. The weighted average duration of the defined benefit plans are 12.4 years and 12.4-14.2 years, respectively.

27. EQUITY

Capital Stock

December 31 2016 2015 Numbers of shares authorized (in thousands) 7,000,000 5,650,000 Shares authorized $ 70,000,000 $ 56,500,000 Numbers of shares issued and fully paid (in thousands) Common stock 6,884,598 5,611,871 Shares issued $ 68,845,983 $ 56,118,710

The Company's Board of Directors approved to amend the Company's Articles of Incorporation for increasing the total capital on May 21, 2015. On June 26, 2015, the Company issued 273,000 thousand ordinary shares by private placement at $22 per share, amounting to $6,006,000 thousand and have been approved by the FSC and the Ministry of Economic Affairs.

A resolution on 2014 earnings distribution of 136,308 thousand shares of stock dividends, amounting to $1,363,084 thousand, was approved by the FSC on August 21, 2015, and the Board of Directors approved the record date was September 16, 2015.

On June 16, 2015, the Company's board of directors resolved to issue 363,636 thousand ordinary shares by private placement at NT$22 per share, amounting to $8,000,000 thousand, and the above transaction was approved by FSC. On December 30, 2016, the Company's board of directors resolved to issue 909,091 thousand ordinary shares by private placement at NT$22 per share, amounting to $20,000,000 thousand, and the above transaction was approved by FSC.

206 Appendix I. Financial Statements and Independent Auditors' Report 10

Pain-in Capital

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

The capital surplus from investments using equity method, employee stock options and conversion options may not be used for any purpose.

Taishin Financial Holding's Board of Directors resolved the fourth stock options and warrants issue plan based on IFRSs 2 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 $4,067 thousand and $11,208 thousand for the years ended December 31, 2016 and 2015, respectively.

Retain Earnings and Dividend Policy

In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and bonuses are limited to shareholders and do not include employees. The shareholders held their regular meeting on February 25, 2016 and, in that meeting, had resolved amendments to the Company's Articles of Incorporation (the "Articles"), particularly the amendment to the policy on dividend distribution and the addition of the policy on distribution of employees' compensation. Please refer to Note 32 for the information relating to employee benefits expenses.

Under the dividend policy as set forth in the amended Articles, where the Company made profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company's board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders' meeting for distribution of dividends and bonus to shareholders. Cash distributions in any given year can not exceed 15% of the Company's paid-in capital. But if Taishin Bank's legal reserve equals to or exceeds paid-in capital, this restriction does not apply.

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

207 The appropriations of earnings for 2015 and 2014 approved in the shareholders' meetings on April 21, 2016, and May 21, 2015, respectively, were as follows:

Appropriation of Earnings Dividend Per Share (NT$) For Year 2015 For Year 2014 For Year 2015 For Year 2014 Legal reserve $ 2,961,317 $ 3,894,526 Special reserve 227,126 - Cash dividends Common stock 6,682,615 7,724,145 $ 1.19 $ 1.48 Stock dividends Common stock - 1,363,084 - 0.26

The Special Reserve Appropriated at the Firs-time Adoption of IFRSs

The increase in retained earnings that resulted from all IFRSs adjustments was not enough, i.e. smaller than the total revaluation and translation differences; therefore, the Company appropriated to special reserve the amount of $86,717 thousand, the increase in retained earnings that resulted from all IFRSs adjustments on transition to IFRSs.

Other Equity - Unrealized Gains (Losses) on Available-for-sale Financial Assets

For the Year Ended December 31 2016 2015 Beginning balance ($ 314,599 ) $ 195,490 Unrealized gains (losses) on available-for-sale financial assets 201,312 ( 258,957 ) Income tax relating to unrealized gains (losses) on available-for-sale 13,885 7,646 financial assets Cumulative gains (losses) reclassified to profit or loss on sale of ( 176,964 ) ( 260,261 ) available-for-sale financial assets The amount of unrealized gains (losses) on available-for-sale 1,071 1,483 financial assets of associates by using equity method Ending balance ($ 275,295 ) ($ 314,599 )

208 Appendix I. Financial Statements and Independent Auditors' Report 10

28. NET INTEREST REVENUE

For the Year Ended December 31 2016 2015 Interest revenue Loans $ 21,728,946 $ 21,969,079 Investment in marketable securities 2,723,666 2,989,621 Revolving credit interest 1,169,614 1,218,870 Others 1,778,987 2,033,760 27,401,213 28,211,330 Interest expense Deposits ( 7,112,572 ) ( 7,960,917 ) Due to the central bank and call loans from banks ( 440,151 ) ( 547,684 ) Securities sold under repurchase agreements ( 416,724 ) ( 579,287 ) Issuance of bonds and securities ( 1,247,699 ) ( 987,591 ) Structured products ( 978,600 ) ( 993,965 ) Others ( 1,501 ) ( 1,009 ) ( 10,197,247 ) ( 11,070,553 ) Net interest revenue $ 17,203,966 $ 17,140,777

29. NET SERVICE FEE INCOME

For the Year Ended December 31 2016 2015 Service fee income Interbank fees $ 768,771 $ 728,731 Fees from loan 470,545 431,981 Fees from trustee business 1,431,162 1,781,551 Fees from trustee affiliated business 133,604 131,102 Insurance fees 5,480,086 5,355,393 Fees from credit card 3,402,186 3,190,502 Others 1,490,836 1,610,169 13,177,190 13,299,429 Service fee expense Fees from credit card ( 1,611,879 ) ( 1,508,952 ) Interbank fees ( 180,606 ) ( 158,971 ) Marketing fees ( 501,707 ) ( 468,294 ) Others ( 533,839 ) ( 546,897 ) ( 2,828,031 ) ( 2,683,114 ) Net service fee income $ 10,349,159 $ 10,616,315

209 The Company provided custody, trust, investment managements and consultancy services to the third party. Therefore, the Company involved in the planning of financial instruments and the decision making of management and trading. Management of custody, application of trust and portfolio independent accounts and preparing financial statements for the purpose of inner management were not included in the financial statement of the Company.

30. GAIN ON FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

For the Year Ended December 31 2016 2015 Disposal gains (losses) on financial assets and liabilities at FVTPL Stocks and beneficiary certificates $ 5,092 $ 2,986 Bills ( 4,065 ) 7,159 Bonds 587,063 327,550 Derivative financial instruments 881,189 3,121,598 1,469,279 3,459,293 Valuation gains (losses) on financial assets and liabilities at FVTPL Stocks and beneficiary certificates ( 7,448 ) 384 Bills 909 ( 2,687 ) Bonds ( 251,082 ) 256,479 Derivative financial instruments 1,197,851 212,596 940,230 466,772 Net interest income on financial assets and 425,790 517,376 liabilities at FVTPL Dividend revenue on financial assets at FVTPL 11,463 5,620 $ 2,846,762 $ 4,449,061

31. REALIZED GAIN ON AVAILABLE-FOR-SALE FINANCIAL ASSETS

For the Year Ended December 31 2016 2015 Disposal gains (losses) Bills ($ 15,157) ($ 18,709 ) Bonds 143,959 197,346 Stocks and beneficiary certificates 48,162 81,624 176,964 260,261 Stock dividends 110,089 133,450 $ 287,053 $ 393,711

210 Appendix I. Financial Statements and Independent Auditors' Report 10

32. EMPLOYEE BENEFITS EXPENSES

For the Year Ended December 31 2016 2015 Short-term benefits $ 9,010,655 $ 9,054,116 Post-employment benefits (Note 26) Defined contribution plans 342,854 326,779 Defined benefit plans 29,093 25,516 Share-based payment Equity-settled share-based payment 4,067 11,208 Cash-settled share-based payment 20,914 ( 11,230 ) Other employee benefits expenses 430,313 350,380 $ 9,837,896 $ 9,756,769

a. Employees' compensation in 2016 and 2015

In compliance with the Company Act as amended in May 2015 and the amended Articles of Incorporation of the Company approved by the board of directors (insteading shareholders) in their meeting on February 25, 2016, the Company accrued employees' compensation at 0.01%, respectively, of net profit before income tax, employees' compensation. The number of shares of the employees' compensation, determined by dividing the amount of the employees' compensation resolved for 2016 and 2015 by $1,104 thousand and $1,163 thousand, respectively.

If there is a change in the amounts after the financial statements were authorized for issue, the differences are recorded as a change in the accounting estimate.

There was no difference between the actual amounts of employees' compensation paid and the amounts recognized in the financial statements for the year ended December 31, 2015.

Information on the employees' compensation resolved by the Company's board of directors in 2017 and 2016 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

b. Bonus to employees in 2014

On May 21, 2015, the bonus to employees which approved by the board of directors (insteading shareholders) in their meeting was $909 thousand. There was no difference between the actual amounts of employees' compensation paid and the amounts recognized in the financial statements for the year ended December 31, 2014.

Information on the bonus to employees resolved by the Company's board of directors in 2015 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

c. The benefit program

implemented by the Company was executed on embedded value for proper person by cash. Provision for (reverse of) the expense recognized by the Company for year 2016 and 2015 were $20,914 thousand and $(11,230) thousand, respectively. The related liability recognized for the years ended December 31, 2016 and 2015 were $43,117 thousand and $39,776 thousand, respectively.

Please refer to Note 27 for the information relating to the share-based payment arrangements.

211 33. DEPRECIATION AND AMORTIZATION EXPENSES

For the Year Ended December 31 2016 2015 Property and equipment $ 734,780 $ 647,386 Intangible assets 173,959 161,550 $ 908,739 $ 808,936

34. INCOME TAX

a. Income tax recognized in profit or loss

The major components of tax expense were as follows:

For the Year Ended December 31 2016 2015 Current tax In respect of the current period $ 1,009,612 $ 1,329,345 Adjustment for prior years ( 18,401 ) ( 11,976 ) Offshore income tax expense 1,223 9,648 Land value increment tax 2,469 - Deferred tax In respect of the current period 512,399 447,306 Income tax expense recognized in profit or loss $ 1,507,302 $ 1,774,323

Reconciliation of profit before income tax and income tax was as follows:

For the Year Ended December 31 2016 2015 Income before income tax $ 11,042,928 $ 13,080,785 Income tax expense calculated at the statutory rate $ 1,877,297 $ 2,223,733 17% Nondeductible expense in determining taxable income 2,393 ( 23,319 ) Tax-exempt income ( 435,019 ) ( 745,089 ) Unrecognized deductible temporary differences 72,490 ( 58,754 ) Deferred tax effects of Overseas branches ( 3,212 ) 140,095 Payable due to AMT 8,062 239,985 Land value increment tax 2,469 - Adjustments to prior years' tax ( 18,401 ) ( 11,976 ) Offshore income tax expense 1,223 9,648 Income tax expense recognized in profit or loss $ 1,507,302 $ 1,774,323

The applicable tax rate used above is the corporate tax rate of 17% payable by the Company in ROC. Tax rate used by other group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.

Due to the uncertainty of appropriation, the potential effect of additional income tax on unappropriated earnings by 10% can not be reliably measured.

212 Appendix I. Financial Statements and Independent Auditors' Report 10

b. Income tax recognized in other comprehensive income

For the Year Ended December 31 2016 2015 Deferred tax In respect of the current period Unrealized gains on available-for-sale $ 13,885 $ 7,646 financial assets Remeasurements of the defined benefit plans 43,028 49,862 Recognized in other comprehensive income $ 56,913 $ 57,508 c. Current tax assets and liabilities

December 31 2016 2015 Current tax assets Tax refund receivable $ 527,781 $ 643,990 Prepaid tax 233 1,708 $ 528,014 $ 645,698 Current tax liabilities Income tax payable $ 636,309 $ 314,486 d. Deferred tax assets and liabilities

For the Year Ended December 31, 2016 Recognized Payables Beginning Recognized in in Other to Taishin Ending Balance Profit or Loss Comprehensive Financial Balance Income Holding Deferred tax assets Allowance for b ad debts in excess $ 1,940,322 $ 52,444 $ - ($ 132,089 ) $ 1,860,677 of tax limit Loss carryforwards 567,566 - - - 567,566 Reserve for guarantee liabilities in 3,344 5,374 - - 8,718 excess of tax limit Linked debt settlement 46,450 ( 25,604 ) - ( 3,749 ) 17,097 Credit card bonus points liabilities 111,884 ( 259 ) - - 111,625 Unfunded pension liabilities 92,661 ( 1,917 ) 43,028 - 133,772 Unrealized gains or losses on 470,868 ( 470,868 ) - - - financial instruments Unrealized gains or losses on 17,590 - 13,885 - 31,475 available-for- sale financial assets $ 3,250,685 ($ 440,830 ) $ 56,913 ($ 135,838 ) $ 2,730,930

Deferred tax liabilities Unrealized gains or losses on $ - ($ 71,569 ) $ - $ - ($ 71,569 ) financial instruments Land value increment tax ( 53,552 ) - - - ( 53,552 ) ($ 53,552 ) ($ 71,569 ) $ - $ - ($ 125,121 )

213 For the Year Ended December 31, 2015 Recognized Payables Beginning Recognized in in Other to Taishin Ending Balance Profit or Loss Comprehensive Financial Balance Income Holding Deferred tax assets Allowance for bad debts in excess $ 1,645,919 $ 294,403 $ - $ - $ 1,940,322 of tax limit Loss carryforwards 2,021,927 ( 1,222,953 ) - ( 231,408 ) 567,566 Reserve for guarantee liabilities in 16,262 ( 12,918 ) - - 3,344 excess of tax limit Linked debt settlement 47,122 ( 672 ) - - 46,450 Linked credit card bonus points 115,441 ( 3,557 ) - - 111,884 liabilities Unfunded pension liabilities 45,149 ( 2,350 ) 49,862 - 92,661 Unrealized gains or losses on - 470,868 - - 470,868 financial instruments Unrealized gains or losses on 9,944 - 7,646 - 17,590 available-for-sale financial assets $ 3,901,764 ($ 477,179 ) $ 57,508 ($ 231,408 ) $ 3,250,685

Deferred tax liabilities Unrealized gains or losses on ($ 29,873 ) $ 29,873 $ - $ - $ - financial instruments Land value increment tax ( 53,552 ) - - - ( 53,552 ) ($ 83,425 ) $ 29,873 $ - $ - ($ 53,552 )

e. Information about loss carryforwards

The Company's loss carryforwards as of December 31, 2016 are as followed:

Unused Amount Expiry Year 2017 $ 275,135 2018 292,431 $ 567,566

f. The estimated payables to Taishin Financial Holding due to the adoption of the linked-tax system were as follows:

December 31 2016 2015 Payables to Taishin Financial Holding (recorded under current $ 363,306 $ 643,990 tax asset) Payables to Taishin Financial Holding (recorded under current $ 427,253 $ - tax liability)

g. The Company's information about integrated income tax

December 31 2016 2015 Unappropriated earnings Unappropriated earnings generated on and after $ 8,943,094 $ 9,871,058 January 1, 1998

Imputation credits accounts $ 32,732 $ 21,066

214 Appendix I. Financial Statements and Independent Auditors' Report 10

The creditable ratio for distribution of earnings of 2016 was 0.37% (expected ratio).

The creditable ratio for distribution of earnings of 2015 was 0.33%.

Under the Income Tax Law, for distribution of earnings generated after January 1, 1998, the imputation credits allocated to ROC resident shareholders of the Company was calculated based on the creditable ratio as of the date of dividend distribution. The actual imputation credits allocated to shareholders of the Company was based on the balance of the Imputation Credit Accounts (ICA) as of the date of dividend distribution. Therefore, the expected creditable ratio for the 2016 earnings may differ from the actual creditable ratio to be used in allocating imputation credits to the shareholders.

According to legal interpretation No. 10204562810 announced by the Taxation Administration of the Ministry of Finance, when calculating imputation credits in the year of first-time adoption of IFRSs, the cumulative retained earnings include the net increase or net decrease in retained earnings arising from first-time adoption of IFRSs

h. Assessment of income tax

The Company's income tax returns through 2010 had been assessed by the tax authorities.

35. EARNINGS PER SHARE

Earnings Per Share For the Year Ended December 31 2016 2015 Basic earnings per share $ 1.64 $ 2.06 Diluted earnings per share $ 1.64 $ 2.06

The earnings and weighted average number of common shares outstanding in the computation of earnings per share were as follows:

Net Income for the Periods

For the Year Ended December 31 2016 2015 Earnings used in computation of basic earnings $ 9,535,626 $ 11,306,462 per share Earnings used in computation of diluted earnings $ 9,535,626 $ 11,306,462 per share

Weighted Average Number of Ordinary Shares

In Thousand Shares For the Year Ended December 31 2016 2015 Weighted average number of ordinary shares outstanding $ 5,814,554 $ 5,480,233 in computation of basic earnings per share Effect of dilutive potential ordinary shares: Employees compensation/employees bonus 83 106 Weighted average number of ordinary shares outstanding 5,814,637 5,480,339 in computation of dilutive earnings per share

215 If the Company offered to settle compensation or bonuses paid to employees in cash or shares, the Company assumed the entire amount of the compensation or bonus would be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, if the effect is dilutive. Such dilutive effect of the potential shares was included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

36. OPERATING LEASE ARRANGEMENTS

The Company as Lessee

Operating leases relate to leases of operating place with lease terms between 1 and 10 years.

As of December 31, 2016 and 2015, refundable deposits paid under operating leases amounted to $225,284 thousand and $222,454 thousand, respectively.

The Company's future minimum lease payments of non-cancellable operating lease commitments were as follows:

December 31 2016 2015 Not later than 1 year $ 488,821 $ 469,273 Later than 1 year and not later than 5 years 1,174,009 1,194,443 Later than 5 years 384,680 350,053 $ 2,047,510 $ 2,013,769

37. CAPITAL RISK MANAGEMENT

a. Summary

The Company's goals in capital management are as follows:

1) The Company's eligible self-owned capital should meet the requirement of legal capital, and reached the minimum capital adequacy ratio. 2) The calculation of eligible self-owned capital and legal capital are according to the regulation of administration. 3) To ensure the Company is able to meet the capital needs, it should be evaluated periodicity and observed the variation between eligible self-owned capital and risk assets.

b. Capital management procedures

The Company maintains a sound capital adequacy ratio to meet the requirement of the administration, and reports to the administration quarterly. In addition, the capital management procedures for the overseas branches of the Company are carried out according to the regulation of local administrations.

The Company's capital adequacy performance, which is calculated based on Regulations Governing the Capital Adequacy and Capital Category of Banks, is reported to the Asset and Liability Management Committee of Taishin Financial Holding monthly. The regulatory capital is classified into Tier 1 capital and Tier 2 capital respectively.

216 Appendix I. Financial Statements and Independent Auditors' Report 10

Tier 1 capital: Include common equity Tier 1 and other Tier 1 capital.

1) Common equity Tier 1: Include common stock, capital reserves (exclude additional paid-in capital in excess of par- preferred stock), accumulated earnings and equity adjustments. Deduct: Intangible assets (include goodwill), unamortized losses on sales of non-performing loans, significant investments in financial institutions, deferred tax assets, deferred pension cost, and the one shall have been deducted from Tier 1 capital and Tier 2 capital (exclude significant investments in financial institutions). 2) Other Tier 1 capital: Include noncumulative perpetual preferred stock, noncumulative perpetual subordinated debts.

Tier 2 capital: Include cumulative perpetual preferred stock, cumulative perpetual subordinated debts, revaluation surplus of real estate, convertible bonds, operating reserves and allowance for doubtful accounts. c. Capital adequacy

Period December 31, 2016 December 31, 2015 Item Common equity Tier I 95,432,638 84,258,268 Self-owned Other Tier I capital 25,144,114 6,056,885 capital Tier II capital 40,443,301 43,230,933 Self-owned capital 161,020,053 133,546,086 Standardized approach 1,037,487,856 979,838,822 Credit risk IRB - - Securitization 152,514 379,345 Basic indicator approach - - Standardized approach/ Risk-weighted Operation 52,386,025 50,385,625 assets risk optional standard Advanced internal-rating based - - approach Market Standardized approach 42,766,500 38,971,325 price risk Internal model approach - - Total 1,132,792,895 1,069,575,117 Capital adequacy ratio 14.21% 12.49% Common equity Tier I to risk-weighted assets ratio 8.42% 7.88% Tier I capital to risk-weighted assets ratio 10.64% 8.44% Leverage ratio 7.34% 5.66%

Note 1: The ratios are calculated in accordance with the Letters issued by FSC on January 9, 2014 (Ref. No. Jin-Guan-Yin 10200362920 and 10200362921). Note 2: Formula: a. Self-owned capital = Common equity Tier I + Other Tier I capital + Tier II 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. Common equity Tier I capital to risk-weighted assets ratio = Common equity Tier I capital/Risk-weighted assets e. Tier I capital to risk-weighted assets ratio = (Common equity Tier I + Other Tier I capital)/Risk-weighted assets f. Leverage ratio = Tier I capital/Adjusted average assets

217 38. FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

a. Summary

Fair value is the exchange price in the orderly transaction between market participants and is the amount to be received on the sale of an assets or the amount to be paid on the transfer of a liability.

Financial instruments are initially measured at fair value. In many cases, the transaction price will equal the fair value. Subsequently, the financial instruments are measured at fair value, unless the financial assets meet the criteria for being measured at amortized cost. A quoted price in an active market provides the most reliable evidence of fair value. If financial instruments have no quoted prices in an active market, the Company will use valuation techniques or refer to Bloomberg or Reuters' quotes or the fair value quoted by the counterparty.

b. The definition of three levels of fair value

1) Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Active markets must have the following attributes: (A) assets or liabilities traded in the market are identical, (B) the market is principal (or most advantageous), providing ease in finding buyers and sellers that are both able and willing to transact an asset sale or liability transfer; and (C) pricing information is readily available on an ongoing basis to the public. 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as price) or indirectly (i.e., value derived from price), in the active markets. a) 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 of quoted price of similar instruments and the quoted price of financial instruments. b) Quoted prices for identical or similar assets or liabilities in markets that are not active. c) Valuation models are used to measure fair value, and the inputs (e.g. interest rate, yield curve, and volatilities) are based on accessible data 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). d) Inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs). 3) 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. Historical volatility typically does not represent current market participants' expectations about future volatility.

c. Financial instruments measured at fair value

1) The level information of fair value The financial instruments of the Company measured at fair value on a recurring basis. The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

218 Appendix I. Financial Statements and Independent Auditors' Report 10

December 31, 2016 Financial Assets and Liabilities Total Level 1 Level 2 Level 3 Recurring fair value measurement Non-derivative assets and liabilities Assets Financial assets at FVTPL Financial assets held for trading Stocks and beneficiary certificates $ 164,311 $ 164,311 $ - $ - Bond investments 19,471,478 6,861,366 12,610,112 - Others 28,140,543 - 28,140,543 - Available-for-sale financial assets Stocks and beneficiary certificates 3,456,947 3,456,947 - - Bond investments 90,002,214 12,401,591 77,600,623 - Others 208,162,211 336,511 207,063,544 762,156 Liabilities Financial liabilities at FVTPL Financial liabilities held for trading 453,975 453,975 - - Derivative assets and liabilities Assets Financial assets at FVTPL 36,601,031 91,410 24,172,129 12,337,492 Liabilities Financial liabilities at FVTPL 34,970,485 2,801 22,291,470 12,676,214

December 31, 2015 Financial Assets and Liabilities Total Level 1 Level 2 Level 3 Recurring fair value measurement Non-derivative assets and liabilities Assets Financial assets at FVTPL Financial assets held for trading Stocks and beneficial certificates $ 280,544 $ 280,544 $ - $ - Bond investments 43,239,850 9,407,142 33,832,708 - Others 25,117,908 - 25,117,908 - Available-for-sale financial assets Stocks and beneficial certificates 3,147,988 3,147,988 - - Bond investments 102,525,451 20,882,115 81,643,336 - Others 184,438,713 344,021 183,184,461 910,231 Derivative assets and liabilities Assets Financial assets at FVTPL 48,512,998 37,977 23,398,003 25,077,018 Liabilities Financial liabilities at FVTPL 49,883,193 2,213 24,404,457 25,476,523

219 2) The valuation techniques based on fair value

Financial instruments are initially measured at fair value. In many cases the transaction price will equal the fair value. Subsequently, the financial instruments are measured at fair value, unless the financial assets meet the criteria for being measured at amortized cost. A quoted price in an active market provides the most reliable evidence of fair value. If financial instruments have no quoted prices in an active market, the Company will use valuation techniques or refer to Bloomberg or Reuters' quotes or the fair value quoted by the counterparty.

If there is an active market and a price for a financial instrument is quoted in that market, the quoted price will be the fair value of the financial instrument. Market prices provided by major stock exchanges and market prices of popular central government bonds announced by the GreTai Securities Market are considered to be the basis of fair values for equity instruments and debt instruments with active market. If a quoted price, which represents the price being practically and frequently transacted in orderly transactions, can be acquired from stock exchanges, brokers, underwriters, pricing service institutions or the administration in time and frequently, then there is an active market for the financial instrument. If the conditions mentioned above are not met, then the market is regarded as inactive. Generally speaking, extremely high bid-ask spread, significant increase of bid-ask spread or extremely low transaction amounts are all indications for an inactive market.

The Company's financial instruments with active markets and the basis of their fair values are described as follows:

Foreign currency products

Since the foreign exchange market is very active, the Company adopts the market prices of each respective currency or the last trading prices as fair values.

Government bonds and part of interest rate derivatives

a) New Taiwan Dollar Central Government Bonds: If there is a trading price on the measurement date, then the last trading price is the fair value. If there is no trading price for reference and the subordinated bond fair price provided by the GreTai Securities Market is not in the market quoted price interval, then the median price of the market quoted prices is the fair value. If the subordinated bond fair price is in the market quoted price interval, then the fair price is the fair value. b) Interest rate derivatives: The quoted price from Reuters is the fair value. c) Stock-related products: The Company adopts stock market quoted prices or the last trading prices as fair values. Except for the financial instruments with active market, fair values of other financial instruments are acquired based on valuation techniques or the quoted prices from counterparties. Fair values acquired through valuation techniques can be calculated using models based on fair values from financial instruments with similar conditions and characteristics, cash flow discount method and other valuation techniques, including accessible information on the balance sheet date such as the yield curve from the GreTai Securities Market or the average quoted price from Reuters commercial papers interest rate.

When measuring financial instruments that are not standardized and with low complexity such as options without active market, the Company will adopt valuation techniques consistent with those generally used by other market participants to price financial instruments. Parameters applied for the valuation models for this type of financial instruments are observable in the market.

220 Appendix I. Financial Statements and Independent Auditors' Report 10

With regard to financial instruments with high complexity, the Company will adopt self-developed valuation techniques and methods consistent with those generally used by other market participants and valuation models to measure fair values. This type of valuation models are often applied to derivatives, embedded bond instrument or securitized products, etc. Part of parameters applied for the valuation models for this type of financial instruments are not observable in the market. Therefore, the Company makes appropriate estimates based on assumptions.

Valuation of derivatives is based on valuation models consistent with those generally used by other market participants, such as the discount rate method or the option pricing models.

3) Adjustments of fair values

a) Limits of valuation models and indeterminate input value Valuation models generate estimated approximate values. That is, valuation techniques may not be able to reflect all the factors relevant to the performance of the Company's financial instruments. Thus, results generated by valuation models are adjusted appropriately by using additional parameters, such as determinants of fair value (prevailing economic conditions, financial condition of counterparties to financial instruments, etc.) or assumptions and forecasts (future economic conditions, amount and pricing of future cash flows, etc.). Based on Taishin International Bank's valuation basis manual and model management policies, the price information and parameters used in the valuation process are carefully assessed and appropriately adjusted in accordance with actual market conditions.

b) Credit risk value adjustments Credit risk value adjustments are mainly classified into credit value adjustments (CVA) and debit value adjustments (DVA), described as follows:

The CVA is an adjustment to the valuation of derivative contracts made in decentralized market, which is the Over the counter (OTC) market, to reflect within fair value the possibility that the counterparty may default and that the company may not receive the full market value of the transactions.

The DVA is an adjustment to the valuation of derivative contracts made in decentralized market, which is the Over the counter (OTC) market, to reflect within fair value the possibility that the Company may default, and that the Company may not pay the full market value of the transactions.

The Company would calculate CVA by assessing probability of default (PD) and loss given default (LGD) of the counterparty before multiplying by exposure at default (EAD) of the counterparty. On the contrary, DVA is computed by applying probability of default of the Company and considering loss given default of the Company before being multiplied by exposure at default of the Company.

The Company manages PD through its regular internal rating review. After examining the experiences of foreign financial institutions, the Company adopted 60% as its LGD and chose the marking to market of OTC derivative instruments to determine EAD. In addition, in calculating the fair values of financial instruments, the Company took credit risk rating adjustments into consideration to reflect competitors' credit risk and the Company's credit quality, respectively.

4) The transfer between Level 1 and Level 2

Based on an internal risk control management policy, some of the New Taiwan dollar Central Government Bonds were determined as bond instrument investments with no active market. Thus, the bond amounts of $512,990 thousand and $2,893,941 thousand for the years ended December 31, 2016 and 2015, respectively, were transferred from Level 1 to Level 2.

221 5) Reconciliation of Level 3 financial assets

For the Year Ended December 31, 2016 Valuation Gains (Losses) Increase Decrease Beginning In Other Sell, Ending Item In Net Buy or Balance Comprehensive Transfer in Disposal or Transfer out Balance Income Issue Income Delivery Financial assets at FVTPL $ 25,077,018 ($ 5,306,875 ) $ - $ 2,626,524 $ - ($ 10,059,175 ) $ - $ 12,337,492 Available-for-sale financial 910,231 ( 21,970 ) 2,300 1,002,143 - ( 1,130,548 ) - 762,156 assets Total $ 25,987,249 ($ 5,328,845 ) $ 2,300 $ 3,628,667 $ - ($ 11,189,723 ) $ - $ 13,099,648 Note: No transfer from Level 3.

For the Year Ended December 31, 2015 Valuation Gains (Losses) Increase Decrease Beginning In Other Sell, Ending Item In Net Buy or Balance Comprehensive Transfer in Disposal or Transfer out Balance Income Issue Income Delivery Financial assets at FVTPL $ 18,640,661 $ 2,414,533 $ - $ 9,095,450 $ - ($ 5,073,626 ) $ - $ 25,077,018 Available-for-sale financial assets 474,002 20,058 ( 3,340 ) 1,321,327 - ( 901,816 ) - 910,231 Total $ 19,114,663 $ 2,434,591 ($ 3,340 ) $ 10,416,777 $ - ($ 5,975,442 ) $ - $ 25,987,249 Note: No transfer from Level 3.

Valuation gains (losses) above recognized in current profits or losses in the amounts of $(5,284,965) thousand and $4,948,371 thousand were attributed to gains (losses) on assets owned during the years ended December 31, 2016 and 2015, respectively.

Valuation gains (losses) above recognized in other comprehensive income in the amounts of $816 thousand and $(2,405) thousand were attributed to gains (losses) on assets owned during the years ended December 31, 2016 and 2015, respectively.

Reconciliation of Level 3 financial liabilities:

For the Year Ended December 31, 2016 Increase Decrease Beginning Valuation Gains Ending Item Sell, Balance (Losses) Buy or Issue Transfer in Disposal or Transfer out Balance Delivery Financial liabilities at FVTPL $ 25,476,523 ($ 5,971,931 ) $ 581,955 $ - ($ 7,410,333 ) $ - $ 12,676,214 Note: No transfer from Level 3.

For the Year Ended December 31, 2015 Increase Decrease Beginning Valuation Gains Ending Item Sell, Balance (Losses) Buy or Issue Transfer in Disposal or Transfer out Balance Delivery Financial liabilities at FVTPL $ 18,683,213 $ 1,631,710 $ 8,398,704 $ - ($ 3,237,104 ) $ - $ 25,476,523 Note: No transfer from Level 3.

222 Appendix I. Financial Statements and Independent Auditors' Report 10

Valuation gains (losses) above recognized in current profits or losses in the amounts of $5,609,967 thousand and $(4,160,884) thousand were attributed to gains (losses) on liabilities owned during the years ended December 31, 2016 and 2015, respectively.

6) The quantification information measured by fair value of significant unobservable inputs (Level 3)

The most fair value attributed to Level 3 in the Company only has single significant unobservable input.

The quantification information of significant unobservable inputs were as follows:

Significant Fair Value on Valuation Range of Relationship Between Unobservable December 31, 2016 Technique Estimate Inputs and Fair Value Inputs Non-derivative financial instrumen Available-for-sale Financial assets Cash flow Discount The higher the discount Beneficial $ 762,156 discount method/ for lack of 0%~ 10% for lack of marketability, securities prepayment model marketability the lower the fair value. Derivative financial instrument Financial assets at FVTPL Discount The higher the discount Cash flow discount Interest rate swaps 1,270,167 for lack of 0%~ 20% for lack of marketability, method marketability the lower the fair value. Option pricing The higher the volatility Equity-linked 177 model/cash flow Volatility rate 5%~ 40% rate, the higher the fair swaps discount method value. The higher the volatility Option pricing Structured FXO 72 Volatility rate 5%~ 25% rate, the higher the fair model value. Derivative financial liabilities Financial liabilities at FVTPL Discount The higher the discount Cash flow discount Interest rate swaps 1,266,372 for lack of 0%~ 20% for lack of marketability, method marketability the lower the fair value.

7) The assessment of fair value based on Level 3 inputs

The financial instrument assessment group of the Company's department of risk management is responsible for independently verifying fair value, using an impartial, reliable source of information, so that the evaluation results reflect market status closely, same with other resource and representing executable price calibrating the assessment model regularly, and updating input values, information and any other information needed to ensure that the assessment model results are reasonable.

The department of finance and the department of risk management set assessment policies and procedures for determining the fair values of financial instruments and ensure that these policies and procedures are in compliance with IFRS.

223 d. Not measured at fair value

1) Fair value information

The Company's assets that are not measured at fair value-such as cash and cash equivalents, due from the Central Bank and call loans to banks, securities purchased under resell agreements, receivables, other financial assets, loans, due to the Central Bank and banks, securities sold under repurchase agreements, payables, deposits and remittances, bank debentures, other borrowing and other financial liabilities-have carrying amounts that are equal to, or reasonably approximate, their fair values. The Company didn't have any financial instruments not measured at fair value in current period.

2) Valuation techniques

a) Financial instruments such as cash and cash equivalents, due from the Central Bank and call loans to banks, securities purchased under resell agreements, receivables, other financial assets, due to the Central Bank and banks, securities sold under repurchase agreements, payables, remittances, other financial liabilities, are disclosed at their carrying amounts as shown in the individual balance sheets since their maturities are very short or their future payments/receipts approximate their carrying amounts. b) Loans (including delinquent loans) The Company's loan interest rate is usually determined based on the prime rate plus or minus basic points (i.e. the floating rate), which reflects the market interest rate. The expected recovery of loans is taken into consideration. Therefore, loans are disclosed at their carrying amounts. Medium and long-term loans, which are determined at fixed rates and account for a minor proportion of loans, are disclosed at their carrying amounts. c) Financial assets carried at cost Since the fair value of financial assets carried at cost cannot be reliably measured, the carrying amount is disclosed instead of fair value. d) Deposits Considering that most of the banking transactions are within one year of maturity, deposits are disclosed at their carrying amounts. e) Bank debentures The bank debentures were issued to enhance liquidity or capital management instead of earning short- term profits, the carrying amount is disclosed instead of fair value.

Financial Assets and Financial Liabilities Offsetting

Taishin International Bank signs net settlement contracts or similar agreements with counterparties. When both transaction parties choose to do netting, the Company can offset financial assets and financial liabilities after the signing of the net settlement agreement. If not, the Company would execute total settlement. However, if one of the transaction parties breaks a contract, the other party can choose to execute net settlement. The table below shows more information on the offset of financial assets and financial liabilities.

December 31, 2016 Offset and Execution of Net Settlement or Similar Agreement on Financial Assets Amount of Offset Not Shown in Offset of Realized Net Financial Balance Sheet (d) Realized Financial Assets in Net Interpretation Financial Assets Financial Liabilities in Balance Sheet Received Cash (e)=(c)-(d) (a) Instruments Balance Sheet (b) (c)=(a)-(b) Collaterals (Note)

Derivative $ 21,195,529 $ - $ 21,195,529 $ 15,047,938 $ 719,055 $ 5,428,536 Note: Including net settlement and non-cash collaterals.

224 Appendix I. Financial Statements and Independent Auditors' Report 10

December 31, 2016 Offset and Execution of Net Settlement or Similar Agreement on Financial Liabilities Offset of Amount of Offset Not Shown in Realized Net Financial Balance Sheet (d) Realized Financial Assets in Net Interpretation Financial Assets Financial Liabilities in Balance Sheet Received Cash (e)=(c)-(d) (a) Instruments Balance Sheet (c)=(a)-(b) Collaterals (b) (Note) Derivative $ 30,547,358 $ - $ 30,547,358 $ 15,047,938 $ 12,514,626 $ 2,984,794 Note: Including net settlement and non-cash collaterals.

December 31, 2015 Offset and Execution of Net Settlement or Similar Agreement on Financial Assets Offset of Amount of Offset Not Shown in Realized Net Financial Balance Sheet (d) Realized Financial Assets in Net Interpretation Financial Assets Financial Liabilities in Balance Sheet Received Cash (e)=(c)-(d) (a) Instruments Balance Sheet (c)=(a)-(b) Collaterals (b) (Note) Derivative $ 19,258,158 $ - $ 19,258,158 $ 14,537,109 $ 510,853 $ 4,210,196 Note: Including net settlement and non-cash collaterals.

December 31, 2015 Offset and Execution of Net Settlement or Similar Agreement on Financial Liabilities Offset of Amount of Offset Not Shown in Realized Net Financial Balance Sheet (d) Realized Financial Financial Assets in Net Interpretation Assets Financial Liabilities in Balance Sheet Received Cash (e)=(c)-(d) (a) Instruments Balance Sheet (c)=(a)-(b) Collaterals (b) (Note) Derivative $ 46,011,912 $ - $ 46,011,912 $ 14,537,109 $ 25,283,586 $ 6,191,217 Note: Including net settlement and non-cash collaterals.

Transfer of Financial Assets

Taishin International Bank treats debt securities under repurchase agreements as transferred financial assets that do not qualify for full derecognition; thus, the Company will recognize debts on the transferred financial assets to be bought back at a confirmed price because of the transfer of cash on the debt security contracts. In addition, the Company should not use, sell or pledge the transferred financial assets during the transaction validity period. However, the Company still bears interest and credit risks although the financial assets will not be fully derecognized. The following table shows the amounts of the financial assets that did not qualify for full derecognition and information on the related financial liabilities.

December 31, 2016 Transferred Financial Assets - Related Financial Liabilities - Financial Assets Book Value Book Value Financial assets at fair value through profit or loss $ 25,522,019 $ 25,533,000 repurchase agreement

Available-for-sale financial assets repurchase agreement 43,551,015 43,441,177

225 Financial Risk Management Objectives and Policies

a. Summary

The Company's goal in risk management is to balance the risks and returns by giving consideration to business operation, overall risk taken, and external legal restrictions. The major risks the Company sustains includes in- and off-balance-sheet credit risks, market risks (including interest rate, exchange rate, equity security prices and commodity price risks) and liquidity risks.

The parent company has rules for risk management policies and risk control procedures, which had been approved by the Board of Directors or Risk Management Committee, in order to effectively identify, measure, supervise and control credit risks, market risks and liquidity risks.

b. Organizational structure of risk management function

The Board of Directors is the highest level in the risk management function in the Company and takes the full responsibility for risk management issues. The Board of Directors authorizes the Risk Management Committee to examine policies and standards and establish risk management system. The chairman of Risk Management Committee takes charge of risk management and reports to the Board of Directors periodically.

Risk management department is independent of business department and identifies, assesses, and controls various risks according to risk management standards. In addition, internal auditing department is responsible for the independent review of risk management and control environment.

c. Market risk

1) The source and definition of market risk

Market risk is the uncertainty of changes in fair value of in- and off-balance-sheet financial instruments due to changes in market risk factors. Market risk factors include interest rates, exchange rates, equity security prices and commodity prices.

The major market risks of the Company are equity securities price risks, interest rate risks, and exchange rate risks. The main position of equity securities risk includes domestic public, OTC, and emerging market stocks, domestic stock index options and stock index futures. The main position of interest rate risk includes bonds and interest derivative instruments, such as interest rate swap. The main position of exchange rate risk includes the Company's investments denominated in foreign currencies, such as foreign currency spots and foreign currency options.

2) Market risk management policy

Taishin International Bank's risk management policy was approved by the Board of Directors and is the highest guidance and principle of risk management.

Risk management policy clearly defines the risk management procedures for risk identifying, risk measuring, risk controlling and risk reporting, which are executed by risk management department independent of trading and other departments. The risk management department develops management principles for different businesses and for various aspects of market risk management based on the risk management policy. It establishes market risk management system and regulates market risks, risk limits and stress tests of various financial assets.

226 Appendix I. Financial Statements and Independent Auditors' Report 10

3) Market risk management procedures

a) Identifying risks and measuring possible effects The Company's risk management department identifies the exposures of positions or new financial instruments to market risks and measures the gains and losses on positions held due to changes in market risk factors based on standards; the risk management department calculates price sensitivity and gains and losses on positions are recorded in trading books daily; and calculates the maximum potential losses recorded in each trading book monthly. The Company wants to avoid tremendous losses that will harm the Company's operations due to overwhelming changes in market risk factors. b) Controlling of risk and reporting of issues The Company controls market risk by managing risk limits. The risk management department sets various trading limits, such as position limits, stop-loss limits, and maximum potential loss. The trading limits are implemented only after they are reported to and approved by the Board of Directors. The risk management department calculates exposures and estimated gains and losses on positions daily to make sure that the positions held and losses do not exceed the limits approved by the Board of Directors and prepares reports to the high-level management and the Board of Directors periodically for their sufficient understanding of the implementation of the market risk management work and, if necessary, issuance of additional guidance. The risk management department reports important market risk issues, such as discovery of possible loss on positions in each trading book or identification of weakness in the market risk management system, to the Risk Management Committee of the parent company in order to improve the effectiveness of the market risk management.

4) Trading book market risk management

Based on the related risk management standards, the Company classifies financial instruments into trading books and banking books according to the purpose of holding the instruments and manages them with different methods. Trading book position consists of trading purpose financial instruments or commodities held to hedge positions in trading books. A position, such as self-run position or position produced by matched principal brokering or market making, is for trading purpose if it is intended to be sold within a short period; profit can be earned from actual or expected short-term price fluctuations which are the reasons for dealing, matched principal brokering or market making position.

Principles of trading book market risk management are as follows:

a) Management strategy The goal of trading book market risk management is to pursue maximum return on capital, meaning maximizing the capital usage efficiency to improve stockholders' interest. In order to control market risks, the risk management department sets risk limits for various investment portfolio based on trading strategies, category of trading products and annual profit goals in order to control exposure to risks on positions and losses. b) Management principles The parent company stipulated "Principles of Market Risk Limit Management" to manage trading book limits. c) Valuation gains and losses If objective prices of financial instruments in various trading books exist in open market, such as trading prices, gains and losses on positions are valued in accordance with the market prices by the risk management department. If fair value data is inaccessible, the risk management department will cautiously adopt verified mathematical models to value gains and losses and review the assumptions and parameters of the valuation models periodically.

227 d) Risk measuring methods The methods applied by the risk management department in measuring market risks are as follows: i. Measure the price sensitivity of various risk factors (i.e. Greeks), such as the effect on the valuations of foreign currency position of a 1% change in exchange rate or the effect on option position valuation due to changes in Greeks. ii. Please refer to Item 9 for the risk assumptions and calculation methods. iii. Measure potential losses resulting from extreme market volatility in order to assess capital adequacy and essential position adjustments.

5) Trading book interest rate risk management

a) Definition of interest rate risk Interest rate risk is fair value changes in interest rate risk position held by the Company due to interest rate changes. The risks are mainly in debt securities and interest rate derivatives. b) Measuring methods The risk management department applies DV01 to measure interest risk. DV01 is the change in the value of interest rate risk positions when the yield curve moves upward by one basis point (1bp). And the department calculates stress loss of risk position held. Please refer to Item 9 for the risk assumptions and calculation methods. c) Management procedures The risk management department defines the interest rate related products that can be undertaken among trading book investment portfolio and set the total limit of DV01, the limit of DV01 in each time band and the stop-loss limits in order to control exposure risks on position losses. If the losses reach the stop-loss limit, then the trading department should decrease risk exposure positions so as to control losses.

6) Exchange rate risk management

a) Definition of exchange rate risk Exchange rate risk is the gain or loss resulting from exchange or translation of two different foreign currencies at different times. The Company's exchange rate risk mainly comes from spot and forward exchange positions and forward exchange options. b) Measuring methods The risk management department applies Delta to measure the exchange rate risk of the first order change and applies Gamma to measure the exchange rate risk of the second order change. In addition, Vega is used to measure the first order risk of implied volatility rate. And the department calculates stress loss of risk position held. Please refer to Item 9 for the risk assumptions and calculation methods. c) Management procedures The risk management department sets the position limit and stop-loss limit of trading book investment combinations in order to control exchange rate risk. If the losses reach the stop-loss limit, the trading department should decrease risk exposure positions so as to control losses.

7) Equity security price risk management

a) Definition of equity security price risk Equity security price risk is the valuation effect on the position held by the Company when the equity security price changes. The Company's equity security price risk mainly comes from public and OTC stocks, index futures and options. b) Measuring methods

228 Appendix I. Financial Statements and Independent Auditors' Report 10

The risk management department calculates stress loss of risk position held, applies Delta to measure the independent equity security price risk of the first order change, or market value is applied to indicate the exposure risks on positions of stocks.'Please refer to Item 9 for the risk assumptions and calculation methods. c) Management procedures The risk management department sets the position limit and stop-loss limit of trading book investment portfolio in order to control equity security price risk. If the losses reach the stop-loss limit, then the trading department should decrease risk exposure position so as to control losses.

8) Banking book interest rate risk management

Banking book interest rate risk involves bonds and bills and their hedge position, which are held to manage the Bank's liquidity risk and the interest rate risk of deposits and loans undertaken by business departments. The interest rate risk is transferred to banking book management department for centralized management through internal fund transfer pricing (FTP) system. Banking book interest rate risk is the effect on net interest income of risk exposure positions held due to changes in interest rate. There is no secondary market for loan transactions and the purpose of holding banking book investment position is to establish deposit reserve. This is different from short-term holding for pursuing profit in trading book. Banking book interest rate risks are regulated separately by the risk management department.

a) Management strategy The goal of banking book interest rate risk management is to control interest rate risk position and pursue stability and growth of banking book net interest income under the circumstances that liquidity is appropriate. b) Management principles The Company stipulated "The Principles of Banking Book Interest Rate Risk Management" as the important control regulations for banking book interest rate risk management. c) Measuring methods The banking book interest rate risk is the risk of quantitative or repricing term differences due to the differences in amounts and maturity or repricing dates of banking book assets, liabilities and off-balance- sheet items. The Company measures the effect on net interest income when the yield curve moves upward by 1bp. Please refer to Item 9 for the risk assumptions and calculation methods. d) Management procedures The Company defines the instruments of banking book interest rate management and sets the limit of interest rate risk in order to avoid severe recession of net interest income when the interest rate changes unfavorably. The banking book management unit sets limits and keeps the interest rate risk within the limits.

9) Methods for measuring market risk

a) Stress test A stress test is applied to measure loss under extremely unfavorable market circumstances in order to assess financial institutions' tolerance to extreme market volatility. The risk management unit is required to execute the stress test at least once a month to calculate trading book stress loss. The risk management unit observes historical information of market price and sets the biggest possible volatility range for various market risk factors as the stress circumstance, which should be approved by the Risk Management Committee of the parent company. Since there are so many market risk factors that affect trading book position, there might be plenty of permutation and combination of stress circumstances when the unit calculates stress loss. For instance, change in a market risk factor might result in the

229 biggest loss of one investment portfolio but create profits for another investment portfolio. Based on the conservative principles, the risk management unit will take into account correlation between various risk factors to calculate the biggest loss as the stress loss. The risk management unit should confirm that overall trading book loss does not exceed the stress loss limit and report to the high-level management as references for adjusting positions or resource distribution. b) Value at risk, "VaR" The Company uses variety of methods to control market risk; the VaR is one of them. Taishin Bank is using risk model to assess the value of trading portfolios and potential loss amount of holding positions. VaR is the Company's important internal risk control system, and the Board of Directors reviews and establishes trading portfolio's limits annually. Actual exposures of the Company are monitored daily by risk management. VaR is used to estimate adverse market potential loss of existing positions. The VaR model uses historical simulation method, a one-year historical observation period, the estimate of 99% confidence interval, the maximum possible amount of loss holding positions for one day, and the probability that actual losses may exceed the estimate.

For the Year Ended December 31, 2016 Average Highest Lowest Ending Balance Exchange VaR $ 24,877 $ 40,120 $ 8,358 $ 30,585 Interest rate VaR 60,664 94,871 23,294 30,883 Equity securities VaR 29,283 45,528 8,087 31,102 Value at risk 68,293 106,205 33,424 45,007

For the Year Ended December 31, 2016 Average Highest Lowest Ending Balance Exchange VaR $ 26,921 $ 68,254 $ 5,106 $ 21,682 Interest rate VaR 45,437 73,748 22,815 68,266 Equity securities VaR 23,391 45,997 5,394 23,480 Value at risk 52,823 80,147 32,205 69,262

c) Information of exchange rate risk concentration For information regarding the Company's non-functional currency financial assets and liabilities on the balance sheet date, please refer to Note 43.

d. Credit risk

1) Source and definition

Credit risk means the possible loss due to failure of debtors or counterparties to fulfill their contractual obligations or their ability of fulfill contractual obligations is impaired. Credit risk arises from the operation, on- and off-balance-sheet items, including credit loans, derivatives transactions and securities investment, etc. Because the business becomes more complex, the credit risk is often generated with other risks that affect one another. For example, exchange rate risk also exists in foreign currency debt investment. Secured loans will be affected by the price volatility on the collaterals and market liquidity risk of the collaterals.

230 Appendix I. Financial Statements and Independent Auditors' Report 10

Credit risk can be divided into the following categories based on the object and nature of business:

a) Credit risk Credit risk is the risk that a borrower is unable to pay its debt or fulfill its debt commitments in credit loans operation. b) Issuer (guarantor) risk of the underlying issue It is the credit risk that stock issuers go into liquidation or are unable to pay back money when debt, bills and other securities mature. c) Counterparty risk It is the credit risk that the counterparty undertaking OTC derivatives or RP/RS transactions are unable to fulfill settlement obligations. Counterparty risk is also divided into settlement risk and pre-settlement risk. i. Settlement risk It is the loss resulting from the counterparty failing to deliver goods or other money on the settlement date when the Company had fulfilled settlement obligations. ii. Pre-settlement risk It is the loss resulting from the counterparty failing to fulfill settlement or pay the obligations and from changes in market prices before the settlement date. d) Other credit risks Country risk, custodian risk and brokers risk, etc.

2) Credit risk management policies

To ensure its credit risk under control within the tolerable range, the Company has stipulated in the guidelines for risk management that for all the products provided and businesses conducted, including all on- and off-balance-sheet transactions in the banking and trading books, the Company should make detailed analyses to identify existing and potential credit risks. Before launching new products or businesses, the Company ensures compliance with all applicable rules and regulations and identifies relevant credit risks. For sophisticated credit extensions, such as accounts receivable factoring and credit derivative instruments, the Company also establishes risk management system described in the related rules and guidelines.

Unless the assessment of asset qualities and provision for potential losses of the overseas business department is regulated by the local authorities, it is in accordance with the Company's risk management policies and guidelines.

The measurement and management procedures of credit risks in the Company's main businesses are as follows:

a) Credit granting business (including loans and guarantees) Classification of credit assets and level of credit quality are summarized as follows: i. Classification of credit assets The Company's credit assets are classified into five categories. Except for normal credit assets classified as "Category One", the remaining unsound credit assets are evaluated based on the status of the loan collaterals and the length of time overdue. Assets that require special mention are classified as "Category Two", assets that are substandard are classified as "Category Three”, assets that are doubtful are classified as “Category Four”, and assets with existing loss are classified as “Category Five”. In order to manage the problematic credit loans, the reorganization of loan loss provisions, allowance for bad debt or guarantee liability provisions, measures are adopted for overdue loans and procedures and for collecting default loans. In the management of credit assets, the Company is also

231 guided by the "Regulations Governing the Procedures for Corporation Credit Business to Evaluate Assets and Deal with Nonperforming Assets", "Measures for Corporation Credit Business to Be Taken When Credit Extensions Become Past Due and Regulations Governing Collection Procedures", "Regulations Governing the Procedures for Consumer Business to Evaluate Assets and Deal with Nonperforming Assets", "Regulations Governing the Procedures for Overdue Loan, Non-accrual Loans and Doubtful Loans". ii. Credit risk rating For risk management purposes, the Company rates credit qualities (by using internal rating models for credit risk or credit score tables) in accordance with the nature and scale of a business. The credit risk rating system is internal rating based on the definition of Basel II of internal rating method (IRB). It covers operation procedures, methodology, control mechanism, information system and data collection, which is used to assist risk assessment, rating approval and loss assessment. The corporate finance department's internal rating adopts two aspects. One is obligor risk rating (ORR) and the other is Facility Risk Rating (FRR). ORR is used to assess the possibility of the debtor performing financial commitments, which is a quantitative value based on the probability of default (PD) within one year. FRR is used to assess the effect of rating structures and collateral conditions on credit rating, which is a quantitative value based on loss given default (LGD). At the same time, experts also engage in judging and adjusting the rating overrides of statistic models to make up the shortage of the model. The consumer finance department's internal rating system adopts product characteristic and debtor condition (such as new case or behavior grading) as the basis of segmentation. It is to ensure that the same pools of debtors and risk exposure are homogeneous. At the same time, review of loans based on experts' override is complemented to make up the shortage of the model. b) Due from and call loans to banks The Company evaluates the credit status of counterparties before deals are closed. The Company grants different limits to the counterparties based on their respective credit ratings as suggested by external qualified credit rating institutes. c) Security investment and financial derivatives transaction Regarding the credit risk of security investments and financial derivatives, the Company manages the risk by internal credit rating of issuers, issued underlying, counterparties, and by external credit rating of debt instruments and counterparties or status of regions/countries. The other banks with which the Company conducts derivative transactions are mostly considered investment grade. The credits extended to counterparties that are not rated as investment grade are assessed case by case. The credits extended to counterparties are monitored in accordance with the related contract terms and conditions, and the credit limits for derivatives established in normal credit granting processes. Meanwhile, the Company has set the total position limit on trading and banking book securities and each issuer's limit based on credit ratings.

3) Credit risk hedging or mitigation policies

a) Collaterals The Company has a series of measures for credit granting to reduce credit risks. One of the procedures is asking for collaterals from the borrowers. To secure the loans, The Company manages and assesses the collaterals following the procedures that suggest the scope of collateralization and valuation of collaterals and the process of disposition. In credit contracts, the Company stipulates the security mechanism for loans and the conditions and terms for collaterals and offsetting to state clearly that the Company reserves the right to reduce granted limit, to reduce repayment period, to demand immediate settlement or to offset the debt of the borrowers with their deposits in the Company in order to reduce the credit risks.

232 Appendix I. Financial Statements and Independent Auditors' Report 10

The requirements for collaterals for other non-credit businesses depend on the nature of the financial instruments. Asset-backed securities and similar financial instruments are required to provide a pool of underlying financial assets as collaterals. b) Credit risk concentration limits and control To avoid the concentration of credit risks, the Company has included credit limits for the same person (entity) and for the same related-party corporation (group) based on the credit risk arising from loans, securities investment and derivatives transactions. Meanwhile, for trading and banking book investments, the Company has set a ratio, which is the credit limit of a single issuer in relation to the total security position. The Company has also included credit limits for a single counterparty and a single group. In addition, to manage the concentration risk on the financial assets, the Company has set credit limits by industry, conglomerate, country and transactions collateralized by stocks, and integrated within one system to supervise concentration of credit risk in these categories. The Company monitors concentration of each asset and controls various types of credit risk concentration in a single transaction counterparty, group, related-party corporation, industries, nations. c) Net settlement The Company settles most of its transactions at gross amounts. For further reduction of credit risks, settlement netting is used for some counterparties or some circumstances where the transactions with counterparties are terminated due to defaults. d) Other credit enhancements To reduce its credit risks, the Company stipulates in its credit contracts the terms for offsetting to state clearly that the Company reserves the right to offset the borrowers' debt against their deposits in the Company.

4) Maximum exposure to credit risk

The maximum credit risk exposures of various financial instruments held by the Company are the same as per book amounts. Please refer to the notes to the consolidated financial statements.

As of December 31, 2016 and 2015, the maximum exposure to credit risk (before deducting the guarantees or other credit enhancement instruments and the irrepealable maximum amount of exposure) were as follows:

December 31 Financial Instrument Type 2016 2015 Guarantees $ 15,732,747 $ 15,034,602 Letters of credit 2,902,726 3,853,744 Unused loan commitments (excluding credit 600,553,630 595,996,350 card) Unused loan commitments 14,120,357 13,340,999

5) Situation of credit risk concentration

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 of concentration of credit risks include the nature of business activities engaged by debtors. The Company has not engaged in transactions that involved a prominent concentration to one client or one transaction party, but has engaged in transaction parties of similar industry type or from similar region.

233 The Company's information on prominent concentration of credit risk was as follows:

December 31 2016 2015 Percentage Percentage Industry Type Carrying Amount Carrying Amount of Item (%) of Item (%) Manufacturing $ 121,689,439 14 $ 112,354,885 13 Wholesale and retailing 50,275,504 6 61,566,474 7 Finance and insurance 89,444,644 10 92,018,197 11 Real estate and leasing 43,434,193 5 38,875,370 5 Service 15,110,538 2 12,594,185 1 Individuals 533,690,339 60 496,949,037 59 Others 37,323,009 3 32,897,814 4 $ 890,967,666 $ 847,255,962

December 31 2016 2015 Percentage Percentage Geographic Location Carrying Amount Carrying Amount of Item (%) of Item (%) Asia $ 808,335,514 91 $ 782,515,969 92 Europe 3,557,697 - 1,210,153 - America 340,979 - 475,220 - Others 78,733,476 9 63,054,620 8 $ 890,967,666 $ 847,255,962

6) Financial assets credit quality and nonperforming impairment analysis

Part of financial assets held by the Company, such as cash and cash equivalents, due from the Central Bank and call loans to banks, financial assets at fair value through profit or loss, securities purchased under resell agreement, deposit refunds, operating deposits, and settlement deposits are exposed to low credit risks because the counterparties have rather high credit ratings.

Except for those mentioned above, the credit quality remaining financial assets were analyzed as follows:

a) Credit quality analysis of loans and receivables (including delinquent loans reclassified from other items)

(In Thousands of New Taiwan Dollars)

December 31, 2016

Provision for Impairment Neither Past Due Nor Impaired Past Due But Losses (D) Net Item Total Not Impaired Impaired (C) (A)+(B)+ (A)+(B)+(C) Objective Nonobjective Excellent Good Acceptable Non-ratings Subtotal (A) (B) Evidence of Evidence of (C)-(D) Impairment Impairment

In-balance-sheet items

Receivables (including delinquent loans reclassified $ 81,297,951 $ 10,044,056 $ 603,136 $ 5,340,275 $ 97,285,418 $ 69,198 $ 4,384,511 $ 101,739,127 $ 2,313,282 $ 153,191 $ 99,272,654 from other items)

Loans 691,444,894 175,153,368 8,311,458 - 874,909,720 351,116 15,706,830 890,967,666 8,239,261 4,706,753 878,021,652

234 Appendix I. Financial Statements and Independent Auditors' Report 10

(In Thousands of New Taiwan Dollars)

December 31, 2015

In-balance-sheet items

Receivables (including delinquent loans reclassified $ 71,999,794 $ 10,259,546 $ 398,643 $ 5,791,799 $ 88,449,782 $ 55,619 $ 5,821,913 $ 94,327,314 $ 3,182,951 $ 120,314 $ 91,024,049 from other items)

Loans 653,569,406 161,444,397 16,838,396 - 831,852,199 944,239 14,459,524 847,255,962 7,045,336 4,923,464 835,287,162 b) Credit quality analysis of loans neither past due nor impaired based on credit ratings of clients

(In Thousands of New Taiwan Dollars) December 31, 2016 Item Neither Past Due Nor Impaired Excellent Good Acceptable Non-ratings Total Consumer finance $ 498,086,775 $ - $ 7,378,278 $ - $ 505,465,053 Corporation finance 193,358,119 175,153,368 933,180 - 369,444,667 Total $ 691,444,894 $ 175,153,368 $ 8,311,458 $ - $ 874,909,720

(In Thousands of New Taiwan Dollars) December 31, 2015 Item Neither Past Due Nor Impaired Excellent Good Acceptable Non-ratings Total Consumer finance $ 459,712,987 $ - $ 10,957,142 $ - $ 470,670,129 Corporation finance 193,856,419 161,444,397 5,881,254 - 361,182,070 Total $ 653,569,406 $ 161,444,397 $ 16,838,396 $ - $ 831,852,199 c) Credit quality analysis of non-credit financial assets

(In Thousands of New Taiwan Dollars)

December 31, 2016 Provision for Impairment Neither Past Due Nor Impaired Losses (D) Item Past Due But Net Total Not Impaired Impaired (C) (A)+(B)+(C)- (A)+(B)+(C) Objective Nonobjective Excellent Good Acceptable Non-ratings Subtotal (A) (B) Evidence of Evidence of (D) Impairment Impairment

Call loans to banks $ 27,759,857 $ - $ - $ - $ 27,759,857 $ - $ - $ 27,759,857 $ - $ - $ 27,759,857

Securities purchased under resell 5,286,859 - - - 5,286,859 - - 5,286,859 - - 5,286,859 agreements

Available-for-sale financial assets

Stocks ------3,300,074 - - -

Bills 207,400,055 - - - 207,400,055 - - 207,400,055 - - 207,400,055

Bonds and beneficiary 90,921,243 - - - 90,921,243 - - 90,921,243 - - 90,921,243 securities

Financial assets carried at cost

Stocks ------117,484 117,484 31,301 - 86,183 (In Thousands of New Taiwan Dollars)

235 December 31, 2015 Provision for Impairment Neither Past Due Nor Impaired Losses (D) Item Past Due But Net Total Not Impaired Impaired (C) (A)+(B)+(C)- (A)+(B)+(C) Objective Nonobjective Excellent Good Acceptable Non-ratings Subtotal (A) (B) Evidence of Evidence of (D) Impairment Impairment

Call loans to banks $ 14,152,621 $ - $ - $ - $ 14,152,621 $ - $ - $ 14,152,621 $ - $ - $ 14,152,621

Securities purchased under 2,951,852 - - - 2,951,852 - - 2,951,852 - - 2,951,852 resell agreements

Available-for-sale financial assets

Stocks ------2,297,612 - - -

Bills 182,544,058 - - - 182,544,058 - - 182,544,058 - - 182,544,058

Bonds and beneficiary 104,918,273 352,209 - - 105,270,482 - - 105,270,482 - - 105,270,482 securities

Financial assets carried at cost

Stocks ------132,982 132,982 51,554 - 81,428

7) Aging analysis of financial assets that are past due but not impaired

(In Thousands of New Taiwan Dollars) December 31, 2016 December 31, 2015 Past Due Past Due Item Past Due Up Past Due Up Two to Three Total Two to Three Total to Two Months to Two Months Months Months Receivables (including delinquent loans $ 45,896 $ 23,302 $ 69,198 $ 36,545 $ 19,074 $ 55,619 reclassified from other items) Consumer finance 45,896 23,302 69,198 34,445 18,704 53,149 Corporation finance - - - 2,100 370 2,470 Loans 304,449 46,667 351,116 816,962 127,277 944,239 Consumer finance 304,449 46,667 351,116 166,358 33,719 200,077 Corporation finance - - - 650,604 93,558 744,162

8) For information regarding impairment analysis of loans and receivables, please refer to Note 11.

e. Liquidity risk

1) The source and definition of liquidity risk

Liquidity risk is the potential loss that the Company may suffer due to inability to liquidate assets or raise enough funds in reasonable time to perform obligations when due and to meet the demands of assets growth. Sources of liquidity risk are as follows:

a) Inability to fulfill funding gap due to asymmetric time and amount in cash inflows and outflows. b) Liabilities paid off in advance before maturity, inability to maintain liabilities at maturity or inability to acquire funds from the market. c) Inability to liquidate current assets at reasonable price or raising funds to fulfill funding gap with price higher than the reasonable one.

236 Appendix I. Financial Statements and Independent Auditors' Report 10

Except for the liquidity risks arising from normal operation, the Company's liquidity might be affected by events such as credit ratings being downgraded, credibility seriously damaged, financial system's system risk, causing customers to lack confidence and canceling deposits before maturity, call loans from banks being suspended, RS or RP transactions being deterred and liquidity of financial assets decreasing.

2) Liquidity risk management policy

The objective of liquidity risk management is to ensure that the Company can acquire funds at reasonable price to pay off debt, perform obligations and contingent liabilities and satisfy demands required by business growth either in normal operation or under sudden, serious and unusual circumstances. The Company has established policies on assets and liabilities management that stipulate related liquidity risk management rules and principles, stipulate clear distinction between accountability and responsibility of Asset and Liability Committee and management departments and regulate the limits of liquidity risk, risk measuring, risk monitoring and the scope and procedures of reporting to ensure that overall liquidity risk is within the limits of liquidity risk approved by the Board of Directors.

Basic principles of liquidity risk management policy are as follows:

a) Principle of risk diversification: The Company should avoid excessively concentrating funds on the same maturity, instruments, currencies, regions, funding sources or counterparties. b) Principle of stability: The Company should follow stable strategies and pay attention to market and internal funding liquidity. For example, the Company should absorb the core deposits at appropriate time in order to prevent market volatility from affecting funding sources and thus lower dependence on unstable fund sources. c) Principle of maintaining appropriate asset liquidity: Market liquidity will indirectly affect funding liquidity. Therefore, the Company should make sure total assets can pay off total liabilities and maintain certain proportion of assets with high liquidity or collaterals in order to finance funds and pay off current liabilities in critical and urgent time. d) Principle of matching asset and liability maturity: The Company should pay attention to the spread of maturity and liquidity of liquid assets and current assets should be sufficient to pay off current liabilities. For urgent or sudden liquidity events, the Company has stipulated urgent fund dispatching handling plan as the highest principle for urgent events in order to integrate the Bank's resources quickly to resolve emergencies efficiently.

3) Financial assets held to manage liquidity risk and maturity analysis of non-derivative financial liabilities

a) Financial assets held to manage liquidity risk: The Company holds cash and cash equivalents, due from the Central Bank and banks and available-for- sale and financial assets held for the purpose of managing liquidity risk, in order to perform contracted obligations when due and meet the needs of urgent fund dispatching. b) Maturity analysis of non-derivative financial liabilities The Company's non-derivative financial liabilities presented based on the residual maturities from the balance sheet date to the contract maturity date were as follows:

237 (In Thousands of New Taiwan Dollars) December 31, 2016 Financial Instruments 31-90 91-180 181 Days - Over 5 Item 1-30 Days 1-2 Years 2-3 Years 3-4 Years 4-5 Years Total Days Days 1 Year Years Due to the Central Bank $ 22,501,196 $ 5,308,198 $12,671,704 $ 6,485,363 $ - $ - $ - $ - $ - $ 46,966,461 and banks Financial liabilities at fair value through profit or 453,975 ------453,975 loss Securities sold under 62,640,248 6,333,929 ------68,974,177 repurchase agreements

Payables 25,618,077 440,893 1,193,332 918,119 17,491 - - - - 28,187,912

Deposits and 128,180,199 263,720,884 127,605,183 245,277,579 344,920,706 3,471,452 8,634 - - 1,113,184,637 remittances

Bank debentures - - 13,300,000 - - 4,900,000 - - 34,800,000 53,000,000

Other financial liabilities 1,086,908 745,973 681,321 3,692,304 1,377,735 1,236,068 326,308 29,338 34,938,783 44,114,738

$ 240,480,603 $ 276,549,877 $ 155,451,540 $ 256,373,365 $ 346,315,932 $ 9,607,520 $ 334,942 $ 29,338 $ 69,738,783 $ 1,354,881,900

(In Thousands of New Taiwan Dollars) December 31, 2015 Financial Instruments 31-90 91-180 181 Days - Over 5 Item 1-30 Days 1-2 Years 2-3 Years 3-4 Years 4-5 Years Total Days Days 1 Year Years Due to the Central Bank $ 38,022,041 $ 6,834,198 $ 12,722,940 $ 7,082,699 $ 28,000 $ - $ - $ - $ - $ 64,689,878 and banks Securities sold under 80,133,946 12,999,451 350,883 ------93,484,280 repurchase agreements

Payables 18,746,879 870,964 654,200 461,204 8,214 - - - - 20,741,461

Deposits and 118,593,685 277,695,566 138,167,265 214,000,197 288,074,876 5,675,252 13,460 - - 1,042,220,301 remittances

Bank debentures - - - - 13,300,000 - 4,900,000 - 34,800,000 53,000,000

Other financial liabilities 2,441,196 1,176,537 821,000 349,844 705,355 456,595 1,059,239 813,952 39,356,408 47,180,126

$ 257,937,747 $ 299,576,716 $ 152,716,288 $ 221,893,944 $ 302,116,445 $ 6,131,847 $ 5,972,699 $ 813,952 $ 74,156,408 $ 1,321,316,046

The maturity analysis of time deposits in "deposits and remittances" is allocated to each time band based on the Company's historical experience. If all the time deposits were required to be paid off in recent period, the funds outflows in less than one-month time band would have been $508,304,578 thousand and $470,102,186 thousand as of December 31, 2016 and 2015, respectively.

4) Maturity analysis of derivative financial liabilities

Taishin Bank disclosed amounts of derivative financial liabilities at fair value through profit or loss using fair values recognized in the earliest time band as follows:

(In Thousands of New Taiwan Dollars) December 31, 2016 Financial Instruments 91-180 181 Days - Over 5 Item 1-30 Days 31-90 Days 1-2 Years 2-3 Years 3-4 Years 4-5 Years Total Days 1 Year Years Derivative financial liabilities at fair value $ 34,970,485 $ - $ - $ - $ - $ - $ - $ - $ - $ 34,970,485 through profit or loss

(In Thousands of New Taiwan Dollars) December 31, 2015 Financial Instruments 91-180 181 Days - Over 5 Item 1-30 Days 31-90 Days 1-2 Years 2-3 Years 3-4 Years 4-5 Years Total Days 1 Year Years Derivative financial liabilities at fair value $ 49,883,193 $ - $ - $ - $ - $ - $ - $ - $ - $ 49,883,193 through profit or loss

238 Appendix I. Financial Statements and Independent Auditors' Report 10

5) Maturity analysis of off-balance-sheet items

Below are the amounts of the Company's off-balance-sheet items presented based on the residual maturities from the balance sheet date to the maturity date of loan commitments, guarantees or letters of credit. As of December 31, 2016 and 2015, assuming that all amounts, including the amounts in the longest time band, were due in the less than one-month time band, the amounts would have been $15,732,747 thousand and $15,034,602 thousand, respectively, for guarantees; $2,902,726 thousand and $3,853,744 thousand, respectively, for letters of credit; $600,553,630 thousand and $595,996,350 thousand, respectively, for loans commitments (excluding credit card); and $14,120,357 thousand and $13,340,999 thousand, respectively, for credit cards commitments.

(In Thousands of New Taiwan Dollars) December 31, 2016 Item 181 Days - 1-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year

Guarantees $ 4,038,325 $ 5,410,928 $ 1,961,196 $ 1,124,343 $ 3,197,955 $ 15,732,747

Letters of credit 812,895 1,970,058 94,861 24,912 - 2,902,726

Loans commitments (excluding 5,330,834 145,805,643 128,632,988 316,250,255 4,533,910 600,553,630 credit cards)

Credit cards commitments 134 9,907 27,064 95,999 13,987,253 14,120,357

(In Thousands of New Taiwan Dollars) December 31, 2015 Item 181 Days - 1-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year

Guarantees $ 4,032,742 $ 4,262,994 $ 1,721,245 $ 2,060,549 $ 2,957,072 $ 15,034,602

Letters of credit 1,582,021 2,097,305 174,418 - - 3,853,744

Loans commitments (excluding 6,681,139 101,515,295 190,950,987 262,173,706 34,675,223 595,996,350 credit cards)

Credit cards commitments 68 18,860 21,290 48,836 13,251,945 13,340,999

239 39. OTHER DISCLOSURES REQUIRED FOR OF FINANCIAL INSTITUTIONS

a. Asset quality

Nonperforming loans and receivables

Item December 31, 2016 December 31, 2015 Non- Non- Non- Non- Allowance Coverage Allowance Coverage performing performing performing performing Loans For Loan Ratio Loans For Loan Ratio Loans Loans Ratio Loans Loans Ratio Losses (Note c) Losses (Note c) Business Type (Note a) (Note b) (Note a) (Note b)

Corporate Secured 1,031,279 179,549,663 0.57% 1,911,651 185.37% 582,617 182,954,736 0.32% 3,866,065 663.57% finance Unsecured 475,494 201,960,724 0.24% 4,412,193 927.92% 49,610 189,102,069 0.03% 1,681,022 3,388.47% Mortgage loans (Note d) 350,220 236,623,690 0.15% 3,532,066 1,008.53% 175,850 230,362,765 0.08% 3,542,581 2,014.55% Cash cards 23,543 2,192,299 1.07% 80,840 343.37% 36,192 2,842,408 1.27% 92,135 254.57% Consumer finance Credit loans (Note e) 94,061 49,703,886 0.19% 676,365 719.07% 105,228 45,946,238 0.23% 750,604 713.31%

Others Secured 378,521 220,118,478 0.17% 2,303,531 608.56% 178,238 193,753,934 0.09% 2,005,543 1,125.21% (Note f) Unsecured 6,993 818,926 0.85% 29,368 419.96% 10,352 2,293,812 0.45% 30,850 298.01% Subtotal 2,360,111 890,967,666 0.26% 12,946,014 548.53% 1,138,087 847,255,962 0.13% 11,968,800 1,051.66% Credit card 99,061 42,040,545 0.24% 399,615 403.40% 96,522 37,103,286 0.26% 364,556 377.69% Accounts receivable factoring with no recourse (Note g) - 49,980,906 - 100,977 - - 46,810,927 - 96,909 - 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 loans ÷ 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 applicants to build or repair the buildings owned by the applicants, their spouses or their minor children. These applicants provide their buildings as collaterals and assign the right on mortgage to financial institutions. Note e: Credit loans are defined in the Letter issued by the Banking Bureau on December 19, 2005 (Ref. No. Jin-Guan-Yin (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 August 24, 2009 (Ref. No. Jin-Guan-Yin (5) 09850003180), accounts receivable without recourse are classified as non-performing loans if not compensated by the factor or insurance company within year.

Exempted from report as nonperforming loans and receivables

Item December 31, 2016 December 31, 2015 Exempted from Exempted from Exempted from Exempted from Report as Non- Report as Non- Report as Non- Report as Non- performing performing performing Loans performing Loans Business Type Receivables Receivables Amounts negotiated in accordance with $ 1,107,574 $ 331,241 $ 1,546,091 $ 463,397 the agreement (Note a) Loans executed in accordance with debt clearing and renewal regulations 1,688,633 1,242,510 1,700,220 1,267,837 (Note b) Total 2,796,207 1,573,751 3,246,311 1,731,234 Note a: Disclosed in accordance with the Letter issued by the 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).

240 Appendix I. Financial Statements and Independent Auditors' Report 10

b. Concentration of credit risk

Year December 31, 2016 December 31, 2015 As Rank Loans Proportion Loans As Proportion (Note Transaction Party (Note b) Transaction Party (Note b) (Note c) of Net (Note c) of Net Equity a) Equity A Group (other financial B Group (other financial service actives not 1 12,812,891 10.67% intermediary not elsewhere 11,019,105 12.28% elsewhere classified classified industry) industry) B Group (other financial C Group (liquid crystal service actives not 2 12,161,446 10.13% panel and components 10,803,728 12.04% elsewhere classified manufacturing industry) industry) C Group (liquid crystal E Group (other financial 3 panel and components 9,896,584 8.24% intermediary not elsewhere 9,669,735 10.78% manufacturing industry) classified industry) A Group (other financial D Group (cement 4 8,564,968 7.14% intermediary not elsewhere 9,422,740 10.50% manufacturing industry) classified industry) E Group (other financial K Group (visual electronic service actives not 5 7,272,071 6.06% products manufacturing 6,037,831 6.73% elsewhere classified industry) industry) F Group (other financial F Group (other financial service actives not 6 6,944,813 5.79% intermediary not elsewhere 5,946,079 6.63% elsewhere classified classified industry) industry) L Group (ocean freight G Group (property insurance 7 5,838,735 4.86% transportation forwarding 5,714,446 6.37% industry) services industry) H Group (property other M Group (property insurance 8 5,552,304 4.63% 5,307,458 5.91% holding companies) industry) N Group (wholesale of other I Group (smelting and specialized products 9 refining of iron and steel 5,110,995 4.26% 5,137,474 5.72% not elsewhere classified industry) industry) O Group (other financial J Group (manufacturing 10 4,681,118 3.90% intermediary not elsewhere 4,691,558 5.23% computers industry) classified industry)

Note a: Sorted by the balance of loans on December 31, 2016 and 2015, excluding government or state-owned business. If borrowers belong 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 Article 6 of the Supplementary Provisions of 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.

241 c. Interest rate sensitivity

(In Thousands of New Taiwan Dollars) December 31, 2016 Item More Than 1-90 Days 91-180 Days 181 Days-1 Year Total 1 Year Interest-sensitive assets $ 685,859,149 ($ 101,125,405 ) $ 49,377,141 $ 137,183,804 $ 771,294,689

Interest-sensitive liabilities 185,147,931 ( 28,070,004 ) 187,296,919 380,562,795 724,937,641

Interest sensitivity gap 500,711,218 ( 73,055,401 ) ( 137,919,778 ) ( 243,378,991 ) 46,357,048

Net equity 120,248,052

Ratio of interest-sensitive assets to liabilities 106.39%

Ratio of interest sensitivity gap to net equity 38.55%

(In Thousands of New Taiwan Dollars) December 31, 2015 Item More Than 1-90 Days 91-180 Days 181 Days-1 Year Total 1 Year Interest-sensitive assets $ 1,049,299,830 $ 158,469,905 $ 55,956,517 $ 165,270,744 $ 1,428,996,996

Interest-sensitive liabilities 594,387,700 196,857,526 224,441,331 289,966,550 1,305,653,107

Interest sensitivity gap 454,912,130 ( 38,387,621 ) ( 168,484,814 ) ( 124,695,806 ) 123,343,889

Net equity 86,746,460

Ratio of interest-sensitive assets to liabilities 109.45%

Ratio of interest sensitivity gap to net equity 142.19%

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-bearing 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 Interest-sensitive assets = liabilities (N.T. dollars only) Interest-sensitive liabilities

(In Thousands of U.S. Dollars) December 31, 2016 Item 181 Days- More Than 1-90 Days 91-180 Days Total 1 Year 1 Year Interest-sensitive assets $ 9,409,002 $ 6,645,164 $ 7,365,532 $ 1,350,057 $ 24,769,755

Interest-sensitive liabilities 7,047,040 5,022,854 8,758,920 3,427,668 24,256,482

Interest sensitivity gap 2,361,962 1,622,310 ( 1,393,388 ) ( 2,077,611 ) 513,273

Net equity ( 1,330 )

Ratio of interest-sensitive assets to liabilities 102.12%

Ratio of interest sensitivity gap to net equity ( 38,591.95% )

242 Appendix I. Financial Statements and Independent Auditors' Report 10

(In Thousands of U.S. Dollars) December 31, 2015 Item 181 Days- More Than 1-90 Days 91-180 Days Total 1 Year 1 Year Interest-sensitive assets $ 3,320,557 $ 278,586 $ 217,749 $ 1,864,136 $ 5,681,028

Interest-sensitive liabilities 3,104,091 3,404,779 446,001 286,574 7,241,445

Interest sensitivity gap 216,466 ( 3,126,193 ) ( 228,252 ) 1,577,562 ( 1,560,417 )

Net equity 119,952

Ratio of interest-sensitive assets to liabilities 78.45%

Ratio of interest sensitivity gap to net equity ( 1,300.87% )

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-bearing 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 Interest-sensitive assets = liabilities (N.T. dollars only) Interest-sensitive liabilities d. Profitability

For the Year Ended For the Year Ended Item December 31, 2016 December 31, 2015 Pretax 0.74% 0.93% Return on total assets After tax 0.64% 0.81%

Pretax 10.53% 15.23% Return on net equity After tax 9.09% 13.16%

Profit margin 30.17% 34.19%

Income before (after) tax Note a: Return on total assets = Average assets Income before (after) tax Note b: Return on net equity = Average net equity Income after tax Note c: Profit margin = Net revenue Note d: Profitability presented above is cumulative from January 1 to December 31 of 2016 and 2015. e. Maturity analysis of assets and liabilities

(In Thousands of New Taiwan Dollars) December 31, 2016 Period Remaining until Due Date and Amount Due Total 181 Days- More Than 0-30 Days 31-90 Days 91-180 Days 1 Year 1 Year Major maturity $1,565,786,073 $ 512,529,369 $ 203,322,035 $ 118,162,681 $ 124,800,062 $ 606,971,926 cash inflow Major maturity 1,907,497,207 307,546,427 306,755,904 280,042,345 362,282,108 650,870,423 cash outflow Gap ( 341,711,134 ) 204,982,942 ( 103,433,869 ) ( 161,879,664 ) ( 237,482,046 ) ( 43,898,497 )

243 (In Thousands of New Taiwan Dollars) December 31, 2015 Period Remaining until Due Date and Amount Due Total 181 Days- More Than 0-30 Days 31-90 Days 91-180 Days 1 Year 1 Year Major maturity cash $ 1,467,939,185 $ 477,414,641 $ 178,221,672 $ 126,375,612 $ 118,743,488 $ 567,183,772 inflow Major maturity cash 1,839,640,131 293,965,610 313,603,152 316,285,200 373,428,106 542,358,063 outflow Gap ( 371,700,946 ) 183,449,031 ( 135,381,480 ) ( 189,909,588 ) ( 254,684,618 ) 24,825,709 Note: The amounts listed above include amounts 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, 2016 Period Remaining until Due Date and Amount Due Total 181 Days- More Than 1-30 Days 31-90 Days 91-180 Days 1 Year 1 Year Major maturity cash $ 29,640,795 $ 6,764,523 $ 5,783,562 $ 7,146,448 $ 5,173,698 $ 4,772,564 inflow Major maturity cash 29,437,817 5,956,678 6,121,748 9,332,673 4,321,409 3,705,309 outflow Gap 202,978 807,845 ( 338,186 ) ( 2,186,225 ) 852,289 1,067,255

(In Thousands of U.S. Dollars) December 31, 2015 Period Remaining until Due Date and Amount Due Total 181 Days- More Than 1-30 Days 31-90 Days 91-180 Days 1 Year 1 Year Major maturity cash $ 36,848,593 $ 11,849,165 $ 7,937,604 $ 5,900,150 $ 6,277,285 $ 4,884,389 inflow Major maturity cash 36,688,039 10,206,714 7,440,001 7,548,284 6,986,844 4,506,196 outflow Gap 160,554 1,642,451 497,603 ( 1,648,134 ) ( 709,559 ) 378,193 Note: The amounts listed above include amounts in U.S. dollars for head office, domestic branches, and OBU.

f. Trust accounts

Under Article 3 of the Trust Law, the Company can offer trust services. The items and amounts of trust accounts were as follows:

December 31 2016 2015 Special purpose trust account-foreign and $ 136,209,653 $ 126,893,604 domestic investments Collective administration account 719,957 1,218,720 Securities trust 32,769,470 28,951,928 Other monetary fund 14,164,879 7,938,656 Employee benefit trust 272,208 74,400 Real estate trust 19,000,475 16,432,725 Domestic securities investment trust for 57,935,656 44,208,148 custody $ 261,072,298 $ 225,718,181

244 Appendix I. Financial Statements and Independent Auditors' Report 10

40. RELATED-PARTY TRANSACTIONS

Names and relationships of related parties were as follow:

Name Relationship Taishin Financial Holding Parent Company Taishin Venture Capital Investment Co., Ltd. ("Taishin Fellow subsidiaries Venture Capital") Taishin Asset Management Co., Ltd. ("Taishin AMC") Fellow subsidiaries Taishin Securities Co., Ltd. ("Taishin Securities ") Fellow subsidiaries Taishin Securities Investment Trust Co., Ltd. ("Taishin Fellow subsidiaries Securities Investment Trust") Taishin Securities Investment Advisory Co., Ltd. ("Taishin Fellow subsidiaries Securities Investment Advisory ") Taishin Financial Leases (China) CO., Ltd Fellow subsidiaries Taishin Financial Leases (Tianjin) CO., Ltd Fellow subsidiaries Taishin D.A. Finance Co., Ltd. Subsidiary Xiang An Insurance Agency Subsidiary Taishin Insurance Brokers Co., Ltd. Subsidiary (dissolved in July 2015, and liquidated in March 2016 Taishin Real-Estate Subsidiary An Hsin Real-Estate Associates Chang Hwa Bank Associates CHB Life Insurance Agency Co., Ltd. Associates (merged with Chang Hwa Bank on April 1, 2016) CHB Insurance Brokerage Co., Ltd. Associates (merged with Chang Hwa Bank on April 1, 2016) Shin Kong Life Insurance Co., Ltd. ("Shin Kong Life Others Insurance") Shin Kong Synthetic Fibers Co., Ltd. ("Shin Kong Synthetic Others (became non-related party after the second quarter of Fibers") 2016) Shin Kong Financial Holding Co., Ltd. ("Shin Kong Financial Others Holding") Taiwan Shin Kong Commercial Bank Co., Ltd. ("Shin Kong Others Bank") Dah Chung Bills Finance Corp. ("Dah Chung Bills") Others CyberSoft Digital Service Corp. ("CyberSoft Digital Service") Others Shin Kong Mitsukoshi Department Store Co., Ltd. ("Shin Others Kong Mitsukoshi") Shin Kong Insurance Co., Ltd. ("Shin Kong Insurance") Others Diamond Biotech Investment Corp. ("Diamond Biotech Others Investment") Ri Chang Electronics Co., Ltd. ("Ri Chang Electronics") Others (became non-related party after the fourth quarter of 2016) Ubright Optronics Corporation ("Ubright") Others Agricultural Credit Guarantee Fund ("ACGF") Others De Lin Industrial Corp. ("De Lin") Others OBI Pharma Inc., ("OBI Pharma") Others (became non-related party after the third quarter of 2016)

(Continued)

245 Name Relationship An Shin Construction Manager Corp. ("An Shin Construction Others Manager") Peng-Cheng Co., Ltd. ("Peng-Cheng") Others Fenghe Development Management Co., Ltd. ("Fenghe") Others EASYCARD Co., Ltd. ("EASYCARD") Others International Bills Finance Corp. ("IBFC") Others Nanya Technology Corporation ("Nanya Technology") Others (became non-related party after the second quarter of 2016) Taiwan Mobile Payment Corporation ("TMPC") Others 17 Life INC. ("17 Life") Others Concord VII Venture Capital Co., Ltd. ("Concord VII") Others Sercomm Corp. ("Sercomm") Others Savior Lifetec Corporation ("Savior Lifetect") Others Individual A Key management personnel Others Including key management personnel and others

Material transactions with related parties were as follows:

Loans, Deposits and Guaranteed Loans

Loans to related parties of Taishin Bank and subsidiaries were as follows:

Loans

Ending Balance Percentage of Loans (%) December 31, 2016 $ 1,370,045 0.15 December 31, 2015 1,921,112 0.23

For the years ended December 31, 2016 and 2015, interest ranged from 0.0001% to 10.52% and from 0.0001% to 10.01%, and interest revenues were $22,974 thousand and $33,815 thousand, respectively.

For the Year Ended December 31, 2016 Non- Different Trading Ending Highest Normal Loans performing Collateral Conditions with Balance Amount Loans Non-related Party Consumer loans 111 accounts $ 375,884 $ 396,026 $ 375,884 $ - Land, building, chattels None Self-used residence mortgage loans 89 accounts 515,814 547,290 515,814 - Land, building None Other loans Peng-Cheng 154,000 154,000 154,000 - Land, building None Land, building, chattels, Others 324,347 458,734 324,347 - None securities - stock $ 1,370,045 $ 1,370,045

246 Appendix I. Financial Statements and Independent Auditors' Report 10

For the Year Ended December 31, 2015 Non- Different Trading Ending Highest Normal Loans performing Collateral Conditions with Balance Amount Loans Non-related Party Consumer loans 104 accounts $ 226,768 $ 275,184 $ 226,768 $ - Land, building, chattels None Self-used residence mortgage loans 96 accounts 559,771 632,457 559,771 - Land, building None Other loans Nanya Technology 400,000 400,000 400,000 - Chattels None Shin Kong Synthetic 300,000 400,000 300,000 - Securities None Fibers De lin 116,000 121,000 116,000 - Land, building None Peng-Cheng 107,000 107,000 107,000 - Land, building None Land, building, chattels, Others 211,573 273,964 211,573 - None securities - stock $ 1,921,112 $ 1,921,112