Annual Report 2011 Annual Report 2011

Stock Code:2812

用心盡在其中

總行 Date of publication:March 2011 臺中市西區民權路87號電話：04-22236021 Website:http://www.tcbbank.com.tw No.87, Min-Chuan Road, Taichung, Taiwan, R.O.C. M.O.P.S: http://newmops.tse.com.tw Printed on recycled paper. Index Taichung Commercial Bank Company Limited One. A Message to the Shareholders ...... 1 No. 87, Min Chuan Road, Taichung, Taiwan, R.O.C. Two. A profile of Taichung Bank ...... 5 Tel.:(04)2223-6021 Three. Corporate Governance Report ...... 6 Website:http://www.tcbbank.com.tw I. Organization ...... 6 Company Spokesman II. Profiles of Directors, Supervisors, President, Executive Vice Presidents, Asst. VP, and supervisors of the various Name:Chi-Chuang Fang departments and branches ...... Taichung Commercial...... Bank 8 Job title:Executive Vice President III. Status of Corporate Governance ...... 45 Tel.:(04)2223-6021 IV. Disclosure of the accountant’s fee ...... 63 Email:[email protected] V. Changes of Accountants ...... 64 VI. Disclose the names and job title of the chairman, president, financial and accounting manager of the Bank who has Acting Spokesman worked with the CPA firm who conducts the audit of the Bank or the affiliates to such firms in the most recent one Name:Hsueh-Hsien Liao Job title:Executive Vice President year, and the duration of their employment in the CPA firm and its affiliate ...... 64 Tel.:(04)2223-6021 VII. Changes in shareholdings by directors, supervisors, and managers through transfer and pledged under lien and those Email:[email protected] required to be declared pursuant to Article 25-3 of the Banking Act from the recent year until the date the Annual Report was printed ...... 64 Shares Registrar VIII. Top 10 shareholders in proportion of shareholdings and who are related parties to one another as required to disclose Name:by internal function under Statement of Financial Accounting Standards No. 6, or spouses, or kids at the second tier under the Civil Code Address:11F., No. 50, Sec. 1, XinSheng South Road, ZhongZheng District, Taipei, Taiwan, R.O.C...... 71 Website:http://www.tcbbank.com.tw IX. Quantity of shareholdings of the same investee by the Bank and directors, supervisors, presidents, Executive Vice Tel.:(02)2395-7388 Presidents, Asst. Executive Vice Presidents, supervisors of the various departments and branches, and direct or indirect subsidiaries in proportion to the combined holdings of all ...... 72 Credit Rating Agency Four. Status of Capital Planning ...... Chairman : Jin-Fong...... Soo 73 Name:Fitch Ratings Limited, Taiwan Branch I. Shares and dividends ...... 73 Address:Suite 1306, 13F., No. 205, Tun Hwa N. Road, Taipei, Tawian, R.O.C. II. Issuance of Financial Bonds ...... 78 Tel.:(02)8175-7600 III. Issuance of Preferred Stocks ...... 87 External Auditors in the Most Recent Year IV. Issuance of Overseas Depository Receipts ...... 87 Name of CPA firm:Deloitte & Touche V. Employee Stock Options ...... 87 Name of CPA:Wen-Ya Hsu & Tze-Chun Wang, VI. Acquisition or Assightment of Other Financial Institutions ...... 87 Address:12F., No. 156, MinSheng East Road, Sec. 3, Song Shan District, Taipei, VII. Implementation of Fund utilization plan ...... 87 Taiwan, R.O.C. Five. Operation Profile ...... 89 Website:http://www.deloitte.com.tw I. Business Contents ...... 89 Tel.:(02)2545-9988 II. Employees ...... 100 III. Enterprise Responsibilities and Ethical Behavior ...... 103 Name of any exchanges where the Company's securities are traded overseas, and the method by which to access information on said offshore securities : None IV. IT Equipment ...... 103 V. Labor-Management Relations...... 105

Index

One. A Message to the Shareholders ...... 1 Two. A profile of Taichung Bank ...... 5 Three. Corporate Governance Report ...... 6 I. Organization ...... 6 II. Profiles of Directors, Supervisors, President, Executive Vice Presidents, Asst. VP, and supervisors of the various departments and branches ...... 8 III. Status of Corporate Governance ...... 45 IV. Disclosure of the accountant’s fee ...... 63 V. Changes of Accountants ...... 64 VI. Disclose the names and job title of the chairman, president, financial and accounting manager of the Bank who has worked with the CPA firm who conducts the audit of the Bank or the affiliates to such firms in the most recent one year, and the duration of their employment in the CPA firm and its affiliate ...... 64 VII. Changes in shareholdings by directors, supervisors, and managers through transfer and pledged under lien and those required to be declared pursuant to Article 25-3 of the Banking Act from the recent year until the date the Annual Report was printed ...... 64 VIII. Top 10 shareholders in proportion of shareholdings and who are related parties to one another as required to disclose under Statement of Financial Accounting Standards No. 6, or spouses, or kids at the second tier under the Civil Code ...... 71 IX. Quantity of shareholdings of the same investee by the Bank and directors, supervisors, presidents, Executive Vice Presidents, Asst. Executive Vice Presidents, supervisors of the various departments and branches, and direct or indirect subsidiaries in proportion to the combined holdings of all ...... 72 Four. Status of Capital Planning ...... 73 I. Shares and dividends ...... 73 II. Issuance of Financial Bonds ...... 78 III. Issuance of Preferred Stocks ...... 87 IV. Issuance of Overseas Depository Receipts ...... 87 V. Employee Stock Options ...... 87 VI. Acquisition or Assightment of Other Financial Institutions ...... 87 VII. Implementation of Fund utilization plan ...... 87 Five. Operation Profile ...... 89 I. Business Contents ...... 89 II. Employees ...... 100 III. Enterprise Responsibilities and Ethical Behavior ...... 103 IV. IT Equipment ...... 103 V. Labor-Management Relations...... 105

VI. Major Agreements ...... 106 One. A Message to the Shareholders VII. Securitized products and related information ...... 108 I. Business result in 2011 Six. Financial Status ...... 109 (I) Domestic and foreign financial environment For the global economy in 2011, the notable events included the high unemployment rate I. Brief balance sheet and income statement for the most recent five years ...... 109 in the U.S.A. and European countries, as well as the European Debt Crisis, which not only II. Financial Analysis for the most recent five years ...... 112 expanded to Greek and Italy in Eurozone but also arouse turmoil in international financial markets. Meanwhile, Mainland China has started to adopt the currency revaluation policy as III. Supervisors’ Review Report on the Financial Statement of 2011 ...... 117 of 2010. A variety of unfavorable factors increased concerns about the global economic IV. Financial statements 2011 ...... 117 prospective drastically. Due to the sluggish global economy, our country’s economic growth declined accordingly. V. Consolidated financial statements 2011 ...... 117 Though the economy appears to grow moderately in terms of consumption, finance and VI. In the case of any insolvency of the Bank and its affiliates, specify its effect on the Financial Status of the Bank ..... 117 production, the trade index is declining. According to the Directorate-General of Budget, Seven. Financial Status and Operation Result, Review and Analysis, and Risk Management ...... 118 Accounting and Statistics, Executive Yuan, the local economic growth rate amounted to 4.03% in 2011, a decrease of the local economic growth rate in the previous year by 10.72%. I. Financial Status ...... 118 Generally, the uncertain factors for the global economic prospective increased and the local II. Operating result ...... 120 economy appeared to reverse. Given such factors as export trading, private final consumption, fixed investment and commodity price, the economic growth rate in 2012 is forecasted as III. Cash flows ...... 120 3.91%, and the GDP is expected to exceed USD20,527. IV. The material effect on financial structure from substantial capital expenditure in the last few years ...... 121 (II) Changes in organization V. Direct investment policy, the main reasons for profit or loss, and corrective action plan in 2011, and investment plan in 1. In order to provide customers with solid financial planning and service, the Bank set up the “Wealth Management Department” and retained professional financial advisors and the next year ...... 122 financial specialists to upgrade the Bank’s competitiveness and generate the service fee VI. Risk Management ...... 122 revenue. 2. In order to enhance the development of corporate banking business,, the Bank set up the VII. Crisis management mechanism ...... 133 “Corporate Finance Department” and thereby upgraded the Bank’s corporate credit VIII. The following methods and hypotheses for the valuation of fair value of financial instruments are applied ...... 133 extension and market share. (III) Operating result of business plans and strategies IX. Other important notes ...... 134 The Bank has continued strengthening the structure of capital, upgrading the profitability Eight. Special Notes ...... 135 and expanding the scale of operation in the past year. The major results are outlined as I. Special Notes ...... 135 following: 1. Strengthen the operating constitution to raise the profitability greatly II. Conditions that will materially affect shareholders’ equity or price of securities ...... 141 The net profit before taxation was NTD1,914 million, and the EPS before taxation was Nine. Branches of Taichung Commercial Bank at a Glance ...... 142 NTD1.03, the ROA before taxation was 0.53% and ROE before taxation was 8.53%, in 2011. 2. Enrich the operating capital and upgrade the beneficial results of fund utilization The Bank increased the capital by NTD4.5 billion in cash to strengthen the capital structure and raise the capital adequacy ratio to 11.63% to help it undertake new products and expand the scope of business, in 2011. 3. Strength the risk management ability on an on-going basis The Bank’s continuous strict risk management and credit policies led the NPL rate to drop to 0.30% and allowance for bad debt coverage rate to 348.52%, which was better than the mean of the same rate of local banks in the previous and same year. 4. Expand the Bank’s securities market scale and upgrade branch channeling effect In order to expand the Bank’s securities market scale, the Bank has successively set up the securities branches in Yuanlin, Taipei and Zhongli, in order to develop external clientele and exert strength in cross-marketing via branches to upgrade the service quality and increase the earnings. (IV) Implementation of budget, financial income and expenditures, and profitability analysis 1. Deposit Operations: By the end of December 2011, the Bank’s total deposit balance (including foreign currency) has been NTD335.818 billion. The achievement rate attained 101.01% and the balance increased by NTD30.915 billion more than that at the end of December 2010, namely NTD304.903 billion. The growth rate thereof was 10.14%. 1

One. A Message to the Shareholders I. Business result in 2011 (I) Domestic and foreign financial environment For the global economy in 2011, the notable events included the high unemployment rate in the U.S.A. and European countries, as well as the European Debt Crisis, which not only expanded to Greek and Italy in Eurozone but also arouse turmoil in international financial markets. Meanwhile, Mainland China has started to adopt the currency revaluation policy as of 2010. A variety of unfavorable factors increased concerns about the global economic prospective drastically. Due to the sluggish global economy, our country’s economic growth declined accordingly. Though the economy appears to grow moderately in terms of consumption, finance and production, the trade index is declining. According to the Directorate-General of Budget, Accounting and Statistics, Executive Yuan, the local economic growth rate amounted to 4.03% in 2011, a decrease of the local economic growth rate in the previous year by 10.72%. Generally, the uncertain factors for the global economic prospective increased and the local economy appeared to reverse. Given such factors as export trading, private final consumption, fixed investment and commodity price, the economic growth rate in 2012 is forecasted as 3.91%, and the GDP is expected to exceed USD20,527. (II) Changes in organization 1. In order to provide customers with solid financial planning and service, the Bank set up the “Wealth Management Department” and retained professional financial advisors and financial specialists to upgrade the Bank’s competitiveness and generate the service fee revenue. 2. In order to enhance the development of corporate banking business,, the Bank set up the “Corporate Finance Department” and thereby upgraded the Bank’s corporate credit extension and market share. (III) Operating result of business plans and strategies The Bank has continued strengthening the structure of capital, upgrading the profitability and expanding the scale of operation in the past year. The major results are outlined as following: 1. Strengthen the operating constitution to raise the profitability greatly The net profit before taxation was NTD1,914 million, and the EPS before taxation was NTD1.03, the ROA before taxation was 0.53% and ROE before taxation was 8.53%, in 2011. 2. Enrich the operating capital and upgrade the beneficial results of fund utilization The Bank increased the capital by NTD4.5 billion in cash to strengthen the capital structure and raise the capital adequacy ratio to 11.63% to help it undertake new products and expand the scope of business, in 2011. 3. Strength the risk management ability on an on-going basis The Bank’s continuous strict risk management and credit policies led the NPL rate to drop to 0.30% and allowance for bad debt coverage rate to 348.52%, which was better than the mean of the same rate of local banks in the previous and same year. 4. Expand the Bank’s securities market scale and upgrade branch channeling effect In order to expand the Bank’s securities market scale, the Bank has successively set up the securities branches in Yuanlin, Taipei and Zhongli, in order to develop external clientele and exert strength in cross-marketing via branches to upgrade the service quality and increase the earnings. (IV) Implementation of budget, financial income and expenditures, and profitability analysis 1. Deposit Operations: By the end of December 2011, the Bank’s total deposit balance (including foreign currency) has been NTD335.818 billion. The achievement rate attained 101.01% and the balance increased by NTD30.915 billion more than that at the end of December 2010, namely NTD304.903 billion. The growth rate thereof was 10.14%. 1 1 2. Loan Operations: II. Effect of external competitive environment, laws & regulations and entire business environment By the end of December 2011, the total balance of loans (including foreign currency, (I) External competitive environment OBU and delinquent accounts) has been NTD280.693 billion. The achievement rate Following the opening of the cross-strait financial cooperation, the market will cancel some attained 100.99%. The total balance of loans consolidated with receivable security control policies successively and, therefore, the Bank will face more intensive competition in bonds and acceptances receivable has been NTD285.676 billion, and the balance the market. In order to cope with the effect and impact produced by the cross-strait financial increased by NTD34.437 billion more than that at the end of December 2010, namely cooperation, the Bank has taken effective countermeasures against the market development, NTD251.239 billion. The growth rate thereof was 13.17%. credit operations, financial products, marketing skills, personnel training and risk control, 3. Foreign Exchanges Operations: thereby upgrading the operating performance. In 2011 the Bank undertook foreign exchanges amounting to USD8.987 billion, i.e. the (II) Laws & regulations achievement rate attaining 92.17%, an increase of USD0.522 billion or growth of 6.17% 1. The “Financial Consumers Protection Act” has been enforced as in December 30, 2011 to from 2010. protect customers’ interest and fulfill the financial organization’s obligation and liability 4. Trust Operations: to provide financial products and services, which initiated a new era for financial Until the end of 2011, the balance of trust assets has been NTD38.646 billion, an increase consumers protection in this country. of NTD3.312 billion more than that at the end of 2010, NTD35.334 billion, or growth of 2. To deal with the new “Personal Data Protection Act” to be enforced in the future and to 9.37% from the end of December 2010. promote the fair use of personal data, the Bank shall respect the customers’ interest and 5. Financial income and expenditure, and profitability analysis: right when collecting customers’ data and engaging in the cross marketing, for the (1) The income before income tax was stated at NTD1.914 billion in 2011, an increase purpose of protecting personal data privacy. of NTD1.075 billion from 2010. The income after income tax was NTD1.454 3. IFRS will be applicable in Taiwan definitely as of 2013. As far as enterprises are billion, an increase of NTD1.042 billion from 2010. concerned, it may reduce the fund raising-related costs and also upgrade the (2) KPI: Key Performance Indicator comparability of the financial statements between local enterprises and international Capital adequacy ratio (BIS) 11.63% enterprises. For banking service providers, how to connect the recognition of interest expenses for bank employees’ premium deposits with IFRS will be a concern to be ROA (Before taxation)0.53% resolved. (III) Entire business environment ROE (Before taxation)8.53% For the economic prospective in the near future, as the increasingly critical situation in the (Before taxation) Eurozone and weak performance in other territories have threatened the global economic Earnings Per Share (EPS) NTD1.03 recovery, the urgent priority will be how to prevent any sudden risk of economic regression. NPL ratio 0.30% III. Future development strategies Coverage ratio 348.52% (I) Upgrade the core profitability, solidify banking operation and development foundation. (II) Control enterprise's cash flow needs, provide complete and convenient financing plan. Net revenue NTD5.713 billion (III) Train financial professionals, oriented toward consolidated commercial bank. (IV) Initiate new financial operations, provide diversified financial products. Income after income tax NTD1.454 billion (V) Control the cross-strait financial opportunities, enhance financial services to Taiwanese Service fee NTD0.970 billion businessmen in Mainland China. (VI) Develop offshore financial domain, strengthen international banking scale. Total deposits (including foreign (VII) Optimize assets/liabilities management, upgrade operating safety and increase operating currency) NTD335.818 billion revenue. Total loans (including foreign currency) NTD280.693 billion (VIII) Enhance beneficial results of financial investment, well found property management product platform. 6. Information about the most recent credit rating (IX) With full efforts and exertion of excellent service and competitive strengths. Credit rating Rating agency Date of rating Long-term Short-term Outlook (X) Implement local charity events, continuously fulfill the enterprise’s social responsibilities. Fitch Ratings Limited Taiwan Branch 100.10.13 A-(twn) F2(twn) Stable IV. Summary of business plan 2012 (V) R&D (I) Integrate marketing resources, upgrade the core profitability synergy 1. To accelerate the examination on loans, shorten operating procedures and service Continuously expand the scale of deposit, loan and foreign exchange operations, stabilize the customers effectively, the Bank continued reviewing and improving various credit existing clientele and also expand the corporate banking and wealth management marketing policies, including request, credit investigation, credit extension and facility, so as to teams, and provide diversified and customized financial products to expand the scope of upgrade the operating efficiency. interactions between customers and the Bank. 2. The Bank continued expanding e-banking services and network banking functions, (II) Adhere to the stable management philosophy, optimize the assets/liabilities management including foreign currency trust operations and reserved batch transfer, et al., to increase Maintain the entire financial asset position and stability of financial constitution by strict customers’ utilization of the network banking and reduce the cost of human resources. trading disciplines and well-founded risk control mechanism; also, continuously train professionals dedicated to investment, and develop R&D and innovation of various products in 2 3 2 II. Effect of external competitive environment, laws & regulations and entire business environment (I) External competitive environment Following the opening of the cross-strait financial cooperation, the market will cancel some control policies successively and, therefore, the Bank will face more intensive competition in the market. In order to cope with the effect and impact produced by the cross-strait financial cooperation, the Bank has taken effective countermeasures against the market development, credit operations, financial products, marketing skills, personnel training and risk control, thereby upgrading the operating performance. (II) Laws & regulations 1. The “Financial Consumers Protection Act” has been enforced as in December 30, 2011 to protect customers’ interest and fulfill the financial organization’s obligation and liability to provide financial products and services, which initiated a new era for financial consumers protection in this country. 2. To deal with the new “Personal Data Protection Act” to be enforced in the future and to promote the fair use of personal data, the Bank shall respect the customers’ interest and right when collecting customers’ data and engaging in the cross marketing, for the purpose of protecting personal data privacy. 3. IFRS will be applicable in Taiwan definitely as of 2013. As far as enterprises are concerned, it may reduce the fund raising-related costs and also upgrade the comparability of the financial statements between local enterprises and international enterprises. For banking service providers, how to connect the recognition of interest expenses for bank employees’ premium deposits with IFRS will be a concern to be resolved. (III) Entire business environment For the economic prospective in the near future, as the increasingly critical situation in the Eurozone and weak performance in other territories have threatened the global economic recovery, the urgent priority will be how to prevent any sudden risk of economic regression.

III. Future development strategies (I) Upgrade the core profitability, solidify banking operation and development foundation. (II) Control enterprise's cash flow needs, provide complete and convenient financing plan. (III) Train financial professionals, oriented toward consolidated commercial bank. (IV) Initiate new financial operations, provide diversified financial products. (V) Control the cross-strait financial opportunities, enhance financial services to Taiwanese businessmen in Mainland China. (VI) Develop offshore financial domain, strengthen international banking scale. (VII) Optimize assets/liabilities management, upgrade operating safety and increase operating revenue. (VIII) Enhance beneficial results of financial investment, well found property management product platform. (IX) With full efforts and exertion of excellent service and competitive strengths. (X) Implement local charity events, continuously fulfill the enterprise’s social responsibilities.

IV. Summary of business plan 2012 (I) Integrate marketing resources, upgrade the core profitability synergy Continuously expand the scale of deposit, loan and foreign exchange operations, stabilize the existing clientele and also expand the corporate banking and wealth management marketing teams, and provide diversified and customized financial products to expand the scope of interactions between customers and the Bank. (II) Adhere to the stable management philosophy, optimize the assets/liabilities management Maintain the entire financial asset position and stability of financial constitution by strict trading disciplines and well-founded risk control mechanism; also, continuously train professionals dedicated to investment, and develop R&D and innovation of various products in 3 3 financial market actively (III) Dedicated to development of financial products, expand cross-border financial services Two. A profile of Taichung Bank: Control Taiwan businessmen’s needs for international banking and RMB operations, Formerly a cooperative savings company in Taichung permitted to establish in April 1953, continuously promote adequate financial products, complete the setup of Hong Kong Branch, the predecessor of Taichung Bank started its operation in savings and loans in August 1st of the the Bank’s first off-shore operation center, develop the clientele of cross-border operations, same year. The scope of business then covered Taichung City, Taichung County, Chang Hwa increase the international banking scale County and Nantou County. In compliance with the amendments to Banking Act and business (IV) Developed as consolidated commercial bank, upgrade operation performance development needs, the Bank successfully transformed into “Taichung Small and Medium Under the “customer-oriented" business strategies, provide customers with professional Business Bank” in 1978. On May 15, 1984, the Bank went public and expanded its scale of banking services, enhance securities brokerage, investment trust, insurance brokerage and operations, and has successfully been listed on the centralized market. In order to expand the lease to be oriented toward a consolidated commercial bank and upgrade the operation business locations, since Taipei Branch operated as of September 9, 1995, the Bank’s operation performance. has broken through the threshold for regional operation and successively relocated its business (V) Continue implementing business performance analysis and budget control to cope with the locations initially centralized in central Taiwan to north and south Taiwan, thereby extending its enforcement of IFRS business locations throughout Taiwan. Actively promote the Bank’s adaption to IFRS to enable the Bank to connect with the global With the efforts from all staff, the Bank's business grew rapidly. In order to expand the market intensively and maintain the Bank’s objective capital adequacy ratio to upgrade its Bank’s securities market scale, in addition to the existing securities brokerage in Taichung City, competitiveness the Bank has successively set up the securities branches in Yuanlin, Taipei and Zhongli, in order (VI) Expected business objectives to develop external clientele and exert strength in cross-marketing via branches to upgrade the Scope of business Objective 2012 service quality and increase the earnings. Deposit Operations NTD373.734 billion - end Until the end of 2011, the Bank has increased its capital from NTD500,000 to NTD22.339 billion, and expanded to an operation with 80 branch locations and 4 securities branches in 2011 Loan Operations NTD314.880 billion - end from 5 at the beginning of the operation. The business lines and operations upon the expansion Foreign Exchanges Annual amount USD9.618 billion have grown by multiples of those charged by the cooperative savings company at the very Operations beginning. Annual service fee revenue Trust Operations NTD0.762 billion Looking forward to 2012, a year full of hopes and challenges, the Bank will spare no efforts to promote customers’ service, growth of profit and capital management, and will also continue * Massive transactions or changes in equity shares by Directors, Supervisors, or shareholders providing diversified financial products, controlling customers’ needs and movements, and holding more than 1% of the total outstanding shares in the most recent year: None. upgrading customers’ satisfaction, market competitiveness and the Bank’s corporate identity, * Changes in the management in the most recent year: None. in hopes of creating investment value for shareholders. Meanwhile, the Bank also longs for * Major events affecting the rights and privileges of the investors and the effect on the Bank: further support and encouragement from all of you. None. * Reinvested affiliate: Taichung Commercial Bank Insurance Broker Co., Ltd. and Reliance Best regards, Securities Investment Trust Co., Ltd.

To All Shareholders

Blessing you healthy, Wishing you all the best!

President ______Chairman ______

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Two. A profile of Taichung Bank: Formerly a cooperative savings company in Taichung permitted to establish in April 1953, the predecessor of Taichung Bank started its operation in savings and loans in August 1st of the same year. The scope of business then covered Taichung City, Taichung County, Chang Hwa County and Nantou County. In compliance with the amendments to Banking Act and business development needs, the Bank successfully transformed into “Taichung Small and Medium Business Bank” in 1978. On May 15, 1984, the Bank went public and expanded its scale of operations, and has successfully been listed on the centralized market. In order to expand the business locations, since Taipei Branch operated as of September 9, 1995, the Bank’s operation has broken through the threshold for regional operation and successively relocated its business locations initially centralized in central Taiwan to north and south Taiwan, thereby extending its business locations throughout Taiwan. With the efforts from all staff, the Bank's business grew rapidly. In order to expand the Bank’s securities market scale, in addition to the existing securities brokerage in Taichung City, the Bank has successively set up the securities branches in Yuanlin, Taipei and Zhongli, in order to develop external clientele and exert strength in cross-marketing via branches to upgrade the service quality and increase the earnings. Until the end of 2011, the Bank has increased its capital from NTD500,000 to NTD22.339 billion, and expanded to an operation with 80 branch locations and 4 securities branches in 2011 from 5 at the beginning of the operation. The business lines and operations upon the expansion have grown by multiples of those charged by the cooperative savings company at the very beginning.

* Massive transactions or changes in equity shares by Directors, Supervisors, or shareholders holding more than 1% of the total outstanding shares in the most recent year: None. * Changes in the management in the most recent year: None. * Major events affecting the rights and privileges of the investors and the effect on the Bank: None. * Reinvested affiliate: Taichung Commercial Bank Insurance Broker Co., Ltd. and Reliance Securities Investment Trust Co., Ltd.

5 5 Three. Corporate Governance Report (II) Operations & Functions I. Organization 1. Auditing Office of Board: Administer the general auditing of the Bank, including (I) Organizational Structure operation audit, computer information audit, internal self-audit, internal audit, corrective actions as per the requests of competent authority, and related reporting. 2. Office of the Board of Directors: Call for sessions and elections of the Standing Office of the Board Committee of the Board, the Board of Directors and Supervisors, General Meeting of Directors of the Shareholders, shares registration and related matters, public relations, press release. 3. Business Development Dept.: Administer the planning and development of deposits and remittances, e-banking and credit card operations.

4. International Banking Dept.: Administer the planning, promotion, management and Auditing Office of the Board operation of foreign exchanges. 5. Trust Dept.: Administer the planning, management and operation of trust business.

Chief Auditor 6. Information Dept.: Administer the planning, configuration and operation of IT Business system and banking information package software. Development Dept. 7. Risk Management Dept.: Administer the decision-making of the risk management policies for the whole bank, supervise the departments to establish the risk control International mechanism, control of the overall exposures of the Bank and other risk related Banking Dept. management. 8. Treasury Dept.: Administer the appropriation of funds and investments of the whole Trust Dept. bank and other financial matters. 9. General Affairs Dept.: Administer the articles of incorporation, organization, important documents and corporate seals, cashier service, general purchase, custody Information Dept. of assets, procurement and lease of real properties, improvement and repair of properties, and labor safety & health issues, property insurance, and any matters other than those administered by the other departments/offices. Risk Management 10. Human Resources Dept.: Administer human resources management and review, Dept. drill, management and supervision of the Bank’s safety protection, and employee welfare, and also administer employees’ advanced studies and training, library Treasury Dept. management, and publication and printing of journals. 11. Accounting Dept.: Administer accounting affairs, management accounting, annual budget settlement, and inter-branch transactions. General Affairs 12. Securities Dept.: Administer planning, execution and management of the securities Dept. Dept.), and Overseas Banking Branch business, and process any other securities approved by the competent authority. 13. Corporate Finance Dept.: Administer corporate banking business related to President President Chairman Human Resources corporate banking, receivable accounts, corporate syndicate loans and overseas

Vice Chairman Chairman Vice Dept. Taiwanese businessmen loans. Board of Directors Directors of Board Assistant President President Assistant

Shareholders’ Meeting Meeting Shareholders’ 14. Wealth Management Dept.: Administer the planning, marketing and management of Executive Vice President Vice Executive the financial planning business throughout the bank. Board of Managing Directors Directors Managing of Board Accounting Dept. 15. Loan Administration Dept.: Administer the planning, review, management, research, analysis and consultation service of the various credit extensions, investigations and Securities Dept. consumer banking. 16. Dept. of Debt Collection and Asset Recovery: Administer the precautionary and review after granting loan, and planning, promotion, supervision and statistic Corporate Finance analysis of the collection of delinquent accounts, performance appraisal of the Dept. collection, review of writing off non-performing loans, examination and management of Collaterals Assumed, participation and cooperation in the process Wealth Management of resolving legal issues, retaining of external attorneys-at-law, and drafting, Dept. promotion, supervision and performance appraisal of the compliance system. Business locations (including 17. Business Dept.: Administer the operation of different types of deposits, loans, Loan Administration foreign exchange settlements and banking matters. Dept. 18. District Center: Handle the various credit facilities (other than the consumer loan,

Resident District Center ATM card and credit card business), supervision of the business, and management Supervisor Supervisors Dept. of Debt of the collection of delinquent accounts under their respective jurisdiction. Collection and Asset 19. Overseas Banking Branch: Administer the planning, promotion, management and Recovery operation of international banking.

6 7 6

(II) Operations & Functions 1. Auditing Office of Board: Administer the general auditing of the Bank, including operation audit, computer information audit, internal self-audit, internal audit, corrective actions as per the requests of competent authority, and related reporting. 2. Office of the Board of Directors: Call for sessions and elections of the Standing Committee of the Board, the Board of Directors and Supervisors, General Meeting of the Shareholders, shares registration and related matters, public relations, press release. 3. Business Development Dept.: Administer the planning and development of deposits and remittances, e-banking and credit card operations. 4. International Banking Dept.: Administer the planning, promotion, management and operation of foreign exchanges. 5. Trust Dept.: Administer the planning, management and operation of trust business. 6. Information Dept.: Administer the planning, configuration and operation of IT system and banking information package software. 7. Risk Management Dept.: Administer the decision-making of the risk management policies for the whole bank, supervise the departments to establish the risk control mechanism, control of the overall exposures of the Bank and other risk related management. 8. Treasury Dept.: Administer the appropriation of funds and investments of the whole bank and other financial matters. 9. General Affairs Dept.: Administer the articles of incorporation, organization, important documents and corporate seals, cashier service, general purchase, custody of assets, procurement and lease of real properties, improvement and repair of properties, and labor safety & health issues, property insurance, and any matters other than those administered by the other departments/offices. 10. Human Resources Dept.: Administer human resources management and review, drill, management and supervision of the Bank’s safety protection, and employee welfare, and also administer employees’ advanced studies and training, library management, and publication and printing of journals. 11. Accounting Dept.: Administer accounting affairs, management accounting, annual budget settlement, and inter-branch transactions. 12. Securities Dept.: Administer planning, execution and management of the securities business, and process any other securities approved by the competent authority. 13. Corporate Finance Dept.: Administer corporate banking business related to corporate banking, receivable accounts, corporate syndicate loans and overseas Taiwanese businessmen loans. 14. Wealth Management Dept.: Administer the planning, marketing and management of the financial planning business throughout the bank. 15. Loan Administration Dept.: Administer the planning, review, management, research, analysis and consultation service of the various credit extensions, investigations and consumer banking. 16. Dept. of Debt Collection and Asset Recovery: Administer the precautionary and review after granting loan, and planning, promotion, supervision and statistic analysis of the collection of delinquent accounts, performance appraisal of the collection, review of writing off non-performing loans, examination and management of Collaterals Assumed, participation and cooperation in the process of resolving legal issues, retaining of external attorneys-at-law, and drafting, promotion, supervision and performance appraisal of the compliance system. 17. Business Dept.: Administer the operation of different types of deposits, loans, foreign exchange settlements and banking matters. 18. District Center: Handle the various credit facilities (other than the consumer loan, ATM card and credit card business), supervision of the business, and management of the collection of delinquent accounts under their respective jurisdiction. 19. Overseas Banking Branch: Administer the planning, promotion, management and operation of international banking.

7 7 II. Profiles of Directors, Supervisors, President, Executive Vice Presidents, Asst. VP, and supervisors of the various departments and branches (I) Directors and supervisors 1. Directors and Supervisors Information: Feb. 29, 2012 Current Shares Held Shareholding under Other Chief, Supervisors or Major Current Election Shares at Election Current shareholding by Spouse & the title of a third Directors with a Spousal or Inauguration (academic Bank & Title Name (Appointment) Duration Dependents party Other Immediate Relative date degree) Other Date Ratio of Ratio of Ratio of Ratio of Quantity Quantity Quantity Quantity experience positions Title Name Relation Shareholding Shareholding Shareholding Shareholding Pan Asia Institutional Chemical 2011/6/22 3 years 2002/5/17 115,740,767 6.68％ 141,767,694 6.35％ 0 0 0 0 - - - - - Director Corporation I Joung Institutional Investment 2011/6/22 3 years 2008/6/13 15,308,183 0.88％ 15,767,428 0.71％ 0 0 0 0 - - - - - Director Co., Ltd. Ho Yang Institutional Management 2011/6/22 3 years 2011/6/22 1,101,000 0.06％ 1,348,584 0.06％ 0 0 0 0 - - - - - Director Consultant Co., Ltd. Institutional Chou Chang 2011/6/22 3 years 2011/6/22 8,227,568 0.48％ 8,474,395 0.38％ 0 0 0 0 - - - - - Director Co., Ltd. Chairman of Representative 8 Taiwan Business of Pan Asia Bank; MBA of Chairman Chemical 2011/6/22 3 years 2002/5/17 0 0 0 0 0 0 0 0 None None None None New York Corporation Institute of : Jin-Fong Soo Technology Chairman of Pan Asia Chemical Corporation, Chairman of Taichung Commercial Representative P, Corporate Bank of Pan Asia Financing Dept., Insurance Vice Chemical Kuei-Hsien 2011/6/22 3 years 2002/5/17 203,667 0.01％ 249,466 0.01％ 0 0 0 0 BNP Paribas Broker Co., Director Brothers Chairman Corporation Wang Hong Kong; Ltd., : Kuei-Fong MBA of NYU Managing Wang Director and also President of China Man-Made Fiber Co., Ltd.

Current Shares Held Shareholding under Other Chief, Supervisors or Major Current Election Shares at Election Current shareholding by Spouse & the title of a third Directors with a Spousal or Inauguration (academic Bank & Title Name (Appointment) Duration Dependents party Other Immediate Relative date degree) Other Date Ratio of Ratio of Ratio of Ratio of Quantity Quantity Quantity Quantity experience positions Title Name Relation Shareholding Shareholding Shareholding Shareholding Chairman of I Joung Chairman of Investment Lehigh Representative Co., Ltd.; Technology; of I Joung director of Managing Master of Science Investment 2011/6/22 3 years 2008/6/13 9,257,387 0.53％ 9,535,108 0.43％ 0 0 0 0 Taichung None None None Director of Government Co., Ltd.: Commercial Apparatus, Yi-Der Chen Bank Lehigh Insurance University Broker Co., Ltd. Director of Reliance Chairman of Securities Representative Taiwan Financial Investment of Pan Asia Holdings; Dept of Trust Co., Managing Chemical 2011/6/22 3 years 2002/5/17 0 0 0 0 0 0 0 0 International Ltd.; None None None Director Corporation Trade, National Director of : Jer-Shyong Chengchi Taichung Tsai University Commercial Bank Lease Enterprise 9 Representative of TC Bank, Taipei Representative Managing Office; National Director Hsi-Rong 2011/6/22 3 years 2008/6/13 0 0 0 0 0 0 0 0 Chung Hsing None None None None (Independent Huang University, director) Department of Agricultural Economics Vice General Manager of Cooperative Bank, Chairman of Cooperative Bank Insurance Independent Chen-Le Liu 2011/6/22 3 years 2010/6/15 0 0 0 0 0 0 0 0 Agency Co., Ltd., None None None None Director Department of Transportation and Communication Management Science, NCKU

10 Co., Ltd. , Master Investment :Kuei-Hsien in Finance of Trust Co., Wang NYU, Finance Ltd.; Department of Chairman of Boston Greencol University Taiwan Corporation Vice President, Taiwan Business President of Bank; Taichung Representative Independent Commerical of Pan Asia Director of Bank; Chemical Taichung Supervisor Director 2011/6/22 3 years 2002/5/17 190,500 0.01％ 463,338 0.02％ 17,440 0.00％ 00 None None None Corporation Commercial of Reliance : Chun-Sheng Bank; MBA, Securities Lee National Taiwan Investment University Trust Co., College of Ltd. Management Director of Representative ITOCHU Vice of Pan Asia CORPORATION, Chairman of Chemical Taipei Branch; China Director 2011/6/22 3 years 2002/5/17 0 0 0 0 55,477 0.00％ 00 None None None Corporation Department of Man-Made : Ming-Shan Political Science, Fiber Chuang National Taiwan Corporation University

Current Shares Held Shareholding under Other Chief, Supervisors or Major Current Election Shares at Election Current shareholding by Spouse & the title of a third Directors with a Spousal or Inauguration (academic Bank & Title Name (Appointment) Duration Dependents party Other Immediate Relative date degree) Other Date Ratio of Ratio of Ratio of Ratio of Quantity Quantity Quantity Quantity experience positions Title Name Relation Shareholding Shareholding Shareholding Shareholding Chief Auditor, Representative Land Bank of Chairman of of Pan Asia Taiwan; Master Taichung Chemical Director 2011/6/22 3 years 2002/5/17 0 0 0 0 0 0 0 0 in Land Commercial None None None Corporation Administration, Bank Lease : Hsin-Ching National Chung Enterprise Chang Hsing University Overseas Representative Compatriot of Chou Affairs Chang Co., Commissioner; Director 2011/6/22 3 years 2011/6/22 4,691,102 0.27％ 6,735,951 0.30％ 0 0 0 0 None None None None Ltd. Department of : Jer-Nan Business and Wang Management, Kinki University Vice President of Representative Cosmos Bank; Director of of Pan Asia Vice Chairman of China Chemical Director 2011/6/22 3 years 2002/5/17 0 0 0 0 0 0 0 0 Reliance Man-Made None None None Corporation Securities Fiber : Ming-Hsiung Investment Trust Corporation Huang

11 Co., Ltd. V.P., Taichung Representative Business Bank; of I Joung Kainan High Investment Director 2011/6/22 3 years 2008/6/13 66,542 0.00％ 63,505 0.00％ 0 0 0 0 School of None None None None Co., Ltd.: Commerce and Ching-Hsin Industry, Senior Chang Class, Business Chairman of Representative Ho Fa of Ho Yang Master of Construction Management Science, Co., Ltd.; Director Consultant 2011/6/22 3 years 2011/6/22 0 0 0 0 0 0 0 0 None None None University of Chairman of Co., Ltd.,: Southampton Sakura Chia-Hung Construction Lin Co., Ltd. Xin Rui Institute Investment 2011/6/22 3 years 2011/6/22 4,800,000 0.28％ 7,429,388 0.33％ 0 0 0 0 - - - - - Supervisor Co., Ltd. Tai Jiunn Institute Enterprise 2011/6/22 3 years 2008/6/13 737,449 0.04％ 759,572 0.03％ 0 0 0 0 - - - - - Supervisor Co., Ltd. Manager of Representative Chiao Tung of Xin Rui Bank; Resident Investment 2011/6/22 3 years 2011/6/22 0 0 0 0 0 0 0 0 Department of None None None None Supervisor Co., Ltd. Accounting, : Jiann-Ell National Chung Huang Hsing University 11

2. Major Shareholders of Corporate Shareholders:

Relation Feb. 29, 2012

Corporate shareholder Major shareholder of corporate shareholder and shareholding Ratio of

Name Name Shareholding thereof

China Man-Made Fiber Co., Ltd. (42.59%）, Sheng Jen Knitted Title Other Immediate Relative Immediate Other Directors with a Spousal or or Spousal with a Directors Other Chief, Supervisors or or Supervisors Chief, Other Textiles Co., Ltd.（5.95%）, Yu Hui Limited (5.38%）, Chung Chien Pan Asia Chemical Investment Co., Ltd. (4.91%）, Deh Hsing Investment Co., Ltd. Corporation (4.5%）, Tai Yi Investment Co., Ltd.（2.26%）, Ke Yi Bao Investment None None None None None None None None None None None None None None None None None None None None Other Other Bank & Bank Current positions Co., Ltd.（0.73%）, Pan Asia Investment Co., Ltd.（0.68%）, Ya-Ying

Jhu（0.61%）, Kuei-Hsien Wang（0.41%）。 Chou Chin Industrial Co., Ltd. (48.24%), Pan Asia Investment Co., Major Major degree) (academic (academic experience Ltd. (36.39%), Deh Hsing Investment Co., Ltd. (14.78%), Chou Huei VP of Changhua of Changhua VP Bank; of Department Economics, Taiwan National University Manager of Manager Taiwan Cooperative Da Bank; Yu of School High Commerce and Economics Home of Manager Pacific Computers; Senior Fuxing High School Chief Vice of Auditor Business Taiwan WenShan Bank; High Senior School Chou Chang Co., Ltd. Investment Co., Ltd. (0.25%), Ge Ling Co., Ltd. (0.19%), Tai Yi 0 0 0 0 Investment Co., Ltd. (0.05%), Hsiun-Ching Hsu (0.05%), Chung-Yi Chen (0.02%), Chung-Tien Hsu (0.01%), Yun-Ling Chen (0.01%) Ratio of Ratio

Shareholding Yi-Jen Chen (33.17%), Yi-Der Chen (27.77%), Yee-Fan (12.37%), party I Joung Investment Co., Ching-Shuan Chen Ting (6.47%), Hsiun-Fan Lo (5.51%), Yee-Chen

the title of a third a third of title the Ltd. Shareholding under

Quantity Chen (5.65%), Min-Yuan Yeh (0. 68%) 0 0 0 0 0 0 0 0 Ho Yang Management Shu-Cyong Zen, Chen-Hai Lin (19%) Consultant Co., Ltd. Ratio of Ratio

Shareholding Xin Rui Investment Co., You-Ciang Yang (34.8), Ying-Huei Liou (32.4%), Mei-Jyuan Syong Ltd. (26.8%) Dependents by Spouse & by Spouse Tai Jiunn Enterprise Co., Yi-Jen Chen (46.13%), Auto Life International Holdings (BVI) Current Shares Held Held Shares Current Quantity 0 0 0 0 0 0 0 0 Ltd. (42.84%), Ming-Yuan Yeh (0.69%), Ching-Shuan Chen Ting (0.21%)

12 3. Major Shareholders of Major Corporate Shareholder:

Ratio of Ratio Feb. 29, 2012 Shareholding Major shareholder of corporate shareholder and shareholding Ratio Corporate shareholder Name of Shareholding thereof Current shareholding Current Quantity Pan Asia Chemical Corporation (14.97%), Sheng Jen Knitted 0 0 0 0 0 0 0 0

Textiles Co., Ltd. (4.21%), Formosa Imperial Wineseller Corp. (3.52%), Pan Asia Investment Co., Ltd. (3.00%), Chung Chien China Man-Made Fiber Co., Ratio of Ratio Investment Co., Ltd. (2.51%), Netherlands Pension Robert Bacal Shareholding Ltd. 0 0 0 0 Investment Account at Citibank (0.94%), Morgan Stanley Bank International Limited at HSBC (0.89%), Deh Hsing Investment Shares at Election at Shares

Quantity Co., Ltd. (0.67%), Chou Chang Co. Ltd. (0.63%) Pan Asia Investment Co., Ltd.(41.80%), Ta Fa Investment Co.,

Tai Yi Investment Co., Ltd. Ltd.(38.17%), Tsung Hao Enterprise Co., Ltd. (9.93%), Chao-Jia date Lee (6.31%), Sian-Jhang Syu (2.53%), Guei-Lian Jheng(1.26%). Inauguration Inauguration Ta Fa Investment Co., Ltd. (30.28%), Pan Asia Chemical Corporation (19.05%), Ching-Yuan Huang (15.87%), Hsuan Teh Duration Chung Chien Investment Co., Consultation Co., Ltd. (12.70%), Chun Fu Development Co., Ltd.

Ltd. (10.32%), Tsung Hao Enterprise Co., Ltd. (10.21%), Kuei-Hsien

Date Wang (0.63%), Kuei-Fong Wang (0.47%), Yu Hui Limited Election 2011/6/22 2011/6/22 3 years 2011/6/22 2011/6/22 3 years 2011/6/22 2011/6/22 3 years 2011/6/22 2011/6/22 3 years 2008/6/13 (0.47%) (Appointment) (Appointment) Pan Asia Investment Co., Tai Yi Investment Co., Ltd. (47.42%), Ta Fa Investment Co., Ltd.

Ltd. (42.63%), Tsung Hao Enterprise Co., Ltd. (9.95%) Representative Rui of Xin Investment Co., Ltd. : Shu-Li Huang Representative Rui of Xin Investment Co., Ltd. : Chien-Hwa Fu Lee Representative Rui of Xin Investment Co., Ltd. Ching-Huang Tsai Representative Jiunn of Tai Enterprise Co., Ltd. : Chao-Nan Hsieh Name Yu Hui Limited Kuei-Hsien Wang (100%)

Ke Yi Bao Investment Co., Yun-Jyun Deng (99.99%) Title Ltd. Supervisor Supervisor Supervisor Supervisor Supervisor

13 12 2. Major Shareholders of Corporate Shareholders: Feb. 29, 2012 Corporate shareholder Major shareholder of corporate shareholder and shareholding Ratio of Name Shareholding thereof China Man-Made Fiber Co., Ltd. (42.59%）, Sheng Jen Knitted Textiles Co., Ltd.（5.95%）, Yu Hui Limited (5.38%）, Chung Chien Pan Asia Chemical Investment Co., Ltd. (4.91%）, Deh Hsing Investment Co., Ltd. Corporation (4.5%）, Tai Yi Investment Co., Ltd.（2.26%）, Ke Yi Bao Investment Co., Ltd.（0.73%）, Pan Asia Investment Co., Ltd.（0.68%）, Ya-Ying Jhu（0.61%）, Kuei-Hsien Wang（0.41%）。 Chou Chin Industrial Co., Ltd. (48.24%), Pan Asia Investment Co., Ltd. (36.39%), Deh Hsing Investment Co., Ltd. (14.78%), Chou Huei Chou Chang Co., Ltd. Investment Co., Ltd. (0.25%), Ge Ling Co., Ltd. (0.19%), Tai Yi Investment Co., Ltd. (0.05%), Hsiun-Ching Hsu (0.05%), Chung-Yi Chen (0.02%), Chung-Tien Hsu (0.01%), Yun-Ling Chen (0.01%) Yi-Jen Chen (33.17%), Yi-Der Chen (27.77%), Yee-Fan (12.37%), I Joung Investment Co., Ching-Shuan Chen Ting (6.47%), Hsiun-Fan Lo (5.51%), Yee-Chen Ltd. Chen (5.65%), Min-Yuan Yeh (0. 68%) Ho Yang Management Shu-Cyong Zen, Chen-Hai Lin (19%) Consultant Co., Ltd. Xin Rui Investment Co., You-Ciang Yang (34.8), Ying-Huei Liou (32.4%), Mei-Jyuan Syong Ltd. (26.8%) Tai Jiunn Enterprise Co., Yi-Jen Chen (46.13%), Auto Life International Holdings (BVI) Ltd. (42.84%), Ming-Yuan Yeh (0.69%), Ching-Shuan Chen Ting (0.21%) 3. Major Shareholders of Major Corporate Shareholder: Feb. 29, 2012 Major shareholder of corporate shareholder and shareholding Ratio Corporate shareholder Name of Shareholding thereof Pan Asia Chemical Corporation (14.97%), Sheng Jen Knitted Textiles Co., Ltd. (4.21%), Formosa Imperial Wineseller Corp. (3.52%), Pan Asia Investment Co., Ltd. (3.00%), Chung Chien China Man-Made Fiber Co., Investment Co., Ltd. (2.51%), Netherlands Pension Robert Bacal Ltd. Investment Account at Citibank (0.94%), Morgan Stanley Bank International Limited at HSBC (0.89%), Deh Hsing Investment Co., Ltd. (0.67%), Chou Chang Co. Ltd. (0.63%) Pan Asia Investment Co., Ltd.(41.80%), Ta Fa Investment Co., Tai Yi Investment Co., Ltd. Ltd.(38.17%), Tsung Hao Enterprise Co., Ltd. (9.93%), Chao-Jia Lee (6.31%), Sian-Jhang Syu (2.53%), Guei-Lian Jheng(1.26%). Ta Fa Investment Co., Ltd. (30.28%), Pan Asia Chemical Corporation (19.05%), Ching-Yuan Huang (15.87%), Hsuan Teh Chung Chien Investment Co., Consultation Co., Ltd. (12.70%), Chun Fu Development Co., Ltd. Ltd. (10.32%), Tsung Hao Enterprise Co., Ltd. (10.21%), Kuei-Hsien Wang (0.63%), Kuei-Fong Wang (0.47%), Yu Hui Limited (0.47%) Pan Asia Investment Co., Tai Yi Investment Co., Ltd. (47.42%), Ta Fa Investment Co., Ltd. Ltd. (42.63%), Tsung Hao Enterprise Co., Ltd. (9.95%) Yu Hui Limited Kuei-Hsien Wang (100%) Ke Yi Bao Investment Co., Yun-Jyun Deng (99.99%) Ltd.

13 13 Major shareholder of corporate shareholder and shareholding Ratio Corporate shareholder Name of Shareholding thereof 4. Information on Directors and Supervisors in professionalism and impartiality Feng Yuan Engineering Co., Ltd. (83.42%), Chung Chien Have more than 5 years of experience and the Status of independence (note) Sheng Jen Knitted Textiles Investment Co., Ltd. (10.45%), Chao-Chang Wang (5.57%), Conditions following professional qualifications

Lecturer or Passed the Required Co., Ltd. Keui-Hsien Wang (0.25%), Chao-Ching Wang (0.05%), Shang-Jr above in qualification Work Chiang (0.15%), Shih-Yi Chiang (0.10%) Number of commerce, examination with experience in De-sing Securities law, finance, proper licensing by the commerce, public China Man-Made Fiber Corporation (100%) companies accounting or national Government law, finance, Investment Trust Co., Ltd. where the subjects Apparatus as court accounting or China Man-Made Fiber Co., Ltd. (53.21%), Ta Fa Investment Co., required by judge, prosecutor, others person holds 1234567 8 9 10 Ltd. (32.35%), Deh Hsing Investment Co., Ltd. (2.45%), Deh the business lawyers, certified required by the title as independent Hsing Consolidated Securities Co., Ltd. (1.44%), Reconciliation of the public accountant or the Company company in other professional director Chou Chin Corporation Account (1.04%), Nurkse County Investment Account at HSBC, pubic or designations required private by the business of the Taipei Branch (0.64%), Chung-Yi Chen (0.40%), Yi Chan Name colleges or Company Investment Co., Ltd. (0.38%), Chou Chang Co., Ltd. (0.35%), universities Global Securities Finance Corporation (0.31%) Jin-Fong Soo           0 Li-Kai Chuang (21.36%), Hsin-Yi Chuang (13.49%), Chien-Huei Kuei-Fong Wang       0 Chou Heui Investment Co., Jer-Shyong Tsai          0 Chuang (13.43%), Man-Yen Chuang Chen (12.14%), Teng-Hsin Yi-Der Chen          0 Ltd. Chuang (8.17%), Lai-Zi Kuao (5.01%) Hsi-Rong Huang            0 Chen-Le Liu            0 Chou Chin Corporation. (89.78%), Chou Chang Co., Ltd. (5.74%), Jin-Yi Lee            0 Ching-Long Tu (1.72%), Tsui-Chueh Chan (0.20%), Chiung-Er Kuei-Hsien Wang       0 Chun-Sheng Lee          0 Ge Ling Co., Ltd. Wang (0.17%), Shu-Chin Kuo (0.17%), Shu-Yun Hsu Chu Ming-Hsiung Huang         0 (0.12%), Chi-Chien Chan (0.08%), Rong-Li Chen (0.08%), Hsin-Ching Chang          0 Ming-Shan Chuang         0 Mei-Keui Lin (0.07%) Jer-Nan Wang           0 Auto Life International Ching-Hsin Chang           0 GIUM CO., LTD (100%) Holdings (BVI) Chia-Hung Lin          0 Jiann-Ell Huang           0 Shu-Li Huang           0 Chien-Hwa Lee Fu           0 Ching-Huang Tsai           0 Chao-Nan Hsieh           0 Note:Respective director and supervisor who meet the following qualifications 2 years before assumption of office and at the time of assumption office shall put a “” in the appropriate space. (1) Not an employee of the Bank or its affiliates. (2) Not a director or supervisor of the Bank or its affiliates (excluding the capacity of independent director of the Bank or its parents, or a subsidiary directly or indirectly held by the Bank with more than 50% of the stakes). (3) Not a natural person, spouse, underage children, or under the title of a third party who holds more than 1% of the outstanding shares issued by the Bank or among the top 10 natural person shareholders. (4) Not a spouse, kin at the second pillar under the Civil Code, or the lineal blood relatives within the fifth pillar under the Civil Code as specified in (1) through (3). (5) Not a director, supervisor or employee of an institutional shareholder who holds more than 5% of the outstanding shares issued by the Bank, or a director, supervisor or employee of an institutional shareholder who is among the top 5 shareholders. (6) Not a director, supervisor, manager or shareholder holding more than 5% of the outstanding shares of specific company or institution in business or financial relation with the Bank. (7) Not a professional, owner, partner, director, supervisor, manager of proprietorship, partnership, company or institution that provide business, legal, financial and accounting services to the Bank or a spouse to the aforementioned persons. (8) Not a spouse to or kin at the second pillar under the Civil Code to any other director. (9) Not under any of the categories stated in Article 30 of the Company Act. (10) No Government Apparatus agency, juristic person or its representative is elected under Article 27 of the Company Act.

14 15 14

4. Information on Directors and Supervisors in professionalism and impartiality Have more than 5 years of experience and the Status of independence (note) Conditions following professional qualifications

Lecturer or Passed the Required

above in qualification Work Number of commerce, examination with experience in law, finance, proper licensing by the commerce, public companies accounting or national Government law, finance, where the subjects Apparatus as court accounting or required by judge, prosecutor, others person holds 1234567 8 9 10 the business lawyers, certified required by the title as of the public accountant or the Company independent company in other professional director pubic or designations required private by the business of the Name colleges or Company universities Jin-Fong Soo           0 Kuei-Fong Wang       0 Jer-Shyong Tsai          0 Yi-Der Chen          0 Hsi-Rong Huang            0 Chen-Le Liu            0 Jin-Yi Lee            0 Kuei-Hsien Wang       0 Chun-Sheng Lee          0 Ming-Hsiung Huang         0 Hsin-Ching Chang          0 Ming-Shan Chuang         0 Jer-Nan Wang           0 Ching-Hsin Chang           0 Chia-Hung Lin          0 Jiann-Ell Huang           0 Shu-Li Huang           0 Chien-Hwa Lee Fu           0 Ching-Huang Tsai           0 Chao-Nan Hsieh           0 Note:Respective director and supervisor who meet the following qualifications 2 years before assumption of office and at the time of assumption office shall put a “” in the appropriate space. (1) Not an employee of the Bank or its affiliates. (2) Not a director or supervisor of the Bank or its affiliates (excluding the capacity of independent director of the Bank or its parents, or a subsidiary directly or indirectly held by the Bank with more than 50% of the stakes). (3) Not a natural person, spouse, underage children, or under the title of a third party who holds more than 1% of the outstanding shares issued by the Bank or among the top 10 natural person shareholders. (4) Not a spouse, kin at the second pillar under the Civil Code, or the lineal blood relatives within the fifth pillar under the Civil Code as specified in (1) through (3). (5) Not a director, supervisor or employee of an institutional shareholder who holds more than 5% of the outstanding shares issued by the Bank, or a director, supervisor or employee of an institutional shareholder who is among the top 5 shareholders. (6) Not a director, supervisor, manager or shareholder holding more than 5% of the outstanding shares of specific company or institution in business or financial relation with the Bank. (7) Not a professional, owner, partner, director, supervisor, manager of proprietorship, partnership, company or institution that provide business, legal, financial and accounting services to the Bank or a spouse to the aforementioned persons. (8) Not a spouse to or kin at the second pillar under the Civil Code to any other director. (9) Not under any of the categories stated in Article 30 of the Company Act. (10) No Government Apparatus agency, juristic person or its representative is elected under Article 27 of the Company Act.

15 15 (II) President, Executive Vice Presidents, Assistant Executive Vice Presidents and managers of the departments and branches Feb. 29, 2012 Shareholding under Spouse or kin within the Shares Held by Spouse Status of shareholding the title of a third Positions second pillar under the Civil Election & Dependents Title Name party Major experience with other Code and who is a manager Date Ratio of Ratio of Ratio of companies Quantity Quantity Quantity Title Name Relation Shareholding Shareholding Shareholding Vice President of Supervisor Taiwan Business of Reliance Chun-Sheng Bank; Finance Master Securities President 2010.10.13 463,338 0.021％ 17,440 0.001％ 0 0 None None None Lee of National Taiwan Investment University College of Trust Co., Management Ltd. Regional Center Director of Land Bank Supervisor of Taiwan; of Taichung Executive Vice Rong-Hua 2010.5.5 161,082 0.007％ 0 0 0 0 Department of Bank None None None President Kao Business Leasing Co., Administration, Ltd

16 Tamkang University Supervisor of Taichung Bank Chief Secretary, Insurance Office of the Board; Broker Co., Executive Vice Kai-Yu Lin 2010.7.30 87,000 0.004％ 0 0 0 0 Department of Law, Ltd.; None None None President National Chengchi Director of University Taichung Bank Leasing Co., Ltd Manager, Business Director of Development Dept.; Reliance Executive Vice Hsueh-Hsien Finance Master, Securities 2010.8.4 441,948 0.020％ 31,458 0.001％ 0 0 None None None President Liao National Chung Hsing Investment University College of Trust Co., Management Ltd. Manager, HR Dept.; Executive Vice Chi-Chuan Department of 2009.8.27 306,184 0.014％ 0 0 0 0 None None None None President Fang Accounting, Fu Jen Catholic University 16

17 Taichung Bank Leasing Co., Ltd Deputy Director of Manager, General Affairs Ching-hu General 2008.6.10 153,247 0.007％ 0 0 0 0 Department; None None None None Hsieh Affairs Dept. Department of Fiber, Ming Chi College Manager, Er Lin Manager, Branch; Business Chun-Yin Department of 2011.11.24 351,554 0.016％ 0 0 0 0 None None None None development Wang Technology Dept Management, Chung Hua University North District Center manager; Director of Manager, Department of Taichung Loan Kuo-Chun 2010.8.4 243,432 0.011％ 0 0 0 0 Business Bank None None None Administration Liu Administration, Leasing Co., Dept. National Taipei Ltd University 17

Shareholding under Spouse or kin within the Shares Held by Spouse Status of shareholding the title of a third Positions second pillar under the Civil Election & Dependents Title Name party Major experience with other Code and who is a manager Date Ratio of Ratio of Ratio of companies Quantity Quantity Quantity Title Name Relation Shareholding Shareholding Shareholding Deputy Director of Chi-Chuan HR Dept.; Manager, HR Fang 2006.9.1 306,184 0.014％ 0 0 0 0 Department of None None None None Dept. (concurrent Accounting, Fu Jen post) Catholic University Deputy Manager, Manager, Accounting Dept.; Yi-Ying Accounting 2009.11.9 126,000 0.006％ 0 0 0 0 Graduate Institute of None None None None Chung Dept. Accounting, National Chengchi University Manager, Taichungkang Branch Director of Manager, Deh-Wei Department of Fong Yun Information 2008.5.28 312,469 0.014％ 0 0 0 0 None None None Chia Statistics, National Construction Dept. 18 Cheng Kung Co., Ltd. University Deputy Manager, International Business Manager, Cheng-Yu Dept.; International 2006.5.4 130,797 0.006％ 0 0 0 0 None None None None Lai Department of Banking Dept. Accounting, Feng Chia University Deputy Manager, Loan Administration Director of Dept.; Reliance Manager, Yu-Chung Graduate Institute of Securities 2010.8.4 125,963 0.006％ 0 0 0 0 None None None Trust Dept. Lin Information Investment Management, Trust Co., National Sun Yat-Sen Ltd. University Manager, Dept Deputy Manager, Dept of Debt of Debt Collection and Collection and Mei-Li Wu 2010.4.29 110,000 0.005％ 0 0 0 0 Asset Recovery; None None None None Asset Department of Law, Recovery Soochow University

19 Co., Ltd. Head of Credit Risk Jhen-Ying Management Deputy Wu Division, Cosmos Manager, Risk (Deputy 2011.7.12 75,702 0.003％ 0 0 0 0 Bank; None None None None Management manager on Department of Dept. behalf of Finance, National manager) Taiwan University Head of Market Risk Guang-Jhong Section, Risk Siao Deputy Management Dept.; (Deputy Manager, 2011.4.1 164,965 0.007％ 1,595 0.000％ 0 0 Graduate Institute of None None None None manager on Treasury Dept. International Business behalf of National Taiwan manager) University Deputy Manager, Mu-Ken Deputy Trust Dept.; Chang Manager, Graduate Institute of (Deputy Wealth 2011.7.11 40,000 0.002％ 0 0 0 0 Business None None None None manager on Management Administration, behalf of Dept. National Chung Hsin manager) University 19

20 Securities Ruei-Fen Tsai 2011.8.5 41,000 0.002％ 0 0 0 0 Department of None None None None Brokerage International Trade, Feng Chia University Manager, Szumin Branch; Manager, Business Daching Sin-Fu Liang 2011.7.7 50,000 0.002％ 0 0 0 0 None None None None Administration, Branch Overseas Chinese College of Commerce Deputy Manager, Taichung Regioal Manager, W. Dong-Hsu center; Taichung 2011.3.2 48,330 0.002％ 0 0 0 0 Accounting and None None None None Liu Branch Statistics, Tamsui Institute of Business Administration Manager, Dadu Branch; Manager, Department of Rai-Cheng Business Jhongzhen 2008.9.22 261,165 0.012％ 0 0 0 0 None None None None Yang Administration, Branch Mingshin University of Science and Technology 20

21 Branch; Manager, Department of Neihsin Yu-Ing Chen 2010.5.4 110,739 0.005％ 0 0 0 0 Applied Commerce, None None None None Branch Taichung Institute of Technology (Open Education Program) Manager, Taichungkang Branch; Manager, Ching-Kun 2011.3.2 311,537 0.014％ 0 0 0 0 International Trade, None None None None Dadu Branch Lin Overseas Chinese College of Commerce Deputy Manager, Taichung Regional Manager, N. Zai-Hong center; Taiping 2011.3.2 116,021 0.005％ 0 0 0 0 International Trade, None None None None Yang Branch Tamsui Institute of Business Administration Manager, Dachia Manager, Branch; Director of Tzer-Hsiu Business Taichungkang 2011.3.2 28,016 0.001％ 0 0 0 0 Zhao-Meng None None None Lin Administration, Branch Overseas Chinese Co., Ltd. College of Commerce 21

Shareholding under Spouse or kin within the Shares Held by Spouse Status of shareholding the title of a third Positions second pillar under the Civil Election & Dependents Title Name party Major experience with other Code and who is a manager Date Ratio of Ratio of Ratio of companies Quantity Quantity Quantity Title Name Relation Shareholding Shareholding Shareholding Manager, Trust Dept.; Manager, Department of Chung-Teng Szumin 2009.12.31 221,350 0.010％ 0 0 0 0 Cooperative None None None None Hung Branch Economics, Feng Chia University Manager, Daching Manager, Branch; Hwei-Chin Chungkang 2009.2.27 2,008 0.000％ 0 0 0 0 Institute of Business None None None None Lu Branch and Management, Feng Chia University Deputy Manager, S. Taichung Branch; Manager, S. Huan-Chang Department of Taichung 2011.7.7 112,571 0.005％ 0 0 0 0 None None None None Tseng Taxation and Public 22 Branch Finance, Feng Chia University Manager, Yungchiung Manager, N. Branch; Taichung Wen-Chu Lee 2009.2.27 104,316 0.005％ 0 0 0 0 Institute of Business None None None None Branch and Management, Feng Chia University Manager, Neihsin Branch; Manager, Chung-Hsien Commerce, Shin Min Taiping 2010.5.4 339,844 0.015％ 0 0 0 0 None None None None Lee Commercial & Branch Industrial Vocational High School Manager, Chingsui Branch; Department of Manager, Pi-Hwa 2009.12.31 80,926 0.004％ 58,632 0.003％ 0 0 Applied Commerce, None None None None Houli Branch Chang Taichung Institute of Technology (Open Education Program)

23 University Manager, Peitou Branch; Manager, Wei-Huang Department of Fongyuan 2009.2.27 75,000 0.003％ 0 0 0 0 None None None None You Accounting, National Branch Chung Hsing University Manager, Dadu Manager, Tung-Po Branch; 2011.3.2 447,939 0.020％ 49,839 0.002％ 0 0 None None None None Dachia Branch Yang International Trade, Ling Tung College Manager, Peitun Manager, Branch; Chingsui Ya-Mei Chen 2009.12.31 51,000 0.002％ 0 0 0 0 Department of None None None None Branch Banking, National Chengchi University Manager, Accounting Dept. ; Manager, Shu-Chen Department of 2009.11.9 329,170 0.015％ 0 0 0 0 None None None None Shalu Branch Chen Accounting, National Cheng Kung University 23

24 Deputy Manager, Wutze Branch; Manager, Shih-Huei Tourism Department, 2011.7.7 70,726 0.003％ 0 0 0 0 None None None None Wutze Branch Wang Tamsui Institute of Business Administration Deputy Manager, Manager, S. Hsinchu Branch; Chi-Hung Fongyuan 2009.2.27 55,469 0.002％ 0 0 0 0 Graduate School of None None None None Wu Branch Statistics, National Taipei University Manager, Shangkong Branch; Manager, Chun-Chun Finance, Taichung Nanyang 2009.8.28 84,323 0.004％ 0 0 0 0 None None None None You Institute of Branch Technology (Open Education Program) Deputy Manager, Er Manager, Lin Branch; Nantou Tsung-Yi Liu 2010.5.4 86,673 0.004％ 0 0 0 0 Department of Law, None None None None Branch National Taiwan University 24

25 Manager, Puli Yi-Yuan Banking and 2009.8.28 642,365 0.029％ 0 0 0 0 None None None None Branch Tung Insurance, Taichung Institute of Technology (Open Education Program) Manager, Siangshang Manager, Yung-Chang Branch; Tsaotun 2008.9.22 77,541 0.003％ 1,011 0.000 0 0 Department of None None None None Lai Branch Accounting, Feng Chia University Deputy Manager, Business Dept.; Manager, Ya-Ching Accounting and Changhua 2009.8.28 188,000 0.008％ 0 0 0 0 Statistics, Taichung None None None None Peng Branch Home Economics of Commercial High School Manager, Siushui Branch; Manager, Department of Chung-Cheng Business Lukang 2010.8.4 177,623 0.008％ 0 0 0 0 None None None None Wu Administration, Branch Tamsui Institute of Business Administration

26 Manager, Ming-Cheng Management, Chung 2009.2.27 215,326 0.010％ 0 0 0 0 None None None None Peitou Branch Wu Chou Institute of Technology, Affiliated College of Continuing Education Manager, Huatan Manager, Hsin-Hsin Branch; Teinchung 2009.8.28 152,264 0.007％ 62,109 0.003％ 0 0 None None None None Lee Business, Holy Savior Branch High School Deputy Manager, Sheng Kang Branch; Manager, Ching-Yuan Department of Yuanlin 2009.8.28 77,023 0.003％ 0 0 0 0 None None None None Lin Business Branch Administration, Chung Hua University Manager, Risk Management Dept.; Manager, Cheng-Wen Department of Cheng-Hsien 2011.7.12 163,918 0.007％ 0 0 0 0 None Manager Brothers Homei Branch Ni Business Ni Administration, Ling Tung College

27 Manager, Graduate Institute of Yungchiung Chi-Hua Yao 2010.5.10 230,964 0.010％ 0 0 0 0 Agricultural None None None None Branch Economics, National Chung Hsing University Manager, Shetou Branch; Manager, Yu-Nien Accounting and Siushui 2010.8.4 234,654 0.011％ 85,720 0.004％ 0 0 None None None None Kang Statistics, Tamsui Branch Institute of Business Administration Manager, Yuanlin Manager, Branch; Wen-Tung Department of Shangkong 2009.8.28 214,897 0.010％ 0 0 0 0 None None None None You Business Branch Administration, Feng Chia University Manager, N. Yuanlin Branch; Manager, Shun-Deh Graduate Institute of 2009.2.27 187,117 0.008％ 0 0 0 0 Finance, National None None None None Dachu Branch Tsai Yunlin University of Technology and Science 27

Shareholding under Spouse or kin within the Shares Held by Spouse Status of shareholding the title of a third Positions second pillar under the Civil Election & Dependents Title Name party Major experience with other Code and who is a manager Date Ratio of Ratio of Ratio of companies Quantity Quantity Quantity Title Name Relation Shareholding Shareholding Shareholding Manager, Dounan Branch; Manager, N. Accounting and Yuanlin Yi-Ren Teng 2009.2.27 210,041 0.009％ 0 0 0 0 None None None None Statistics, Overseas Branch Chinese College of Commerce Manager, Chushan Branch; Manager, Kwei-Ching 2009.7.2 218,693 0.010％ 0 0 0 0 School of Humanity None None None None Peitou Branch Ho Studies, National Sun Yat-Sun University Manager, S. Taichung Branch; Manager, Yi-Ping Lin 2009.12.31 85,645 0.004％ 0 0 0 0 Department of Law, None None None None Peitun Branch 28 Fu Jen Catholic University Deputy Manager, Chunan Branch; Applied Foreign Manager, Jhih-Hao 2011.11.24 57,838 0.003％ 0 0 0 0 Language, Taichung None None None None Puhsin Branch Liang Commercial School on Continuing Education Manager, Sung Shan Branch; Manager, Rong-Kuo 2009.9.2 129,431 0.006％ 0 0 0 0 Graduate Institute of None None None None Taipei Branch Cheng Law, Soochow University Manager, Chungkang Branch; Manager, Department of Chang-Chi Lungjing 2009.8.28 211,792 0.009％ 565 0.000％ 0 0 Cooperative None None None None Liu Branch Economics, National Chung Hsing University

29 program Corporate Finance manager, Cosmos Bank, Hsin Hsing Branch; Manager, Chiang-Kai Graduate Institute of Kaohsiung 2009.3.11 77,349 0.003％ 0 0 0 0 None None None None Liu Financial Operations, Branch National Kaohsiung First University of Science and Technology Manager, BanChiao Branch; Supervisor Manager, Wen-Che 2010.4.30 141,851 0.006％ 0 0 0 0 Department of of HCT None None None Linko Branch Chen Economics, Feng Chia Logistics University Deputy Manager, Er Lin Branch; Manager, Chen-Hsiang Bank Management, 2008.8.7 100,000 0.004％ 0 0 0 0 None None None None Huwei Branch Chuang Tamsui Institute of Business Administration 29

30 Manager, Homei Branch; Dounan Shun-Chi Ke 2009.2.27 124,436 0.006％ 117 0.000％ 0 0 Department of None None None None Branch Commerce, National Open University Manager, Wutze Branch; Manager, Chiu-Wen Department of 2010.8.4 80,065 0.004％ 0 0 0 0 None None None None Neihu Branch Chang International Trade, Chienkou Technology University Deputy Manager, Manager, Sung Shan Branch; Tsai-Tuan Department of BanChiao 2010.4.30 126,916 0.006％ 0 0 0 0 None None None None Chen Business Branch Administration, Tung Hai University Assistant Manager, CitiBank (Taiwan) ; Graduate Institute of Manager, Feng Financial Operations, Wen-Kai Tsai 2008.4.25 78,579 0.004％ 0 0 0 0 None None None None Shan Branch National Kaohsiung First University of Science and Technology 30

31 Deputy Manager, Min Hsiung Branch; Business Manager, Min Ming-Yu 2009.2.27 81,583 0.004％ 0 0 0 0 Administration, None None None None Hsiung Branch Chiu Taichung Commercial School on Open education program Manager, BOWA Bank Neihu Branch; Manager, Chun-wen Department of Taoyuan 2007.7.30 80,894 0.004％ 0 0 0 0 None None None None Chen Taxation and Public Branch Finance, National Chengchi University Manager, Citibank Fu Cheng Branch,; Comprehensive Manager, Commerce Chung-Hsien Yung Kung 2010.6.1 58,000 0.003％ 0 0 0 0 Depertment, None None None None Lee Branch National Tainan Commercial Vocational Senior High School 31

32 Nung Institute of Technology Manager, Standard Chartered Bank, Xin Ming Branch; Manager, Nei Jr-Hsin Lee 2008.9.8 228,121 0.010％ 0 0 0 0 Department of None None None None Li Branch Applied Commerce, National Taipei College of Business Manager, Standard Chartered Bank, Manager, Cheng-Hua Management Dept.; Hsinchu 2008.9.1 118,954 0.005％ 0 0 0 0 None None None None Lee Department of Branch Banking Insurance, Feng Chia University Manager, Pingjhen Branch; Manager, Chen-Hung University of Gueishan 2010.4.30 106,071 0.005％ 0 0 0 0 None None None None Cheng Tennessee School of Branch Business Administration

33 Tayuan 2009.5.25 66,000 0.003％ 0 0 0 0 Taoyung District; None None None None Tseng Branch Graduate School of Management, Yuan Ze University Manager, Pingjhen Branch; Manager, Ting-Kuang Department of Yangmei 2009.6.16 250,097 0.011％ 0 0 0 0 None None None None Huang Cooperative Branch Economics, Feng Chia University Manager, Cosmos Bank, Corporate Manager, Su-Lang Finance Center of Tucheng 2011.3.7 85,000 0.004％ 0 0 0 0 North 1st District; None None None None Huang Branch Graduate School of Management, Yuan Ze University Assistant Manager of Manager, Taiwan International Yuanlin Hong-Lun Securities Corporation Branch 2011.5.3 15,000 0.001％ 3,090 0.000％ 0 0 Graduate Institute of None None None None Jhang Securities Business; Brokerage Administration, Da-Yeh University 33

34 Manager, Nantou District Center; Manager, Department of Taichung Wen-Chun 2007.7.18 123,421 0.006％ 0 0 0 0 Taxation and Public None None None None Regional Jan Finance, National Center Cung Hsing University Manager, S. Fongyuan Manager, Branch; Chang Hwa Kuo-Chi Lin 2009.2.27 301,000 0.013％ 16,285 0.001％ 0 0 Department of None None None None Regional International Trade, Center Feng Chia University Deputy Manager, Manager, North District Center; North Pei-Miao Jan 2010.8.4 133,350 0.006％ 0 0 0 0 Graduate Institute of None None None None Regional Finance, National Center Central University

(III) Remuneration to Directors, Supervisors, President and Executive Vice Presidents, and allocation of bonus to employees: 1. Remuneration to Directors (including independent directors) Unit: NTD thousand; % Remuneration to Directors Remuneration in the capacity as employees The sum of A, B, C Quantity of shares The sum of A, B, C, Retained Shares and D in proportion Salaries, bonus and entitled under D, E, F and G to Director fees (A) Pension (B) Distribution (C) For services (D) Pension (F) Employee bonus from earnings (G) (Note 1) to Earnings (%) special subsidies (E) employee stock Earnings (%) (Note 1) option (H) Remuneration Title Name All All All All All All All companies included All All from companies companies companies companies companies companies All companies The Bank in the consolidated companies companies investees included in included in included in included in included in included in included in the financial statements included in included in The The The The The The The The The the the the the the the consolidated the the Bank Bank Bank Bank Bank Bank Bank Bank Bank consolidated consolidated consolidated consolidated consolidated consolidated financial Cash Free-Gratis Cash Free-Gratis consolidated consolidated financial financial financial financial financial financial statements Dividends Dividends Dividends Dividends financial financial statements statements statements statements statements statements statements statements Jin-Fong Soo, Chairman Shiu-Nan Huang Kuei-Fong Wang, Jer-Shyong Managing Tsai Director Hsi-Rong Huang (independent director) Independent Chen-Le Liu, director Jin-Yi Lee Kuei-Hsien Wang,

35 Hsin-Ching Chang Ming-Shan Chuang, 17,968 19,228 0 0 109 109 1,748 1,848 1.37 1.46 1,192 1,192 0 0 1 0 1 0 0 0 1.45 1.54 72 Chun-Sheng Lee Director Ming-Hsiung Huang, Chia-Hung Lin Jiann-Ell Huang, Yuh-Eing Chung Hsien-Tsung Lin Pan Asia Chemical Corporation Ho Yang Management Consultation Co., Ltd. Chiung Tung Investment Corporation TCB Corporate Union (Note 2) Managing Director Yi-Der 1,200 1,320 0 0 0 0 100 140 0.09 0.10 0 0 0 0 0 0 0 0 0 0 0.09 0.10 0 Chen (Note 3) Director Ching-Hsin Chang 540 540 0 0 0 0 55 55 0.04 0.04 0 0 0 0 0 0 0 0 0 0 0.04 0.04 0 (Note 3) Director Jer-Nan Wang 0 0 0 0 0 0 18 18 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (Note 3) I Joung Investment Co., Ltd. 0 0 0 0 24 24 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (Note 3) Chou Chang Co., Ltd. (Note 3) 420 420 0 0 11 11 0 0 0.03 0.03 0 0 0 0 0 0 0 0 0 0 0.03 0.03 0 Note 1: The employee bonus and remuneration to directors/supervisors are allocated according to the earnings allocation motion in the most recent year. The proportion of allocation this year is imputed based on the proportion of allocation in the most recent year. Note 2: TBC Industrial Union was renamed into TBC Corporate Union on November 4, 2011. Note 3: The pledge ratio of I Joung Investment Co., Ltd. and Chou Chang Co., Ltd. is more than 50%.

Classification of remuneration

Name

Classification of remuneration paid to Total (A+B+C+D) Total (A+B+C+D+E+F+G) directors The Bank Consolidation I The Bank Consolidation J Shiu-Nan Huang, Kuei-Fong Shiu-Nan Huang, Kuei-Fong Shiu-Nan Huang, Kuei-Fong Shiu-Nan Huang, Kuei-Fong Wang, Yi-Der Chen, Chen-Le Wang, Yi-Der Chen, Chen-Le Wang, Yi-Der Chen, Chen-Le Wang, Yi-Der Chen, Chen-Le Liu, Jin-Yi Lee, Ching-Hsin Liu, Jin-Yi Lee, Ching-Hsin Liu, Jin-Yi Lee, Ching-Hsin Liu, Jin-Yi Lee, Ching-Hsin Chang, Ming-Shan Chuang, Chang, Ming-Shan Chuang, Chang, Ming-Shan Chuang, Chang, Ming-Shan Chuang, Chun-Sheng Lee, Chun-Sheng Lee, Ming-Hsiung Huang, Ming-Hsiung Huang, Ming-Hsiung Huang, Ming-Hsiung Huang, Chia-Hung Lin, Jer-Nan Chia-Hung Lin, Jer-Nan Chia-Hung Lin, Jer-Nan Chia-Hung Lin, Jer-Nan Wang, Ching-Hsin Chang, Wang, Ching-Hsin Chang, Wang, Ching-Hsin Chang, Wang, Ching-Hsin Chang, Jiann-Ell Huang, Yuh-Eing Jiann-Ell Huang, Yuh-Eing Less than 2,000,000 Jiann-Ell Huang, Yuh-Eing Jiann-Ell Huang, Yuh-Eing Chung, Hsien-Tsung Lin, I Chung, Hsien-Tsung Lin, I Chung, Hsien-Tsung Lin, I Chung, Hsien-Tsung Lin, I Joung Investment Co., Ltd., Joung Investment Co., Ltd.,

36 Joung Investment Co., Ltd., Joung Investment Co., Ltd., Ho Yang Management Ho Yang Management Ho Yang Management Ho Yang Management Consultant Co., Ltd., Chou Consultant Co., Ltd., Ltd., Consultant Co., Ltd., Chou Consultant Co., Ltd., Chou Chang Co., Ltd., Chiung Chou Chang Co., Ltd., Chang Co., Ltd., Chiung Chang Co., Ltd., Chiung Tung Investment Chiung Tung Investment Tung Investment Tung Investment Corporation, TCB Corporate Corporation, TCB Corporate Corporation, TCB Corporate Corporation, TCB Corporate Union Union Union Union Jin-Fong Soo, Jer-Shyong Jin-Fong Soo, Jer-Shyong Jin-Fong Soo, Jer-Shyong Jin-Fong Soo, Jer-Shyong Tsai, Hsi-Rong Huang, Tsai, Hsi-Rong Huang, Tsai, Hsi-Rong Huang, Tsai, Hsi-Rong Huang, 2,000,000~5,000,000 (exclusive) Kuei-Hsien Wang, Kuei-Hsien Wang, Kuei-Hsien Wang, Pan Asia Kuei-Hsien Wang, Pan Asia Chun-Sheng Lee, Pan Asia Chun-Sheng Lee, Pan Asia Chemical Corporation Chemical Corporation Chemical Corporation Chemical Corporation 5,000,000~10,000,000 (exclusive) None None None None 10,000,000~15,000,000 (exclusive) None None None None 15,000,000~30,000,000 (exclusive) None None None None 30,000,000~50,000,000 (exclusive) None None None None 50,000,000~100,000,000 (exclusive) None None None None 100,000,000 above None None None None Total 25 persons 25 persons 25 persons 25 persons

2. Remuneration to Supervisors Unit: NTD thousand; % Remuneration to Supervisors The sum of A, B, C Pension and Earning Business Affair and D in proportion Remuneration Rewards (A) Title Name Superannuation (B) Distribution (C) Expense (D) to Earnings (%) from investee The The The The The company Consolidation Consolidation Consolidation Consolidation Consolidation Bank Bank Bank Bank Bank Resident Jiann-Ell Huang, Jin-Fong Supervisor Soo Ching-Huang Tsai, Shu-Li Huang Supervisor Chao-Nan Hsieh, Chien-Hwa 3,525 3,525 0 0 57 57 468 468 0.28 0.28 9 Lee Fu Xin Rui Investment Co., Ltd. Tai Jiunn Enterprise Co., Ltd. Chou Chang Co., Ltd. (Note 2) 360 360 0 0 0 0 0 0 0.02 0.02 0 Note 1: The employee bonus and remuneration to directors/supervisors are allocated according to the earnings allocation motion in the most recent year. 37 The proportion of allocation this year is imputed based on the proportion of allocation in the most recent year. Note 2: The pledge ratio of Chou Chang Co., Ltd. is more than 50%.

Classification of remuneration Name Classification of remuneration paid Total (A+B+C+D) to supervisors The Bank Consolidation E Jiann-Ell Huang, Jin-Fong Soo, Ching-Huang Tsai, Jiann-Ell Huang, Jin-Fong Soo, Ching-Huang Tsai, Shu-Li Huang, Chien-Hwa Lee Fu, Chao-Nan Hsieh, Shu-Li Huang, Chien-Hwa Lee Fu, Chao-Nan Hsieh, Less than 2,000,000 Xin Rui Investment Co., Ltd., Tai Jiunn Enterprise Co., Xin Rui Investment Co., Ltd., Tai Jiunn Enterprise Co., Ltd., Chou Chang Co., Ltd. Ltd., Chou Chang Co., Ltd. 2,000,000~5,000,000 (exclusive) None None 5,000,000~10,000,000 (exclusive) None None 10,000,000~15,000,000 (exclusive) None None 15,000,000~30,000,000 (exclusive) None None 30,000,000~50,000,000 (exclusive) None None 50,000,000~100,000,000 (exclusive) None None 100,000,000 above None None

38 Total 9 persons 9 persons

3. Remuneration to President and Executive Vice Presidents: Unit: NTD thousand; % The sum of A, B, C Employee share Remuneration Pension and Bonus and special Employee bonus of earning distribution(D) Salary (A) and D in proportion subscription paid to Superannuation (B) Disbursement (C) (Note 1) to Earnings (%) warrants directions from an Title Name The Bank Consolidation invested The The The company The Bank Consolidation Consolidation The Bank Consolidation Consolidation Consolidation Bank Cash Stock Cash Stock Bank Bank other than the Dividends Dividends Dividends Dividends company’s subsidiary President Chun-Sheng Lee

Executive Vice President Rong-Hua Kao

Executive Vice President Chi-Chuan Fang 14,155 14,325 0 0 3,937 3,937 11 0 11 0 1.25 1.26 0 0 36 Executive Vice President Kai-Yu Lin

Executive Vice President Hsueh-Hsien Liao

Chief Auditor Min-Chin Shen Note: The employee bonus and remuneration to directors/supervisors are allocated according to the earnings allocation motion in the most recent year. The proportion of allocation this year is imputed based on the

39 proportion of allocation in the most recent year. Classification of remuneration Classification of Remuneration paid to presidents Name and Executive Vice Presidents The Bank Consolidation financial statements Less than 2,000,000 None None Chun-Sheng Lee, Rong-Hua Kao, Chi-Chuang Fang Chun-Sheng Lee, Rong-Hua Kao, Chi-Chuang Fang 2,000,000~5,000,000 (exclusive) Kai-Yu Lin, Hsueh-Hsien Liao, Min-Chin Shen Kai-Yu Lin, Hsueh-Hsien Liao, Min-Chin Shen 5,000,000~10,000,000 (exclusive) None None 10,000,000~15,000,000 (exclusive) None None 15,000,000~30,000,000 (exclusive) None None 30,000,000~50,000,000 (exclusive) None None 50,000,000~100,000,000 (exclusive) None None 100,000,000 above None None Total 6 persons 6 persons

4. Members of management team receiving employee bonus and bonus distribution:

December 31, 2011 Unit: NTD thousand; % Cash Stock Total/after-tax Title Name Dividends Total Dividends profit (%) (Note) Remarks Remarks Remarks Remarks Unit: NTD thousand Unit: NTD thousand employee. employee. externally. externally. Chun-Sheng President Lee

The driver is retained retained is The driver

The driver is the Bank’s Executive Vice Rong-Hua Kao The dormitory as provided was The dormitory owned by the Bank itself. The house cost was based on the cost land the of information and the price of acquisition less depreciation of allowance for thereon the buildings (exclusive of the accessory additions and equipment, renovation of the buildings) of catalogue the in specified of end the at property 2011. December President Executive Hsueh-Hsien Vice Liao President Executive Chi-Chuan Vice Fang President

2011 Executive Vice Kai-Yu Lin President

Chief Min-Chin Shen Auditor Remuneration paid to driver in Remuneration Manager Ching-hu Hsieh

Manager Chun-Yin Wang

ce Presidents in 2011 ce Presidents in 2011 Manager Kuo-Chun Liu

40 Yi-Ying Chung Manager Manager Deh-Wei Chia

0 1,174 Manager Mei-Li Wu 15,126 77 Manager Feng-Lang 0 142 142 0.01

Monthly rent Monthly rent Chen Managers Manager Chien-Min

House and the land value House and the land value rent monthly Imputed Chou Manager Sin-Fu Liang Manager Dong-Syu Liou President and Executive Vi Executive and President Manager Rai-Cheng Yang Manager Han-Ching Tsai

, Shiu-Nan Manager Hung-Ping Chen

Name Name Name Name Huang Manager Yu-Ing Chen Jin-Fong Soo Jin-Fong Rong-Hua Kao Min-Chin Shen Shen Min-Chin Chi-Chuan Fang Chun-Sheng Lee Chun-Sheng Lee Shiu-Nan Huang Manager Ching-Kun Lin Zai-Hong Yang Jin-Fong Soo Jin-Fong Manager Manager Chung-Teng Hung Manager Hwei-Chin Lu Manager Huan-Chang Tseng Manager Wen-Chu Lee Manager Chung-Hsien Title Title Title Title Lee President President President President Chairman Chairman Chairman Chairman Pi-Hwa Chang

Chief Auditor Auditor Chief Manager Vice Chairman Vice Chairman Kuei-Fong Wang Executive Vice Executive Vice Manager Chia-Wei Tsai d to the Chairman and President in 2011 in 2011 and President Chairman rent provide d to the and monthly Vehicles Note 1: house rent provided to Chairman, Note 2: Imputed 41 40 4. Members of management team receiving employee bonus and bonus distribution:

December 31, 2011 Unit: NTD thousand; % Cash Stock Total/after-tax Title Name Dividends Total Dividends profit (%) (Note) Chun-Sheng President Lee Executive Vice Rong-Hua Kao President Executive Hsueh-Hsien Vice Liao President Executive Chi-Chuan Vice Fang President Executive Vice Kai-Yu Lin President

Chief Min-Chin Shen Auditor

Manager Ching-hu Hsieh

Manager Chun-Yin Wang

Kuo-Chun Liu Manager Yi-Ying Chung Manager Manager Deh-Wei Chia Manager Mei-Li Wu Manager Feng-Lang 0 142 142 0.01 Chen Managers Manager Chien-Min Chou Manager Sin-Fu Liang Manager Dong-Syu Liou Manager Rai-Cheng Yang Manager Han-Ching Tsai Manager Hung-Ping Chen Manager Yu-Ing Chen Manager Ching-Kun Lin Manager Zai-Hong Yang Manager Chung-Teng Hung Manager Hwei-Chin Lu Manager Huan-Chang Tseng Manager Wen-Chu Lee Manager Chung-Hsien Lee Manager Pi-Hwa Chang

Manager Chia-Wei Tsai

41 41 Cash Cash Stock Total/after-tax Stock Total/after-tax Title Name Dividends Total Title Name Dividends Total Dividends profit (%) Dividends profit (%) (Note) (Note) Manager Yu-Chen Yang Manager Ming-Ren Hsu Manager He-Chin Chang Manager Chiu-Wen Manager Wei-Huang You Chang Manager Tung-Po Yang Manager Tsai-Tuan Chen Manager Ya-Mei Chen Manager Wen-Kai Tsai Manager Shu-Chen Chen Manager Hsin-Fa Wang Manager Kuo-Chin Chi Manager Wen-Chuan Zhuang Manager Pi-Wei Wang Manager Ming-Yu Chiu Chien-Hao Manager Chen Manager Chun-wen Chen Shih-Huei Manager Chung-Hsien Manager Lee Wang Manager Manager Chi-Hung Wu Chien-Hung Lin Manager Chun-Chun You Manager Shih-Fan Weng (Continued (Continued (Continued (Continued Manager Tsung-Yi Liu Manager Jr-Hsin Lee from from from from previous Ming-San Manager Cheng-Hua Lee Manager previous previous previous page) Huang Manager Chen-Hung page) page) page) Cheng Manager Chien-ting Lin Manager Yi-Yuan Tung Manager Cheng-Huan Huang Yung-Chang Manager Lai Manager Chang-Sheng Liu Chung-Cheng Manager Wu Manager Yu-Heui Tseng Manager Pao-Yuan Chen Manager Ting-Kuang Huang Manager Cheng-Hsien Ni Manager Yu-Chung Lin Ming-Cheng (Continued (Continued (Continued (Continued Manager from from from from previous Manager Wen-Chun Jan Wu Manager Kuo-Chi Lin previous previous previous page) Manager Hsin-Hsin Lee Manager Pei-Miao Jan page) page) page) Manager Ching-Yuan Lin Note: The employee bonus to be allocated in 2011 was NTD401,746. The bonus of

Manager Cheng-Wen Ni managers to be allocated this year, NTD142,493 [(32,669/92,107)×401,748], was

Manager Kee-Hsien Lee calculated based on the percentage of allocation last year. Manager Yu-Nien Kang (IV) Specify and compare the Remuneration to Directors, supervisors, President and Manager Wen-Tung You Executive Vice Presidents of the Bank in proportion to the earnings from the Bank and Manager Shun-Deh Tsai companies included in the consolidated financial statements in the latest 2 years, and Manager Yi-Ren Teng specify the policies, standards, combinations, procedure of decision-making of Manager Kwei-Ching Ho remunerations and their relation to business performance and future risk. Manager Yi-Ping Lin 1. Analysis on Proportion to Earnings Manager Jhih-Hao Liang Unit: NTD thousand Manager Cheng-Yu Lai 2011 2010 (Note 2) Rong-Kuo Manager The Bank Consolidation The Bank Consolidation Cheng Directors (Note 1) 23,385 24,905 18,847 20,076

Manager Chang-Chi Liu Supervisor 4,410 4,410 5,137 5,215

Manager Tien-Hou Tsai President/Executive Vice Presidents 18,104 18,274 14,776 15,744

Manager Ruei-Chang Lee Total 45,899 47,589 38,760 41,035 Total/after-tax profit 3.16％ 3.27％ 9.41％ 9.96％ Manager Chiang-Kai Liu Note 1: The remuneration to directors less the salary received by President for assuming Manager Wen-Che Chen employees concurrently. Manager Chen-Hsiang Chuang Note 2: The employee bonus allocated to the major management in 2010, NTD3 thousand, Manager Kuang-Chi was disclosed additionally based on the actual allocation in December 2011. Chen

42 43 42 Cash Stock Total/after-tax Title Name Dividends Total Dividends profit (%) (Note) Manager Ming-Ren Hsu Manager Chiu-Wen Chang Manager Tsai-Tuan Chen Manager Wen-Kai Tsai Manager Hsin-Fa Wang Manager Wen-Chuan Zhuang Manager Ming-Yu Chiu Manager Chun-wen Chen Manager Chung-Hsien Lee

Manager Chien-Hung Lin Manager Shih-Fan Weng (Continued (Continued (Continued (Continued Manager Jr-Hsin Lee from from from from previous Manager Cheng-Hua Lee previous previous previous page) Manager Chen-Hung page) page) page) Cheng

Manager Cheng-Huan Huang Manager Chang-Sheng Liu Manager Yu-Heui Tseng Manager Ting-Kuang Huang Manager Yu-Chung Lin Manager Wen-Chun Jan Manager Kuo-Chi Lin Manager Pei-Miao Jan Note: The employee bonus to be allocated in 2011 was NTD401,746. The bonus of managers to be allocated this year, NTD142,493 [(32,669/92,107)×401,748], was calculated based on the percentage of allocation last year. (IV) Specify and compare the Remuneration to Directors, supervisors, President and Executive Vice Presidents of the Bank in proportion to the earnings from the Bank and companies included in the consolidated financial statements in the latest 2 years, and specify the policies, standards, combinations, procedure of decision-making of remunerations and their relation to business performance and future risk. 1. Analysis on Proportion to Earnings Unit: NTD thousand 2011 2010 (Note 2) The Bank Consolidation The Bank Consolidation Directors (Note 1) 23,385 24,905 18,847 20,076 Supervisor 4,410 4,410 5,137 5,215 President/Executive Vice Presidents 18,104 18,274 14,776 15,744 Total 45,899 47,589 38,760 41,035 Total/after-tax profit 3.16％ 3.27％ 9.41％ 9.96％ Note 1: The remuneration to directors less the salary received by President for assuming employees concurrently. Note 2: The employee bonus allocated to the major management in 2010, NTD3 thousand, was disclosed additionally based on the actual allocation in December 2011.

43 43 2. Policies, standards, combinations, procedure of decision-making of remunerations III. Status of Corporate Governance and their relation to business performance (I) The function of the Board (1) The Bank defined the policy and standard combination of remuneration paid to The Board called 15 meetings in 2011. The attendance of directors/supervisors is directors, supervisors, President and Executive Vice Presidents in accordance specified as follows: with Article 27-1, Article 29-1, Article 35 and the relevant provisions of the (2011.1.1-2011.12.31) Articles of Incorporation, including the procedure of decision-making of Attendance Attend Attendance remuneration and their relation to business performance. Title Name (attend as throug rate (%) Remarks (2) The bonus to President and Executive Vice Presidents will be evaluated based observer) h proxy (note 2) on the earnings and consolidated performance for various businesses Appointed as a director on according to the rules for awarding bonus authorized by the Bank’s Board of Jin-Fong Soo March 29, 2011, and elected Directors or Board of Managing Directors, and awarded subject to the Bank’s (Representative of Pan as the Chairman on March Chairman 12 0 100 business performance. Asia Chemical 30, 2011; the number of (3) The remuneration to directors/supervisors includes the attendance fee, Corporation) attendance to the Board remuneration, and compensation allocated from earnings. The remuneration to session is 12. President/Executive Vice Presidents includes salary, bonus and special Kuei-Fong Wang Reelected on June 22, 2011, subsidies, and employee bonus allocated from earnings. Vice (Representative of Pan and elected as the managing 13 2 86.67 Chairman Asia Chemical director and Vice Chairman Corporation) on November 17, 2011. Yi-Der Chen Managing (Representative of I 11 1 73.33 Reelected on June 22, 2011 Director Joung Investment Co., Ltd.) Jer-Shyong Tsai Managing (Representative of Pan 12 3 80 Reelected on June 22, 2011 Director Asia Chemical Corporation) Managing Director Hsi-Rong Huang 15 0 100 Reelected on June 22, 2011 (Independent Director) Independent Chen-Le Liu 14 1 93.33 Reelected on June 22, 2011 director Reelected on June 22, 2011; Independent Jin-Yi Lee 4 3 50 the number of attendance to director the Board session is 8. Reelected on June 22, 2011, Kuei-Hsien Wang resigned as the Vice (Representative of Pan Director 11 4 73.33 Chairman on November 17, Asia Chemical 2011, and only assumed Corporation) director now. Hsin-Ching Chang (Representative of Pan Director 15 0 100 Reelected on June 22, 2011 Asia Chemical Corporation) Ming-Shan Chuang (Representative of Pan Director 13 2 86.67 Reelected on June 22, 2011 Asia Chemical Corporation) Chia-Hung Lin Reelected on June 22, 2011; Director Ho Yang Management 6 1 75 the number of attendance to Consultant Co., Ltd. the Board session is 8.

44 45 44 III. Status of Corporate Governance (I) The function of the Board The Board called 15 meetings in 2011. The attendance of directors/supervisors is specified as follows: (2011.1.1-2011.12.31) Attendance Attend Attendance Title Name (attend as throug rate (%) Remarks observer) h proxy (note 2) Appointed as a director on Jin-Fong Soo March 29, 2011, and elected (Representative of Pan as the Chairman on March Chairman 12 0 100 Asia Chemical 30, 2011; the number of Corporation) attendance to the Board session is 12. Kuei-Fong Wang Reelected on June 22, 2011, Vice (Representative of Pan and elected as the managing 13 2 86.67 Chairman Asia Chemical director and Vice Chairman Corporation) on November 17, 2011. Yi-Der Chen Managing (Representative of I 11 1 73.33 Reelected on June 22, 2011 Director Joung Investment Co., Ltd.) Jer-Shyong Tsai Managing (Representative of Pan 12 3 80 Reelected on June 22, 2011 Director Asia Chemical Corporation) Managing Director Hsi-Rong Huang 15 0 100 Reelected on June 22, 2011 (Independent Director) Independent Chen-Le Liu 14 1 93.33 Reelected on June 22, 2011 director Reelected on June 22, 2011; Independent Jin-Yi Lee 4 3 50 the number of attendance to director the Board session is 8. Reelected on June 22, 2011, Kuei-Hsien Wang resigned as the Vice (Representative of Pan Director 11 4 73.33 Chairman on November 17, Asia Chemical 2011, and only assumed Corporation) director now. Hsin-Ching Chang (Representative of Pan Director 15 0 100 Reelected on June 22, 2011 Asia Chemical Corporation) Ming-Shan Chuang (Representative of Pan Director 13 2 86.67 Reelected on June 22, 2011 Asia Chemical Corporation) Chia-Hung Lin Reelected on June 22, 2011; Director Ho Yang Management 6 1 75 the number of attendance to Consultant Co., Ltd. the Board session is 8.

45 45 Attendance Attend Attendance Title Name (attend as throug rate (%) Remarks (II) The function of Audit Committee or Supervisors’ Participation in the Function of Board observer) h proxy (note 2) of Directors Ming-Hsiung Huang The Board called 15 meetings in 2011 (A). The attendance of directors/supervisors is Reelected on June 22, 2011; (Representative of Pan specified as following: Director 8 0 100 the number of attendance to Actual Asia Chemical Actual number the Board session is 8. attendance Corporation) Title Name of attendance Remarks ratio (%) (B) Ching-Hsin Chang (B/A) (Note 2) (Representative of I Director 15 0 100 Reelected on June 22, 2011 Appointed on March 29, 2011, Joung Investment Co., Jiann-Ell Huang and reelected as the director Resident (Representative of Xin Rui 12 100 on June 22, 2011; the number Ltd.) Supervisor Appointed as a director on Investment Co., Ltd.) of attendance to the Board session is 12. Jer-Nan Wang March 30, 2011, and Chien-Hwa Lee Fu (Representative of Chou reelected as the director on Director 4 5 36.36 Supervisor (Representative of Xin Rui 10 66.67 Reelected on June 22, 2011 Chang Chemical June 22,, 2011; the number Investment Co., Ltd.) Corporation) of attendance to the Board Ching-Huang Tsai session is 11. Supervisor (Representative of Xin Rui 15 100 Reelected on June 22, 2011 Chun-Sheng Lee Investment Co., Ltd.) Reelected on June 22, 2011; Shu-Li Huang (Representative of Pan Director 8 0 100 the number of attendance to Supervisor (Representative of Xin Rui 15 100 Reelected on June 22, 2011 Asia Chemical the Board session is 8. Investment Co., Ltd.) Corporation) Chao-Nan Hsieh Resigned as the Chairman Supervisor (Representative of Tai Jiunn 15 100 Reelected on June 22, 2011 Shiu-Nan Huang on March 25, 2011, and Enterprise Co., Ltd.) Resident Chairman (Representative of Pan discharged as director on Appointed as a director on Supervisor Jin-Fong Soo 4 0 100 March 29, 2011; the number of (Discharged) Asia Chemical March 30, 2011; the number (already (Representative of Chou Chang 3 100 attendance to the Board Corporation) of attendance to the Board dismiss from Chemical Corporation) session is 3. session is 4. office) Jiann-Ell Huang Appointed as a supervisor on Other notes: Director (Representative of Pan March 29, 2011; the number I. The organization of supervisors and their duties: 3 0 100 (I) Communications between the Supervisors and the employees and shareholders: The communication may be (Discharged) Asia Chemical of attendance to the Board made via the hotline and e-mail. Corporation) session is 3. (II) Communication between supervisors and internal audit officers and CPA: The supervisors shall call the Yuh-Eing Chung A director of 20th term, supervisors’ meeting periodically, in which the President and Executive Vice Presidents shall be present, and resigned upon reelection on the internal audit unit (chief auditor) shall propose the various business inspection reports and have the Director (Representative of Pan 0 3 0 June 22, 2011; the number relevant department supervisors report the business development. If necessary, the supervisors may ask (Discharged) Asia Chemical of attendance to the Board CPAs to attend the supervisors’ meeting called by them to provide explanation. Corporation) II. If any supervisor attends the directors’ meeting to state their opinion, it is necessary to specify the date, session, session is 7. motions and resolution of the directors’ meeting, and the Bank’s response to the opinion stated by the supervisor: TCB Industrial Union was Supervisors attended directors’ meeting frequently to provide their positive opinion, but no record showing opinion for renamed into TCB dissent is retained. Corporation Union on Note 1: The Bank called the general shareholders’ meeting 2011 on June 22, 2011 to reelect the supervisors of 31st November 4, 2011; A term. Director Hsien-Tsung Lin 7 0 100 director of 20th term, Note 2: (1) Where a specific supervisor may be relieved from duties before the end of the fiscal year, specify their (Discharged) TCB Corporate Union resigned upon reelection on date of discharge in the “Remarks” Section. Their attendance (%) to the Board session shall be June 22, 2011; the number calculated on the basis of the actual number of sessions they attended. of attendance to the Board (2) Where an election may be held for filling the vacancies of supervisor before the end of the fiscal year, list out both the new and the discharged supervisors, and specify if they are the former supervisor, or session is 7. st newly elected, re-elected and the date of the election. Their attendance (%) to Board session shall be Note 1: The Bank called the general shareholders’ meeting 2011 on June 22, 2011 to reelect the directors of 21 term. calculated on the basis of the actual number of sessions they attended during the term of office. Note 2: (1) Where a specific director or supervisor may be relieved from duties before the end of the fiscal year, specify their date of discharge. Their attendance (%) to Board session shall be calculated on the basis of the actual (III) Items to be disclosed according to the Corporate Governance Best-Practice Principles number of sessions held and the number of sessions they attended. (2) Where an election may be held for filling the vacancies of director or supervisor before the end of the fiscal for the Banking Industry year, list out both the new and the discharged directors and supervisors, and specify if they are the former Please refer to the Bank’s website (www.tcbbank.com.tw) About Taichung Bank → director or supervisor, or newly elected, re-elected and the date of the election. Their attendance (%) at the Disclosure of Information → Information to be Disclosed under Laws Board session shall be calculated on the basis of the actual number of sessions held and the number of sessions they attended.

46 47 46

(II) The function of Audit Committee or Supervisors’ Participation in the Function of Board of Directors The Board called 15 meetings in 2011 (A). The attendance of directors/supervisors is specified as following: Actual Actual number attendance Title Name of attendance Remarks ratio (%) (B) (B/A) (Note 2) Appointed on March 29, 2011, Jiann-Ell Huang and reelected as the director Resident (Representative of Xin Rui 12 100 on June 22, 2011; the number Supervisor Investment Co., Ltd.) of attendance to the Board session is 12. Chien-Hwa Lee Fu Supervisor (Representative of Xin Rui 10 66.67 Reelected on June 22, 2011 Investment Co., Ltd.) Ching-Huang Tsai Supervisor (Representative of Xin Rui 15 100 Reelected on June 22, 2011 Investment Co., Ltd.) Shu-Li Huang Supervisor (Representative of Xin Rui 15 100 Reelected on June 22, 2011 Investment Co., Ltd.) Chao-Nan Hsieh Supervisor (Representative of Tai Jiunn 15 100 Reelected on June 22, 2011 Enterprise Co., Ltd.) Resident Appointed as a director on Supervisor Jin-Fong Soo March 29, 2011; the number of (already (Representative of Chou Chang 3 100 attendance to the Board dismiss from Chemical Corporation) session is 3. office) Other notes: I. The organization of supervisors and their duties: (I) Communications between the Supervisors and the employees and shareholders: The communication may be made via the hotline and e-mail. (II) Communication between supervisors and internal audit officers and CPA: The supervisors shall call the supervisors’ meeting periodically, in which the President and Executive Vice Presidents shall be present, and the internal audit unit (chief auditor) shall propose the various business inspection reports and have the relevant department supervisors report the business development. If necessary, the supervisors may ask CPAs to attend the supervisors’ meeting called by them to provide explanation. II. If any supervisor attends the directors’ meeting to state their opinion, it is necessary to specify the date, session, motions and resolution of the directors’ meeting, and the Bank’s response to the opinion stated by the supervisor: Supervisors attended directors’ meeting frequently to provide their positive opinion, but no record showing opinion for dissent is retained. Note 1: The Bank called the general shareholders’ meeting 2011 on June 22, 2011 to reelect the supervisors of 31st term. Note 2: (1) Where a specific supervisor may be relieved from duties before the end of the fiscal year, specify their date of discharge in the “Remarks” Section. Their attendance (%) to the Board session shall be calculated on the basis of the actual number of sessions they attended. (2) Where an election may be held for filling the vacancies of supervisor before the end of the fiscal year, list out both the new and the discharged supervisors, and specify if they are the former supervisor, or newly elected, re-elected and the date of the election. Their attendance (%) to Board session shall be calculated on the basis of the actual number of sessions they attended during the term of office.

(III) Items to be disclosed according to the Corporate Governance Best-Practice Principles for the Banking Industry Please refer to the Bank’s website (www.tcbbank.com.tw) About Taichung Bank → Disclosure of Information → Information to be Disclosed under Laws

47 47 Deviation from the Corporate Governance Best-Practice (IV) Status of Corporate Governance as required for banks, and any nonconformity to the Item Implementation Status Principles for the Banking Corporate Governance Best-Practice Principles for Banking Industry and reasons thereof Industry and reasons Deviation from the Corporate and request completion of the Governance Best-Practice Item Implementation Status stakeholder information list Principles for the Banking immediately upon the stakeholder’s Industry and reasons transfer. The communication channel I. Equity structure and shareholders’ is considered uninterrupted. equity (2) The Bank not only disclosed the (1) Handling suggestions from (1) The Bank has built the hotline and message on the MOPS site as shareholders and disputes email dedicated to handling the required but also published it on the suggestions from shareholders and Bank’s official website to help disputes, and published them in the investors’ search. Bank’s official website. 5. Disclosures (2) Control of the name list of Principle (2) The Bank pays attention to the (1) The company has established a (1) The Bank has established a website shareholders and the dominant increase/ decrease in or mortgage/ website for the disclosure of its for the disclosure of its Financial parties behind such shareholders pledge of the equity of shareholders Financial Status and status of Status and status of corporate holding more than 5% of the total Conformity to the “Corporate corporate governance. governance. outstanding shares or shareholders Governance Best-Practice (2) The company also adopts other (2) The Bank has one spokesman and assuming directors/ supervisors, and Principles for the Banking means for disclosure (establish a one deputy spokesman. The disclose such information on the Industry” website in the English language, spokesman is assumed by the Conformity to the “Corporate MOPS site as required. with specific personnel to gather and Executive Vice President. The Governance Best-Practice (3) The establishment of risk control (3) The 19th term Board of the Bank has disclose relevant information, spokesman makes a speech upon the Principles for the Banking mechanism and firewall between the resolved in its 21th Special Session properly implement the system of supervisor’s order and also Industry” Bank and affiliated companies dated September 27, 2007 the spokesman, and meetings with supervises the press release, media passing of “Regulations for institutional investors for offering communication and other public Inter-Branch Financial Business will also be posted on the company relations handled by the competent Operation of Taichung Commercial website). units. Where the spokesman is Bank Co., Ltd. And its Affiliates" as unable to perform his/her duty, the the rule to be followed by the deputy spokesman will act on behalf various businesses. of him/her. 2. The organization of the Board and their rd 6. The establishment of functional The Bank has resolved at 3 temporary duties st committees such as Audit Committee, meeting of 21 term Board held on August Conformity to the “Corporate (1) The position of independent (1) Three independent directors were and the status of their operations. 18, 2011 to establish the Salary Review Governance Best-Practice directors installed in the office according to st st Committee, and held 1 meeting of 1 Principles for the Banking the Bank’s Articles of Incorporation. Conformity to the “Corporate term Salary Review Committee on Industry” (2) Regular review and assessment on (2) The Bank has not retained the same Governance Best-Practice December 1, 2011. the impartiality and independence of external auditor to conduct financial Principles for the Banking 7. Please specify the status of the Bank’s corporate governance, and any deviation from the Corporate Governance the external auditor audit for many years consecutively. Industry” Best-Practice Principles for the Banking Industry” and reasons thereof: The Bank's assessment report on the The Bank has not yet established “independent supervisors”. Except that, the Bank’s corporate governance is impartiality and independence of the considered complying with the “Corporate Governance Best-Practice Principles for the Banking Industry”. external auditor also passed 21st term th 8. Please specify the systems and measures that the Bank has adopted with respect to its corporate social responsibilities, Board in its 5 Board Session on and the status of implementation thereof (Bank’s social responsibilities or important information to facilitate better October 12, 2011. understanding of the Company’s corporate social responsibility practices (e.g., human rights, employees’ interest and 3. The organization of supervisors and right, environmental protection, community participation, relations with suppliers, supervision and interest of conflict): their duties (1) The Bank is always dedicated to taking part in social welfare activities, and sponsoring the following activities: (1) The position of independent (1) The Bank has not yet installed the 1. Work with “Eden Social Welfare Foundation” in the charity petty cash donation activity and install petty cash supervisors independent supervisors. The Bank has not yet installed donation boxes at the business locations of the Bank’s branches. (2) Communications between the the independent supervisors. 2. Broadcast the welfare commercial for “Quit Smoking Promoted by the John Tung Foundation” in the (2) Communications between the Supervisors and the employees and multi-media channels at the Bank’s business locations. supervisors and the employees and shareholders of the Bank could be 3. Broadcast the film for “Anti-Fraud – Kidnapping” in the multi-media channels at the Bank’s business locations. shareholders of the company. made via the hotline and e-mail. 4. To work with the Child Welfare League Foundation in the fund-raising event entitled “Heart United Makes 4. Communication channels with (1) The Bank has already disclose it on Home Reunion”, the Bank helps find missing children and juvenile, and establishes the link from the Bank’s site stakeholders. the Bank’s intranet pursuant to the to the official site of the Child Welfare League Foundation. Banking act and the competent 5. To help the “Dajiama Society Welfare Foundation Taichung City Private Zhen Lan Children Home” to raise authority’s requirements about Conformity to the “Corporate invoices, and set up the invoice box at the lobby of the Bank’s Central Taiwan Branch. limitation on the credit extended to Governance Best-Practice 6. The Bank has allocated a fraction of the amount consumed via the Ma Tsu Safety Card as contribution to Ta Chia stakeholders, and also held the Principles for the Banking Chen Nan Temple for worshiping the Ma Tsu to help religious development and for social charity. seminars for laws and regulations Industry” 7. Assist the donation promoted by: “Child Welfare League Foundation” and run the list of donations on the back irregularly to enable the side of the Bank’s credit card debit notes. persons-in-charge to comply with 8. Broadcast the promotional films for ECFA, “Chance for Ministry of Economic Affairs” and “Survival of and know the laws and regulations, Mainland Affairs Council”, in the multi-media channels at the Bank’s business locations, to cope with the decree 48 49 48 Deviation from the Corporate Governance Best-Practice Item Implementation Status Principles for the Banking Industry and reasons and request completion of the stakeholder information list immediately upon the stakeholder’s transfer. The communication channel is considered uninterrupted. (2) The Bank not only disclosed the message on the MOPS site as required but also published it on the Bank’s official website to help investors’ search. 5. Disclosures (1) The company has established a (1) The Bank has established a website website for the disclosure of its for the disclosure of its Financial Financial Status and status of Status and status of corporate corporate governance. governance. (2) The company also adopts other (2) The Bank has one spokesman and means for disclosure (establish a one deputy spokesman. The website in the English language, spokesman is assumed by the Conformity to the “Corporate with specific personnel to gather and Executive Vice President. The Governance Best-Practice disclose relevant information, spokesman makes a speech upon the Principles for the Banking properly implement the system of supervisor’s order and also Industry” spokesman, and meetings with supervises the press release, media institutional investors for offering communication and other public will also be posted on the company relations handled by the competent website). units. Where the spokesman is unable to perform his/her duty, the deputy spokesman will act on behalf of him/her. 6. The establishment of functional The Bank has resolved at 3rd temporary committees such as Audit Committee, meeting of 21st term Board held on August Conformity to the “Corporate and the status of their operations. 18, 2011 to establish the Salary Review Governance Best-Practice Committee, and held 1st meeting of 1st Principles for the Banking term Salary Review Committee on Industry” December 1, 2011. 7. Please specify the status of the Bank’s corporate governance, and any deviation from the Corporate Governance Best-Practice Principles for the Banking Industry” and reasons thereof: The Bank has not yet established “independent supervisors”. Except that, the Bank’s corporate governance is considered complying with the “Corporate Governance Best-Practice Principles for the Banking Industry”. 8. Please specify the systems and measures that the Bank has adopted with respect to its corporate social responsibilities, and the status of implementation thereof (Bank’s social responsibilities or important information to facilitate better understanding of the Company’s corporate social responsibility practices (e.g., human rights, employees’ interest and right, environmental protection, community participation, relations with suppliers, supervision and interest of conflict): (1) The Bank is always dedicated to taking part in social welfare activities, and sponsoring the following activities: 1. Work with “Eden Social Welfare Foundation” in the charity petty cash donation activity and install petty cash donation boxes at the business locations of the Bank’s branches. 2. Broadcast the welfare commercial for “Quit Smoking Promoted by the John Tung Foundation” in the multi-media channels at the Bank’s business locations. 3. Broadcast the film for “Anti-Fraud – Kidnapping” in the multi-media channels at the Bank’s business locations. 4. To work with the Child Welfare League Foundation in the fund-raising event entitled “Heart United Makes Home Reunion”, the Bank helps find missing children and juvenile, and establishes the link from the Bank’s site to the official site of the Child Welfare League Foundation. 5. To help the “Dajiama Society Welfare Foundation Taichung City Private Zhen Lan Children Home” to raise invoices, and set up the invoice box at the lobby of the Bank’s Central Taiwan Branch. 6. The Bank has allocated a fraction of the amount consumed via the Ma Tsu Safety Card as contribution to Ta Chia Chen Nan Temple for worshiping the Ma Tsu to help religious development and for social charity. 7. Assist the donation promoted by: “Child Welfare League Foundation” and run the list of donations on the back side of the Bank’s credit card debit notes. 8. Broadcast the promotional films for ECFA, “Chance for Ministry of Economic Affairs” and “Survival of Mainland Affairs Council”, in the multi-media channels at the Bank’s business locations, to cope with the decree 49 49 Deviation from the Corporate Deviation from the Corporate Governance Best-Practice Governance Best-Practice Item Implementation Status Item Implementation Status Principles for the Banking Principles for the Banking Industry and reasons Industry and reasons and policy promotion. of Independent Directors and Audit Committee” organized by TCGA. 9. Apply recycled paper to print the Bank’s annual report. (9) July 22, 2011: Director Chun-Sheng Lee took a 3-hour course on the “Development and Operations of Two 10. Sponsor the contest for the theme song of the promotion film for the campaign “Anti-fraud and Let’s Be Konan” Functional Committees of Board of Directors” organized by TCGA. organized by National Police Agency, Ministry of Interior. (10) July 25, 2011: Chairman, Jin-Fong Soo took the 3-hour course on the “Presentation for Responsible 11. Sponsor the “2011 Ming Dao International University Basketball Game” organized by Ming Dao University. Persons of Enterprises Adopting IFRSs” organized by the Securities and Futures Development Foundation. 12. Sponsor the scholarship for graduates from Da Der Commercial and Technical Vocational School in Changhua (11) July 29, 2011: Chairman, Jin-Fong Soo, took a 3-hour course on the “Remuneration Policy and County. Performance Appraisal” organized by TCGA. 13. Sponsorship to the scholarship for graduates from Holy Savior High School, Changhua County. (12) August 26, 2011: Director Ming-Syong Huang took a 3-hour course on the “Establishment and Operations of 14. Organize the visit tour of students from Overseas Chinese College of Commerce to make the financial Salary Review Committee” organized by the Chinese National Association of Industry and Commerce, knowledge more prevail in the academy. Taiwan (CNAIC). 15. Donate 5 rehab buses to Taichung City Government. (13) November 24, 2011: Director Ming-Syong Huang took a 3-hour course on the “Directors'/Supervisors’ 16. Sponsor the 2011 “Bike Pray for Matzu” and “Lucky Jogging” campaigns organized by Dajia Zhen Lan Temple. Conflict of Interest and Avoidance Thereof In Terms of Corporate Governance” organized by the Chinese 17. Sponsor the “R.O.C. Centenary Campaigns for 60th Anniversary of Foundation and Commendation Awarded to National Association of Industry and Commerce, Taiwan (CNAIC). National Model Labors in 2011” organized by Chinese Federation of Labor. (14) November 24, 2011: Director Jia-Hong Lin took a 6-hour course on the “7th Term Taipei Corporate 18. Sponsorship to Little Giant Chinese Chamber Orchestra to help promotion of traditional Chinese musical arts. Governance Forum” organized by the Financial Supervisory Commission, Executive Yuan (FSC). 19. Work with Gold FM to organize the Moon Festival-related energy saving activity “Lightened by Moon” to (15) November 24, 2011: Director Chun-Sheng Lee took a 6-hour course on the “7th Term Taipei Corporate respond to the energy conservation and carbon and greenhouse gas reduction policy. Governance Forum” organized by the Financial Supervisory Commission, Executive Yuan (FSC). 20. Organize the visit tour of students from Department of Finance of Asia University, Taiwan to provide the (16) November 25, 2011: Resident Supervisor Jiann-Ell Huang took a 3-hour course on the “Internal Control and students with the chance to learn and observe, and to train excellent talents in banking business. Internal Audit, and Case Study” organized by the Chinese National Association of Industry and Commerce, 21. Organize the visit of students from Graduate Institute of Business Administration, National Changhua University Taiwan (CNAIC). of Education to introduce the financial market information and industrial overview to enable the students to be (17) November 25, 2011: Supervisor Shu-Li Huang took a 3-hour course on the “Internal Control and Internal prepared for their careers. Audit, and Case Study” organized by the Chinese National Association of Industry and Commerce, Taiwan th rd 22. Sponsor the “18 Term Care Cup 3 -Level Baseball Game” organized by Taiwan Aboriginal Baseball (CNAIC). Development Association to care the aboriginal groups and boost baseball games in the society. (18) December 7, 2011: Managing Director Jer-Shyong Tsai took a 3-hour course on the “Frequent Dispute Over 23. Organize the “Cooperation and Devotion Biking” campaign in which employees and their family members were Investment by Taiwanese Businessmen and Risk Countermeasures” organized by Taiwan Securities invited to participate, to show sympathy for hardworking employees and enhance the parent-child interaction. Association. 24. Sponsor the “Taichung County Private Sound Home” to help the physically and mentally disordered participate (19) December 7, 2011: Director Chun-Sheng Lee took a 3-hour course on the “Frequent Dispute Over in social activities altogether. Investment by Taiwanese Businessmen and Risk Countermeasures” organized by Taiwan Securities 25. Sponsor the “Taiwan Cultural Center Foundation” to promote cultural and art activities. Association. (2) The Bank has employed 18 persons who are physically or mentally disordered until the end of December 2011. 2. Continuing education for managers: 9. Other information essential for the understanding of corporate governance (e.g., the continuing education of directors (1) January 4, 2011: Accounting Dept. Manager Yuh-Eing Chung took a 3-hour course on the “2011 Economic and supervisors, risk management policy and the enforcement of the standards for risk assessment, the protection of Finance Trend and Prospective” organized by TABF. consumers and the Fund utilization plan of customer policy, the enforcement by the Board on the avoidance of the (2) January 4, 2011: Securities Dept. Manager Feng-Lang Chen took a 3-hour course on the “2011 Economic conflict of interest, insurance coverage for the directors and the supervisors on liabilities and social responsibility of the Finance Trend and Prospective” organized by TABF. company): (3) January 4, 2011: Taiping Branch Manager Zai-Hong Yang took a 3-hour course on the “2011 Economic (1) Continuing education and training programs related to corporate governance attended by directors/supervisors and Finance Trend and Prospective” organized by TABF. managers (4) January 4, 2011: Qingshui Branch Manager Ya-Mei Chen took a 3-hour course on the “2011 Economic 1. Continuing education for the Directors and Supervisors: Finance Trend and Prospective” organized by TABF. (1) March 17, 2011: Supervisor Shu-Li Huang took a 3-hour course on the “Corporate Governance and (5) January 4, 2011: Shalu Branch Manager Chu-Chen Chen took a 3-hour course on the “2011 Economic Corporate Social Responsibility” organized by the Chinese National Association of Industry and Commerce, Finance Trend and Prospective” organized by TABF. Taiwan (CNAIC). (6) January 4, 2011: Natou Branch Manager Tsung-Yi Liu took a 3-hour course on the “2011 Economic Finance (2) March 17, 2011: Supervisor Ching-Huang Tsai took a 3-hour course on the “Corporate Governance and Trend and Prospective” organized by TABF. Corporate Social Responsibility” organized by the Chinese National Association of Industry and Commerce, (7) January 7, 2011: Executive Vice President Kai-Yu Lin took a 4-hour course on the “Chance and Challenge Taiwan (CNAIC). for Investment by Taiwanese Banks in Mainland China” organized by TABF. (3) March 17, 2011: Independent Director Chen-Le Liu took a 3-hour course on the “Corporate Governance and (8) January 7, 2011: Accounting Dept. Manager Yuh-Eing Chung took a 4-hour course on the “Chance and Corporate Social Responsibility” organized by the Chinese National Association of Industry and Commerce, Challenge for Investment by Taiwanese Banks in Mainland China” organized by TABF. Taiwan (CNAIC). (9) January 7, 2011: Taipei Branch Manager Rong-Kuo Cheng took a 4-hour course on the “Chance and (4) March 17, 2011: Supervisor Chien-Hwa Lee Fu took a 3-hour course on the “Corporate Governance and Challenge for Investment by Taiwanese Banks in Mainland China” organized by TABF. Corporate Social Responsibility” organized by the Chinese National Association of Industry and Commerce, (10) January 14, 2011: Securities Dept. Manager Feng-Lang Chen took a 2-hour course on the “Overview and Taiwan (CNAIC). Development Strategies of Foreign Banks in Mainland China” organized by TABF. (5) April 29, 2011: Chairman, Jin-Fong Soo, took a 3-hour course on the “Directors, Supervisors vs. Inside (11) January 17-18, 2011: Executive Vice President Rong-Hua Kao took a 16-hour course on the “Mainland Trading – Judicial Investigation/Trial Practices” organized by TCGA. Finance Workshop” organized by TABF. (6) May 10, 2011: Independent Managing Director, Hsi-Rong Huang, took a 3-hour course on the “Planning of (12) January 17-18, 2011: Taipei Branch Manager Rong-Kuo Cheng took a 16-hour course on the “Mainland Salary Review Committee’s Functions” organized by TCGA. Finance Workshop” organized by TABF. (7) May 18, 2011: Resident Supervisor Jiann-Ell Huang took a 3-hour course on the “IFRS Policy Adopted by (13) January 20, 2011: Executive Vice President Rong-Hua Kao took a 6-hour on the “Presentation for the R.O.C.-Countermeasures Taken by Directors, Supervisors and High-Rank Management and Discussion Laws/Regulations and Guiding Cases for Urban Planning By Trust” organized by TABF. About Strengths in Adoption of IFRS” organized by the Chinese National Association of Industry and (14) January 21, 2011: Executive Vice President Kai-Yu Lin took a 6-hour course on the “International Money Commerce, Taiwan (CNAIC). Laundering Control Workshop” organized by TABF. (8) July 19, 2011: Managing Director, Jer-Shyong Tsai, took a 3-hour course on the “Operations and Functions (15) February 11, 2011: Securities Dept. Manager Feng-Lang Chen took a 2-hour course on the “Issue and 50 51 50 Deviation from the Corporate Governance Best-Practice Item Implementation Status Principles for the Banking Industry and reasons of Independent Directors and Audit Committee” organized by TCGA. (9) July 22, 2011: Director Chun-Sheng Lee took a 3-hour course on the “Development and Operations of Two Functional Committees of Board of Directors” organized by TCGA. (10) July 25, 2011: Chairman, Jin-Fong Soo took the 3-hour course on the “Presentation for Responsible Persons of Enterprises Adopting IFRSs” organized by the Securities and Futures Development Foundation. (11) July 29, 2011: Chairman, Jin-Fong Soo, took a 3-hour course on the “Remuneration Policy and Performance Appraisal” organized by TCGA. (12) August 26, 2011: Director Ming-Syong Huang took a 3-hour course on the “Establishment and Operations of Salary Review Committee” organized by the Chinese National Association of Industry and Commerce, Taiwan (CNAIC). (13) November 24, 2011: Director Ming-Syong Huang took a 3-hour course on the “Directors'/Supervisors’ Conflict of Interest and Avoidance Thereof In Terms of Corporate Governance” organized by the Chinese National Association of Industry and Commerce, Taiwan (CNAIC). (14) November 24, 2011: Director Jia-Hong Lin took a 6-hour course on the “7th Term Taipei Corporate Governance Forum” organized by the Financial Supervisory Commission, Executive Yuan (FSC). (15) November 24, 2011: Director Chun-Sheng Lee took a 6-hour course on the “7th Term Taipei Corporate Governance Forum” organized by the Financial Supervisory Commission, Executive Yuan (FSC). (16) November 25, 2011: Resident Supervisor Jiann-Ell Huang took a 3-hour course on the “Internal Control and Internal Audit, and Case Study” organized by the Chinese National Association of Industry and Commerce, Taiwan (CNAIC). (17) November 25, 2011: Supervisor Shu-Li Huang took a 3-hour course on the “Internal Control and Internal Audit, and Case Study” organized by the Chinese National Association of Industry and Commerce, Taiwan (CNAIC). (18) December 7, 2011: Managing Director Jer-Shyong Tsai took a 3-hour course on the “Frequent Dispute Over Investment by Taiwanese Businessmen and Risk Countermeasures” organized by Taiwan Securities Association. (19) December 7, 2011: Director Chun-Sheng Lee took a 3-hour course on the “Frequent Dispute Over Investment by Taiwanese Businessmen and Risk Countermeasures” organized by Taiwan Securities Association. 2. Continuing education for managers: (1) January 4, 2011: Accounting Dept. Manager Yuh-Eing Chung took a 3-hour course on the “2011 Economic Finance Trend and Prospective” organized by TABF. (2) January 4, 2011: Securities Dept. Manager Feng-Lang Chen took a 3-hour course on the “2011 Economic Finance Trend and Prospective” organized by TABF. (3) January 4, 2011: Taiping Branch Manager Zai-Hong Yang took a 3-hour course on the “2011 Economic Finance Trend and Prospective” organized by TABF. (4) January 4, 2011: Qingshui Branch Manager Ya-Mei Chen took a 3-hour course on the “2011 Economic Finance Trend and Prospective” organized by TABF. (5) January 4, 2011: Shalu Branch Manager Chu-Chen Chen took a 3-hour course on the “2011 Economic Finance Trend and Prospective” organized by TABF. (6) January 4, 2011: Natou Branch Manager Tsung-Yi Liu took a 3-hour course on the “2011 Economic Finance Trend and Prospective” organized by TABF. (7) January 7, 2011: Executive Vice President Kai-Yu Lin took a 4-hour course on the “Chance and Challenge for Investment by Taiwanese Banks in Mainland China” organized by TABF. (8) January 7, 2011: Accounting Dept. Manager Yuh-Eing Chung took a 4-hour course on the “Chance and Challenge for Investment by Taiwanese Banks in Mainland China” organized by TABF. (9) January 7, 2011: Taipei Branch Manager Rong-Kuo Cheng took a 4-hour course on the “Chance and Challenge for Investment by Taiwanese Banks in Mainland China” organized by TABF. (10) January 14, 2011: Securities Dept. Manager Feng-Lang Chen took a 2-hour course on the “Overview and Development Strategies of Foreign Banks in Mainland China” organized by TABF. (11) January 17-18, 2011: Executive Vice President Rong-Hua Kao took a 16-hour course on the “Mainland Finance Workshop” organized by TABF. (12) January 17-18, 2011: Taipei Branch Manager Rong-Kuo Cheng took a 16-hour course on the “Mainland Finance Workshop” organized by TABF. (13) January 20, 2011: Executive Vice President Rong-Hua Kao took a 6-hour on the “Presentation for Laws/Regulations and Guiding Cases for Urban Planning By Trust” organized by TABF. (14) January 21, 2011: Executive Vice President Kai-Yu Lin took a 6-hour course on the “International Money Laundering Control Workshop” organized by TABF. (15) February 11, 2011: Securities Dept. Manager Feng-Lang Chen took a 2-hour course on the “Issue and 51 51 Deviation from the Corporate Deviation from the Corporate Governance Best-Practice Governance Best-Practice Item Implementation Status Item Implementation Status Principles for the Banking Principles for the Banking Industry and reasons Industry and reasons Trading Practices for Mainland Securities Business” organized by TABF. Lease Market Analysis Workshop” organized by TABF. (16) February 18, 2011: Securities Dept. Manager Feng-Lang Chen took a 2-hour course on the “Mainland (44) October 13-14, 2011: Accounting Dept. Manager Yuh-Eing Chung took a 7-hour course on the “Job Securities Market System and Overview” organized by TABF. Performance Appraisal and Salary Structure Practice Workshop” organized by Towers Watson. (17) March 17, 2011: Dept. of Debt Collection and Asset Recovery Manager Mei-Li Wu took a 3-hour course on (45) October 13-14, 2011: Information Dept. Manager Deh-Wei Chia took a 7-hour course on the “Job the “Workshop for Amendments to Personal Data Protection Act" organized by TABF. Performance Appraisal and Salary Structure Practice Workshop” organized by Towers Watson. (18) March 18, 2011: Executive Vice President Kai-Yu Lin took a 3-hour course on the “Instructions to Directors’ (46) October 26, 2011: Trust Dept. Manager Yu-Chung Lin took a 3-hour course on the “Presentation for Meeting and Shareholders’ Meeting” organized by TABF. Overview of Trust Business and Products in Japan” organized by Trust Association of R.O.C. (19) March 24-25, 2011: Accounting Dept. Manager Yuh-Eing Chung took a 12-hour course on the “Accounting (47) October 28-29, 2011: Securities Dept. Manager Fan-Lang Chen took a -13 hour course on the “Middle-Rank Executive Officers’ Continuing Education” organized by TABF. Supervisors Law Study Group” organized by Taiwan Securities Association. (20) April 26, 2011: Executive Vice President Kai-Yu Lin took a 3-hour course on the “Planning of Salary (48) November 24, 2011: President, Chun-Sheng Lee, took a 6-hour course on the “7th Term Taipei Corporate Review Committee’s Functions” organized by TABF. Governance Forum” organized by the Financial Supervisory Commission, Executive Yuan (FSC). (21) April 26, 2011: Accounting Dept. Yuh-Eing Chung took a 3-hour course on the “Planning of Salary Review (49) December 7, 2011: Director Chun-Sheng Lee took a 3-hour course on the “Frequent Dispute Over Committee’s Functions” organized by TABF. Investment by Taiwanese Businessmen and Risk Countermeasures” organized by TCGA. (22) May 10, 2011: Nantou Branch Manager Tsung-Yi Liu took a 3-hour course on the “Planning of Salary (50) December 8, 2011: Executive Vice President Rong-Hua Kao took a 4.5-hour course on the “Plentiful Central Review Committee’s Functions” organized by TABF. Taiwan-Workshop for Chance and Challenge of Taichung to be Regional Financial Center” organized by (23) May 20-December 15, 2011: Homei Manager Cheng-Wen Ni took a 149-hour course on the “Leading TABF. Executive Apex Program” organized by TABF. (51) December 8, 2011: Business Development Dept. Manager Chun-Yin Wang took a 6-hour course on the (24) June 10, 2011: Executive Vice President Kai-Yu Lin took a 3.5-hour course on the “How to Utilize Financial “Workshop for Changes of Hong Kong Banks and Trust Business, and Development Thereof” organized by Analysis to Make Critical Decision” organized by TABF. Trust Association of R.O.C.. (25) June 22, 2011: Dounan Branch Manager Shun-Chi Ke took a 2-hour course on the “New Trend in Financial (52) December 8, 2011: Qingshui Branch Manager Ya-Mei Chen took a 6-hour course on the “Workshop for Market” organized by TABF. Changes of Hong Kong Banks and Trust Business, and Development Thereof” organized by Trust (26) June 24-December 2, 2011: Gueishan Branch Manager Chen-Hung Cheng took a 195-hour course on the Association of R.O.C.. “2011 Internationalized Financial Talents Training Program” organized by TABF. (53) December 8, 2011: Gueishan Branch Manager Chen-Hung Cheng took a 6-hour course on the “Workshop (27) July 1, 2011: Loan Administration Dept. Manager Kuo-Chun Liu took a 3-hour course on the “Trust for Changes of Hong Kong Banks and Trust Business, and Development Thereof” organized by Trust Supervising Staff (including on-the-job) Workshop” organized by TABF. Association of R.O.C.. (28) July 2, 2011: Executive Vice President Rong-Hua Kao took a 3.5-hour course on the “2011 Corporate (54) December 21, 2011: Accounting Dept. Manager Yuh-Eing Chung took a 3.5-hour course on the “Effect on Financial Supervisors’ Seminar” organized by TABF. Delivery of IFRS into Taxation Compliance” organized by Taiwan Securities Association. (29) July 22, 2011: Director Chun-Sheng Lee took a 3-hour course on the “Class Dedicated to Salary Review – (2) Attendance of directors and supervisors to the Board sessions: All of them attended the Bank’s Board sessions as Practices of Two Functional Committees of Board of Directors” organized by TABF. scheduled. (30) August 3, 2011: Executive Vice President Hsueh-Hsien Liao took a 2-hour course on the “Presentation for (3) The implementation of risk management policies and the standards for risk assessment: “Sharing and Discussion of Guiding Cases About Defect in Audit” organized by TABF. 1. To deal with the risk management requirements under the New Basel Capital Accord, the Bank continues (31) August 3, 2011: Executive Vice President Chi-Chuang Fang took a 2-hour course on the “Presentation for planning the risk management structure and information platform for credit, market and operational risks, and “Sharing and Discussion of Guiding Cases About Defect in Audit” organized by TABF. further enhance the control and management of various risks to ensure the effective promotion of various risk (32) August 3, 2011: Manager Ruei-Fen Tsai of Securities Firm took a 2-hour course on the “Presentation for management policies, evaluate the related operational risk, define the risk limits bearable by the various “Sharing and Discussion of Guiding Cases About Defect in Audit” organized by TABF. businesses and urge the management unit to take the necessary actions to enhance the risk management (33) August 10, 2011: Dept. of Debt Collection and Asset Recovery Manager Mei-Li Wu took a 3-hour course on sensitivity effectively. the “IFRSs Important Issue Workshop" organized by TABF. 2. To ensure that the various risk management policies may be promoted effectively, the Bank will call the risk (34) August 15-17, 2011: Dept. of Debt Collection and Asset Recovery Manager Mei-Li Wu took a 19-hour management committee meeting periodically to identify the effects of the various risk controls and adjust the course on the “Basel III and Bank Risk Management Workshop" organized by TABF. various risk control measures in a timely manner. (35) August 15-17, 2011: North District Center Manager Pei-Miao Jan took a 19-hour course on the “Basel III 3. The status of the Bank’s execution of the various risk assessments: and Bank Risk Management Workshop" organized by TABF. (1) Credit risk: The Bank’s current assessment on the credit risk factors of the Bank’s businesses covers all (36) August 16, 2011: Executive Vice President Chi-Chuan Fan took a 3-hour course on the “Establishment and transactions included in the banking books and trading books, and on-balance sheet and off-balance sheet, Promotion of Salary Review Committee” organized by TCGA. and the Bank will proceed with the multi-departmental planning and discussion before releasing any new (37) August 23, 2011: Accounting Dept. Manager Yuh-Eing Chung took a 3-hour course on the “IFRS Program product and business, and then have the relevant business departments to conduct the appropriate risk Series-Enterprise Merger-Related IFRS”. control pursuant to the requirements and rules. Further, the Bank will establish the appropriate credit risk (38) August 23, 2011: Accounting Dept. Manager Yuh-Eing Chung took a 3-hour course on the “IFRS Program control mechanism to control the credit risk of individual credit extension and credit extension portfolio; the Series-First Adoption of IFRS”. control mechanism includes the limit management, post-loaning management, collateral management and (39) August 25, 2011: Executive Vice President Kai-Yu Lin took a 4-hour course on the “Mainland China asset quality management. The Bank will also provide the senior management and Board of Directors with Finance Internationalization Development Workshop” organized by TABF. the credit risk report covering said assessment and control results periodically to help them make any (40) August 30, 2011: Accounting Dept. Manager Yuh-Eing Chung took a 3-hour course on the “IFRS Program decision. Series-Pension/Lease-Related IFRS”. (2) Operational risk: The Bank also made record of various exposures. By introducing the Operational risk (41) September 2, 2011: Dept. of Debt Collection and Asset Recovery Manager Mei-Li Wu took a 4.5-hour identification, assessment, control and report management mechanism, the Bank establishes and centrally course on the “Taiwanese Banks’ Analysis on Difference in Cross-Strait Labor Laws, Mainland China Labor manages the database for the Bank’s Operational risk losses and summarizes the Operational risk Policies and Overview of HR and Salary, and Countermeasures Thereof” organized by the Bankers information and implementation status, and submit the report and suggestions to Risk Management Association of the Republic of China. Committee and the Board periodically. Further, in order to enhance the monitoring of operational risks, the (42) September 14, 2011: Dept. of Debt Collection and Asset Recovery Manager Mei-Li Wu took a 3.5-hour Bank also establishes risk evaluation and monitors various changes in the indicators according to the four course on the “How to Enhance Banks’ Compliance with Laws” organized by the Bankers Association of the dimensions of operational risk, i.e. internal procedure, people, systems and external events. In order to Republic of China and the TABF. reduce the operational risk loss effectively, the Bank can transfer or write off the loss and impact of incidents (43) October 5, 2011: Executive Vice President Rong-Hua Kao took a 3.5-hour course on the “Mainland China caused by operational risk through insurance and outsourcing, in part or in whole. 52 53 52 Deviation from the Corporate Governance Best-Practice Item Implementation Status Principles for the Banking Industry and reasons Lease Market Analysis Workshop” organized by TABF. (44) October 13-14, 2011: Accounting Dept. Manager Yuh-Eing Chung took a 7-hour course on the “Job Performance Appraisal and Salary Structure Practice Workshop” organized by Towers Watson. (45) October 13-14, 2011: Information Dept. Manager Deh-Wei Chia took a 7-hour course on the “Job Performance Appraisal and Salary Structure Practice Workshop” organized by Towers Watson. (46) October 26, 2011: Trust Dept. Manager Yu-Chung Lin took a 3-hour course on the “Presentation for Overview of Trust Business and Products in Japan” organized by Trust Association of R.O.C. (47) October 28-29, 2011: Securities Dept. Manager Fan-Lang Chen took a -13 hour course on the “Middle-Rank Supervisors Law Study Group” organized by Taiwan Securities Association. (48) November 24, 2011: President, Chun-Sheng Lee, took a 6-hour course on the “7th Term Taipei Corporate Governance Forum” organized by the Financial Supervisory Commission, Executive Yuan (FSC). (49) December 7, 2011: Director Chun-Sheng Lee took a 3-hour course on the “Frequent Dispute Over Investment by Taiwanese Businessmen and Risk Countermeasures” organized by TCGA. (50) December 8, 2011: Executive Vice President Rong-Hua Kao took a 4.5-hour course on the “Plentiful Central Taiwan-Workshop for Chance and Challenge of Taichung to be Regional Financial Center” organized by TABF. (51) December 8, 2011: Business Development Dept. Manager Chun-Yin Wang took a 6-hour course on the “Workshop for Changes of Hong Kong Banks and Trust Business, and Development Thereof” organized by Trust Association of R.O.C.. (52) December 8, 2011: Qingshui Branch Manager Ya-Mei Chen took a 6-hour course on the “Workshop for Changes of Hong Kong Banks and Trust Business, and Development Thereof” organized by Trust Association of R.O.C.. (53) December 8, 2011: Gueishan Branch Manager Chen-Hung Cheng took a 6-hour course on the “Workshop for Changes of Hong Kong Banks and Trust Business, and Development Thereof” organized by Trust Association of R.O.C.. (54) December 21, 2011: Accounting Dept. Manager Yuh-Eing Chung took a 3.5-hour course on the “Effect on Delivery of IFRS into Taxation Compliance” organized by Taiwan Securities Association. (2) Attendance of directors and supervisors to the Board sessions: All of them attended the Bank’s Board sessions as scheduled. (3) The implementation of risk management policies and the standards for risk assessment: 1. To deal with the risk management requirements under the New Basel Capital Accord, the Bank continues planning the risk management structure and information platform for credit, market and operational risks, and further enhance the control and management of various risks to ensure the effective promotion of various risk management policies, evaluate the related operational risk, define the risk limits bearable by the various businesses and urge the management unit to take the necessary actions to enhance the risk management sensitivity effectively. 2. To ensure that the various risk management policies may be promoted effectively, the Bank will call the risk management committee meeting periodically to identify the effects of the various risk controls and adjust the various risk control measures in a timely manner. 3. The status of the Bank’s execution of the various risk assessments: (1) Credit risk: The Bank’s current assessment on the credit risk factors of the Bank’s businesses covers all transactions included in the banking books and trading books, and on-balance sheet and off-balance sheet, and the Bank will proceed with the multi-departmental planning and discussion before releasing any new product and business, and then have the relevant business departments to conduct the appropriate risk control pursuant to the requirements and rules. Further, the Bank will establish the appropriate credit risk control mechanism to control the credit risk of individual credit extension and credit extension portfolio; the control mechanism includes the limit management, post-loaning management, collateral management and asset quality management. The Bank will also provide the senior management and Board of Directors with the credit risk report covering said assessment and control results periodically to help them make any decision. (2) Operational risk: The Bank also made record of various exposures. By introducing the Operational risk identification, assessment, control and report management mechanism, the Bank establishes and centrally manages the database for the Bank’s Operational risk losses and summarizes the Operational risk information and implementation status, and submit the report and suggestions to Risk Management Committee and the Board periodically. Further, in order to enhance the monitoring of operational risks, the Bank also establishes risk evaluation and monitors various changes in the indicators according to the four dimensions of operational risk, i.e. internal procedure, people, systems and external events. In order to reduce the operational risk loss effectively, the Bank can transfer or write off the loss and impact of incidents caused by operational risk through insurance and outsourcing, in part or in whole. 53 53

X. If there is any internal self-audit on corporate on If there internal self-audit is any governance or audit conducted by X. (4) (5) status of corrective action: None. the result (or evaluation by external professional auditors), the major shortcomings (or recommendations) given, and the

the Bank, and followed thereafter.up and followed Bank, the Customers’ or consumers’ complaints or disputes shall be handled pursuant to the complaining procedure defined by Company Law, and would never participate in voting. the The Bank’s directors would avoid any motions in which they had conflict of interest pursuant to Banking Act and (V) (3)

operation plan, business development and changes in the entire financial environment. mechanism whenever necessary. Saidrelevant requirem in risk to hedge product derivative available any adopt position accordingto the change in the relevant market the operation of fund frombeing highly concentrated. Ea to and prevent financial status itscredit rating based on counterpart trading isalso the set against limitation The specific to market risk have defined the limits of the various investment objects in the relevant rules. in accordance with the Internal Mode the system risk measuring theBank willestablish business development, the Following management. limit Bank’s The limitation. specific the the in and IT engaged authorization existing under system is primarily areconducted transactions that the various ensure and market risk cover all positions said report of contents summarizethe information and pres business supervisory unit and Risk Management Dept. Risk Management Dept. shall consolidate and shall the submit unit trading Each business Market risk: . Operations: 1 3. 2. Functions: Establishment: The21 1. Establishment, functionsandoperati Item (2) (1) Kuei-Fong WangDirector: Independent Director:Chen-Le Liu Independent Managing Director which waseffective from August 18,2011. Committee Organizational Articles" and Session thepassingof“Taichung Co

supervisors and managers. To evaluate periodically anddefine managers; remuneration paidto,andperformance ap To defineand periodically st meeting hasalreadybeen helduntil February 29, 2012. st l under the New Basel Capital Accord term BoardoftheBank ent the report to Risk Management Committee andthe Board. The Implementation Status 54 54 54 n fRmnrto omte: committee: ons ofRemuneration : Hsi-RongHuang(Convener) review thepolicy, system, a timelymanner andexecute the relevant stop-loss trading information related to the market risk to the related to the tomarket the information risk trading environments under the authority granted to it, and mmercial Bank Co., Ltd. Remuneration mmercial BankCo.,Ltd.Remuneration ch business trading unit shall adjust the operational operational the adjust shall unit trading ch business ents shall be reviewed and revised subject to the appointed three committee members, the remunerationpaidtodirectors, praisal of, director external professional auditors, specify has resolved in its3 . The Bank’s transactions subject Deviation from the Corporate standard andstructureof Principles for the Banking Governance Best-Practice Industry and reasons reasons and Industry s, supervisorsand rd Special

(VI) Corporate Social Responsibility Deviations from “Corporate Social Responsibility Best Practice Item Implementation Status Principles for TWSE/GTSM Listed Companies” and reasons 1. Exercising Corporate Governance (1) The company declares its corporate social (1) The Bank has established the “Corporate Social responsibility policy and examines the Responsibility Best Practice”. According to results of the implementation. Article 6 of the Code, the Board of Directors shall urge the Bank to fulfill the corporate social responsibility with due diligence and shall examine the results of the implementation and continue making improvement, to ensure fulfillment of the corporate social responsibility policies. (2) The company establishes exclusively (or (2) The “Office of the Board” shall be the concurrent Compliance with the “Corporate Social Responsibility Best Practice concurrently) dedicated units to be in unit dedicated to promoting the corporate social Principles for TSEC/GTSM Listed Companies”. charge of proposing and enforcing the responsibility. corporate social responsibility policies. (3) The company organizes regular training on (3) The Bank organizes regular training on business business ethics and promotion of matters ethics and promotion of matters prescribed for prescribed in the preceding Article for directors, supervisors and employees, and directors, supervisors and employees, and incorporates the foregoing into its employee should incorporate the foregoing into its performance appraisal system to establish a clear employee performance appraisal system to and effective reward and discipline system. establish a clear and effective reward and discipline system. 2. Fostering a Sustainable Environment (1) The company endeavors to utilize all  Proceed with the improvement on SOP, reduce resources more efficiently and uses the paper for vouchers and general paper, and renewable materials which have a low continue simplifying the SOP. impact on the environment.  Work with Gold FM to organize the Moon (2) The company establishes proper Festival-related energy saving activity “Lightened environmental management systems based by Moon”. on the characteristics of their industries.  The clerks shall bring their own cups and be Compliance with the “Corporate Social Responsibility Best Practice (3) The company establishes dedicated units or provided with environmental tableware to avoid Principles for TSEC/GTSM Listed Companies”. assigns dedicated personnel for utilization of disposable tableware. environment management to maintain the  General Affairs Dept. shall be the unit dedicated environment. to the environment protection. (4) The company monitors the impact of  Article 18 of Corporate Social Responsibility climate change on its operations and should Best Practice, it is necessary to pay attention to establish company strategies for energy the impact of climate change on its operations conservation and carbon and greenhouse and establish the Bank’s strategies for energy

55 directors, supervisors and employees, and incorporates the foregoing into its employee should incorporate the foregoing into its performance appraisal system to establish a clear employee performance appraisal system to and effective reward and discipline system. establish a clear and effective reward and discipline system. 2. Fostering a Sustainable Environment (1) The company endeavors to utilize all  Proceed with the improvement on SOP, reduce resources more efficiently and uses the paper for vouchers and general paper, and renewable materials which have a low continue simplifying the SOP. impact on the environment.  Work with Gold FM to organize the Moon (2) The company establishes proper Festival-related energy saving activity “Lightened environmental management systems based by Moon”. on the characteristics of their industries.  The clerks shall bring their own cups and be Compliance with the “Corporate Social Responsibility Best Practice (3) The company establishes dedicated units or provided with environmental tableware to avoid Principles for TSEC/GTSM Listed Companies”. assigns dedicated personnel for utilization of disposable tableware. environment management to maintain the  General Affairs Dept. shall be the unit dedicated environment. to the environment protection. (4) The company monitors the impact of  Article 18 of Corporate Social Responsibility climate change on its operations and should Best Practice, it is necessary to pay attention to establish company strategies for energy the impact of climate change on its operations conservation and carbon and greenhouse and establish the Bank’s strategies for energy

Deviations from “Corporate Social Responsibility Best Practice Item Implementation Status Principles for TWSE/GTSM Listed Companies” and reasons gas reduction. conservation and carbon and greenhouse gas reduction, in order to reduce the impact to be brought by the Bank’s operation to the natural environment. 3. Preserving Public Welfare (1) The company complies with relevant labor (1) The Bank has defined the relevant labor laws and laws and regulations, protects the legal regulations to protect the employees’ legal interest rights and interests of employees, and has and right, and planned appropriate management in place appropriate management methods methods and procedures to protect the same. and procedures. (2) The company provides safe and healthy (2) The Bank has defined the code of safe and healthy work environments for its employees, and work, and arrange for employees’ health organizes training on safety and health for inspection and training on a regular basis. its employees on a regular basis. (3) The company establishes and discloses (3) The Bank has defined the relevant procedures and policies on consumer rights and interests operating rules to maintain consumers’ interests Compliance with the “Corporate Social Responsibility Best Practice and provides a clear and effective and rights, and provides the procedure for Principles for TSEC/GTSM Listed Companies”. procedure for accepting consumer accepting consumer complaints for follow-up. 56 complaints. (4) The company cooperates with its suppliers (4) As specified in Paragraph 8 on P.49, please to jointly foster a stronger sense of specify the social responsibility of the Bank, the corporate social responsibility. system and policy adopted and the performance of its social responsibility: (5) The company, through commercial (5) As specified in Paragraph 8 on P.49, please activities, non-cash property endowments, specify the social responsibility of the Bank, the volunteer service or other free professional system and policy adopted and the performance of services, participates in community its social responsibility: development and charities events. 4. Enhancing Information Disclosure (1) The measures of disclosing relevant and (1) The Bank has established a website for the reliable information relating to their disclosure of its corporate social responsibility. corporate social responsibility. Compliance with the “Corporate Social Responsibility Best Practice (2) The company produces corporate social (2) The Bank produces corporate social responsibility Principles for TSEC/GTSM Listed Companies”. responsibility reports disclosing the status reports disclosing the status of their of their implementation of the corporate implementation of the corporate social social responsibility policy. responsibility policy. 5. If the Company has established corporate social responsibility principles based on “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies”, please describe any discrepancy between the principles and their implementation: The Bank has defined its “Corporate Social Responsibility Best Practice”, and implements its corporate social responsibility according to the Practice. Therefore, there is no discrepancy between the principles and their implementation. 56

Deviations from “Corporate Social Responsibility Best Practice Item Implementation Status Principles for TWSE/GTSM Listed Companies” and reasons 6. Other important information to facilitate better understanding of the Company’s corporate social responsibility practices (e.g., systems and measures that the company has adopted with respect to environmental protection, community participation, contribution to society, service to society, social and public interests, consumer rights and interests, human rights, safety and health, other corporate social responsibilities and activities, and the status of implementation.): As specified in Paragraph 8 on P.49, please specify the social responsibility of the Bank, the system and policy adopted and the performance of its social responsibility: 7. If the products or corporate social responsibility reports have received assurance from external institutions, they should state so below: None (VII) Performance in the area of good faith management and the adoption of related measures: The Bank’s performance of management complies with the “Performance of Good-Faith Management Best Practice Principles for TWSE/GTSM Listed Companies”. For the related measures adopted, please view http://www/tcbbank.com/tw/About Taichung Bank/Disclosure. (VIII) Corporate Governance Practices and the relevant regulations: Please refer to http://newmops.tse.com.tw/corporate governance (IX) Other important information: Please refer to http://newmops.tse.com.tw/important information

(X) Status of Internal Control Improvement and Corrective Action of Internal Control System of Taichung Commercial Bank 1. Statement of Declaration of Internal Control System (Record Date: December 31, 2011) Scheduled to Statement of Declaration of Internal Control System of Taichung Commercial Bank Complete Improvement Corrective Action Corrective Action The Undersigned hereby duly declares on behald of Taichung Commercial Bank that Taichung on ○○ Branch and ○○ Branch Corrective Action: Already completed Commercial Bank has complied with the Regulations for the Implementation of Internal Control and were defective in internal 1. On May 19, 2011 and June 24, 2011, the in 2011 Internal Audit Systems by Banks to establish its internal control system and exercise risk management. control system because: Bank issued an official letter to it’s An independent and impartial Audit Department of the Bank has conducted an audit covering the Clerk ○○ Liu withdrew the branches to restate and prohibit from cash with the blank slip affixed depositing or withdrawing fund keeping period from January 1 to Dec. 31, 2011, in accordance with applicable legal rules, and has reported to with the seal and the passbook passbook, seal, withdrawal slip and ATM the Board and the Supervisors on a regular basis. The audit of securities dealing operations has been in his custody on behalf of the account and password on behalf of clients; client and misappropriated the if any client fails to take back his passbook conducted in accordance with the Standards for Service Industries Securities and Futures Markets in client’s deposit. At the same and seal with cause, it should be registered the Establishment of Internal Control System promulgated by the Securities and Futures Bureau of the time, the two branches’ in an entry book and delivered to the operators still accepted Liu’s operating supervisor for control. The Financial Supervisory Commission under the Executive Yuan to identify the effectiveness of the requests that were against Bank also highlighted that all of the clerks internal control system, and determines if the design and enforcement of internal control are effective. rules. As a result, the Bank and supervisors should be controlled under Caution has been taken in the assessment of audits. Other than the circumstances referred to in the was fined NTD2 million by the internal control system, who should do FSC for violating Article 45-1 their job well; clerks should not proceed attached schedules, all functional units of the Bank have effectively enforced the internal control of the Banking Act. with transactions against the prescribed system of the Bank and acted in compliance with applicable legal rules. This statement constitutes procedures, and supervisors should not allow colleagues to proceed with the summary content of Taichung Commercial Bank annual Report of current year and the Offering transactions against the prescribed

Prospectus, and shall be disclosed to the public. Any misrepresentation or concealment of the procedures with the excuse that they are aforementioned disclosures shall be liable to violation of Articles 20, 32, 171 and 174 of the Securities busy or for convenience, lest any abuse should arise therefor. and Exchanges Act and the legal consequences thereof. 2. On July 5, 2011, the Bank promulgated the

To:Financial Supervisor Commission “Guidelines for Disposition of Important Belongings Including Seals and Passbooks Left by Clients” to strengthen the Declarant: management operation of branches with

respect to such important belongings as Chairman:Jin-Fong Soo seals and passbooks unclaimed by clients. President:Chun-Sheng Lee 3. On May 19, 2011, the Bank issued an Chief Auditor: Ming-Chin Shen official letter to all branches to restate and strictly clerks prohibit from keeping Chief Compliance Officer:Chi-Chuang Fang various blank application forms, such as Date:March 8, 2012 trust and related trading documents affixed with seals on behalf of clients, and ask

clients to sign and seal the same in person after explaining the contents and risk of the 58 59 58 Improvement and Corrective Action of Internal Control System of Taichung Commercial Bank (Record Date: December 31, 2011) Scheduled to Complete Improvement Corrective Action Corrective Action on ○○ Branch and ○○ Branch Corrective Action: Already completed were defective in internal 1. On May 19, 2011 and June 24, 2011, the in 2011 control system because: Bank issued an official letter to it’s Clerk ○○ Liu withdrew the branches to restate and prohibit from cash with the blank slip affixed depositing or withdrawing fund keeping with the seal and the passbook passbook, seal, withdrawal slip and ATM in his custody on behalf of the account and password on behalf of clients; client and misappropriated the if any client fails to take back his passbook client’s deposit. At the same and seal with cause, it should be registered time, the two branches’ in an entry book and delivered to the operators still accepted Liu’s operating supervisor for control. The requests that were against Bank also highlighted that all of the clerks rules. As a result, the Bank and supervisors should be controlled under was fined NTD2 million by the internal control system, who should do FSC for violating Article 45-1 their job well; clerks should not proceed of the Banking Act. with transactions against the prescribed procedures, and supervisors should not allow colleagues to proceed with transactions against the prescribed

procedures with the excuse that they are busy or for convenience, lest any abuse should arise therefor. 2. On July 5, 2011, the Bank promulgated the

“Guidelines for Disposition of Important Belongings Including Seals and Passbooks Left by Clients” to strengthen the management operation of branches with

respect to such important belongings as

seals and passbooks unclaimed by clients. 3. On May 19, 2011, the Bank issued an official letter to all branches to restate and strictly clerks prohibit from keeping various blank application forms, such as trust and related trading documents affixed with seals on behalf of clients, and ask clients to sign and seal the same in person after explaining the contents and risk of the 59 59 portfolio to the clients when the clients (XI) Violations punishable under laws and major deficiencies of the past two years, and status of improvement: subscribe the trust portfolio and have the witness clerk enter his/her signature and Item Case Status of corrective action Processing officer or staff None None seal into the “Witness” section. charged by public 4. On July 6, 2011, the Bank promulgated the prosecutors on professional misconducts “Guidelines for Confirmation and Audit of Fined by Financial 1. The Bank’s list of candidates for The Bank has discussed the relevant Sale and Transaction for Trust” to enhance Supervisory Commission independent directors of general operating requirements and taken the various for violation of laws and shareholders’ session in 2008 was corrective actions against the internal control, the trust portfolio sale operation regulations reviewed by the 13th board session of 19th and also continue urging the various units that management and establish the term on April 30, 2008 was submitted they shall fulfill the internal contract strictly, upon a temporary motion. As a result, the enhance the internal management, complete extraordinary transaction detection system, Bank violated Paragraph 3 of Article 3 of the compliance training program, and in order to prevent sale representatives of Parliamentary Rules for Board Sessions of enhance the appraisal on the clerks’ financial instruments from proceeding with Public Companies and was fined compliance of law and ethics. NTD240,000 by FSC. transactions on behalf of clients without the 2. Clerk ○○ Liu withdrew the cash with the client’s prior authorization. blank slip affixed with the seal and the passbook in his custody on behalf of the 5. Audit Office has listed said corrective client and misappropriated the client’s actions as the highlights of audit, and will deposit. As a result, the Bank was fined by FSC NTD2 million for violating Article continue enhancing the special audit and 45-1 of the Banking Act. internal audit on cash inventory. Defects to be corrected None None upon request of Financial 6. The Bank will continue enhancing various Supervisor Commission business training programs, and also train Disciplined by FSC 1. The FSC decided that the false statement 1. The Bank has restated to the various units the intrabank clerks to keep their risk under Article 61-1 of the of customer’s deposits prepared by the the operating requirements and asked the awareness and fulfill the internal control Banking Act manager of ○○ Branch, Liao ○○, should various units to enhance the internal through internal audit and compliance be corrected, and also ordered the Bank to control and comply with the operating education, so as to prevent any illegal discharge him from his duty. requirements strictly to prevent any abuses. The Bank has terminated the activities from time to time, and also fulfill employment with the clerk on June 19, the units’’ self-inspection and enhance 2009. employees’ concept about laws, lest 2. The Bank was commissioned to invest the 2. The Bank has defined the “Regulations lawbreaking should arise again. relevant financial products offered by Governing Review of Release of Offshore PEM Group. Notwithstanding, the Structured Notes by Taichung Commercial review and delivery of such products were Bank” per the competent authority’s held to be defective and likely to hinder requirement to help its compliance. the well-founded operation. Therefore, the Bank was ordered to correct the defect and suspend the trust business for six months since September 17, 2010. 3. The Bank was ordered to terminate the 3. The Bank has terminated the employment employment of Clerk ○○ Liu who with the clerk on May 25, 2011. misappropriated the client’s deposits. Casualty or accident due None None to corruption, major incident or failure to comply with the safety measures, which caused 2. Disclose the audit report by independent external auditors with a special audit on damage exceeding internal control system: None NTD50 million in a particular incident or in particular fiscal year Other matters requiring None None disclosure commanded by FSC

60 61 60 (XI) Violations punishable under laws and major deficiencies of the past two years, and status of improvement: Item Case Status of corrective action Processing officer or staff None None charged by public prosecutors on professional misconducts Fined by Financial 1. The Bank’s list of candidates for The Bank has discussed the relevant Supervisory Commission independent directors of general operating requirements and taken the various for violation of laws and shareholders’ session in 2008 was corrective actions against the internal control, regulations reviewed by the 13th board session of 19th and also continue urging the various units that term on April 30, 2008 was submitted they shall fulfill the internal contract strictly, upon a temporary motion. As a result, the enhance the internal management, complete Bank violated Paragraph 3 of Article 3 of the compliance training program, and Parliamentary Rules for Board Sessions of enhance the appraisal on the clerks’ Public Companies and was fined compliance of law and ethics. NTD240,000 by FSC. 2. Clerk ○○ Liu withdrew the cash with the blank slip affixed with the seal and the passbook in his custody on behalf of the client and misappropriated the client’s deposit. As a result, the Bank was fined by FSC NTD2 million for violating Article 45-1 of the Banking Act. Defects to be corrected None None upon request of Financial Supervisor Commission Disciplined by FSC 1. The FSC decided that the false statement 1. The Bank has restated to the various units under Article 61-1 of the of customer’s deposits prepared by the the operating requirements and asked the Banking Act manager of ○○ Branch, Liao ○○, should various units to enhance the internal be corrected, and also ordered the Bank to control and comply with the operating discharge him from his duty. requirements strictly to prevent any abuses. The Bank has terminated the employment with the clerk on June 19, 2009. 2. The Bank was commissioned to invest the 2. The Bank has defined the “Regulations relevant financial products offered by Governing Review of Release of Offshore PEM Group. Notwithstanding, the Structured Notes by Taichung Commercial review and delivery of such products were Bank” per the competent authority’s held to be defective and likely to hinder requirement to help its compliance. the well-founded operation. Therefore, the Bank was ordered to correct the defect and suspend the trust business for six months since September 17, 2010. 3. The Bank was ordered to terminate the 3. The Bank has terminated the employment employment of Clerk ○○ Liu who with the clerk on May 25, 2011. misappropriated the client’s deposits. Casualty or accident due None None to corruption, major incident or failure to comply with the safety measures, which caused damage exceeding NTD50 million in a particular incident or in particular fiscal year Other matters requiring None None disclosure commanded by FSC

61 61 in 2011. (XII) Important resolutions of shareholders’ meetings and Board sessions: B. Ratify the appointment of the Bank’s “Salary Review Committee” 1. Important resolutions of general shareholders’ meeting 2011 (June 22, 2011) members (1) Recognize the business report and financial statement 2010 (9) 4th special Board session of 21st term of the Board on September 21, 2011 (2) Pass the earnings allocation plan 2010 A. Re-define the issuing price of the Bank’s capital increase by issuance of (3) Ratify the amendments to certain provisions of the Bank’s Articles of common shares in 2011 Incorporation B. Ratify the motion for applying for addition of “Business Contributed to (4) Ratify the motion for capital increase by recapitalization of earnings and Futures Transactions” into the business lines of the Bank’s securities capital surplus in 2010 firm’ head office and Yuanlin Branch. (5) Ratify the motion for capital increase in cash by private placement (10) 5th special Board session of 21st term of the Board on Oct. 12, 2011 (6) Motion for reelection of directors/supervisors A. Ratify the motion for investment in incorporation of “Taichung 2. Important resolutions of the Board sessions (from January 1, 2011 to February 29, Commercial Bank Lease Enterprise" 2012) B. Ratify the motion for establishment of “Corporate Finance Dept., Taipei (1) 14th special Board session of 20th term of the Board on March 9, 2011 Office” A. Ratify the Bank’s final (consolidated) financial statements 2010 (11) 2nd special Board session of 21st term of the Board on November 17, 2011 B. Ratify the earnings allocation plan 2010 Ratify the motion for investment in incorporation of “Taichung Commercial (2) 14th special Board session of 20th term of the Board on March 30, 2011 Bank Consolidated Securities Co., Ltd." A. Ratify the motion for application for financial planning management (12) 6th special Board session of 21st term of the Board on December 15, 2011 business A. Ratify the motion for processing of the “Exchange of Convertible B. Ratify the motion for application for capital increase by recapitalization Corporate Bond and Assets in NTD” of earnings and capital surplus in 2010 B. Ratify the motion for processing of “FX Option” C. Ratify the motion for application for capital increase in cash by private (13) 7th special Board session of 21st term of the Board on January 11, 2012 placement A. Ratify the motion for conclusion of the letter of intent for the property D. Ratify the motion for application for issuing 1st seniority non-secured transaction with the owner of the property in Neihu District, Taipei City convertible bank debentures domestically B. Ratify the motion for establishment of “Trust Dept., Taipei Office” E. Ratify the date, location and cause of the general shareholders’ meeting (XIII) Adverse opinion from directors or supervisor over important resolution of the Board in 2011 the most recent year until the day the Annual Report was printed with records and (3) 15th special Board session of 20th term of the Board on April 29, 2011 written declaration, and the contents of such opinion: None A. Ratify the motion for application for establishment of Taipei Branch and (XIV) Information on discharge and resignation of parties relating to the financial report Zhongli Branch of the Bank’s securities firm (including Chairman, President, chief accountants and internal audit officers, etc.) in the B. Ratify the name list of candidates for independent directors of 21st term. most recent year until the date the Annual Report was printed: Feb. 29, 2012 (4) 15th special Board session of 20th term of the Board on May 26, 2011 Election Termination Title Name Cause of Resignation or Termination Define the limit of 1st seniority non-secured convertible bank debentures Date Date Shiu-Nan issued domestically in 2011 was NTD2.3 billion. Chairman 2005.12.8 2011.3.31 Resign (5) 15th special Board session of 20th term of the Board on June 7, 2011 Huang Define the record date for the pricing of 1st seniority non-secured convertible bank debentures issued domestically in 2011, and conversion price and earning IV. Disclosure of the accountant’s fee: rate of repurchase thereof Firm Name CPA Name Duration of Audit Remarks nd st (6) 2 special Board session of 21 term of the Board on July 7, 2011 Deloitte & Touche Wen-Ya Hsu Tze-Chun Wang 2011 Ratify the motion for application for capital increase of NTD4.5 billion in cash Note: If the CPA or CPA office is replaced in the then year, please specify the duration by issuance of common stock st st of audit separately, and the cause of replacement in the “Remarks” Section. (7) 1 special Board session of 21 term of the Board on August 4, 2011 A. Define the record date of dividend allocation, ex-right record date, record Unit: NTD thousand date of capital increase and stock transfer suspension period for the Retainers Fee capital increase by recapitalization of earnings and capital surplus in 2010 Breakdown of Fee Audit Non-Audit Total B. Ratify the motion for applying for establishment of the branch in the territory of Hong Kong. 1 Less than 2,000 thousand  C. Ratify the Bank’s “Salary Review Committee Organizational Articles” 2 2,000 thousand~4,000 thousand  (8) 3rd special Board session of 21st term of the Board on August 18, 2011 3 4,000 thousand~6,000 thousand  A. Ratify the “ex-right record date”, “record date of capital increase and 4 6,000 thousand~8,000 thousand subscription”, “issue price of capital increase” and “date of stock 5 8,000 thousand~10,000 thousand payment” for the Bank’s capital increase by issuance of common shares 6 10,000 thousand above

62 63 62 in 2011. B. Ratify the appointment of the Bank’s “Salary Review Committee” members (9) 4th special Board session of 21st term of the Board on September 21, 2011 A. Re-define the issuing price of the Bank’s capital increase by issuance of common shares in 2011 B. Ratify the motion for applying for addition of “Business Contributed to Futures Transactions” into the business lines of the Bank’s securities firm’ head office and Yuanlin Branch. (10) 5th special Board session of 21st term of the Board on Oct. 12, 2011 A. Ratify the motion for investment in incorporation of “Taichung Commercial Bank Lease Enterprise" B. Ratify the motion for establishment of “Corporate Finance Dept., Taipei Office” (11) 2nd special Board session of 21st term of the Board on November 17, 2011 Ratify the motion for investment in incorporation of “Taichung Commercial Bank Consolidated Securities Co., Ltd." (12) 6th special Board session of 21st term of the Board on December 15, 2011 A. Ratify the motion for processing of the “Exchange of Convertible Corporate Bond and Assets in NTD” B. Ratify the motion for processing of “FX Option” (13) 7th special Board session of 21st term of the Board on January 11, 2012 A. Ratify the motion for conclusion of the letter of intent for the property transaction with the owner of the property in Neihu District, Taipei City B. Ratify the motion for establishment of “Trust Dept., Taipei Office” (XIII) Adverse opinion from directors or supervisor over important resolution of the Board in the most recent year until the day the Annual Report was printed with records and written declaration, and the contents of such opinion: None (XIV) Information on discharge and resignation of parties relating to the financial report (including Chairman, President, chief accountants and internal audit officers, etc.) in the most recent year until the date the Annual Report was printed: Feb. 29, 2012 Election Termination Title Name Cause of Resignation or Termination Date Date Shiu-Nan Chairman 2005.12.8 2011.3.31 Resign Huang

IV. Disclosure of the accountant’s fee: Firm Name CPA Name Duration of Audit Remarks Deloitte & Touche Wen-Ya Hsu Tze-Chun Wang 2011 Note: If the CPA or CPA office is replaced in the then year, please specify the duration of audit separately, and the cause of replacement in the “Remarks” Section.

Unit: NTD thousand Retainers Fee Breakdown of Fee Audit Non-Audit Total

1 Less than 2,000 thousand  2 2,000 thousand~4,000 thousand  3 4,000 thousand~6,000 thousand  4 6,000 thousand~8,000 thousand 5 8,000 thousand~10,000 thousand 6 10,000 thousand above

63 63 (I) Non-Auditing fees paid for the CPA, CPA firm and their affiliates exceeded the audit Jan. 1, 2012 ~ Feb. 29, 2011 fees over twenty-five percent, and the audit and non-audit fees and contents of the 2012 Increase Increase non-audit service: Increase Title Name Increase (decrease) (decrease) Unit: NTD thousand (decrease) in Non-Auditing fee (decrease) in in No. of in No. of Accounting Name of Auditing Inspection No. of System Corporate Human Others Remarks No. of Shares Pledged Pledged Firm Accountant fee Subtotal Period Shares Design Registration Resources (Notes) Shares Shares Tai Jiunn Enterprise Co., Deloitte & Wen-Ya Tze-Chun Supervisor 125,789 0 0 0 3,250 - 130 - 785 915 2011 - Ltd. Touche Hsu Wang Note: The contents of the non-auditing fee service refer to the appointment of Deloitte & President Chun-Sheng Lee 272,838 0 0 0 Executive Vice Touche to help the Bank establish the information security management system and Rong-Hua Kao 54,682 0 0 0 delivery of consulting services. The retainer fees were NTD385 thousand. The rest President Executive Vice refers to the retainer fees totaling NTD400 thousand for the CPA’s recheck of the Kai-Yu Lin 48,800 0 (18,000) 0 prospectus for the Bank’s capital increase in 2011 and other opinions. President Executive Vice Hsueh-Hsien Liao 94,840 0 0 0 President (II) Change of Accounting firm and the auditing fee of the year changing the Accounting Executive Vice Chi-Chuan Fang 141,118 0 0 0 firm less than that of the previous year, and the amount of audit fees before and after the President change, and reasons of the change: None. (III) Auditing fee were 15% less than that of the previous year: None. Chief Auditor Min-Chin Shen 121,247 0 0 0 Office of the Board Kai-Yu Lin (concurrent V. Changes of Accountants: N/A of Directors 48,800 0 (18,000) 0 post) VI. Disclose the names and job title of the chairman, president, financial and accounting manager Chief Secretary of the Bank who has worked with the CPA firm who conducts the audit of the Bank or the Manager, General Ching-hu Hsieh 77,987 0 0 0 affiliates to such firms in the most recent one year, and the duration of their employment in the Affairs Dept. CPA firm and its affiliate: Manager, Business Chun-Yin Wang 128,221 0 0 0 VII. Changes in shareholdings by directors, supervisors, and managers through transfer and pledged development Dept under lien and those required to be declared pursuant to Article 25-3 of the Banking Act from Manager, Loan the recent year until the date the Annual Report was printed Administration Kuo-Chun Liu 181,032 0 0 0 (I) Changes in shareholdings Dept. Jan. 1, 2012 ~ Feb. 29, Chi-Chuan Fang 2011 Manager, HR Dept. 141,118 0 0 0 2012 (concurrent post) Increase Increase Manager, Increase Yi-Ying Chung 126,000 0 0 0 Title Name Increase (decrease) (decrease) Accounting Dept. (decrease) in (decrease) in in No. of in No. of Manager, No. of Deh-Wei Chia 147,870 0 0 0 No. of Shares Pledged Pledged Information Dept. Shares Shares Shares Manager, Pan Asia Chemical International Cheng-Yu Lai (30,183) 0 0 0 Managing Director 26,026,927 0 0 0 Corporation Banking Dept. Manager, Trust I Joung Investment Co., Yu-Chung Lin 63,863 0 0 0 Managing Director (2,540,755) (2,500,000) 0 0 Dept. Ltd. Manager, Dept of Independent Hsi-Rong Huang 0 0 0 0 Debt Collection and Mei-Li Wu 47,600 0 0 0 Managing Director Asset Recovery Ho Yang Management Director 1,348,584 0 0 0 Manager of Consultant Co., Ltd. Rong-Hua Kao Corporate Finance 54,682 0 0 0 (Concurrent post) Director Chou Chang Co., Ltd. 246,827 0 0 0 Dept. Manager of Independent Feng-Lang Chen 0 0 0 0 Chen-Le Liu 0 0 0 0 Securities Dept. director Jhen-Ying Wu (Deputy Manager, Risk Independent manager on behalf of 75,702 0 0 0 Jin-Yi Lee 0 0 0 0 Management Dept. director manager) Xin Rui Investment Co., Guan-Jhong Siao (Deputy Supervisor 2,629,388 0 0 0 Manager, Treasury Ltd. manager on behalf of 22,969 0 0 0 Dept. manager)

64 65 64 Jan. 1, 2012 ~ Feb. 29, 2011 2012 Increase Increase Increase Title Name Increase (decrease) (decrease) (decrease) in (decrease) in in No. of in No. of No. of No. of Shares Pledged Pledged Shares Shares Shares Tai Jiunn Enterprise Co., Supervisor 125,789 0 0 0 Ltd. President Chun-Sheng Lee 272,838 0 0 0 Executive Vice Rong-Hua Kao 54,682 0 0 0 President Executive Vice Kai-Yu Lin 48,800 0 (18,000) 0 President Executive Vice Hsueh-Hsien Liao 94,840 0 0 0 President Executive Vice Chi-Chuan Fang 141,118 0 0 0 President Chief Auditor Min-Chin Shen 121,247 0 0 0 Office of the Board Kai-Yu Lin (concurrent of Directors 48,800 0 (18,000) 0 post) Chief Secretary Manager, General Ching-hu Hsieh 77,987 0 0 0 Affairs Dept. Manager, Business Chun-Yin Wang 128,221 0 0 0 development Dept Manager, Loan Administration Kuo-Chun Liu 181,032 0 0 0 Dept. Chi-Chuan Fang Manager, HR Dept. 141,118 0 0 0 (concurrent post) Manager, Yi-Ying Chung 126,000 0 0 0 Accounting Dept. Manager, Deh-Wei Chia 147,870 0 0 0 Information Dept. Manager, International Cheng-Yu Lai (30,183) 0 0 0 Banking Dept. Manager, Trust Yu-Chung Lin 63,863 0 0 0 Dept. Manager, Dept of Debt Collection and Mei-Li Wu 47,600 0 0 0 Asset Recovery Manager of Rong-Hua Kao Corporate Finance 54,682 0 0 0 (Concurrent post) Dept. Manager of Feng-Lang Chen 0 0 0 0 Securities Dept. Jhen-Ying Wu (Deputy Manager, Risk manager on behalf of 75,702 0 0 0 Management Dept. manager) Guan-Jhong Siao (Deputy Manager, Treasury manager on behalf of 22,969 0 0 0 Dept. manager)

65 65 Jan. 1, 2012 ~ Feb. 29, Jan. 1, 2012 ~ Feb. 29, 2011 2011 2012 2012 Increase Increase Increase Increase Increase Increase Title Name Increase (decrease) (decrease) Title Name Increase (decrease) (decrease) (decrease) in (decrease) in (decrease) in in No. of in No. of (decrease) in in No. of in No. of No. of No. of No. of Shares Pledged Pledged No. of Shares Pledged Pledged Shares Shares Shares Shares Shares Shares Mu-Ken Chang (Deputy Manager, Dachia Manager of Wealth Tung-Po Yang 110,134 0 0 0 manager on behalf of (164,000) 0 0 0 Branch Management Dept. manager) Manager, Qingshui Ya-Mei Chen 56,000 0 （9,000） 0 Overseas Banking Cheng-Yu Lai (concurrent Branch (30,183) 0 0 0 Branch post) Manager, Shalu Shu-Chen Chen 122,478 0 0 0 Manager, Business Branch Chien-Min Chou 79,923 0 0 0 Dept. Manager, Wufong Kuo-Chin Chi 89,788 0 0 0 Manager, Securities Branch Ruei-Fen Cai 7,000 0 0 0 Brokerage Manager, Dongshih Pi-Wei Wang (32,331) 0 0 0 Manager, Daching Branch Sin-Fu Liang 30,000 0 0 0 Branch Manager, E. Chien-Hao Chen (20,745) 0 （27,000） 0 Manager, W. Fongyuan Branch Dong-Syu Liou 15,184 0 （14,000） 0 Taichung Branch Manager, Wuri Shih-Huei Wang 27,021 0 0 0 Manager, Branch Rai-Cheng Yang 129,587 0 0 0 Jhongzhen Branch Manager, S. Chi-Hung Wu 4,269 0 0 0 Manager, Hsitun Fongyuan Branch Han-Ching Tsai 19,000 0 0 0 Branch Manager, Nanyang Chun-Chun You 18,609 0 0 0 Manager, Nantun Branch Hung-Ping Chen (12,888) 0 (32,000) 0 Branch Manager, Nantun Tsung-Yi Liu 21,509 0 0 0 Manager, Neihsin Branch Yu-Ing Chen 20,099 0 0 0 Branch Manager, Chushan Ming-San Huang 54,938 0 0 0 Manager, Dadu Branch Ching-Kun Lin 94,690 0 0 0 Branch Manager, Shuili Chien-ting Lin (26,276) 0 (24,000) 0 Manager, N. Branch Taiping Branch Zai-Hong Yang 52,327 0 0 0 Manager, Puli Yi-Yuan Tung 222,431 0 0 0 Branch Manager, Manager, Tsaotun Yung-Chang Lai 10,016 0 0 0 Taichungkang Tzer-Hsiu Lin (60,448) 0 0 0 Branch Branch Manager, Changhua Ya-Ching Peng 84,114 0 0 0 Manager, Szumin Branch Chung-Teng Hung 76,350 0 0 0 Branch Manager, Lukang Chung-Cheng Wu 51,959 0 0 0 Manager, Branch Hwei-Chin Lu (21,942) 0 0 0 Chungkang Branch Manager, Shihu Pao-Yuan Chen 78,805 0 0 0 Manager, S. Branch Huan-Chang Tseng 52,210 0 0 0 Taichung Branch Manager, Er Lin Cheng-Hsien Ni (32,846) 0 0 0 Manager, N. Branch Wen-Chu Lee 39,853 0 0 0 Taichung Branch Manager, Peitou Ming-Cheng Wu 81,999 0 0 0 Manager, Taiping Branch Chung-Hsien Lee 127,704 0 0 0 Branch Manager, Hsin-Hsin Lee 78,221 0 0 0 Manager, Houli Teinchung Branch Pi-Hwa Chang 5,542 0 0 0 Branch Manager, Yuanlin Ching-Yuan Lin 11,289 0 0 0 Manager, Daya Branch Chia-Wei Tsai 84,922 0 0 0 Branch Manager, Homei Cheng-Wen Ni 21,323 0 0 0 Manager, Tan Tzu Branch Yu-Chen Yang 78,250 0 0 0 Branch Manager, Shetou Tsung-chang Tseng (39,983) 0 （10,000） 0 Manager, Sheng Branch He-Chin Chang (99,444) 0 0 0 Kang Branch Manager, Huatan Kee-Hsien Lee 268,161 0 0 0 Manager, Fongyuan Branch Wei-Huang You 12,700 0 0 0 Branch

66 67 66 Jan. 1, 2012 ~ Feb. 29, 2011 2012 Increase Increase Increase Title Name Increase (decrease) (decrease) (decrease) in (decrease) in in No. of in No. of No. of No. of Shares Pledged Pledged Shares Shares Shares Manager, Dachia Tung-Po Yang 110,134 0 0 0 Branch Manager, Qingshui Ya-Mei Chen 56,000 0 （9,000） 0 Branch Manager, Shalu Shu-Chen Chen 122,478 0 0 0 Branch Manager, Wufong Kuo-Chin Chi 89,788 0 0 0 Branch Manager, Dongshih Pi-Wei Wang (32,331) 0 0 0 Branch Manager, E. Chien-Hao Chen (20,745) 0 （27,000） 0 Fongyuan Branch Manager, Wuri Shih-Huei Wang 27,021 0 0 0 Branch Manager, S. Chi-Hung Wu 4,269 0 0 0 Fongyuan Branch Manager, Nanyang Chun-Chun You 18,609 0 0 0 Branch Manager, Nantun Tsung-Yi Liu 21,509 0 0 0 Branch Manager, Chushan Ming-San Huang 54,938 0 0 0 Branch Manager, Shuili Chien-ting Lin (26,276) 0 (24,000) 0 Branch Manager, Puli Yi-Yuan Tung 222,431 0 0 0 Branch Manager, Tsaotun Yung-Chang Lai 10,016 0 0 0 Branch Manager, Changhua Ya-Ching Peng 84,114 0 0 0 Branch Manager, Lukang Chung-Cheng Wu 51,959 0 0 0 Branch Manager, Shihu Pao-Yuan Chen 78,805 0 0 0 Branch Manager, Er Lin Cheng-Hsien Ni (32,846) 0 0 0 Branch Manager, Peitou Ming-Cheng Wu 81,999 0 0 0 Branch Manager, Hsin-Hsin Lee 78,221 0 0 0 Teinchung Branch Manager, Yuanlin Ching-Yuan Lin 11,289 0 0 0 Branch Manager, Homei Cheng-Wen Ni 21,323 0 0 0 Branch Manager, Shetou Tsung-chang Tseng (39,983) 0 （10,000） 0 Branch Manager, Huatan Kee-Hsien Lee 268,161 0 0 0 Branch

67 67 Jan. 1, 2012 ~ Feb. 29, Jan. 1, 2012 ~ Feb. 29, 2011 2011 2012 2012 Increase Increase Increase Increase Increase Increase Title Name Increase (decrease) (decrease) Title Name Increase (decrease) (decrease) (decrease) in (decrease) in (decrease) in in No. of in No. of (decrease) in in No. of in No. of No. of No. of No. of Shares Pledged Pledged No. of Shares Pledged Pledged Shares Shares Shares Shares Shares Shares Manager, Manager, Taoyuan Chi-Hua Yao 100,366 0 0 0 Chun-wen Chen 21,094 0 0 0 Yungchiung Branch Branch Manager, Siushui Manager, Yung Yu-Nien Kang 102,677 0 0 0 Chung-Hsien Lee 10,200 0 0 0 Branch Kung Branch Manager, Manager, Chu Pei Wen-Tung You 97,417 0 0 0 Chien-Hung Lin 82,975 0 0 0 Shangkong Branch Branch General Manager, Manager, Nan Kang Shun-Deh Tsai 70,411 0 0 0 Shih-Fan Weng 82,975 0 0 0 Dachu Branch Branch Manager, N. Manager, Nei Li Yi-Ren Teng 76,991 0 0 0 Jr-Hsin Lee 123,521 0 0 0 Yuanlin Branch Branch Manager, Peitou Manager, Hsinchu Kwei-Ching Ho 68,214 0 0 0 Cheng-Hua Lee 59,354 0 0 0 Branch Branch Manager, Peitun Manager, Gueishan Yi-Ping Lin 22,320 0 0 0 Chen-Hung Cheng 42,071 0 0 0 Branch Branch Manager, Puhsin Manager, Zhongli Jhih-Hao Liang (10,335) 0 0 0 Cheng-Huan Huang 80,278 0 0 0 Branch Branch Manager, Taipei Manager, Hsinfong Rong-Kuo Cheng 71,731 0 0 0 Chang-Sheng Liu 58,089 0 0 0 Branch Branch Manager, Lungjing Manager, Tayuan Chang-Chi Liu 76,071 0 0 0 Yu-Heui Tseng 66,000 0 0 0 Branch Branch Manager, Sung Manager, Yangmei Tien-Hou Tsai 88,000 0 0 0 Ting-Kuang Huang 193,017 0 0 0 Shan Branch Branch Manager, Sanchung Manager, Tucheng Ruei-Chang Lee (18,000) 0 0 0 Su-Lang Huang 157,000 0 （72,000） 0 Branch Branch Manager, Yuanlin Securities Chiang-Kai Liu 71,349 0 0 0 Kaohsiung Branch Branch Hong-Lun Jhang 60,000 0 （45,000） 0 Manager, Linko Manager Wen-Che Chen 61,151 0 0 0 Branch Taipei Securities Manager, Huwei Branch Cian-Yu Lin 0 0 0 0 Chen-Hsiang Chuang 73,000 0 （43,000） 0 Branch Manager Manager, Wanli Zhongli Securities Kuang-Chi Chen 24,764 0 0 0 Branch Branch Wun-Jheng Lee 0 0 0 0 Manager, Chunan Manager Ming-Ren Hsu (40,592) 0 0 0 Branch Manager, District Manager, Dounan Center, Taichung Wen-Chun Jan 5,119 0 0 0 Shun-Chi Ke 16,993 0 0 0 Branch District Manager, Neihu Manager, Chang Chiu-Wen Chang 58,001 0 0 0 Kuo-Chi Lin 106,136 0 0 0 Branch Hwa District Center Manager, BanChiao North District Tsai-Tuan Chen 69,716 0 0 0 Pei-Miao Jan 61,350 0 0 0 Branch Center manager Manager, Feng China Man-Made Fiber 139,000,00 Wen-Kai Tsai 20,879 0 0 0 Major Shareholder 203,530,473 0 0 Shan Branch Corporation 0 Manager, Hsin-Fa Wang 12,089 0 0 0 Principle Xinzhuang Branch Chen-Hai Lin 173,444,089 0 0 0 shareholder Manager, Pingjhen Wen-Chuan Zhuang 55,285 0 0 0 Principle Lin Yuan Investment Co., Branch 2,431,251 0 0 0 shareholder Ltd. Manager, Min Ming-Yu Chiu 56,575 0 0 0 Principle Hsiung Branch Wan Bau Co., Ltd. 1,154,078 0 0 0 shareholder

68 69 68 Jan. 1, 2012 ~ Feb. 29, 2011 2012 Increase Increase Increase Title Name Increase (decrease) (decrease) (decrease) in (decrease) in in No. of in No. of No. of No. of Shares Pledged Pledged Shares Shares Shares Manager, Taoyuan Chun-wen Chen 21,094 0 0 0 Branch Manager, Yung Chung-Hsien Lee 10,200 0 0 0 Kung Branch Manager, Chu Pei Chien-Hung Lin 82,975 0 0 0 Branch Manager, Nan Kang Shih-Fan Weng 82,975 0 0 0 Branch Manager, Nei Li Jr-Hsin Lee 123,521 0 0 0 Branch Manager, Hsinchu Cheng-Hua Lee 59,354 0 0 0 Branch Manager, Gueishan Chen-Hung Cheng 42,071 0 0 0 Branch Manager, Zhongli Cheng-Huan Huang 80,278 0 0 0 Branch Manager, Hsinfong Chang-Sheng Liu 58,089 0 0 0 Branch Manager, Tayuan Yu-Heui Tseng 66,000 0 0 0 Branch Manager, Yangmei Ting-Kuang Huang 193,017 0 0 0 Branch Manager, Tucheng Su-Lang Huang 157,000 0 （72,000） 0 Branch Yuanlin Securities Branch Hong-Lun Jhang 60,000 0 （45,000） 0 Manager Taipei Securities Branch Cian-Yu Lin 0 0 0 0 Manager Zhongli Securities Branch Wun-Jheng Lee 0 0 0 0 Manager Manager, District Center, Taichung Wen-Chun Jan 5,119 0 0 0 District Manager, Chang Kuo-Chi Lin 106,136 0 0 0 Hwa District Center North District Pei-Miao Jan 61,350 0 0 0 Center manager China Man-Made Fiber 139,000,00 Major Shareholder 203,530,473 0 0 Corporation 0 Principle Chen-Hai Lin 173,444,089 0 0 0 shareholder Principle Lin Yuan Investment Co., 2,431,251 0 0 0 shareholder Ltd. Principle Wan Bau Co., Ltd. 1,154,078 0 0 0 shareholder

69 69 Jan. 1, 2012 ~ Feb. 29, 2011 2012 Increase Increase Increase Title Name Increase (decrease) (decrease) (decrease) in (decrease) in in No. of in No. of No. of No. of Shares Pledged Pledged Shares Shares Shares Principle Far Glory Life Insurance 36,903,691 0 0 0 shareholder Corporation Ltd. Principle Taiwan Fire & Marine 885,861 0 0 0 shareholder Insurance Co., Ltd. (II) Information of shares ownership transfer: Not applicable, because the counterparts of said shares ownership transfer are not stakeholders. (III) Information of shares ownership pledge: Not applicable, because the counterparts of said shares ownership pledge are not stakeholders.

70 70 VIII. Top 10 shareholders in proportion of shareholdings and who are related parties to one another as required to disclose under Statement of Financial Accounting Standards No. 6, or spouses, or kids at the second tier under the Civil Code Feb. 29, 2012 Information on top 10 shareholders in Shares Held by Spouse Shareholdings under the proportion of shareholdings and are related Own shareholdings Remarks & Dependents title of a third party to one another under Financial Accounting Name Standard No. 6, their names and affiliations Ratio of Ratio of Ratio of Quantity Quantity Quantity Name Relation Shareholding Shareholding Shareholding Brother of the Chairman of Pan Asia Chemical China Man-Made Fiber Co., Ltd. 512,760,972 22.95 0 0 0 0 Board of its Corporation parent company Pan Asia Chemical China Man-Made Fiber Co., Ltd. Corporation Responsible person: Kuei-Hsien 00000 0 Brothers Responsible person: Wang Kuei-Fong Wang

71 Chen-Hai Lin 173,444,089 7.76 0 0 0 0 None None Brother of the China Man-Made Fiber Chairman of Pan Asia Chemical Corporation 141,767,694 6.35 0 0 0 0 Co., Ltd. Board of its subsidiary China Man-Made Fiber Pan Asia Chemical Corporation Co., Ltd. Responsible person: Kuei-Fong 249,466 0.01 0 0 0 0 Brothers Responsible person: Wang Kuei-Hsien Wang Far Glory Life Insurance 108,435,630 4.85 0 0 0 0 None None Corporation Ltd. Far Glory Life Insurance Corporation Ltd. 0 0 0 0 0 0 None None Responsible person: Chung-Sheng Tu The same as Lin Yuan Investment Co., Ltd. 83,472,972 3.74 0 0 0 0 Wan Bau Co., Ltd. chairman Lin Yuan Investment Co., Ltd. 0 0 0 0 0 0 None None Responsible person: Jen-Ching, You Lin Yuan Investment Co., The same as Wan Bau Co., Ltd. 39,623,363 1.77 0 0 0 0 Ltd. chairman 71

Four. Status of Capital Planning 100% 100% 44.74% 44.74%

I. Shares and dividends (I) Sources of shares and dividends sst. Executive Executive sst.

Unit: share; % share; Unit: Authorized shares capital Paid-in shares capital Remarks Year and Issuing None None None None Sources of combined holdings combined month price Quantity of Stock Quantity of Stock Amount (NTD) Amount (NTD) shares and Others (Shares) (Shares) dividends

Combined investment 2006 1,538,014,400 15,380,144,000 1,538,014,400 15,380,144,000 - None 13,958,562

Issuance of March 11.5 2,000,000,000 20,000,000,000 1,304,088,000 13,040,880,000 common stock None 2007 (NTD/share) None None None None None None None None None None None None None None None for cash

November 10 Recapitalization 2,000,000,000 20,000,000,000 1,371,900,576 13,719,005,760 None 2008 (NTD/share) of earnings idiaries in proportion to the to the in proportion idiaries Issuance of 0 0 December 10 2,000,000,000 20,000,000,000 1,731,900,576 17,319,005,760 common stock None 2010 (NTD/share) for cash Recapitalization September 10 2,000,000,000 20,000,000,000 1,783,857,594 17,838,575,940 of earnings and None 2011 (NTD/share) capital surplus Issuance of November 10 4,320,000,000 43,200,000,000 2,233,857,594 22,338,575,940 common stock None 1,958,562 6.28% 1,958,562 2011 (NTD/share) for cash Note: The Bank’s special shareholders’ meeting resolved on December 7, 2006 to reduce the shares and dividends of 0 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0

, and direct or indirect subs the Bank to NTD7,339,264,000 with the elimination of 733,926,400 outstanding shares. At the same time the rectors, supervisors, presidents, Executive Vice Presidents, A Presidents, Vice Executive presidents, supervisors, rectors, 72 meeting also resolved to increase capital by issuing new shares of common stock amounting to 500 million residents, executive vice presidents, assistant assistant presidents, vice executive residents, Investment made by directors, supervisors, supervisors, directors, by made Investment p VPs, supervisors of branches, and direct or direct and branches, of supervisors VPs, subsidiaries indirect shares at NTD10 per share. The resolutions have been reported to FSC on January 22, 2007 under Chin-Kuan-Cheng No. 0950158669 confirmation letter. As of 2006, the Bank has successfully raised NTD5.75

100% - - 600,000 billion (including the issue at premium) and the investments have been fully collected by the end of March 2007. 38.46% The Bank’s shareholders’ meeting resolved on June 13, 2008 to recapitalize the earnings amounting to NTD678,125,760 by issuing new shares of common stock amounting to 67,812,576 shares at NTD10 per share. The resolution has been reported to FSC on August 21, 2008 under Chin-Kuan-Cheng-Yi-Tze No. 0970041379 confirmation letter. The Bank’s special board session resolved on October 6, 2010 to increase the capital by

0 0 issuing new shares of common stock totaling 360,000,000 shares at NTD10 per share. The resolution has been reported to FSC on November 2, 2010 under Chin-Kuan-Cheng No. 0990058141 confirmation letter. The investments have been fully collected on December 10, 2010.The Bank’s shareholders’ meeting resolved on June 22, 2011 to recapitalize the earnings and capital surplus amounting to NTD519,570,180 by issuing new

600,000 shares of common stock amounting to 51,957,018 shares at NTD10 per share. The resolution has been reported

12,000,000 to FSC on July 20, 2011 under Chin-Kuan-Cheng-Yi-Tze No. 20110032577 confirmation letter. The Bank’s 0

e various departments and branches e various departments board session resolved on July 7, 2011 to increase the capital by issuing new shares of common stock totaling Investment made by the Bank Bank the by made Investment

Quantity Ratioof Shareholding Quantity Ratioof Shareholding Quantity Ratioof Shareholding 450,000,000 shares at NTD10 per share, totaling NTD4,500,000,000. The resolution has been reported to FSC on August 9, 2011 under Chin-Kuan-Cheng No. 20110035963 confirmation letter. The investments have been 3,000,000 0.139,535,108 0 8,294,564 0.43 0.37 0 0

32,920,906 1.4717,032,341 0 0.76 0 fully collected on August 8, 2011.

Authorized shares capital Stock Type Remarks Outstanding shares Unissued Shares Total

Registered common 2,233,857,594 2,086,142,406 4,320,000,000 Listed Investee Investee Co., Ltd. Ltd. Co., shares

Vice Presidents, supervisors of th of all Quantity of shareholdings of the same investee by the Bank and di by the Bank and investee the same of shareholdings of Quantity

Insurance AgencyInsuranceCo., Ltd. Taichung Commercial Bank Taichung IX. Reliance Securities Investment Trust Trust RelianceInvestment Securities Wan Bau Co., Ltd. Ltd. Co., Bau Wan Jen-Ching, person: Responsible You Taiwan Fire & Marine Insurance Insurance Marine Fire & Taiwan Ltd. Co., Insurance Marine Fire & Taiwan Ltd. Co., Lee ResponsibleTai-Hung person: Bacal Robert Pension Netherlands AccountCitibankat Investment (Taiwan) IJoung Investment Co., Ltd. Ltd. Co., Investment Joung I Chen Yi-Der person: Responsible Ltd. Co., Investment Target Wise 15,767,428 Ltd. Co., Investment Target Wise 15,468,459 Tsai Responsible person: Yu-Fang 0.71 0.69 0 0 73 72 Four. Status of Capital Planning I. Shares and dividends (I) Sources of shares and dividends

Authorized shares capital Paid-in shares capital Remarks Year and Issuing Sources of month price Quantity of Stock Quantity of Stock Amount (NTD) Amount (NTD) shares and Others (Shares) (Shares) dividends

2006 1,538,014,400 15,380,144,000 1,538,014,400 15,380,144,000 - None

Issuance of March 11.5 2,000,000,000 20,000,000,000 1,304,088,000 13,040,880,000 common stock None 2007 (NTD/share) for cash

November 10 Recapitalization 2,000,000,000 20,000,000,000 1,371,900,576 13,719,005,760 None 2008 (NTD/share) of earnings

Issuance of December 10 2,000,000,000 20,000,000,000 1,731,900,576 17,319,005,760 common stock None 2010 (NTD/share) for cash Recapitalization September 10 2,000,000,000 20,000,000,000 1,783,857,594 17,838,575,940 of earnings and None 2011 (NTD/share) capital surplus Issuance of November 10 4,320,000,000 43,200,000,000 2,233,857,594 22,338,575,940 common stock None 2011 (NTD/share) for cash Note: The Bank’s special shareholders’ meeting resolved on December 7, 2006 to reduce the shares and dividends of the Bank to NTD7,339,264,000 with the elimination of 733,926,400 outstanding shares. At the same time the meeting also resolved to increase capital by issuing new shares of common stock amounting to 500 million shares at NTD10 per share. The resolutions have been reported to FSC on January 22, 2007 under Chin-Kuan-Cheng No. 0950158669 confirmation letter. As of 2006, the Bank has successfully raised NTD5.75 billion (including the issue at premium) and the investments have been fully collected by the end of March 2007. The Bank’s shareholders’ meeting resolved on June 13, 2008 to recapitalize the earnings amounting to NTD678,125,760 by issuing new shares of common stock amounting to 67,812,576 shares at NTD10 per share. The resolution has been reported to FSC on August 21, 2008 under Chin-Kuan-Cheng-Yi-Tze No. 0970041379 confirmation letter. The Bank’s special board session resolved on October 6, 2010 to increase the capital by issuing new shares of common stock totaling 360,000,000 shares at NTD10 per share. The resolution has been reported to FSC on November 2, 2010 under Chin-Kuan-Cheng No. 0990058141 confirmation letter. The investments have been fully collected on December 10, 2010.The Bank’s shareholders’ meeting resolved on June 22, 2011 to recapitalize the earnings and capital surplus amounting to NTD519,570,180 by issuing new shares of common stock amounting to 51,957,018 shares at NTD10 per share. The resolution has been reported to FSC on July 20, 2011 under Chin-Kuan-Cheng-Yi-Tze No. 20110032577 confirmation letter. The Bank’s board session resolved on July 7, 2011 to increase the capital by issuing new shares of common stock totaling 450,000,000 shares at NTD10 per share, totaling NTD4,500,000,000. The resolution has been reported to FSC on August 9, 2011 under Chin-Kuan-Cheng No. 20110035963 confirmation letter. The investments have been fully collected on August 8, 2011.

Authorized shares capital Stock Type Remarks Outstanding shares Unissued Shares Total

Registered common 2,233,857,594 2,086,142,406 4,320,000,000 Listed shares

73 73

(II) Composition of Shareholders (IV) Name of Principle shareholders Feb. 29, 2012 Feb. 29, 2012 Composition of Foreign Shareholders Government Financial Other Juridical Individual Institution and Total Stock Ratio of Apparatus Institution Person Shares Foreigner Name of Principle shareholders Shareholding Structure China Man-Made Fiber Co., Ltd. 512,760,972 22.95% No. of Person 6 3 179 75,310 87 75,585 Chen-Hai Lin 173,444,089 7.76% Pan Asia Chemical Corporation 141,767,694 6.35% Far Glory Life Insurance Corporation Ltd. 108,435,630 4.85% Shares 27,829 151,356,536 919,220,398 1,089,271,258 73,981,573 2,233,857,594 Lin Yuan Investment Co., Ltd. 83,472,972 3.74% Wan Bau Co., Ltd. 39,623,363 1.77% Ratio of 0.00% 6.78% 41.15% 48.76% 3.31% 100% Taiwan Fire & Marine Insurance Co., Ltd. 32,920,906 1.47% Shareholding Netherlands Pension Robert Bacal Investment 17,032,341 0.76% Account at Citibank (Taiwan) (III) Diversification of Shareholdings I Joung Investment Co., Ltd. 15,767,428 0.71% Unit: share; person: % Feb. 29, 2012 Wise Target Investment Co., Ltd. 15,468,459 0.69% No. of Ratio of Range of Shares Shares Shareholders Shareholding (V) Information on market price, net value, earnings and dividends per share in the most recent 2 years 1 to 999 26,361 8,315,971 0.37% Unit: NTD; % 1,000 to 5,000 26,346 64,612,987 2.89% Year Until Feb. 29, 2010 2011 5,001 to 10,000 9,008 59,338,162 2.66% Item 2012 Market The Highest 12.45 14.45 10.15 10,001 to 15,000 4,652 53,094,449 2.38% Price Per The Lowest 7.53 7.92 8.26 15,001 to 20,000 1,710 29,405,472 1.32% Share Average 10.48 12.11 9.50 Net Value Before Distribution 11.21 11.40 - 20,001 to 30,000 2,349 54,591,066 2.44% Per Share After Distribution 10.88 - - 30,001 to 50,000 2,031 78,174,581 3.50% Weighted average shares 1,390,640 1,850,433 2,233,858 Earnings EPS (before adjustment) 0.30 0.79 - 50,001 to 100,000 1,656 112,184,006 5.02% Per Share EPS (after adjustment) 0.29 - 100,001 to 200,000 817 108,279,050 4.85% Cash Dividends - - - Retained Shares 200,001 to 400,000 362 97,295,389 4.36% 0.17 - - Dividend Free-Gratis Distribution 400,001 to 600,000 96 46,199,383 2.07% Per Share Dividends Capital Reserve 0.13 - - 600,001 to 800,000 42 28,881,455 1.29% Shares Distribution Retained Dividends - - - 800,001 to 1,000,000 28 25,312,872 1.13% Return on Price-Earnings Ratio 31.53 14.24 - 1,000,001 to 1,200,000 21 22,631,610 1.01% investment Dividend Yield - - - 1,200,001 to 1,400,000 16 20,663,320 0.93% Analysis Cash Dividend Yields - - -

1,400,001 to 1,600,000 9 13,533,030 0.61% 1,600,001 to 1,800,000 4 6,790,095 0.30% 1,800,001 to 2,000,000 6 11,478,187 0.51% 2,000,001 and above 71 1,393,076,509 62.36% Total 75,585 2,233,857,594 100.00%

74 75 74

(IV) Name of Principle shareholders Feb. 29, 2012

Stock Ratio of Shares Name of Principle shareholders Shareholding China Man-Made Fiber Co., Ltd. 512,760,972 22.95% Chen-Hai Lin 173,444,089 7.76% Pan Asia Chemical Corporation 141,767,694 6.35% Far Glory Life Insurance Corporation Ltd. 108,435,630 4.85% Lin Yuan Investment Co., Ltd. 83,472,972 3.74% Wan Bau Co., Ltd. 39,623,363 1.77% Taiwan Fire & Marine Insurance Co., Ltd. 32,920,906 1.47% Netherlands Pension Robert Bacal Investment 17,032,341 0.76% Account at Citibank (Taiwan) I Joung Investment Co., Ltd. 15,767,428 0.71% Wise Target Investment Co., Ltd. 15,468,459 0.69%

(V) Information on market price, net value, earnings and dividends per share in the most recent 2 years Unit: NTD; % Year Until Feb. 29, 2010 2011 Item 2012 Market The Highest 12.45 14.45 10.15 Price Per The Lowest 7.53 7.92 8.26 Share Average 10.48 12.11 9.50 Net Value Before Distribution 11.21 11.40 - Per Share After Distribution 10.88 - - Weighted average shares 1,390,640 1,850,433 2,233,858 Earnings EPS (before adjustment) 0.30 0.79 - Per Share EPS (after adjustment) 0.29 - Cash Dividends - - - Retained Shares 0.17 - - Dividend Free-Gratis Distribution Per Share Dividends Capital Reserve 0.13 - - Shares Distribution Retained Dividends - - - Return on Price-Earnings Ratio 31.53 14.24 - investment Dividend Yield - - - Analysis Cash Dividend Yields - - -

75 75 (VI) Dividend Policy and the Status of Implementation (1) The cash dividends shall be no less than 10% of the Dividends and bonus 1. Dividend policy in the Bank’s Articles of Incorporation: allocated to shareholders. Article 7: The Bank’s Dividends shall be allocated subject to resolution of the (2) Notwithstanding, if the Dividends are allocated at less than or equal to shareholders’ meeting upon the proposal made by the Board of NTD0.3 per share, the earnings may be allocated in the form of stock Directors, provided that no capital may be provided as Dividends where Dividends in full. the Bank has retained no earnings. If the capital adequacy ratio fails to reach the legal ratio, the earnings shall be Article 35: Any profit from settlement of the year shall be subject to applicable allocated in accordance with the Banking Act and the competent authority’s taxes as the top Seniority, followed by the offsetting of losses carried requirements. forward from previous years and thirty percent of the remainder of such 2. The difference between estimated and actual employee bonus and remuneration to profit shall be allocated as legal reserve, and special reserve shall be directors and supervisors as well as stock dividends distributed shall be handled by provided pursuant to laws. The balance, if any, plus the unallocated accountants as follows: accumulated retained earnings for the previous years shall be allocated (1) In the case of material change in the allocation resolved by the Board session as the shareholders’ Dividends, and the remainder thereof, if any, shall at the end of the fiscal year, the difference shall be adjusted by the expense of be allocated in the following order: the original fiscal year. A. 1%-5% for employee bonus. (2) If the shareholders’ meeting resolves the actual allocated amount different B. Remuneration to directors/supervisors granted based on 50% of from the estimate, it shall be handled as the “change in accounting estimates” the allocated employee bonus. in the year of the resolution made by the shareholders’ meeting. C. Shareholder bonus. 3. Information about any proposed allocation of employee bonus resolved by the The Board shall retain the required fund subject to the change of Board session: Not yet resolved before the Board session on February 29, 2012. operating environment, operation and investment needs before 4. Actual employee bonus and remuneration to directors and supervisors for the proposing the proportion between cash and stock Dividends for the preceding year: approval of the shareholders’ meeting: (3) Employee bonus in cash: NTD92,107 A. The cash dividends shall be no less than 10% of the Dividends and (4) Remuneration to directors/supervisors: NTD46,053 bonus allocated to shareholders. (5) Proposed allocation initially ratified by the Board session: No allocation of B. Notwithstanding, if the Dividends are allocated at less than or remuneration to directors/supervisors. equal to NTD0.3 per share, the earnings may be allocated in the (IX) Repurchase of the Bank Shares: None form of stock Dividends in full. If the capital adequacy ratio fails to reach the legal ratio, the earnings shall be allocated in accordance with the Banking Act and the competent authority’s requirements. 2. The Dividends distribution proposed at the shareholders’ meeting: Not yet resolved before the Board session on February 29, 2012 (VII) Effect of Dividends distribution proposed at the shareholders’ meeting on the operation performance of the Bank and the Earnings Per Share: Not yet resolved before the Board session on February 29, 2012. (VIII) Employee bonus and remuneration paid to directors and supervisors: 1. Ratio of Shareholding or scope of employee bonus and Remuneration to Directors and supervisors as stated in the Bank’s Articles of Incorporation: Any profit from settlement of the year shall be subject to applicable taxes as the top Seniority, followed by the offsetting of losses carried forward from previous years and thirty percent of the remainder of such profit shall be allocated as legal reserve, and special reserve shall be provided pursuant to laws. The balance, if any, plus the unallocated accumulated retained earnings for the previous years shall be allocated as the shareholders’ Dividends, and the remainder thereof, if any, shall be allocated in the following order: (1) 1%-5% for employee bonus. (2) Remuneration to directors/supervisors granted based on 50% of the allocated employee bonus. (3) Shareholder bonus. The Board shall retain the required fund subject to the change of operating environment, operation and investment needs before proposing the proportion between cash and stock Dividends for the approval of the shareholders’ meeting:

76 77 76 (1) The cash dividends shall be no less than 10% of the Dividends and bonus allocated to shareholders. (2) Notwithstanding, if the Dividends are allocated at less than or equal to NTD0.3 per share, the earnings may be allocated in the form of stock Dividends in full. If the capital adequacy ratio fails to reach the legal ratio, the earnings shall be allocated in accordance with the Banking Act and the competent authority’s requirements. 2. The difference between estimated and actual employee bonus and remuneration to directors and supervisors as well as stock dividends distributed shall be handled by accountants as follows: (1) In the case of material change in the allocation resolved by the Board session at the end of the fiscal year, the difference shall be adjusted by the expense of the original fiscal year. (2) If the shareholders’ meeting resolves the actual allocated amount different from the estimate, it shall be handled as the “change in accounting estimates” in the year of the resolution made by the shareholders’ meeting. 3. Information about any proposed allocation of employee bonus resolved by the Board session: Not yet resolved before the Board session on February 29, 2012. 4. Actual employee bonus and remuneration to directors and supervisors for the preceding year: (3) Employee bonus in cash: NTD92,107 (4) Remuneration to directors/supervisors: NTD46,053 (5) Proposed allocation initially ratified by the Board session: No allocation of remuneration to directors/supervisors. (IX) Repurchase of the Bank Shares: None

77 77

II. Issuance of Financial Bonds st Type 1 term of 2009 Subordinated Financial Bonds st Type 1 term of 2007 Subordinated Financial Bonds Ching-Kuan-Yin (4) Tze No. 09800104050 dated March 20, Ching-Kuan-Yin (4) Tze No. 09600481190 dated November Date & Approval No. Date & Approval No. 2009 14, 2007 Issue Date June 26, 2009 Issue Date December 21, 2007 Face Value NTD100,000 Face Value NTD10,000,000 Place of Issue and Trading Taiwan R.O.C Place of Issue and Trading Taiwan R.O.C Currency NTD Currency NTD Issuing price At Par Value Issuing price At Par Value Total amount NTD2.4 billion Total amount NTD1.8 billion Annual interest rate is index interest rate plus 1.02%. Index Annual interest rate is index interest rate plus 1.40%. Index Interest rate interest rate is the displayed floating rates for one-year term Interest rate interest rate is the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. deposits of Chunghua Post Co., Ltd. Maturity 5.5 years, matured on June 21, 2013 Maturity 7 years, matured on June 26, 2016 Prevail over the shareholders’ right to allocate residual Seniority Prevail over the shareholders’ right to allocate residual property, and follow the Bank’s depositors and other creditors Seniority property, and follow the Bank’s depositors and other creditors Guarantee Institution None Trustee None Guarantee Institution None Consignee None Trustee None Certified Lawyer None Consignee None Certified CPA None Certified Lawyer None Certified financial institution None Certified CPA None Repayment Methods Repayment in lump sum upon maturity Certified financial institution None Unredeemed balance NTD2.4 billion Repayment Methods Repayment in lump sum upon maturity Paid-in shares capital in last Fiscal NTD15,380,144 thousand Year Unredeemed balance NTD4.2 billion After-tax Net Worth in last Fiscal Paid-in shares capital in last Fiscal NTD8,324,959 thousand NTD13,719,006 thousand Year Year After-tax Net Worth in last Fiscal Performance Normal NTD15,504,958 thousand Redemption or earlier redemption None Year Conversion and exchange Performance Normal None conditions Redemption or earlier redemption None Limitation Article Subordinated bond Conversion and exchange None Fund utilization plan Mid-term and long-term loans conditions Balance of Bonds as a Ratio of Limitation Article Subordinated bond Shareholding of After-tax net worth 28.83% Strengthen financial structure, upgrade capital adequacy ratio (%) Fund utilization plan Whether it is accounted for equity and expand business scale Tier II Capital capital and type Balance of Bonds as a Ratio of Credit rating agency: Taiwan Ratings Corporation Shareholding of After-tax net worth Rating 27.09% Type of rating: Issuer rating (%) upon issue Rating: twBBB Date of rating: 2007/09/17 Name of credit rating agency, date Name: Fitch Ratings Limited Taiwan Branch Whether it is accounted for equity of rating and ratings Rating Tier II Capital (Fitch) capital and type upon Type of rating: Issuer rating Name: Fitch Ratings Limited Taiwan Branch (Fitch) adjustment Name of credit rating agency, date Rating: A-(twn) Date of rating: 2010/08/03 Type of rating: Bond rating of rating and ratings Rating: BBB+(twn) Date of rating: 2010/08/03

78 79 78

Type 1st term of 2009 Subordinated Financial Bonds Ching-Kuan-Yin (4) Tze No. 09800104050 dated March 20, Date & Approval No. 2009 Issue Date June 26, 2009 Face Value NTD100,000 Place of Issue and Trading Taiwan R.O.C Currency NTD Issuing price At Par Value Total amount NTD1.8 billion Annual interest rate is index interest rate plus 1.40%. Index Interest rate interest rate is the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. Maturity 7 years, matured on June 26, 2016 Prevail over the shareholders’ right to allocate residual Seniority property, and follow the Bank’s depositors and other creditors Guarantee Institution None Trustee None Consignee None Certified Lawyer None Certified CPA None Certified financial institution None Repayment Methods Repayment in lump sum upon maturity Unredeemed balance NTD4.2 billion Paid-in shares capital in last Fiscal NTD13,719,006 thousand Year After-tax Net Worth in last Fiscal NTD15,504,958 thousand Year Performance Normal Redemption or earlier redemption None Conversion and exchange None conditions Limitation Article Subordinated bond Strengthen financial structure, upgrade capital adequacy ratio Fund utilization plan and expand business scale Balance of Bonds as a Ratio of Shareholding of After-tax net worth 27.09% (%)

Whether it is accounted for equity Tier II Capital capital and type Name: Fitch Ratings Limited Taiwan Branch (Fitch) Name of credit rating agency, date Type of rating: Bond rating of rating and ratings Rating: BBB+(twn) Date of rating: 2010/08/03

79 79

Type 2nd term of 2009 Subordinated Financial Bonds Type 3rd term of 2009 Subordinated Financial Bonds Ching-Kuan-Yin (4) Tze No. 09800104050 dated March 20, Ching-Kuan-Yin (4) Tze No. 09800104050 dated March 20, Date & Approval No. Date & Approval No. 2009 2009 Issue Date December 10, 2009 Issue Date December 18, 2009 Face Value NTD500,000 Face Value NTD500,000 Place of Issue and Trading Taiwan R.O.C Place of Issue and Trading Taiwan R.O.C Currency NTD Currency NTD Issuing price At Par Value Issuing price At Par Value Total amount NTD1.2 billion Total amount NTD0.1 billion Annual interest rate is index interest rate plus 1.50%. Index Interest rate Fixed annual interest rate 2.75%. Interest rate interest rate is the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. Maturity 7 years, matured on December 10, 2016 Maturity 7 years, matured on December 18, 2016 Prevail over the shareholders’ right to allocate residual Seniority Prevail over the shareholders’ right to allocate residual property, and follow the Bank’s depositors and other creditors Seniority property, and follow the Bank’s depositors and other creditors Guarantee Institution None Guarantee Institution None Trustee None Trustee None Consignee None Consignee None Certified Lawyer None Certified Lawyer None Certified CPA None Certified CPA None Certified financial institution None Certified financial institution None Repayment Methods Repayment in lump sum upon maturity Repayment Methods Repayment in lump sum upon maturity Unredeemed balance NTD5.5 billion Unredeemed balance NTD4.3 billion Paid-in shares capital in last Fiscal Paid-in shares capital in last Fiscal NTD13,719,006 thousand NTD13,719,006 thousand Year Year After-tax Net Worth in last Fiscal NTD15,504,958 thousand After-tax Net Worth in last Fiscal Year NTD15,504,958 thousand Year Performance Normal Performance Normal Redemption or earlier redemption None Redemption or earlier redemption None Conversion and exchange conditions None Conversion and exchange conditions None Limitation Article Subordinated bond Strengthen financial structure, upgrade capital adequacy ratio Limitation Article Subordinated bond Fund utilization plan and expand business scale Strengthen financial structure, upgrade capital adequacy ratio Fund utilization plan Balance of Bonds as a Ratio of and expand business scale Shareholding of After-tax net worth 35.47% Balance of Bonds as a Ratio of (%) Shareholding of After-tax net worth 27.73% Whether it is accounted for equity Tier II Capital (%) capital and type Whether it is accounted for equity Name: Fitch Ratings Limited Taiwan Branch (Fitch) Tier II Capital Name of credit rating agency, date of capital and type Type of rating: Bond rating rating and ratings Name: Fitch Ratings Limited Taiwan Branch (Fitch) Rating: BBB+(twn) Date of rating: 2010/08/03 Name of credit rating agency, date of Type of rating: Bond rating rating and ratings Rating: BBB+(twn) Date of rating: 2010/08/03

80 81 80

Type 3rd term of 2009 Subordinated Financial Bonds Ching-Kuan-Yin (4) Tze No. 09800104050 dated March 20, Date & Approval No. 2009 Issue Date December 18, 2009 Face Value NTD500,000 Place of Issue and Trading Taiwan R.O.C Currency NTD Issuing price At Par Value Total amount NTD1.2 billion Annual interest rate is index interest rate plus 1.50%. Index Interest rate interest rate is the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. Maturity 7 years, matured on December 18, 2016 Prevail over the shareholders’ right to allocate residual Seniority property, and follow the Bank’s depositors and other creditors Guarantee Institution None Trustee None Consignee None Certified Lawyer None Certified CPA None Certified financial institution None Repayment Methods Repayment in lump sum upon maturity Unredeemed balance NTD5.5 billion Paid-in shares capital in last Fiscal NTD13,719,006 thousand Year After-tax Net Worth in last Fiscal NTD15,504,958 thousand Year Performance Normal Redemption or earlier redemption None Conversion and exchange conditions None Limitation Article Subordinated bond Strengthen financial structure, upgrade capital adequacy ratio Fund utilization plan and expand business scale Balance of Bonds as a Ratio of Shareholding of After-tax net worth 35.47% (%) Whether it is accounted for equity Tier II Capital capital and type Name: Fitch Ratings Limited Taiwan Branch (Fitch) Name of credit rating agency, date of Type of rating: Bond rating rating and ratings Rating: BBB+(twn) Date of rating: 2010/08/03

81 81 Type 1st term of 2010 Subordinated Financial Bonds th Type 4 term of 2009 Subordinated Financial Bonds Ching-Kuan-Yin (4) Tze No. 09800104050 dated March 20, Date & Approval No. Ching-Kuan-Yin (4) Tze No. 09800104050 dated March 20, 2009 Date & Approval No. 2009 Issue Date January 28, 2010 Issue Date December 30, 2009 Face Value NTD500,000 Face Value NTD500,000 Place of Issue and Trading Taiwan R.O.C Place of Issue and Trading Taiwan R.O.C Currency NTD Currency NTD Issuing price At Par Value Issuing price At Par Value Total amount NTD0.6 billion Total amount NTD1.1 billion Annual interest rate is index interest rate plus 1.50%. Index Annual interest rate is index interest rate plus 1.48%. Index Interest rate interest rate is the displayed floating rates for one-year term Interest rate interest rate is the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. deposits of Chunghua Post Co., Ltd. Maturity 7 years, matured on January 28, 2017 Maturity 6.5 years, matured on June 30, 2016 Prevail over the shareholders’ right to allocate residual Prevail over the shareholders’ right to allocate residual Seniority Seniority property, and follow the Bank’s depositors and other creditors property, and follow the Bank’s depositors and other creditors Guarantee Institution None Guarantee Institution None Trustee None Trustee None Consignee None Consignee None Certified Lawyer None Certified Lawyer None Certified CPA None Certified CPA None Certified financial institution None Certified financial institution None Repayment Methods Repayment in lump sum upon maturity Repayment Methods Repayment in lump sum upon maturity Unredeemed balance NTD7.2 billion Unredeemed balance NTD6.6 billion Paid-in shares capital in last Fiscal Year NTD13,719,006 thousand Paid-in shares capital in last Fiscal Year NTD13,719,006 thousand After-tax Net Worth in last Fiscal Year NTD15,361,003 thousand After-tax Net Worth in last Fiscal Year NTD15,504,958 thousand Performance Normal Performance Normal Redemption or earlier redemption None Redemption or earlier redemption None Conversion and exchange conditions None Conversion and exchange conditions None Limitation Article Subordinated bond Limitation Article Subordinated bond Strengthen financial structure, upgrade capital adequacy ratio Strengthen financial structure, upgrade capital adequacy ratio Fund utilization plan Fund utilization plan and expand business scale and expand business scale Balance of Bonds as a Ratio of Balance of Bonds as a Ratio of 42.57% 46.87% Shareholding of After-tax net worth (%) Shareholding of After-tax net worth (%) Whether it is accounted for equity Tier II Capital Whether it is accounted for equity capital and type Tier II Capital Name: Fitch Ratings Limited Taiwan Branch (Fitch) capital and type Name of credit rating agency, date of Name: Fitch Ratings Limited Taiwan Branch (Fitch) Type of rating: Bond rating Name of credit rating agency, date of rating and ratings Type of rating: Bond rating Rating: BBB+(twn) Date of rating: 2010/08/03 rating and ratings Rating: BBB+(twn) Date of rating: 2010/08/03

82 83 82 Type 1st term of 2010 Subordinated Financial Bonds Ching-Kuan-Yin (4) Tze No. 09800104050 dated March 20, Date & Approval No. 2009 Issue Date January 28, 2010 Face Value NTD500,000 Place of Issue and Trading Taiwan R.O.C Currency NTD Issuing price At Par Value

Total amount NTD0.6 billion Annual interest rate is index interest rate plus 1.50%. Index Interest rate interest rate is the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. Maturity 7 years, matured on January 28, 2017 Prevail over the shareholders’ right to allocate residual Seniority property, and follow the Bank’s depositors and other creditors Guarantee Institution None Trustee None Consignee None Certified Lawyer None Certified CPA None Certified financial institution None Repayment Methods Repayment in lump sum upon maturity Unredeemed balance NTD7.2 billion Paid-in shares capital in last Fiscal Year NTD13,719,006 thousand After-tax Net Worth in last Fiscal Year NTD15,361,003 thousand Performance Normal

Redemption or earlier redemption None

Conversion and exchange conditions None Limitation Article Subordinated bond Strengthen financial structure, upgrade capital adequacy ratio Fund utilization plan and expand business scale Balance of Bonds as a Ratio of 46.87% Shareholding of After-tax net worth (%) Whether it is accounted for equity Tier II Capital capital and type Name: Fitch Ratings Limited Taiwan Branch (Fitch) Name of credit rating agency, date of Type of rating: Bond rating rating and ratings Rating: BBB+(twn) Date of rating: 2010/08/03

83 83

Type 2nd term of 2010 Subordinated Financial Bonds Type 3rd term of 2010 Subordinated Financial Bonds Ching-Kuan-Yin (4) Tze No. 09800104050 dated March 20, Ching-Kuan-Yin-Piao Tze No. 09900204230 dated June 4, Date & Approval No. Date & Approval No. 2009 2010 Issue Date February 9, 2010 Issue Date June 25, 2010 Face Value NTD10,000,000 Face Value NTD10,000,000 Place of Issue and Trading Taiwan R.O.C Place of Issue and Trading Taiwan R.O.C Currency NTD Currency NTD Issuing price At Par Value Issuing price At Par Value Total amount NTD0.2 billion Total amount NTD0.9 billion Annual interest rate is index interest rate plus 1.50%. Index Annual interest rate is index interest rate plus 1.75%. Index Interest rate interest rate is the displayed floating rates for one-year term Interest rate interest rate is the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. deposits of Chunghua Post Co., Ltd. Maturity 6 years, matured on February 9, 2016 Maturity 7 years, matured on June 25, 2017 Prevail over the shareholders’ right to allocate residual Prevail over the shareholders’ right to allocate residual Seniority Seniority property, and follow the Bank’s depositors and other creditors property, and follow the Bank’s depositors and other creditors Guarantee Institution None Guarantee Institution None Trustee None Trustee None Consignee None Consignee None Certified Lawyer None Certified Lawyer None Certified CPA None Certified CPA None Certified financial institution None Certified financial institution None Repayment Methods Repayment in lump sum upon maturity Repayment Methods Repayment in lump sum upon maturity Unredeemed balance NTD7.4 billion Unredeemed balance NTD8.3 billion Paid-in shares capital in last Fiscal Year NTD13,719,006 thousand Paid-in shares capital in last Fiscal Year NTD13,719,006 thousand After-tax Net Worth in last Fiscal Year NTD15,361,003 thousand After-tax Net Worth in last Fiscal Year NTD15,361,003 thousand Performance Normal Performance Normal

Redemption or earlier redemption None Redemption or earlier redemption None

Conversion and exchange conditions None Conversion and exchange conditions None Limitation Article Subordinated bond Limitation Article Subordinated bond Strengthen financial structure, upgrade capital adequacy ratio Strengthen financial structure, upgrade capital adequacy ratio Fund utilization plan Fund utilization plan and expand business scale and expand business scale Balance of Bonds as a Ratio of Balance of Bonds as a Ratio of 48.17% 54.03% Shareholding of After-tax net worth (%) Shareholding of After-tax net worth (%) Whether it is accounted for equity Whether it is accounted for equity Tier II Capital Tier II Capital capital and type capital and type Name: Fitch Ratings Limited Taiwan Branch (Fitch) Name: Fitch Ratings Limited Taiwan Branch (Fitch) Name of credit rating agency, date of Name of credit rating agency, date of Type of rating: Bond rating Type of rating: Bond rating rating and ratings rating and ratings Rating: BBB+(twn) Date of rating: 2010/08/03 Rating: BBB+(twn) Date of rating: 2010/08/03

84 85 84

Type 3rd term of 2010 Subordinated Financial Bonds Ching-Kuan-Yin-Piao Tze No. 09900204230 dated June 4, Date & Approval No. 2010 Issue Date June 25, 2010 Face Value NTD10,000,000 Place of Issue and Trading Taiwan R.O.C Currency NTD Issuing price At Par Value Total amount NTD0.9 billion Annual interest rate is index interest rate plus 1.75%. Index Interest rate interest rate is the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. Maturity 7 years, matured on June 25, 2017 Prevail over the shareholders’ right to allocate residual Seniority property, and follow the Bank’s depositors and other creditors Guarantee Institution None Trustee None Consignee None Certified Lawyer None Certified CPA None Certified financial institution None Repayment Methods Repayment in lump sum upon maturity Unredeemed balance NTD8.3 billion Paid-in shares capital in last Fiscal Year NTD13,719,006 thousand After-tax Net Worth in last Fiscal Year NTD15,361,003 thousand Performance Normal

Redemption or earlier redemption None

Conversion and exchange conditions None Limitation Article Subordinated bond Strengthen financial structure, upgrade capital adequacy ratio Fund utilization plan and expand business scale Balance of Bonds as a Ratio of 54.03% Shareholding of After-tax net worth (%) Whether it is accounted for equity Tier II Capital capital and type Name: Fitch Ratings Limited Taiwan Branch (Fitch) Name of credit rating agency, date of Type of rating: Bond rating rating and ratings Rating: BBB+(twn) Date of rating: 2010/08/03

85 85 Bonds due to transaction or other causes subsequently should be published by public notice. 1st term of 2011 unsecured convertible Financial Bonds issued III. Issuance of Preferred Stocks: None Type domestically IV. Issuance of Overseas Depository Receipts: None Date & Approval No. Ching-Kuan-Cheng-Fa Tze No. 20110018296 dated May 16, 2011 V. Employee Stock Options: None Issue Date June 15, 2011 VI. Acquisition or Assightment of Other Financial Institutions: None Face Value NTD100,000 VII. Implementation of Fund utilization plan Place of Issue and Trading Taiwan R.O.C (I) Contents of the plan: Currency NTD 1. In order to strengthen the structure of capital and upgrade the capital adequacy ratio, Issuing price At Par Value the Bank applied with FSC for issuing the Subordinated Financial Bonds in 2006, Total amount NTD2.3 billion 2009 and 2010 respectively: Interest rate 0％ (1) The FSC approved the Bank’s application in 2006 for issuance of Maturity 3 years, matured on June 15, 2014 Seniority 1st Seniority Subordinated Financial Bonds in the amount of NTD2.4 billion via its Letter under Ching-Kuan-Yin (4) Tze No. 09600481190 dated November 14, 2007. Guarantee Institution None st Trustee Chinatrust Commercial Bank The Bank issued the “1 term of 2007 Subordinated Financial Bonds of Consignee KGI Securities Co., Ltd. Taichung Commercial Bank” (Bond No. G13001) on December 21, 2007. Certified Lawyer None The total issued amount was NTD2.4 billion with the duration of 5.5 years. Certified CPA None The Subordinated Financial Bonds were traded on GreTai markets on Dec. 24, Certified financial institution None 2007. Repayment in lump sum upon maturity, other than those converted or Repayment Methods (2) The FSC approved the Bank’s application in 2008 for issuance of redeemed pursuant to the conversion rules Subordinated Financial Bonds in the amount of NTD5 billion via its Letter Unredeemed balance NTD2.3 billion under Ching-Kuan-Yin (4) Tze No. 09800104050 on March 20, 2009. Paid-in shares capital in last Fiscal Year NTD17,319,006 thousand Term& After-tax Net Worth in last Fiscal Year NTD19,415,020 thousand Financial Performance None 2009 2009 2009 2009 2010 2010 Bonds In the event of any of the following circumstances from December 1st Term 2nd Term 3rd Term 4th Term 1st Term 2nd Term

16, 2011 (the day following maturity of six months after issuance) until May 6, 2014 (40 days prior to maturity), the Bank may send the Item “Notice of Call” to be matured in one month (Note 1) to the Financial Bond No. G13002 G13003 G13004 G13005 G13006 G13007 Bonds holder (Note 2) via registered mail within the agreed time Issue Date 2009.6.26 2009.12.10 2009.12.18 2009.12.30 2010.1.28 2010.2.9 NTD1.8 NTD0.1 NTD1.2 NTD1.1 NTD0.6 NTD0.2 limit, and notify the GTSM in writing and call the outstanding Total Issued Financial Bonds at the face value upon expiration of said-noted billion billion billion billion billion billion period: Duration 7 years 7 years 7 years 6.5 years 7 years 6 years Redemption or earlier redemption (1) If the closing price of the Bank’s common shares exceeds the Listing Date 2009.6.26 2009.12.10 2009.12.18 2009.12.30 2010.1.28 2010.2.9 current conversion price by more than 30% for 30 consecutive (3) The FSC approved the Bank’s application in 2010 for issuance of business days, the Bank may send the “Notice of Call” to be Subordinated Financial Bonds in the amount of NTD0.9 billion via its Letter matured in one month to the Financial Bonds holder via registered under Ching-Kuan-Yin (4) Tze No. 0900204230 on June 4, 2010. The Bank mail within 30 business days. rd (2) If the balance of the outstanding Financial Bonds is less than 10% issued the “3 term of 2010 Subordinated Financial Bonds of Taichung of the initial total issue price, the Bank may send the “Notice of Commercial Bank” (Bond No. G13008) on June 25, 2010. The total issued Call” to be matured in one month to the Financial Bonds holder amount was NTD0.9 billion with the duration of 7 years. The bond was via registered mail at any time. traded on GreTai markets on the same date. Conversion and exchange conditions None 2. Recapitalization through issuing common share in amount of NTD3.6 billion in Limitation Article None 2010: Strengthen financial structure, upgrade capital adequacy ratio and Fund utilization plan expand business scale In order to strengthen the Bank’s financial structure, upgrade the Bank's capital Balance of Bonds as a Ratio of adequacy ratio and expand the Bank’s business scale, the Bank applied with 54.60％ Shareholding of After-tax net worth (%) Securities and Futures Bureau of FSC for recapitalization through issuing common Whether it is accounted for equity share in amount of NTD3.6 billion on October 14, 2010 and the case approved on Not included capital and type November 2, 2010 under Chin-Kuan-Cheng No. 0990058141 confirmation letter. Name: Fitch Ratings Limited Taiwan Branch (Fitch) Name of credit rating agency, date of The stock payment in the amount of NTD3.6 billion has been fully collected on Type of rating: Bond rating Rating: A-(twn) rating and ratings December 9, 2010, and the new shares were listed on December 15, 2010. Date of rating: 2011/06/15 3. 1st term of 2011 unsecured convertible Financial Bonds issued domestically in 【Note 1】 Said-noted period was counted from the date when the Bank issued the letter and the record date of the call was the expiry date of the period. Meanwhile, the conversion suspension period referred to in Article 9 of amount of NTD2.3 billion: the Bank’s Rules for Issuing and Conversion of 1st term of 2011 unsecured converbible Financial Bonds In order to strengthen the Bank’s financial structure, upgrade the Bank's capital issued domestically should not fall in said-noted period. adequacy ratio and expand the Bank’s business scale, the Bank applied with 【Note 2】 Financail Bonds holder: To be identified based on the name list of Financail Bonds holders prevailing within st five business days prior to mailing of the Notice of Call, provided that the investor who holds the Financail Securities and Futures Bureau of FSC for issuance of the domestic 1 term of 2011

86 87 86 Bonds due to transaction or other causes subsequently should be published by public notice. III. Issuance of Preferred Stocks: None IV. Issuance of Overseas Depository Receipts: None V. Employee Stock Options: None VI. Acquisition or Assightment of Other Financial Institutions: None VII. Implementation of Fund utilization plan (I) Contents of the plan: 1. In order to strengthen the structure of capital and upgrade the capital adequacy ratio, the Bank applied with FSC for issuing the Subordinated Financial Bonds in 2006, 2009 and 2010 respectively: (1) The FSC approved the Bank’s application in 2006 for issuance of Subordinated Financial Bonds in the amount of NTD2.4 billion via its Letter under Ching-Kuan-Yin (4) Tze No. 09600481190 dated November 14, 2007. The Bank issued the “1st term of 2007 Subordinated Financial Bonds of Taichung Commercial Bank” (Bond No. G13001) on December 21, 2007. The total issued amount was NTD2.4 billion with the duration of 5.5 years. The Subordinated Financial Bonds were traded on GreTai markets on Dec. 24, 2007. (2) The FSC approved the Bank’s application in 2008 for issuance of Subordinated Financial Bonds in the amount of NTD5 billion via its Letter under Ching-Kuan-Yin (4) Tze No. 09800104050 on March 20, 2009. Term& Financial 2009 2009 2009 2009 2010 2010 Bonds 1st Term 2nd Term 3rd Term 4th Term 1st Term 2nd Term

Item Bond No. G13002 G13003 G13004 G13005 G13006 G13007 Issue Date 2009.6.26 2009.12.10 2009.12.18 2009.12.30 2010.1.28 2010.2.9 NTD1.8 NTD0.1 NTD1.2 NTD1.1 NTD0.6 NTD0.2 Total Issued billion billion billion billion billion billion Duration 7 years 7 years 7 years 6.5 years 7 years 6 years Listing Date 2009.6.26 2009.12.10 2009.12.18 2009.12.30 2010.1.28 2010.2.9 (3) The FSC approved the Bank’s application in 2010 for issuance of Subordinated Financial Bonds in the amount of NTD0.9 billion via its Letter under Ching-Kuan-Yin (4) Tze No. 0900204230 on June 4, 2010. The Bank issued the “3rd term of 2010 Subordinated Financial Bonds of Taichung Commercial Bank” (Bond No. G13008) on June 25, 2010. The total issued amount was NTD0.9 billion with the duration of 7 years. The bond was traded on GreTai markets on the same date. 2. Recapitalization through issuing common share in amount of NTD3.6 billion in 2010: In order to strengthen the Bank’s financial structure, upgrade the Bank's capital adequacy ratio and expand the Bank’s business scale, the Bank applied with Securities and Futures Bureau of FSC for recapitalization through issuing common share in amount of NTD3.6 billion on October 14, 2010 and the case approved on November 2, 2010 under Chin-Kuan-Cheng No. 0990058141 confirmation letter. The stock payment in the amount of NTD3.6 billion has been fully collected on December 9, 2010, and the new shares were listed on December 15, 2010. 3. 1st term of 2011 unsecured convertible Financial Bonds issued domestically in amount of NTD2.3 billion: In order to strengthen the Bank’s financial structure, upgrade the Bank's capital adequacy ratio and expand the Bank’s business scale, the Bank applied with Securities and Futures Bureau of FSC for issuance of the domestic 1 st term of 2011

87 87 unsecured convertible Finanical Bonds in the amount of NTD2.8 billion on April 27, 2011, and the issuance has been reported to FSC and approved on May 16, 2011 Five. Operation Profile upon the FSC’s approval under Chin-Kuan-Cheng No. 1000018296 confirmation I. Business Contents letter. Further, on May 26, 2011, the Bank’s board session resolved at 15th (I) Principal business of the Bank by business type, assets under respective business units meeting of 20th term to adjust the total issued amount as NTD2.3 billion by issuing and/or their proportion to total assets and/or revenue, and the status of growth. 2,300 Financial Bonds in total at the face value of NTD100,000 per Bond. The 1. Principal business of the Bank by business type: conversion price was NTD11.89 then, with the duration of 3 years (from June 5, (1) Deposits Operations: passbooks, check deposits, certificates of deposit, 2011 until June 15, 2014). The payment totaling NTD2.3 billion has been fully negotiable certificates of deposit. collected on June 13, 2011, and the Financial Bonds were traded on GreTai markets (2) Loan Operations: personal loans, corporate loans, syndicate loans, discounts of on June 15, 2011. instruments, issuance of local L/C and local guarantee making. 4. Capital increase by recapitalization of earnings and capital surplus in amount of (3) Foreign Exchanges Operations: import, export, foreign exchange settlements, NTD519,570,180 in 2010: deposits, and loans of foreign currency. In order to strengthen the Bank’s financial structure, upgrade the Bank's capital (4) Wealth Management Operations: Administer the planning and execution of the adequacy ratio and expand the Bank’s business scale, the Bank applied with financial planning businesses throughout the nation, management of financial Securities and Futures Bureau of FSC for capital increase by recapitalization of planning staff, preparation and revision of the wealth management policy and earnings and capital surplus by NTD519,570,180 on July 4, 2011 and the capital operating procedure, and promotion, supervision and management of wealth increase has been reported to FSC and approved on July 20, 2011 under management customers’ investment in the financial planning business. Chin-Kuan-Cheng No. 1000032577 confirmation letter. The capital increase was (5) Corporate Finance Operations: Administer corporate banking business related registered on September 22, 2011, and the Bank’s paid-in capital became to loans to SMEs, corporate syndicate loans and factoring, et al. NTD17,838,575,940, and the gross capital NTD20,000,000,000. (6) e-banking Operations: Network banking, e-ATM, ATM and Phone banking. 5. Recapitalization through issuing common share in amount of NTD4.5 million in (7) Trust Operations: Investment in domestic and overseas marketable securities 2011: through special monetary trustee accounts, Certified auditors of marketable In order to strengthen the Bank’s financial structure, upgrade the Bank's capital securities, real estate trust and specific independent money management and adequacy ratio and expand the Bank’s business scale, the Bank applied with utilization trust. Securities and Futures Bureau of FSC for Recapitalization through issuing common (8) Investment Operations: Dispatch of funds in NTD and foreign currency, share in amount of NTD4.5 million on July 22, 2011 and the capital increase has foreign exchange, marketable securities trading and long-term equity been reported to FSC and approced on August 9, 2011 under Chin-Kuan-Cheng No. investment. 1000035963 confirmation letter. The stock payment in the amount of NTD4.5 (9) Securities: Entrusted with buying and selling securities, Margin transaction of billion has been fully collected on November 8, 2011, and the new shares were Purchase on margin and Short sale. listed on November 11, 2011. 2. Assets under respective business units and/or their proportion to total assets and/or (II) Status of implementation: revenue, and the status of growth: The Bank issued the Subordinated Financial Bonds in 2007, 2009 and 2010, increased (1) Deposit Operations: capital by recapitalization of earnings and capital surplus in 2010, increased capital st Unit: NTD thousand; % through issuing common share and issued the domestic 1 unsecured convertible Year Comparison between 2011 Financial Bonds in 2011, in order to strengthen the Bank’s financial structure, upgrade 2011 2010 and 2010 the Bank's capital adequacy ratio and expand the Bank’s business scale. The said plan Increase Increase had positive contribution to the Bank’s financial structure and financial ratios. The Proportion Proportion Amount (%) Amount (%) (decrease) in (decrease) in Bank’s important financial ratios for 2009, 2010 and 2011 are summarized as follows: Item amount proportion % Year Comparison between Comparison between Check deposits 7,012,760 2.09 4,908,754 1.61 2,104,006 42.86 2011 2010 2009 2011 and 2010 2010 and 2009 Current deposits 66,620,964 19.84 59,579,199 19.54 7,041,765 11.82 Financial ratio Current Current saving ROA (%) 0.40 0.13 0.27 0.01 0.12 deposits 81,231,495 24.19 80,164,600 26.29 1,066,895 1.33 deposits ROE (%) 6.48 2.37 4.11 0.12 2.25 Capital adequacy ratio (%) 11.63 11.10 0.53 10.32 0.78 Subtotal 154,865,219 46.12 144,652,553 47.44 10,212,666 7.06 Net income(Thousand NTD) 1,454,000 411,956 1,042,044 18,988 392,968 Time deposits 60,654,582 18.06 50,938,305 16.71 9,716,277 19.07 Time Time saving Earnings Per Share ($) 0.79 0.29 0.50 0.01 0.28 118,312,830 35.23 107,239,823 35.17 11,073,007 10.33 deposits deposits Subtotal 178,967,412 53.29 158,178,128 51.88 20,789,284 13.14

Accounts transfer Others and deposits via 1,986,115 0.59 2,072,953 0.68 (86,838) (4.19) post office Total 335,818,746 100.00 304,903,634 100.00 30,915,112 10.14 Note 1: Current deposits and Current deposits include deposits in foreign currencies and treasury deposits Note 2: Accounts transfer and deposits via post office include the national development fund tied in with

88 89 88

Five. Operation Profile I. Business Contents (I) Principal business of the Bank by business type, assets under respective business units and/or their proportion to total assets and/or revenue, and the status of growth. 1. Principal business of the Bank by business type: (1) Deposits Operations: passbooks, check deposits, certificates of deposit, negotiable certificates of deposit. (2) Loan Operations: personal loans, corporate loans, syndicate loans, discounts of instruments, issuance of local L/C and local guarantee making. (3) Foreign Exchanges Operations: import, export, foreign exchange settlements, deposits, and loans of foreign currency. (4) Wealth Management Operations: Administer the planning and execution of the financial planning businesses throughout the nation, management of financial planning staff, preparation and revision of the wealth management policy and operating procedure, and promotion, supervision and management of wealth management customers’ investment in the financial planning business. (5) Corporate Finance Operations: Administer corporate banking business related to loans to SMEs, corporate syndicate loans and factoring, et al. (6) e-banking Operations: Network banking, e-ATM, ATM and Phone banking. (7) Trust Operations: Investment in domestic and overseas marketable securities through special monetary trustee accounts, Certified auditors of marketable securities, real estate trust and specific independent money management and utilization trust. (8) Investment Operations: Dispatch of funds in NTD and foreign currency, foreign exchange, marketable securities trading and long-term equity investment. (9) Securities: Entrusted with buying and selling securities, Margin transaction of Purchase on margin and Short sale. 2. Assets under respective business units and/or their proportion to total assets and/or revenue, and the status of growth: (1) Deposit Operations: Unit: NTD thousand; % Year Comparison between 2011 2011 2010 and 2010

Proportion Proportion Increase Increase Amount (%) Amount (%) (decrease) in (decrease) in Item amount proportion % Check deposits 7,012,760 2.09 4,908,754 1.61 2,104,006 42.86 Current deposits 66,620,964 19.84 59,579,199 19.54 7,041,765 11.82 Current Current saving deposits 81,231,495 24.19 80,164,600 26.29 1,066,895 1.33 deposits Subtotal 154,865,219 46.12 144,652,553 47.44 10,212,666 7.06 Time deposits 60,654,582 18.06 50,938,305 16.71 9,716,277 19.07 Time Time saving 118,312,830 35.23 107,239,823 35.17 11,073,007 10.33 deposits deposits Subtotal 178,967,412 53.29 158,178,128 51.88 20,789,284 13.14 Accounts transfer Others and deposits via 1,986,115 0.59 2,072,953 0.68 (86,838) (4.19) post office Total 335,818,746 100.00 304,903,634 100.00 30,915,112 10.14 Note 1: Current deposits and Current deposits include deposits in foreign currencies and treasury deposits Note 2: Accounts transfer and deposits via post office include the national development fund tied in with

89 89 accounts transfer and deposits. (2) Loan Operations: (4) Wealth Management: Unit: NTD thousand; % Unit: NTD thousand; % Year Comparison between Year 2011 2010 Comparison between 2011 and 2010 2011 2010 2011 and 2010 Increase Increase (decrease) Proportion Proportion Increase (decrease) Amount Amount Increase (decrease) in amount in Proportion (%) (%) Amount Proportion(%) Amount (decrease) in in proportion (%) Item amount proportion % Item % Short-term secured （2,384,198）（4.65） Trust service fee 48,851,378 17.10 51,235,576 20.39 306,696 54.28 433,478 72.80 （126,782）（29.25） loans revenue Short-term credit Insurance service fee 33,924,033 11.87 22,732,821 9.05 11,191,213 49.23 258,291 45.72 161,894 27.20 96,397 59.54 loans revenue Subtotal 82,775,411 28.98 73,968,397 29.44 8,807,015 11.91 Total 564,987 100.00 595,372 100.00 （30,385）（5.10） Mid-term secured 82,832,302 29.00 71,883,058 28.61 10,949,244 15.23 loans Mid-term credit (5) Corporate Finance: 26,781,468 9.37 21,983,205 8.75 4,798,263 21.83 loans Unit: NTD million; % Comparison between Subtotal 109,613,770 38.37 93,866,263 37.36 15,747,507 16.78 Year 2011 2010 2011 and 2010

Long-term secured Increase 85,425,962 29.90 75,751,631 30.15 9,674,331 12.77 loans Increase (decrease) Proportion Long-term credit Amount Proportion(%) Amount (decrease) in in 1,592,791 0.56 1,451,703 0.58 141,088 9.72 (%) loans amount proportion Item Subtotal 87,018,753 30.46 77,203,334 30.73 9,815,419 12.71 % Balance of loans to SMEs 95,241 65.46 81,752 68.35 13,489 16.50 Others 6,268,476 2.19 6,200,791 2.47 67,685 1.09 Balance of loans to large-size 33,040 22.71 25,073 20.96 7,967 31.78 Subtotal 6,268,476 2.19 6,200,791 2.47 67,685 1.09 enterprises Balance of loans to Total 285,676,411 100.00 251,238,783 100.00 34,437,626 13.71 governments and public 800 0.55 2,000 1.67 （1,200）（60.00） Note: Said table includes foreign currencies, OBU, delinquent accounts, Acceptances enterprises Balance of corporate Finance receivable and receivable security bonds 129,081 88.72 108,825 90.98 20,256 （11.72） loans in NTD Balance of loans in foreign (3) Foreign Exchanges Operations: 16,410 11.28 10,790 9.02 5,620 52.09 Unit: USD 1,000; % currency Year Comparison between 2011 Total 145,491 100.00 119,615 100.00 25,876 21.63 2011 2010 and 2010 Increase Increase Proportion Proportion (6) e-Banking Operations: Amount Amount (decrease) in (decrease) in (%) (%) A. Number of new network accounts Item amount proportion % Comparison between 2011 and Year 2011 2010 Import 1,412,516 15.72 1,303,945 15.41 108,571 8.33 2010

Increase Export 552,916 6.15 464,035 5.48 88,881 19.15 (decrease) in Increase Number of Number of Number of Number of Outward remittance 3,804,229 42.33 3,552,847 41.97 251,382 7.08 number of (decrease) in active accounts new accounts active accounts new accounts active proportion % Inward remittance 3,217,223 35.80 3,144,106 37.14 73,117 2.33 Item accounts Total 8,986,884 100.00 8,464,933 100.00 521,951 6.17 Number of new Balance of deposits network 98,713 18,188 80,525 15,082 18,188 22.58 at the end of the 490,991 502,841 （11,850）（2.36） accounts year Balance of loans at 554,393 378,677 175,716 46.40 the end of the year

90 91 90

(4) Wealth Management: Unit: NTD thousand; % Year Comparison between 2011 2010 2011 and 2010 Increase Increase (decrease) Proportion Amount Proportion(%) Amount (decrease) in in (%) amount proportion Item % Trust service fee 306,696 54.28 433,478 72.80 （126,782）（29.25） revenue Insurance service fee 258,291 45.72 161,894 27.20 96,397 59.54 revenue Total 564,987 100.00 595,372 100.00 （30,385）（5.10）

(5) Corporate Finance: Unit: NTD million; % Comparison between Year 2011 2010 2011 and 2010

Increase

Increase (decrease) Proportion Amount Proportion(%) Amount (decrease) in in (%) amount proportion Item % Balance of loans to SMEs 95,241 65.46 81,752 68.35 13,489 16.50 Balance of loans to large-size 33,040 22.71 25,073 20.96 7,967 31.78 enterprises Balance of loans to governments and public 800 0.55 2,000 1.67 （1,200）（60.00） enterprises Balance of corporate Finance 129,081 88.72 108,825 90.98 20,256 （11.72） loans in NTD Balance of loans in foreign 16,410 11.28 10,790 9.02 5,620 52.09 currency Total 145,491 100.00 119,615 100.00 25,876 21.63

(6) e-Banking Operations: A. Number of new network accounts Comparison between 2011 and Year 2011 2010 2010

Increase

(decrease) in Increase Number of Number of Number of Number of number of (decrease) in active accounts new accounts active accounts new accounts active proportion % Item accounts Number of new network 98,713 18,188 80,525 15,082 18,188 22.58 accounts

91 91 B. e-Banking trading ratio (8) Investments Operations: Comparison between 2011 and Unit: NTD thousand; % Year 2011 2010 2010 Comparison between 2011 Proportion to 2011 2010 Proportion to Proportion to Year and 2010 Increase increase Accumulative Total Accumulative Total Increase (decrease) in (decrease) in Increase transactions Transactions transactions Transactions Proportion Proportion (decrease) in transactions total Amount Amount (decrease) in Item (%) (%) Item (%) (%) proportion transactions % amount e-Banking % 5,707,491 47.76 4,914,367 44.05 793,124 16.13 Long-term/short-term transaction （157,350）（31.53） 355,940 40.45 （513,290）（144.21） Note: The transactions exclude those for inquiries. investment revenue Interest income – 571,485 114.52 416,077 47.28 155,408 37.35 (7) Trust Operations: NTD/foreign currency Unit: NTD thousand; % Exchange revenue - spot 84,903 17.01 108,003 12.27 （23,100）（21.39） Year Comparison between 2011 Total income 2011 2010 and 2010 (exclusive of the reserve 499,038 100.00 880,020 100.00 （380,982）（43.29） Increase Increase fund and own reserves) Proportion Proportion Item Amount Amount (decrease) in (decrease) in (%) (%) amount proportion % (9) Securities: Investment Balance of Unit: NTD thousand; % in domestic trust in 5,692,959 14.73 5,419,189 15.34 273,770 5.05 Year Comparison between 2011 and domestic 2011 2010 overseas funds and 2010 Increase Increase marketable Service fee Proportion Proportion 32,411 10.57 33,248 7.67 （837）（2.52） Amount Amount (decrease) (decrease) in securities revenue (%) (%) through Balance of Item in amount proportion % special trust in Amount of 30,174,736 78.08 28,198,360 79.81 1,976,376 7.01 monetary overseas transactions of Brokerage （）（） trustee funds Securities 51,217,173 - 58,183,078 - 6,965,905 11.97 accounts Service fee brokerage 257,758 84.04 385,006 88.82 （127,248）（33.05） revenue Average ETF balance 36,844 0.09 0 0 36,844 balance of Service fee 227,095 - 285,024 - （57,929）（20.32） 692 0.23 0 0 692 Purchase on revenue margin Balance of Brokerage fee Service fee revenue 56,945 structure 663,484 1.72 639,899 1.81 23,585 3.69 revenue 97.77 65,745 98.07 （8,800）（13.38） note Service fee Short Sale - 0.00 1,261 0.29 （1,261） 1,105 1.90 1,074 1.60 31 2.89 revenue revenue Certified Business Underwriting 3,265,939 - 3,702,873 - （436,934）（11.80） 193 auditors of volume revenue 0.33 220 0.33 （27）（12.27） marketable Service fee 402 0.13 741 0.17 （339）（45.75） securities revenue Total service 58,243 100 67,039 100 （8,796）（13.12） Balance of fee 690,879 1.79 365,347 1.03 325,532 89.10 Real estate trust trust Service fee Note: Brokerage fee revenue less discount of service charges 5,190 1.69 10,572 2.44 （5,382）（50.91） revenue Specific Balance of independent 1,387,135 3.59 710,908 2.01 676,227 95.12 trust money management and Service fee 10,242 3.34 2,650 0.61 7,593 286.53 utilization revenue trust Balance of trust assets 38,646,037 100.00 35,333,703 100.00 3,312,334 9.37

92 93 92 (8) Investments Operations: Unit: NTD thousand; % Comparison between 2011 2011 2010 Year and 2010 Increase Increase Proportion Proportion (decrease) in Amount Amount (decrease) in Item (%) (%) proportion amount % Long-term/short-term （157,350）（31.53） 355,940 40.45 （513,290）（144.21） investment revenue Interest income – 571,485 114.52 416,077 47.28 155,408 37.35 NTD/foreign currency Exchange revenue - spot 84,903 17.01 108,003 12.27 （23,100）（21.39） Total income (exclusive of the reserve 499,038 100.00 880,020 100.00 （380,982）（43.29） fund and own reserves)

(9) Securities: Unit: NTD thousand; % Year Comparison between 2011 2011 2010 and 2010 Increase Increase Proportion Proportion Amount Amount (decrease) (decrease) in (%) (%) Item in amount proportion % Amount of transactions of Brokerage Securities 51,217,173 - 58,183,078 - （6,965,905）（11.97） brokerage Average balance of Purchase on 227,095 - 285,024 - （57,929）（20.32） margin Brokerage fee Service fee revenue 56,945 revenue 97.77 65,745 98.07 （8,800）（13.38） Short Sale 1,105 revenue 1.90 1,074 1.60 31 2.89 Underwriting 193 revenue 0.33 220 0.33 （27）（12.27） Total service 58,243 fee 100 67,039 100 （8,796）（13.12） Note: Brokerage fee revenue less discount of service charges

93 93 (II) Business plan for 2012: investment by customers. 1. Deposit Operations (3) Wealth Management Dept. will work with various branches to provide the (1) Add more business items to increase additional risk-free service charge exclusive service for one-by-one consultation on investment in fund income. irregularly. (2) Continue improving SOP, simplifying routine operating, reducing operating (4) Organize small-size and large-size investment presentations to upgrade the cost and upgrading service quality. Bank’s professional identity and attract customers, so as to communicate the (3) Continue enhancing e-banking service functions, promoting customers’ global financial market information to customers for reference in a timely utilization actively, increasing service fee revenue, upgrading the processing manner. efficiency. (5) Enhance the market analysis and investment strategies by providing financial (4) Develop the number of customers, promote development of the source of planning specialists and branches with the real-time market information, relevant derivatives, and develop the Bank’s potential income. portfolio messages and sale strategies through phone conference, and making 2. Loan Operations available to business unit managers and financial planning specialists the latest (1) Develop the house loans tied in with house loan life insurance program, and market information, global index, selected funds, ETF and suggestions via have Taichung Commercial Bank Insurance Broker Co., Ltd. process fire and email on a daily basis and on a weekly basis, to help them provide customers earthquake insurance programs or preferential house loan life insurance with professional suggestions. programs to increase the Bank’s revenue. 5. Corporate Finance (2) The Bank worked with the Government in the various house loan policies, and (1) Strength visits to customers to develop new clientele, continue providing continued the “An Hsin House Loans” and “30 House Loan Project” to press excellent customers with the pricing policy based on the interest rate in money close to the house loan market level and increase the options and market, develop new financial derivatives, and include corporate banking competitiveness of house loan products. integrated marketing. (3) The Bank provided the “personal loans” and “real estate brokerage industry (2) Continue enhancing the “loans to SMEs” core business to increase operating house loans” to strengthen the Bank’s personal loans for funding civil revenue. engineering projects, and also allied with the real estate brokerage industry (3) Expand the personnel organization and business scale for “syndicated loan” to horizontally to control the funding needs derived from the transactions of real increase the revenue from service fees for organization of syndicated loans. estate, expand the Bank’s house loan scale and to increase the transactions. (4) Accelerate the promotion of “receivable accounts” to enhance the trading cash (4) The Bank adheres to the stable management philosophy with respect to the flow business development. Personal banking and strictly controls the quality of credit extension. (5) Establish the service counters for SMEs and micro-enterprises according to the (5) Enhance the whole colleagues’ concept about credit extension business and national economic development policies and the government’s “Program to education training programs for review of guiding cases, upgrade the quality Encourage Lending By Domestic Banks to Small and Medium Enterprises”, of credit extension and operating efficiency, enhance colleagues’ knowledge continue providing various preferential funding services to domestic SMEs about credit guarantee fund, and avoid occurrence of illegal credit extension tied with the SME credit guarantee fund to reduce the Bank's credit extension and non-repayment from credit guarantee fund. risk. (6) Review the regulations for credit extension, modify the various rules and 6. Trust Operations improve SOP. (1) Develop the custodian bank business, strive for niche businesses, and develop 3. Foreign Exchanges Operations stable income source. (1) Simplify SOP, upgrade service quality, enhance the various staff’s expertise (2) Mutual fund: and development ability with respect to foreign exchanges, upgrade the Bank’s A. Introduction of new products: RMB-related portfolio and Bond ETF competitiveness B. Provide new investment strategy: Efficient investment method (feeder (2) Actively develop the OBU business and cross-strait financial transactions and fund investment) and easy fund investment such as deposit of service fee funding, provide professional services to Taiwan-based enterprises, aim to (3) General Trust Operations: become the base of dispatching fund for customers engaged in overseas A. Real estate trust: Plan the overall marketing model of land and investment. construction financing and credit extension to increase the service fee (3) Strengthen R&D and transactions of financial derivatives, upgrade the Bank’s revenue. skills in operating finance in order to satisfy customers’ diversified needs. B. Escrow: Personal loans and house loans tied in with the trust mechanism (4) Actively solicit foreign currency deposits, by promoting the preferential rules to increase the service fee revenue. for foreign currency deposit to diversify the funds. 7. Securities (5) Upgrading and developing foreign exchange’s e-banking function. (1) Increase IB business and order by mobile phone to increase the service fee 4. Wealth Management revenue. (1) Introduce investments in dual currency deposits and other new financial (2) For the time being, the securities business locations include the Head Office and instruments, in order to increase the categories of investment by customers. Yuanlin, Taipei and Zhongli Securities Branches. In 2012, the Bank will (2) Provide such new investment methods as efficient investment method and easy continue expanding the securities branches, and expect to add New Taipei City, fund investment such as deposit of service fees to increase the modes of Hsinchu and Kaohsiung securities branches to expand the Bank’s market share.

94 95 94 investment by customers. (3) Wealth Management Dept. will work with various branches to provide the exclusive service for one-by-one consultation on investment in fund irregularly. (4) Organize small-size and large-size investment presentations to upgrade the Bank’s professional identity and attract customers, so as to communicate the global financial market information to customers for reference in a timely manner. (5) Enhance the market analysis and investment strategies by providing financial planning specialists and branches with the real-time market information, portfolio messages and sale strategies through phone conference, and making available to business unit managers and financial planning specialists the latest market information, global index, selected funds, ETF and suggestions via email on a daily basis and on a weekly basis, to help them provide customers with professional suggestions. 5. Corporate Finance (1) Strength visits to customers to develop new clientele, continue providing excellent customers with the pricing policy based on the interest rate in money market, develop new financial derivatives, and include corporate banking integrated marketing. (2) Continue enhancing the “loans to SMEs” core business to increase operating revenue. (3) Expand the personnel organization and business scale for “syndicated loan” to increase the revenue from service fees for organization of syndicated loans. (4) Accelerate the promotion of “receivable accounts” to enhance the trading cash flow business development. (5) Establish the service counters for SMEs and micro-enterprises according to the national economic development policies and the government’s “Program to Encourage Lending By Domestic Banks to Small and Medium Enterprises”, continue providing various preferential funding services to domestic SMEs tied with the SME credit guarantee fund to reduce the Bank's credit extension risk. 6. Trust Operations (1) Develop the custodian bank business, strive for niche businesses, and develop stable income source. (2) Mutual fund: A. Introduction of new products: RMB-related portfolio and Bond ETF B. Provide new investment strategy: Efficient investment method (feeder fund investment) and easy fund investment such as deposit of service fee (3) General Trust Operations: A. Real estate trust: Plan the overall marketing model of land and construction financing and credit extension to increase the service fee revenue. B. Escrow: Personal loans and house loans tied in with the trust mechanism to increase the service fee revenue. 7. Securities (1) Increase IB business and order by mobile phone to increase the service fee revenue. (2) For the time being, the securities business locations include the Head Office and Yuanlin, Taipei and Zhongli Securities Branches. In 2012, the Bank will continue expanding the securities branches, and expect to add New Taipei City, Hsinchu and Kaohsiung securities branches to expand the Bank’s market share.

95 95 (III) Market Analysis (2) Countermeasures: 1. Territories of banking business: A. Upgrade the core profitability, solidify banking operation and At present, the Bank has 80 branch locations and 4 securities locations. The development foundation Bank has fulfilled its diversified and combined business to provide well-founded B. Control enterprise's cash flow needs, provide complete and convenient and multiple financial services by increasing its business locations and developing financing plan the territories of its business. C. Train financial professionals, oriented toward consolidated commercial 2. Supply and Demand of the market and growth in the future bank In 2011, such concerns as the earthquake in Japan, Jasmine Revolution in D. Initiate new financial operations, provide diversified financial products Middle East Asia, European Debt Crisis and the second economic regression in the E. Control the cross-strait financial opportunities, enhance financial services U.S.A. made the international financial market in a turmoil. Meanwhile, to Taiwanese businessmen in Mainland China Mainland China has started to adopt the currency revaluation policy as of 2010. A F. Develop offshore financial domain, strengthen international banking scale variety of unfavorable factors increased concerns about the global economic G. Optimize assets/liabilities management, upgrade operating safety and prospective drastically. increase operating revenue Due to the continuously sluggish global economy, the indicators in terms of H. Enhance beneficial results of financial investment, well found property finance, trading, production and consumption declined accordingly. The leading management product platform indicator and coincident indicator have been blue light for two consecutive months I. With full efforts and exertion of excellent service and competitive as of November. Apparently, the economic growth was sluggish. strengths. 3. Transformation and challenge of market structure J. Implement local charity events, continuously fulfill the enterprise’s social The financial organizations’ operating performance is decided depending on responsibilities. whether the competitiveness and profitability structure may be upgraded and (IV) Research and Development of financial products and status of business development improved continuously and successfully. How to deal with the cross-strait 1. Primary financial products and new banking units, their sizes and income in the financial cooperation agreement, MOU and ECFA, which led to the direct most recent two years cross-strait financial transactions, extension of Taiwan’s experience in operation to Unit: NTD thousand the Mainland China and collaboration with Taiwanese businessmen in Mainland Until Feb. 29, 2012 2011/end 2010/end China to establish the base to expand the market scale and to intensify the Item Trade Operating Trade Operating Trade Operating cross-strait financial cooperation will be the important domains which the financial value/volume revenue value/volume revenue value/volume revenue organizations will work hard to develop. Corporate Finance 4. Competitive niche, favorable and unfavorable factors for development in the future, Volume of and Countermeasures. 129,063,096 569,232 129,081,019 3,410,331 101,128,721 2,570,170 (1) SWOT analysis on favorable and unfavorable factors corporate loans Personal banking Strength Weakness Consumer loans 45,646,278 174,713 44,415,697 1,027,690 43,947,420 957,175   Unique strength deriving from the dense Financial innovation ability is inferior than that Non-Consumer branch channels, and the long-term SME of international large-scale financial 89,684,454 421,228 89,520,272 1,890,980 94,382,753 1,581,267 loans customer base organization  Long-term deep-rooted localization in the  Business scale still needs to be upgraded, and it Credit card loans 563,387 15,215 2,873,196 110,840 2,237,795 72,540 Central Taiwan to establish the regular is impossible to rival large-size financial Trust Operations clientele organizations. Balance of trust   37,422,880 36,930 38,646,037 306,695 35,333,703 433,478 Well-founded financial structure and No offshore branches have been established and, assets stability profitability therefore, lose the chance to develop Taiwan Financial  Credit rating maintained at specific level businessmen at the very beginning  International competitiveness needs to be management upgraded. Securities trade 623,508 73,489 4,170,355 （248,768） 4,957,147 152,713 Opportunity Threat Securities Securities  Open cross-strait financial policies  Given the global financial development, the 9,545,065 10,434 51,217,173 58,243 58,183,078 67,039 increases the chance to expand the bank’s Bank is facing the challenge from international brokerage scale groups Note 1: The “operating revenue” from securities trading means the income from disposition and  Adjust the branches’ clientele bases and the  Multi-sectorial competition from holding evaluation of securities trading.) benefits of business are expectable companies which have strength in scale and cost Note 2: The Bank established the Corporate Finance Dept. in May 2011.  Promote the concept about asset  Intense competition among local banks, and it is management and reserve the potential difficult to increase the interest spread. income resource  Emigration of industries and funds impact on the financial industry directly

96 97 96 (2) Countermeasures: A. Upgrade the core profitability, solidify banking operation and development foundation B. Control enterprise's cash flow needs, provide complete and convenient financing plan C. Train financial professionals, oriented toward consolidated commercial bank D. Initiate new financial operations, provide diversified financial products E. Control the cross-strait financial opportunities, enhance financial services to Taiwanese businessmen in Mainland China F. Develop offshore financial domain, strengthen international banking scale G. Optimize assets/liabilities management, upgrade operating safety and increase operating revenue H. Enhance beneficial results of financial investment, well found property management product platform I. With full efforts and exertion of excellent service and competitive strengths. J. Implement local charity events, continuously fulfill the enterprise’s social responsibilities. (IV) Research and Development of financial products and status of business development 1. Primary financial products and new banking units, their sizes and income in the most recent two years Unit: NTD thousand Until Feb. 29, 2012 2011/end 2010/end Item Trade Operating Trade Operating Trade Operating value/volume revenue value/volume revenue value/volume revenue Corporate Finance Volume of 129,063,096 569,232 129,081,019 3,410,331 101,128,721 2,570,170 corporate loans Personal banking Consumer loans 45,646,278 174,713 44,415,697 1,027,690 43,947,420 957,175 Non-Consumer 89,684,454 421,228 89,520,272 1,890,980 94,382,753 1,581,267 loans Credit card loans 563,387 15,215 2,873,196 110,840 2,237,795 72,540 Trust Operations Balance of trust 37,422,880 36,930 38,646,037 306,695 35,333,703 433,478 assets Financial management Securities trade 623,508 73,489 4,170,355 （248,768） 4,957,147 152,713 Securities Securities 9,545,065 10,434 51,217,173 58,243 58,183,078 67,039 brokerage Note 1: The “operating revenue” from securities trading means the income from disposition and evaluation of securities trading.) Note 2: The Bank established the Corporate Finance Dept. in May 2011.

97 97 2. R&D expenditure and results in the most recent two years, and the future R&D plans HTS e-Trading Under NTD13,500,000 August 2012 1. Configure complete on-line order (1) R&D expenditure and results in the most recent two years System and construction placement system: including AP, WEB, Name of R&D Platform backup for traders, enhancing the Descriptions of R&D Results R&D product expenditure Integration efficiency of order placement, Application for BIN, certification The Card is primarily promoted Program increasing volume of business for e-order. of chip cards (including design and to the excellent clients and 2. Control client’s income and contract submission), procurement of chip corporations that have not yet Ma Tsu NTD information in a timely manner to cards, drafting of programs, held the Bank’s credit cards, in Platinum Card 500,000 upgrade client's satisfaction. certification of card production order to upgrade the Bank’s Data warehouse Under NTD45,000,000 December 1. Upgrade the Bank’s competitiveness in procedure, and the National Credit promotion of credit cards and and relations construction 2012 the same trade and meet the long-term Card Center system go-live watch. charity identity positively. with customers and mid-term information development Enrolled in the IBON installed at Develop the Bank’s credit card management to plan and establish the more than 4,800 7-11 chain stores market rapidly and upgrade the application customer-oriented data warehouse IBON Debit throughout the nation dedicated to Developed marketing and promotion system system. Note and Bonus providing credit card bonus independently performance. 2. Enhance the relations with customers’ exchange, exchange of gifts and management and utilize effective marketing management platforms to reissue of credit card debit note. create better income for the Bank. Automatically import the land Save the credit investigation Collected note Under NTD9,000,000 December 1. Resolve such problems as old registration transcript information: staff’s time in creating files and operating update 2012 equipment and complicated operating Integrate the land offices’ transcript enhance the accuracy of credit Configuration system procedures to make the operations information and automatically NTD investigation information and of e-transcript uniform and upgrade efficiency. import the same into the credit 1,130,000 thereby increase operating 2. Add such functions as image scanning, system investigation system to enable the efficiency. withdrawal and access at the branch system to summarize and export ends to reduce the risk in loss of notes the information automatically. in the process of delivery. (2) Future development plans Mobile bank Under NTD13,500,000 December Help customers access their NTD accounts, planning 2012 fund investment or credit services on line Plan in the R&D expenses Scheduled to via mobile devices (mobile phones or pads), most recent Status Key factors to success of future R&D to be invested complete in and transfer fund as agreed per customers’ year needs, pay credit card debit notes and Installation of Under NTD3,680,000 April 2012 To deal with the establishment of securities search for ledger accounts for fund (such securities construction branches and upgrade the trading system function as search for accounts is expected trading servers performance. to be provided in 1st-phase system). Computer Under NTD3,000,000 May 2012 Corporate Under NTD50,000,000 June 2013 Expect to provide multi-language system, software and construction Upgrade the efficiency of e-orders for network bank planning corporate accounts mechanism, global hardware securities. funding and multi-national ledger account contracts in Q2 of 2013, to deal with enterprises' system tendency to be globalized, satisfy SMEs Under NTD3,500,000 May 2012 1. Comply with the competent authority’s Taiwanese businessmen’s funding needs in requirements to continue improving the Application construction the world, provide enterprises with Scorecard risk management system and provide credit extensions and investigations for comprehensive and complete service System Project. reference to reduce the Bank’s credit platforms, and enhance the Bank’s extension risk. competitiveness in the same trade. 2. Utilize the project to accumulate the (V) Long-term and short-term business development plans Bank’s skills in developing other credit rating models independently and ability 1. Short-term business development plan: Please refer to (2) the business plan 2012. to calibrate and modify the subsequent 2. Long-term business development plan: Please refer to Section 3. Future models. Development Strategies of Part I. A Message to Shareholders. e-Statement of Under NTD2,000,000 June 2012 1. Save the paper, printing, packaging and account construction mailing expenses for the written statement of account sent by the Bank to customers. 2. Send the advertisements about the Bank’s marketing activities to customers via email. 3. Conservation and carbon and greenhouse gas reduction 98 99 98 HTS e-Trading Under NTD13,500,000 August 2012 1. Configure complete on-line order System and construction placement system: including AP, WEB, Platform backup for traders, enhancing the Integration efficiency of order placement, Program increasing volume of business for e-order. 2. Control client’s income and contract information in a timely manner to upgrade client's satisfaction. Data warehouse Under NTD45,000,000 December 1. Upgrade the Bank’s competitiveness in and relations construction 2012 the same trade and meet the long-term with customers and mid-term information development management to plan and establish the application customer-oriented data warehouse system system. 2. Enhance the relations with customers’ management and utilize effective marketing management platforms to create better income for the Bank. Collected note Under NTD9,000,000 December 1. Resolve such problems as old operating update 2012 equipment and complicated operating system procedures to make the operations uniform and upgrade efficiency. 2. Add such functions as image scanning, withdrawal and access at the branch ends to reduce the risk in loss of notes in the process of delivery. Mobile bank Under NTD13,500,000 December Help customers access their NTD accounts, planning 2012 fund investment or credit services on line via mobile devices (mobile phones or pads), and transfer fund as agreed per customers’ needs, pay credit card debit notes and search for ledger accounts for fund (such function as search for accounts is expected to be provided in 1st-phase system). Corporate Under NTD50,000,000 June 2013 Expect to provide multi-language system, network bank planning corporate accounts mechanism, global funding and multi-national ledger account in Q2 of 2013, to deal with enterprises' tendency to be globalized, satisfy Taiwanese businessmen’s funding needs in the world, provide enterprises with comprehensive and complete service platforms, and enhance the Bank’s competitiveness in the same trade. (V) Long-term and short-term business development plans 1. Short-term business development plan: Please refer to (2) the business plan 2012. 2. Long-term business development plan: Please refer to Section 3. Future Development Strategies of Part I. A Message to Shareholders.

99 99

II. Employees (II) Licenses designated by the competent authority as acquired by personnel relevant to (I) Employees’ information transparent financial information: Year 2010 2011 Until Feb. 29, 2012 Item License By department Total Aggregate Employee No. More than 50 years old 83 110 117 Treasury Dept. 3 More than 40 years old 780 870 878 Accounting Dept. 2 More than 30 years old 497 506 514 Securities sales traders 314 Audit Office 8 More than 20 years old 458 485 456 Less than 20 years old 11 4 2 Other entities 301 Total 1,829 1,975 1,967 Treasury Dept. 11 Accounting Dept. 6 Average age 37.2 37.3 37.6 Investment Insurance Products 956 Average seniority 11.0 10.7 10.9 Audit Office 19 Other entities 920

Background Doctoral 0% 0% 0% Education Treasury Dept. 11 Master 8.6% 8.7% 8.5% Securities investment Accounting Dept. 2 Bachelor 52.7% 55.9% 55.9% trust/investment advice sales 142 Audit Office 2 Junior College Graduates 28.9% 26.6% 26.9% traders Senior High School 9.6% 8.8% 8.7% Other entities 127 Below Senior High School 0.2% 0% 0% Treasury Dept. 13 Initial credit extension Accounting Dept. 4 Securities sales traders 260 316 314 821 personnel’s professional ability Investment Insurance Products 873 947 956 Audit Office 21 Other entities 783

Professional designation and licensin Securities investment trust/investment 137 144 142 advice sales traders Treasury Dept. 0 Initial credit extension personnel’s Advanced credit extension Accounting Dept. 0 781 819 821 40 professional ability personnel’s professional ability Audit Office 1 Advanced credit extension personnel’s Other entities 39 36 42 40 professional ability Treasury Dept. 6 Accounting Dept. 1 Futures sales traders 98 116 116 Futures sales traders 116 Life Insurance of Agent 1,531 1,633 1,638 Audit Office 2 Bond sales qualified in professional Other entities 107 14 20 20 ability test Treasury Dept. 14 Initial foreign exchange personnel’s Accounting Dept. 9 391 429 429 Life Insurance of Agent 1,638 professional ability Audit Office 29 Wealth management and planning Other entities 1,586 481 517 511 g, and number of such employees personnel Treasury Dept. 6 Trust Operations Personnel 1,435 1,501 1,502 Bond sales qualified in Accounting Dept. 1 20 Bank’s internal control basic test 817 934 936 professional ability test Audit Office 1 Senior Securities sales traders 177 190 187 Other entities 12 Property Insurance of Agent 1,503 1,584 1,587 Treasury Dept. 12 Notes and bills traders 16 20 20 Initial foreign exchange Accounting Dept. 3 Marketable securities, financing and 426 19 30 31 personnel’s professional ability Audit Office 10 financial instruments sales traders Other entities 401 Internal auditor 3 3 3 Treasury Dept. 14 Stock affairs personnel qualified in Wealth management and planning Accounting Dept. 4 7 14 14 511 professional ability test personnel Audit Office 15 Foreign exchange professional ability 8 7 7 Other entities 478 Financial personnel’s professional Treasury Dept. 15 ability in appraising collaterals for 8 7 7 Accounting Dept. 9 Trust Operations Personnel 1,489 credit extension Audit Office 26 Note: The employees include part-time student workers. Other entities 1,439

100 101 100

(II) Licenses designated by the competent authority as acquired by personnel relevant to transparent financial information:

License By department Total Aggregate Treasury Dept. 3 Accounting Dept. 2 Securities sales traders 314 Audit Office 8 Other entities 301 Treasury Dept. 11 Accounting Dept. 6 Investment Insurance Products 956 Audit Office 19 Other entities 920 Treasury Dept. 11 Securities investment Accounting Dept. 2 trust/investment advice sales 142 Audit Office 2 traders Other entities 127 Treasury Dept. 13 Initial credit extension Accounting Dept. 4 821 personnel’s professional ability Audit Office 21 Other entities 783 Treasury Dept. 0 Advanced credit extension Accounting Dept. 0 40 personnel’s professional ability Audit Office 1 Other entities 39 Treasury Dept. 6 Accounting Dept. 1 Futures sales traders 116 Audit Office 2 Other entities 107 Treasury Dept. 14 Accounting Dept. 9 Life Insurance of Agent 1,638 Audit Office 29 Other entities 1,586 Treasury Dept. 6 Bond sales qualified in Accounting Dept. 1 20 professional ability test Audit Office 1 Other entities 12 Treasury Dept. 12 Initial foreign exchange Accounting Dept. 3 426 personnel’s professional ability Audit Office 10 Other entities 401 Treasury Dept. 14 Wealth management and planning Accounting Dept. 4 511 personnel Audit Office 15 Other entities 478 Treasury Dept. 15 Accounting Dept. 9 Trust Operations Personnel 1,489 Audit Office 26 Other entities 1,439

101 101 (V) Employees’ code of conduct or ethics License By department Total Aggregate The Bank has defined the employees’ work rules and personnel management rules to Treasury Dept. 9 enable employees to verify their own interest and right and code of conduct to be Accounting Dept. 5 Bank’s internal control basic test 936 followed. Meanwhile, the Bank has posted the electronic files for the work rules and Audit Office 18 personnel management rules at the Bank’s portal website to provide the whole Other entities 904 employees with the access to the rules. Treasury Dept. 11 (VI) Work environment and employees’ personal safety protection measures Accounting Dept. 3 Item Contents Senior Securities sales traders 187 Audit Office 2 1. Under the precision entrance guard control system all day. Other entities 171 Entrance guard 2. Contract with the security company to maintain the safety of the office Treasury Dept. 12 safety premises at nighttime and holidays. Accounting Dept. 9 3. Access to the police authority hotline for caution. Property Insurance of Agent 1,587 Audit Office 32 1. According to the Building Public Safety Inspection and Declaration Rules, Other entities 1,534 the Bank will commission the profession service provider to conduct the public safety inspection and report per two or four years. Treasury Dept. 11 Maintenance 2. According to Fire Act, the Bank will outsource the fire inspection per year. Accounting Dept. 2 and inspection Notes and bills traders 20 3. According to the Labor Safety and Health Act, the Bank will conduct Audit Office 1 of equipment Other entities 6 maintenance and inspection on high-voltage/low-voltage electrical and Treasury Dept. 0 mechanical equipment, lifters, air conditioners, water dispensers and Marketable securities, financing Accounting Dept. 0 fire-protection equipment per month or six months. and financial instruments sales 31 Audit Office 2 The Bank has defined the instructions to rescue disasters and reporting procedure traders Other entities 29 for occupational accidents, such as “Disaster Urgent Response Action Manual”, Treasury Dept. 1 Disaster “Guidelines for Dealing with Important Contingencies”, “Instructions to Safety prevention Protection and Organization of Relevant Business Units”, “Labor Safety and Accounting Dept. 1 Internal auditor 3 measures and Health Automatic Inspection Plan”, and “Instructions to Maintenance of Facility Audit Office 1 response Safety”, expressly defining the job responsibilities to be taken by the Bank’s staff Other entities 0 actions before and after important events, such as force majeure and robbery, and also Treasury Dept. 3 requiring the various business units to perform the robbery-proof drills for two Stock affairs personnel qualified Accounting Dept. 1 14 times per year. in professional ability test Audit Office 0 1. Health inspection: The Bank provides the in-service staff with the health Other entities 10 inspection service per two years. Treasury Dept. 3 Physical/mental 2. No smoking at the business locations pursuant to requirements; defining the Foreign exchange professional Accounting Dept. 1 7 health complaining requirements and relevant punishment rules against “Sexual ability Audit Office 0 Harassment Control”. Other entities 3 3. Set up the inter-bank forum as the opinion exchange platform. Treasury Dept. 0 Be enrolled in the labor insurance and health insurance programs pursuant to Financial personnel’s professional Accounting Dept. 0 laws. In the case of any casualty, it is necessary to designate the dedicated ability in appraising collaterals for 8 Audit Office 0 Insurance personnel to safeguard evidence, contact the insurance company, work with the credit extension Other entities 8 accidental liability insurance investigation conducted by the employer, filing of the claims and report to the competent authority. (III) Corporate governance-related continued education and training attended by managers: Please see Paragraph 9. Other information essential for the understanding of corporate III. Enterprise Responsibilities and Ethical Behavior governance on P.50. Please refer to III. Status of Corporate Governance → (IV)Status of Corporate Governance as (IV) Employees’ advanced studies and training: required for banks, and any nonconformity to the Corporate Governance Best-Practice The Bank has established the complete training system and actively organized the Principles for Banking Industry and reasons thereof → 8. Specify the social responsibility of various internal training programs for colleagues to upgrade their competence. A total the Bank, the system and policy adopted and the performance of its social obligations→III. of 117 classes were organized in 2011, and the total trainees were 7,092 persons. Status of Corporate Governance→(VI) Corporate Social Responsibility Meanwhile, the Bank also sent a large number of personnel to attend external training IV. IT Equipment programs to learn new knowledge. The total trainees were 510 persons in 2011.Until (I) The Bank has the following major IT systems: February 29, 2012, the internal training programs have consisted of 11 classes, and the 1. NTD Account System: NEC duo server and peripherals. total trainees were 633 persons. Further, a total 83 trainees were sent to attend the 2. Foreign Exchange Account System: Sun duo server and peripherals. external training programs. 3. Trust System: IBM server and peripherals.

102 103 102 (V) Employees’ code of conduct or ethics The Bank has defined the employees’ work rules and personnel management rules to enable employees to verify their own interest and right and code of conduct to be followed. Meanwhile, the Bank has posted the electronic files for the work rules and personnel management rules at the Bank’s portal website to provide the whole employees with the access to the rules. (VI) Work environment and employees’ personal safety protection measures Item Contents 1. Under the precision entrance guard control system all day. Entrance guard 2. Contract with the security company to maintain the safety of the office safety premises at nighttime and holidays. 3. Access to the police authority hotline for caution. 1. According to the Building Public Safety Inspection and Declaration Rules, the Bank will commission the profession service provider to conduct the public safety inspection and report per two or four years. Maintenance 2. According to Fire Act, the Bank will outsource the fire inspection per year. and inspection 3. According to the Labor Safety and Health Act, the Bank will conduct of equipment maintenance and inspection on high-voltage/low-voltage electrical and mechanical equipment, lifters, air conditioners, water dispensers and fire-protection equipment per month or six months. The Bank has defined the instructions to rescue disasters and reporting procedure for occupational accidents, such as “Disaster Urgent Response Action Manual”, Disaster “Guidelines for Dealing with Important Contingencies”, “Instructions to Safety prevention Protection and Organization of Relevant Business Units”, “Labor Safety and measures and Health Automatic Inspection Plan”, and “Instructions to Maintenance of Facility response Safety”, expressly defining the job responsibilities to be taken by the Bank’s staff actions before and after important events, such as force majeure and robbery, and also requiring the various business units to perform the robbery-proof drills for two times per year. 1. Health inspection: The Bank provides the in-service staff with the health inspection service per two years. Physical/mental 2. No smoking at the business locations pursuant to requirements; defining the health complaining requirements and relevant punishment rules against “Sexual Harassment Control”. 3. Set up the inter-bank forum as the opinion exchange platform. Be enrolled in the labor insurance and health insurance programs pursuant to laws. In the case of any casualty, it is necessary to designate the dedicated Insurance personnel to safeguard evidence, contact the insurance company, work with the accidental liability insurance investigation conducted by the employer, filing of the claims and report to the competent authority.

III. Enterprise Responsibilities and Ethical Behavior Please refer to III. Status of Corporate Governance → (IV)Status of Corporate Governance as required for banks, and any nonconformity to the Corporate Governance Best-Practice Principles for Banking Industry and reasons thereof → 8. Specify the social responsibility of the Bank, the system and policy adopted and the performance of its social obligations→III. Status of Corporate Governance→(VI) Corporate Social Responsibility IV. IT Equipment (I) The Bank has the following major IT systems: 1. NTD Account System: NEC duo server and peripherals. 2. Foreign Exchange Account System: Sun duo server and peripherals. 3. Trust System: IBM server and peripherals.

103 103 4. Call Center: Wintel multiple server and peripherals. 10. Configuration of Microsoft AD directory service and information center safety 5. Network Bank System: Wintel multiple server and peripherals. audit platform: Configure the lowest-layer certification and management platform 6. e-ATM System: Wintel multiple server and peripherals. to enhance the centralization of computer management affairs and other 7. Credit Card System: Wintel multiple server and peripherals. information safety management. (II) Plans for development and procurement in the future: 11. Replacement of intra-bank network switch: The useful life of the intra-bank 1. Data warehouse and relations with customers’ management application system network switch has expired, and the switch was replaced by a new one. configuration program: In order to upgrade the Bank’s competitiveness in the same 12. Configuration of bandwidth management system: Configure the bandwidth trade, and enhance the relations with customers’ management and marketing management system at the Internet portal and all branches’ portals to make the performance, the Bank will complete the configuration of the data warehouse and related business access more bandwidth to facilitate the operations. relations with customers’ management application system before the end of 2012. 13. IP-MAC control: Lock the IP-MAC of computer equipments in all of the branches 2. Corporate banking network service platform and mobile service device resolution to prevent any access from external computers and to enhance the information program: In order to upgrade the Bank’s e-banking services and enhance the security. services to corporate accounts, the Bank will complete the corporate banking 14. Proceed with information safety propagation and education per year. network service platform and mobile service device resolution program V. Labor-Management Relations successively before the end of 2012. (I) Current Labor-Management Agreement and the status of execution (III) Emergency and safety protection assessments: 1. Staff fringe benefits 1. Replacement of NTD server: Replacement of NTD server: The useful life of the (1) Provide labor insurance, national health insurance, and group accident NTD server, NEC PX7800 (go-live in May 2001), has expired. The Bank insurance. purchased a new server, NEC (NX7700i), by contract in March 2011, which went (2) Staff bonus and Free-Gratis Dividends. live on February 11, 2012. The new server would save remote data into the (3) Scholarships for the children of Staffs. remote backup support system (in FETnet IDC control room in Panchiao) (4) Gifts for Spring Festival and Mid-Autumn Festival, subsidies for marriage, simultaneously, in order to upgrade its ability to respond to disasters and funeral and other celebrities, funds for travels and tours, and staff birthdays. emergencies and to shorten the time spent in recovery, reduce operating risk and (5) Periodic health inspection upgrade the customer service level. 2. Retirement System 2. In addition to various periodical drills dedicated to shooting trouble in servers, the (1) Pension will be disbursed to employees under the Retirement Regulation of Bank also held the drills for backup support system for NTD server and foreign the Bank. exchange server under different scenarios. (2) The Bank contributed to the employee pension fund under the Statute for 3. “Double system fire wall” Able to prevent any unlicensed link and access to the Labor Retirement. system. (3) Subsidies for employees retired at the statutory age of retirement for overseas 4. Anti-virus software upgrade: Upgrade the anti-virus server operating system and traveling. corporate anti-virus software release to provide more defensive measures and to (4) Gifts for employees retired at statutory age of retirement reduce the infection of malicious software. 3. Other important benefits: 5. Anti-hacker system: Update the features of anti-hacker system periodically, and (1) Increase fuel subsidies for field specialists. send dedicated personnel to continue analyzing the network attack packets detected (2) At the end of the year, employees may apply for retaining the unconsumed by the anti-hacker system, and submit the proposals to fix or defend the intranet or special leave until Q3 of next year insofar as the special leave not consumed internet threats, if any. Meanwhile, the Bank also prohibited internal users from by the employees is less than one-thirds of the total days of the special leave in using live messengers, P2P file sharing software and Tunnel software. the current year. 6. Screening of webpages and mails: Screen the contents of webpages and mails to (3) Granting of treasury stock. reduce the access of harmful contents (such as malicious software, malicious (4) A total of 86 excellent employees selected in 2011 were delegated to pay a websites and spam) to the Bank’s intranet, and also prohibit users from accessing visit to China Zheshang Bank Co., Ltd. and the Bank’s Taiwanese live messengers, pornographic websites, illegal software, P2P file sharing, businessmen accounts. chatroom, streaming media and malicious websites to save the network bandwidth (5) Rules for Reward & Compensation for the Acquisition of License and and reduce the computer’s risk of being hacked. Certificate by Staff 7. Virtualization of servers: To upgrade the backup ability of servers and comply with 4. Labor-management agreement: None the Green IT energy conservation and carbon and greenhouse gas reduction. 5. Employees' interest and right protection assessments 8. Frequent snapshot protection system: To provide the frequent data protection (1) Personnel Review Committee’s functions: review of in-service staff’s ability. promotion and performance appraisal guidelines, review of in-service staff’s promotion and performance appraisal cases,, and review of employees’ reward 9. Storage system: Provide the simultaneous storage service to save data in two and punishment, and review of applications different control rooms simultaneously; then, the data protection may be enhanced, (2) The scope of labor-management meeting agenda: development of labors, and the backup ability of two different control rooms may be available upon business plan and overview of business, mediation of labor-management combination of the server virtualization system and the relevant system, so as to relations, promotion of labor-management cooperation, labor terms and reduce the operating risk to be suffered by the control room. conditions, labor benefits planning, and enhancement of working efficiency

104 105 104 10. Configuration of Microsoft AD directory service and information center safety audit platform: Configure the lowest-layer certification and management platform to enhance the centralization of computer management affairs and other information safety management. 11. Replacement of intra-bank network switch: The useful life of the intra-bank network switch has expired, and the switch was replaced by a new one. 12. Configuration of bandwidth management system: Configure the bandwidth management system at the Internet portal and all branches’ portals to make the related business access more bandwidth to facilitate the operations. 13. IP-MAC control: Lock the IP-MAC of computer equipments in all of the branches to prevent any access from external computers and to enhance the information security. 14. Proceed with information safety propagation and education per year. V. Labor-Management Relations (I) Current Labor-Management Agreement and the status of execution 1. Staff fringe benefits (1) Provide labor insurance, national health insurance, and group accident insurance. (2) Staff bonus and Free-Gratis Dividends. (3) Scholarships for the children of Staffs. (4) Gifts for Spring Festival and Mid-Autumn Festival, subsidies for marriage, funeral and other celebrities, funds for travels and tours, and staff birthdays. (5) Periodic health inspection 2. Retirement System (1) Pension will be disbursed to employees under the Retirement Regulation of the Bank. (2) The Bank contributed to the employee pension fund under the Statute for Labor Retirement. (3) Subsidies for employees retired at the statutory age of retirement for overseas traveling. (4) Gifts for employees retired at statutory age of retirement 3. Other important benefits: (1) Increase fuel subsidies for field specialists. (2) At the end of the year, employees may apply for retaining the unconsumed special leave until Q3 of next year insofar as the special leave not consumed by the employees is less than one-thirds of the total days of the special leave in the current year. (3) Granting of treasury stock. (4) A total of 86 excellent employees selected in 2011 were delegated to pay a visit to China Zheshang Bank Co., Ltd. and the Bank’s Taiwanese businessmen accounts. (5) Rules for Reward & Compensation for the Acquisition of License and Certificate by Staff 4. Labor-management agreement: None 5. Employees' interest and right protection assessments (1) Personnel Review Committee’s functions: review of in-service staff’s promotion and performance appraisal guidelines, review of in-service staff’s promotion and performance appraisal cases,, and review of employees’ reward and punishment, and review of applications (2) The scope of labor-management meeting agenda: development of labors, business plan and overview of business, mediation of labor-management relations, promotion of labor-management cooperation, labor terms and conditions, labor benefits planning, and enhancement of working efficiency

105 105 (II) Labor-management dispute: Nature of Limitation Contracting Parties Term of Agreement Summary Content Countermeasures agreement Article Counterpart Descriptions Status and anticipated SWIFT software Lease Ares International loss 2010.2.1-2012.1.31 professional None agreement Corporation Clerk ○○ Liu , when acting as the branch consultation service regulation compliance officer, withdrew the Lease Lease of telephone CHT 2010.11.12-2018.10.31 None cash with the blank slip affixed with the seal agreement switching system and the passbook in his custody on behalf of Purchase TAIWAN ECONOMIC Enterprise information 2009.6.9-2012.6.9 None the client and the “Investment in domestic and contracts JOURNAL CO.,LTD. database overseas marketable securities through special Backup ability of open Purchase monetary trustee accounts contract and NEC Taiwan Ltd. 2010.7.30-2013.7.29 system and expansion None contracts application form” and “Investment in domestic of backup capacity and overseas marketable securities through Purchase NEC Taiwan Ltd. 2011.3.25-2012.5.24 NTD server NX7700i None special monetary trustee accounts redemption, The contracts conversion and exchange application form”, judgment Liu did not file Data warehouse and and consequently was recorded one major was an appeal. The Purchase 2011.12.2-Configuration relations with ○○ Liu demerit in accordance with Paragraph 1.16 of rendered IBM None Bank has not contracts Completed customers management Case Article 43 of the Bank’s work rules. He took in favor of suffered any loss system configuration the advantage of his office to conduct the Bank Outsourced works on therefor. Outsourcing Eagles Information monetary transactions with customers, and in the first 2011.7.1-2012.6.30 mutual funds None Agreement Systems Corp. consequently was recorded two major demerits instance. transactions statements in accordance with Paragraph 1.7 and SMEs corporate Outsourcing 2011.8.2-Configuration Paragraph 2 of Article 43 of the Bank’s work AsiaMiner Inc. banking scorecard None Agreement Completed rules. He misappropriated the customers’ system configuration deposits and ultimately was removed without Statement of accounts prior notice in accordance with Paragraphs or notice sent 1.6(1), (2)&(8) of Article 48 of the Bank’s periodically or Outsourcing Yuen Foong Paper Co., irregularly in work rules. For Liu’s misappropriation of the 2011.4.14-2012.4.13 None customers’ deposits, the Bank was fined by Agreement Ltd. accordance with the FSC NTD2,000,000 accordingly. requirements of the competent authority or the Bank VI. Major Agreements Outsourcing Processing of Nature of Limitation TWNCH 2011.8.15-2012.8.14 None Contracting Parties Term of Agreement Summary Content Agreement non-MICR instruments agreement Article Labor Delivery service of Leebao Security Co., Outsourced fund Outsourcing Transnational Group of financial instruments None service 2009.6.1-2012.5.31 None 2011.1.18-2012.1.17 Ltd. delivery services Agreement Companies and documents for all contracts 72 branches Labor Goyun Security Security guard on-site Statement of accounts service 2009.7.1-2012.6.30 None or notice sent Company Ltd. services contracts periodically or Outsourcing Chunghwa Post Co., irregularly in Lease Remote backup support 2011.5-2012.5 None NEC Taiwan Ltd. 2012.1.1-2012.3.31 for NEC server None Agreement Ltd. accordance with the agreement requirements of the Remote backup support competent authority or Lease for NEC server (CHT NEC Taiwan Ltd. 2010.10.1-2011.12.31 None the Bank agreement Chientan IDC Control Statement of accounts Room) or notice sent Remote backup support periodically or Lease for NEC server (FETnet Outsourcing Yuen Foong Paper Co., irregularly in NEC Taiwan Ltd. 2012.2.11-2015.1.31 Panchiao IDC Control None 2011.5-2012.5 None agreement Agreement Ltd. accordance with the Room) requirements of the Remote backup support Lease competent authority or NEC Taiwan Ltd. 2009.9.1-2012.8.31 for foreign exchage None the Bank agreement server

106 107 106 Nature of Limitation Contracting Parties Term of Agreement Summary Content agreement Article SWIFT software Lease Ares International 2010.2.1-2012.1.31 professional None agreement Corporation consultation service Lease Lease of telephone CHT 2010.11.12-2018.10.31 None agreement switching system Purchase TAIWAN ECONOMIC Enterprise information 2009.6.9-2012.6.9 None contracts JOURNAL CO.,LTD. database Backup ability of open Purchase NEC Taiwan Ltd. 2010.7.30-2013.7.29 system and expansion None contracts of backup capacity Purchase NEC Taiwan Ltd. 2011.3.25-2012.5.24 NTD server NX7700i None contracts Data warehouse and Purchase 2011.12.2-Configuration relations with IBM None contracts Completed customers management system configuration Outsourced works on Outsourcing Eagles Information 2011.7.1-2012.6.30 mutual funds None Agreement Systems Corp. transactions statements SMEs corporate Outsourcing 2011.8.2-Configuration AsiaMiner Inc. banking scorecard None Agreement Completed system configuration Statement of accounts or notice sent periodically or Outsourcing Yuen Foong Paper Co., irregularly in 2011.4.14-2012.4.13 None Agreement Ltd. accordance with the requirements of the competent authority or the Bank Outsourcing Processing of TWNCH 2011.8.15-2012.8.14 None Agreement non-MICR instruments Delivery service of Outsourcing Transnational Group of financial instruments None 2011.1.18-2012.1.17 Agreement Companies and documents for all 72 branches Statement of accounts or notice sent periodically or Outsourcing Chunghwa Post Co., irregularly in 2011.5-2012.5 None Agreement Ltd. accordance with the requirements of the competent authority or the Bank Statement of accounts or notice sent periodically or Outsourcing Yuen Foong Paper Co., irregularly in 2011.5-2012.5 None Agreement Ltd. accordance with the requirements of the competent authority or the Bank

107 107 Nature of Limitation Contracting Parties Term of Agreement Summary Content agreement Article Six. Financial Status Equipment Exclusive check books Well Long Information I. Brief balance sheet and income statement for the most recent five years Maintenance 2011.7.1-2012.6.30 provided to customers None Co., Ltd. Brief Balance Sheet Contract to facilitate branches Unit: NTD thousand Hardware Centralized Key-in Year Financial information in the most recent five years Until Feb. equipment 2010.1.18-Configuration Operating System for New Image Co., Ltd. None 29, 2012 procurement Completed Passbook Account Item 2007 2008 2009 2010 2011 Financial agreement Opening Statement Hardware Centralized operating Cash and cash equipment 2010.6.1-Configuration New Image Co., Ltd. system for seizure of None equivalent, Due from procurement Completed 47,913,347 58,731,905 67,439,659 73,281,789 82,617,614 82,617,962 deposits Central Bank of China agreement and Banks Maintenance of Maintenance Financial assets at fair Harmonation Inc. 2009.7.1-2012.6.30 collected note scanners, None agreement value through profit or 839,633 537,560 494,712 1,646,562 1,096,769 1,156,748 et al. loss Maintenance Maintenance of high Available-for-Sale Harmonation Inc. 2011.10.11-2012.10.10 None - - 678,453 1,099,035 4,211,580 6,725,860 agreement speed draft machine Financial Assets Notes discounted and 192,468,949 201,741,645 217,689,020 244,463,233 277,756,366 278,461,026 VII. Securitized products and related information: None loans, net Receivable, net 2,116,240 2,625,758 3,540,368 3,389,297 2,888,283 14,538,279 Held to maturity 11,346,949 14,770,415 12,696,240 10,382,868 9,439,040 9,802,086 investments, net Stocks- equity method 104,354 90,275 291,021 337,561 216,970 1,232,325 Assets held for sale - - - 150,763 41,639 41,639 Property and equipment, 3,770,773 3,672,458 3,562,226 3,230,721 3,335,981 3,358,731 net Other financial assets, 211,549 181,549 181,549 144,453 850,396 832,480 net Other assets 3,902,321 3,392,549 2,930,173 2,338,643 1,892,043 1,579,442 Total assets 262,674,115 285,744,114 309,503,421 340,464,925 384,346,681 400,346,578 Due to Central Bank of 3,168,649 3,450,987 6,470,385 2,306,957 3,462,519 4,942,426 China and banks Customer deposits and 237,831,638 258,881,337 276,577,319 302,849,512 333,832,631 339,542,645 remittances Financial liabilities at fair value through profit 23,471 654,605 67,348 110,069 51,804 85,222 or loss Bonds and securities sold under repurchase - - - 1,477,800 - - agreements Borrowed funds - - 320,300 1,602,150 2,877,550 2,793,000 Financial debentures 2,400,000 2,400,000 6,600,000 8,300,000 10,512,559 10,518,414 Payables 2,688,097 4,235,256 3,504,465 3,872,015 7,683,501 15,899,132 Accruable pension 292,480 118,128 173,748 122,602 136,764 138,061 liabilities Other financial liabilities 45 - - - - - Other liabilities 418,131 498,843 428,853 408,800 328,299 393,941 Before 246,822,511 270,239,156 294,142,418 321,049,905 358,885,627 374,312,841 Total Distribution liabilities After 247,374,692 270,383,206294,142,418 321,049,905 - - Distribution

108 109 108

Six. Financial Status I. Brief balance sheet and income statement for the most recent five years Brief Balance Sheet Unit: NTD thousand Year Financial information in the most recent five years Until Feb. 29, 2012 Item 2007 2008 2009 2010 2011 Financial Statement Cash and cash equivalent, Due from 47,913,347 58,731,905 67,439,659 73,281,789 82,617,614 82,617,962 Central Bank of China and Banks Financial assets at fair value through profit or 839,633 537,560 494,712 1,646,562 1,096,769 1,156,748 loss Available-for-Sale - - 678,453 1,099,035 4,211,580 6,725,860 Financial Assets Notes discounted and 192,468,949 201,741,645 217,689,020 244,463,233 277,756,366 278,461,026 loans, net Receivable, net 2,116,240 2,625,758 3,540,368 3,389,297 2,888,283 14,538,279 Held to maturity 11,346,949 14,770,415 12,696,240 10,382,868 9,439,040 9,802,086 investments, net Stocks- equity method 104,354 90,275 291,021 337,561 216,970 1,232,325 Assets held for sale - - - 150,763 41,639 41,639 Property and equipment, 3,770,773 3,672,458 3,562,226 3,230,721 3,335,981 3,358,731 net Other financial assets, 211,549 181,549 181,549 144,453 850,396 832,480 net Other assets 3,902,321 3,392,549 2,930,173 2,338,643 1,892,043 1,579,442 Total assets 262,674,115 285,744,114 309,503,421 340,464,925 384,346,681 400,346,578 Due to Central Bank of 3,168,649 3,450,987 6,470,385 2,306,957 3,462,519 4,942,426 China and banks Customer deposits and 237,831,638 258,881,337 276,577,319 302,849,512 333,832,631 339,542,645 remittances Financial liabilities at fair value through profit 23,471 654,605 67,348 110,069 51,804 85,222 or loss Bonds and securities sold under repurchase - - - 1,477,800 - - agreements Borrowed funds - - 320,300 1,602,150 2,877,550 2,793,000 Financial debentures 2,400,000 2,400,000 6,600,000 8,300,000 10,512,559 10,518,414 Payables 2,688,097 4,235,256 3,504,465 3,872,015 7,683,501 15,899,132 Accruable pension 292,480 118,128 173,748 122,602 136,764 138,061 liabilities Other financial liabilities 45 - - - - - Other liabilities 418,131 498,843 428,853 408,800 328,299 393,941 Before 246,822,511 270,239,156 294,142,418 321,049,905 358,885,627 374,312,841 Total Distribution liabilities After 247,374,692 270,383,206294,142,418 321,049,905 - - Distribution

109 109 Capital stock 13,040,880 13,719,006 13,719,006 17,319,006 22,338,576 22,338,576 Note 3: The Bank’s Board sessions held on November 4, 2010 and July 7, 2011 resolved to increase Capital surplus 750,000 750,000 766,813 792,069 675,537 731,359 capital by 360,000,000 shares and 450,000,000 shares to increase its own fund. Considering Before capital increase from earnings and capital surplus distribution of 2010 As such, adjustment 1,776,645 742,399 617,337 1,029,293 2,212,377 2,713,986 Retained Distribution was made retroactively on the weighted average quantity of outstanding shares and earnings earnings After per share from 2007 to 2010. 536,865 598,349617,337 734,870 - - Distribution Unrealized revaluation The names of CPA conducting financial audits in the most recent five years and their audit opinions 284,079 293,553 283,744 283,744 283,744 283,744 Year increment 2011 2007 2008 2009 2010 Unrealized gain/loss from financial - - (25,897) (9,092) 10,960 26,212 Item Tze-Chun instruments Deloitte & Wen-Ya Hsu Wen-Ya Hsu Wen-Ya Hsu Wen-Ya Hsu Other shareholders’ Wang - - - - (60,140) (60,140) Touche Hsiun-Lien Lin Hsiun-Lien Lin Tze-Chun Wang Tze-Chun Wang equity Hsiun-Lien Lin Before Modified Modified Modified Modified Total 15,851,604 15,504,958 15,361,003 19,415,020 25,461,054 26,033,737 Audit Unqualified Distribution unqualified unqualified unqualified unqualified shareholders opinions opinions After opinions (Note 1) opinions (Note 2) opinions (Note 2) opinions (Note 2) equity 15,299,423 15,360,90815,361,003 19,415,020 - - Distribution Note 1: As of January 1, 1990e official letter under Kee-Mi-Tze No. 052 issued by Accounting Note: The financial information for the most recent five years has been audited by accountant. Research and Development Foundation in Taiwan was applied. Accordingly, the employee bonus and remuneration to directors/supervisors shall be stated as expenses instead of Brief Income Statement allocation of earnings. Modified unqualified opinions have been issued for the change in the Unit: NTD thousand; EPS: NTD accounting principles. Year Until Feb. 29, Note 2: The CPA audited the equity investment of Reliance Securities Investment Trust Co., Ltd. Financial information in the most recent five years 2012 under equity method in the financial statements 2009, 2010 and 2011 based on the audit report Item Financial issued by the other CPA, and the modified unqualified opinions were issued therefor. 2007 2008 2009 2010 2011 Statement Net interest 5,331,732 5,430,157 3,629,406 4,383,460 4,943,297 867,687 income Net income other than interest 771,872 (281,113) (321,356) 154,137 769,560 181,200 income Bad debt expenses (985,969) (1,788,126) (349,553) (933,359) (664,948) (23,778) Operating (3,013,918) (3,103,251) (2,668,676) (2,765,417) (3,133,733) (541,002) expenses Income before income tax of 2,103,717 257,667 289,821 838,821 1,914,176 484,107 continued operations Income after income tax of 1,776,645 205,535 18,988 411,956 1,454,000 - continued operations Net income 1,776,645 205,535 18,988 411,956 1,454,000 - Earnings Per 1.38 0.15 0.01 0.29 0.79 - Share Note 1: The financial information for the most recent five years has been audited by accountant. Note 2: The Bank’s special shareholders’ meeting held on December 7, 2006 resolved to reduce the Shares and dividends of the Bank by NTD7,339,264 thousand whereby 733,926,000 outstanding common shares were eliminated. The Board resolved to make February 8, 2007 the record date of capital reduction. The Bank’s dividends distribution was NTD0.52 per share in 2007. The quantity of outstanding shares under weighted average method after adjustment is 1,249,408 thousand shares. As such, adjustment was made retroactively on the weighed average quantity of outstanding shares in 2007.

110 111 110 Note 3: The Bank’s Board sessions held on November 4, 2010 and July 7, 2011 resolved to increase capital by 360,000,000 shares and 450,000,000 shares to increase its own fund. Considering capital increase from earnings and capital surplus distribution of 2010 As such, adjustment was made retroactively on the weighted average quantity of outstanding shares and earnings per share from 2007 to 2010.

The names of CPA conducting financial audits in the most recent five years and their audit opinions Year 2011 2007 2008 2009 2010

Item Tze-Chun Deloitte & Wen-Ya Hsu Wen-Ya Hsu Wen-Ya Hsu Wen-Ya Hsu Wang Touche Hsiun-Lien Lin Hsiun-Lien Lin Tze-Chun Wang Tze-Chun Wang Hsiun-Lien Lin Modified Modified Modified Modified Audit Unqualified unqualified unqualified unqualified unqualified opinions opinions opinions (Note 1) opinions (Note 2) opinions (Note 2) opinions (Note 2) Note 1: As of January 1, 1990e official letter under Kee-Mi-Tze No. 052 issued by Accounting Research and Development Foundation in Taiwan was applied. Accordingly, the employee bonus and remuneration to directors/supervisors shall be stated as expenses instead of allocation of earnings. Modified unqualified opinions have been issued for the change in the accounting principles. Note 2: The CPA audited the equity investment of Reliance Securities Investment Trust Co., Ltd. under equity method in the financial statements 2009, 2010 and 2011 based on the audit report issued by the other CPA, and the modified unqualified opinions were issued therefor.

111 111 Notwithstanding, because the Bank proceeded with the capital increase in cash by NTD4,500 million in November 2011 and recapitalization of 2011 earnings after income tax, the increase in shareholders’ equity is more than that in the fixed assets and II. Financial Analysis for the most recent five years thereby causes said ratio to decrease. Financial Analysis 5. The increase in asset growth rate is a result of the increase in total assets by NTD43,882 million in 2011, more than that, Unit: NTD thousand NTD30,962 million, in the total assets in 2010. The increase in total assets in 2011 is a result of the increase in notes discounted and loans by NTD33,293 million, the increase in due from Central Bank of China and banks by NTD5,655 million and the Year Consolidated financial increase in available-for-sale financial assets by NTD3,113 million. The increase in total assets in 2010 is a result of the increase Financial Analysis for the most recent five years analysis for the most in notes discounted and loans by NTD26,774 million and the increase in due from Central Bank of China and banks by NTD5,413 Item recent two years million. 2007 2008 2009 2010 2011 2010 2011 6. The decrease in profit growth rate is a result of the increase in the income before income tax in 2010, NTD839 million, more than Loans to deposits 81.94 79.06 79.65 81.60 84.08 81.67 84.12 that in 2009, NTD290 million, by 190% (due to the low base period in 2009), and the increase in the income before income tax in ratio 2011, NTD1,914 million, more than that in 2010, NTD839 million, by 128% (due to the high base period in 2010). NPL ratio 1.72 1.54 1.27 0.60 0.30 0.60 0.30 7. The increase in market share of net worth is a result of the Bank’s capital increase in cash by NTD4,500 million in November 2011 Interest expenses to and recapitalization of 2011 earnings after income tax resulting in the increase from the Bank’s shareholders’ equity in 2010, annual average 1.45 1.57 0.89 0.60 0.78 0.60 0.78 NTD19,415 million, to NTD25,461 million in 2011 and thereby causing the increase in net worth market share. deposit ratio 8. The increase in cash flow ratio is a result of the increase in net cash flow from operating activities, NTD6,952 million, in 2011 more Operating Interest income to than NTD2,337 million in 2010, by NTD4,615 million. ability annual average loan 4.54 4.60 2.77 2.57 2.76 2.57 2.76 9. The increase in cash flow adequacy rate is a result of the increase in the total of net cash flow from operating activities from 2007 ratio to 2011, NTD9,932 million, more than NTD3,696 million from 2006-2010, by NTD6,236 million. Total assets 2.32 1.81 1.07 1.33 1.49 1.35 1.50 10. The decrease in cash flow for operating to cash flow from investing ratio is a result of the increase in the net cash flow from turnover(times) investing activities in 2011, NTD-41,970 million, more than that in 2010, NTD-32,067 million, by NTD9,903 million (a result of Average operation 2,967 2,585 1,773 2,481 2,893 2,481 2,888 the increase in notes discounted and loans in 2011, NTD33,568 million, more than that in 2010, NTD26,831 million, by revenue per employee NTD6,737 million, and the increase in available-for-sale financial assets in 2011, NTD3,120 million, more than that in 2010, Average profit per NTD420 million, by NTD2,700 million). 864 103 10 225 736 222 727 employee Note 1: The financial information for the most recent five years and the consolidated financial information for the most Return on Tier I 17.79 1.69 1.94 5.04 8.95 5.23 9.01 recent five years have been audited. Capital Note 2: Equations for financial analysis: ROA 0.68 0.07 0.01 0.13 0.40 0.13 0.40 1. Utility Profitability ROE 14.70 1.31 0.12 2.37 6.48 2.37 6.48 (1) Loans/deposits ratio = Total amount/total deposits. Net profit rate 29.11 3.99 0.57 9.08 25.45 8.96 25.16 (2) NPL rate = Total non-performing loans/Total amount. Earnings Per Share($) 1.38 0.15 0.01 0.29 0.79 0.29 0.79 (3) Interest expense to average annual deposit balance ratio = total interest expenses/average annual deposit balance Liabilities to total 93.93 94.53 95.02 94.28 93.37 94.28 93.37 assets ratio (4) Interest income to average annual loan balance ratio = total interest incomes/average annual loan balance Financial Fixed assets to (5) Total assets turnover rate = Earnings/Total assets. structure shareholders’ equity 23.79 23.69 23.19 16.64 13.10 16.65 13.11 (6) Employee average return (Note 6) = Earning/Total Employee No. ratio (7) Employee average profit rate = Earnings/Total Employee No. Asset Growth Rate 1.23 8.58 8.31 10.00 12.89 9.99 12.93 2. Profitability Growth rate Profit Growth Rate 136.60 (87.75) 12.48 189.43 128.20 160.59 120.70 (1) Return on Tier I Capital = EBT/Average total amount of Tier I capital. Cash flow ratio - 75.81 - 32.51 58.59 33.20 57.56 (2) ROA = earnings/Average total assets. Cash flow adequacy (3) ROE = earnings/Average net shareholders equity. 720.59 921.43 527.99 311.62 744.94 334.52 756.53 ratio (4) Profit rate = Income After Income tax/income-net. Cash flows Cash flow for (5) Earnings Per Share = (earnings – dividends from preferred shares)/weighed average quantity of operating to cash outstanding shares.(Note 4) - (15.99) - (7.29) (16.56) (7.48) (16.32) flow from investing 3. Financial structure ratio (1) Liabilities to total assets =Total liabilities/total assets Liquidity Reserve Ratio 15.37 17.57 19.07 19.03 19.63 19.03 19.63 (2) Fixed assets to net worth =net total assets/net shareholders’ equity Related party secured loans 1,772,335 1,378,697 1,337,906 1,219,243 1,377,605 1,219,243 1,377,605 4. Growth rate Related party secured loans to total (1) Asset growth rate = (Total assets of current year – total assets of previous year)/total assets of previous 0.90 0.66 0.60 0.49 0.48 0.49 0.48 loan ratio year Market share of (2) Profit growth rate = (EBT of current year – EBT of previous year)/EBT of previous year 0.69 0.71 0.76 0.79 0.84 0.79 0.84 assets 5. Cash flow (Note 7) Market share of net (1) Cash flow ratio= net cash flow from operation /(Call loans and overdraft from banks + payable CP + 0.73 0.73 0.66 0.78 0.98 0.78 0.98 worth financial liabilities which change in fair value is recognized as gain (loss) + R/P and bond liabilities + Operating Scale Market share of 0.94 0.95 0.96 1.00 1.06 1.00 1.06 current portion of payables. deposits (2) Net cash flow adequacy rate= net cash flow from operation in the last 5 years/ (capital spending + Cash Market share of 1.08 1.11 1.18 1.25 1.34 1.25 1.34 Dividends) in the last 5 years. loans (3) Cash flow satisfied rate = Cash flow from operation/ cash flow from investments. Reasons for changes in financial rates in the most recent two years: 6. Liquidity Reserve Ratio = Central Bank Required Current Assets/Allowance for liquidity of liabilities. 1. The decrease in NPL rate is a result of the upgrading of the Bank’s asset quality and active clearance of overdue loan. 7. Scale of operation 2. The increase in interest expenses to average deposit balance ratio is a result of the average deposit balance in 2011 more than that (1) Asset market share rate = Total assets/total assets of all financial institutions available for making in 2010 by NTD24,986 million, and the increase in average interest rate for time deposit and saving deposit by 0.28%. deposits and loans) (Note 5) 3. The drastic increase in average profit per employee, return on Tier 1 Capital, ROA, ROE, profit rate and EPS is a result of the (2) Net worth market share rate = Net worth/total net worth of all financial institutions available for making income before income tax and income after income tax in 2011 more than those in 2010 (income before income tax by NTD1,075 million and income after income tax by NTD1,042 million). deposits and loans. 4. The decrease in fixed assets to shareholders’ equity ratio results from the increase in fixed assets by NTD105 million. (3) Deposit market share rate = total deposits/total deposits of all financial institutions available for making deposits and loans. 112 113 112 Notwithstanding, because the Bank proceeded with the capital increase in cash by NTD4,500 million in November 2011 and recapitalization of 2011 earnings after income tax, the increase in shareholders’ equity is more than that in the fixed assets and thereby causes said ratio to decrease. 5. The increase in asset growth rate is a result of the increase in total assets by NTD43,882 million in 2011, more than that, NTD30,962 million, in the total assets in 2010. The increase in total assets in 2011 is a result of the increase in notes discounted and loans by NTD33,293 million, the increase in due from Central Bank of China and banks by NTD5,655 million and the increase in available-for-sale financial assets by NTD3,113 million. The increase in total assets in 2010 is a result of the increase in notes discounted and loans by NTD26,774 million and the increase in due from Central Bank of China and banks by NTD5,413 million. 6. The decrease in profit growth rate is a result of the increase in the income before income tax in 2010, NTD839 million, more than that in 2009, NTD290 million, by 190% (due to the low base period in 2009), and the increase in the income before income tax in 2011, NTD1,914 million, more than that in 2010, NTD839 million, by 128% (due to the high base period in 2010). 7. The increase in market share of net worth is a result of the Bank’s capital increase in cash by NTD4,500 million in November 2011 and recapitalization of 2011 earnings after income tax resulting in the increase from the Bank’s shareholders’ equity in 2010, NTD19,415 million, to NTD25,461 million in 2011 and thereby causing the increase in net worth market share. 8. The increase in cash flow ratio is a result of the increase in net cash flow from operating activities, NTD6,952 million, in 2011 more than NTD2,337 million in 2010, by NTD4,615 million. 9. The increase in cash flow adequacy rate is a result of the increase in the total of net cash flow from operating activities from 2007 to 2011, NTD9,932 million, more than NTD3,696 million from 2006-2010, by NTD6,236 million. 10. The decrease in cash flow for operating to cash flow from investing ratio is a result of the increase in the net cash flow from investing activities in 2011, NTD-41,970 million, more than that in 2010, NTD-32,067 million, by NTD9,903 million (a result of the increase in notes discounted and loans in 2011, NTD33,568 million, more than that in 2010, NTD26,831 million, by NTD6,737 million, and the increase in available-for-sale financial assets in 2011, NTD3,120 million, more than that in 2010, NTD420 million, by NTD2,700 million). Note 1: The financial information for the most recent five years and the consolidated financial information for the most recent five years have been audited. Note 2: Equations for financial analysis: 1. Utility (1) Loans/deposits ratio = Total amount/total deposits. (2) NPL rate = Total non-performing loans/Total amount. (3) Interest expense to average annual deposit balance ratio = total interest expenses/average annual deposit balance (4) Interest income to average annual loan balance ratio = total interest incomes/average annual loan balance (5) Total assets turnover rate = Earnings/Total assets. (6) Employee average return (Note 6) = Earning/Total Employee No. (7) Employee average profit rate = Earnings/Total Employee No. 2. Profitability (1) Return on Tier I Capital = EBT/Average total amount of Tier I capital. (2) ROA = earnings/Average total assets. (3) ROE = earnings/Average net shareholders equity. (4) Profit rate = Income After Income tax/income-net. (5) Earnings Per Share = (earnings – dividends from preferred shares)/weighed average quantity of outstanding shares.(Note 4) 3. Financial structure (1) Liabilities to total assets =Total liabilities/total assets (2) Fixed assets to net worth =net total assets/net shareholders’ equity 4. Growth rate (1) Asset growth rate = (Total assets of current year – total assets of previous year)/total assets of previous year (2) Profit growth rate = (EBT of current year – EBT of previous year)/EBT of previous year 5. Cash flow (Note 7) (1) Cash flow ratio= net cash flow from operation /(Call loans and overdraft from banks + payable CP + financial liabilities which change in fair value is recognized as gain (loss) + R/P and bond liabilities + current portion of payables. (2) Net cash flow adequacy rate= net cash flow from operation in the last 5 years/ (capital spending + Cash Dividends) in the last 5 years. (3) Cash flow satisfied rate = Cash flow from operation/ cash flow from investments. 6. Liquidity Reserve Ratio = Central Bank Required Current Assets/Allowance for liquidity of liabilities. 7. Scale of operation (1) Asset market share rate = Total assets/total assets of all financial institutions available for making deposits and loans) (Note 5) (2) Net worth market share rate = Net worth/total net worth of all financial institutions available for making deposits and loans. (3) Deposit market share rate = total deposits/total deposits of all financial institutions available for making deposits and loans. 113 113 (4) Loan market share rate = Total amount/Total amount of all financial institutions available for making deposits and loans. Note 3: Total liabilities net of reserve, allowance for loss from bill trade, allowance for default, and allowance for contingency. Note 4: The following shall be considered in assessing the equation for EARNINGS PER SHARE as aforementioned: 1. Weighted average quantity of shares is on the basis of common stock, not the outstanding shares as of the end of the year. 2. The quantity of new shares for raising new capital or treasury stock trade shall be included in the weighted average quantity of shares during their effective term. 3. Where the shares may be issued through the capitalization of retained earnings or capital surplus, make adjustment in proportion to the quantity of shares issued in calculating the semi-annual or annual EARNINGS PER SHARE of the year. The period for the release of such new shares may be omitted. 4. If the preferred stock is non-convertible cumulative preferred stocks, dividend for the year (issued or not) shall be subtracted from earnings or added to earnings. 5. If the preferred stock is non-cumulative preferred stocks, dividend on the preferred stock shall be subtracted from earnings after income tax, if any. If there are no earnings after income tax, no adjustment shall be made. Note 5: Financial institutions that can undertake deposits and withdrawals included domestic banks, branches of foreign banks in Taiwan, Credit Unions, Credit Departments of Farmers and Fishermen Associations, and investment trust firms. Note 6: Return rate refers to the total of incomes from interests and other sources. Note 7: Consider the followings in conducting cash flow analysis: 1. Net cash flow from operation refers to net cash inflow from operation as stated in the Statement of Cash Flow. 2. Capital spending refers to the cash outflow to annual capital investments. 3. Cash Dividends includes the dividends in cash paid to holders of common shares and preferred shares. 4. Gross fixed assets refer to total fixed assets before subtracting by accumulated depreciation.

114 114 Capital Adequacy Unit: NTD thousand Year (Note 1) Consolidated Capital Capital Adequacy Ratio for the past five years(Note 2) adequacy ratio in the last 2 years Until Feb. 29, 2011 (Note 5) 2007 2008 2009 2010 2011 2010 2011

Items Common stock 13,040,880 13,719,006 13,719,006 17,319,006 22,338,576 22,338,576 17,319,006 22,338,576 Perpetual non-cumulative ------preferred shares Non-cumulative subordinated debt ------without maturity date Capital collected in ------advance Capital reserves (except the value 750,000 750,000 766,813 792,069 675,537 731,359 792,069 675,537 appreciation of Tier I fixed assets) Capital Legal reserve - 532,993 594,653 600,350 723,937 723,937 600,350 723,937 Special reserve - - - 16,987 32,599 32,599 16,987 32,599 Accumulated profit 1,776,645 209,406 22,684 411,956 1,455,841 1,863,535 411,956 1,455,841 or loss Minority equity ------Other shareholders’ - - -30,491 -20,903 -65,005 -60,394 -20,903 -65,005 equity Less: goodwill ------Less: unamortized loss from sale of ------NPL Less: capital 143,450 121,012 221,385 670,169 842,498 1,340,097 573,425 797,919 deductions Total Tier I capital 15,424,075 15,090,393 14,851,280 18,449,296 24,318,987 24,289,515 18,546,040 24,363,566 Perpetual cumulative ------preferred stock Self-owned Cumulative Capital subordinated debt ------without maturity date Fixed asset revaluation increment surplus 284,079 293,553 283,744 283,744 283,744 283,744 283,744 283,744 (including appreciations) 45% of unrealized gain on - - 2,067 5,138 4,492 6,790 5,138 4,492 available-for-sale financial Convertible Bonds ------Operating reserve Tier II and provisions for 208,828 662,655 63,699 - - - - - Capital bad debts Long-term 2,400,000 1,920,000 5,640,000 6,860,000 5,500,000 5,340,000 6,860,000 5,500,000 subordinated debt Non-perpetual ------preferred stock The sum of Perpetual non-cumulative preferred stocks and non-cumulative ------subordinated debt without maturity date exceeding 15% of total Tier I Capital Less: capital 143,450 121,012 221,385 478,293 541,568 1,071,959 381,549 496,989 deductions Total Tier II Capital 2,749,457 2,755,196 5,768,125 6,670,589 5,246,668 4,558,575 6,767,333 5,291,247

115 115 Year (Note 1) Consolidated Capital Capital Adequacy Ratio for the past five years(Note 2) adequacy ratio in the last 2 years Until Feb. 29, 2011 (Note 5) 2007 2008 2009 2010 2011 2010 2011

Items Tier II Short-term ------subordinated debt - Non-perpetual Tier III ------Capital preferred stock Total Tier III ------Capital Self-owned Capital 18,173,532 17,845,589 20,619,405 25,119,885 29,565,655 28,848,090 25,313,373 29,654,813 Standardized 163,663,230 177,949,841 188,394,903 214,191,716 244,298,087 247,347,296 214,173,049 244,284,117 Approach Internal Credit Ratings-Based ------Risk Approach Asset ------Securitization Basic Indicator 10,339,825 10,929,313 10,546,325 9,921,300 9,243,025 9,693,988 10,010,975 9,340,762 Approach Total Standard risk-weighted Operation method/optional ------assets risk standard method Advanced Measurement ------Approach Standardized 2,480,213 2,386,925 930,825 2,180,938 782,175 957,370 2,180,938 782,175 Market Approach Risk Internal Models ------Approach Total risk-weighed assets 176,483,268 191,266,079 199,872,053 226,293,954 254,323,287 257,998,654 226,364,962 254,407,054 Capital adequacy ratio 10.30% 9.33% 10.32% 11.10% 11.63% 11.18% 11.18% 11.66% Tier I Capital 8.74% 7.89% 7.43% 8.15% 9.56% 9.41% 8.19% 9.58% Tier II Capital 1.56% 1.44% 2.89% 2.95% 2.07% 1.77% 2.99% 2.08% Tier III Capital ------Ratio of common stock to total assets 4.96% 4.81% 4.43% 5.09% 5.81% 5.58% 5.09% 5.81% Leverage ratio 5.91% 5.51% 4.99% 5.69% 6.73% 6.14% 5.72% 6.74% Please specify the reasons for changes in the capital adequacy ratio in the most recent two periods. (No analysis is required, if the changes in increase/decrease are less than 20 %.) Omitted *If any consolidated financial statement is prepared, the consolidated capital adequacy ratio shall also be disclosed. Note 1: The year(s) which is not audited shall be specified expressly. Note 2: The Shares and dividends and the amount of weighed average risk assets shall be filled in as required in “Regulation for Banks in the Management of Capital Adequacy”, and “Explanation and Forms for the Calculation of Shares and dividends and Risk Assets by Banks”. Note 3: Where banks may calculate credit risk in transitional periods, fill in the amount of risk-based assets under the Credit Risk Standardized Approach. Note 4: The following equation shall be identified at the end of the annual report: 1. Total Self-owned Capital = Tier I Capital + Tier II Capital + Tier III Capital 2. Total amount of risk-weighed-assets = Credit risk-weighed assets + Capital charge of (operational risk + market risk) x 12.5. 3. Capital Adequacy ratio = Total self-owned capital / Total amount risk-weighed assets. 4. Tier I ratio = Tier I Capital / Total risk-weighed asset 5. Tier II ratio = Tier II Capital / Total risk-weighed asset 6. Tier III ratio = Tier III Capital / Total risk-weighed asset 7. Ratio of common stock to total assets = Common stock/ Total assets 8. Leverage ratio=Tier I Capital/Average assets upon adjustment(average assets less Tier I Capital “Good Will”, “Unamortized Loss from Sale of NPL” and the deduction from Tier I Capital referred to in the “Explanation and Forms for the Calculation of Shares and dividends and Risk Assets by Banks”) Note 5: List the listed companies, or companies trading at the securities firms’ business places in the quarter prior to the date of publication of the Annual Report. Also specify whether the financial information is certified or audited, or uncertified or unaudited, by CPA. Note 6: If Basel I was implemented in the year, the Form shall be specified in the following manner: 1. To be in line with the Basel II format, the capital deduction items were distributed 50% to Tier I capital and the other 50% to Tier II capital. 2. Basel II credit risk capital requirement shall be stated as capital requirements of credit risk “Standardized Approach”.

116 116 III. Supervisors’ Review Report on the Financial Statement of 2011

Taichung Commercial Bank Co., Ltd. Supervisors’ Audit Report March 8, 2012 To: Shareholders of Taichung Commercial Bank, Ltd The Board of Directors has prepared the 2011 Report on Business Operations, Earnings Distribution Proposal as well as various financial statements (including Balance Sheet, Income Statement, Changes in Stockholders’ Equity, and Cash Flow Statement). These statements have then been approved by the Board of Directors as presenting fairly the financial position as of December 31, 2011 and the operation results and cash flows in 2011 of the company. The Supervisors have reviewed the above-mentioned statement in accordance with Article 219 of the Company Law and hereby provide such audit report.

Resident Supervisor: Institutional Representative to Xin Rui Investment Co., Ltd. Jiann-Ell Huang Supervisor: Institutional Representative to Xin Rui Investment Co., Ltd. Shu-Li Huang Supervisor: Institutional Representative to Xin Rui Investment Co., Ltd. Chien-Hua Lee Fu Supervisor: Institutional Representative to Xin Rui Investment Co., Ltd. Ching-Hwang Tsai Supervisor: Institutional Representative to Tai Jiunn Enterprise Co., Ltd. Chao-Nan Hsieh

March 8, 2012

IV. Financial statements 2011: See Appendix 1 V. Consolidated financial statements 2011: See Appendix 2 VI. In the case of any insolvency of the Bank and its affiliates, specify its effect on the Financial Status of the Bank: N/A

117 117

Seven. Financial Status and Operation Result, Review and Analysis, and Risk Management I. Financial Status Unit: NTD thousand Year Variation 2011 2010 Item Amount % Cash and cash equivalent, Due from Central Bank of 82,617,614 73,281,789 9,335,825 13 China and Banks Financial assets at fair value through profit or 1,096,769 1,646,562 （549,793）（33） loss Notes discounted and 277,756,366 244,463,233 33,293,133 14 loans, net Receivables, net 2,888,283 3,389,297 （501,014）（15） Available-for-Sale 4,211,580 1,099,035 3,112,545 283 Financial Assets Financial instruments 9,439,040 10,382,868 （943,828）（9） held to maturity, net Stocks- equity method 216,970 337,561 （120,591）（36） Assets held for sale 41,639 150,763 （109,124）（72） Property and equipment, 3,335,981 3,230,721 105,260 3 net Other financial assets, net 850,396 144,453 705,943 489 Other assets 1,892,043 2,338,643 （446,600）（19） Total assets 384,346,681 340,464,925 43,881,756 13 Due to Central Bank of 3,462,519 2,306,957 1,155,562 50 China and other banks Borrowed funds 2,877,550 1,602,150 1,275,400 80 Customer deposit and 333,832,631 302,849,512 30,983,119 10 remittances Financial liabilities at fair value through profit or 51,804 110,069 （58,265）（53） loss Bonds and securities sold under repurchase 0 1,477,800 （1,477,800）（100） agreements Financial debentures 10,512,559 8,300,000 2,212,559 27 Payables 7,683,501 3,872,015 3,811,486 98 Accruable pension 136,764 122,602 14,162 12 liabilities Other liabilities 328,299 408,800 （80,501）（20） Total liabilities 358,885,627 321,049,905 37,835,722 12 Capital stock 22,338,576 17,319,006 5,019,570 29 Capital surplus 675,537 792,069 （116,532）（15） Unrealized revaluation 283,744 283,744 - - increment Unrealized gain (loss) from 10,960 (9,092) 20,052 221 financial instruments Retained earnings 2,212,377 1,029,293 1,183,084 115 Other shareholders’ equity （60,140） - （60,140）（100） Total shareholders equity 25,461,054 19,415,020 6,046,034 31

118 118 Analysis of variance: Seven. Financial Status and Operation Result, Review and Analysis, and (I) The decrease in the financial instruments at fair value through profit or loss is a result of the decrease in the balance of investment in domestic stock traded on TSEC and OTC at the end Risk Management of 2011 more than that at the end of 2010 by NTD300 million, and the decrease in foreign I. Financial Status exchange swaps by NTD224 million. Unit: NTD thousand (II) The increase in available-for-sale financial assets is a result of the increase in the income from Year Variation 2011 2010 fixed income instruments and thereby causes the increase in investment in domestic bonds by Item Amount % NTD3,016 million from the end of 2010 to the end of 2011. Cash and cash equivalent, (III) The decrease in equity investment under equity method is a result of the changes in the Bank’s Due from Central Bank of 82,617,614 73,281,789 9,335,825 13 statement of the investment income of Taichung Commercial Bank Insurance Broker Co., Ltd. China and Banks and the channel service fees to be charged at fixed rate as of December 2010, thereby causing Financial assets at fair the decrease in investment income under equity method in 2011 more than that in 2010 by value through profit or 1,096,769 1,646,562 （549,793）（33） NTD104 million. loss Notes discounted and (IV) The decrease of asset held for sale is a result of the sale of former Changhua branch and 277,756,366 244,463,233 33,293,133 14 loans, net former Beitun branch in 2011 and former Xiangshang branch had been reclassification to fixed Receivables, net 2,888,283 3,389,297 （501,014）（15） asset. Available-for-Sale (V) The increase in other financial assets is a result of the statement of the life insurance policy 4,211,580 1,099,035 3,112,545 283 Financial Assets assets issued by PEM Group in 2011 and subsequent capitalization, totaling NTD707 million, Financial instruments in 2011. 9,439,040 10,382,868 （943,828）（9） held to maturity, net (VI) The decrease in financial liabilities at fair value through profit or loss is a result of issuance of Stocks- equity method 216,970 337,561 （120,591）（36） convertible bank debentures in 2011 resulting in statement of the put option of convertible Assets held for sale 41,639 150,763 （109,124）（72） bank debentures in the amount of NTD42 million, and the decrease in foreign exchange swap Property and equipment, liabilities by NTD92 million. 3,335,981 3,230,721 105,260 3 net (VII) The decrease in RP (Debt) is a result of the adjustment of fund allocation, and no RP (Debt) Other financial assets, net 850,396 144,453 705,943 489 undertaken at the end of 2011. Other assets 1,892,043 2,338,643 （446,600）（19） (VIII) The increase in borrowed funds is a result of the needs for fund allocation and decrease in Total assets 384,346,681 340,464,925 43,881,756 13 foreign exchange cost, thereby causing the balance of borrowed funds at the end of 2011 to Due to Central Bank of increase more than that in 2010 by NTD1,275 million. 3,462,519 2,306,957 1,155,562 50 China and other banks (IX) The increase in payable bank debentures is a result of the Bank’s issuance of convertible bank Borrowed funds 2,877,550 1,602,150 1,275,400 80 debentures in the amount of NTD2,300 million in 2011. Customer deposit and 333,832,631 302,849,512 30,983,119 10 (X) The increase in payables is a result of the increase in notes and checks for clearing at the end remittances of 2011 more than that at the end of 2010 by NTD3,760 million (December 31, 2011 fell on a Financial liabilities at fair holiday). value through profit or 51,804 110,069 （58,265）（53） (XI) The decrease in other liabilities is a result of the decrease in guarantee deposits received at the loss end of 2011 by NTD38 million from the end of 2010, and the decrease in various reserves by Bonds and securities sold NTD24 million (a result of the translation of default loss into special reserve pursuant to the under repurchase 0 1,477,800 （1,477,800）（100） agreements competent authority’s Order). Financial debentures 10,512,559 8,300,000 2,212,559 27 (XII) The increase in capital stock is a result of the capital increase by NTD4,500 million and Payables 7,683,501 3,872,015 3,811,486 98 recapitalization of 2010 earnings and capital surplus resulting in new shares issued at NTD0.3 Accruable pension per share in 2011 and the increase in capital stock by NTD520 million. 136,764 122,602 14,162 12 liabilities (XIII) The increase in retained earnings is a result of the investment of the earnings after income tax Other liabilities 328,299 408,800 （80,501）（20） in 2011, NTD1,454 million, in unallocated earnings and allocation of stock dividends at Total liabilities 358,885,627 321,049,905 37,835,722 12 NTD0.3 per share from earnings 2010 resulting in the decrease in unallocated earnings by Capital stock 22,338,576 17,319,006 5,019,570 29 NTD294 million and translation of default loss into legal reserve, NTD24 million. Capital surplus 675,537 792,069 （116,532）（15） Unrealized revaluation 283,744 283,744 - - increment Unrealized gain (loss) from 10,960 (9,092) 20,052 221 financial instruments Retained earnings 2,212,377 1,029,293 1,183,084 115 Other shareholders’ equity （60,140） - （60,140）（100） Total shareholders equity 25,461,054 19,415,020 6,046,034 31

118 119 119 II. Operating result Unit: NTD thousand Variation Ratio Item 2011 2010 Variation % Net interest income 4,943,297 4,383,460 559,837 13 Net income other than interest 769,560 154,137 615,423 399 income Bad debt expenses （664,948）（933,359）（268,411）（29） Operating expenses （3,133,733）（2,765,417） 368,316 13 Income before income tax of 1,914,176 838,821 1,075,355 128 continued operations Income after income tax of 1,454,000 411,956 1,042,044 253 continued operations Net income 1,454,000 411,956 1,042,044 253 Earnings Per Share($) 0.79 0.29 0.50 172 Analysis of variance: (I) The increase in net interest income is a result of the increase in interest revenue in 2011 more than that in 2010 by NTD1,306 million (a result of the increase in the average balance of notes discounted and loans by NTD27,776 million and the increase in the average interest rate by 0.15%), and the increase in interest expenses by NTD746 million (a result of the increase in the average balance of time deposits and saving deposits by NTD11,904 million and the increase in the average interest rate by 0.28%). (II) The increase in net income other than interest income is a result of revaluation in the impairment on assets recognized in 2011, NTD11 million, more than that recognized in 2010, impairment loss NTD707 million, by NTD718 million and the decrease in other provisions by NTD478 million. (III) The decrease in bad debt expenses is a result of the decrease in bad debt expenses in 2011 more than that in 2010 by NTD268 million. (IV) The increase in net income and EPS is a result of the increase in net interest income by NTD560 million, the increase in net income other than interest income by NTD615 million, decrease in bad debt expenses by NTD268 million and the increase in operating expenses by NTD368 million.

III. Cash flows (I) Analysis on liquidity in the most recent two years Unit: % Year Increase/Decrease 2011 2010 Item Ratio Cash flow ratio (%) 58.59 32.51 26.08 Cash flow adequacy ratio 744.94 311.62 433.08 (%) Cash flow for operating to cash flow from investing （16.56）（7.29）（9.27） ratio (%) Analysis of variance in increase/decrease: 1. The increase in cash flow ratio is a result of the increase in net cash flow from operating activities, NTD6,952 million, in 2011 more than NTD2,337 million in 2010, by NTD4,615 million. 2. The increase in cash flow adequacy ratio is a result of the increase in the total of net cash flow from operating activities from 2007 to 2011, NTD9,932 million, more than NTD3,696 million from 2006-2010, by NTD6,236 million.

120 120 (II) Analysis of liquidity for next year Unit: NTD thousand Expected net Remediation measures Cash cash flow of against expected cash Expected net balance of investing and flow deficit operating cash Surplus the start of financing flow for the (deficit)++ the activities for Wealth whole year Investment period the whole management year 8,349,890 1,100,433 (1,635,878) 7,814,445 - - Analysis of variance in cash flows: 1. Operating activities: Operating activities: Expecting that the economic growth rate will recover in Taiwan in 2012, the Bank will work hard to develop its business and upgrade the fund utilization effect. It is expected that earnings will be generated in the year to contribute to the net cash inflow from operating activities. 2. Investing activities: It is expected that the increase in discounts and loans, due from Central Bank of China and banks will contribute to the net cash outflow from investing activities. 3. Financing activities: The issuance of subordinated debt and increase in estimated deposits and remittances will contribute to the net cash inflow from financing activities. The net cash flow from investing activities and financing activities will be cash outflow in the year. (III) Corrective action against insufficient liquidity: N/A

IV. The material effect on financial structure from substantial capital expenditure in the last few years: (I) Major capital expenditure and funding sources Unit: NTD thousand Actual and Actual and Actual and expected capital expected expected Total capital utilization Plans funding Completion required 2011 2012 2013 source Date Update of Self-owned main server 2012.03 163,600 81,800 81,800 NX7700i Capital Corporate Banking Self-owned Network 2013.12 50,000 - 22,500 22,500 Capital Service Platform (II) Projected potential benefits 1. Update of main server NX7700i: The original server has been used for many years. In order to provide more real-time and stable information system to deal with the Bank’s business development and information system expansion, the main server was updated. 2. Corporate banking network service platform: Integrate the existing e-banking service platform to provide corporate accounts with such innovative services as multi-level licenses, FXML collection/payment, cloud corporate network service, global network embedding and on-line financial planning/customers' service, and continue enhancing the safety of personal information system, to upgrade the convenience and completeness of the Bank’s network banking service platform. 121 121

V. Direct investment policy, the main reasons for profit or loss, and corrective action plan in 2011, and investment plan in the next year (I) Direct investment policy in the most recent year: In 2011, the Bank engaged in the domestic direct investment to meet the business development demand for the purpose of establishing the complete financial product transaction platform and ensuring the Bank’s sustainable operation and business growth. The foreign direct investment made by the Bank complied with the Government’s financial and economic policies, and assessed the ideal investment objects to upgrade the service quality in the entire financial market. (II) Root cause of investment earnings or loss in the most recent year: The Bank is used to adhering to the stable management philosophy. The performance of businesses invested by the Bank appears to be fair in risk control, business development and cooperative promotion of business. The entire performance of the investment by the Bank appears to continue earning profit for the time being. (III) Corrective action plan: In addition to continuing enhancing the risk control and cooperative promotion of business in the invested companies, the Bank will carefully review the performance and business expansion of the invested companies. (IV) The investment plan for next year: To meet the business development needs and expect to establish a complete financial instrument distribution platform to provide customers with more diversified financial instruments, the Bank will re-invest in incorporation of subsidiaries dedicated to lease business and also apply with the authority institution for re-investment in incorporation of subsidiaries dedicated to securities business in 2012. VI. Risk Management (I) Qualitative and quantitative information about the various risks 1. Credit risk management system and capital requirement: Credit risk management system 2011 Item Contents 1. Credit risk strategies, 1. Credit risk strategies and objectives: objectives, policies and (1) Comply with The New Basel Capital Accord and upgrade the processes Bank’s risk management ability. (2) Develop well-founded risk management mechanisms and execute them strictly. (3) Strengthen the loan asset portfolio quality, risk management information integration, analysis, control and precautionary effect, and play the role of risk management. 2. Credit risk policies: (1) Establish the business strategies and organizational culture valuing credit risk management and provide the qualitative and quantitative management method as the reference for enactment of business strategies. (2) Establish the entire credit risk management system to be executed by the Bank’s Board, the management and employees jointly, and control the various business risks to the tolerable extent through identification, assessment, control and report of risks in the qualitative and quantitative management manner, so as to achieve the Bank’s credit risk objectives. (3) Establish the effective method and control procedure to control the adequacy of the deposits/withdrawals to ensure the shareholders’ equity as the first priority. 122 122 Item Contents V. Direct investment policy, the main reasons for profit or loss, and corrective action plan in 2011, 3. Credit risk management process: and investment plan in the next year Risk identification, risk assessment, risk control and risk report (I) Direct investment policy in the most recent year: include: In 2011, the Bank engaged in the domestic direct investment to meet the business development (1) Establish the credit risk rating model step by step. demand for the purpose of establishing the complete financial product transaction platform and (2) Define the credit risk-related regulations. ensuring the Bank’s sustainable operation and business growth. The foreign direct investment (3) Establish the control mechanism and define the limit for the made by the Bank complied with the Government’s financial and economic policies, and various large-sum exposures. assessed the ideal investment objects to upgrade the service quality in the entire financial (4) Upgrade the entire asset quality and establish the proper market. management mechanism step by step. (II) Root cause of investment earnings or loss in the most recent year: (5) Continue developing and executing the stress tests for credit risks that comply with the competent authority’s requirements. The Bank is used to adhering to the stable management philosophy. The performance of (6) Review and report periodically. businesses invested by the Bank appears to be fair in risk control, business development and 2. Credit risk management 1. Board of Directors cooperative promotion of business. The entire performance of the investment by the Bank organization and The Board is the supreme decision-making entity in credit risk appears to continue earning profit for the time being. structure management of the bank, and takes the ultimate responsibility for the (III) Corrective action plan: Bank's credit risk management. In addition to continuing enhancing the risk control and cooperative promotion of business in the 2. Risk Management Committee: invested companies, the Bank will carefully review the performance and business expansion of Risk Management Committee takes charge of the Bank’s credit risk the invested companies. management mechanism, review of the credit risk regulations and the (IV) The investment plan for next year: To meet the business development needs and expect to multi-departmental communication and coordination of credit risk establish a complete financial instrument distribution platform to provide customers with more management, and continuous supervision of the performance, diversified financial instruments, the Bank will re-invest in incorporation of subsidiaries according to the risk management policy authorized by the Board. dedicated to lease business and also apply with the authority institution for re-investment in 3. Loan Review Committee and credit review Committee of the regional incorporation of subsidiaries dedicated to securities business in 2012. centers: Review the credit extension applications in accordance with the credit VI. Risk Management extension policies, credit extension authorization rules and the relevant (I) Qualitative and quantitative information about the various risks requirements. 1. Credit risk management system and capital requirement: 4. Delinquent Accounts Review Committee: Credit risk management system The Committee processes the delinquent accounts, receivables on demand and bad debt in accordance with the Rules for Establishment 2011 of Delinquent Accounts Review Committee, Rules for Allowance for Item Contents Loss of Asset Evaluation and Collection of Delinquent Account, Receivable on Demand and Bad Debt, and the relevant requirements. 1. Credit risk strategies, 1. Credit risk strategies and objectives: 5. Risk Management Dept.: objectives, policies and (1) Comply with The New Basel Capital Accord and upgrade the (1) Risk Management Department is the Bank’s unit dedicated to the processes Bank’s risk management ability. risk management, responsible for planning, establishing and (2) Develop well-founded risk management mechanisms and execute integrating the Bank’s credit risk management operation and them strictly. executing the Bank’s entire credit risk management control. (3) Strengthen the loan asset portfolio quality, risk management (2) Responsible for drafting, or proposing amendments to, the Bank’s information integration, analysis, control and precautionary credit risk management policies and relevant guidelines, and effect, and play the role of risk management. reporting them to the Board for approval. 2. Credit risk policies: (3) Summarize the Bank’s credit risk information periodically and (1) Establish the business strategies and organizational culture report it to the Board and Risk Management Committee. valuing credit risk management and provide the qualitative and (4) Establish the Bank’s entire framework of assess, control and quantitative management method as the reference for enactment qualitative and quantitative management method. of business strategies. 6. Business supervisory departments of Head Office: (2) Establish the entire credit risk management system to be executed Fully understand the credit risk of the businesses handled by them by the Bank’s Board, the management and employees jointly, and according to the Bank’s risk management policies and regulations, so control the various business risks to the tolerable extent through as to fulfill the various requirements defined in the process of risk identification, assessment, control and report of risks in the management, and supervise the execution of the various business units’ qualitative and quantitative management manner, so as to achieve risk management in a timely manner and work with Risk Management the Bank’s credit risk objectives. Department to complete the control over the Bank’s risks. (3) Establish the effective method and control procedure to control 7. The Bank’s business units (including regional centers): the adequacy of the deposits/withdrawals to ensure the (1) Responsible for identifying, evaluating and assessing risks, and shareholders’ equity as the first priority. 122 123 123 Item Contents taking the proper response against the risks. (2) Comply with the Bank’s rules for credit investigation, credit extension and credit risk management, fulfill the routine jobs and risk management, and report the risk to the various business supervisory departments. (3) Routine work integrated with the risk control, and identify the accuracy and integrity of the operation information. 8. Audit Office of the Board: Audit Office of the Board will periodically audit the execution of the Bank’s credit risk management system impartially and independently, and provide the suggestions about corrective actions. 3. Scope and 1. Scope and characteristics of credit risk report: characteristics of credit (1) The Board’s report (Comprehensive risk report). risk report and (2) Monthly Assets and Liabilities Management Committee report measurement system (Comprehensive risk report). (3) Asset quality report. (4) Report for the individual limit in the various countries. (5) Risk Management Control System (to disclose the information about credit risk). (6) Stress test scenario analysis report. 2. Credit risk assessment system includes: (1) Capital requirement calculation platform information system. (2) Credit investigation and extension system. (3) Debt collection management system. (4) Credit review and precaution management system. (5) Establishment of credit rating model. 4. Credit risk hedging or 1. Credit risk hedging or reduction policies: mitigation policies, and (1) Review the business with concentration of risk or higher risk, and effective strategies and conduct the credit risk hedging. process for controlling (2) Comply with The New Basel Capital Accord and upgrade the risk hedging and Bank’s risk management ability mitigation tools 2. Effective strategies and procedures for controlling risk hedging and reduction tools: (1) Establish the risk control mechanism to control the credit risk of individual credit extension and credit extension portfolio; the control mechanism includes the limit management, post-loaning management, collateral management and asset quality management. (2) Enhance the credit account guarantee by demanding collaterals, guarantors or transfer of SME credit guarantee fund. (3) Cope with the domestic and foreign economic condition and industrial development, control the industrial risk and adjust the limit on the credit extension rate of the industry to select excellent customers; raise the management level for authorizing the loans with respect to non-secured credit extension to control the credit extension and default risks. 5. Approach for regulatory Capital Standardized Approach Charge

124 124 Item Contents Exposure and capital requirement under the credit risk standardized approach after risk taking the proper response against the risks. mitigation (2) Comply with the Bank’s rules for credit investigation, credit extension and credit risk management, fulfill the routine jobs and December 31, 2011 Unit: NTD thousand risk management, and report the risk to the various business Type of exposure Exposure after risk Capital requirement supervisory departments. mitigation (3) Routine work integrated with the risk control, and identify the accuracy and integrity of the operation information. Sovereigns 0 0 8. Audit Office of the Board: Non-central government Audit Office of the Board will periodically audit the execution of the public sector entities 2,014,547 80,582 Bank’s credit risk management system impartially and independently, （PSEs） and provide the suggestions about corrective actions. Banks (including 3. Scope and 1. Scope and characteristics of credit risk report: multilateral development 9,162,736 282,342 characteristics of credit (1) The Board’s report (Comprehensive risk report). banks-MDBs) risk report and (2) Monthly Assets and Liabilities Management Committee report Corporates (including measurement system (Comprehensive risk report). securities and Insurance 104,774,535 8,131,524 (3) Asset quality report. companies) (4) Report for the individual limit in the various countries. Retail 144,965,618 9,346,326 (5) Risk Management Control System (to disclose the information about credit risk). Residential mortgage 30,112,457 1,179,313 Equity securities (6) Stress test scenario analysis report. 29,000 9,280 2. Credit risk assessment system includes: investments (1) Capital requirement calculation platform information system. Other assets 88,301,563 514,480 (2) Credit investigation and extension system. Total 379,360,456 19,543,847 (3) Debt collection management system. (4) Credit review and precaution management system. (5) Establishment of credit rating model. 2. Risk management system, exposure and capital requirement of asset securitization 4. Credit risk hedging or 1. Credit risk hedging or reduction policies: Risk management system of asset securitization mitigation policies, and (1) Review the business with concentration of risk or higher risk, and effective strategies and conduct the credit risk hedging. 2011 process for controlling (2) Comply with The New Basel Capital Accord and upgrade the Item Contents risk hedging and Bank’s risk management ability 1. Asset securitization management mitigation tools 2. Effective strategies and procedures for controlling risk hedging and Not applicable reduction tools: strategy and process 2. Asset securitization management (1) Establish the risk control mechanism to control the credit risk of Not applicable individual credit extension and credit extension portfolio; the organization and structure control mechanism includes the limit management, post-loaning 3. Scope and characteristics of asset management, collateral management and asset quality securitization report and Not applicable management. measurement system (2) Enhance the credit account guarantee by demanding collaterals, 4. Asset securitization risk hedging or guarantors or transfer of SME credit guarantee fund. mitigation policies, and effective (3) Cope with the domestic and foreign economic condition and strategies and process for Not applicable industrial development, control the industrial risk and adjust the controlling risk hedging and limit on the credit extension rate of the industry to select excellent mitigation tools customers; raise the management level for authorizing the loans 5. Approach for regulatory Capital with respect to non-secured credit extension to control the credit Not applicable Charge extension and default risks. 5. Approach for regulatory Capital Standardized Approach Charge

124 125 125 3. Operational risk management system and capital requirement Operational risk management system 2011 Item Contents 1. Operational risk 1. Operational risk management strategies: By establishing and executing the management sound operational risk management mechanism, the Bank manages the strategies and operational risk actively, generally evaluates the frequency and effect of processes the various potential risks in routines and management and takes the appropriate counter-assessments to avoid, transfer or write off, control and bear the risk to reduce the substantial loss and frequencies. 2. Operational risk management process: (1) Risk identification According to the Bank’s operational risk management rules, the risk identification approaches include Loss Data Collection（LDC）, Key Risk Indicators（KRIs）, Risk and Control Self Assement（RCSA）, audit report and external loss event. (2) Risk assessment Assess such factors as possibility and effect of the risks as identified. (3) Risk measurement Analyze the risk assessment result in accordance with the 7 major types of loss and 8 major types of businesses defined in BASEL II, and quantize the risk as high (red light), medium (yellow light) or low (green light). (4) Risk control Control the operational risk events, KRIs and risk control exposure, quality of risk write-off and control actions, and the effect of other cases (5) Risk report Report the information about operational risk exposure to Risk Management Committee and the Board periodically 2. Operational risk 1. The operational risk management organization includes the Board, Risk management Management Committee, Risk Management Dept., the business organization and management units of Head Office, units of the Bank, all staff and Audit structure Office of the Board. 2. The functions under operational risk management are specified as following: (1) Board of Directors The Board is the supreme decision-making entity in operational risk management of the bank, and takes the ultimate responsibility for the Bank’s operational risk management. (2) Risk Management Committee: Control the risk management mechanism, review the operational risk of the products, activities, processes and systems of the Bank, and coordinate and communicate with the various units for the operational risk management-related matters, and continue supervising the performance thereof, according to the operational risk management policies approved by the Board. (3) Risk Management Dept. Responsible for researching and drafting the Bank’s operational risk management policies and procedures, establishing and centrally managing the Bank’s operational risk loss database, collecting,

126 126 3. Operational risk management system and capital requirement Item Contents Operational risk management system summarizing and analyzing the information about loss, and reporting 2011 it to Risk Management Committee and the Board periodically. (4) Business management units of Head Office Item Contents Fully understand the risk encountered by them respectively, and 1. Operational risk 1. Operational risk management strategies: By establishing and executing the supervise the various units to execute the necessary risk management management sound operational risk management mechanism, the Bank manages the tasks in a timely manner, and assist Risk Management Dept. to strategies and operational risk actively, generally evaluates the frequency and effect of complete the various risk controls. processes the various potential risks in routines and management and takes the (5) Units of the Bank appropriate counter-assessments to avoid, transfer or write off, control and Comply with and implement the operational risk management rules, bear the risk to reduce the substantial loss and frequencies. and report the risk events pursuant to the requirements. 2. Operational risk management process: (6) Whole staff (1) Risk identification The whole staff shall be responsible for dealing with the operational According to the Bank’s operational risk management rules, the risk risk jointly, and shall implement the operational risk management identification approaches include Loss Data Collection（LDC）, Key tasks strictly within their functions. Risk Indicators（KRIs）, Risk and Control Self Assement（RCSA）, (7) Audit Office of the Board audit report and external loss event. Audit Office of the Board shall conduct the audit independently, (2) Risk assessment assess and validate the effectiveness of the Bank’s operational risk Assess such factors as possibility and effect of the risks as identified. management structure and processes, and provide the suggestions for (3) Risk measurement corrective action in a timely manner. Analyze the risk assessment result in accordance with the 7 major 3. Scope and When measuring the Operational risk, each unit of the Bank shall analyze the types of loss and 8 major types of businesses defined in BASEL II, characteristics of cause, consequence, frequency and effect thereof and conclude the degree of and quantize the risk as high (red light), medium (yellow light) or low operational risk individual risk to verify the exposure of the Bank’s Operational risk. Each (green light). report and unit shall also record the various exposures. By introducing the Operational (4) Risk control measurement system risk identification, assessment, control and report management mechanism, Control the operational risk events, KRIs and risk control exposure, the Bank establishes and centrally manages the database for the Bank’s quality of risk write-off and control actions, and the effect of other Operational risk losses and summarizes the Operational risk information and cases implementation status, and submit the report and suggestions to Risk (5) Risk report Management Committee and the Board periodically. Report the information about operational risk exposure to Risk 4. Operational risk In order to enhance the monitor over operational risk, the Bank also Management Committee and the Board periodically hedging or establishes the risk evaluation and monitor various changes in the indicators 2. Operational risk 1. The operational risk management organization includes the Board, Risk mitigation policies, according to the four dimensions of operational risk, i.e. internal procedure, management Management Committee, Risk Management Dept., the business and effective people, systems and external events, in order to reduce the operational risk organization and management units of Head Office, units of the Bank, all staff and Audit strategies and loss effectively. The Bank can transfer or write off the loss and impact of structure Office of the Board. process for incidents caused by operational risk through insurance and outsourcing, in 2. The functions under operational risk management are specified as controlling risk part or in whole. following: hedging and (1) Board of Directors mitigation tools The Board is the supreme decision-making entity in operational risk 5. Approach for Basic Indicator Approach management of the bank, and takes the ultimate responsibility for the regulatory Capital Bank’s operational risk management. Charge (2) Risk Management Committee: Control the risk management mechanism, review the operational risk Capital requirement for operational risk of the products, activities, processes and systems of the Bank, and December 31, 2011 Unit: NTD thousand coordinate and communicate with the various units for the operational Year Gross profit Capital requirement risk management-related matters, and continue supervising the performance thereof, according to the operational risk management 2008 5,190,937 policies approved by the Board. (3) Risk Management Dept. 2009 4,576,975 Responsible for researching and drafting the Bank’s operational risk 2010 5,020,931 management policies and procedures, establishing and centrally managing the Bank’s operational risk loss database, collecting, Total 14,788,843 739,442

126 127 127

4. Market risk management system and capital requirement: Market risk management system

2011

Item Contents 1. Market risk 1. The Bank’s market risk management strategy is to develop the sound and management effective market risk management mechanism. The mechanism shall strategies and correspond to the Bank’s business scale, nature and complexity to ensure the processes proper management of the market risk to be borne by the Bank and seek the balance between the tolerable risk level and expect return level. 2. The Bank's market risk management process covers the risk identification, evaluation, assessment, control and report. The contents thereof cover the market risk related to the Bank’s major traded products, trading activities, process and system. (1) Risk identification: The Bank ‘s relevant units identified the source of market risk by means of business analysis or product analysis to define the market risk factors of the various financial products (the market risk factors were categorized as interest rate risk, foreign, equity securities price risk, commodity price risk and liquidity risk) and the relevant requirements. (2) Risk evaluation and assessment: Establish the effective valuation mechanism to evaluate the income of position precisely, and conduct the independent market price evaluation procedure with respect to the short-term investment position for which the reference market price is available. Establish the quantitative model step by step to assess the market risk in such manners as sensitivity analysis,VaR calculation, scenario drill and stress testing, and integrated with the routine risk management. (3) Risk control: Define the relevant rules governing excess of limit, stop-loss mechanism and operating procedure for excess of limit in order to control the market risk effectively. (4) Risk report: Review and report periodically; in the case of material market change, the relevant units shall report it immediately to reduce the market risk. Disclose the Bank’s market risk information to the public periodically pursuant to the competent authority’s requirements. 2. Market risk The Bank’s market risk management organization and structure includes the management Board, Risk Management Committee, Risk Management Dept., business organization and supervisory units, business trading units and Audit Office of the Board. structure 1. Board of Directors The Board is the supreme decision-making unit in market risk management of the bank, and takes the ultimate responsibility for the Bank's market risk management. 2. Risk Management Committee: Control the risk management mechanism, review various market risk limits and the limit per department level, check multi-departmental market risk management-related matters, and continue supervising the performance thereof, according to the market risk management policies approved by the Board.

128 128 Item Contents 4. Market risk management system and capital requirement: 3. Risk Management Dept.: Market risk management system Risk Management Dept. is the unit dedicated to the Bank’s market risk management, responsible for consolidating and executing the Bank’s entire 2011 market risk management. 4. Business supervisory departments of head office: Item Contents Business supervisory departments of head office are responsible for managing 1. Market risk 1. The Bank’s market risk management strategy is to develop the sound and and supervising the necessary risk management tasks to be executed by management effective market risk management mechanism. The mechanism shall business trading units and working with Risk Management Department to strategies and correspond to the Bank’s business scale, nature and complexity to ensure the complete the control of the Bank’s risks. Meanwhile, they are also responsible processes proper management of the market risk to be borne by the Bank and seek the for defining the proper limit control, stop-loss mechanism and operating balance between the tolerable risk level and expect return level. procedure for excess of limit with respect to the products and process of 2. The Bank's market risk management process covers the risk identification, transaction. evaluation, assessment, control and report. The contents thereof cover the 5. Business trading units: market risk related to the Bank’s major traded products, trading activities, Business trading units are responsible for executing the risk identification, process and system. assessment and measurement, and taking appropriate countermeasures in (1) Risk identification: accordance with the Bank’s market risk management rules. They shall also The Bank ‘s relevant units identified the source of market risk by means control the various limits, and report to the business supervisory departments of business analysis or product analysis to define the market risk factors of head office and Risk Management Dept. pursuant to the requirements. of the various financial products (the market risk factors were 6. Audit Office of the Board: categorized as interest rate risk, foreign, equity securities price risk, Audit Office of the Board executes the market risk management auditing commodity price risk and liquidity risk) and the relevant requirements. business independently and provides the suggestions for corrective action. (2) Risk evaluation and assessment: 3. Scope and Each business trading unit shall submit the trading information related to the Establish the effective valuation mechanism to evaluate the income of characteristics of market risk to the business supervisory departments of head office and Risk position precisely, and conduct the independent market price evaluation market risk Management Dept. Risk Management Dept. shall consolidate and summarize procedure with respect to the short-term investment position for which report and the information and present the report to Risk Management Committee and the the reference market price is available. Establish the quantitative measurement Board. The contents of said report cover all market risk positions and ensure model step by step to assess the market risk in such manners as system that the various transactions are conducted under authorization and the specific sensitivity analysis,VaR calculation, scenario drill and stress testing, and limit. Meanwhile, the Bank utilizes such indicators as deposit/loan rate, integrated with the routine risk management. liquidity reserve ratio, and matured capital gap ratio to ensure the capital (3) Risk control: liquidity safety. The Bank’s existing IT system is primarily engaged in the Define the relevant rules governing excess of limit, stop-loss mechanism limit management. Following the business development, the Bank will and operating procedure for excess of limit in order to control the market establish the risk measuring system in accordance with the Internal Model under risk effectively. the New Basel Capital Accord. (4) Risk report: 4. Market risk The Bank’s transactions subject to market risk have defined the limits of the Review and report periodically; in the case of material market change, hedging or various investment objects in the relevant rules. The specific limit is also set the relevant units shall report it immediately to reduce the market risk. mitigation against the trading counterpart based on its credit rating and financial status to Disclose the Bank’s market risk information to the public periodically policies, and prevent the operation of fund from being highly concentrated. Each business pursuant to the competent authority’s requirements. effective trading unit shall adjust the operational position according to the change in the 2. Market risk The Bank’s market risk management organization and structure includes the strategies and relevant market environments under the authority granted to it, and adopt any management Board, Risk Management Committee, Risk Management Dept., business processes for available derivative product to hedge risk in a timely manner and execute the organization and supervisory units, business trading units and Audit Office of the Board. controlling risk relevant stop-loss mechanism whenever necessary. Said relevant requirements structure 1. Board of Directors hedging and shall be reviewed and revised subject to the operation plan, business The Board is the supreme decision-making unit in market risk management of mitigation tools development and changes in the entire financial environment. the bank, and takes the ultimate responsibility for the Bank's market risk 5. Approach for management. regulatory Standardized Approach 2. Risk Management Committee: Capital Charge Control the risk management mechanism, review various market risk limits and the limit per department level, check multi-departmental market risk management-related matters, and continue supervising the performance thereof, according to the market risk management policies approved by the Board.

128 129 129 Capital requirements for market risk December 31, 2011 Unit: NTD thousand Type of risk Capital requirement Interest rate risk 14,718 Equity securities risk 44,687 Foreign Exchange risk 3,169 Commodity risk - Total 62,574 5. Liquidity risk includes the analysis of maturity of assets and liabilities, and also explains the management method for asset liquidity and capital gap liquidity. In order to control the Bank’s business risk, maintain the adequate liquidity and ensure the solvency effectively, the Bank prepares the “analysis of maturity structure of NTD” periodically to analyze the capital gap and structural change upon maturity of the various assets and liabilities. Meanwhile, the Bank complies with the competent authority’s requirement that the proportion of negative capital liquidity to the total assets shall be no more than -5% from 1 day to 30 days, and identifies -3% as the precautionary mark, to deal with the allocation of fund at different time and enhance the Bank’s liquidity control.

Analysis of maturity structure of NTD December 31, 2011 Unit: NTD thousand Remaining balance to maturity Total 181 days to 1 More than 1 0 to 30 days 31 to 90 days 91 to 180 days year year Main capital inflow 380,570,251 68,295,275 42,934,392 35,470,700 59,250,520 174,619,364 upon maturity Main capital outflow 430,265,099 44,564,497 52,210,394 75,026,018 104,831,2011 153,633,090 upon maturity Gap (49,694,848) 23,730,778 (9,276,002) (39,555,318) (45,580,580) 20,986,274 Note: The table only specifies the amount in NTD (exclusive of foreign currencies) of Head Office and local branches.

130 130 Februauy 29, 2012 Unit: NTD thousand Capital requirements for market risk Remaining balance to maturity December 31, 2011 Total 181 days to 1 0 to 30 days 31 to 90 days 91 to 180 days More than 1 year Unit: NTD thousand year Type of risk Capital requirement Main Interest rate risk 14,718 capital inflow 386,848,152 94,091,095 25,043,290 33,079,141 57,303,926 177,330,700 Equity securities risk 44,687 upon Foreign Exchange risk 3,169 maturity Commodity risk - Main Total 62,574 capital 5. Liquidity risk includes the analysis of maturity of assets and liabilities, and also explains outflow 436,718,958 44,033,223 49,533,343 79,777,330 109,275,883 154,099,179 upon the management method for asset liquidity and capital gap liquidity. maturity In order to control the Bank’s business risk, maintain the adequate liquidity and ensure the solvency effectively, the Bank prepares the “analysis of maturity structure of NTD” Gap （49,870,806） 50,057,872 （24,490,053）（46,698,189）（51,971,957） 23,231,521 periodically to analyze the capital gap and structural change upon maturity of the various assets and liabilities. Meanwhile, the Bank complies with the competent authority’s (II) The influence of domestic and foreign major policies and law amendment exerting on the requirement that the proportion of negative capital liquidity to the total assets shall be no bank’s financial structure and responding measures: more than -5% from 1 day to 30 days, and identifies -3% as the precautionary mark, to deal 1. Install the following additional systems to deal with the promulgation and enforcement of with the allocation of fund at different time and enhance the Bank’s liquidity control. Computer-Processed Personal Data Protection Law Enforcement Rules:

(1) NTD server and open server for log collection and analysis configuration Analysis of maturity structure of NTD (2) File encryption management system configuration December 31, 2011 Unit: NTD thousand (3) Establishment of ISO27001 ISMS Remaining balance to maturity 2. The FSC announced that IFRSs should be generally applied to preparation of financial Total 181 days to 1 More than 1 0 to 30 days 31 to 90 days 91 to 180 days statements as of 2013. In order to adopt the IFRSs, the Bank has already established the year year multi-departmental taskforce dedicated to IFRSs. In addition to sending personnel to Main attend the IFRSs training programs, the Bank has also entrusted Deloitte & Touche to capital provide assistance in adoption of IFRSs to have the Bank’s finance comply with the inflow 380,570,251 68,295,275 42,934,392 35,470,700 59,250,520 174,619,364 competent authority’s requirements and IFRSs. Until the end of 2011, the Bank's adopt upon of IFRSs has been performed in accordance with the timeline reported by the Bank to the maturity competent authority. The Bank will also continue completing the adopt of IFRSs as Main scheduled. capital 3. Amend the “Rules Governing the Preparation of Financial Statements of Public Issued outflow 430,265,099 44,564,497 52,210,394 75,026,018 104,831,2011 153,633,090 Banks”: upon (1) In order to cope with the policy requiring that IFRSs should be applied to maturity preparation of financial statements in the banking industry as of 2013, the FSC Gap (49,694,848) 23,730,778 (9,276,002) (39,555,318) (45,580,580) 20,986,274 amended the “Rules Governing the Preparation of Financial Statements of Public Issued Banks” on December 26, 2011, and the amended Rules should be enforced as Note: The table only specifies the amount in NTD (exclusive of foreign currencies) of Head Office and of 2013. local branches. (2) Said amendments were extensive, and made in accordance with the plan for adopt of IFRSs into this country. The Bank has researched the amendments, and firstly applied the IFRSs, and will select following accounting policies in accordance with the relevant requirements and in consideration of the Bank’s status, and then submit the same to the Board for resolution. The other statements and matters to be amended and disclosed will also be prepared and disclosed in accordance with the amended Rules, and the financial statements will be provided within the time limit prescribed by the competent authority. (III) The effect of technological and industrial changes on the Financial Status and operation of the Bank and countermeasures The information technology has been improved drastically. The bank’s equipment and operation becomes rapid due to the change in the social life and custom. Such e-banking services as e-ATM, network bank and voice bank have been well received by the public. As

130 131 131 a result, the operating cost may be reduced and the operating efficiency may be upgraded relatively. The Bank will continue providing more diversified on-line transaction services and providing customers with more complete, convenient and safe choices. (IV) The effect of the change in the corporate image of the Bank and countermeasures 1. As of 2009 until now, the Bank has promoted the “branch demonstration and learning system”. In addition to establishing the various standardized service requirements and upgrading the customer service quality, the Bank also introduced the “CIS” (Corporate Identity System) to strengthen the Bank’s corporate identity by integrated planning and communication of idea discrimination, vision discrimination and activity discrimination. 2. The Bank released new TV commercials in the Chinese New Year 2012 enabling the public to recognize the Bank’s corporate identity highlighting "Always on my mine” and also demonstrating the Bank’s deep-rooted localization and positive service attitude. This year, the Bank will make every endeavor to provide more diversified financial products, control customers’ needs and orientation, and upgrade customers’’ satisfaction and market competitiveness. (V) Expected result and possible risks of mergers and acquisitions and Counter assessments: None (VI) Expected result for establishing more business locations, possible risk and countermeasures Item Expected Result Possible Risk and Countermeasures Expansion Expansion of business Given the products and services identical in nature, of business locations is critical to intensive competition and high set-up cost in the locations expansion of the market financial industry, the set-up of a financial organization scale, and also the shall take into consideration such strengthens as source important channel of the of customers and profitability. Therefore, to set up sales and customer service. additional business locations, the Bank complied with By expanding business the competent authority’s requirements and also locations, the Bank may evaluated various factors with caution, in hopes of not only upgrade its reducing risk, solidifying stable business niche and operating performance but enhancing the Bank’s competitiveness in the market. Securities also receive positive effect For the time being, the Bank only undertakes brokerage branches in personnel training and business. According to the Bank’s Regulations for dispersion of risk. Securities Business Management, any accounts in error or defaults shall be notified to the managers immediately, and also reported and written off pursuant to the competent authority’s requirements, in order to reduce the loss. The general default loss shall be borne by clerks on their own, while the default loss for credit transactions shall be restated as bad debt according to the Bank’s relevant requirements. The reserve for accounts in error and default loss, no more than NTD300,000, will also be allocated from clerks’ monthly business bonus to cover the considerable risk. Hong Hong Kong is not only a On the premise of profit and management, the Kong fund allocation centre for settlement of “Hong Kong Branch” in the near future is Branch cross-strait expected to be very helpful to the Bank’s growth. The Taiwanese-based operational risk and management of the Branch will be enterprises, but also an subjected to the applicable local laws of Hong Kong important business location and the Head Office’s SOP for Risk Management. where all the financial institutions are seeking to set up branches for providing a more diversified and comprehensive financial services.

132 132 (VII) The risk confronting the over concentration of business, and countermeasures: The Bank has maintained a proper balance of banking services and there is no over concentration to the extent that dispersion of risk is impossible. (VIII) The effect of change in the management produced to the Bank, possible risk and countermeasures: None (IX) Contentious matters and non-contentious matters 1. The Kuang San Group’s illegal and excessive borrowing and the improper investment and default in the delivery of stocks issued by Shun Ta Yu were uncovered in November 1998. The loss suffered by the Bank has been written off into bad debt in whole. The fund seized by Taichung District Prosecutors Office and Taichung District Court in said case totaled NTD2.56 billion. After being remanded for several times upon appeals, now the case is pending in Taiwan High Court, Taichung Branch. Therefore, it is not possible to identify the actual amount recoverable at this moment. 2. The Bank has laid charges against the core members and important members of the illegal loans, improper investment and default stock delivery of the Kuang San Group Case to claim damages. The case of the Bank’s claim against the head of the gang and the accomplices, including Tseng ○ Jen, et al., for damages amounted to approximately NTD11.2 billion is still pending. The case is now pending in Taichung District Court in part, and Supreme Court in part. 3. Chang ○ Yi and Tseng ○ Jen were the co-infringers in the case of illegal loan and default stock delivery. Meanwhile, Chang ○ Yi was the Chairman of Shun Ta Yu in 1999. Therefore, the Bank filed a civil action with monetary claim against them. The claimed amount was NTD650,000 thousand. The case is now pending in Supreme Court. (X) Other major risks and counter-assessments: None VII. Crisis management mechanism In order to deal with the business crisis suffered by the Bank due to unexpected factors, such as extraordinary withdrawal of deposit, loss of large-sum fund and serious impairment on goodwill, or the likelihood of the loss of liquidity and solvency, the Bank will establish the “the taskforce dedicated to crisis management” to take the urgent response action to resolve the situation or recover operation. No crisis or other material natural disasters or contingencies occurred in 2011. VIII. The following methods and hypotheses for the valuation of fair value of financial instruments are applied: (I) Financial Instruments at Fair Value through Profit or Loss Financial instruments classified as financial assets or financial liabilities at fair value through profit or loss (“FVTPL”) include financial assets or financial liabilities held for trading and those designated as at FVTPL on initial recognition. The Bank recognizes a financial asset or a financial liability on its balance sheet when the Bank becomes a party to the contractual provisions of the financial instrument. A financial asset is derecognized when the Bank has lost control of its contractual rights over the financial asset. A financial liability is derecognized when the obligation specified in the relevant contract is discharged, cancelled or expired. FVTPL is initially measured at fair value plus transaction costs, and at each balance sheet date subsequent to issue of initial recognition, it is measured at fair value, with changes in fair value recognized directly in profit or loss in the period in which it arises. On de-recognition of a financial instrument, the difference between its carrying amount and the sum of the consideration received and receivable or consideration paid and payable is recognized in profit or loss. The purchase or disposal of financial assets in customary transactions shall be subject to accounting on the date of transaction. A derivative that does not meet the criteria for hedge accounting is classified as a financial asset or a financial liability held for trading. If the fair value of the derivative is positive, the derivative is recognized as a financial asset; otherwise, the derivative is recognized as a financial liability.

133 133 Basis of fair value: The fair value of stocks traded on the TSEC (GreTai) market and depository receipt is based on the closing price on the balance sheet. The fair value of open-ended funds is based on the net asset value on the balance sheet date. The fair value of bonds is based on the reference price on the balance sheet date in the GreTai Securities Market. The fair value of financial products for which no market price is available shall be evaluated based on the evaluation method. FVTPL which are mixed instruments, or for the reason of elimination or material reduction of the difference in accounting practices, can be designated as financial instruments at fair value through profit or loss at the initial recognition. Financial instruments portfolios, based on the Bank’s risk-management or investment policy, may also be designated as financial instruments at fair value through profit or loss. (II) Short-term financial instruments: The Book Value of short-term financial instruments stated in the balance sheet shall be the fair value of such instruments. The reason is that the maturity date of these instruments is close or the consideration received and paid is equivalent to its book value, and it would be reasonable to use the Book Value in the valuation of fair value. This method is applied to the valuation of due from Central Bank, call loans to banks and RP (Debt) investments. (III) Available-for-sale financial assets and held-to-maturity financial assets: The open market price of held-to-maturity financial assets shall be the fair value of such assets. The fair value of equity securities traded on the TSEC (GreTai) market is based on the closing price on the balance sheet date. The fair value of fund is based on the net asset value of assets on the balance sheet date. The fair value of bonds is based on the closing price or reference price on the balance sheet date. The fair value of derivatives is based on the settlement price or trading counterpart’s quotation. Where there is no such market price available, the fair value shall be estimated under evaluation method. When the market price applied by the Bank includes buying price and selling price, the Bank will evaluate the sale position based on the selling price prevailing in the market. Where there is no market price but the latest strike price available in the market at the time of evaluation, such strike price shall be the fair value of such assets. (IV) Equity investment under equity method The equity investment under equity method refers to the equity of unlisted (non-OTC) companies and no open market price thereof is available. Besides, it is impossible to evaluate the possibility of various estimates in the variance interval and it is impossible to measure the fair value. Therefore, the fair value of such investment shall be the book value thereof. (V) Investment in financial assets at cost: The financial assets at cost which are the stocks other than those traded on the TSEC (GreTai) market will have no public market price available, and the fair value thereof can be sought only at the price exceeding the reasonable cost. Therefore, it is impossible to measure the fair value of such investment. (VI) derivatives (including forward exchange and foreign exchange swap): It means the price to be received or paid by the Bank on the expiration date of the contract. The Bank applied the parameter or quotation disclosed by Reuter's quotation system to calculate the fair value of holding position.

IX. Other important notes  Settlement of disputes Subsequent negotiations for Lehman Brothers structured notes dispute: In order to settle the dispute over Lehman Brothers structured notes effectively, the Bank has complied with the competent authorities’ instruction to settle the dispute with customers. Until February 29, 2012, the Bank has filed a total of 727 cases over the dispute with the “Banking Dispute Review Board”, and settled 693 cases amicably, the settlement ratio of 95.32%, after 54 review meetings for the Lehman Brothers case were called.

134 134 Eight. Special Notes I. Special Notes (I) Information regarding the bank’s subsidiaries 1. Consolidated Report on business operations: (1) Chart showing the bank’s subsidiaries: A. The controlling Company and subsidiary companies

Taichung Commercial Bank Co., Ltd

100%

Taichung Bank Insurance Brokerage Co., Ltd.

B. Cross-investment: None. C. Subsidiaries and subsidiaries: None

(2) Profiles of the bank’s subsidiaries: Unit: NTD thousand Paid-in Date of Name of enterprise Address shares Major operations establishment Captial Controlling company: Taichung 1953.08.26 No. 87, Min Chuan Road, 22,338,576 Banking business as Commercial Bank West District, Taichung permitted under the Co., Ltd. Banking Act.

Subsidiary companies: Taichung Bank 2007.09.26 8F, No. 87, Min Chuan 6,000 Insurance brokerage. Insurance Brokerage Road., West District., Co., Ltd. Taichung

(3) Entities presumed in controll-subsidiary relations and information on identical shareholders: None (4) A. The industries housed in the same business location of the whole business group: (a) A. Commercial bank: Banking business as permitted under the Banking Act. (b) B. Insurance broker: Please refer to Paragraph (2), Profiles of the bank’s subsidiaries. B. The division of labor of the business group The business group started with banking through Taichung Commercial Bank. Taichung Commercial Bank Insurance Agency acted as brokerage for personal and property insurance business and developed the business through employees of Taichung Commercial Bank.

135 135 (5) Profiles of Directors, Supervisors and Presidents of the bank’s subsidiaries Unit: Thousand shares Status of shareholding Company name or Name of enterprise Poistion representative Quantity Ratio of Shareholding Controlling company: Taichung Chairman Pan Asia Chemical Corporation 141,768 6.35% Commercial Bank Delegate of Jin-Fong Soo - - Co., Ltd. Vice Pan Asia Chemical Corporation 141,768 6.35% Chairman Delegate of Kuei-Fong Wang 249 0.01% Managing Pan Asia Chemical Corporation 141,768 6.35% Director Delegate of Tzer-Hsiung Tsai - - Managing I Joung Investment Co., Ltd. 15,767 0.71% Director Delegate of Yee-Deh Chen 9,535 0.43% Hsi-Rong Huang - - Managing Director (Independen t director) Director Pan Asia Chemical Corporation 141,768 6.35% Delegate of Chun-Sheng Lee 463 0.02% Kuei-Hsien Wang - - Ming-Shan Chuang - - Hsin-Ching Chang - - Ming-Hsiung Huang - - Director I Joung Investment Co., Ltd. 15,767 0.71% Delegate of Ching-Hsin Chang 64 - Director He Yang Management 1,349 0.06% Consultation Co., Ltd. - - Delegate of Jia-Hong Lin Director Chou Chang Corporation 8,474 0.38% Delegate of Jer-Nan Wang 6,736 0.30%

Independent Chen-Le Liu - - director

Independent Jin-Yi Lee - - director Resident Xin Rui Investment Co., Ltd. 7,429 0.33% Supervisor Representative: Jiann-Ell - - Huang Supervisor Xin Rui Investment Co., Ltd. 7,429 0.33% Delegate of Chien-Hwa Lee Fu - - Ching-Huang Tsai Su-Li Huang Supervisor Tai Jiunn Enterprise Co., Ltd. 760 0.03% Delegate of Chao-Nan Hsieh - -

136 136 Status of shareholding Company name or Name of enterprise Poistion representative Quantity Ratio of Shareholding President Chun-Sheng Lee 463 0.02% Subsidiary company: Chairman Representative to Taichung 600 100.00% Taichung Bank Commercial Bank: Keui-Fong - - Insurance Director Wang 600 100.00% Brokerage Co., Representative to Taichung - - Ltd. Commercial Bank: Kai-Yu Lin - - Supervisor Yee-Deh Chen 600 100.00% Representative to Taichung - - Commercial Bank: Hsin-Ching Chang

(6) Operation overview of the bank’s subsidiaries Unit: in NTD thousand unless otherwise specified Earnings Income Income Per Share Name of Total before After (NTD) Capital Total assets Equity Net Income enterprise liabilities income income (After tax tax income tax) Controlling company: Taichung 22,338,576 384,346,681 358,885,627 25,461,054 5,712,857 1,914,176 1,454,000 0.79 Commercial Bank Co., Ltd.

Subsidiary company: Taichung 6,000 147,309 58,150 89,159 144,313 96,270 77,159 128.60 Bank Insurance Brokerage Co., Ltd.

2. Consolidated financial statement of subsidiaries: The Bank is required to prepare consolidated financial statements with its subsidiaries under the “Standards for the Preparation of Consolidated Report on Operation, Consolidated Financial Statements, and Report on Affiliations between Parent and Subsidiaries”. Subsidiaries of the Bank under the aforementioned legal rule are identical with the subsidiaries defined under Financial Accounting Standard No. 7 on “Consolidated Financial Statements”. Information on Financial Status and operation performance of such subsidiaries has been included in the disclosure of the aforementioned consolidated financial statement between parent and subsidiaries and therefore will not be prepared separately. For further information, please refer to the aforementioned consolidated statement between parent and subsidiaries.

137 137

Statement of Declaration

The Bank Affiliation Report 2011 (from January 1, 2011 to December 31, 2011) was prepared in accordance with the “Criteria Governing Preparation of Report on Affiliations, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises”, and the information disclosed herein is materially consistent with that disclosed in the notes to the financial statement for the previous period.

Taichung Commercial Bank Co., Ltd.

Responsible Person: Jin-Fong Soo

March 8, 2012

138 138 CPA’s Review Comments

To: Taichung Commercial Bank Co., Ltd.

We conducted the audit on the financial statements of Taichung Commercial Bank Company Limited for 2011 in accordance with the “Standards on the Audit of Financial Statements” and the audit principle generally accepted in the Republic of China, and we have issued modified unqualified opinions dated March 8, 2012. The purpose of the audit is to give an opinion on the fair presentation of the said financial statements. The Affiliation Report prepared by Taichung Commercial Bank was attached. Such report was prepared in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises”. An audit review requires us to proceed with the necessary procedures, including the acquisition of customers’ declaration and the confirmation on related information. The review has been successfully accomplished. In our opinion, the Affiliation Report for 2011 prepared by Taichung Commercial Bank is in compliance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” and the contents of financial information are identical with those presented in the financial statements. No material amendments to the information shall be required.

Deloitte & Touche

Wen-Ya Hsu, CPA Tze-Chun Wang, CPA

SFC Approval Document No. SFC Approval Document No. Tai-Tsai-Cheng (6) No. 0920123784 Tai-Tsai-Cheng (6) No. 0920123784

March 8, 2012

139 139

3. Affiliation Report: II. Conditions that will materially affect shareholders’ equity or price of securities: A. Relations between parent and subsidiaries Record date: 2012.2.29 Unit: share; % Date Conditions Directors, Supervisors or The Bank’s Board resolved to assume the policy assets at the transfer price of Status of shareholding and lien of stock by Name of managers appointed by 2011.2.24 USD17.11 million in order to deal with the U.S. court’s plan to appoint the receiver holding company of PEM case. holding Reason of holding holding company st company: Ratio of Shares Announce that the Bank’s Board resolved to issue the domestic 1 non-secured Shares Title Name 2011.3.30 Shareholding under lien convertible bank debentures in 2011. Announce that the Bank would state the impairment on financial assets in accordance 2011.6.30 Pan Asia Win a majority of 141,767,694 6.35% - Chairman Jin-Fong Soo with the Statement of Financial Accounting Standards No. 34. Chemical director seats of the Announce that the Bank’s Board resolved to increase capital by issuing new shares of 2011.7.7 Corporation Bank common stock domestically. Vice Kuei-Fong Announce that the Bank’s Board resolved to apply for installation of a branch in the 2011.8.4 Chairman Wang territory of Hong Kong. Managing Tzer-Shyong Announce that the Bank applied for investing in incorporation of “Taichung 2011.12.5 Director Tsai Commercial Bank Lease Enterprise” wholly-owned by the Bank. Announce that the Bank would state the impairment on financial assets in accordance Chairman 2011.12.30 and with the Statement of Financial Accounting Standards No. 34. Executive The Bank’s Board resolved to ratify the motion for conclusion of the letter of intent Vice 2012.1.11 for the property transaction with the owner of the property in Neihu District, Taipei President City.

Director Chun-Sheng Lee

Director Kuei-Hsien Wang Director Ming-Shan Chuang Director Hsin-Ching Chang Director Ming-Hsiung Huang

China Indirectly control 512,760,972 22.95% 139,000,000 - - Man-Made over the HR, Fiber Co., finance or operation Ltd. of the Bank

Chung Indirectly control - - - - - Chien over the HR, Investment finance or operation Co., Ltd. of the Bank B. Transactions between subsidiaries and Parent Name of enterprise: None C. Guarantees/endorsements between subsidiaries and Parent Name of enterprise: None (II) Private placement of securities and Bank debentures: None (III) Holding or disposal of the Bank’s stock by subsidiaries: None (IV) Other Supplementary Disclosure: None

140 141 140

II. Conditions that will materially affect shareholders’ equity or price of securities: Record date: 2012.2.29 Date Conditions The Bank’s Board resolved to assume the policy assets at the transfer price of 2011.2.24 USD17.11 million in order to deal with the U.S. court’s plan to appoint the receiver of PEM case. Announce that the Bank’s Board resolved to issue the domestic 1st non-secured 2011.3.30 convertible bank debentures in 2011. Announce that the Bank would state the impairment on financial assets in accordance 2011.6.30 with the Statement of Financial Accounting Standards No. 34. Announce that the Bank’s Board resolved to increase capital by issuing new shares of 2011.7.7 common stock domestically. Announce that the Bank’s Board resolved to apply for installation of a branch in the 2011.8.4 territory of Hong Kong. Announce that the Bank applied for investing in incorporation of “Taichung 2011.12.5 Commercial Bank Lease Enterprise” wholly-owned by the Bank. Announce that the Bank would state the impairment on financial assets in accordance 2011.12.30 with the Statement of Financial Accounting Standards No. 34. The Bank’s Board resolved to ratify the motion for conclusion of the letter of intent 2012.1.11 for the property transaction with the owner of the property in Neihu District, Taipei City.

141 141 Nine. Branches of Taichung Commercial Bank at a Glance Name Tel. No. Fax No. Postal No. Address Head Office Min Chuan Building 04-22236021 04-22240748 40341 No. 87, Min Chuan Rd., West Dist., Taichung Min Zu Building 04-22236023 04-22278584 40041 No. 45, Min Tsu Rd., Central Dist., Taichung Trust Dept. 04-22236021 04-22202327 40341 8F, No. 87, Min Chuan Rd., Wenstern Dist., Taichung International Business 04-22212933 04-22202046 40341 2F, No. 87, Min Chuan Rd., Wenstern Dist., Taichung Dept. Securities Brokerage 04-22268588 04-22267708 40041 1F, No. 45, Min Tsu Rd., Central Dist., Taichung Taipei City Taipei Branch 02-23211819 02-23212659 10049 No. 85, Jhongsiao E. Rd., Sec. 1, Taipei Songshan Branch 02-27658666 02-27658368 11072 No. 176, Keelung Rd., Sec. 1, Xin Yi Dist., Taipei Neihu Branch 02-26579899 02-26578887 11492 No. 306, Ruei Guang Rd., Neihu Dist., Taipei Taipei Securities Branch 02-23216266 02-23215020 10049 4F.-1, No.85, Jhongsiao E. Rd., Sec. 1, Taipei New Taipei City BanChiao Branch 02-29563456 02-29581616 22067 No. 28-2, Min Sheng Rd., Sec. 1, Banchiao Dist., New Taipei Sanzhong Branch 02-29877878 02-29872411 24141 No. 2, Jhongzhen Rd., Sanzhong Dist., New Taipei Xinzhuang Branch 02-29017888 02-29013040 24257 No. 651, Zhong Zheng Rd., Xinzhuang Dist., New Taipei Linkou Branch 02-26021888 02-26014522 24443 No. 8, Chu Lin Rd., Linko Dist., New Taipei Tucheng Branch 02-82603158 02-82601658 23659 No. 56, Ming-De Rd., Tucheng Dist., New Taipei Taoyuan County Nei Li Branch 03-4610566 03-4620277 32067 No. 24, Zhong Xiao Rd., Jhongli City, Taoyuan Jhongli Branch 03-4228828 03-4228826 32085 No. 326, Zhong Xiao Rd., Jhongli City, Taoyuan Pingzhen Branch 03-4915688 03-4912789 32441 No. 18, Jhongfong Rd., Pingzhen City, Taoyuan Taoyuan Branch 03-3333389 03-3331599 33058 1&2F, No. 324, Zhong Shan Rd., Taoyuan City, Taoyuan Yangmei Branch 03-4855288 03-4855859 32645 No. 337-1, Xin Nong Street, Yangmei Township, Taoyuan Nan Kang Branch 03-3216611 03-2223311 33859 No. 288, Nan Kang Rd., Sec. 1, Lu Zhu Hsiang, Taoyuan Gueishan Branch 03-3590005 03-3591266 33342 No. 1185, Wan Shou Rd., Sec. 2, Gueishan Hsiang, Taoyuan Tayuan Branch 03-3857001 03-3859033 33753 No. 47, Da Guan Rd., Tayuan Hsiang, Taoyuan Jhongli Securities 03-4251366 03-4251172 32085 2F, No. 18, Zhong Mei Rd., Jhongli City, Taoyuan Branch Hsinchu City Hsinchu Branch 03-5257288 03-5233566 30046 No. 128, Si Wei Rd., Hsinchu Hsinchu County Zhu Pei Branch 03-6675188 03-6675168 30264 No. 276, Kuang Ming 6th Rd., East Sec. 1, Zhu Pei, Hsinchu Hsinfong Branch 03-5590929 03-5590788 30442 No. 155-12, Chien Hsing Rd., Sec. 1, Hsinfong, Hsinchu Miaoli County Zhunan Branch 037-481148 037-480465 35041 No. 66, Ho Ping Street, Zhu Nan Township, Miaoli Yuanli Branch 037-866366 037-866316 35844 No. 79, Xin Yi Rd., Yuan Nan Li, Yuan Li Township, Miaoli Taichung City Zhong Zheng Branch 04-22245181 04-22251969 40044 No. 189, Zhong-Zheng Rd., Central Dist., Taichung N. Taiping Branch 04-22121298 04-22120800 40147 No. 66, Wu Dong Rd., East Dist., Taichung S. Taichung Branch 04-22244187 04-22253055 40247 No. 355, Fu Xin Rd., Sec. 3, South Dist., Taichung Daqing Branch 04-22634838 04-22634846 40256 No. 295, Fu Xin Rd., Sec. 1, South Dist., Taichung Business Dept. 04-22274567 04-22232926 40341 1F, No. 87, Min-Chuan Rd., West Dist., Taichung Overseas Banking 04-22212933 04-22202046 40341 2F, No. 87, Min-Chuan Rd., Wenstern Dist., Taichung Branch W. Taichung Branch 04-23212501 04-23211847 40356 No. 369, Gong Yi Rd., West Dist., Taichung N. Taichung Branch 04-22920832 04-22957526 40462 No. 624, Da Ya Rd., North Dist., Taichung Peitun Branch 04-22316266 04-22316168 40646 No. 80, Ching Hua N. Rd., Peitun Dist., Taichung Junkong Branch 04-24371151 04-24367374 40663 No. 222, Tung Shan Rd, Sec. 1, Pei Tun Dist., Taichung Simin Branch 04-24226165 04-24226567 40673 No. 199, Chong De Rd., Sec. 3, Pei Tun Dist., Taichung Xitun Branch 04-27060696 04-27010309 40744 No. 436, Sec. 2, Ho-Nan Rd., Xitun Dist., Taichung 1F & 2F No. 663, Wu Chuan W. Rd., Sec.2, Nan Tun Dist., Nantun Branch 04-23824358 04-23828070 40869 Taichung Taiping Branch 04-22700756 04-22708629 41142 No. 115, Zhong Xing Rd, Tai Ping Dist., Taichung Neixin Branch 04-24830345 04-24838958 41254 No. 339, Zhong Xing Rd., Sec. 2, Da Li Dist., Taichung Wufeng Branch 04-23391165 04-23326083 41341 No. 829, Zhong-Zheng Rd., Wufong Dist., Taichung Wuri Branch 04-23373176 04-23373180 41442 No. 107, San Min St., Wu Ri Hsiang, Taichung S. Fongyuan Branch 04-25261195 04-25284637 42050 No. 232, Zhong Shan Rd., Fong Yuan Dist., Taichung Nanyang Branch 04-25244426 04-25284638 42051 No. 338, Yuan Wan E. Rd, Fong Yuan Dist., Taichung Fongyuan Branch 04-25244171 04-25244178 42056 No. 302-1, Zhong Shan Rd., Fong Yuan Dist., Taichung E. Fongyuan Branch 04-25260175 04-25279944 42060 No. 203, Zhong Shan Rd., Fong Yuan Dist., Taichung Houli Branch 04-25571180 04-25573081 42151 No. 95, Min Sheng Rd., Hou Li District, Taichung City Dongshi Branch 04-25872185 04-25875203 42343 No. 61, Zhong Shan Rd., Dongshi Dist., Taichung Tanzi Branch 04-25323121 04-25338460 42751 No. 76, Tan Xing Rd., Sec. 3, Tan Zi Dist., Taichung 142 142 Name Tel. No. Fax No. Postal No. Address Nine. Branches of Taichung Commercial Bank at a Glance Daya Branch 04-25668161 04-25671143 42843 1&2F, No. 39, Zhong Qing S. Rd., Daya Dist., Taichung Name Tel. No. Fax No. Postal No. Address Shengang Branch 04-25621501 04-25627404 42944 No. 40, Mintzu Rd., Shengang Dist., Taichung Head Office Dadu Branch 04-26991166 04-26991170 43242 No. 778, Sha Tian Rd., Sec. 2, Dadu Dist., Taichung Min Chuan Building 04-22236021 04-22240748 40341 No. 87, Min Chuan Rd., West Dist., Taichung Shalu Branch 04-26621101 04-26622467 43350 1&2F, No. 298, Zhong Shan Rd., Sha Lu Dist., Taichung Min Zu Building 04-22236023 04-22278584 40041 No. 45, Min Tsu Rd., Central Dist., Taichung Lungjing Branch 04-26326788 04-26323566 43448 No. 77, You Yuan S. Rd., Lung Jing Dist., Taichung Trust Dept. 04-22236021 04-22202327 40341 8F, No. 87, Min Chuan Rd., Wenstern Dist., Taichung Taichungkang Branch 04-26571191 04-26571517 43542 No. 36, Ba De Rd., Wu Qin Dist., Taichung International Business Qingshui Branch 04-26226106 04-26227587 43653 No. 104, Zhong Shan Rd., Qingshui Dist., Taichung 04-22212933 04-22202046 40341 2F, No. 87, Min Chuan Rd., Wenstern Dist., Taichung Dept. Dajia Branch 04-26862151 04-26875838 43746 No. 42, CKS Route, Dajia Dist., Taichung Securities Brokerage 04-22268588 04-22267708 40041 1F, No. 45, Min Tsu Rd., Central Dist., Taichung Changhwa County Taipei City Changhua Branch 04-7224641 04-7221431 50061 No. 126, Guang-Fu Rd., Changhua Taipei Branch 02-23211819 02-23212659 10049 No. 85, Jhongsiao E. Rd., Sec. 1, Taipei Dazhu Branch 04-7387648 04-7386907 50078 No. 364, Jang Nan Rd., Sec. 1, Changhwa Songshan Branch 02-27658666 02-27658368 11072 No. 176, Keelung Rd., Sec. 1, Xin Yi Dist., Taipei Huatan Branch 04-7868775 04-7869067 50343 No. 446, Zhong Shan Rd., Sec. 1, Hua Tan Hsiang, Changhwa Neihu Branch 02-26579899 02-26578887 11492 No. 306, Ruei Guang Rd., Neihu Dist., Taipei 1&2F, No. 597, Jang Shui Rd., Sec. 2, Xiu Shui Hsiang, Xiushui Branch 04-7693525 04-7698148 50448 Taipei Securities Branch 02-23216266 02-23215020 10049 4F.-1, No.85, Jhongsiao E. Rd., Sec. 1, Taipei Changhwa New Taipei City Lukang Branch 04-7780545 04-7762275 50563 No. 266, Zhong Shan Rd., Lu Kang Township, Changhwa BanChiao Branch 02-29563456 02-29581616 22067 No. 28-2, Min Sheng Rd., Sec. 1, Banchiao Dist., New Taipei Homei Branch 04-7562171 04-7562175 50846 No. 393, Lu Ho Rd., Sec. 6, Ho Mei Township, Changhwa Sanzhong Branch 02-29877878 02-29872411 24141 No. 2, Jhongzhen Rd., Sanzhong Dist., New Taipei Shenkang Branch 04-7983171 04-7988403 50941 No. 111, Zhong Shan E. Rd., Shen Kang Hsiang, Changhwa Xinzhuang Branch 02-29017888 02-29013040 24257 No. 651, Zhong Zheng Rd., Xinzhuang Dist., New Taipei Yuanlin Branch 04-8326141 04-8332927 51046 No. 27, Zhong Shan S. Rd., Yuan Lin Township, Changhwa Linkou Branch 02-26021888 02-26014522 24443 No. 8, Chu Lin Rd., Linko Dist., New Taipei No. 116, Da Tung Rd., Sec. 2, Yuan Lin Township, Changhwa N. Yuanlin Branch 04-8322141 04-8354844 51050 Tucheng Branch 02-82603158 02-82601658 23659 No. 56, Ming-De Rd., Tucheng Dist., New Taipei County Taoyuan County No. 311, Yuan Jing Rd., Sec. 2, She Tou Township, Shetou Branch 04-8731466 04-8720427 51141 Nei Li Branch 03-4610566 03-4620277 32067 No. 24, Zhong Xiao Rd., Jhongli City, Taoyuan Changhwa No. 71, Xi Men Rd., Yong Nan Village, Yong Jing Hsiang, Jhongli Branch 03-4228828 03-4228826 32085 No. 326, Zhong Xiao Rd., Jhongli City, Taoyuan Yongjing Branch 04-8232363 04-8232549 51247 Pingzhen Branch 03-4915688 03-4912789 32441 No. 18, Jhongfong Rd., Pingzhen City, Taoyuan Changhwa No. 217, Zhong Zheng Rd., Sec. 1, Dong Men Village, Pu Xin Taoyuan Branch 03-3333389 03-3331599 33058 1&2F, No. 324, Zhong Shan Rd., Taoyuan City, Taoyuan Puxin Branch 04-8281437 04-8281442 51347 Yangmei Branch 03-4855288 03-4855859 32645 No. 337-1, Xin Nong Street, Yangmei Township, Taoyuan Hsiang, Changhwa Nan Kang Branch 03-3216611 03-2223311 33859 No. 288, Nan Kang Rd., Sec. 1, Lu Zhu Hsiang, Taoyuan Xihu Branch 04-8853311 04-8814498 51452 No. 290, Jang Shui Rd., Sec. 3, Xi Hu Township, Changhwa No. 197, Zhong Zhou Rd., Sec. 1, Tian Zhong Township, Gueishan Branch 03-3590005 03-3591266 33342 No. 1185, Wan Shou Rd., Sec. 2, Gueishan Hsiang, Taoyuan Tianzhong Branch 04-8742206 04-8741514 52042 Tayuan Branch 03-3857001 03-3859033 33753 No. 47, Da Guan Rd., Tayuan Hsiang, Taoyuan Changhwa Jhongli Securities Peitou Branch 04-8884146 04-8885331 52146 No. 180, Tou Yuan Rd., Sec. 1, Pei Tou Township, Changhwa 03-4251366 03-4251172 32085 2F, No. 18, Zhong Mei Rd., Jhongli City, Taoyuan Branch Pitou Branch 04-8924606 04-8924335 52341 No. 163, Tou Yuan W. Rd., Pei Tou Hsiang, Changhwa Hsinchu City Erlin Branch 04-8962125 04-8962677 52662 No. 496, Jen Ai Rd., Pei Ping Li, Er Lin Township, Changhwa Yuanlin Securities 3F, No. 462, Zhong Zheng S. Rd., Yuan Lin Township, Hsinchu Branch 03-5257288 03-5233566 30046 No. 128, Si Wei Rd., Hsinchu 04-8329000 04-8311283 51041 Hsinchu County Branch Changhwa Zhu Pei Branch 03-6675188 03-6675168 30264 No. 276, Kuang Ming 6th Rd., East Sec. 1, Zhu Pei, Hsinchu Nantou County Hsinfong Branch 03-5590929 03-5590788 30442 No. 155-12, Chien Hsing Rd., Sec. 1, Hsinfong, Hsinchu Nantou Branch 049-2222146 049-2222481 54058 No. 52, Min Sheng St., Nantou City, Nantou Miaoli County Caotun Branch 049-2334146 049-2303149 54263 No. 141, Pi Shan Rd., Cao Tun Township, Nantou Zhunan Branch 037-481148 037-480465 35041 No. 66, Ho Ping Street, Zhu Nan Township, Miaoli Puli Branch 049-2984001 049-2901265 54555 No. 62, Xi Kang Rd., Pu Li Township, Nantou Yuanli Branch 037-866366 037-866316 35844 No. 79, Xin Yi Rd., Yuan Nan Li, Yuan Li Township, Miaoli Shui Li Branch 049-2772177 049-2770046 55343 No. 270, Min Chuan Rd., Shui Li Hsiang, Nantou Taichung City Zhushan Branch 049-2643181 049-2653081 55747 No. 148, Zhu Shan Rd., Zhu Shan Township, Nantou Zhong Zheng Branch 04-22245181 04-22251969 40044 No. 189, Zhong-Zheng Rd., Central Dist., Taichung Yunlin County N. Taiping Branch 04-22121298 04-22120800 40147 No. 66, Wu Dong Rd., East Dist., Taichung Dounan Branch 05-5954879 05-5954891 63041 No. 151-9, Zhong Shan S. Rd., Tou Nan Township, Yunlin S. Taichung Branch 04-22244187 04-22253055 40247 No. 355, Fu Xin Rd., Sec. 3, South Dist., Taichung Huwei Branch 05-6313788 05-6310599 63246 No. 57-2, Lin Sen Rd., Sec. 2, Hu Wei Township, Yunlin Daqing Branch 04-22634838 04-22634846 40256 No. 295, Fu Xin Rd., Sec. 1, South Dist., Taichung Chiayi County No. 78, Jien Kuo Rd., Sec. 2, Shuang Fu Village, Ming Business Dept. 04-22274567 04-22232926 40341 1F, No. 87, Min-Chuan Rd., West Dist., Taichung Ming Hsiung Branch 05-2208833 05-2205533 62159 Overseas Banking Hsiung Hsiang, Chiayi 04-22212933 04-22202046 40341 2F, No. 87, Min-Chuan Rd., Wenstern Dist., Taichung Branch Tainan City W. Taichung Branch 04-23212501 04-23211847 40356 No. 369, Gong Yi Rd., West Dist., Taichung Yong Kang Branch 06-3026678 06-3035659 71049 No. 760, Zhong Hua Rd., Yong Kang Dist., Tainan N. Taichung Branch 04-22920832 04-22957526 40462 No. 624, Da Ya Rd., North Dist., Taichung Kaohsiung City st Peitun Branch 04-22316266 04-22316168 40646 No. 80, Ching Hua N. Rd., Peitun Dist., Taichung Kaohsiung Branch 07-3355275 07-3346981 80251 1&2F, No. 11, Min Chuan 1 Rd., Ling Ya Dist., Kaohsiung nd Junkong Branch 04-24371151 04-24367374 40663 No. 222, Tung Shan Rd, Sec. 1, Pei Tun Dist., Taichung Fongshan Branch 07-7216719 07-7211423 83081 1&2F, No. 172, Wu Qing 2 Rd., Fong Shan Dist., Kaohsiung Simin Branch 04-24226165 04-24226567 40673 No. 199, Chong De Rd., Sec. 3, Pei Tun Dist., Taichung Xitun Branch 04-27060696 04-27010309 40744 No. 436, Sec. 2, Ho-Nan Rd., Xitun Dist., Taichung 1F & 2F No. 663, Wu Chuan W. Rd., Sec.2, Nan Tun Dist., Nantun Branch 04-23824358 04-23828070 40869 Taichung Taiping Branch 04-22700756 04-22708629 41142 No. 115, Zhong Xing Rd, Tai Ping Dist., Taichung Neixin Branch 04-24830345 04-24838958 41254 No. 339, Zhong Xing Rd., Sec. 2, Da Li Dist., Taichung Wufeng Branch 04-23391165 04-23326083 41341 No. 829, Zhong-Zheng Rd., Wufong Dist., Taichung Wuri Branch 04-23373176 04-23373180 41442 No. 107, San Min St., Wu Ri Hsiang, Taichung S. Fongyuan Branch 04-25261195 04-25284637 42050 No. 232, Zhong Shan Rd., Fong Yuan Dist., Taichung Nanyang Branch 04-25244426 04-25284638 42051 No. 338, Yuan Wan E. Rd, Fong Yuan Dist., Taichung Fongyuan Branch 04-25244171 04-25244178 42056 No. 302-1, Zhong Shan Rd., Fong Yuan Dist., Taichung E. Fongyuan Branch 04-25260175 04-25279944 42060 No. 203, Zhong Shan Rd., Fong Yuan Dist., Taichung Houli Branch 04-25571180 04-25573081 42151 No. 95, Min Sheng Rd., Hou Li District, Taichung City Dongshi Branch 04-25872185 04-25875203 42343 No. 61, Zhong Shan Rd., Dongshi Dist., Taichung Tanzi Branch 04-25323121 04-25338460 42751 No. 76, Tan Xing Rd., Sec. 3, Tan Zi Dist., Taichung 142 143 143 Stock Code: 2812

Auditor’s Report

To: Taichung Commercial Bank Co., Ltd.

identified in said financial statements, the financial statement of Reliance Securities Investment Annual Report Trust Co., Ltd. was audited by a third party auditor instead of by our firm. Therefore, our opinion 2011 (Audit Report Attached) on the values stated by Reliance Securities Investment Trust Co., Ltd. in said financial statements was made based on another auditor’s report. The equity investment of Reliance Securities

Investment Trust Co., Ltd. under equity method was NTD127,811 thousand and NTD144,073

thousand on December 31, 2011 and 2010, accounting for 0.03% and 0.04% of the total assets.

The net equity investment of Reliance Securities Investment Trust Co., Ltd. recognized under

equity method from January 1 to December 31, 2011 and 2010 were NTD(10,262) thousand and

NTD4,085 thousand, accounting for (0.54)% and 0.49% of the income before income tax.

We conducted our audit in accordance with the “Guidelines for Certified Public

Accountants’ Examination and Reports on Financial Statements”, and generally accepted

auditing standards in the Republic of China. Those standards require that we plan and perform

the audit to obtain reasonable assurance as to whether the consolidated financial statement is free

of material misstatement. An audit includes examining, through random sampling, evidence

supporting the amounts and disclosures in the financial statements. An audit also includes

assessing the accounting principles used and significant estimates made by management, as well

as evaluating the overall financial statement presentation. We believe that our audit and the

other auditors' report may provide a reasonable basis for our opinion. Address: No. 87, Min Chuan Road, West District, Taichung City, TEL : (04) 22236021

- 144 - - 145 - Auditor’s Report

To: Taichung Commercial Bank Co., Ltd.

We have audited the accompanying balance sheet of Taichung Commercial Bank Co., Ltd. as of December 31, 2011 and 2010, and the related statements of income, changes in shareholders’ equity and cash flows for the years then ended. Said financial statement is the responsibility of the management. Our responsibility is to express an opinion on the consolidated financial statement based on our audits. Among the investees evaluated under equity method as identified in said financial statements, the financial statement of Reliance Securities Investment Trust Co., Ltd. was audited by a third party auditor instead of by our firm. Therefore, our opinion on the values stated by Reliance Securities Investment Trust Co., Ltd. in said financial statements was made based on another auditor’s report. The equity investment of Reliance Securities Investment Trust Co., Ltd. under equity method was NTD127,811 thousand and NTD144,073 thousand on December 31, 2011 and 2010, accounting for 0.03% and 0.04% of the total assets. The net equity investment of Reliance Securities Investment Trust Co., Ltd. recognized under equity method from January 1 to December 31, 2011 and 2010 were NTD(10,262) thousand and NTD4,085 thousand, accounting for (0.54)% and 0.49% of the income before income tax. We conducted our audit in accordance with the “Guidelines for Certified Public Accountants’ Examination and Reports on Financial Statements”, and generally accepted auditing standards in the Republic of China. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statement is free of material misstatement. An audit includes examining, through random sampling, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the other auditors' report may provide a reasonable basis for our opinion.

- 145 - In our opinion, based on our audit result and the other auditors’ report, the financial statements referred to in the first paragraph present fairly, in all material respects, the Financial Status of the Bank as of December 31, 2011 and 2010, and its operation results and cash flows for years then ended in conformity with the “Rules Governing the Preparation of Financial Statements of Public Issued Banks”, “Rules Governing the Preparation of Financial Statements of Securities Firms”, “Business Accounting Act”, the provisions related to financial accounting standards referred to in the “Regulation on Business Entity Accounting Handling”, and generally accepted accounting principles in the Republic of China. As described in Note 3 to the financial statements, Taichung Commercial Bank Co., Ltd., since January 1, 2011, has adopted revised SFAS No. 34 “Accounting for Financial Instruments” and newly issued SFAS No. 41 “Disclosure of Operating Segments” and adopted early the provision concerning the grant date for capital increase by cash retained for subscription by employees stated in Letter (2012) Ji-Mi-Jin No. 038 issued by Accounting Research and Development Foundation. We have also audited the consolidated financial statements of the Bank for 2011 and 2010, and have expressed modified unqualified opinions on such financial statements. The statement of important accounting titles of the financial statement for 2011 was provided to supplement the analysis only, and has been audited by us in accordance with the procedure referred to in Paragraph 2 herein. In our opinion, the statement of such titles is consistent with the relevant information provided in the financial statement referred to in Paragraph 1 herein in all material respects.

Deloitte & Touche Wun-Ya Syu, CPA Zih-Jyun Wang, CPA

SFC Approval Document No. SFC Approval Document No. Tai-Cai-Jheng (6) No. 0920123784 Tai- Cai-Jheng (6) No. 0920123784

March 8, 2012

- 146 - Taichung Commercial Bank Co., Ltd. Balance Sheet December 31, 2011 and 2010 Unit: NTD thousand

Percentage Percentage December 31,2011 December 31, 2010 of Variation December 31, 2011 December 31, 2010 of Variation Code Assets Amount Amount （％） Code Liabilities and Shareholders’ Equity Amount Amount （%） 11000 Deposits of Central Bank and other banks Cash and cash equivalents (Note 4) $ 8,349,890 $ 4,669,329 79 21000 (Note 16) $ 3,462,519 $ 2,306,957 50

11500 Due from Central Bank of China and other Funds borrowed from CBC and other banks banks (Note 5) 74,267,724 68,612,460 8 21500 (Notes 17 and 30) 2,877,550 1,602,150 80

12000 Financial assets at fair value through profit or 22000 Financial liabilities at fair value through profit loss (Note 2,6 & 30) 1,096,769 1,646,562 ( 33 ) or loss (Notes 2 & 6) 51,804 110,069 ( 53 )

13000 Receivables – net (notes 2, 7, 9, 27 & 22500 RP (Debt) (Notes 2 & 18) - 1,477,800 ( 100 ) 29) 2,888,283 3,389,297 ( 15 ) 23000 Payables (Note 19) 7,683,501 3,872,015 98 13400 Assets held for sale (Notes 2 & 8) 41,639 150,763 ( 72 ) 23500 Deposits and remittances (notes 20 and 29) 333,832,631 302,849,512 10 13500 Discounts and loans – net (Notes 2, 9 & 29) 277,756,366 244,463,233 14 24000 Financial bonds payable (Note 2& 21) 10,512,559 8,300,000 27 14000 Available-for-sale financial assets (Notes 2, 10 and 30) 4,211,580 1,099,035 283 25000 Accruable pension liabilities (notes 2 and 22) 136,764 122,602 12 14500 Held-to-maturity financial assets - net (Notes 147 2, 11 & 30) 9,439,040 10,382,868 ( 9 ) 29500 Other liabilities ( Notes 2 and 23) 328,299 408,800 ( 20 )

15000 Equity investment under equity method (Notes 2 & 12) 216,970 337,561 ( 36 ) 20000 Total liabilities 358,885,627 321,049,905 12

15500 Other financial assets, net (Notes 2, 9 & 13) 850,396 144,453 489 Shareholders' equity (Note 24) 31000 Capital stock 22,338,576 17,319,006 29 Fixed assets, net (Notes 2 & 14) Capital surplus Cost 31501 Stock premiums 569,058 775,256 ( 27 ) 18501 Land 1,619,138 1,573,285 3 31599 Other capital surplus 106,479 16,813 533 18521 Buildings and structures 1,849,721 1,835,820 1 Retained earnings 18541 Transportation and communication equipment 34,821 40,446 ( 14 ) 32001 Legal reserve 723,937 600,350 21 18551 Miscellaneous equipment 1,071,640 1,067,989 - 32003 Special reserve 32,599 16,987 92 Total cost 4,575,320 4,517,540 1 32011 Accumulated earnings 1,455,841 411,956 253 Revaluation increment 605,170 605,170 - Other shareholders’ equity Less: accumulated depreciation ( 1,856,059 ) ( 1,814,989 ) 2 32501 Unrealized appreciations (Note 2) 283,744 283,744 - Unrealized loss on available-for-sale financial assets Less: accumulated impairment ( 77,000 ) ( 77,000 ) - 32523 ( 18575 Prepayments for equipment 88,550 - - Note 2) 10,960 ( 9,092 ) 221 18500 Net loss not recognized as pension Net 3,335,981 3,230,721 3 32544 cost ( Note 22) ( 60,140 ) - - 19500 Other assets (Notes 2, 15 & 27) 1,892,043 2,338,643 ( 19 ) 30000 Total shareholders’ equity 25,461,054 19,415,020 31

10000 Total assets $ 384,346,681 $ 340,464,925 13 Total liabilities and shareholders’ equity $ 384,346,681 $ 340,464,925 13

The notes attached shall constitute an integral part of this financial statement. (Refer to Auditor’s Report presented by Deloitte & Touche dated March 8, 2012)

Chairman: Jin-Fong Soo Manager: Jyun-Sheng Li Chief accountant: Yi-Ying, Jhong

- 147 - Taichung Commercial Bank Co., Ltd. Statements of Income Years Ended December 31, 2011 and 2010 Unit: NTD thousand, except Earnings Per Share ($)

Percentage 2011 2010 change Code Amount Amount (%) 41000 Interest revenues (Notes 2 and 29) $ 7,415,723 $ 6,110,218 21

51000 Interest expenses (Notes 2 and 29) ( 2,472,427 ) ( 1,726,758 ) 43

Net interest income 4,943,296 4,383,460 13

Non-interest income 49100 Net income from service fees (Notes 2, 25 and 29) 889,894 1,035,450 ( 14 ) 49200 Net (loss) gain on financial assets and liabilities at fair value through profit or loss (Notes 2 and 6) ( 503,030 ) 888,832 ( 157 ) 49500 Net gain on equity investment under equity method (Notes 2 and 12) 66,897 185,573 ( 64 ) 49600 Net gain (loss) on foreign exchange (Note 2) 323,494 ( 806,485 ) 140 48063 Net loss on disposal of Fixed assets (Note 2) ( 33,264 ) ( 13,416 ) 148 49700 Gain (loss) on reversal of asset impairment (Notes 2, 7, 8, 11, 13 and 15) 10,741 ( 707,188 ) 102 49805 Net gain from financial assets carried at cost 24,861 21,027 18 58023 Net (loss) gain on disposal of collateral accepted ( 45,657 ) 32,730 ( 239 ) 58089 Other provision (Note 31) ( 5,050 ) ( 483,334 ) ( 99 ) 48099 Other non-interest income (Notes 2 and 23) 40,675 948 4,191

Income - net 5,712,857 4,537,597 26

51500 Bad debts expense (Notes 2 and 9) ( 664,948 ) ( 933,359 ) ( 29 )

(Continued on next page)

- 148 - (Continued from previous page)

Percentage 2011 2010 change Code Amount Amount (%) Operating expenses (Note 26) 58500 Employee expenses ( $ 1,913,089 ) ( $ 1,778,503 ) 8 59000 Depreciation and amortization expenses ( 140,914 ) ( 158,794 ) ( 11 ) 59500 Business and administrative expenses ( 1,079,730 ) ( 828,120 ) 30 Total operating expenses ( 3,133,733 ) ( 2,765,417 ) 13

61001 Income before income tax 1,914,176 838,821 128

61003 Income tax expenses (Notes 2 & 27) ( 460,176 ) ( 426,865 ) 8

69000 Net income of current period $ 1,454,000 $ 411,956 253

Before After Before After Code Income Tax Income tax Income Tax Income tax EPS (Note 28) 69500 Basic earnings per share $ 1.03 $ 0.79 $ 0.59 $ 0.29 69700 Diluted earnings per share $ 0.99 $ 0.75 $ 0.59 $ 0.29

The notes attached shall constitute an integral part of this financial statement. (Refer to Auditor’s Report presented by Deloitte & Touche dated March 8, 2012)

Chairman: Jin-Fong Soo Manager: Jyun-Sheng Li Chief accountant: Yi-Ying, Jhong

- 149 - Taichung Commercial Bank Co., Ltd. Statements of Changes in Shareholders’ Equity Years Ended December 31, 2011 and 2010 Unit: NTD thousand Other shareholders’ equity Capital stock Capital surplus Retained earnings Unrealized Unrealized loss Net loss not Total Common stock Other capital Undistributed Revaluation from financial recognized as shareholders’ capital Stock premiums surplus Legal reserve Special reserve earnings increment instruments pension cost equity Balance as of January 1, 2010 $ 13,719,006 $ 750,000 $ 16,813 $ 594,653 $ - $ 22,684 $ 283,744 ( $ 25,897 ) $ - $ 15,361,003

Allocation of earnings 2009 Legal reserve - - - 5,697 - ( 5,697 ) - - - - Special reserve - - - - 16,987 ( 16,987 ) - - - -

Issuance of common stock for cash 3,600,000 ------3,600,000

Recognition of employee stock option compensation cost - 25,256 ------25,256

Available-for-sale financial asset price difference adjustment ------16,805 - 16,805

Net income 2010 - - - - - 411,956 - - - 411,956

Balance as of December 31, 2010 17,319,006 775,256 16,813 600,350 16,987 411,956 283,744 ( 9,092 ) - 19,415,020

150 Allocation of earnings 2010 Legal reserve - - - 123,587 - ( 123,587 ) - - - - Special reserve - - - - 9,092 ( 9,092 ) - - - - Reversal of special reserve - - - - ( 16,987 ) 16,987 - - - - Stock dividends 294,423 - - - - ( 294,423 ) - - - -

Issuance of common stock for cash 4,500,000 ------4,500,000

Capital surplus transferred to capital 225,147 ( 225,147 ) ------

Equity component of convertible financial bonds - - 83,039 ------83,039

Recognition of employee stock option compensation cost - 18,949 6,627 ------25,576

Available-for-sale financial asset price difference adjustment ------20,052 - 20,052

Default loss reserve transferred as special reserve - - - - 23,507 - - - - 23,507

Net loss not recognized as pension cost ------( 60,140 ) ( 60,140 )

Net income 2011 - - - - - 1,454,000 - - - 1,454,000

Balance as of December 31, 2011 $ 22,338,576 $ 569,058 $ 106,479 $ 723,937 $ 32,599 $ 1,455,841 $ 283,744 $ 10,960 ( $ 60,140 ) $ 25,461,054

The notes attached shall constitute an integral part of this financial statement. (Refer to Auditor’s Report presented by Deloitte & Touche dated March 8, 2012)

Chairman: Jin-Fong Soo Manager: Jyun-Sheng Li Chief accountant: Yi-Ying, Jhong

- 150 - Taichung Commercial Bank Co., Ltd. Statements of Cash Flow Years Ended December 31, 2011 and 2010 Unit: NTD thousand 2011 2010 Cash flow from operating activities Net income of current period $ 1,454,000 $ 411,956 Provision of allowance for bad debts 664,948 933,359 Recovery of bad debts 230,394 232,419 Write-off of non-performing loans ( 553,966 ) ( 1,115,982 ) Provision for reserve accounts - 1,629 Income of investment under the equity method ( 66,897 ) ( 185,573 ) Cash dividends under equity method 187,488 139,033 Available-for-sale financial asset premium/discount amortization 2,599 ( 1,397 ) Gain from disposal of financial assets carried at cost ( 12,327 ) ( 1,365 ) Amortization of premium/discount on held-to-maturity financial assets 64,910 78,522 Amortization of discount on convertible financial bonds 19,518 - Depreciation and amortization (depreciation of assets not for business operation included) 141,111 158,994 Net loss (gain) on disposal of fixed assets , available-for-sale assets and collateral accepted 78,921 ( 19,314 ) Asset impairment loss (reversal gain) ( 10,741 ) 707,188 Deferred income tax expenses 455,369 427,741 Defined benefit pension fund 5,284 ( 6,657 ) Employee stock option compensation cost 25,576 25,256 Unrealized exchange (gain) loss ( 257,127 ) 1,159,241 Decrease (increase) in operating assets Financial assets-Trading 549,793 ( 1,151,850 ) Accounts receivable 247,001 145,059 Other assets 15,807 641 Increase (decrease) in operating liabilities Financial liabilities-Trading ( 82,185 ) 42,721 Payables 3,811,486 367,550 Other liabilities ( 19,188 ) ( 12,466 ) Net cash inflow from operating activities 6,951,774 2,336,705

Cash flow from investing activities Increase in Due From Central Bank Of China And Other Banks ( 5,655,264 ) ( 5,412,953 ) Increase in notes discounted and loans ( 33,567,843 ) ( 26,831,461 ) Proceeds from disposal of financial assets carried at cost 12,420 39,335 Proceeds from acquisition of available-for-sale financial assets ( 3,119,816 ) ( 419,637 ) (Continued on next page)

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2011 2010 Taichung Commercial Bank Co., Ltd. Redemption of held-to-maturity financial assets $ 550,000 $ 1,265,385 Notes to financial statements Proceeds from acquisition of held-to-maturity financial assets - ( 922,079 ) 2011 and 2010 (Increase) decrease in other financial assets ( 116,795 ) 12,590 (In Thousands of New Taiwan Dollars, unless otherwise specified) Proceeds from disposal of Fixed assets , available-for-sale assets and collateral accepted 166,604 217,726 Purchase of Fixed assets and deferred expenses ( 209,211 ) ( 54,016 ) 1. Organization and operations (Increase) decrease in refundable deposits ( 29,783 ) 38,383 Taichung Commercial Bank Co., Ltd. (hereinafter referred to as the “Bank”) was Net cash outflow from investing activities ( 41,969,688 ) ( 32,066,727 ) incorporated as a cooperative savings company in Taichung per the order of the Taiwan Provincial Government Apparatus on Sept. 27, 1952 and the incorporation was Cash flow from financing activities approved in April 1953. The Bank started business as of August in the same year. Issuance of common stock for cash 4,500,000 3,600,000 Upon promulgation and enforcement of the amended Banking Act in July 1975, the Increase (decrease) in deposits of Central Bank of Bank was approved to be reformed as “Taichung Small and Medium Business Bank China and other banks 1,155,562 ( 4,163,428 ) Company Limited” in Jan. 1, 1978, and to list its stock on May 15, 1984. Increase in due to Central Bank of China and In order to cope with national financial policy, provide the pubic with financial other banks 1,275,400 1,281,850 services and support economic construction and develop industrial and commercial (Decrease) increase in RP (Debt) ( 1,477,800 ) 1,477,800 business, the Bank was renamed Taichung Commercial Bank Co., Ltd. in Dec. 1998. Increase in deposits and remittances 30,983,119 26,272,193 As of Dec. 31, 2011, it had established a Business Department, Trust Department, Issuance of financial bonds 2,300,000 1,700,000 International Banking Department and 79 local branches, an International Banking Decrease in guarantee deposits received ( 37,806 ) ( 9,216 ) Branch and Securities Brokerages. It is engaged mainly in financial operations regulated Net cash inflow from financing activities 38,698,475 30,159,199 by Banking Law, trust business, offshore banking business and others approved by the competent authority. Net increase in cash and cash equivalents 3,680,561 429,177

The Bank’s capital was NTD500 thousand when the Bank was incorporated. In Balance of cash and cash equivalents, beginning of order to found its capital structure and comply with the Government Apparatus's order period 4,669,329 4,240,152 and decree, the Bank has increased/reduced its capital over the past years. As of Dec. 31, 2011, its paid-in capital was NTD22,338,576 thousand. Until December 31, 2011 and Balance of cash and cash equivalent, end of period $ 8,349,890 $ 4,669,329 2010, the number of employees of the Bank amounted to 1,975 persons and 1,829 persons, respectively. Supplementary disclosures of cash flow 2. Summary of significant accounting policies Interest payment $ 2,420,413 $ 1,635,931 The accompanying financial statements have been prepared in conformity with the Income tax payment $ 56,513 $ 45,880 “Rules Governing the Preparation of Financial Statements of Public Issued Banks”, “Rules Governing the Preparation of Financial Statements of Securities Firms”, Non-cash investing and financing cash flow “Business Accounting Act”, “Regulation on Business Entity Accounting Handling”, and Undisptributed earnings and capital surplus accounting principles generally accepted. The Bank’s significant accounting policies transferred to capital increase $ 519,570 $ - are summarized as follows:

(1) Principles for preparation of financial statements The accompanying financial statements include the accounts of the Head Office, The notes attached shall constitute an integral part of this financial statement. OBU and all branches. The accounts of inter-branch and intra-branch transactions among Head Office, branches and international banking business branches have been (Refer to Auditor’s Report presented by Deloitte & Touche dated March 8, 2012) written off in the process of preparing the financial statements. (2) Accounting estimates Chairman: Jin-Fong Soo Manager: Jyun-Sheng Li Chief accountant: Yi-Ying, Jhong It is necessary to apply reasonable estimates to provide financial asset valuation, allowance for bad debt, depreciation and amortization, deferred income tax assets valuation, pension fund, reserve for guarantee liability, loss for pending legal action, employee bonus, and remuneration to directors/supervisors when preparing the financial statements in accordance with said guidelines, rules and principles. Since the estimates are subject to individual judgment, the actual result may vary.

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- 152 - - 153 - Because it was difficult to ascertain the business cycle due to the operational Basis of fair value: The fair value of stocks traded on the TSEC (GreTai) market characteristics of a bank, it was not necessary for the Bank to categorize assets and and depository receipt is based on the closing price on the balance sheet. The fair liabilities into current or non-current items according to the Statement of Financial value of open-ended funds is based on the net asset value on the balance sheet date. Accounting Standards No. 28 on Disclosure of Bank’s Financial Statement. However, The fair value of bonds is based on the reference price on the balance sheet date in the assets and liabilities have been categorized by nature and in the order subject to the GreTai Securities Market. The fair value of financial products for which no the equivalent liquidity. The analysis on maturity of assets and liabilities are also market price is available shall be evaluated based on the evaluation method. disclosed in Note 32. FVTPL which are mixed instruments, or for the reason of elimination or (3) Foreign Currency Transactions material reduction of the difference in accounting practices, can be designated as Assets, liabilities, revenues or expenses denominated in foreign currencies as a financial instruments at fair value through profit or loss at the initial recognition. result of foreign-currency transactions of non-derivative financial instruments are Financial instruments portfolios, based on the Bank’s risk-management or investment recorded in New Taiwan dollars at the exchange rates prevailing on the dates of policy, may also be designated as financial instruments at fair value through profit or transactions. Any exchange difference caused by different foreign exchange rates loss. applied when assets or liabilities denominated in foreign currencies are settled are (5) Bonds Purchased under Resell/Notes Issued under Repurchase Agreements credited to or charged against income. When a bond is purchased under a resell agreement, its purchase price is listed Assets or liabilities denominated in foreign currencies are translated at the as “bonds purchased under resell agreements,” an asset account. For a note issued exchange rates prevailing on the balance sheet date, and the resulting exchange under the repurchase agreement, the selling price is listed as “notes issued under differences are included in profit or loss for the current year. repurchase agreements,” a liability account. It is considered a financing transaction At the balance sheet date, non-monetary assets and liabilities denominated in and the relevant interest revenue or expense shall be recognized on an accrual basis. foreign currency (e.g. equity instruments) that are measured at fair value are reported (6) Accounts receivable at the rate that was in effect when the fair values were determined. Subsequent Credit card receivables are recorded when merchants report the amount and the adjustments to carrying values of such non-monetary assets and liabilities, including related interest revenue is recognized on an accrual basis. the effects of changes in exchange rates are reported in profit or loss for the period, If the principal or interest for credit card debt still has not yet been collected except that if movement in fair value of a non-monetary item is recognized directly upon expiration of the specific time limit, the provision of income revenue shall be in equity, any foreign exchange component of that adjustment is also recognized suspended and the principal or interest shall be stated under delinquent loans. directly in equity. Those evaluated based on cost shall be measured based on the

historical exchange rate on the date of transaction. The interest revenue and service fee revenue generated from factoring and management have been recognized when it is realized or becomes realizable and the (4) Financial Instruments at Fair Value through Profit or Loss allowance for bad debt shall be provided based on the collectability of the revenue Financial instruments classified as financial assets or financial liabilities at fair evaluated based on the balance of factoring at the end of the period. The factoring value through profit or loss (“FVTPL”) include financial assets or financial liabilities payment due to the seller shall be stated under accounts payable. held for trading and those designated as at FVTPL on initial recognition. The Bank (7) Assets held for sale recognizes a financial asset or a financial liability on its balance sheet when the Bank becomes a party to the contractual provisions of the financial instrument. The Bank The Fixed assets and other assets, of which the book value is primarily collected recognizes a financial asset or a financial liability on its balance sheet when the Bank by virtue of sale instead of reuse, and which are available for immediate sale by the becomes a party to the contractual provisions of the financial instrument. A financial enterprise in accordance with generally applicable terms and commercial practices, asset is derecognized when the Bank has lost control of its contractual rights over the and for which completion of sale is highly probable shall be re-stated as non-current financial asset. A financial liability is derecognized when the obligation specified in assets held for sale at the book value, and no depreciation, depletion or amortization the relevant contract is discharged, cancelled or expired. may be provided thereof. They shall be measured at the lower of book value and net fair value at the end of year. If the net fair value is less than the book value, the price FVTPL is initially measured at fair value plus transaction costs, and at each difference shall be stated as impairment loss. The net fair value revaluation, if any, balance sheet date subsequent to issue of initial recognition, it is measured at fair shall be stated as reversal of gain, provided that the reversal shall be no more than value, with changes in fair value recognized directly in profit or loss in the period in recognized accumulated impairment. which it arises. On de-recognition of a financial instrument, the difference between its carrying amount and the sum of the consideration received and receivable or The liabilities directly related to assets held for sale and recognized as the consideration paid and payable is recognized in profit or loss. The purchase or adjustment item of shareholders’ equity shall be identified on the balance sheet disposal of financial assets in customary transactions shall be subject to accounting separately. The assets and liabilities shall not be offset against each other. The on the date of transaction. interest and other expenses related to liabilities shall still be stated. A derivative that does not meet the criteria for hedge accounting is classified as (8) Delinquent loans a financial asset or a financial liability held for trading. If the fair value of the According to "Regulations Governing the Procedures for Banking Institutions to derivative is positive, the derivative is recognized as a financial asset; otherwise, the Evaluate Assets and Deal with Non-performing Non-accrual Loans", loans and other derivative is recognized as a financial liability.

- 154 - - 155 - Basis of fair value: The fair value of stocks traded on the TSEC (GreTai) market and depository receipt is based on the closing price on the balance sheet. The fair value of open-ended funds is based on the net asset value on the balance sheet date. The fair value of bonds is based on the reference price on the balance sheet date in the GreTai Securities Market. The fair value of financial products for which no market price is available shall be evaluated based on the evaluation method. FVTPL which are mixed instruments, or for the reason of elimination or material reduction of the difference in accounting practices, can be designated as financial instruments at fair value through profit or loss at the initial recognition. Financial instruments portfolios, based on the Bank’s risk-management or investment policy, may also be designated as financial instruments at fair value through profit or loss. (5) Bonds Purchased under Resell/Notes Issued under Repurchase Agreements When a bond is purchased under a resell agreement, its purchase price is listed as “bonds purchased under resell agreements,” an asset account. For a note issued under the repurchase agreement, the selling price is listed as “notes issued under repurchase agreements,” a liability account. It is considered a financing transaction and the relevant interest revenue or expense shall be recognized on an accrual basis. (6) Accounts receivable Credit card receivables are recorded when merchants report the amount and the related interest revenue is recognized on an accrual basis. If the principal or interest for credit card debt still has not yet been collected upon expiration of the specific time limit, the provision of income revenue shall be suspended and the principal or interest shall be stated under delinquent loans. The interest revenue and service fee revenue generated from factoring and management have been recognized when it is realized or becomes realizable and the allowance for bad debt shall be provided based on the collectability of the revenue evaluated based on the balance of factoring at the end of the period. The factoring payment due to the seller shall be stated under accounts payable. (7) Assets held for sale The Fixed assets and other assets, of which the book value is primarily collected by virtue of sale instead of reuse, and which are available for immediate sale by the enterprise in accordance with generally applicable terms and commercial practices, and for which completion of sale is highly probable shall be re-stated as non-current assets held for sale at the book value, and no depreciation, depletion or amortization may be provided thereof. They shall be measured at the lower of book value and net fair value at the end of year. If the net fair value is less than the book value, the price difference shall be stated as impairment loss. The net fair value revaluation, if any, shall be stated as reversal of gain, provided that the reversal shall be no more than recognized accumulated impairment. The liabilities directly related to assets held for sale and recognized as the adjustment item of shareholders’ equity shall be identified on the balance sheet separately. The assets and liabilities shall not be offset against each other. The interest and other expenses related to liabilities shall still be stated. (8) Delinquent loans According to "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing Non-accrual Loans", loans and other

- 155 - credit payment items which are not repaid upon maturity of the repayment shall be portfolio, and changes in observable national or regional economic situations relating stated as Delinquent loans together with the interest receivable as recognized. to default on loans, discounts, inward remittance and accounts receivable. Delinquent loans transferred from loans shall be stated under discounts and Furthermore, from January 1, 2011, according to the Regulations Governing the loans. The delinquent loans, other than those transferred from loans (e.g. transferred Procedures for Banking Institutions to Evaluate Assets and Deal with from guarantee, acceptance, factoring and credit card loans), shall be stated in other Non-performing Non-accrual Loans, the Bank evaluates the collectability of loaned financial assets. assets according to the borrower’s financial condition and the repayment of principal (9) Allowance for bad debt and reserve for guarantee liability and interest and also based on the evaluated value of the collateral provided for Before January 1, 2011, the Bank evaluates the potential loss risk for failure to specific credit. As mentioned, non-performing loaned assets may be stated as collect specific credit and the potential risk in the entire credit portfolio based on “uncollectible,” “difficulty in collection,” “expected to be collectable”, “to be loans, discounts, inward remittance, accounts receivable, interest receivable, other notified” and “normal loan assets” according to the status of guarantee and length of receivables and delinquent loans, as well as the balance of guarantee and acceptances time overdue; the allowance for loss of at least 100%, 50%, 10%, 2% and 0.5% shall receivable, in order to provide an allowance for bad debt and reserve for guarantee be provided according to the balance of the various credits. liability. Impairment loss to be recognized is the difference between the carrying value of According to the Regulations Governing the Procedures for Banking Institutions the asset and the estimated future cash flow (has reflected the effect of collateral or to Evaluate Assets and Deal with Non-performing Non-accrual Loans, the Bank guarantee) discounted at the original effective interest rate of loans, discounts, evaluates the collectability of loaned assets according to the borrower’s financial inward remittance and accounts receivable. The carrying value of loans, discounts, condition and the repayment of principal and interest and also based on the evaluated inward remittance and accounts receivable is reduced through a valuation allowance value of the collateral provided for specific credit. As mentioned, the item. When any loan, discount, inward remittance and receivable account is non-performing loaned assets may be stated as “uncollectible,” “difficulty in considered uncollectible, the valuation allowance item is written off. Subsequent collection,” “expected to be collectable” and “to be notified” according to the status recovery of any account written off is credited to the valuation allowance item. A of guarantee and length of time overdue; the allowance for loss of at least 100%, change in the carrying value of the valuation allowance item is recognized as bad 50%, 10% and 2% shall be provided according to the balance of the various credit debt loss. lines. (10) Available-for-Sale Financial Assets Uncollectible credit as identified shall be reported by the Board of Directors to When recognizing available-for-sale financial assets initially, such assets shall the Board of Managing Directors and written off upon approval of the Board of be evaluated based on fair value, plus the acquisition or issue price. The following Managing Directors. If the bad debt that has been written off is collected, it shall be evaluation shall be based on fair value and the changes in value shall be stated into stated as the reversal of allowance for bad debt according to the Statement of the adjustment items of shareholders’ equity. Cumulative gain or loss shall be stated Financial Accounting Standards No. 28 on Disclosure of Bank’s Financial Statement. as income for the current period when financial assets are de-recognized. All The Bank started to adopt the third revised provision of SFAS No. 34 conventional transaction purchases or sales of financial instruments are recognized “Accounting for Financial Instruments” on January 1, 2011, which includes loans, and derecognized on a trade date basis. discounts, inward remittance and accounts receivable. Therefore, the Bank evaluates The times to recognition or removal and basis for fair value of financial assets whether there is any sign for impairment for loans, discounts and inward remittance, in available-for-sale are similar to those of financial instruments at fair value through accounts receivable on each balance sheet date. If there is objective evidence profit or loss. showing that estimated cash flows in the future for original loans, discounts, inward Cash Dividends from securities products are stated as income on the remittance and accounts receivable are affected due to a single or several event(s) ex-dividend date or the date of resolution set by the shareholders’ meeting, provided occurring after recognition of original loans, discounts, inward remittance and that the cash dividends announced based on the income before investment shall be accounts receivable, the original loans, discounts, inward remittance and accounts deducted from the investment cost. Free-Gratis Dividends are not stated as income receivable are considered impaired. Objective evidence for impairment may include: investment, provided that the increase in shares is noted and the cost per share is 1. The debtor encounters significant financial difficulties; or recalculated according to the total shares after the increase. The difference between 2. Original loans, discounts, inward remittance and accounts receivable are the amount of liability products recognized initially and due amount shall be overdue; or amortized under the interest method and stated as the income for the current period. Where there is evidence showing impairment, it shall be stated as the loss of 3. High probability of debtor declaring bankruptcy or undertaking of other impairment. The decrease in impairment of equity products in available-for-sale is financial restructuring. stated as the adjustment item of shareholders’ equity. Where the decrease in After certain loans, discounts, inward remittance and accounts receivable are impairment of liability products in available-for-sale is obviously related to the individually evaluated and indicate no sign of impairment, the entire credit portfolio events subsequent to recognition of impairment, it shall be reversed and stated as is evaluated for impairment. Objective evidence of impairment for the portfolio of income for the current period. loans, discounts, inward remittance and accounts receivable may include the historical collection experience of the Bank, increase of delayed payment of the (11) Held-to-maturity financial assets

- 156 - - 157 - portfolio, and changes in observable national or regional economic situations relating to default on loans, discounts, inward remittance and accounts receivable. Furthermore, from January 1, 2011, according to the Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing Non-accrual Loans, the Bank evaluates the collectability of loaned assets according to the borrower’s financial condition and the repayment of principal and interest and also based on the evaluated value of the collateral provided for specific credit. As mentioned, non-performing loaned assets may be stated as “uncollectible,” “difficulty in collection,” “expected to be collectable”, “to be notified” and “normal loan assets” according to the status of guarantee and length of time overdue; the allowance for loss of at least 100%, 50%, 10%, 2% and 0.5% shall be provided according to the balance of the various credits. Impairment loss to be recognized is the difference between the carrying value of the asset and the estimated future cash flow (has reflected the effect of collateral or guarantee) discounted at the original effective interest rate of loans, discounts, inward remittance and accounts receivable. The carrying value of loans, discounts, inward remittance and accounts receivable is reduced through a valuation allowance item. When any loan, discount, inward remittance and receivable account is considered uncollectible, the valuation allowance item is written off. Subsequent recovery of any account written off is credited to the valuation allowance item. A change in the carrying value of the valuation allowance item is recognized as bad debt loss. (10) Available-for-Sale Financial Assets When recognizing available-for-sale financial assets initially, such assets shall be evaluated based on fair value, plus the acquisition or issue price. The following evaluation shall be based on fair value and the changes in value shall be stated into the adjustment items of shareholders’ equity. Cumulative gain or loss shall be stated as income for the current period when financial assets are de-recognized. All conventional transaction purchases or sales of financial instruments are recognized and derecognized on a trade date basis. The times to recognition or removal and basis for fair value of financial assets in available-for-sale are similar to those of financial instruments at fair value through profit or loss. Cash Dividends from securities products are stated as income on the ex-dividend date or the date of resolution set by the shareholders’ meeting, provided that the cash dividends announced based on the income before investment shall be deducted from the investment cost. Free-Gratis Dividends are not stated as income investment, provided that the increase in shares is noted and the cost per share is recalculated according to the total shares after the increase. The difference between the amount of liability products recognized initially and due amount shall be amortized under the interest method and stated as the income for the current period. Where there is evidence showing impairment, it shall be stated as the loss of impairment. The decrease in impairment of equity products in available-for-sale is stated as the adjustment item of shareholders’ equity. Where the decrease in impairment of liability products in available-for-sale is obviously related to the events subsequent to recognition of impairment, it shall be reversed and stated as income for the current period. (11) Held-to-maturity financial assets

- 157 - Held-to-maturity financial assets shall be stated at cost upon amortization. average method and in accordance with the useful life provided in the Table of When recognizing the held-to-maturity financial assets initially, such assets shall be Service Life of Fixed assets promulgated by the Executive Yuan. evaluated based on fair value, plus the acquisition or issue price. All conventional Leased assets shall be stated at the lower of the total of each rent installment transaction purchases or sales of financial assets are recognized and derecognized on (less the performance cost to be borne by lessor) and preferential acquisition cost or a trade date basis. residual value guaranteed by lessee upon expiration of the lease, or fair value of the Where there is evidence showing impairment, it shall be stated as the loss of assets on the commencing date of lease, and receivable rent liability shall be impairment. Where the decrease in impairment is obviously related to the events recognized at the same time. The imputed interest of each installment rent is stated as subsequent to recognition of impairment, it shall be reversed and stated as income for the interest expenses for the current period. the current period, provided that the book value upon reverse shall be no more than Upon the scrapping or sale of properties, the related cost (including the cost after amortization if the impairment is not recognized. appreciations), cumulative depreciation, cumulative depreciation, and unrealized (12) Equity investment under equity method appreciations shall be written off, and any related income is charged to non-operating The equity investment under equity method shall be stated at the original cost of income or non-operating loss accounts for the year and any related gains or losses are acquisition. Equity investment holding more than 20% of equity shall be valued charged to other non-interest Investment income for the year. under the equity method. Equity investment holding less than 20% of equity but Where the Fixed assets are not available for business operation, related cost and able to materially influence the investee shall still be valued under equity method. cumulative depreciation shall be transferred to other assets-assets not available for Where Free-Gratis Dividends are received from the investee, only the increase business operation. in shares is noted. No adjustment will be made to the book value of the investments (15) Deferred expenses and no investment income shall be recognized. Deferred charges are stated at cost and amortized on a straight-line basis over When equity is obtained or the equity method is initially applied, the investment five years. cost shall be analyzed first in accordance with the Statement of Financial Accounting (16) Collateral accepted Standards No. 5 on Accounting Principles for Long-term Equity Investment under Collateral accepted (stated as other assets) shall be stated at the cost of pledge. the Equity Method. The excess of investment costs in the fair value of the Its fair value shall be evaluated at the end of the year. The difference resulting from investee’s identifiable net assets, if any, shall be recognized as goodwill, which will the cost more than net fair value shall be recognized as the impairment loss. As not be amortized, provided that the impairment test shall be conducted per year. required by the Executive Yuan Financial Supervisory Commission, Collateral Meanwhile, where any specific events or environmental changes show the potential accepted which has not yet been disposed upon expiration of the statutory time limit impairment of goodwill, it is also necessary to conduct the impairment test. Where shall also be recognized as the impairment loss in the full amount. the fair value of the investee’s identifiable net assets exceeds the investment cost, the difference thereof will be decreased relatively subject to the fair value of the various (17) Impairment of Assets non-current assets (excluding the financial assets not valued under the equity method, According to the Statement of Financial Accounting Standards No. 35 on assets held for sale, deferred income tax assets and prepaid pension or other pension Accounting Principles on Asset Impairment, it is necessary to evaluate the balance benefits).The balance, if any, shall be stated as extraordinary income. sheet date for whether there is any sign showing that assets (including individual Notwithstanding, where equity is acquired from an affiliate, the capital surplus shall assets or cash generation units) might suffer material impairment. If there is, it is be adjusted based on the difference between the investment cost and net value of the necessary to evaluate the collectable amount of the assets. If their book value investee’s equity. Where the adjustment reflects write-off of capital surplus while exceeds the collectable amount, a loss on asset impairment shall be recognized. the capital surplus generated from the equity investment under the equity method is Where a loss on asset impairment does not exist, or is decreased, the gain reversed insufficient, the retained earnings shall be written off. from asset impairment shall be recognized insofar as it does not exceed the originally (13) Other financial assets recognized impairment loss, provided that the book value upon reversal shall not exceed the book value of the assets less depreciation or amortization to be Financial assets at cost mean investment in equity products that cannot be provisioned when no impairment losses of the assets are recognized. Goodwill evaluated based on fair value, including unlisted (non-OTC) stock and emerging impairment loss cannot be reversed. stock, which shall be evaluated at the original acquisition cost. The accounting of Free-Gratis Dividends thereof is similar to that of available-for-sale financial assets. Where asset appreciation has been made pursuant to laws, the impairment shall Where there is evidence showing impairment, it shall be stated as the loss of deduct the unrealized appreciation included in the shareholders’ equity and the deficit, impairment, and cannot be reversed. if any, shall be recognized as loss. The gain shall be recognized firstly within the scope of originally recognized loss, and the balance, if any, shall be reversed to (14) Fixed assets / Non-Operating Assets unrealized appreciation. In order to proceed with the impairment test, the good will Fixed assets are stated at acquisition or at construction costs plus appreciation acquired upon merger of enterprises shall be amortized to cash generation entities. and less cumulative depreciation and impairment. Major updates and improvements The excess in Book Value of the cash generation entity (including the Book Value of were treated as capital spending. Routine repair and maintenance expenditures were goodwill) against collectable amount shall be recognized as impairment loss. When expensed during the year of incursion. Depreciation thereof is provided using the recognizing impairment loss, it is necessary to deduct the Book Value of good will

- 158 - - 159 - average method and in accordance with the useful life provided in the Table of Service Life of Fixed assets promulgated by the Executive Yuan. Leased assets shall be stated at the lower of the total of each rent installment (less the performance cost to be borne by lessor) and preferential acquisition cost or residual value guaranteed by lessee upon expiration of the lease, or fair value of the assets on the commencing date of lease, and receivable rent liability shall be recognized at the same time. The imputed interest of each installment rent is stated as the interest expenses for the current period. Upon the scrapping or sale of properties, the related cost (including appreciations), cumulative depreciation, cumulative depreciation, and unrealized appreciations shall be written off, and any related income is charged to non-operating income or non-operating loss accounts for the year and any related gains or losses are charged to other non-interest Investment income for the year. Where the Fixed assets are not available for business operation, related cost and cumulative depreciation shall be transferred to other assets-assets not available for business operation. (15) Deferred expenses Deferred charges are stated at cost and amortized on a straight-line basis over five years. (16) Collateral accepted Collateral accepted (stated as other assets) shall be stated at the cost of pledge. Its fair value shall be evaluated at the end of the year. The difference resulting from the cost more than net fair value shall be recognized as the impairment loss. As required by the Executive Yuan Financial Supervisory Commission, Collateral accepted which has not yet been disposed upon expiration of the statutory time limit shall also be recognized as the impairment loss in the full amount. (17) Impairment of Assets According to the Statement of Financial Accounting Standards No. 35 on Accounting Principles on Asset Impairment, it is necessary to evaluate the balance sheet date for whether there is any sign showing that assets (including individual assets or cash generation units) might suffer material impairment. If there is, it is necessary to evaluate the collectable amount of the assets. If their book value exceeds the collectable amount, a loss on asset impairment shall be recognized. Where a loss on asset impairment does not exist, or is decreased, the gain reversed from asset impairment shall be recognized insofar as it does not exceed the originally recognized impairment loss, provided that the book value upon reversal shall not exceed the book value of the assets less depreciation or amortization to be provisioned when no impairment losses of the assets are recognized. Goodwill impairment loss cannot be reversed. Where asset appreciation has been made pursuant to laws, the impairment shall deduct the unrealized appreciation included in the shareholders’ equity and the deficit, if any, shall be recognized as loss. The gain shall be recognized firstly within the scope of originally recognized loss, and the balance, if any, shall be reversed to unrealized appreciation. In order to proceed with the impairment test, the good will acquired upon merger of enterprises shall be amortized to cash generation entities. The excess in Book Value of the cash generation entity (including the Book Value of goodwill) against collectable amount shall be recognized as impairment loss. When recognizing impairment loss, it is necessary to deduct the Book Value of good will

- 159 - already amortized to the cash generation entity. If there is a deficit, the other will be contributed to the exclusive pension fund account at the Workers' Pension impairment loss shall be amortized to the various assets on a proportional basis Fund Management Commission. according to the Book Value of the assets in the cash generation entity (including For the pension of employees who apply the defined benefit rules, it is common assets). necessary to recognize and disclose the related assets and liabilities under the (18) Convertible financial bonds actuarial method pursuant to the Statement of Financial Accounting Standards No. 18 For convertible financial bonds issued after January 1, 2006, the total issuance on Pension Fund Accounting Principles. price minus the amount of the liability component individually measured is allocated The pension fund of employees who apply the defined contribution rules to be to the equity component (capital surplus – stock options). Liability components contributed to the exclusive personal account shall be recognized as pension costs which are not embedded derivatives are measured at amortized cost under interest during the employees’ service years. method, while liability components which are embedded non-equity derivatives are (21) Reserve Securities firms engaging in brokerage trading of marketable securities measured at fair value. When financial bonds are converted, the carrying amount of are required to provide 0.0028% of the monthly transaction volume as the default liability components and equity components is used as a basis to record the common loss provision until the balance of this provision reaches NTD200,000 thousand. In shares issued. accordance with Jin-Guan-Yin-Fa Directive No. 10010000440 and (19) Share-based payment Jin-Guan-Zheng-Quan Directive No. 09900738571, effective January 1, 2011, Employees’ stock options granted after January 1, 2008 (including January 1, provisions of “Reserve for transaction loss” and “Reserve for default loss” should be 2008) shall be processed in accordance with the Statement of Financial Accounting transferred to special reserve. After the transfer, the reserve should be used to offset a Standards No. 39 on “Accounting Principles for Benefits Based on Shares”. The deficit. When the reserve reaches 50% of the Bank’s paid-in capital, it can only be stock option amount is calculated based on the optimally estimated quantity of transferred to capital stock as legal reserve. expected vested stock option and the fair value on the grant date, and recognized as With secured collateral, the allowance for guarantee liability shall be no more expenses in the current period based on Straight-line method in the vested period, than 1% of the guaranteed limit. Without secured collateral, the allowance for and the additional paid-in capital – employees’ stock option is adjusted at the same guarantee liability shall be no more than 3% of the guaranteed limit, provided that time. If the subsequent information shows that the expected vested stock option the allowance provided by the added balance of the receivable guarantee payment in quantity is different from that estimated originally, the quantity originally estimated the year shall be no more than the total service charges for the guarantee business in may be amended. the same year. Before January 1, 2011, the Bank determined the grant date for capital increase (22) Recognition of Interest Revenues and Service Fees by cash retained for subscription by employees based on the date when the Board of The interest accruing on loans shall be stated on an accrual basis, provided that Directors resolved and approved the subscription price and the number of shares for the calculation of the interest transferred to receivable on demand due to capital increase by cash. As described in Note 3, effective January 1, 2011, the grant non-performance upon expiration shall be ceased as of the date of transfer, and the date for capital increase by cash retained for subscription by employees is based on income thereof shall be recognized after the cash is received. the date when the Bank advises employees after the resolution of the Board of According to the Ministry of Finance, the interest revenue approved to be stated Directors. into account due to financing and agreement of extension shall be stated as deferred (20) Pension Plan income (stated as other liabilities) as of the date of bookkeeping and recognized as The Bank has provided defined benefit rules for formal employees in revenue after the cash is received. accordance with the “Labor Standard Law”. According to the rules, employees Service fee revenue has mostly been recognized in the process of realized or whose seniority is less than 15 years are awarded with 2 points per year and 1 point realizable gains. per year for seniority beyond the 15 year. One point represents the average monthly (23) Corporate Income Tax salary of the employee for the six months prior to his/her retirement, provided that

the cumulative points shall be no more than 45. Employees who resign upon The Bank adopted the Statement of Financial Accounting Standards No. 22, expiration of specific seniority will be paid the pension according to their cumulative Accounting Principles for Income Taxes. Deferred income tax assets and liabilities points. As of July 1, 2005 when the “Labor Pension Act" was promulgated by the are computed annually for differences between the financial statement and tax bases Government Apparatus, the Bank also provided the defined contribution rules. 6% of of assets and liabilities that will result in taxable or deductible amounts in the future the salary of employees who choose to apply the rules will be contributed to the based on enacted tax laws and rates applicable to the periods in which the differences exclusive personal account at the Bureau of Labor Insurance on a monthly basis are expected to affect taxable income. Valuation Provisions for reserve accounts are during their service year. The seniority accruing before promulgation of the Act shall provided to reduce deferred tax assets that are not certain to be realized. be reserved. According to SFAS No. 12, “Accounting for Income Tax Credits,” the Bank A specific proportion of the salary of the general staff who choose the defined recognizes tax benefit from research and development and personnel training benefit rules will be contributed to the exclusive pension fund account at Bank of expenses in the year the tax credit was earned. Taiwan on a monthly basis. A specific proportion of the salary of managers (above) Adjustment of prior years’ income tax is added to or deducted from the current income tax expense (benefit) in the year the adjustment is made.

- 160 - - 161 - will be contributed to the exclusive pension fund account at the Workers' Pension Fund Management Commission. For the pension of employees who apply the defined benefit rules, it is necessary to recognize and disclose the related assets and liabilities under the actuarial method pursuant to the Statement of Financial Accounting Standards No. 18 on Pension Fund Accounting Principles. The pension fund of employees who apply the defined contribution rules to be contributed to the exclusive personal account shall be recognized as pension costs during the employees’ service years. (21) Reserve Securities firms engaging in brokerage trading of marketable securities are required to provide 0.0028% of the monthly transaction volume as the default loss provision until the balance of this provision reaches NTD200,000 thousand. In accordance with Jin-Guan-Yin-Fa Directive No. 10010000440 and Jin-Guan-Zheng-Quan Directive No. 09900738571, effective January 1, 2011, provisions of “Reserve for transaction loss” and “Reserve for default loss” should be transferred to special reserve. After the transfer, the reserve should be used to offset a deficit. When the reserve reaches 50% of the Bank’s paid-in capital, it can only be transferred to capital stock as legal reserve. With secured collateral, the allowance for guarantee liability shall be no more than 1% of the guaranteed limit. Without secured collateral, the allowance for guarantee liability shall be no more than 3% of the guaranteed limit, provided that the allowance provided by the added balance of the receivable guarantee payment in the year shall be no more than the total service charges for the guarantee business in the same year. (22) Recognition of Interest Revenues and Service Fees The interest accruing on loans shall be stated on an accrual basis, provided that the calculation of the interest transferred to receivable on demand due to non-performance upon expiration shall be ceased as of the date of transfer, and the income thereof shall be recognized after the cash is received. According to the Ministry of Finance, the interest revenue approved to be stated into account due to financing and agreement of extension shall be stated as deferred income (stated as other liabilities) as of the date of bookkeeping and recognized as revenue after the cash is received. Service fee revenue has mostly been recognized in the process of realized or realizable gains. (23) Corporate Income Tax The Bank adopted the Statement of Financial Accounting Standards No. 22, Accounting Principles for Income Taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation Provisions for reserve accounts are provided to reduce deferred tax assets that are not certain to be realized. According to SFAS No. 12, “Accounting for Income Tax Credits,” the Bank recognizes tax benefit from research and development and personnel training expenses in the year the tax credit was earned. Adjustment of prior years’ income tax is added to or deducted from the current income tax expense (benefit) in the year the adjustment is made.

- 161 - The 10% additional income tax levied on Accumulated earnings calculated increase of NTD46,332 thousand in net income and an increase of NTD0.03 in according to the Income Tax Law is stated as income tax expenses in the year of the after-tax basic EPS for the year ended December 31, 2011. resolution made by the shareholders’ meeting. 4. Cash and cash equivalents (24) Significant undertaking or contingent liabilities December 31, 2011 December 31, 2010 If assets are very likely to have already impaired or generated liabilities on the balance sheet date and it is possible to estimate the reasonable loss, it shall be Cash on hand $ 2,674,443 $ 2,688,091 recognized as a loss for the current period. If the loss is very likely to have already Notes and checks for clearing 5,165,311 1,404,845 been caused but it is impossible to estimate the loss, it shall be disclosed in the notes Deposits of Central Bank of China 510,136 576,393 to the financial statement. and other banks (25) Reclassification of accounting titles $ 8,349,890 $ 4,669,329 In order to cope with the expression of the financial statements 2011, some accounting titles in the financial statement 2010 have been reclassified. 3. Reasons and effects of changes in accounting principles 5. Due From Central Bank Of China And Other Banks (1) Accounting for financial instruments December 31, 2011 December 31, 2010

Effective January 1, 2011, the Bank adopted revised SFAS No. 34 “Accounting Reserve for deposits for Financial Instruments”. Main revisions include: (1) the application of SFAS No. 34 to original loans and receivables; (2) a new regulation concerning impairment of Reserve for $ 7,420,167 $ 5,146,477 financial assets measured at amortized cost when related terms are revised at deposits –checking account financial difficulties; and (3) the debtor’s accounting treatment when debt terms are Reserve for 9,520,465 8,777,418 revised. This accounting change resulted in a decrease of NTD40,807 thousand in deposits –demand account continuing operating income before tax, a decrease of NTD33,870 thousand in net income and a decrease of NTD0.02 in after-tax basic EPS for the year ended Financial Information 444,482 443,315 December 31, 2011. Service Co., Ltd. – liquidated account (2) Disclosure of operating segments The Bank has adopted the newly issued SFAS No. 41 “Disclosure of Operating Reserve for deposits in 18,780 15,148 Segments” since January 1, 2011. Provisions in the statement are based on certain foreign currency information relating to corporate formation which is used when the management Certificate of deposit of the 56,800,000 54,200,000 makes operating decisions. Identification of operating segments is based on the Central Bank internal report which is regularly reviewed by main decision makers to allocate resources to each segment and evaluate performance. The statement replaced SFAS Call loans to banks 63,830 30,102 No. 20 “Disclosure of Financial Information by Segments”. The adoption of this $ 74,267,724 $ 68,612,460 statement changes the way in which segment information is reported for the Bank

only. The Bank also reproduced segment information for 2010. The deposit reserves in the CBC are calculated by multiplying the average monthly (3) Accounting for share-based payment balances of all deposit accounts by the legally required ratio. The demand account Effective January 1, 2011, the Bank adopted early the provision stated in (2012) reserve can be used only for the monthly adjustment of the deposit reserve. Ji-Mi-Zi Interpretation Letter No. 038 issued by the Accounting Research and The guarantee amounts for allocation and liquidation of funds in interbanks under Development Foundation to determine the grant date for capital increase by cash the certificate of deposit of the Central Bank pursuant to laws on December 31, 2011 retained for subscription by employees. The interpretation letter mainly describes and 2010 were both NTD1,500,000 thousand. that if the practice of corporate capital increase by cash retained for subscription by employees includes a procedure of further advising employees of or confirming with employees the number of share subscription after the resolution of the Board of Directors, the date when the corporation advises employees of or confirms with employees the number of share subscription may be the grant date, not subject to the provision concerning the grant date for capital increase by cash retained for subscription by employees described in (2009) Ji-Mi-Zi Interpretation Letter No. 111, which refers to the date when the Board of Directors resolves and approves the price and the number of shares for subscription. This accounting change resulted in an increase of NTD55,822 thousand in continuing operating income before tax, an

- 162 - - 163 - increase of NTD46,332 thousand in net income and an increase of NTD0.03 in after-tax basic EPS for the year ended December 31, 2011. 4. Cash and cash equivalents December 31, 2011 December 31, 2010 Cash on hand $ 2,674,443 $ 2,688,091 Notes and checks for clearing 5,165,311 1,404,845 Deposits of Central Bank of China 510,136 576,393 and other banks $ 8,349,890 $ 4,669,329

5. Due From Central Bank Of China And Other Banks December 31, 2011 December 31, 2010 Reserve for deposits Reserve for $ 7,420,167 $ 5,146,477 deposits –checking account Reserve for 9,520,465 8,777,418 deposits –demand account Financial Information 444,482 443,315 Service Co., Ltd. – liquidated account Reserve for deposits in 18,780 15,148 foreign currency Certificate of deposit of the 56,800,000 54,200,000 Central Bank Call loans to banks 63,830 30,102 $ 74,267,724 $ 68,612,460

The deposit reserves in the CBC are calculated by multiplying the average monthly balances of all deposit accounts by the legally required ratio. The demand account reserve can be used only for the monthly adjustment of the deposit reserve. The guarantee amounts for allocation and liquidation of funds in interbanks under the certificate of deposit of the Central Bank pursuant to laws on December 31, 2011 and 2010 were both NTD1,500,000 thousand.

- 163 - 6. Financial Instruments at Fair Value through Profit or Loss December 31, 2011 December 31, 2010 (3) The forward contracts which have not yet matured before December 31, 2011 and 2010 are specified as following: Financial assets-Trading Contract amount Listed stocks - domestic $ 982,393 $ 1,282,757 Currency Date of maturity (NTD1,000) Foreign exchange contracts 85,395 309,058 December 31, 2011 Forward exchange sold USD translated January 4, 2012~May USD4,909/NTD148,529 Beneficiary certificate 17,728 23,514 into NTD 27, 2012 Short-term bills and notes 9,968 19,972 Forward exchange sold EUR translated February 10, EUR316/NTD12,380 Forward contracts 1,285 11,261 into NTD 2012~May 1, 2012 Forward exchange sold JPY translated April 27, 2012 JPY30,270/NTD11,846 $ 1,096,769 $ 1,646,562 into NTD Financial liabilities-Trading Forward exchange bought NTD translated January 13, 2012~May NTD95,249/USD3,149 into USD 23, 2012 Put options of convertible financial bonds (Note 21) $ 42,090 $ - December 31, 2010 Foreign exchange contracts 8,393 100,151 Forward exchange sold USD translated January 18, 2012~May USD5,730/NTD176,750 Forward contracts 1,321 9,918 into NTD 20, 2012 $ 51,804 $ 110,069 Forward exchange bought NTD translated February 1, NTD201,813/USD6,551 into USD 2012~August 19, 2012 (1) Financial derivative contract related to a foreign exchange rate is a non-trading operation performed for the purpose of providing customers with a hedging tool for Forward exchange bought NTD translated January 21, 2012~May NTD11,108/EUR279 into EUR 27, 2012 the foreign exchange position generated from import/export and foreign exchange and hedging the risk from business and meeting the need for foreign exchange funds. (2) The foreign exchange contracts which have not yet matured before December 31, (4) The income from financial instruments at fair value through profit or loss in 2011 2011 and 2010 are specified as follows: and 2010 is summarized as following: December 31, 2011 December 31, 2010 2011 2010 Realized net (loss) profit Contract amount Contract amount (NTD1,000) Date of maturity (NTD1,000) Date of maturity Free-Gratis Dividends revenue $ 52,380 $ 26,902 Net loss from disposal of domestic Sold USD 187,259 January 3, 2012~March Sold USD 131,739 January 3, 2011~January stock traded on TSEC 28, 2012 31, 2011 (Gretai Securities Market) ( 87,621 ) ( 26,874 ) EUR 72,000 January 3, EUR 73,500 January 12, Net profit from disposal of 2012~February 27, 2012 2011~February 18, 2011 beneficiary securities and JPY 541,515 January 17, 2012 JPY 837,717 January 31, certificates 3,404 - 2011~February 22, 2011 Net (loss) profit from financial Bought USD41,450 January 6, 2012~May 18, Bought USD76,903 January 12, derivatives ( 102,777 ) 641,129 2012 2011~February 22, 2011 ( 134,614 ) 641,157 NZD 10,367 January 6, 2012~January NZD 24,117 January 12, Net valuation (loss) profit 17, 2012 2011~February 1, 2011 Net (loss) profit from domestic AUD 2,000 January 5, 2012 AUD 3,000 January 10, 2011 stock traded on TSEC ( 211,176 ) 149,507 HKD 22,563 January 19, 2012 HKD 23,306 January 10, 2011 (Gretai Securities Market) Net (loss) profit from beneficiary CAD 2,803 January 20, 2012 CAD 1,210 January 18, 2011 certificates ( 5,786 ) 3,514 GBP 3,900 January 3, GBP 2,600 January 13, 2011 Net (loss) profit from financial 2012~February 3, 2012 derivatives ( 151,454 ) 94,654 SGD 778 January 6, 2012 ( 368,416 ) 247,675 ZAR 33,244 January 6, 2012 ( $ 503,030 ) $ 888,832

- 164 - - 165 -

(3) The forward contracts which have not yet matured before December 31, 2011 and 2010 are specified as following: Contract amount Currency Date of maturity (NTD1,000) December 31, 2011 Forward exchange sold USD translated January 4, 2012~May USD4,909/NTD148,529 into NTD 27, 2012 Forward exchange sold EUR translated February 10, EUR316/NTD12,380 into NTD 2012~May 1, 2012 Forward exchange sold JPY translated April 27, 2012 JPY30,270/NTD11,846 into NTD Forward exchange bought NTD translated January 13, 2012~May NTD95,249/USD3,149 into USD 23, 2012

December 31, 2010 Forward exchange sold USD translated January 18, 2012~May USD5,730/NTD176,750 into NTD 20, 2012 Forward exchange bought NTD translated February 1, NTD201,813/USD6,551 into USD 2012~August 19, 2012 Forward exchange bought NTD translated January 21, 2012~May NTD11,108/EUR279 into EUR 27, 2012

(4) The income from financial instruments at fair value through profit or loss in 2011 and 2010 is summarized as following: 2011 2010 Realized net (loss) profit Free-Gratis Dividends revenue $ 52,380 $ 26,902 Net loss from disposal of domestic stock traded on TSEC (Gretai Securities Market) ( 87,621 ) ( 26,874 ) Net profit from disposal of beneficiary securities and certificates 3,404 - Net (loss) profit from financial derivatives ( 102,777 ) 641,129 ( 134,614 ) 641,157 Net valuation (loss) profit Net (loss) profit from domestic stock traded on TSEC (Gretai Securities Market) ( 211,176 ) 149,507 Net (loss) profit from beneficiary certificates ( 5,786 ) 3,514 Net (loss) profit from financial derivatives ( 151,454 ) 94,654 ( 368,416 ) 247,675 ( $ 503,030 ) $ 888,832

- 165 - 7. Accounts receivable – net As of December 31, 2011, above-mentioned receivables of the Bank include December 31, 2011 December 31, 2010 amount due from Central Bank of China and other banks, accounts receivable, interest Receivable spot exchange receivable, acceptance receivable, Deposits of Central Bank of China and other banks, settlement payment $ 1,036,724 $ 698,453 delinquent loans other than loans transferred from loans and refundable deposits. Acceptances receivable 605,123 841,583 8. Assets held for sale Interests receivable 569,687 529,420 2011 2010 Accounts receivable 408,087 376,082 Buildings Buildings Tax refund receivable (Note 27) 237,088 236,918 and and Receivable out-of-pocket Land structures Total Land structures Total Cost expenses for attorney fees and Balance, cost of action 55,323 63,499 beginning $ 166,043 $ 118,305 $ 284,348 $ - $ - $ - Notes receivable 638 43,762 Increase ------Receivable structured note Decrease ( 71,517 ) ( 30,963 ) ( 102,480 ) ( 31,493 ) ( 21,149 ) ( 52,642 ) indemnity $ - $ 534,885 Reclassified in the current Other receivables 87,211 105,279 period ( 50,911 ) ( 16,879 ) ( 67,790 ) 197,536 139,454 336,990 2,999,881 3,429,881 Balance, ending 43,615 70,463 114,078 166,043 118,305 284,348 Less: allowance for bad debt Accumulated (Note 9) ( 111,598 ) ( 40,584 ) depreciation $ 2,888,283 $ 3,389,297 Balance, beginning - 50,653 50,653 - - - Increase ------Receivable structured note indemnity as of December 31, 2010 amounted to Decrease - ( 14,169 ) ( 14,169 ) - ( 9,149 ) ( 9,149 ) Reclassified in NTD534,885 thousand (net balance of USD69,527 thousand less provided allowance the current for loss of USD51,165 thousand. Please refer to Note 31). In addition to continual period - ( 10,799 ) ( 10,799 ) - 59,802 59,802 collection of indemnity of USD11,900 thousand from PEM in 2011, the Bank assumed Balance, ending - 25,685 25,685 - 50,653 50,653 products issued by PEM Group at a transfer price of USD17,110 thousand in Accumulated accordance with the schedule of appointment of receiver of PEM by the USA court impairment Balance, upon the resolution of the Board of Directors on February 24, 2011 and accordingly beginning 50,441 32,491 82,932 - - - recognized gain on reversal of impairment loss of NTD321,618 thousand (USD10,648 Increase - - - 58,385 34,834 93,219 thousand) for the year ended December 31, 2011. For acceptance of products issued by Decrease ( 30,820 ) ( 5,358 ) ( 36,178 ) ( 9,704 ) ( 4,583 ) ( 14,287 ) PEM Group transferred to other financial assets, please refer to Note 13. Reclassified in the current The Bank classifies receivables based on credit risk features of products as follows: period - - - 1,760 2,240 4,000 Allowance for bad Balance, ending 19,621 27,133 46,754 50,441 32,491 82,932 Total receivables Item debt Net, ending $ 23,994 $ 17,645 $ 41,639 $ 115,602 $ 35,161 $ 150,763 December 31, 2011 December 31, 2011 Corporate $ 3,874 $ 716 (1) The Bank sold some owned premises upon resolution of the board session in Individual banking September 2010. Therefore, the owned premises were restated as assets held for evaluation of Personal 1,782 173 sale at the book value of the premises, NTD277,188 thousand, and accumulated With individual impairment banking impairment, NTD4,000 thousand. Upon evaluation, the loss of impairment on assets objective evidence Corporate 3,971 1,187 was stated as NTD93,219 thousand. The Bank sold some of impaired assets held for of impairment Portfolio banking sale in 2011 and 2010. The cause of initial impairment has extinguished, and gains evaluation of Personal 33,913 15,649 on reversal of impairment were recognized for NTD36,178 thousand and impairment banking NTD14,287 thousand, respectively. Corporate 760,604 15,688 (2) Some of above-mentioned assets held for sale were not to be sold upon the resolution Without individual Portfolio banking of the Board of Directors in December 2011. Such assets were transferred as fixed objective evidence evaluation of Personal 561,385 9,011 assets at their carrying value and depreciation expenses were accordingly provided. of impairment impairment banking Please refer to Note 14 for details. Others 76,789,865 70,533 Total 78,155,394 112,957

- 166 - - 167 - As of December 31, 2011, above-mentioned receivables of the Bank include amount due from Central Bank of China and other banks, accounts receivable, interest receivable, acceptance receivable, Deposits of Central Bank of China and other banks, delinquent loans other than loans transferred from loans and refundable deposits. 8. Assets held for sale 2011 2010 Buildings Buildings and and Land structures Total Land structures Total Cost Balance, beginning $ 166,043 $ 118,305 $ 284,348 $ - $ - $ - Increase ------Decrease ( 71,517 ) ( 30,963 ) ( 102,480 ) ( 31,493 ) ( 21,149 ) ( 52,642 ) Reclassified in the current period ( 50,911 ) ( 16,879 ) ( 67,790 ) 197,536 139,454 336,990 Balance, ending 43,615 70,463 114,078 166,043 118,305 284,348 Accumulated depreciation Balance, beginning - 50,653 50,653 - - - Increase ------Decrease - ( 14,169 ) ( 14,169 ) - ( 9,149 ) ( 9,149 ) Reclassified in the current period - ( 10,799 ) ( 10,799 ) - 59,802 59,802 Balance, ending - 25,685 25,685 - 50,653 50,653 Accumulated impairment Balance, beginning 50,441 32,491 82,932 - - - Increase - - - 58,385 34,834 93,219 Decrease ( 30,820 ) ( 5,358 ) ( 36,178 ) ( 9,704 ) ( 4,583 ) ( 14,287 ) Reclassified in the current period - - - 1,760 2,240 4,000 Balance, ending 19,621 27,133 46,754 50,441 32,491 82,932 Net, ending $ 23,994 $ 17,645 $ 41,639 $ 115,602 $ 35,161 $ 150,763

(1) The Bank sold some owned premises upon resolution of the board session in September 2010. Therefore, the owned premises were restated as assets held for sale at the book value of the premises, NTD277,188 thousand, and accumulated impairment, NTD4,000 thousand. Upon evaluation, the loss of impairment on assets was stated as NTD93,219 thousand. The Bank sold some of impaired assets held for sale in 2011 and 2010. The cause of initial impairment has extinguished, and gains on reversal of impairment were recognized for NTD36,178 thousand and NTD14,287 thousand, respectively. (2) Some of above-mentioned assets held for sale were not to be sold upon the resolution of the Board of Directors in December 2011. Such assets were transferred as fixed assets at their carrying value and depreciation expenses were accordingly provided. Please refer to Note 14 for details.

- 167 - 9. Discounts and loans – net (4) Details and changes of allowance for bad debts for receivables and discounts and December 31, 2011 December 31, 2010 loans for 2011 are summarized as follows: Bills negotiated and discounts $ 381,296 $ 534,146 December 31, 2011 Overdraft 1,755 3,267 Accounts Discounts and Total Secured overdraft 18,572 33,789 receivable loans Accounts receivable financing 283,939 160,042 Balance, beginning $ 42,992 $ 2,668,092 $ 2,711,084 Short-term loan 33,640,094 22,572,779 Provided in the current Securities receivable financing $ 221,514 $ 326,813 period 5,864 659,084 664,948 Short-term secured loans 48,629,864 50,908,763 Write-off of Mid-term loans 26,781,468 21,983,205 non-performing loans ( 14,166 ) ( 539,800 ) ( 553,966 ) Mid-term secured loans 82,832,302 71,883,058 Collection of written off Long-term loans 1,592,791 1,451,703 bad debt 20,904 209,490 230,394 Long-term secured loans 85,425,962 75,751,631 Exchange effects - 3,299 3,299 Delinquent loans 883,616 1,522,129 Reclassification 57,363 ( 57,363 ) - 280,693,173 247,131,325 Balance, ending $ 112,957 $ 2,942,802 $ 3,055,759 Add: Adjustment of 5,995 -

premium/discount Less: allowance for bad debt ( 2,942,802 ) ( 2,668,092 ) Allowance for bad debts for above-mentioned receivables includes allowance $ 277,756,366 $ 244,463,233 for bad debts for delinquent loans other than loans transferred from loans. Please refer to Note 13 for details.

10. Available-for-Sale Financial Assets (1) The balances of loans and other loans on which no interest has accrued by the Bank on December 31, 2011 and 2010 were NTD872,792 thousand and NTD1,504,063 December 31, 2011 December 31, 2010 thousand, respectively. The interest receivable on which no interest has accrued Corporate bond $ 3,118,259 $ 102,167 internally in 2011 and 2010 were NTD34,396 thousand and NTD58,788 thousand, Overseas bonds-valued in USD, respectively. were USD14,217 thousand and USD14,568 thousand on (2) There was no credit loan written off without pursuit in 2011 and 2010. December 31, 2011 and 2010, (3) The Bank classifies discounts and loans based on credit risk features of products as and those valued in AUD were follows: AUD20,185 thousand and Discounts and loans AUD19,293 thousand on Total amount Allowance for bad December 31, 2011 and 2010. 1,051,320 996,868 debt Listed stocks - overseas 37,352 - Item December 31, December 31, Certificates of creditor’s right – 2011 2011 USD denominated certificates Corporate $ 1,491,714 $ 613,435 amounting to USD145 Individual banking thousand as of December 31, evaluation of With individual Personal 386,583 14,839 2011 4,389 - impairment objective banking Depository receipts – USD evidence of Corporate 401,838 150,785 denominated DR amounting to Portfolio impairment banking USD9 thousand as of evaluation of Personal 985,300 186,564 December 31, 2011 260 - impairment banking $ 4,211,580 $ 1,099,035 Without Corporate 144,387,729 1,712,984 individual Portfolio banking (1) After evaluating overseas bonds, certificates of creditor’s right and depository objective evaluation of Personal 133,040,009 264,195 receipts, the Bank recognized an impairment loss of NTD63,833 thousand in total for evidence of impairment banking the year ended December 31, 2011. impairment (2) As of December 31, 2011 and 2010, the book value of available-for-sale overseas Total 280,693,173 2,942,802 bonds securing funds borrowed from banks was NTD1,039,060 thousand

- 168 - - 169 - (4) Details and changes of allowance for bad debts for receivables and discounts and loans for 2011 are summarized as follows: December 31, 2011 Accounts Discounts and Total receivable loans Balance, beginning $ 42,992 $ 2,668,092 $ 2,711,084 Provided in the current period 5,864 659,084 664,948 Write-off of non-performing loans ( 14,166 ) ( 539,800 ) ( 553,966 ) Collection of written off bad debt 20,904 209,490 230,394 Exchange effects - 3,299 3,299 Reclassification 57,363 ( 57,363 ) - Balance, ending $ 112,957 $ 2,942,802 $ 3,055,759

Allowance for bad debts for above-mentioned receivables includes allowance for bad debts for delinquent loans other than loans transferred from loans. Please refer to Note 13 for details. 10. Available-for-Sale Financial Assets December 31, 2011 December 31, 2010 Corporate bond $ 3,118,259 $ 102,167 Overseas bonds-valued in USD, were USD14,217 thousand and USD14,568 thousand on December 31, 2011 and 2010, and those valued in AUD were AUD20,185 thousand and AUD19,293 thousand on December 31, 2011 and 2010. 1,051,320 996,868 Listed stocks - overseas 37,352 - Certificates of creditor’s right – USD denominated certificates amounting to USD145 thousand as of December 31, 2011 4,389 - Depository receipts – USD denominated DR amounting to USD9 thousand as of December 31, 2011 260 - $ 4,211,580 $ 1,099,035

(1) After evaluating overseas bonds, certificates of creditor’s right and depository receipts, the Bank recognized an impairment loss of NTD63,833 thousand in total for the year ended December 31, 2011. (2) As of December 31, 2011 and 2010, the book value of available-for-sale overseas bonds securing funds borrowed from banks was NTD1,039,060 thousand

- 169 - (USD14,000 thousand and AUD20,000 thousand) and NTD943,055 thousand (1) The Bank’s investment income (loss) recognized under the equity method in 2011 (USD12,000 thousand and AUD20,000 thousand). Please refer to Note 30 for details. and 2010 are summarized as follows: (11) Held-to-maturity financial assets-net Investment income (loss) Initial Investment Cost December 31, 2011 December 31, 2010 Investee 2011 2010 2011 2010 Overseas bonds – USD Taichung Bank denominated bonds amounting Insurance Agency to USD197,000 thousand as of Co., Ltd. $ 77,159 $ 181,488 $ 6,000 $ 6,000 December 31, 2011 and 2010, Reliance Securities respectively; EUR denominated Investment Trust bonds amounting to Co., Ltd. ( 10,262 ) 4,085 120,000 120,000 EUR84,000 thousand as of $ 66,897 $185,573 $126,000 $ 126,000 December 31, 2011. $ 9,259,930 $ 9,009,041 (2) The entities to be included by the Bank into the consolidated financial statements for Government bonds 1,803,652 2,458,862 2011 and 2010 in accordance with the FSC order under Jin-Guan-zheng (6) Zi No. Financial bonds 100,000 100,000 0960064020, the Statement of Financial Accounting Standards No. 7 on 11,163,582 11,567,903 “Consolidated Financial Statements” and “Rules Governing the Preparation of Less: accumulated impairment ( 1,724,542 ) ( 1,185,035 ) Financial Statements of Public Issued Banks” include Taichung Commercial Bank $ 9,439,040 $ 10,382,868 Insurance Broker Co., Ltd. The consolidated financial statements have already been prepared. (1) As of December 31, 2011 and 2010, book values of the held-to-maturity government 13. Other financial assets - net bonds securing RP were NTD0 thousand and NTD1,448,000 thousand, respectively. December 31, 2011 December 31, 2010 (2) After evaluating the value of overseas bonds, the Bank recognized asset impairment Financial assets at cost $143,486 $ 143,579 loss of NTD496,299 thousand and NTD749,560 thousand for 2011 and 2010, Other miscellaneous financial respectively. Until December 31, 2011, impairment provided for financial bonds held assets 706,910 - to maturity and overseas bonds has been NTD100,000 thousand and NTD1,624,542 Inward remittances, net - 874 thousand (USD53,633 thousand), respectively. Other Delinquent loans, net - - (3) As of December 31, 2011 and 2010, the book value of held-to-maturity overseas $850,396 $ 144,453 bonds securing the funds borrowed from banks was NTD4,213,930 thousand (USD77,000 thousand and EUR48,000 thousand) and NTD2,712,463 thousand (1) Details of the financial assets carried at cost are summarized as follows: (USD45,000 thousand and EUR36,000 thousand). Please refer to Note 30 for details. December 31, 2011 December 31, 2010 (12) Equity investment under equity method Publicly offering of domestic December 31, 2011 December 31, 2010 common stock $ 2 $ 95 Shareholding Shareholding Common stock other than Stated amount % Stated amount % publicly offering of domestic Taichung Bank common stock 143,484 143,484 Insurance Agency $143,486 $ 143,579 Co., Ltd. $ 89,159 100.00 $ 193,488 100.00 Reliance Securities (2) Other financial assets - others Investment Trust Co., December 31, 2011 December 31, 2010 Ltd. 127,811 38.46 144,073 38.46 Insurance policy assets issued $ 216,970 $ 337,561 by PEM Group $ 1,864,258 $ - Less: accumulated impairment ( 1,157,348 ) - $ 706,910 $ -

The Bank’s Board of Directors resolved on February 24, 2011 to assume insurance policy assets of USD17,110 thousand (net balance of USD57,627 thousand less provided allowance for loss of USD40,517 thousand) in accordance with the schedule of appointment of receiver of PEM by the USA court. The Bank has

- 170 - - 171 - (1) The Bank’s investment income (loss) recognized under the equity method in 2011 and 2010 are summarized as follows: Investment income (loss) Initial Investment Cost Investee 2011 2010 2011 2010 Taichung Bank Insurance Agency Co., Ltd. $ 77,159 $ 181,488 $ 6,000 $ 6,000 Reliance Securities Investment Trust Co., Ltd. ( 10,262 ) 4,085 120,000 120,000 $ 66,897 $185,573 $126,000 $ 126,000 (2) The entities to be included by the Bank into the consolidated financial statements for 2011 and 2010 in accordance with the FSC order under Jin-Guan-zheng (6) Zi No. 0960064020, the Statement of Financial Accounting Standards No. 7 on “Consolidated Financial Statements” and “Rules Governing the Preparation of Financial Statements of Public Issued Banks” include Taichung Commercial Bank Insurance Broker Co., Ltd. The consolidated financial statements have already been prepared. 13. Other financial assets - net December 31, 2011 December 31, 2010 Financial assets at cost $143,486 $ 143,579 Other miscellaneous financial assets 706,910 - Inward remittances, net - 874 Other Delinquent loans, net - - $850,396 $ 144,453

(1) Details of the financial assets carried at cost are summarized as follows: December 31, 2011 December 31, 2010 Publicly offering of domestic common stock $ 2 $ 95 Common stock other than publicly offering of domestic common stock 143,484 143,484 $143,486 $ 143,579

(2) Other financial assets - others December 31, 2011 December 31, 2010 Insurance policy assets issued by PEM Group $ 1,864,258 $ - Less: accumulated impairment ( 1,157,348 ) - $ 706,910 $ -

- 171 -

established insurance policy asset trust and entered into relevant documents with 2010 other lending institutions to assume insurance policy assets from the receiver and Transportation and continually pay insurance premium in order to maintain effectiveness of insurance Buildings and Communication Miscellaneous Prepayments for policies. Land structures equipment equipment equipment Total Cost After evaluating the value of insurance policy assets issued by PEM Group, the Balance, beginning $ 1,749,315 $ 1,966,120 $ 44,113 $ 1,072,848 $ - $ 4,832,396 Bank recognized a gain on reversal of impairment loss of NTD69,939 thousand for Increase 1,320 - 5,412 22,997 - 29,729 the year ended December 31, 2011. Decrease - - ( 9,079 ) ( 27,796 ) - ( 36,875 ) Reclassified in (3) Details of other delinquent accounts, net are summarized as follows: the current period ( 177,350 ) ( 130,300 ) - ( 60 ) - ( 307,710 ) December 31, 2011 December 31, 2010 Balance, Non-delinquent loans restated ending 1,573,285 1,835,820 40,446 1,067,989 - 4,517,540 Revaluation from loans $ 1,359 $ 2,408 increment Less: allowance for bad debt Balance, beginning 472,960 132,210 - - - 605,170 (Note 7 & 9) ( 1,359 ) ( 2,408 ) Increase ------$- $ - Decrease ------Reclassified in the current period ------14. Fixed assets Balance, 2011 ending 472,960 132,210 - - - 605,170 Transportation Accumulated and depreciation Buildings and Communication Miscellaneous Prepayments for Balance, Land structures equipment equipment equipment Total beginning - 888,113 31,001 875,226 - 1,794,340 Cost Increase - 36,324 3,129 70,151 - 109,604 Balance, Decrease - - ( 5,454 ) ( 27,785 ) - ( 33,239 ) beginning $ 1,573,285 $ 1,835,820 $ 40,446 $ 1,067,989 $ - $ 4,517,540 Reclassified in Increase - - 5,381 52,205 88,550 146,136 the current Decrease - - ( 11,034 ) ( 48,526 ) - ( 59,560 ) period - ( 55,716 ) - - - ( 55,716 ) Reclassified in Balance, the current ending - 868,721 28,676 917,592 - 1,814,989 period 45,853 13,901 28 ( 28 ) - 59,754 Accumulated Balance, impairment ending 1,619,138 1,849,721 34,821 1,071,640 88,550 4,663,870 Balance, Revaluation beginning 81,000 - - - - 81,000 increment Increase ------Balance, Decrease ------beginning 472,960 132,210 - - - 605,170 Reclassified in Increase ------the current Decrease ------period ( 4,000 ) - - - - ( 4,000 ) Reclassified in Balance, the current ending 77,000 - - - - 77,000 period ------Net, ending $ 1,969,245 $ 1,099,309 $ 11,770 $ 150,397 $ - $ 3,230,721 Balance, ending 472,960 132,210 - - - 605,170 Some land and buildings were resolved to be held for sale by the Board of Accumulated Directors in 2010. Some land and buildings were leased to others, and re-stated as the depreciation Balance, assets held for sale and assets not available for business operation at their book value. beginning - 868,721 28,676 917,592 - 1,814,989 Please refer to Note 8 and Note 15. Increase - 33,529 3,391 53,962 - 90,882 Decrease - - ( 11,034 ) ( 48,506 ) - ( 59,540 ) 15. Other assets Reclassified in the current December 31, 2011 December 31, 2010 period - 9,728 28 ( 28 ) - 9,728 Refundable deposits $ 966,582 $ 896,499 Balance, Deferred income tax assets (note 27) 423,878 879,247 ending - 911,978 21,061 923,020 - 1,856,059 Accumulated Deferred pension cost (note 22) 266,323 317,585 impairment Deferred expenses 131,167 117,979 Balance, Reserve for trust funds compensation 50,000 50,000 beginning 77,000 - - - - 77,000 Increase ------Prepayments 34,122 49,113 Decrease ------Collateral accepted, net - 14,201 Reclassified in the current Assets not available for business 19,309 12,541 period ------operation, net Balance, Others 662 1,478 ending 77,000 - - - - 77,000 Net, ending $ 2,015,098 $ 1,069,953 $ 13,760 $ 148,620 $ 88,550 $ 3,335,981 $ 1,892,043 $ 2,338,643

- 172 - - 173 -

2010 Transportation and Buildings and Communication Miscellaneous Prepayments for Land structures equipment equipment equipment Total Cost Balance, beginning $ 1,749,315 $ 1,966,120 $ 44,113 $ 1,072,848 $ - $ 4,832,396 Increase 1,320 - 5,412 22,997 - 29,729 Decrease - - ( 9,079 ) ( 27,796 ) - ( 36,875 ) Reclassified in the current period ( 177,350 ) ( 130,300 ) - ( 60 ) - ( 307,710 ) Balance, ending 1,573,285 1,835,820 40,446 1,067,989 - 4,517,540 Revaluation increment Balance, beginning 472,960 132,210 - - - 605,170 Increase ------Decrease ------Reclassified in the current period ------Balance, ending 472,960 132,210 - - - 605,170 Accumulated depreciation Balance, beginning - 888,113 31,001 875,226 - 1,794,340 Increase - 36,324 3,129 70,151 - 109,604 Decrease - - ( 5,454 ) ( 27,785 ) - ( 33,239 ) Reclassified in the current period - ( 55,716 ) - - - ( 55,716 ) Balance, ending - 868,721 28,676 917,592 - 1,814,989 Accumulated impairment Balance, beginning 81,000 - - - - 81,000 Increase ------Decrease ------Reclassified in the current period ( 4,000 ) - - - - ( 4,000 ) Balance, ending 77,000 - - - - 77,000 Net, ending $ 1,969,245 $ 1,099,309 $ 11,770 $ 150,397 $ - $ 3,230,721 Some land and buildings were resolved to be held for sale by the Board of Directors in 2010. Some land and buildings were leased to others, and re-stated as the assets held for sale and assets not available for business operation at their book value. Please refer to Note 8 and Note 15. 15. Other assets December 31, 2011 December 31, 2010 Refundable deposits $ 966,582 $ 896,499 Deferred income tax assets (note 27) 423,878 879,247 Deferred pension cost (note 22) 266,323 317,585 Deferred expenses 131,167 117,979 Reserve for trust funds compensation 50,000 50,000 Prepayments 34,122 49,113 Collateral accepted, net - 14,201 Assets not available for business 19,309 12,541 operation, net Others 662 1,478 $ 1,892,043 $ 2,338,643

- 173 - Some land and buildings which were initially held for lease were resolved to be (1) The Government bonds held to maturity deposited as the security bond for held for sale by the Board of Directors and restated as assets held for sale at their provisional seizure at court and for business guarantee on December 31, 2011 and book value. Please refer to Note 8. 2010 were NTD865,100 thousand and NTD824,800 thousand, which are stated as 16. Deposits of Central Bank of China and other banks refundable deposits. December 31, 2011 December 31, 2010 (2) Change of deferred expenses is stated as follows: Due to Chunghwa Post Co., Ltd. $ 1,963,594 $ 2,045,623 2011 2010 Balance, beginning $117,979 $ 141,720 Call loans to banks 1,475,310 233,040 Increase 63,075 24,287 Due to the CBC 22,521 27,330 Amortization in the current ( 49,887 ) ( 48,088 ) period Deposits of other banks 1,094 964 Reclassified in the current - 60 $ 3,462,519 $ 2,306,957 period Balance, ending $131,167 $ 117,979 17. Funds borrowed from CBC and other banks (3) The Reserve for trust funds compensation by Government bonds held to maturity on December 31, 2011 December 31, 2010 December 31, 2011 and 2010 is stated at the par value of NTD50,000 thousand. Interest rate Amount Interest rate Amount (4) Collateral accepted – net: Funds borrowed 0.74%~1.31% $ 2,877,550 0.77%~0.79% $ 1,602,150 December 31, 2011 December 31, 2010 from banks Land $120,507 $ 245,027 Buildings and structures 127,639 163,860 Less: allowance for loss from ( 248,146 ) ( 394,686 ) 18. As of December 31, 2011 and 2010, the government bonds securing RP were NTD0 price declination thousand and NTD1,477,800 thousand, and the redemption price as agreed were NTD0 $- $ 14,201 thousand and NTD1,478,209 thousand, respectively. The Bank sold some assumed collateral which have been impaired in 2011 and 19. Payables 2010. The cause of initial impairment has been extinguished, and gains on reversal of December 31, 2011 December 31, 2010 impairment were recognized for NTD143,138 thousand and NTD121,304 thousand, respectively. Notes and checks in clearing $ 5,165,311 $ 1,404,845 (5) Details of assets not available for business operation leased to others are as follows: Payable spot exchange settlement 2011 2010 payment 1,036,226 698,379 Buildings and Buildings and Land structures Total Land structures Total Acceptances payable 617,918 881,646 Cost Balance, $ 7,955 $ 17,598 $ 17,109 $ 46,938 Accrued expenses 348,244 262,052 beginning $ 9,643 $ 29,829 Increase ------Decrease ------Interest payable 290,632 238,618 Reclassified in 5,058 2,978 8,036 ( 20,186 ) ( 9,154 ) ( 29,340 ) the current Collection payable 21,679 38,274 period Balance, 14,701 10,933 25,634 9,643 7,955 17,598 Payable structured note indemnity ending (Note 31) 18,291 30,876 Accumulated depreciation Balance, - 5,057 5,057 - 8,943 8,943 Deposit payable for securities beginning financing 6,382 12,858 Increase - 197 197 - 200 200 Decrease ------Guarantee deposits received for Reclassified in - 1,071 1,071 - ( 4,086 ) ( 4,086 ) the current financing instruments 5,778 11,737 period Balance, - 6,325 6,325 - 5,057 5,057 Payable stock settlement payment ending for trading - 69,256 Net, ending $ 14,701 $ 4,608 $ 19,309 $ 9,643 $ 2,898 $ 12,541 Others 173,040 223,474 $ 7,683,501 $ 3,872,015

- 174 - - 175 - Some land and buildings which were initially held for lease were resolved to be held for sale by the Board of Directors and restated as assets held for sale at their book value. Please refer to Note 8. 16. Deposits of Central Bank of China and other banks December 31, 2011 December 31, 2010 Due to Chunghwa Post Co., Ltd. $ 1,963,594 $ 2,045,623 Call loans to banks 1,475,310 233,040 Due to the CBC 22,521 27,330 Deposits of other banks 1,094 964 $ 3,462,519 $ 2,306,957

17. Funds borrowed from CBC and other banks December 31, 2011 December 31, 2010 Interest rate Amount Interest rate Amount Funds borrowed 0.74%~1.31% $ 2,877,550 0.77%~0.79% $ 1,602,150 from banks

18. As of December 31, 2011 and 2010, the government bonds securing RP were NTD0 thousand and NTD1,477,800 thousand, and the redemption price as agreed were NTD0 thousand and NTD1,478,209 thousand, respectively. 19. Payables December 31, 2011 December 31, 2010 Notes and checks in clearing $ 5,165,311 $ 1,404,845 Payable spot exchange settlement payment 1,036,226 698,379 Acceptances payable 617,918 881,646 Accrued expenses 348,244 262,052 Interest payable 290,632 238,618 Collection payable 21,679 38,274 Payable structured note indemnity (Note 31) 18,291 30,876 Deposit payable for securities financing 6,382 12,858 Guarantee deposits received for financing instruments 5,778 11,737 Payable stock settlement payment for trading - 69,256 Others 173,040 223,474 $ 7,683,501 $ 3,872,015

- 175 - th 20. Deposits and remittances D. 4 term 2009: NTD1,100,000 thousand. st December 31, 2011 December 31, 2010 E. 1 term 2010: NTD600,000 thousand. F. 2nd term 2010: NTD200,000 thousand. Check deposits $ 7,012,760 $ 4,908,754 (3) Book value: Current deposits 66,620,964 59,579,199 A. 1st term 2009: NTD100 thousand, issued at par value. Current saving deposits 81,231,495 80,164,600 B. 2nd term 2009: NTD500 thousand, issued at par value. Time deposits 60,654,582 50,938,305 C. 3rd term 2009: NTD500 thousand, issued at par value. th Time saving deposits 118,312,830 107,239,823 D. 4 term 2009: NTD500 thousand, issued at par value. E. 1st term 2010: NTD500 thousand, issued at par value. Remittances - 18,831 F. 2nd term 2010: NTD10,000 thousand, issued at par value. $ 333,832,631 $ 302,849,512 (4) Duration: A: 1st term 2009: 7 years, matured on June 26, 2016. 21. Financial bonds payable B. 2nd term 2009: 7 years, matured on December 10, 2016. December 31, 2011 December 31, 2010 C. 3rd term 2009: 7 years, matured on December 18, 2016. th Subordinate financial bonds $ 8,300,000 $ 8,300,000 D. 4 term 2009: 6.5 years, matured on June 30, 2016. E. 1st term 2010: 7 years, matured on January 28, 2017. Convertible financial bonds 2,212,559 - F. 2nd term 2010: 6 years, matured on February 9, 2016. $ 10,512,559 $ 8,300,000 (5) Bond interest rate: A: 1st term 2009: the floating interest rate of one year time deposit (1) Subordinate financial bonds published by Chunghwa Post Co., Ltd. plus 1.40%. 1. As approved by FSC’s Letter under Jin-Guan-Yin (4) Zi No. 09600481190 B. 2nd term 2009: the fixed annual rate of 2.75%. st dated November 14, 2007, the Bank issued 1 term subordinate financial bonds C. 3rd term 2009: the floating interest rate of one year time deposit r on December 21, 2007 upon the following terms and conditions: published by Chunghwa Post Co., Ltd. plus 1.50%. (1) Approved: NTD3,500,000 thousand. D. 4th term 2009: the floating interest rate of one year time deposit r (2) Issued: NTD2,400,000 thousand. published by Chunghwa Post Co., Ltd. plus 1.48%. (3) Denomination: NTD10,000 thousand, issued at par value. E. 1st term 2010: the floating interest rate of one year time deposit (4) Duration: 5.5 years, matured on June 21, 2013. published by Chunghwa Post Co., Ltd. plus 1.50%. nd (5) Bond interest rate: the floating interest rate of one year time deposit F. 2 term 2010: the floating interest rate of one year time deposit r published by Chunghwa Post Co., Ltd. plus 1.02%. published by Chunghwa Post Co., Ltd. plus 1.50%. (6) Repayment Methods: repayment in lump sum upon maturity. (6) Repayment Methods: repayment in lump sum upon maturity. (7) Payment of interest: interest paid per six months as of the date of (7) Payment of interest: interest paid per six months as of the date of issuance. issuance. 2. As approved by FSC’s Letter under Jin-Guan-Yin (4) Zi No. 09800104050 3. As approved by FSC’s Letter under Jin-Guan-Yin-Piao-Zi No. 09900204230 rd dated March 20, 2009, the Bank issued 1st term to 4th term subordinate dated June 4, 2010, the Bank issued 3 term subordinate financial bonds 2010 financial bonds for 2009 on June 26, December 10, December 18, and as of June 25, 2010 upon the following terms and conditions: st nd December 30, 2009 and 1 term to 2 term subordinate financial bonds for (1) Approved: NTD900,000 thousand. 2010 on January 28 and February 9, 2010 upon the following terms and (2) Issued: NTD900,000 thousand. conditions: (3) Denomination: NTD10,000 thousand, issued at par value. (1) Approved: NTD5,000,000 thousand. (4) Duration: 7 years, matured on June 25, 2017. (2) Issued: st (5) Bond interest rate: the floating interest rate of one year time deposit A: 1 term 2009: NTD1,800,000 thousand. published by Chunghwa Post Co., Ltd. plus 1.75%. nd B. 2 term 2009: NTD100,000 thousand. (6) Repayment Methods: repayment in lump sum upon maturity. C. 3rd term 2009: NTD1,200,000 thousand.

- 176 - - 177 - D. 4th term 2009: NTD1,100,000 thousand. E. 1st term 2010: NTD600,000 thousand. F. 2nd term 2010: NTD200,000 thousand. (3) Book value: A. 1st term 2009: NTD100 thousand, issued at par value. B. 2nd term 2009: NTD500 thousand, issued at par value. C. 3rd term 2009: NTD500 thousand, issued at par value. D. 4th term 2009: NTD500 thousand, issued at par value. E. 1st term 2010: NTD500 thousand, issued at par value. F. 2nd term 2010: NTD10,000 thousand, issued at par value. (4) Duration: A: 1st term 2009: 7 years, matured on June 26, 2016. B. 2nd term 2009: 7 years, matured on December 10, 2016. C. 3rd term 2009: 7 years, matured on December 18, 2016. D. 4th term 2009: 6.5 years, matured on June 30, 2016. E. 1st term 2010: 7 years, matured on January 28, 2017. F. 2nd term 2010: 6 years, matured on February 9, 2016. (5) Bond interest rate: A: 1st term 2009: the floating interest rate of one year time deposit published by Chunghwa Post Co., Ltd. plus 1.40%. B. 2nd term 2009: the fixed annual rate of 2.75%. C. 3rd term 2009: the floating interest rate of one year time deposit r published by Chunghwa Post Co., Ltd. plus 1.50%. D. 4th term 2009: the floating interest rate of one year time deposit r published by Chunghwa Post Co., Ltd. plus 1.48%. E. 1st term 2010: the floating interest rate of one year time deposit published by Chunghwa Post Co., Ltd. plus 1.50%. F. 2nd term 2010: the floating interest rate of one year time deposit r published by Chunghwa Post Co., Ltd. plus 1.50%. (6) Repayment Methods: repayment in lump sum upon maturity. (7) Payment of interest: interest paid per six months as of the date of issuance. 3. As approved by FSC’s Letter under Jin-Guan-Yin-Piao-Zi No. 09900204230 dated June 4, 2010, the Bank issued 3rd term subordinate financial bonds 2010 as of June 25, 2010 upon the following terms and conditions: (1) Approved: NTD900,000 thousand. (2) Issued: NTD900,000 thousand. (3) Denomination: NTD10,000 thousand, issued at par value. (4) Duration: 7 years, matured on June 25, 2017. (5) Bond interest rate: the floating interest rate of one year time deposit published by Chunghwa Post Co., Ltd. plus 1.75%. (6) Repayment Methods: repayment in lump sum upon maturity.

- 177 - (7) Payment of interest: interest paid per six months as of the date of the amount of unconverted bonds is lower than 10% of total issuance issuance. amount and the closing prices of common shares of Taichung Bank (2) Convertible financial bonds exceed 30% of the current conversion price for consecutive thirty business days, the Bank may recall outstanding bonds at the December 31, 2011 December 31, 2010 denomination of the bonds in cash. st 1 unsecured convertible 3. The conversion procedure for the Bank’s first domestic unsecured convertible financial bonds financial bonds is summarized as follows: Unsecured convertible (1) Underlying stock: financial bonds of Common shares of the Bank. The conversion is made by issuance of NTD2,300,000 thousand new shares. were issued on June 15, (2) Conversion period: 2011 with duration of 3

years and coupon rate of Bondholders may from time to time ask the Bank to convert their 0% $ 2,300,000 $ - bonds into common shares from July 16, 2011 (the next date after one month from the issuance date of the bonds) to June 5, 2014 except to Less: Discount on corporate stock dividend transfer suspension day, from fifteen business days before bond discount ( 87,441 ) - cash dividend transfer suspension day or suspension day for subscription $ 2,212,559 $ - of common shares for cash capital increase to base day for right distribution, from base day for capital decrease to the day before the share replacement date for capital decrease and other common stock 1. As approved by FSC’s Letter under Jin-Guan-Zheng-Fa-Zi No. 1000018296 transfer suspension period upon laws and regulations. dated May 16, 2011, the Bank issued first unsecured convertible financial (3) Procedures to ask for conversion: bonds of NTD2,300,000 thousand with the coupon rate of 0% on June 15, 2011. A. Bondholders complete the “Conversion/Redemption/Put Back In accordance with SFAS No.36, the convertible rights and liabilities were Application for Convertible Financial Bond Book Entry” (please mark separately recognized as equity and liabilities. The equity portion amounted to “Conversion”) at their original securities company to make the NTD83,039 thousand and was stated as “capital surplus – stock option”; application through Taiwan Depository & Clearing Corporation liability components were recognized as embedded financial derivatives and (hereinafter referred to as "TDCC"). TDCC submits the application to non-derivative liabilities. The evaluated fair value for said embedded financial the Bank’s stock transfer agent after receiving it. The application derivatives as of December 31, 2011 amounted to NTD42,090 thousand, and becomes effective upon receipt of application and can not be cancelled. non-derivative liabilities measured at amortized cost as of December 31, 2011 The conversion procedure will be completed within 5 business days amounted to NTD2,212,559 thousand. after delivery and stocks will be directly transferred into bondholders’ 2. Issuance terms for the Bank’s first domestic unsecured convertible financial central depository accounts. bonds are summarized as follows: B. When overseas Chinese or foreigners apply to convert the bonds they (1) Approved: NTD2,800,000 thousand. hold into shares of the Bank, shares are distributed through book entry (2) Issued: NTD2,300,000 thousand. by TDCC. (3) Denomination: NTD100 thousand, issued at par value. (4) The conversion price at issuance is NTD11.89. After issuance of financial (4) Duration: 3 years, matured on June 15, 2014. bonds, the conversion price should be adjusted in accordance with the (5) Coupon rate: 0%. prescribed formula for any increase in issued common shares except for replacement of common shares due to issuance of various securities with (6) Repayment: A single payment in cash is made for unconverted bonds or common share convertible rights or stock options. The Bank conducted for exercise of put options. the ex-right and ex-dividend procedure in September 2011. The (7) Interest payment: Nil. conversion price was accordingly adjusted to NTD11.23 in accordance (8) Conversion price: NTD11.89. with the prescribed formula. (9) Put options: Bondholders may ask the Bank to redeem the financial 4. Changes in accounts relevant to convertible financial bonds payable for the bonds at the par value plus a yield rate of 1.5% in cash within forty days current period are summarized as follows: before the date as of which the convertible financial bonds have been 2011 issued for two years (June 15, 2013). Financial Capital Benefit from liabilities at surplus – stock effects of profit (10) Call option: From the date after six months from the issuance date to fair value Corporate options of and loss forty days before the expiration date of the convertible financial bonds, if through profit bonds payable convertible accounts

- 178 - - 179 - the amount of unconverted bonds is lower than 10% of total issuance amount and the closing prices of common shares of Taichung Bank exceed 30% of the current conversion price for consecutive thirty business days, the Bank may recall outstanding bonds at the denomination of the bonds in cash. 3. The conversion procedure for the Bank’s first domestic unsecured convertible financial bonds is summarized as follows: (1) Underlying stock: Common shares of the Bank. The conversion is made by issuance of new shares. (2) Conversion period: Bondholders may from time to time ask the Bank to convert their bonds into common shares from July 16, 2011 (the next date after one month from the issuance date of the bonds) to June 5, 2014 except to stock dividend transfer suspension day, from fifteen business days before cash dividend transfer suspension day or suspension day for subscription of common shares for cash capital increase to base day for right distribution, from base day for capital decrease to the day before the share replacement date for capital decrease and other common stock transfer suspension period upon laws and regulations. (3) Procedures to ask for conversion: A. Bondholders complete the “Conversion/Redemption/Put Back Application for Convertible Financial Bond Book Entry” (please mark “Conversion”) at their original securities company to make the application through Taiwan Depository & Clearing Corporation (hereinafter referred to as "TDCC"). TDCC submits the application to the Bank’s stock transfer agent after receiving it. The application becomes effective upon receipt of application and can not be cancelled. The conversion procedure will be completed within 5 business days after delivery and stocks will be directly transferred into bondholders’ central depository accounts. B. When overseas Chinese or foreigners apply to convert the bonds they hold into shares of the Bank, shares are distributed through book entry by TDCC. (4) The conversion price at issuance is NTD11.89. After issuance of financial bonds, the conversion price should be adjusted in accordance with the prescribed formula for any increase in issued common shares except for replacement of common shares due to issuance of various securities with common share convertible rights or stock options. The Bank conducted the ex-right and ex-dividend procedure in September 2011. The conversion price was accordingly adjusted to NTD11.23 in accordance with the prescribed formula. 4. Changes in accounts relevant to convertible financial bonds payable for the current period are summarized as follows: 2011 Financial Capital Benefit from liabilities at surplus – stock effects of profit fair value Corporate options of and loss through profit bonds payable convertible accounts

- 179 - or loss corporate December 31, 2011 December 31, 2010 bonds liabilities Balance, beginning $ - $ - $ - $ - ( $ 136,764 ) ( $ 122,602 ) Issuance of 23,920 2,193,041 83,039 - Accruable pension liabilities convertible financial bonds (3) The Bank’s actuarial hypothesis of pension benefit obligation under the defined Discount - 19,518 - ( 19,518 ) amortization of benefit rules is specified as follows: corporate bonds 2011 2010 Evaluation 18,170 - - ( 18,170 ) Discounted rate 2.00% 2.00% adjustments, end 1.50% 1.50% of year Increase rate of future salary Balance, ending $ 42,090 $ 2,212,559 $ 83,039 ( $ 37,688 ) Expected rate of return of 2.00% 2.00% pension fund assets 22. Pension Plan (1) The Bank’s pension costs provided under the defined contribution rules in 2011 and (4) The vested benefit calculated by the Bank under the defined benefit rules until Dec. 2010 were NTD87,253 thousand and NTD46,335 thousand. The net pension costs 31, 2011 and 2010 is specified as follows: provided under the defined benefit rules were NTD80,612 thousand and NTD85,947 December 31, 2011 December 31, 2010 thousand. The components thereof are specified as follows: Vested benefit $ 241,218 $ 165,364 2011 2010 Service costs $ 20,262 $ 23,412 Interest costs 20,655 21,355 23. Other liabilities Unrecognized amortization of December 31, 2011 December 31, 2010 transitional net benefit Advances $137,427 $ 156,615 obligation 25,765 25,765 Reserve for land revaluation 111,021 111,021 Expected return of pension increment tax (“LRIT”) fund assets ( 15,904 ) ( 15,129 ) Guarantee deposits received 57,214 95,020 Unrecognized unamortized Reserve 22,637 46,144 balance of service costs in $328,299 $ 408,800 26,170 26,170 previous period Amortization of unrecognized

pension loss 3,664 4,374 The breakdown and change of the various reserves: Net pension cost $ 80,612 $ 85,947 2011 2010 Reserve for Reserve for guarantee Reserve for guarantee Reserve for liability default loss Total liability default loss Total (2) The contribution of pension fund and stated accrued pension liabilities under the Balance, defined benefit rules are adjusted as follows: beginning $ 22,637 $ 23,507 $ 46,144 $ 22,637 $ 21,878 $ 44,515 Deposit in the - - - - 1,629 1,629 December 31, 2011 December 31, 2010 current period Benefit obligation: Write off in the ------Vested benefit obligation ( $ 196,337 ) ( $ 133,751 ) current period Reclassified in - ( 23,507 ) ( 23,507 ) - - - Non-vested benefit obligation ( 735,452 ) ( 743,761 ) the current Cumulative benefit obligation ( 931,789 ) ( 877,512 ) period Effects of increase in salary ( 140,267 ) ( 155,253 ) Balance, ending $ 22,637 $ - $ 22,637 $ 22,637 $ 23,507 $ 46,144 Projected benefit obligation ( 1,072,056 ) ( 1,032,765 ) Fair value of pension fund assets 795,025 754,910 The deposit of reserve for guarantee liability is stated as bad debt expenses. The Contribution ( 277,031 ) ( 277,855 ) deposit of reserve for default loss is stated as other non-interest expenses. In accordance Unrecognized transitional benefit 25,772 51,537 with Directive Jin-Guan-Yin-Fa-Zi No. 10010000440 and Directive obligation Jin-Guan-zheng-Quan-Zi No. 09900738571, effective January 1, 2011, reserve for Unrecognized service costs from 240,551 266,721 default loss is transferred as special reserve. previous period 24. Shareholders’ equity Unrecognized pension loss 200,407 154,580 Minimum accruable pension ( 326,463 ) ( 317,585 ) (1) Capital stock

- 180 - - 181 - December 31, 2011 December 31, 2010 liabilities Accruable pension liabilities ( $ 136,764 ) ( $ 122,602 )

(3) The Bank’s actuarial hypothesis of pension benefit obligation under the defined benefit rules is specified as follows: 2011 2010 Discounted rate 2.00% 2.00% Increase rate of future salary 1.50% 1.50% Expected rate of return of 2.00% 2.00% pension fund assets

(4) The vested benefit calculated by the Bank under the defined benefit rules until Dec. 31, 2011 and 2010 is specified as follows: December 31, 2011 December 31, 2010 Vested benefit $ 241,218 $ 165,364

23. Other liabilities December 31, 2011 December 31, 2010 Advances $137,427 $ 156,615 Reserve for land revaluation 111,021 111,021 increment tax (“LRIT”) Guarantee deposits received 57,214 95,020 Reserve 22,637 46,144 $328,299 $ 408,800

The breakdown and change of the various reserves: 2011 2010 Reserve for Reserve for guarantee Reserve for guarantee Reserve for liability default loss Total liability default loss Total Balance, beginning $ 22,637 $ 23,507 $ 46,144 $ 22,637 $ 21,878 $ 44,515 Deposit in the - - - - 1,629 1,629 current period Write off in the ------current period Reclassified in - ( 23,507 ) ( 23,507 ) - - - the current period Balance, ending $ 22,637 $ - $ 22,637 $ 22,637 $ 23,507 $ 46,144

The deposit of reserve for guarantee liability is stated as bad debt expenses. The deposit of reserve for default loss is stated as other non-interest expenses. In accordance with Directive Jin-Guan-Yin-Fa-Zi No. 10010000440 and Directive Jin-Guan-zheng-Quan-Zi No. 09900738571, effective January 1, 2011, reserve for default loss is transferred as special reserve. 24. Shareholders’ equity (1) Capital stock

- 181 - The Bank’s paid-in capital was NTD13,719,006 thousand on December 31, The Bank proceeded with recapitalization by issuing 360,000 thousand shares 2010, divided into 1,371,901 thousand shares at NTD10 per share and offered as for cash in December 2010, 15% of which, totaling 54,000 thousand shares, were common stock in whole. The Company conducted capital increase in cash in offered for employees’ option, and the compensation cost and capital surplus were November 2010 to issue 360,000 thousand common shares at par value. Therefore, recognized as NTD25,256 thousand at the same time. the paid-in capital of the Bank as of December 31, 2010 increased to (3) Earnings allocation and dividend policy NTD17,319,006 thousand as of December 31, 2010, which were 1,731,901 thousand According to the Bank’s Articles of Incorporation, any profit from settlement of common shares with par value of NTD10. the year shall be subject to applicable taxes as the top Seniority, followed by the The Company conducted capital increase out of earnings of NTD294,423 offsetting of losses carried forward from previous years and 30% of the remainder of thousand and capital surplus of NTD225,147 thousand in September 2011 and also such profit shall be allocated as statutory reserve, and special reserve shall be made capital increase in cash in September 2011, which issued 450,000 thousand provided pursuant to laws. The balance, if any, plus the unallocated accumulated shares at par value. Therefore, the Bank’s paid-in capital increased to retained earnings for the previous years shall be allocated as the shareholders’ NTD22,338,576 thousand as of December 31, 2011, which were 2,233,858 thousand Free-Gratis Dividends, and the remainder thereof, if any, shall be allocated in the common shares with par value of NTD10. following order: (2) Capital surplus 1. 1%-5% for employee bonus. Under the related regulations, capital surplus shall not be used except to offset a 2. Remuneration to directors/supervisors granted based on 50% of the allocated deficit. However, capital surplus arising from issuance of shares in excess of par employee bonus. value (including issuance in excess of common stock par value, issuance of shares 3. Shareholder bonus. for combinations and treasury stock transactions, etc.) and donation may be

transferred to common stock on the basis of the Ratio of Shareholding of shares held The Board shall retain the required fund subject to the change of operating by the stockholders. Such capital surplus transferred to common stock shall be environment, operation and investment needs before proposing the proportion within a certain Ratio of Shareholding prescribed by the related regulations. In between cash and Free-Gratis Dividends for the approval of the shareholders’ accordance with revised articles of the Company Law announced on January 4, 2012, meeting: aforementioned capital surplus may be distributed in cash. 1. The cash dividends shall be no less than 10% of the Free-Gratis Dividends and Details of capital surplus are as follows: bonus allocated to shareholders. December 31, 2011 December 31, 2010 2. However, if the Free-Gratis Dividends are allocated at less than or equal to Stock Other capital Stock Other capital NTD0.3 per share, the earnings may be allocated in the form of Free-Gratis premiums surplus premiums surplus Dividends in full. Premium on Free-Gratis Dividends for the approval of the shareholders’ meeting. Before the issuance of legal reserve amounts to the total Paid-in capital, the maximum allocation of earnings shares $ 550,109 $ - $ 750,000 $ - in cash shall be no more than 15% of total capital. Where the rates of Shares and Employee stock dividends and risk-based assets fail to meet the standard required by the business option competent authority, allocation of earnings in cash or with other property shall be compensation restricted or prohibited by the relevant requirements provided by the business cost 18,949 6,627 25,256 - competent authority. Equity component When allocating earnings, the Bank shall provide equivalent special reserve for of convertible the difference between loss on sale of NPL and amortized loss, and also provide financial bonds special reserve from Earnings or Accumulated earnings for the previous period with (Note 21) - 83,039 - - respect to the amount under the “less” item of shareholders’ equity for the current Generated from year and previous years. Where the amount under the “less” item of shareholders’ long-term equity is collected afterwards, earnings may be allocated from the reversal. investments - 16,813 - 16,813 Employees’ bonuses and remuneration to directors/supervisors payable by the $ 569,058 $ 106,479 $ 775,256 $ 16,813 Bank were estimated in accordance with the Bank’s Articles of Incorporation. After the Bank provided legal reserve at 30% of the earnings in 2011 and 2010, and special Upon the resolution of the Board of Directors in August 2011, the Bank reserve required by laws plus the unallocated earnings for the previous years and less conducted capital increase in cash for 450,000 thousand shares, where 67,500 5% allocated as the shareholders’ Free-Gratis Dividends, employees’ bonus and thousand shares, accounting for 15%, were provided for employee subscription, for remuneration to directors/supervisors as provided totaled NTD1,700 thousand and which compensation cost of NTD25,576 thousand, capital surplus – share premium NTD850 thousand, respectively. The change in the allocated amount resolved by of NTD18,949 thousand and capital surplus – overdue stock option of NTD6,627 board session at the end of FY, if any, shall apply to adjustment of the annual thousand were recognized. expenses initially provided. If the shareholders’ meeting resolves an actual

- 182 - - 183 - The Bank proceeded with recapitalization by issuing 360,000 thousand shares for cash in December 2010, 15% of which, totaling 54,000 thousand shares, were offered for employees’ option, and the compensation cost and capital surplus were recognized as NTD25,256 thousand at the same time. (3) Earnings allocation and dividend policy According to the Bank’s Articles of Incorporation, any profit from settlement of the year shall be subject to applicable taxes as the top Seniority, followed by the offsetting of losses carried forward from previous years and 30% of the remainder of such profit shall be allocated as statutory reserve, and special reserve shall be provided pursuant to laws. The balance, if any, plus the unallocated accumulated retained earnings for the previous years shall be allocated as the shareholders’ Free-Gratis Dividends, and the remainder thereof, if any, shall be allocated in the following order: 1. 1%-5% for employee bonus. 2. Remuneration to directors/supervisors granted based on 50% of the allocated employee bonus. 3. Shareholder bonus. The Board shall retain the required fund subject to the change of operating environment, operation and investment needs before proposing the proportion between cash and Free-Gratis Dividends for the approval of the shareholders’ meeting: 1. The cash dividends shall be no less than 10% of the Free-Gratis Dividends and bonus allocated to shareholders. 2. However, if the Free-Gratis Dividends are allocated at less than or equal to NTD0.3 per share, the earnings may be allocated in the form of Free-Gratis Dividends in full. Free-Gratis Dividends for the approval of the shareholders’ meeting. Before the legal reserve amounts to the total Paid-in capital, the maximum allocation of earnings in cash shall be no more than 15% of total capital. Where the rates of Shares and dividends and risk-based assets fail to meet the standard required by the business competent authority, allocation of earnings in cash or with other property shall be restricted or prohibited by the relevant requirements provided by the business competent authority. When allocating earnings, the Bank shall provide equivalent special reserve for the difference between loss on sale of NPL and amortized loss, and also provide special reserve from Earnings or Accumulated earnings for the previous period with respect to the amount under the “less” item of shareholders’ equity for the current year and previous years. Where the amount under the “less” item of shareholders’ equity is collected afterwards, earnings may be allocated from the reversal. Employees’ bonuses and remuneration to directors/supervisors payable by the Bank were estimated in accordance with the Bank’s Articles of Incorporation. After the Bank provided legal reserve at 30% of the earnings in 2011 and 2010, and special reserve required by laws plus the unallocated earnings for the previous years and less 5% allocated as the shareholders’ Free-Gratis Dividends, employees’ bonus and remuneration to directors/supervisors as provided totaled NTD1,700 thousand and NTD850 thousand, respectively. The change in the allocated amount resolved by board session at the end of FY, if any, shall apply to adjustment of the annual expenses initially provided. If the shareholders’ meeting resolves an actual

- 183 - allocated amount different from the estimate, it shall be stated as a change in 26. Employee Expenses, Depreciation, Depletion And Amortization accounting valuation in the year of the resolution made by the shareholders’ meeting. Summarized by functions: If the shareholders’ meeting resolves to allocate stock as the employee bonus, the quantity of stock shall be determined based on the amount of the employee bonus 2011 2010 divided by fair value of the stock. The fair value of the stock is based on the closing Operating expenses Operating expenses price on the day prior to the day of resolution made by the shareholders' meeting and Employee expenses takes the effect of ex-right and After Distribution into consideration. Salaries and wages $ 1,571,596 $ 1,493,800 Labor insurance and national 117,213 101,772 Upon the resolution of 2010 earnings distribution by the Board of Directors, the health insurance Bank provided NTD123,587 thousand for legal reserve and NTD9,092 thousand for Pension expenses 167,865 132,282 special reserve and reversed NTD16,987 thousand provided for special reserve in Other employee expenses 56,415 50,649 previous years. Then the Bank distributed stock dividends of NTD294,423 thousand $ 1,913,089 $ 1,778,503 and NTD225,147 thousand by capital increase out of earnings and capital surplus, Depreciation expenses $ 91,027 $ 110,706 respectively. The Board also resolved to distribute employee bonus of NTD92 Amortization expenses $ 49,887 $ 48,088 thousand and remuneration to directors and supervisors of NTD46 thousand. The difference between the resolution and the recognition of NTD0 thousand in the annual financial statements for employee bonus and remuneration to directors and 27. Corporate Income Tax supervisors amounted to NTD138 thousand, mainly due to changes in estimation, (1) The Bank’s receivable refundable tax in the current period is estimated as follows: which has been adjusted as income of 2011. For the relevant information, please December 31, 2011 December 31, 2010 view MOPS of TSEC. Income before income tax $ 1,914,176 $ 838,821 Upon the resolution of 2011 earnings distribution by the Board of Directors on Permanent difference 695,675 304,806 March 8, 2012, the Bank provided NTD436,200 thousand for legal reserve and Temporary difference ( 641,804 ) ( 694,296 ) NTD60,140 thousand for special reserve and reversed NTD9,092 thousand provided 1,968,047 449,331 for special reserve in previous years. Then the Bank distributed stock dividends of Less: loss deduction ( 1,968,047 ) ( 449,331 ) NTD848,866 thousand by capital increase out of earnings and NTD111,693 thousand Estimated general taxable - - by capital increase in cash. The Board also resolved to distribute employee bonus of income NTD402 thousand and remuneration to directors and supervisors of NTD201 Payable general tax - - thousand. The difference between the resolution and the recognition of NTD1,700 Add: additional 10% income 184 - thousand in the annual financial statements for employee bonus and remuneration to tax levied on directors and supervisors amounted to NTD850 thousand, mainly due to changes in unallocated earnings estimation. If the shareholders’ meeting resolves the actual allocated amount different Add: Supplemented minimum from the estimate, it shall be stated as the change in accounting valuation in the year tax - - of the resolution made by the shareholders’ meeting. For relevant information to Payable income tax for the the resolution of the Board of Directors, please view MOPS of TSEC. current period 184 - 25. Service Fee, Net Less: Investment exemption ( 184 ) - Less: prepaid and withheld tax ( 56,513 ) ( 45,880 ) 2011 2010 Receivable refundable tax in ( $ 56,513 ) ( $ 45,880 ) Service fee revenue $ 970,478 $ 1,109,193 the current period Service fee expenses ( 80,584 ) ( 73,743 ) Receivable refundable $ 236,918 $ 190,162 $ 889,894 $ 1,035,450 tax-beginning Add: Receivable refundable tax 56,513 45,880 in the current period Add: adjustment of income tax ( 4,807 ) 876 for the previous period Less: Refunded tax in current ( 51,536 ) - period Receivable refundable $ 237,088 $ 236,918 tax-ending

- 184 - - 185 - 26. Employee Expenses, Depreciation, Depletion And Amortization Summarized by functions: 2011 2010 Operating expenses Operating expenses Employee expenses Salaries and wages $ 1,571,596 $ 1,493,800 Labor insurance and national 117,213 101,772 health insurance Pension expenses 167,865 132,282 Other employee expenses 56,415 50,649 $ 1,913,089 $ 1,778,503 Depreciation expenses $ 91,027 $ 110,706 Amortization expenses $ 49,887 $ 48,088

27. Corporate Income Tax (1) The Bank’s receivable refundable tax in the current period is estimated as follows: December 31, 2011 December 31, 2010 Income before income tax $ 1,914,176 $ 838,821 Permanent difference 695,675 304,806 Temporary difference ( 641,804 ) ( 694,296 ) 1,968,047 449,331 Less: loss deduction ( 1,968,047 ) ( 449,331 ) Estimated general taxable - - income Payable general tax - - Add: additional 10% income 184 - tax levied on unallocated earnings Add: Supplemented minimum tax - - Payable income tax for the current period 184 - Less: Investment exemption ( 184 ) - Less: prepaid and withheld tax ( 56,513 ) ( 45,880 ) Receivable refundable tax in ( $ 56,513 ) ( $ 45,880 ) the current period

Receivable refundable $ 236,918 $ 190,162 tax-beginning Add: Receivable refundable tax 56,513 45,880 in the current period Add: adjustment of income tax ( 4,807 ) 876 for the previous period Less: Refunded tax in current ( 51,536 ) - period Receivable refundable $ 237,088 $ 236,918 tax-ending

- 185 - (2) The Bank’s net deferred income tax assets consist of the following: (4) The information regarding shareholders’ deductible tax: December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010 Deferred income tax assets (liabilities) Shareholders’ deductible tax Loss deduction $ 207,897 $ 553,951 account-Balance $ 775,625 $ 853,735 Unrealized loss from 207,713 276,417 Projected deductible rate of structured note indemnity earnings allocation for the Unrealized impairment loss 26,188 30,308 current year 20.50% 20.48% Unrealized gain on financial instruments ( 9,995 ) ( 23,146 ) Unrealized exchange (gain) ( 29,935 ) 32,624 Projected deductible rate of earnings allocation for the current year includes the loss payable income tax estimated for the current year. According to the Income Tax Investment exemption 6,378 10,949 Law, no net dividends or earnings may be deducted unless they refer to the dividends Excess allowance for bad debt 22,010 9,093 allocated from a company or cooperative or the profit-making business income tax Less: allowance for deferred paid by an investee or cooperative as included in the total earnings, in the territory of income tax assets ( 6,378 ) ( 10,949 ) the R.O.C.. Notwithstanding, said shall not apply where additional 10% income tax Net deferred income tax assets $ 423,878 $ 879,247 shall be levied as no earnings are allocated by the investee or cooperative. (5) As of December 31, 2011, there were no unallocated earnings of the Bank for 1997 The Legislative Yuan passed the revised Article 5 of Income Tax Law in May and the previous years. 2010 to reduce the income tax rate from 20% to 17%, which became effective in (6) The income tax returns of the Bank until 2008 have been authorized by the tax 2010. collection authority. As of December 31, 2011, the loss deduction applicable by the Bank to taxable 28. Earnings Per Share income of the following years is specified as follows: The numerator and denominator for calculating Earnings Per Share are disclosed as Due year Loss deduction follows: Number of 2016 $ 1,222,925 shares Amount (numerator) (denominator) Earnings per share ($)

Before After As of December 31, 2011, the investment tax credit applicable by the Bank to Before After Income (thousand Income Income taxable income of the following years is specified as follows: Income Tax tax shares) Tax tax 2011 Last year of Item Balance to be Total deduction Merit Basic earnings per share deduction deducted Earnings of current 2012 Personnel $ 2,604 2,604 Statute for period vested in training Upgrading shareholders of $ 1,914,176 $ 1,454,000 1,850,433 $ 1.03 $ 0.79 Industries common stock Effect of dilutive potential 2013 Personnel 3,774 3,774 〃 common stock training Convertible financial bonds 19,518 16,200 110,938 $ 6,378 Employee bonus - - 195 Diluted earnings per share Earnings of current (3) The Bank’s income tax expenses in the current period are specified as follows: period vested in 2011 2010 shareholders of common stock plus Decrease in deferred income effect of dilutive tax assets $ 455,369 $ 427,741 potential common stock $ 1,933,694 $ 1,470,200 1,961,566 $ 0.99 $ 0.75 Adjustment of income tax for the previous period 4,807 ( 876 ) Income tax expenses $ 460,176 $ 426,865 (Continued on next page)

- 186 - - 187 - (4) The information regarding shareholders’ deductible tax: December 31, 2011 December 31, 2010 Shareholders’ deductible tax account-Balance $ 775,625 $ 853,735 Projected deductible rate of earnings allocation for the current year 20.50% 20.48%

Projected deductible rate of earnings allocation for the current year includes the payable income tax estimated for the current year. According to the Income Tax Law, no net dividends or earnings may be deducted unless they refer to the dividends allocated from a company or cooperative or the profit-making business income tax paid by an investee or cooperative as included in the total earnings, in the territory of the R.O.C.. Notwithstanding, said shall not apply where additional 10% income tax shall be levied as no earnings are allocated by the investee or cooperative. (5) As of December 31, 2011, there were no unallocated earnings of the Bank for 1997 and the previous years. (6) The income tax returns of the Bank until 2008 have been authorized by the tax collection authority. 28. Earnings Per Share The numerator and denominator for calculating Earnings Per Share are disclosed as follows: Number of shares Amount (numerator) (denominator) Earnings per share ($) Before After Before After Income (thousand Income Income Income Tax tax shares) Tax tax 2011 Basic earnings per share Earnings of current period vested in shareholders of common stock $ 1,914,176 $ 1,454,000 1,850,433 $ 1.03 $ 0.79 Effect of dilutive potential common stock Convertible financial bonds 19,518 16,200 110,938 Employee bonus - - 195 Diluted earnings per share Earnings of current period vested in shareholders of common stock plus effect of dilutive potential common stock $ 1,933,694 $ 1,470,200 1,961,566 $ 0.99 $ 0.75

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Number of Name Affiliation shares EARNINGS PER Jian-Er Huang (Note 3) Legal representative to Resident Supervisor of Amount (numerator) (denominator) SHARE ($) the Bank Before After Before After Income (thousand Income Income Pan Asia Chemical Corporation, I Joung Director of the Bank Income Tax tax shares) Tax tax Investment Co., Ltd., Chou Chang Co., 2010 Ltd. and He Yang Co., Ltd. (Note 3) Basic earnings per share Ming-Shan Jhuang, Sin-Cing Jhang, Legal representative to Director of the Bank Earnings of current Jhe-Syong Cai, Guei-Fong Wang, Jing-Sin period vested in Jhang, Jhe-Nan Wang, Ming-Syong Huang, shareholders of Jin-Fong Su, Guei-Sian Wang (Note 4), common stock $ 838,821 $ 411,956 1,432,360 $ 0.59 $ 0.29 Jyun-Sheng Li, Yi-De Chen and Jia-Hong Effect of dilutive potential Lin (Note 3) common stock Chiung Tung Investment Corporation Ex-Director of the Bank - - - Employee bonus (Note 3) Diluted earnings per share Jing-Sin Jhang (Note 3) Legal representative to ex-Director of the Bank Earnings of current period vested in Zin Rui Investment Co., Ltd. and Tai Jiunn Supervisor of the Bank shareholders of Enterprise Co., Ltd. (Note 3) common stock plus Shu-Li Huang, Jin-Huang Cai, Jien-Hua Li Legal representative to Supervisor of the Bank effect of dilutive Fu, and Jhao-Nan Sie (Note 3) potential common Chou Chang Corporation (Note 3) Ex-Supervisor of the Bank stock $ 838,821 $ 411,956 1,432,360 $ 0.59 $ 0.29 Jian-Er Huang, Shu-Li Huang, Jien-Hua Li Legal representative to ex-Supervisor of the Fu, and Jin-Huang Cai (Note 3) Bank Si-Rong Huang, Jin-Yi Li, and Jhen-Le Independent Director of the Bank Upon the resolution of the Board of Directors, the Bank conducted capital increase Liou (Note 3) out of undistributed earnings of NTD293,423 thousand and capital surplus of Jyun-Sheng Li (Note 2) President of the Bank NTD225,147 thousand on June 22, 2011. Therefore, 2010 after-tax basic EPS has been Yu-Ying Jhong (Note 2) Ex-President of the Bank retrospectively adjusted. 100 persons including Jhih-Cyuan Fang Managers (above) of Head Office and managers When calculating diluted EPS, the Bank assumes that employee bonus is made of the various entities of the Bank through share distribution. Such potential common shares with dilution effect will be 41 persons including the Chairman’s Spouses and kin at the second tier under the Civil added into weighted average outstanding shares to calculate diluted EPS. When diluted spouse Code of directors, supervisors, Chairman of the EPS is calculated, the closing price of such potential common shares on the balance Board and President of the Bank sheet date is used as the judgment basis for number of shares for issuance. When diluted Taichung Commercial Bank Cultural and Corporations receiving donation amounted to Educational Foundation, Taichung more than one-thirds of the Bank’s Paid-in EPS is calculated in the next year before the Board of Directors resolves the number of Commercial Bank Workers’ Welfare capital share distribution for employee bonus, the dilution effect is also considered for such Commission potential common shares. Taichung Bank Insurance Agency Co., Ltd. Subsidiary of the Bank 29. Important transactions with stakeholders Reliance Securities Investment Trust Co., Investee valued under equity method Name Affiliation Ltd. Jin-Fong Su (Representative to Pan Asia New Chairman of the Bank and the legal China Man-Made Fiber Co., Ltd. Principle shareholder holding more than 10% of Chemical Corporation) (Note 1) representative to the original Resident Supervisor the Bank’s shares Siou-Nan Huang (Legal representative to Original Chairman of the Bank Chung Chien Investment Co., Ltd. Holding company of China Man-Made Fiber Pan Asia Chemical Corporation) (Note 1) Co., Ltd. Guei-Fong Wang (Legal representative to Vice Chairman of the Bank Pan Asia Investment Co., Ltd. Director of China Man-Made Fiber Co., Ltd. Pan Asia Chemical Corporation) (Note 4) De-sing Securities Investment Trust Co., Affiliate Pan Asia Chemical Corporation and I Managing Director of the Bank Ltd. Joung Investment Co., Ltd. Moon Stone Investment Ltd. Affiliate Hsi-Rong Huang Managing Director and Independent Director Greencol Taiwan Corporation Affiliate Chou Chin Corporation Affiliate of the Bank Nan Chung Petrochemical Corp. Affiliate Yi-Der Chen and Jer-Shyong Tsai Legal representative to Managing Director of Je Mi Fang Corporation Affiliate the Bank (Continued on next page) (Continued on next page)

- 188 - - 189 - (Continued from previous page)

Name Affiliation Jian-Er Huang (Note 3) Legal representative to Resident Supervisor of the Bank Pan Asia Chemical Corporation, I Joung Director of the Bank Investment Co., Ltd., Chou Chang Co., Ltd. and He Yang Co., Ltd. (Note 3) Ming-Shan Jhuang, Sin-Cing Jhang, Legal representative to Director of the Bank Jhe-Syong Cai, Guei-Fong Wang, Jing-Sin Jhang, Jhe-Nan Wang, Ming-Syong Huang, Jin-Fong Su, Guei-Sian Wang (Note 4), Jyun-Sheng Li, Yi-De Chen and Jia-Hong Lin (Note 3) Chiung Tung Investment Corporation Ex-Director of the Bank (Note 3) Jing-Sin Jhang (Note 3) Legal representative to ex-Director of the Bank Zin Rui Investment Co., Ltd. and Tai Jiunn Supervisor of the Bank Enterprise Co., Ltd. (Note 3) Shu-Li Huang, Jin-Huang Cai, Jien-Hua Li Legal representative to Supervisor of the Bank Fu, and Jhao-Nan Sie (Note 3) Chou Chang Corporation (Note 3) Ex-Supervisor of the Bank Jian-Er Huang, Shu-Li Huang, Jien-Hua Li Legal representative to ex-Supervisor of the Fu, and Jin-Huang Cai (Note 3) Bank Si-Rong Huang, Jin-Yi Li, and Jhen-Le Independent Director of the Bank Liou (Note 3) Jyun-Sheng Li (Note 2) President of the Bank Yu-Ying Jhong (Note 2) Ex-President of the Bank 100 persons including Jhih-Cyuan Fang Managers (above) of Head Office and managers of the various entities of the Bank 41 persons including the Chairman’s Spouses and kin at the second tier under the Civil spouse Code of directors, supervisors, Chairman of the Board and President of the Bank Taichung Commercial Bank Cultural and Corporations receiving donation amounted to Educational Foundation, Taichung more than one-thirds of the Bank’s Paid-in Commercial Bank Workers’ Welfare capital Commission Taichung Bank Insurance Agency Co., Ltd. Subsidiary of the Bank Reliance Securities Investment Trust Co., Investee valued under equity method Ltd. China Man-Made Fiber Co., Ltd. Principle shareholder holding more than 10% of the Bank’s shares Chung Chien Investment Co., Ltd. Holding company of China Man-Made Fiber Co., Ltd. Pan Asia Investment Co., Ltd. Director of China Man-Made Fiber Co., Ltd. De-sing Securities Investment Trust Co., Affiliate Ltd. Moon Stone Investment Ltd. Affiliate Greencol Taiwan Corporation Affiliate Chou Chin Corporation Affiliate Nan Chung Petrochemical Corp. Affiliate Je Mi Fang Corporation Affiliate (Continued on next page)

- 189 - (Continued from previous page) (2) Loans 2011 Unit: NTD thousand Name Affiliation Performance Reliance Consolidated Securities Co., Ltd. Affiliate business Type Number of Maximum Balance, Normal loans Interest Interest Collateral Difference in accounts or balance – ending revenue revenue Contents trading Sheng Jen Knitted Textiles Co., Ltd. Affiliate business name of current period conditions and stakeholder terms with Da Fa Investment Co., Ltd. Affiliate business non-stakeholders Consumer loans to 46 $ 25,734 $ 15,757 $ 15,757 $ - $ 310 Credit loans None Tai Yi Investment Co., Ltd. Affiliate business employees Formosa Imperial Wineseller Corp. Affiliate business Residential mortgage 22 44,715 40,365 40,365 - 457 Real estate 〃 loans Other loans Ming-Yu Ciou 3,000 2,905 2,905 - 38 〃〃 Jhen-Siang 2,745 2,612 2,612 - 40 〃〃 Jhuang Note 1: The original Chairman of the Bank, Siou-Nan Huang resigned on March 31, Wen-Tong You 3,444 2,500 2,500 - 21 〃〃 Huei-Jin Lyu 1,490 1,490 1,490 - 5 〃〃 2011 and Jin-Fong Su took over the position of Chairman and concurrently Wei-Huang You 1,500 1,466 1,466 - 4 〃〃 Ze-Siou Lin 1,247 1,145 1,145 - 18 〃〃 resigned as Resident Supervisor of the Bank on April 1, 2011. Jheng-Sian Ni 1,245 1,039 1,039 - 24 〃〃 Wen-Jhu Li 1,000 1,000 1,000 - - 〃〃 Note 2: The ex-President of the Bank, Yu-Ying Jhong, resigned on September 30, 2010. Zai-Hong Yang 1,000 978 978 - 3 〃〃 Dong-Po Yang 1,107 898 898 - 21 〃〃 Jyun-Sheng Li resigned from his commission as an independent director on Wen-Cyuan 700 700 700 - - 〃〃 October 12, 2010, and assumed the President of the Bank on October 13, 2010. Jhuang Zong-Sian Li 2,046 - - - 42 〃〃 De-Wei Jia 1,546 - - - 31 〃〃 Note 3: The Bank completed re-election of directors and supervisors on June 22, 2011. Jing-Sin Jhang 3,900 - - - 32 〃〃 Certificate Jian-Ting Lin 400 400 400 - 12 〃 The attachment is provided for reference. of deposit Note 4: The original Vice Chairman of the Bank, Guei-Sian Wang resigned in November 2011. Director Guei-Fong Wang was elected as Vice Chairman of 2010 Unit: NTD thousand the Board at the Managing Directors’ meeting on November 17, 2011.

Performance Summarization of important transactions between the Bank and stakeholders: Type Number of Maximum Balance, Normal loans Interest Interest Collateral Difference in accounts or balance – ending revenue revenue Contents trading (1) Accounts receivable name of current period conditions and stakeholder terms with December 31, 2011 December 31, 2010 non-stakeholders Consumer loans to 43 $ 22,375 $ 18,963 $ 18,963 $ - $ 29 Credit loans None Percentage Percentage employees Residential mortgage 23 41,839 28,115 28,115 - 382 Real estate 〃 of of loans Other loans Jing-Sin Jhang 2,900 2,900 2,900 - 50 〃〃 receivables receivables Jhen-Siang 2,880 2,745 2,745 - 36 〃〃 Jhuang Name Amount (%) Amount (%) Zong-Sian Li 2,195 2,046 2,046 - 44 〃〃 De-Wei Jia 1,650 1,546 1,546 - 32 〃〃 Taichung Bank Ze-Siou Lin 2,566 1,247 1,247 - 18 〃〃 Jheng-Sian Ni 1,449 1,245 1,245 - 24 〃〃 Insurance Agency Dong-Po Yang 1,314 1,107 1,107 - 21 〃〃 Co., Ltd. $ 20,178 1 $ 19,644 1 Wun-Tong You 1,000 944 944 - 19 〃〃 Ya-Cin Peng 3,000 - - - 35 〃〃 An-Fong Lin 2,391 - - - 30 〃〃 Ruei-Fang Chen 1,014 - - - - 〃〃 Jian-Ting Lin 400 400 400 - - Certificate 〃 of deposit

According to Articles 32 and 33 of the Banking Act, no non-secured credit loans shall be granted to any party interested with the Bank’s staff, unless they are consumer loans and loans extended to the Government Apparatus; secured credit loans shall be granted under sufficient collateral and the terms of such credit extension shall not be more favorable than those offered to other customers in the same category.

- 190 - - 191 - (2) Loans 2011 Unit: NTD thousand

Performance Type Number of Maximum Balance, Normal loans Interest Interest Collateral Difference in accounts or balance – ending revenue revenue Contents trading name of current period conditions and stakeholder terms with non-stakeholders Consumer loans to 46 $ 25,734 $ 15,757 $ 15,757 $ - $ 310 Credit loans None employees Residential mortgage 22 44,715 40,365 40,365 - 457 Real estate 〃 loans Other loans Ming-Yu Ciou 3,000 2,905 2,905 - 38 〃〃 Jhen-Siang 2,745 2,612 2,612 - 40 〃〃 Jhuang Wen-Tong You 3,444 2,500 2,500 - 21 〃〃 Huei-Jin Lyu 1,490 1,490 1,490 - 5 〃〃 Wei-Huang You 1,500 1,466 1,466 - 4 〃〃 Ze-Siou Lin 1,247 1,145 1,145 - 18 〃〃 Jheng-Sian Ni 1,245 1,039 1,039 - 24 〃〃 Wen-Jhu Li 1,000 1,000 1,000 - - 〃〃 Zai-Hong Yang 1,000 978 978 - 3 〃〃 Dong-Po Yang 1,107 898 898 - 21 〃〃 Wen-Cyuan 700 700 700 - - 〃〃 Jhuang Zong-Sian Li 2,046 - - - 42 〃〃 De-Wei Jia 1,546 - - - 31 〃〃 Jing-Sin Jhang 3,900 - - - 32 〃〃 Certificate Jian-Ting Lin 400 400 400 - 12 〃 of deposit

2010 Unit: NTD thousand

Performance Type Number of Maximum Balance, Normal loans Interest Interest Collateral Difference in accounts or balance – ending revenue revenue Contents trading name of current period conditions and stakeholder terms with non-stakeholders Consumer loans to 43 $ 22,375 $ 18,963 $ 18,963 $ - $ 29 Credit loans None employees Residential mortgage 23 41,839 28,115 28,115 - 382 Real estate 〃 loans Other loans Jing-Sin Jhang 2,900 2,900 2,900 - 50 〃〃 Jhen-Siang 2,880 2,745 2,745 - 36 〃〃 Jhuang Zong-Sian Li 2,195 2,046 2,046 - 44 〃〃 De-Wei Jia 1,650 1,546 1,546 - 32 〃〃 Ze-Siou Lin 2,566 1,247 1,247 - 18 〃〃 Jheng-Sian Ni 1,449 1,245 1,245 - 24 〃〃 Dong-Po Yang 1,314 1,107 1,107 - 21 〃〃 Wun-Tong You 1,000 944 944 - 19 〃〃 Ya-Cin Peng 3,000 - - - 35 〃〃 An-Fong Lin 2,391 - - - 30 〃〃 Ruei-Fang Chen 1,014 - - - - 〃〃 Jian-Ting Lin 400 400 400 - - Certificate 〃 of deposit

- 191 - (3) Deposits (5) Service fee revenue 2011 2011 2010 Interest rate Interest Amount % Amount % Balance, ending collars % expenses Taichung Bank Insurance Taichung Bank Insurance Agency Co., Ltd. $ 231,355 24 $ 19,644 2 Agency Co., Ltd. $ 140,981 0.06~1.09 $ 628 Taichung Commercial Said amount refers to the revenue from promotion and sale of insurance Bank Workers’ Welfare products and channels. The trading price between the Bank and stakeholders is Commission 130,904 0.06~2.38 3,044 similar to that between the Bank and non-stakeholders. Reliance Securities

Investment Trust Co., (6) Information about salary and remuneration of directors, supervisors and primary Ltd. 133,057 0.00~1.35 1,073 management Reliance Consolidated 2011 2010 Securities Co., Ltd. 15,269 0.06~1.09 144 Salaries $ 41,237 $ 33,812 Chou Chin Corporation 312 0.06~0.13 - Reward 2,408 3,472 Pan Asia Chemical Special subsidies, et al. (Note 1) 2,042 1,473 Corporation 224 0.06~0.13 2 Remuneration and bonus to Others 158,928 0.00~2.38 1,504 directors (Note 2) 212 3 $ 579,675 $ 6,395 Note 1: The special subsidies, et al. include special subsidies and various allowances. 2010 Note 2: The information regarding salaries and remuneration for 2010 includes the Interest rate Interest remuneration to directors/supervisors and bonuses to the primary Balance, ending collars % expenses management according to the motion for earnings allocation resolved by the Taichung Bank Insurance shareholders’ meetings in 2011. Further, the remuneration to Agency Co., Ltd. $ 244,638 0.05～0.60 $ 155 directors/supervisors and employee bonuses to be appropriated for 2011 have Taichung Commercial not yet been resolved by the shareholders’ meetings. The relevant Bank Workers’ Welfare information may be viewed at MOPS of TSEC. Commission 133,322 1.915～2.155 2,790 30. Pledged assets Reliance Securities The pledged assets are stated as follows: Investment Trust Co., Ltd. 120,463 0.00～1.13 487 December 31, 2011 December 31, 2010 Reliance Consolidated Available-for-sale Financial Securities Co., Ltd. 15,081 0.05～0.80 99 Assets-overseas bond $ 1,039,060 $ 943,055 Hel Chou Chin Corporation 420 0.05～0.06 1 d-to-maturity financial Pan Asia Chemical assets-government bond 915,100 874,800 Corporation 32 0.05～0.06 - Held-to-maturity financial assets-overseas bond 4,213,930 2,712,463 Others 129,267 0.00～2.155 1,190 $ 6,168,090 $ 4,530,318 $ 643,223 $ 4,722

With the exception of the interest rates for bank clerks’ deposits on Dec. 31, 2011 and 2010, 2.38% and 2.16%, the other interest rates are not materially different from those offered to general customers. (4) Guarantee deposits received December 31, 2011 December 31, 2010 Amount % Amount % Taichung Bank Insurance Agency Co., Ltd. $ 58 - $ 58 -

- 192 - - 193 - (5) Service fee revenue 2011 2010 Amount % Amount % Taichung Bank Insurance Agency Co., Ltd. $ 231,355 24 $ 19,644 2

Said amount refers to the revenue from promotion and sale of insurance products and channels. The trading price between the Bank and stakeholders is similar to that between the Bank and non-stakeholders. (6) Information about salary and remuneration of directors, supervisors and primary management 2011 2010 Salaries $ 41,237 $ 33,812 Reward 2,408 3,472 Special subsidies, et al. (Note 1) 2,042 1,473 Remuneration and bonus to directors (Note 2) 212 3

Note 1: The special subsidies, et al. include special subsidies and various allowances. Note 2: The information regarding salaries and remuneration for 2010 includes the remuneration to directors/supervisors and bonuses to the primary management according to the motion for earnings allocation resolved by the shareholders’ meetings in 2011. Further, the remuneration to directors/supervisors and employee bonuses to be appropriated for 2011 have not yet been resolved by the shareholders’ meetings. The relevant information may be viewed at MOPS of TSEC. 30. Pledged assets The pledged assets are stated as follows: December 31, 2011 December 31, 2010 Available-for-sale Financial Assets-overseas bond $ 1,039,060 $ 943,055 Held-to-maturity financial assets-government bond 915,100 874,800 Held-to-maturity financial assets-overseas bond 4,213,930 2,712,463 $ 6,168,090 $ 4,530,318

- 193 - The Overseas bonds were provided to secure funds borrowed from banks. The Group was suspected of fraud on April 27, 2009, and petitioned U.S. courts to freeze Government bonds were deposited as security bonds for provisional seizure at court and PEM Group’s assets and conducted a site investigation. The U.S. court has sent a for trust business guarantee, which are stated as refundable deposits as follows: dedicated person to assume the execution of PEM Group’s assets temporarily. December 31, 2011 December 31, 2010 The Bank defined the “PEM Group structured note clients’ interests and rights Security bond for provisional protection policy” upon the resolution made by the temporary directors’ meeting on seizure at court $ 735,100 $ 724,800 May 6, 2009. It resolved to repurchase PEM Group structured notes from investors Securities Brokerage business in whole at the initial selling price of USD70,617 thousand less the accumulated security bond 130,000 100,000 dividends of USD1,090 thousand, namely USD69,527 thousand, in the manner that Reserve for trust funds investors undertake the one-year term deposit in USD of the Bank, of which the compensation 50,000 50,000 interest is accrued at the fixed rate, 1.50%. Upon evaluation, the Bank has provided $915,100 $ 874,800 the loss from indemnity, NTD1,155,969 thousand (approx. USD36,090 thousand) and NTD439,135 thousand (approx. USD15,075 thousand) in 2009 and 2010, which were stated as other deposits. Until December 31, 2011, the Bank has paid 31. Significant undertaking or contingent liabilities investors USD69,527 thousand (approx. NTD2,226,621 thousand). Meanwhile, in

In addition to the undertaking for financial products specified in Notes 6 and 18, order to maintain interests and rights, the Bank has appointed an attorney-at-law to the Bank has had the following undertakings or contingent liabilities until December 31, seek the relevant remedies. Further, the Bank received the written decision 2011 and 2010: rendered by FSC on September 17, 2010 holding that the Bank’s investment in the (1) Undertaking: structured notes issued by PEM Group was defective. Therefore, the Bank was December 31, 2011 December 31, 2010 ordered to correct the defect and suspend the trust business for six months. (4) The balance sheet and trust property catalogue of the trust account is disclosed Undisbursed credit committee pursuant to Article 17 of the “Enforcement Rules of Trust Enterprise Act” as follows: (exclusive of credit cards) $ 88,760,384 $ 76,389,270 Balance Sheet of Trust Accounts Credit card committee 8,005,108 6,017,033 December 31, 2011 Guarantee payments 4,378,115 3,265,875 Trust assets Amount Trust liabilities Amount Trust liabilities 38,646,037 35,333,703 Bank deposits $ 1,105,335 Trust capital Fund investment 36,186,339 Money trust $ 37,955,158 Balance of application for L/C 2,859,121 3,540,598 Structured product 663,484 Real estate trust 690,879 investment Real estate Investment income 656,242 (2) The Bank engaged in investing in the structured notes issued and secured by Lehman of current period Brothers Holdings Inc. through the special monetary trustee accounts upon investors’ Land 677,871 Deferred carry-over ( 656,242 ) request. However, Lehman Brothers Holdings Inc. petitioned for bankruptcy with Buildings and 13,008 U.S. courts on September 15, 2008. The quotation and redemption of the structured structures notes issued and secured by it were suspended. Afterwards, it petitioned for an Total trust assets $ 38,646,037 Total trust liabilities $ 38,646,037 extension and submitted a reorganization plan with a U.S. courts for approval in December 2008, and further petitioned for an extension and submitted two motions Property Catalogue of Trust Accounts in the duration of debt clearance. The U.S. court approved its petition later. December 31, 2011 The Bank defined the “Regulations for Settlement of Dispute over Lehman Brothers Structured Notes” and policy for settlement according to the resolution Investment Amount made by the temporary directors’ meeting on May 6, 2009, and indemnified investors Bank deposits $ 1,105,335 Fund investment 36,186,339 at the ratio assessed by the “Banking Dispute Review Board” of the Bankers Structured product 663,484 Association of the Republic of China. Upon evaluation, the Bank has provided the investment loss from indemnity, NTD161,668 thousand NTD44,199 thousand and NTD5,050 Real estate thousand in 2009, 2010 and 2011, respectively, which were stated as other deposits. Land 677,871 As of December 31, 2011, the Bank has paid investors NTD192,626 thousand, and Buildings and structures 13,008 the outstanding indemnity of NTD18,291 thousand was stated as payables. $ 38,646,037 (3) The Bank engaged in investing in the structured notes issued by Private Equity Management Group (PEM Group), USD70,617 thousand, through the special monetary trustee accounts upon investors’ request. The SEC alleged that PEM

- 194 - - 195 - Group was suspected of fraud on April 27, 2009, and petitioned U.S. courts to freeze PEM Group’s assets and conducted a site investigation. The U.S. court has sent a dedicated person to assume the execution of PEM Group’s assets temporarily. The Bank defined the “PEM Group structured note clients’ interests and rights protection policy” upon the resolution made by the temporary directors’ meeting on May 6, 2009. It resolved to repurchase PEM Group structured notes from investors in whole at the initial selling price of USD70,617 thousand less the accumulated dividends of USD1,090 thousand, namely USD69,527 thousand, in the manner that investors undertake the one-year term deposit in USD of the Bank, of which the interest is accrued at the fixed rate, 1.50%. Upon evaluation, the Bank has provided the loss from indemnity, NTD1,155,969 thousand (approx. USD36,090 thousand) and NTD439,135 thousand (approx. USD15,075 thousand) in 2009 and 2010, which were stated as other deposits. Until December 31, 2011, the Bank has paid investors USD69,527 thousand (approx. NTD2,226,621 thousand). Meanwhile, in order to maintain interests and rights, the Bank has appointed an attorney-at-law to seek the relevant remedies. Further, the Bank received the written decision rendered by FSC on September 17, 2010 holding that the Bank’s investment in the structured notes issued by PEM Group was defective. Therefore, the Bank was ordered to correct the defect and suspend the trust business for six months. (4) The balance sheet and trust property catalogue of the trust account is disclosed pursuant to Article 17 of the “Enforcement Rules of Trust Enterprise Act” as follows: Balance Sheet of Trust Accounts December 31, 2011

Trust assets Amount Trust liabilities Amount Bank deposits $ 1,105,335 Trust capital Fund investment 36,186,339 Money trust $ 37,955,158 Structured product 663,484 Real estate trust 690,879 investment Real estate Investment income 656,242 of current period Land 677,871 Deferred carry-over ( 656,242 ) Buildings and 13,008 structures Total trust assets $ 38,646,037 Total trust liabilities $ 38,646,037

Property Catalogue of Trust Accounts December 31, 2011

Investment Amount Bank deposits $ 1,105,335 Fund investment 36,186,339 Structured product 663,484 investment Real estate Land 677,871 Buildings and structures 13,008 $ 38,646,037

- 195 -

Income Statement of Trust Accounts Income Statement of Trust Accounts 2011 2010

Amount Amount Trust income Trust income Interest revenue $ 907,730 Interest revenue $ 998,262 Trust expenses Trust expenses Administration expenses ( 251,163 ) Administration expenses ( 432,737 ) Taxation ( 325 ) Tax expenses ( 459 ) Income before income tax 656,242 ( 433,196 ) Income tax expenses - Income before income tax 565,066 Income After Income tax $ 656,242 Income tax expenses - Income After Income tax $ 565,066 Balance Sheet of Trust Accounts December 31, 2010 32. Disclosure of information about financial instruments (1) Information about fair value Trust assets Amount Trust liabilities Amount December 31, 2011 December 31, 2010 Bank deposits $ 425,908 Trust capital Book Value Fair value Book Value Fair value

Fund investment 33,902,549 Money trust $ 34,968,356 Financial assets Structured product 639,899 Real estate trust 365,347 Financial assets at fair investment value equivalent to Real estate Investment income 565,066 Book Value $ 369,400,890 $ 369,400,890 $ 324,125,012 $ 324,125,012 of current period Held-to-maturity Land 352,699 Deferred carry-over ( 565,066 ) financial assets 9,439,040 9,420,022 10,382,868 10,359,429 Buildings and 12,648 structures Financial liabilities Total trust assets $ 35,333,703 Total trust liabilities $ 35,333,703 Financial liabilities at fair value equivalent to Book Value 347,908,005 347,908,005 312,218,503 312,218,503 Financial bonds payable 10,512,559 10,575,231 8,300,000 8,255,231 Property Catalogue of Trust Accounts December 31, 2010 (2) The following methods and hypotheses for the valuation of fair value of financial

instruments are applied: Investment Amount Bank deposits $ 425,908 1. The Book Value of short-term financial instruments stated in the balance sheet Fund investment 33,902,549 shall be the fair value of such instruments. The reason is that the maturity Structured product 639,899 date of these instruments is close and it would be reasonable to use the Book investment Value in the valuation of fair value. This method is applied to the valuation of Real estate cash and cash equivalents, due from Central Bank of China and other banks, Land 352,699 receivable accounts (exclusive of Receivable Refundable Tax), Deposits of Buildings and 12,648 Central Bank of China and other banks, RP (Debt), payables (excluding income structures tax payable) and remittances. $ 35,333,703 2. The open market price of financial instruments at fair value through profit or loss, available-for sale financial assets, held-to-maturity financial assets and financial bonds payable, if any, shall be the fair value of such assets. Where there is no such active market price available, the fair value shall be estimated under the evaluation method. The estimation and hypotheses used in the evaluation method adopted by the Bank are identical to information about the estimation and hypotheses applied by the market participants in setting the price of the financial instruments, and such information is available to the Bank. Where there is no open market price of financial derivatives available for reference, the fair value of the various contracts shall be estimated at the cash

- 196 - - 197 -

Income Statement of Trust Accounts 2010

Amount Trust income Interest revenue $ 998,262 Trust expenses Administration expenses ( 432,737 ) Tax expenses ( 459 ) ( 433,196 ) Income before income tax 565,066 Income tax expenses - Income After Income tax $ 565,066

32. Disclosure of information about financial instruments (1) Information about fair value December 31, 2011 December 31, 2010 Book Value Fair value Book Value Fair value Financial assets Financial assets at fair value equivalent to Book Value $ 369,400,890 $ 369,400,890 $ 324,125,012 $ 324,125,012 Held-to-maturity financial assets 9,439,040 9,420,022 10,382,868 10,359,429

Financial liabilities Financial liabilities at fair value equivalent to Book Value 347,908,005 347,908,005 312,218,503 312,218,503 Financial bonds payable 10,512,559 10,575,231 8,300,000 8,255,231

(2) The following methods and hypotheses for the valuation of fair value of financial instruments are applied: 1. The Book Value of short-term financial instruments stated in the balance sheet shall be the fair value of such instruments. The reason is that the maturity date of these instruments is close and it would be reasonable to use the Book Value in the valuation of fair value. This method is applied to the valuation of cash and cash equivalents, due from Central Bank of China and other banks, receivable accounts (exclusive of Receivable Refundable Tax), Deposits of Central Bank of China and other banks, RP (Debt), payables (excluding income tax payable) and remittances. 2. The open market price of financial instruments at fair value through profit or loss, available-for sale financial assets, held-to-maturity financial assets and financial bonds payable, if any, shall be the fair value of such assets. Where there is no such active market price available, the fair value shall be estimated under the evaluation method. The estimation and hypotheses used in the evaluation method adopted by the Bank are identical to information about the estimation and hypotheses applied by the market participants in setting the price of the financial instruments, and such information is available to the Bank. Where there is no open market price of financial derivatives available for reference, the fair value of the various contracts shall be estimated at the cash

- 197 - flow discounting method according to the foreign exchange rate displayed in deduction from adjustment items of shareholders' equity recognized as impairment the Reuters’ quotation system. loss amounted to NTD63,833 thousand and NTD0 thousand, respectively. 3. The equity investment under equity method refers to the equity of unlisted (6) Information about financial risk (non-OTC) companies and no open market price thereof is available. Besides, 1. Market Risk the verifiable fair value thereof may be perceived with the cost exceeding the The fair value of the bonds, notes and loans at fixed interest rate, and reasonable cost. Therefore, the fair value of such investment shall be the similar financial instruments held by the Bank will vary depending on the book value thereof. changes in the market interest rate on the balance sheet date. The analysis 4. Discounts and loans, funds borrowed from CBC and banks, and deposits, are regarding sensitivity of fair value of such financial instruments per increase of all financial instruments with interest accruing thereon. Therefore, their Book 0.01% in the market interest rate is specified as follows: Value is similar to the current fair value. The Book Value of Delinquent loans refers to the projected collected amount less allowance for bad debt. Therefore, the Book Value is also the fair value. December 31, 2011 More than one More than More than six More than one 5. The financial assets at cost which are non-listed (OTC) stocks without month and less three months months and year and less Less than one than three and less than less than one than seven More than significant influence will have no public market price available, and the fair Currency month months six months year years seven years Total value thereof can be sought only at the price exceeding the reasonable cost. NTD $ 13,343 $ 2,276 ( $ 15,245 ) ( $ 3,056 ) $ 3,255 $ 494 $ 1,067 Therefore, the fair value thereof shall be the Book Value. USD 89 342 ( 312 ) ( 142 ) 597 - 574 (3) The fair value of financial assets and financial liabilities is determined by the open Others ( 77 ) ( 6 ) ( 54 ) ( 19 ) 330 - 174 market quotation and evaluated under the evaluation method: Determined by open market Evaluated under evaluation quotation method The Bank adopted the Standard Method to evaluate the market risk of December 31, December 31, December 31, December 31, financial products to estimate the potential risk for loss on-balance sheet and 2011 2010 2011 2010 off-balance sheet due to uncertain changes in the market price value of Financial assets financial instruments within some periods. The Bank’s market risk evaluation Financial assets at fair value covered interest rate risk, equity securities risk and foreign exchange risk. The through profit or loss $ 1,096,769 $ 1,646,562 $ - $ - following indicates the risk value subject to the various types of market risk of Available-for-Sale Financial Assets 4,211,580 1,099,035 - - the Bank’s financial instruments, including the yearly maximum and minimum Held-to-maturity financial means adopted from the means of the total risk values of the year preceding to assets 1,784,634 2,435,423 7,635,388 7,924,006 December 31, 2011 and 2010 respectively. Equity investment under Market Risk December 31, 2011 December 31, 2010 equity method - - 216,970 337,561 Financial assets at cost - - 143,486 143,579 Type Yearly mean Maximum Minimum Yearly mean Maximum Minimum Interest rate $ 23,129 $ 36,683 $ 9,700 $ 33,164 $ 53,377 $ 21,753 Financial liabilities risk Financial liabilities at fair Equity risk 101,493 165,112 33,491 117,643 149,343 82,648 value through profit or loss 51,804 110,069 - - Foreign 7,288 17,544 2,314 7,230 12,661 2,220 Exchange Financial bonds payable 10,575,231 8,255,231 - - risk

(4) The financial assets recognized in December 31, 2011 and 2010 based on the 2. Credit Risk changes in fair value estimated under interest rate changes were NTD

NTD117,500,842 thousand and NTD105,562,534 thousand, and the financial The financial instruments held or issued by the Bank might suffer loss due liabilities NTD108,194,680 thousand and NTD113,989,477 thousand. The financial to the trading counterpart’s or the other party’s failure to perform contractual assets recognized based on changes in cash flow estimated under interest rate obligations. The Bank will evaluate credit carefully to grant loans, loan changes were NTD243,034,446 thousand and NTD215,291,550 thousand, and the commitments and guarantees. The loans secured by collateral accounted for financial liabilities NTD235,565,260 thousand and NTD197,619,357 thousand. about 76% of the total credit loans on December 31, 2011. The proportion of financing guarantee and collateral held by commercial L/C was approximately (5) The Bank’s total interest revenue of financial assets or financial liabilities other than 14%, because the collateral required by loans, loaning commitments or those at fair value, and those at fair value through profit or loss, in 2011 and 2010 guarantees usually referred to cash, inventory, marketable securities or other were NTD7,415,600 thousand and NTD6,108,196 thousand. The total interest property. In the event of the trading counterpart’s or the other party’s default, expenses thereof were NTD2,472,427 thousand and NTD1,726,758 thousand. the Bank was entitled to perform compulsory execution against the collateral or Unrealized gains on available-for-sale financial assets stated as adjustment items of other guarantees to effectively reduce the credit risk, provided that the fair shareholders’ equity were NTD20,052 thousand and NTD16,805 thousand and

- 198 - - 199 - deduction from adjustment items of shareholders' equity recognized as impairment loss amounted to NTD63,833 thousand and NTD0 thousand, respectively. (6) Information about financial risk 1. Market Risk The fair value of the bonds, notes and loans at fixed interest rate, and similar financial instruments held by the Bank will vary depending on the changes in the market interest rate on the balance sheet date. The analysis regarding sensitivity of fair value of such financial instruments per increase of 0.01% in the market interest rate is specified as follows:

December 31, 2011

More than one More than More than six More than one month and less three months months and year and less Less than one than three and less than less than one than seven More than Currency month months six months year years seven years Total NTD $ 13,343 $ 2,276 ( $ 15,245 ) ( $ 3,056 ) $ 3,255 $ 494 $ 1,067 USD 89 342 ( 312 ) ( 142 ) 597 - 574 Others ( 77 ) ( 6 ) ( 54 ) ( 19 ) 330 - 174

The Bank adopted the Standard Method to evaluate the market risk of financial products to estimate the potential risk for loss on-balance sheet and off-balance sheet due to uncertain changes in the market price value of financial instruments within some periods. The Bank’s market risk evaluation covered interest rate risk, equity securities risk and foreign exchange risk. The following indicates the risk value subject to the various types of market risk of the Bank’s financial instruments, including the yearly maximum and minimum means adopted from the means of the total risk values of the year preceding to December 31, 2011 and 2010 respectively. Market Risk December 31, 2011 December 31, 2010 Type Yearly mean Maximum Minimum Yearly mean Maximum Minimum Interest rate $ 23,129 $ 36,683 $ 9,700 $ 33,164 $ 53,377 $ 21,753 risk Equity risk 101,493 165,112 33,491 117,643 149,343 82,648 Foreign 7,288 17,544 2,314 7,230 12,661 2,220 Exchange risk

2. Credit Risk The financial instruments held or issued by the Bank might suffer loss due to the trading counterpart’s or the other party’s failure to perform contractual obligations. The Bank will evaluate credit carefully to grant loans, loan commitments and guarantees. The loans secured by collateral accounted for about 76% of the total credit loans on December 31, 2011. The proportion of financing guarantee and collateral held by commercial L/C was approximately 14%, because the collateral required by loans, loaning commitments or guarantees usually referred to cash, inventory, marketable securities or other property. In the event of the trading counterpart’s or the other party’s default, the Bank was entitled to perform compulsory execution against the collateral or other guarantees to effectively reduce the credit risk, provided that the fair

- 199 - value of collateral would not be taken into consideration when the maximum credit exposure was disclosed. The Bank evaluated the contract bearing Region December 31, 2011 December 31, 2010 positive fair value on the balance sheet date as the counterpart. The maximum credit exposures on December 31, 2011 and 2010 were NTD244,298,087 Domestic $ 277,567,134 $ 246,673,712 thousand and NTD214,191,716 thousand. Further, the maximum exposures of Territory of America 5,302,656 2,756,739 undertakings and contracts based on credit risk on the off-balance sheet are specified as following: Territory of Asia 2,476,460 1,763,275 December 31, 2011 December 31, 2010 Other territories 330,161 45,059 Credit commitment $ 88,760,384 $ 76,389,270 $ 285,674,411 $ 251,238,785 (exclusive of credit cards) 3. Liquidity Risk Credit card committee 8,005,108 6,017,033 The Bank’s Liquidity Ratios on December 31, 2011 and 2010 were 20% and 19%. The Bank’s capital and working funds are sufficient to perform all contractual obligations. Therefore, there is no liquidity risk arising from the Where financial instrument transactions are apparently concentrated on failure to raise funds to perform contractual obligations. It is very unlikely one person, or most of the multiple trading counterparts of financial that the financial derivatives held by the Bank could not be sold at a reasonable instruments are engaged in similar business activities and possess similar price on the market. Therefore, there is low liquidity risk for realization. economic characteristics and thereby the effects of economic or other conditions to their ability to perform the contracts are similar, the concentration The Bank’s basic management policy is to coordinate the maturity date of of credit risk arises accordingly. The characteristics of credit risk assets and liabilities and interest rates and to control gaps. Due to the concentration include the nature of business activities conducted by debtors. uncertainty in trading terms and different types, usually it is impossible to The Bank did not concentrate any transactions on one single customer or coordinate the maturity date of assets and liabilities and interest rates perfectly. trading counterpart, other than similar counterparts, industrial type, and regions. The gaps might generate potential gain or loss. The Bank applied the The amount of contract based on concentrated credit risk: appropriate approach to conduct maturity analysis to evaluate the liquidity by nature of assets and liabilities. The maturity analysis is specified as follows: Counterpart December 31, 2011 December 31, 2010 Unit: NTD thousand December 31, 2011 More than one More than three More than six More than one Private enterprise $ 149,856,760 $ 122,194,725 Less than one month and less months and less months and less year and less than More than seven month than three months than six months than one year seven years years Total Assets Natural person 134,411,891 126,497,364 Cash and cash equivalents $ 8,349,890 $ - $ - $ - $ - $ - $ 8,349,890 Due From Central Others 1,407,760 2,546,696 Bank Of China And Other Banks 44,598,749 18,585,232 4,790,052 2,823,518 3,470,173 - 74,267,724 Financial assets at fair $ 285,676,411 $ 251,238,785 value through profit or loss 1,038,016 48,490 10,263 - - - 1,096,769 Accounts receivable 1,687,226 442,828 475,203 63,941 330,683 - 2,999,881 Discounts and loans 12,499,135 21,833,148 30,530,731 48,965,788 83,042,260 83,822,111 280,693,173 Available-for-Sale Financial Assets 37,928 - - 243,169 3,930,483 - 4,211,580 Industrial type December 31, 2011 December 31, 2010 Held-to-maturity financial assets - 451,078 - 49,973 10,662,531 - 11,163,582 Long-term equity Private party $ 134,411,891 $ 126,497,364 investment under equity method - - - - - 216,970 216,970 Other financial assets 680 679 - - - 850,396 851,755 Manufacturer 59,069,525 51,520,446 Total assets 68,211,624 41,361,455 35,806,249 52,146,389 101,436,130 84,889,477 383,851,324

42,290,413 34,553,733 Liabilities Commerce Deposits of Central Bank of China and other banks 1,588,587 251,778 29,797 1,592,357 - - 3,462,519 Real estate 22,486,309 14,784,355 Funds borrowed from CBC and other banks 454,350 1,665,950 454,350 302,900 - - 2,877,550 Warehousing and 7,079,389 5,493,550 Financial liabilities at fair value through information profit or loss 3,043 6,029 642 - 42,090 - 51,804 Payables 6,709,333 259,915 340,494 151,222 222,537 - 7,683,501 Deposits and Commercial and 6,266,412 4,921,187 remittances 31,000,300 34,690,648 55,059,784 96,822,028 116,259,871 - 333,832,631 Financial bonds industrial service payable - - - - 10,512,559 - 10,512,559 Total liabilities 39,755,613 36,874,320 55,885,067 98,868,507 127,037,057 - 358,420,564 business Net liquidity gap $ 28,456,011 $ 4,487,135 ( $ 20,078,818 ) ( $ 46,722,118 ) ( $ 25,600,927 ) $ 84,889,477 $ 25,430,760 Others 14,072,472 13,468,150 (Continued on next page) $ 285,676,411 $ 251,238,785

- 200 - - 201 -

Region December 31, 2011 December 31, 2010 Domestic $ 277,567,134 $ 246,673,712 Territory of America 5,302,656 2,756,739 Territory of Asia 2,476,460 1,763,275 Other territories 330,161 45,059 $ 285,674,411 $ 251,238,785

3. Liquidity Risk The Bank’s Liquidity Ratios on December 31, 2011 and 2010 were 20% and 19%. The Bank’s capital and working funds are sufficient to perform all contractual obligations. Therefore, there is no liquidity risk arising from the failure to raise funds to perform contractual obligations. It is very unlikely that the financial derivatives held by the Bank could not be sold at a reasonable price on the market. Therefore, there is low liquidity risk for realization. The Bank’s basic management policy is to coordinate the maturity date of assets and liabilities and interest rates and to control gaps. Due to the uncertainty in trading terms and different types, usually it is impossible to coordinate the maturity date of assets and liabilities and interest rates perfectly. The gaps might generate potential gain or loss. The Bank applied the appropriate approach to conduct maturity analysis to evaluate the liquidity by nature of assets and liabilities. The maturity analysis is specified as follows: Unit: NTD thousand December 31, 2011 More than one More than three More than six More than one Less than one month and less months and less months and less year and less than More than seven month than three months than six months than one year seven years years Total Assets Cash and cash equivalents $ 8,349,890 $ - $ - $ - $ - $ - $ 8,349,890 Due From Central Bank Of China And Other Banks 44,598,749 18,585,232 4,790,052 2,823,518 3,470,173 - 74,267,724 Financial assets at fair value through profit or loss 1,038,016 48,490 10,263 - - - 1,096,769 Accounts receivable 1,687,226 442,828 475,203 63,941 330,683 - 2,999,881 Discounts and loans 12,499,135 21,833,148 30,530,731 48,965,788 83,042,260 83,822,111 280,693,173 Available-for-Sale Financial Assets 37,928 - - 243,169 3,930,483 - 4,211,580 Held-to-maturity financial assets - 451,078 - 49,973 10,662,531 - 11,163,582 Long-term equity investment under equity method - - - - - 216,970 216,970 Other financial assets 680 679 - - - 850,396 851,755 Total assets 68,211,624 41,361,455 35,806,249 52,146,389 101,436,130 84,889,477 383,851,324

Liabilities Deposits of Central Bank of China and other banks 1,588,587 251,778 29,797 1,592,357 - - 3,462,519 Funds borrowed from CBC and other banks 454,350 1,665,950 454,350 302,900 - - 2,877,550 Financial liabilities at fair value through profit or loss 3,043 6,029 642 - 42,090 - 51,804 Payables 6,709,333 259,915 340,494 151,222 222,537 - 7,683,501 Deposits and remittances 31,000,300 34,690,648 55,059,784 96,822,028 116,259,871 - 333,832,631 Financial bonds payable - - - - 10,512,559 - 10,512,559 Total liabilities 39,755,613 36,874,320 55,885,067 98,868,507 127,037,057 - 358,420,564 Net liquidity gap $ 28,456,011 $ 4,487,135 ( $ 20,078,818 ) ( $ 46,722,118 ) ( $ 25,600,927 ) $ 84,889,477 $ 25,430,760 (Continued on next page)

- 201 - (Continued from previous page) Unit: NTD thousand December 31, 2010 December 31, 2010 More than one More than three More than six More than one Financial instruments at fair Less than one month and less months and less months and less year and less than More than seven value through profit or loss Total Level 1 Level 2 Level 3 month than three months than six months than one year seven years years Total Assets Non-financial derivatives Cash and cash Assets equivalents $ 4,669,329 $ - $ - $ - $ - $ - $ 4,669,329 Due From Central Financial assets at fair Bank Of China And value through profit Other Banks 46,037,026 10,590,396 6,384,063 2,370,802 3,230,173 - 68,612,460 Financial assets at fair or loss value through profit Stock investment $ 1,282,757 $ 1,282,757 $ - $ - or loss 1,566,191 75,979 3,979 413 - - 1,646,562 Others 43,486 43,486 - - Accounts receivable 1,828,372 489,418 648,528 93,003 370,560 - 3,429,881 Discounts and loans 11,235,118 14,983,178 25,812,647 35,583,609 85,424,075 74,092,698 247,131,325 Available-for-sale Available-for-Sale financial assets Financial Assets 52,489 - - - 1,046,546 - 1,099,035 Held-to-maturity Bond investment 1,099,035 1,099,035 - - financial assets 100,061 - - 463,080 7,036,035 3,968,727 11,567,903 Equity investment under equity method - - - - - 337,561 337,561 Financial derivatives Other financial assets 2,077 1,205 - - - 143,579 146,861 Assets Total assets 65,490,663 26,140,176 32,849,217 38,510,907 97,107,389 78,542,565 338,640,917 Financial assets at fair value through profit or loss 320,319 - 320,319 - December 31, 2010 More than one More than three More than six More than one Liabilities Less than one month and less months and less months and less year and less than More than seven Financial liabilities at fair month than three months than six months than one year seven years years Total Liabilities value through profit Deposits of Central or loss ( 110,069 ) - ( 110,069 ) - Bank of China and Total $ 2,635,528 $ 2,425,278 $ 210,250 $ - other banks $ 406,857 $ 265,696 $ 167,380 $ 1,467,024 $ - $ - $ 2,306,957 Funds borrowed from CBC and other banks 145,650 1,456,500 - - - - 1,602,150 Financial liabilities at fair value through 33. Risk control and hedging strategies profit or loss 71,357 36,738 1,974 - - - 110,069 RP (Debt) 1,477,800 - - - - - 1,477,800 Payables 2,707,075 316,126 577,873 163,515 107,426 - 3,872,015 The Bank has defined a risk management policy in writing, covering the entire Deposits and remittances 26,075,887 30,731,596 60,039,624 79,948,322 106,054,083 - 302,849,512 operating strategies and risk management philosophy. The overall risk management Financial bonds payable - - - - 8,300,000 - 8,300,000 plan is to minimize potential harmful effects to the Bank’s business performance. The Total liabilities 30,884,626 32,806,656 60,786,851 81,578,861 114,461,509 - 320,518,503 Net liquidity gap $ 34,606,037 ( $ 6,666,480 ) ( $ 27,937,634 ) ( $ 43,067,954 ) ( $ 17,354,120 ) $ 78,542,565 $ 18,122,414 Board of the Bank has approved the written overall risk management policy and the written policies towards specific risk (e.g. credit risk, market risk, operation risk, 4. Cash flow risk estimated under interest rate changes liquidity risk, and country risk, etc.). The Board of the Bank is the supreme risk management unit, and will review written policies and actual status to ensure that the

The future cash flow of assets or liabilities estimated based on floating risk management policies are executed precisely. interest rates held or borne by the Bank might fluctuate and even generate risk

due to market interest rate changes. However, upon evaluation, the Bank, in The Bank has established a Risk Management Commission and Risk Management practice, tends to control the net liquidity gap to reduce cash flow risk resulting Dept. responsible for granting risk authority and the relevant authorities to the relevant from interest rate changes. departments to ensure the successful operation of risk management. An Executive Vice President shall be appointed as the Secretary General of the Risk Management

(7) Information on levels of fair value of financial instruments Committee by the President under the authorization of the Board. The Committee’s December 31, 2011 Financial instruments at fair functions are specified as follows: value through profit or loss Total Level 1 Level 2 Level 3 (1) Review of risk management projects. Non-financial derivatives Assets (2) Measure various risk management scopes. Financial assets at fair value through profit (3) Review of motions for institutionalization of risk management. or loss Stock investment $ 982,393 $ 982,393 $ - $ - (4) Periodical report to the Board. Others 27,696 27,696 - - Available-for-sale The commissioners of the Risk Management Committee shall set the various risk financial assets management indicators by nature of business and functions of departments and report Stock investment 37,352 37,352 - - Bond investment 4,169,579 4,169,579 - - them to the Risk Management Committee for high-ranking supervisors’ reference in Others 4,649 4,649 - - decision making.

Financial derivatives Assets Financial assets at fair value through profit or loss 86,680 - 86,680 - Liabilities Financial liabilities at fair value through profit or loss ( 51,804 ) - ( 51,804 ) - Total $ 5,256,545 $ 5,221,669 $ 34,876 $ -

- 202 - - 203 -

December 31, 2010 Financial instruments at fair value through profit or loss Total Level 1 Level 2 Level 3 Non-financial derivatives Assets Financial assets at fair value through profit or loss Stock investment $ 1,282,757 $ 1,282,757 $ - $ - Others 43,486 43,486 - - Available-for-sale financial assets Bond investment 1,099,035 1,099,035 - -

Financial derivatives Assets Financial assets at fair value through profit or loss 320,319 - 320,319 - Liabilities Financial liabilities at fair value through profit or loss ( 110,069 ) - ( 110,069 ) - Total $ 2,635,528 $ 2,425,278 $ 210,250 $ -

33. Risk control and hedging strategies The Bank has defined a risk management policy in writing, covering the entire operating strategies and risk management philosophy. The overall risk management plan is to minimize potential harmful effects to the Bank’s business performance. The Board of the Bank has approved the written overall risk management policy and the written policies towards specific risk (e.g. credit risk, market risk, operation risk, liquidity risk, and country risk, etc.). The Board of the Bank is the supreme risk management unit, and will review written policies and actual status to ensure that the risk management policies are executed precisely. The Bank has established a Risk Management Commission and Risk Management Dept. responsible for granting risk authority and the relevant authorities to the relevant departments to ensure the successful operation of risk management. An Executive Vice President shall be appointed as the Secretary General of the Risk Management Committee by the President under the authorization of the Board. The Committee’s functions are specified as follows: (1) Review of risk management projects. (2) Measure various risk management scopes. (3) Review of motions for institutionalization of risk management. (4) Periodical report to the Board. The commissioners of the Risk Management Committee shall set the various risk management indicators by nature of business and functions of departments and report them to the Risk Management Committee for high-ranking supervisors’ reference in decision making.

- 203 - 34. Capital adequacy ratio 6. Proportion of Tier III Capital to Risk Assets = Tier III Capital / Total amount Unit: NTD thousand; % of weighed average asset. December 31, 2011 December 31, 2010 7. Ratio of common stock to total assets = Common stock/ Total assets. Tier I Capital 24,318,987 18,449,296 8. Leverage ratio=Tier I Capital/Average assets upon adjustment(average assets Self-owned Tier II Capital 5,246,668 6,670,589 less Tier I Capital “Good Will”, “Unamortized Loss from Sale of NPL” and Capital Tier III Capital - - the deduction from Tier I Capital referred to in the “Explanation and Forms Self-owned Capital 29,565,655 25,119,885 for the Calculation of Shares and dividends and Risk Assets by Banks”) Standardized Approach 244,298,087 214,191,716 35. Mean and average interest rate of assets and liabilities with interest Internal Ratings-Based - - Credit Risk Approach The mean shall be estimated based on the daily average value of the assets and Asset Securitization - - liabilities with interest. Basic Indicator 9,243,025 9,921,300 2011 Approach Total Standard - - Average interest Operation risk-weighed method/optional Mean rate risk assets standard method Advanced Measurement - - Assets Approach Deposits of Central Bank of China Standardized Approach 782,175 2,180,938 $ 838,361 0.05% Market and other banks Internal Models - - Risk Approach Due to the CBC 68,154,115 0.76% Total risk-weighed assets 254,323,287 226,293,954 Call loans to banks 214,802 1.98% Capital adequacy ratio 11.63 11.10 Proportion of Tier I capital to risk assets 9.56 8.15 Financial assets-Trading 13,164 0.93% Proportion of Tier II capital to risk assets 2.07 2.95 RP (Debt) investment 14,743 0.73% Proportion of Tier III capital to risk assets - - Ratio of common stock to total assets 5.81 5.09 Receivable credit card loans 166,451 14.42% Leverage ratio 6.73 5.69 Discounts and loans 259,375,403 2.55%

Available-for-Sale Financial 1,531,405 3.29% Note 1: The self-owned capital and the amount of weighed average risk assets shall be Assets filled in as required in “Regulation for Banks in the Management of Capital Adequacy and Tiers of Capital”, and “Explanation and Forms for the Held-to-maturity financial assets 12,858,488 0.51% Calculation of Self-Owned Capital and Risk Assets by Banks”. Note 2: The annual financial statement shall specify the Capital adequacy ratios for the Liabilities current period and the previous period. The semiannual financial statement shall also disclose the Capital adequacy ratio at the end of the previous year, in Deposits of other banks 1,968,970 1.31% addition to those for the current period and previous period. Call loans to banks 2,068,693 0.73% Note 3: Equations for financial analysis: RP 727,504 0.54% 1. Self-owned capital = Tier I Capital + Tier II Capital + Tier III Capital. Funds borrowed from CBC and 2. Total amount of weighed average risk-based assets = credit risk weighed 2,068,514 0.84% other banks average risk-based assets + allowance of (operation risk + market risk) x 12.5. Current deposits 141,149,201 0.18% 3. Capital adequacy ratio = self-owned capital/ total amount of weighed Current deposits and saving 166,157,353 1.16% average risk assets. deposits 4. Proportion of Tier I Capital to Risk Assets = Tier I Capital / Total amount of Financial bonds payable 9,503,346 2.45% weighed average asset.

5. Proportion of Tier II Capital to Risk Assets = Tier II Capital / Total amount of weighed average asset.

- 204 - - 205 - 6. Proportion of Tier III Capital to Risk Assets = Tier III Capital / Total amount of weighed average asset. 7. Ratio of common stock to total assets = Common stock/ Total assets. 8. Leverage ratio=Tier I Capital/Average assets upon adjustment(average assets less Tier I Capital “Good Will”, “Unamortized Loss from Sale of NPL” and the deduction from Tier I Capital referred to in the “Explanation and Forms for the Calculation of Shares and dividends and Risk Assets by Banks”) 35. Mean and average interest rate of assets and liabilities with interest The mean shall be estimated based on the daily average value of the assets and liabilities with interest. 2011 Average interest Mean rate Assets Deposits of Central Bank of China $ 838,361 0.05% and other banks Due to the CBC 68,154,115 0.76% Call loans to banks 214,802 1.98% Financial assets-Trading 13,164 0.93% RP (Debt) investment 14,743 0.73% Receivable credit card loans 166,451 14.42% Discounts and loans 259,375,403 2.55% Available-for-Sale Financial 1,531,405 3.29% Assets Held-to-maturity financial assets 12,858,488 0.51%

Liabilities Deposits of other banks 1,968,970 1.31% Call loans to banks 2,068,693 0.73% RP 727,504 0.54% Funds borrowed from CBC and 2,068,514 0.84% other banks Current deposits 141,149,201 0.18% Current deposits and saving 166,157,353 1.16% deposits Financial bonds payable 9,503,346 2.45%

- 205 -

2010 Average interest Mean rate Assets Deposits of Central Bank of China $ 744,627 0.02% and other banks Due to the CBC 60,531,101 0.56% Call loans to banks 255,817 1.84% Financial assets-Trading 187,206 1.11% RP (Debt) investment 892 0.42% Receivable credit card loans 170,922 14.27% Discounts and loans 231,599,664 2.40% Available-for-Sale Financial 945,857 3.80% Assets Held-to-maturity financial assets 13,078,901 0.66%

Liabilities Deposits of other banks 3,503,125 1.10% Call loans to banks 1,072,678 0.34% Funds borrowed from CBC and 676,055 0.84% other banks RP (Debt) 572,603 0.39% Current deposits 128,066,908 0.12% Current deposits and saving 154,253,749 0.88% deposits Financial bonds payable 7,800,023 2.35%

- 206206 - 36. Information in a bank’s financial statement to be disclosed by the Bank pursuant to the Statement of Financial Accounting Standards No. 28 (1) Asset quality December 31, 2011 December 31, 2010 Item Allowance for Allowance for

NPL amount NPL rate Allowance for bad debt NPL amount NPL rate Allowance for bad debt Total amount Total amount (Note 1) (Note 2) bad debt coverage rate (Note 1) (Note 2) bad debt coverage rate Type (Note 3) (Note 3) Corporate Secured 211,851 88,737,006 0.24% 751,310 354.64% 326,428 79,118,058 0.41% 644,021 197.29% banking Non-secured 240,094 57,544,276 0.42% 1,725,895 718.84% 653,808 41,515,904 1.57% 917,917 140.40% Residential mortgage 143,560 42,864,096 0.33% 75,522 52.61% 178,702 42,275,835 0.42% 320,651 179.43% loans (Note 4) Cash card 307 32,064 0.96% 26,182 8,528.34% 330 48,456 0.68% 19,728 5,978.18% Personal Small credit loans banking 14,485 682,364 2.12% 105,589 728.95% 60,731 813,541 7.47% 122,391 201.53% (Note 5) Others Secured 220,334 86,030,910 0.26% 123,598 56.10% 217,202 78,118,126 0.28% 563,352 259.37% (Note 6) Non-secured 13,750 4,802,457 0.29% 134,706 979.68% 39,901 5,241,405 0.76% 80,032 200.58% Total amount 844,381 280,693,173 0.30% 2,942,802 348.52% 1,477,102 247,131,325 0.60% 2,668,092 180.63%

December 31, 2011 December 31, 2010 Item Balance of Allowance for Balance of Allowance for Allowance for Allowance for 207 NPL amount receivable NPL rate bad date NPL amount receivable NPL rate bad date Type bad debt bad debt accounts coverage rate accounts coverage rate Credit card 2,693 409,446 0.66% 21,989 816.52% 2,696 376,701 0.72% 21,743 806.49% Factoring without recourse ------(Note 7)

NPL or non-performing receivable accounts exempted from report December 31, 2011 December 31, 2010 Total non-performing receivable Total non-performing receivable Total NPL exempted from report Total NPL exempted from report accounts exempted from report accounts exempted from report Amount exempted from report upon debt negotiation and 88,541 9,870 132,168 12,931 performance (Note 8) Performance of debt clearance program and rehabilitation program 37,921 11,177 50,606 9,905 (Note 9) Total 126,462 21,047 182,774 22,836

- 207 - Note 1: The NPL amount is recognized according to "Regulations Governing the (2) Status of credit risk concentration Procedures for Banking Institutions to Evaluate Assets and Deal with December 31, 2011 Non-performing Non-accrual Loans". The credit card NPL is recognized based on Unit: NTD thousand that provided under the Letter Jin-Guan-Yin (4) Zi No. 0944000378 dated July 6, 2005. Proportion to net worth in the Note 2: NPL rate=NPL/Total amount; Credit card NPL rate=NPL/balance of receivable Total balance of Rank Business type of company or group Bank’s financial accounts. loan (Note 1) (Note 2) statement on (Note 3) Note 3: Allowance for bad debt coverage rate=allowance for bad debt provided for Dec. 31, 2010 loans/NPL amount; allowance for bad debt coverage rate for receivable accounts (%) of credit cards=allowance for bad debt provided for receivable accounts of credit Group A cards/NPL amount. 1 012612 Separable components $ 3,278,053 12.87% Note 4: Borrowers apply for residential mortgage loans for the purpose of purchasing or manufacturing building residences or decorating houses. The loans shall be secured by the Group B 2 2,623,206 10.30% residence purchased (owned) by the borrower himself/herself, or his/her spouse or 012641 LCD and parts manufacturing minor children in full, and the mortgage shall be pledged to the financial Group C 3 2,558,358 10.05% institution. 015590 Other accommodation service Note 5: Small credit loans mean those provided in the Letter under Jin-Guan-Yin (4) Zi Group D 4 2,504,646 9.84% No. 09440010950 dated December 19, 2005 and those other than small loans by 010892 Noodle products manufacturing credit cards/cash cards. Group E 5 1,852,228 7.27% Note 6: “Others” for Personal banking refer to the secured or non-secured consumer loans 012411 Iron and steel Manufacturing other than “residential mortgage loans”, “cash card loans” and “small credit Group F loans”, exclusive of credit cards loans. 6 015510 Short-term accommodation 1,747,814 6.86% Note 7: According to the Letter under Jin-Guan-Yin (5) Zi No. 094000494 dated July 19, service 2005, factoring without recourse shall be recognized as NPL within three months 7 Group G Civil air transportation 1,597,488 6.27% Group H after the factoring Consignee or insurance company confirms that no 8 1,508,954 5.93% compensation should be granted. 015610 Restaurant industry Group I Note 8: Total NPL exempted from report upon debt negotiation and performance and the 9 1,500,000 5.89% 016811 Real estate lease and sale balance of total non-performing receivable accounts exempted from report upon Group J debt negotiation and performance were disclosed pursuant to the Letter under 10 1,495,092 5.87% 015101 Civil air transportation Jin-Guan-Yin (1) Zi No. 09510001270 dated April 25, 2006.

Note 9: The balance of total NPL exempted from report upon performance of debt clearance program and rehabilitation program and balance of total non-performing December 31, 2010 receivable accounts exempted from report upon performance of debt clearance Unit: NTD thousand program and rehabilitation program were disclosed pursuant to the Letter under Proportion to net Jin-Guan-Yin (1) Zi No. 09700318940 dated September 15, 2008. worth in the Total balance of Rank Business type of company or group Bank’s financial loan (Note 1) (Note 2) statement on (Note 3) Dec. 31, 2010 (%) Group A 1 012612 Separable components $ 3,480,847 17.93% manufacturing Group D 2 2,089,902 10.76% 010892 Noodle products manufacturing Group G 3 2,073,855 10.68% 015101 Private airlines (Continued on next page)

- 208208 - - 209 - (2) Status of credit risk concentration December 31, 2011 Unit: NTD thousand Proportion to net worth in the Total balance of Rank Business type of company or group Bank’s financial loan (Note 1) (Note 2) statement on (Note 3) Dec. 31, 2010 (%) Group A 1 012612 Separable components $ 3,278,053 12.87% manufacturing Group B 2 2,623,206 10.30% 012641 LCD and parts manufacturing Group C 3 2,558,358 10.05% 015590 Other accommodation service Group D 4 2,504,646 9.84% 010892 Noodle products manufacturing Group E 5 1,852,228 7.27% 012411 Iron and steel Manufacturing Group F 6 015510 Short-term accommodation 1,747,814 6.86% service 7 Group G Civil air transportation 1,597,488 6.27% Group H 8 1,508,954 5.93% 015610 Restaurant industry Group I 9 1,500,000 5.89% 016811 Real estate lease and sale Group J 10 1,495,092 5.87% 015101 Civil air transportation

December 31, 2010 Unit: NTD thousand Proportion to net worth in the Total balance of Rank Business type of company or group Bank’s financial loan (Note 1) (Note 2) statement on (Note 3) Dec. 31, 2010 (%) Group A 1 012612 Separable components $ 3,480,847 17.93% manufacturing Group D 2 2,089,902 10.76% 010892 Noodle products manufacturing Group G 3 2,073,855 10.68% 015101 Private airlines (Continued on next page)

- 209209 - (Continued from previous page) (3) Interest rate sensitivity information Interest rate sensitivity assets and liabilities analysis data (NTD) Proportion to net December 31, 2011 worth in the Unit: NTD thousand; % Total balance of Rank Business type of company or group Bank’s financial loan 181 days to 1 (Note 1) (Note 2) statement on Item 1 to 90 days 91 to 180 days Over 1 year Total (Note 3) year Dec. 31, 2010 Interest rate 264,233,551 15,430,434 12,794,718 42,660,268 335,118,971 (%) sensitivity assets Group C 4 $ 1,830,970 9.43% 015590 Other accommodation service Interest rate 108,052,057 167,868,673 43,355,443 5,171,346 324,447,519 sensitivity liabilities Group E 5 1,766,614 9.10% 012411 Iron and steel manufacturing Interest rate 156,181,494 ( 152,438,239 ) ( 30,560,725 ) 37,488,922 10,671,452 sensitivity gap Group I 6 1,500,000 7.73% 016811 Real estate lease and sale Net worth 25,461,054 Group J Interest rate sensitivity assets and liabilities rate 103.29 7 1,450,000 7.47% 015101 Civil air transportation Interest rate sensitivity gap and net worth rate 41.91 Group B 8 1,446,516 7.45% 012641 LCD and parts manufacturing Group K December 31, 2010 9 014340 Renovation and construction 1,372,564 7.07% Unit: NTD thousand; % contractor 181 days to 1 Group L Item 1 to 90 days 91 to 180 days Over 1 year Total 10 1,191,826 6.14% year 012630 Printed circuit manufacturing Interest rate 239,243,469 14,431,484 10,727,872 36,538,952 300,941,777 sensitivity assets Note 1: The top ten enterprises other than public or state enterprises were identified Interest rate 83,233,888 175,313,899 33,895,026 2,683,090 295,125,903 according to rank of the total balance of loans to these enterprises. If the sensitivity liabilities account refers to a group, the loan to the group should be identified and Interest rate 156,009,581 ( 160,882,415) ( 23,167,154 ) 33,855,862 5,815,874 summed up, and disclosed in the form of “code” and “business type”. In sensitivity gap the case of group, the business type of the group with the maximum Net worth 19,415,020 exposure should be disclosed. The business type shall be specified in “detailed item” according to the business classification defined by Interest rate sensitivity assets and liabilities rate 101.97 Directorate General of Budget, Accounting and Statistics (e.g. Company Interest rate sensitivity gap and net worth rate 29.96 (Group) A, LCD and parts manufacturing). Note 2: The enterprises mean those defined in Article 6 of “Supplementary Rules of Note 1: The table only specifies the amount in NTD (exclusive of foreign currencies) TSEC’s Criteria for Reviewing Listing of Marketable Securities”. of the Head Office and local branches. Note 3: The balance of total credit extension means the total balance of the various Note 2: Interest rate sensitivity assets and liabilities mean the assets and liabilities loans (including import negotiation, export negotiation, discount, overdraft, with interest of which the income or cost varies depending on the interest short-term loans, short-term secured loans, receivable securities financing, rate. mid-term loans, mid-term secured loans, long-term loans, long-term secured loans, Delinquent loans), inward remittances, factoring without recourse, Note 3: Interest rate sensitivity gap=Interest rate sensitivity assets - Interest rate Acceptances receivable and guarantee payments. sensitivity liabilities. Note 4: Interest rate sensitivity assets and liabilities rate=interest rate sensitivity assets ÷ interest rate sensitivity liabilities (i.e. interest rate sensitivity assets and interest rate sensitivity liabilities in NTD)

- 210210 - - 211 - (3) Interest rate sensitivity information Interest rate sensitivity assets and liabilities analysis data (NTD) December 31, 2011 Unit: NTD thousand; % 181 days to 1 Item 1 to 90 days 91 to 180 days Over 1 year Total year Interest rate 264,233,551 15,430,434 12,794,718 42,660,268 335,118,971 sensitivity assets Interest rate 108,052,057 167,868,673 43,355,443 5,171,346 324,447,519 sensitivity liabilities Interest rate 156,181,494 ( 152,438,239 ) ( 30,560,725 ) 37,488,922 10,671,452 sensitivity gap Net worth 25,461,054 Interest rate sensitivity assets and liabilities rate 103.29 Interest rate sensitivity gap and net worth rate 41.91

December 31, 2010 Unit: NTD thousand; % 181 days to 1 Item 1 to 90 days 91 to 180 days Over 1 year Total year Interest rate 239,243,469 14,431,484 10,727,872 36,538,952 300,941,777 sensitivity assets Interest rate 83,233,888 175,313,899 33,895,026 2,683,090 295,125,903 sensitivity liabilities Interest rate 156,009,581 ( 160,882,415) ( 23,167,154 ) 33,855,862 5,815,874 sensitivity gap Net worth 19,415,020 Interest rate sensitivity assets and liabilities rate 101.97 Interest rate sensitivity gap and net worth rate 29.96

Note 1: The table only specifies the amount in NTD (exclusive of foreign currencies) of the Head Office and local branches. Note 2: Interest rate sensitivity assets and liabilities mean the assets and liabilities with interest of which the income or cost varies depending on the interest rate. Note 3: Interest rate sensitivity gap=Interest rate sensitivity assets - Interest rate sensitivity liabilities. Note 4: Interest rate sensitivity assets and liabilities rate=interest rate sensitivity assets ÷ interest rate sensitivity liabilities (i.e. interest rate sensitivity assets and interest rate sensitivity liabilities in NTD)

- 211211 - Interest rate sensitivity assets and liabilities analysis data (USD) (4) Profitability December 31, 2011 Unit: % Unit: USD 1,000; % Item December 31, 2011 December 31, 2010 91 to 180 181 days to 1 Item 1 to 90 days Over 1 year Total Before 0.53 0.26 days year Income Interest rate 253,787 164,116 27,608 310,404 755,915 ROA Tax sensitivity assets After 0.40 0.13 Interest rate 146,352 326,751 81,526 - 554,629 Income tax sensitivity liabilities Before 8.53 4.82 Income Interest rate 107,435 ( 162,635 ) ( 53,918 ) 310,404 201,286 sensitivity gap Return of net worth Tax Net worth 840,576 After 6.48 2.37 Income tax Interest rate sensitivity assets and liabilities rate 136.29 Net profit rate 25.45 9.08 Interest rate sensitivity gap and net worth rate 23.95

Note: 1. ROA=income before (after) taxation ÷ average assets December 31, 2010 2. Return of net worth=income before (after) taxation ÷ average net worth Unit: USD 1,000; % 3. Profit rate = income After Income tax ÷ Investment income 91 to 180 181 days to 1 Item 1 to 90 days Over 1 year Total 4. Income before taxation means the income accumulated from January of days year the current year until the current quarter Interest rate 149,177 162,925 9,705 258,781 580,588 (5) Analysis on maturity of assets and liabilities sensitivity assets Analysis of maturity structure of NTD Interest rate 118,631 293,829 66,571 - 479,031 sensitivity December 31, 2011 liabilities Unit: NTD thousand Remaining balance to maturity Interest rate 30,546 ( 130,904 ) ( 56,866 ) 258,781 101,557 Total 1 to 30 days 31 to 90 days 91 to 180 days 181 days to 1 More than 1 sensitivity gap year year Net worth 666,496 Main capital inflow 380,570,251 68,295,275 42,934,392 35,470,700 59,250,520 174,619,364 upon maturity Interest rate sensitivity assets and liabilities rate 121.20 Main capital outflow 430,265,099 44,564,497 52,210,394 75,026,018 104,831,100 153,633,090 Interest rate sensitivity gap and net worth rate 15.24 upon maturity Gap ( 49,694,848 ) 23,730,778 ( 9,276,002 ) ( 39,555,318 ) ( 45,580,580 ) 20,986,274

Note 1: The table specifies the total amount in USD of Head Office and local branches, International Banking Branch and offshore branches, exclusive of December 31, 2010 contingent assets or liabilities. Unit: NTD thousand Note 2: Interest rate sensitivity assets and liabilities mean the assets and liabilities Remaining balance to maturity with interest of which the income or cost varies depending on the interest Total 1 to 30 days 31 to 90 days 91 to 180 days 181 days to 1 More than 1 year year rate. Main capital inflow 336,689,058 66,114,589 26,122,473 31,412,297 45,771,113 167,268,586 Note 3: Interest rate sensitivity gap=Interest rate sensitivity assets - Interest rate upon maturity sensitivity liabilities. Main capital outflow 382,170,136 36,259,146 46,333,039 77,352,468 86,973,710 135,251,773 Note 4: Interest rate sensitivity assets and liabilities rate=interest rate sensitivity upon maturity assets ÷ interest rate sensitivity liabilities (i.e. interest rate sensitivity assets Gap ( 45,481,078 ) 29,855,443 ( 20,210,566 ) ( 45,940,171 ) ( 41,202,597 ) 32,016,813 and interest rate sensitivity liabilities in USD) Note: The table only specifies the amount in NTD (exclusive of foreign currencies) of Head Office and local branches.

- 212 -212 - 213 - (4) Profitability Unit: % Item December 31, 2011 December 31, 2010 Before 0.53 0.26 Income ROA Tax After 0.40 0.13 Income tax Before 8.53 4.82 Income Return of net worth Tax After 6.48 2.37 Income tax Net profit rate 25.45 9.08

Note: 1. ROA=income before (after) taxation ÷ average assets 2. Return of net worth=income before (after) taxation ÷ average net worth 3. Profit rate = income After Income tax ÷ Investment income 4. Income before taxation means the income accumulated from January of the current year until the current quarter (5) Analysis on maturity of assets and liabilities Analysis of maturity structure of NTD December 31, 2011 Unit: NTD thousand Remaining balance to maturity Total 1 to 30 days 31 to 90 days 91 to 180 days 181 days to 1 More than 1 year year Main capital inflow 380,570,251 68,295,275 42,934,392 35,470,700 59,250,520 174,619,364 upon maturity Main capital outflow 430,265,099 44,564,497 52,210,394 75,026,018 104,831,100 153,633,090 upon maturity Gap ( 49,694,848 ) 23,730,778 ( 9,276,002 ) ( 39,555,318 ) ( 45,580,580 ) 20,986,274

December 31, 2010 Unit: NTD thousand Remaining balance to maturity Total 1 to 30 days 31 to 90 days 91 to 180 days 181 days to 1 More than 1 year year Main capital inflow 336,689,058 66,114,589 26,122,473 31,412,297 45,771,113 167,268,586 upon maturity Main capital outflow 382,170,136 36,259,146 46,333,039 77,352,468 86,973,710 135,251,773 upon maturity Gap ( 45,481,078 ) 29,855,443 ( 20,210,566 ) ( 45,940,171 ) ( 41,202,597 ) 32,016,813 Note: The table only specifies the amount in NTD (exclusive of foreign currencies) of Head Office and local branches.

- 213213 - Analysis of maturity structure of USD (Continued from previous page) December 31, 2011 Unit: USD 1,000 December 31, 2011 December 31, 2010 Foreign Exchange Foreign Exchange Remaining balance to maturity Total 1 to 30 days 31 to 90 days 91 to 180 days 181 days to 1 More than 1 currency rate NTD currency rate NTD year year Non-Currency Main capital inflow 882,193 143,097 190,798 170,064 27,608 350,626 USD $ 159,034 30.29 $ 4,817,150 $ 174,314 29.13 $ 5,077,767 upon maturity EUR 84,000 39.20 3,292,800 84,000 38.93 3,270,431 Main capital outflow 772,397 203,858 228,592 273,325 66,622 - AUD 20,174 30.75 620,344 19,258 29.67 571,475 upon maturity

Gap 109,796 ( 60,761 ) ( 37,794 ) ( 103,261 ) ( 39,014 ) 350,626 Financial liabilities Currency December 31, 2010 USD 580,340 30.29 17,578,488 507,251 29.13 14,776,228 Unit: USD 1,000 EUR 21,540 39.20 844,358 14,775 38.93 575,235 Remaining balance to maturity JPY 904,445 0.39 353,367 1,314,621 0.36 470,897 Total 1 to 30 days 31 to 90 days 91 to 180 days 181 days to 1 More than 1 HKD 43,578 3.90 169,868 42,164 3.75 157,991 year year GBP 4,524 46.75 211,496 3,310 45.17 149,538 Main capital inflow 709,504 150,829 131,050 171,798 9,705 246,122 AUD 24,479 30.75 752,737 24,543 29.67 728,293 upon maturity CAD 3,417 29.68 101,420 1,669 29.15 48,634 Main capital outflow 653,062 225,489 104,997 255,483 67,093 - SGD 2,061 23.32 48,072 693 22.72 15,734 upon maturity CHF 434 32.20 13,976 159 31.07 4,927 Gap 56,442 ( 74,660 ) 26,053 ( 83,685 ) ( 57,388 ) 246,122 ZAR 36,538 3.72 136,031 2,699 4.39 11,853 SEK 6 4.38 28 23 4.33 98 NZD 11,609 23.40 271,660 24,316 22.54 548,029 Note: 1. The table specifies the total amount in USD of Head Office, local THB 5 0.96 5 5 0.97 5 branches and International Banking Branch. Unless otherwise provided, it shall be stated at the Book Value, and it is not necessary to include any accounts that are not stated in the table (e.g. negotiable certificates of 38. Financial information for operating segments deposit, bonds or stocks scheduled to be issued). Financial information for operating segments is provided for main decision makers 2. Where offshore assets account for more than 10% of the Bank’s total to allocate resources and evaluate the performance of each segment. Such information assets, it is necessary to provide supplementary disclosure. focuses on each delivered or offered product or service. In accordance with SFAS No.41 “Disclosure of Operating Segments”, segments that the Bank should report are as 37. Information on exchange rates of financial assets and liabilities denominated in foreign follows: currencies First District in Taichung The information regarding financial assets and liabilities dominated by foreign

currency which might arouse material effect: Second District in Taichung December 31, 2011 December 31, 2010 North District Foreign Exchange Foreign Exchange Changhua Area currency rate NTD currency rate NTD Financial assets Head Office and other Currency USD $ 601,071 30.29 $ 18,206,453 $ 420,798 29.13 $ 12,257,851 EUR 10,060 39.20 394,334 4,669 38.93 181,764 JPY 1,466,020 0.39 572,774 2,154,767 0.36 771,838 HKD 21,212 3.90 82,686 19,287 3.75 72,269 GBP 647 46.75 30,238 684 45.17 30,913 AUD 2,498 30.75 76,824 1,529 29.67 45,367 CAD 587 29.68 17,426 395 29.15 11,512 SGD 1,364 23.32 31,808 700 22.72 15,891 CHF 415 32.20 13,355 131 31.07 4,077 ZAR 2,810 3.72 10,463 2,985 4.39 13,108 SEK 243 4.38 1,064 373 4.33 1,616 NZD 1,277 23.40 29,875 129 22.54 2,907 THB 23 0.96 23 23 0.97 23 RMB 5,316 4.81 25,558 3,001 4.42 13,266

(Continued on next page)

- 214214 - - 215 - (Continued from previous page)

December 31, 2011 December 31, 2010 Foreign Exchange Foreign Exchange

currency rate NTD currency rate NTD Non-Currency USD $ 159,034 30.29 $ 4,817,150 $ 174,314 29.13 $ 5,077,767 EUR 84,000 39.20 3,292,800 84,000 38.93 3,270,431 AUD 20,174 30.75 620,344 19,258 29.67 571,475

Financial liabilities Currency USD 580,340 30.29 17,578,488 507,251 29.13 14,776,228 EUR 21,540 39.20 844,358 14,775 38.93 575,235 JPY 904,445 0.39 353,367 1,314,621 0.36 470,897 HKD 43,578 3.90 169,868 42,164 3.75 157,991 GBP 4,524 46.75 211,496 3,310 45.17 149,538 AUD 24,479 30.75 752,737 24,543 29.67 728,293 CAD 3,417 29.68 101,420 1,669 29.15 48,634 SGD 2,061 23.32 48,072 693 22.72 15,734 CHF 434 32.20 13,976 159 31.07 4,927 ZAR 36,538 3.72 136,031 2,699 4.39 11,853 SEK 6 4.38 28 23 4.33 98 NZD 11,609 23.40 271,660 24,316 22.54 548,029 THB 5 0.96 5 5 0.97 5

38. Financial information for operating segments Financial information for operating segments is provided for main decision makers to allocate resources and evaluate the performance of each segment. Such information focuses on each delivered or offered product or service. In accordance with SFAS No.41 “Disclosure of Operating Segments”, segments that the Bank should report are as follows: First District in Taichung Second District in Taichung North District Changhua Area Head Office and other

- 215215 - (1) Revenues and operating results of segments (3) Main revenues from products and service Revenues and operating results of the Bank’s continuing units are analyzed in The Bank’s main business is interest revenue. There is no information by accordance with segments to be reported, which are summarized as follows: products and by service. Second First District District in Changhua Head Office (4) Information by areas in Taichung Taichung North District Area and other Total 2011 The Bank’s business covers the Taiwan area. There is no information by areas. Interest revenue $ 1,469,270 $ 1,087,301 $ 1,864,959 $ 2,053,436 $ 940,757 $ 7,415,723 Interest expenses ( 513,555 ) ( 366,636 ) ( 483,986 ) ( 783,534 ) ( 324,716 ) ( 2,472,427 ) (5) Information on key customers Net interest income 955,715 720,665 1,380,973 1,269,902 616,041 4,943,296 Non-interest income Interest revenue from a single customer of the Bank does not exceed 10% of

(loss) total interest revenues. Therefore, there is no information on key customers. Service Fee, Net 42,668 34,133 59,633 58,095 695,365 889,894 Other net profit 417,159 345,181 ( 155,589 ) 703,562 ( 1,430,646 ) ( 120,333 ) 39. Notes of disclosure (loss) Bad debt expenses ( 33,368 ) 16,646 ( 35,024 ) 11,671 ( 624,873 ) ( 664,948 ) (1) Information about important transactions: Operating expenses ( 453,171 ) ( 401,517 ) ( 479,681 ) ( 727,059 ) ( 1,072,305 ) ( 3,133,733 ) Income (loss) before $ 929,003 $ 715,108 $ 770,312 $ 1,316,171 ( $ 1,816,418) $ 1,914,176 Information to be disclosed pursuant to Article 16 of the “Rules Governing the income tax Preparation of Financial Statements of Public Issued Banks”: 2010 Interest revenue $ 1,302,074 $ 973,627 $ 1,405,551 $ 1,724,451 $ 704,515 $ 6,110,218 No. Item Remark Interest expenses ( 372,542 ) ( 248,972 ) ( 307,251 ) ( 557,667 ) ( 240,326 ) ( 1,726,758 ) Net interest income 929,532 724,655 1,098,300 1,166,784 464,189 4,383,460 Cumulative amount of the stock of the same investee purchased Non-interest income

(loss) 1 or sold reaching NTD300 million or more than 10% of the None Service Fee, Net 67,155 67,520 147,773 136,288 616,714 1,035,450 Paid-in shares capital. Other net profit 353,512 299,323 ( 27,887 ) 634,383 ( 2,140,644 ) ( 881,313 ) (loss) Acquisition amount of real estate reaching NTD300 million or Gain on reversal of 2 None bad debts (bad debt ( 26,875 ) 19,868 ( 25,446 ) 9,778 ( 910,684 ) ( 933,359 ) more than 10% of the Paid-in shares capital. expense) Operating expenses ( 412,029 ) ( 393,213 ) ( 432,166 ) ( 648,396 ) ( 879,613 ) ( 2,765,417 ) Amount on disposal of real estate reaching NTD300 million or Income (loss) before 3 None $ 911,295 $ 718,153 $ 760,574 $ 1,298,837 ($ 2,850,038 ) $ 838,821 income tax more than 10% of the Paid-in shares capital. Discount of service charges in transaction with related party 4 None Revenues reported above are generated from transactions with external reaching more than NTD5 million. customers. There was no inter-department sale in 2011 and 2010. Accounts receivable-related party reaching NTD300 million or 5 None The measured figures are provided for main decision makers to allocate more than 10% of the Paid-in shares capital. resources to segments and evaluate the performance of each segment. 6 Information regarding sale of NPL. None (2) Assets and liabilities of segments 7 Securitization of financial assets or real estate. None Segment assets December 31, 2011 December 30, 2010 Other important transactions sufficient to affect the policy to use 8 None First District in Taichung $ 59,178,409 $ 55,645,655 financial statements. Second District in Taichung 46,872,307 43,885,441 North District 99,708,739 81,463,240 (2) Information regarding investees: Changhua Area 79,000,514 70,935,183 Head Office and other 99,586,712 88,535,406 No. Item Remark Attached Total segment assets $ 384,346,681 $ 340,464,925 1 Information regarding investees and total shareholdings. table 1

2 Loans to others. None Segment liabilities December 31, 2011 December 30, 2010 First District in Taichung $ 82,555,330 $ 77,757,173 3 Endorsements/guarantees to others. None Second District in Taichung 62,954,829 56,132,228 4 Marketable securities – end. None North District 68,385,290 53,386,292 Cumulative amount of the same marketable securities purchased Changhua Area 116,975,287 110,013,593 5 or sold reaching NTD300 million or more than 10% of the None Head Office and other 28,014,891 23,760,619 Paid-in shares capital. Acquisition amount of real estate reaching NTD300 million or Total segment assets $ 358,885,627 $ 321,049,905 6 None more than 10% of the Paid-in shares capital. (Continued on next page)

- 216216 - - 217 - (3) Main revenues from products and service The Bank’s main business is interest revenue. There is no information by products and by service. (4) Information by areas The Bank’s business covers the Taiwan area. There is no information by areas. (5) Information on key customers Interest revenue from a single customer of the Bank does not exceed 10% of total interest revenues. Therefore, there is no information on key customers. 39. Notes of disclosure (1) Information about important transactions: Information to be disclosed pursuant to Article 16 of the “Rules Governing the Preparation of Financial Statements of Public Issued Banks”: No. Item Remark Cumulative amount of the stock of the same investee purchased 1 or sold reaching NTD300 million or more than 10% of the None Paid-in shares capital. Acquisition amount of real estate reaching NTD300 million or 2 None more than 10% of the Paid-in shares capital. Amount on disposal of real estate reaching NTD300 million or 3 None more than 10% of the Paid-in shares capital. Discount of service charges in transaction with related party 4 None reaching more than NTD5 million. Accounts receivable-related party reaching NTD300 million or 5 None more than 10% of the Paid-in shares capital. 6 Information regarding sale of NPL. None 7 Securitization of financial assets or real estate. None Other important transactions sufficient to affect the policy to use 8 None financial statements.

(2) Information regarding investees: No. Item Remark Attached 1 Information regarding investees and total shareholdings. table 1 2 Loans to others. None 3 Endorsements/guarantees to others. None 4 Marketable securities – end. None Cumulative amount of the same marketable securities purchased 5 or sold reaching NTD300 million or more than 10% of the None Paid-in shares capital. Acquisition amount of real estate reaching NTD300 million or 6 None more than 10% of the Paid-in shares capital. (Continued on next page)

- 217217 - (Continued from previous page)

No. Item Remark Amount on disposal of real estate reaching NTD300 million or 7 None more than 10% of the Paid-in shares capital. Discount of service charges in transaction with related party 8 None reaching more than NTD5 million. Accounts receivable-related party reaching NTD300 million or 9 None more than 10% of the Paid-in shares capital. 10 Information about sale of NPL. None 11 Securitization of financial assets or real estate. None 12 Information regarding transactions of derivative products.。 None Other important transactions sufficient to affect the policy to use 13 None financial statements.

Note: No disclosure of such information is required, if the investee is a financial business, insurance business, and securities business.

- 218218 - Attached table 1: Information regarding investees:

Unit: NTD thousand; thousand shares Consolidated shareholding of the Bank and affiliated enterprises Investment Proportion (note 1) profit (loss) Investee of Book value of Investor Location Principal business recognized in Scheduled Total Remarks Name (Note 1) shareholding investment the current Quantity - quantity % - end Proportion period current Quantity (Note 2) % Taichung Taichung Bank Taichung City Insurance agent 100 $ 89,159 $ 77,159 600 - 600 100.00 Commercial Bank Insurance Co., Ltd. Agency Co., Ltd. Taichung Reliance Securities Taipei City Securities investment and 38.46 127,811 ( 10,262 ) 14,477 - 14,477 46.40 Commercial Bank Investment Trust trust Co., Ltd. Co., Ltd.

Any current shares or scheduled shares held by the Bank, directors, supervisors, President, Executive Vice President, and investees that are defined as affiliated enterprises under Company Law shall be included. Note 2: (1) Scheduled shares mean swapped shares under the assumption that the equity securities purchased or derivative product contract as concluded (not yet converted into equity) are converted according to the agreed trading conditions and the bank’s intent to link with the equity of investee for the purpose of the reinvestment referred to in Article 74 of the Banking Act. (2) Said “equity securities” mean the marketable securities, convertible corporate bonds, and stock warrants provided in Paragraph 1 of Article 11 of the Enforcement Rules of Securities and Exchange Act. 219 (3) Said “derivative product contract” means those defined in the Statement of Financial Accounting Standards No. 34, e.g. stock options. Note 3: This table may not be disclosed in the financial statements for Q1 and the previous three quarters.

- 219 - Stock Code: 2812

Taichung Commercial Bank Co., Ltd.

Disclosures by securities dept. 2011

- 220 - Taichung Commercial Bank Co., Ltd. Balance sheet of securities dept. December 31, 2011 and 2010 Unit: NTD thousand

December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010 Code Assets Amount ％ Amount ％ Code Liabilities and Shareholders’ Equity Amount ％ Amount ％ Current assets Current liabilities 101010 Cash and cash equivalents (Notes 2 $ 5,446 1 $ 18,495 2 201310 Guarantee deposits received for $ 5,778 1 $ 11,737 1 & 4) financing instruments (Note 2) 101630 Accounts receivable (Notes 2 & 5) 9,930 1 12,059 2 201320 Deposit payable for securities 6,382 1 12,858 1 financing (Note 2) 101310 Securities receivable financing 221,514 26 326,813 36 201670 Other payables (Note 12) 9,018 1 13,475 2 (Note 2) 101330 Refinancing deposit receivable 109 - 2,037 - 201000 Total current liabilities 21,178 3 38,070 4 101000 Total current assets 236,999 28 359,404 40 Other liabilities Fund and investment 203010 Reserve for default loss (Notes 2 - - 23,507 3 and 13) 102500 Held-to-maturity financial assets 324,540 39 355,918 40 203990 Other liabilities - other 1 - 873 - (Notes 2 & 6) 203000 Total other liabilities 1 - 24,380 3

Fixed assets (Notes 2 & 7) 906003 Total liabilities 21,179 3 62,450 7 103030 Equipment 22,335 3 10,002 1 103XX Less: accumulated depreciation ( 6,056 ) ( 1 ) ( 4,797 ) - Shareholders’ equity 9

221 103000 Fixed assets – net 16,279 2 5,205 1 301110 Appropriation working fund (Notes 800,000 95 800,000 89 1 and 2) Retained earnings Other assets 304040 Undistributed earnings 20,711 2 39,026 4 105010 Business security bond (Notes 8 & 130,000 16 100,000 11 906004 Total shareholders’ equity 820,711 97 839,026 93 16) 105020 Settlement payment fund (Note 9) 26,128 3 12,266 1 105030 Refundable deposits 417 - 2,346 - 105040 Deferred charges (Notes 2 & 10) 17,236 2 6,497 1 105990 Other assets - others 890 - 407 - 105000 Total other assets 174,671 21 121,516 13

111000 Inter-branch transactions (Note 15) 88,738 10 57,955 6

121000 Brokerage trading – net (Notes 2 & 11) 663 - 1,478 -

906001 Total assets $ 841,890 100 $ 901,476 100 906002 Total liabilities and shareholders’ equity $ 841,890 100 $ 901,476 100

The notes attached shall constitute an integral part of this financial statement. (Refer to Auditor’s Report presented by Deloitte & Touche dated March 8, 2012)

Chairman: Jin-Fong Soo President: Jyun-Sheng Li Chief accountant: Yi-Ying, Jhong

- 221 - Taichung Commercial Bank Co., Ltd. Taichung Commercial Bank Co., Ltd. Income Statements of Securities Department Notes to financial statements of securities dept. Years Ended December 31, 2011 and 2010 2011 and 2010 Unit: NTD thousand (In Thousands of New Taiwan Dollars, unless otherwise specified)

2011 2010 1. Organization, Functions and Operations Code Amount ％ Amount ％ The Bank’s Securities Department obtained the securities brokerage license issued Revenue (Note 2) by the competent authority on July 31, 1989 and formally started operation on August 12, 1989. Furthermore, Yuanlin Securities Branch, Taipei Securities Branch, and Jhongli 401000 Brokerage fee revenue $ 58,243 70 $ 67,039 72 Securities Branch were established in 2011 upon approval of the competent authority. 421200 Interest revenue 25,115 30 26,680 28 The main business is to buy or sell marketable securities and securities lending or 440000 Non-operating borrowing in the stock exchange market or its business office upon customers’ revenue and gain 109 - 108 - commission. As of Dec. 31, 2011, its appropriation working fund has been NTD800,000 400000 Total revenue 83,467 100 93,827 100 thousand. As of December 31, 2011 and 2010, numbers of employees of the Securities Dept. Expenses were 72 persons and 26 persons, respectively. 501000 Brokerage fee 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES expenses 2,924 4 3,441 4 The financial statements of Securities Dept. have been prepared in conformity with 538000 Other service fee the “Rules Governing the Preparation of Financial Statements of Securities Firms”, expenses 2,035 2 1,255 1 “Business Accounting Act”, “Regulation on Business Entity Accounting Handling”, and 521200 Interest expenditure 10 - 42 - accounting principles generally accepted. The Bank’s significant accounting policies 530000 Operating expenses are summarized as follows: (Note 14) 46,463 56 33,187 35 (1) Accounting estimates 540000 Non-operating It is necessary to apply reasonable estimates to provide financial asset valuation, expenses and loss 7,082 8 8,549 9 allowance for bad debt, depreciation and amortization, and employee bonus when 500000 Total expenses 58,514 70 46,474 49 preparing financial statements in accordance with said guidelines, rules and principles. Since the estimates are subject to individual judgment, the actual result 902001 Net profit before income may vary. tax 24,953 30 47,353 51 (2) Standards in differentiating current and non-current assets and liabilities Current assets include cash and cash equivalents, assets held for trading, and 551000 Income tax expenses (Note assets estimated to be realized within 12 months as of the balance sheet date. Fixed 2) ( 4,242 ) ( 5 ) ( 8,327 ) ( 9 ) assets, intangible assets, and any assets other than current assets are included in non-current items. Current liabilities are debts incurred for trading and to be paid off within 12 months as of the balance sheet. Any liabilities other than current 902005 Net profit of current period $ 20,711 25 $ 39,026 42 liabilities are classified as non-current items.

(3) Cash equivalents

Cash equivalents are commercial paper cashable and matured upon expiration The notes attached shall constitute an integral part of this financial statement. of three months as of the investment date, bank acceptance, and RP investment at (Refer to Auditor’s Report presented by Deloitte & Touche dated March 8, 2012) book value similar to fair value. (4) Allowance for bad debt The allowance for bad debts is estimated based on the collectability of receivable notes, receivable accounts, and balance of other receivable accounts-end. As described in Note 3 to the financial statements, the Bank has adopted the Chairman: Jin-Fong Soo President: Jyun-Sheng Li Chief accountant: Yi-Ying, Jhong third revised article of SFAS No. 34 “Accounting for Financial Instruments”, which includes original account receivable. Therefore, the Bank evaluates whether there is any sign of impairment for accounts receivable on each balance sheet date. If there is

-222 222 - - 223 - Taichung Commercial Bank Co., Ltd. Notes to financial statements of securities dept. 2011 and 2010 (In Thousands of New Taiwan Dollars, unless otherwise specified)

1. Organization, Functions and Operations The Bank’s Securities Department obtained the securities brokerage license issued by the competent authority on July 31, 1989 and formally started operation on August 12, 1989. Furthermore, Yuanlin Securities Branch, Taipei Securities Branch, and Jhongli Securities Branch were established in 2011 upon approval of the competent authority. The main business is to buy or sell marketable securities and securities lending or borrowing in the stock exchange market or its business office upon customers’ commission. As of Dec. 31, 2011, its appropriation working fund has been NTD800,000 thousand. As of December 31, 2011 and 2010, numbers of employees of the Securities Dept. were 72 persons and 26 persons, respectively. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of Securities Dept. have been prepared in conformity with the “Rules Governing the Preparation of Financial Statements of Securities Firms”, “Business Accounting Act”, “Regulation on Business Entity Accounting Handling”, and accounting principles generally accepted. The Bank’s significant accounting policies are summarized as follows: (1) Accounting estimates It is necessary to apply reasonable estimates to provide financial asset valuation, allowance for bad debt, depreciation and amortization, and employee bonus when preparing financial statements in accordance with said guidelines, rules and principles. Since the estimates are subject to individual judgment, the actual result may vary. (2) Standards in differentiating current and non-current assets and liabilities Current assets include cash and cash equivalents, assets held for trading, and assets estimated to be realized within 12 months as of the balance sheet date. Fixed assets, intangible assets, and any assets other than current assets are included in non-current items. Current liabilities are debts incurred for trading and to be paid off within 12 months as of the balance sheet. Any liabilities other than current liabilities are classified as non-current items. (3) Cash equivalents Cash equivalents are commercial paper cashable and matured upon expiration of three months as of the investment date, bank acceptance, and RP investment at book value similar to fair value. (4) Allowance for bad debt The allowance for bad debts is estimated based on the collectability of receivable notes, receivable accounts, and balance of other receivable accounts-end. As described in Note 3 to the financial statements, the Bank has adopted the third revised article of SFAS No. 34 “Accounting for Financial Instruments”, which includes original account receivable. Therefore, the Bank evaluates whether there is any sign of impairment for accounts receivable on each balance sheet date. If there is

- 223 - objective evidence showing that estimated cash flows in the future for original Upon the scrapping or sale of fixed assets, the related cost and cumulative accounts receivable are affected due to a single or several event(s) occurring after depreciation shall be written off, and any related income is charged to non-operating recognition of original accounts receivable, the accounts receivable are considered revenue in the year and any related loss is charged to non-operating expenses in the impaired. Objective evidence for impairment may include: year. 1. The debtor encounters significant financial difficulties; or (8) Deferred charges 2. Accounts receivable are overdue; or Deferred charges are stated at cost and amortized on a straight-line basis over 3. Probability of debtor declaring bankruptcy or undertaking other financial five years. restructuring. (9) Impairment of Assets After certain receivables are individually evaluated and indicate no sign of According to the Statement of Financial Accounting Standards No. 35 on impairment, the entire credit portfolio is evaluated for impairment. Objective Accounting Principles on Asset Impairment, it is necessary to evaluate the balance evidence of impairment for the portfolio of accounts receivable may include the sheet date for whether there is any sign showing that assets (including individual historical collection experience of the Bank, increase of delayed payment of the assets or cash generation units) might suffer material impairment. If there is, it is portfolio, and changes in observable national or regional economic situations relating necessary to evaluate the collectable amount of the assets. If their book value to default on accounts receivable. exceeds the collectable amount, a loss on asset impairment shall be recognized. Impairment loss to be recognized is the difference between the carrying value of Where the loss on asset impairment does not exist, or is decreased, the gain reversed the asset and the estimated future cash flow (has reflected the effect of collateral or from asset impairment shall be recognized insofar as it does not exceed the originally guarantee) discounted at the original effective interest rate of accounts receivable. recognized impairment loss, provided that the book value upon reversal shall not The carrying value of accounts receivable is reduced through a valuation allowance exceed the book value of the assets less depreciation or amortization to be item. When accounts receivable are unrecoverable, the relevant allowance account provisioned when no impairment losses of the assets are recognized. should be written off. Subsequent recovery of any account written off is credited to (10) Debit (credit) items for trade brokerage the valuation allowance item. A change in the carrying value of the valuation The relevant titles for brokerage trading include debit items for trade brokerage allowance item is recognized as bad debt loss. (bank deposits-settlement accounts receivable price of securities purchased for (5) Securities receivable financing customers, receivable accounts for settlement and margin trading) and credit items Financing to investors who buy stock and securities shall be stated as securities for trade brokerage (payable price of securities sold for customers, payable receivable financing in the transaction of securities financing. Stock bought by settlement accounts and settlement price). The balance after offsetting debit items investors upon the financing shall be provided as collateral in whole recorded in against credit items shall be recorded. memorandum entries, and be returned to the investors after the investors’ repayment (11) Guarantee deposits received for financing instruments and deposit payable for of the financing. securities financing (6) Held-to-maturity financial assets The guarantee received for financing instruments shall be stated as the Held-to-maturity financial assets shall be stated at cost upon amortization. guarantee deposits received for financing instruments in the transactions of financing When recognizing the held-to-maturity financial assets initially, such assets shall be instruments of marketable securities. The proceeds collected from sale of financing evaluated based on fair value, plus the acquisition or issue price. All regular way instruments (less securities exchange tax, brokerage fee and service fee for financing purchases or sales of financial assets are recognized and derecognized on a trade date instruments) shall be provided as collateral and stated as deposit payable for basis. securities financing. Stock loaned to customers for financing instruments shall be Where there is evidence showing impairment, it shall be stated as the loss of recorded in memorandum entries. Guarantee deposits received for financing impairment. Where the decrease in impairment is obviously related to the events instruments and deposit payable for securities financing shall be returned upon subsequent to recognition of impairment, it shall be reversed and stated as income for customer’s repayment and settlement of the marketable securities. the current period, provided that the book value upon reverse shall be no more than (12) Reserve for default loss the cost after amortization if the impairment is not recognized. Securities firms engaging in brokerage trading of marketable securities are (7) Fixed assets required to provide 0.0028% of the monthly transaction volume as the default loss provision until the balance of this provision reaches $200,000 thousand. Fixed assets are stated at acquisition or construction costs less cumulative depreciation. Major updates and improvements are treated as capital spending. In accordance with Directive Jin-Guan-Yin-Fa-Zi No. 10010000440 and Routine repair and maintenance expenditures are expensed during the year of Directive Jin-Guan-Zheng-Quan-Zi No. 09900738571, effective January 1, 2011, incursion. Depreciation thereof is provided using the average method and in “Reserve for trading loss” and “Reserve for default loss” should be transferred as accordance with the useful life provided in the Table of Service Life of Fixed assets special reserve. promulgated by Executive Yuan. (13) Recognition of revenue

- 224224 - - 225 - Upon the scrapping or sale of fixed assets, the related cost and cumulative depreciation shall be written off, and any related income is charged to non-operating revenue in the year and any related loss is charged to non-operating expenses in the year. (8) Deferred charges Deferred charges are stated at cost and amortized on a straight-line basis over five years. (9) Impairment of Assets According to the Statement of Financial Accounting Standards No. 35 on Accounting Principles on Asset Impairment, it is necessary to evaluate the balance sheet date for whether there is any sign showing that assets (including individual assets or cash generation units) might suffer material impairment. If there is, it is necessary to evaluate the collectable amount of the assets. If their book value exceeds the collectable amount, a loss on asset impairment shall be recognized. Where the loss on asset impairment does not exist, or is decreased, the gain reversed from asset impairment shall be recognized insofar as it does not exceed the originally recognized impairment loss, provided that the book value upon reversal shall not exceed the book value of the assets less depreciation or amortization to be provisioned when no impairment losses of the assets are recognized. (10) Debit (credit) items for trade brokerage The relevant titles for brokerage trading include debit items for trade brokerage (bank deposits-settlement accounts receivable price of securities purchased for customers, receivable accounts for settlement and margin trading) and credit items for trade brokerage (payable price of securities sold for customers, payable settlement accounts and settlement price). The balance after offsetting debit items against credit items shall be recorded. (11) Guarantee deposits received for financing instruments and deposit payable for securities financing The guarantee received for financing instruments shall be stated as the guarantee deposits received for financing instruments in the transactions of financing instruments of marketable securities. The proceeds collected from sale of financing instruments (less securities exchange tax, brokerage fee and service fee for financing instruments) shall be provided as collateral and stated as deposit payable for securities financing. Stock loaned to customers for financing instruments shall be recorded in memorandum entries. Guarantee deposits received for financing instruments and deposit payable for securities financing shall be returned upon customer’s repayment and settlement of the marketable securities. (12) Reserve for default loss Securities firms engaging in brokerage trading of marketable securities are required to provide 0.0028% of the monthly transaction volume as the default loss provision until the balance of this provision reaches $200,000 thousand. In accordance with Directive Jin-Guan-Yin-Fa-Zi No. 10010000440 and Directive Jin-Guan-Zheng-Quan-Zi No. 09900738571, effective January 1, 2011, “Reserve for trading loss” and “Reserve for default loss” should be transferred as special reserve. (13) Recognition of revenue

- 225225 - 1. Brokerage fee revenue shall be recognized on the trading date of brokerage 7. Fixed assets trading. 2011 2010 2. The interest revenue from financing instrument of marketable securities shall Transportation Transportation and and be recognized on an accrual basis in the duration of financing. communication Miscellaneous communication Miscellaneous (14) Corporate Income Tax equipment equipment Total equipment equipment Total Cost Intra-period tax allocation is made for corporate income tax based on the Balance, department’s income. beginning $ 238 $ 9,764 $ 10,002 $ 223 $ 8,958 $ 9,181 (15) Significant undertaking or contingent liabilities Increase 795 12,305 13,100 15 1,098 1,113 Decrease - ( 767 ) ( 767 ) - ( 292 ) ( 292 ) If assets are very likely to have already impaired or generated liabilities on the Balance, ending 1,033 21,302 22,335 238 9,764 10,002 balance sheet date and it is possible to estimate the reasonable loss, it shall be recognized as a loss for the current period. If the loss is very likely to have already 2011 2010 been caused but it is impossible to estimate the loss, it shall be disclosed in the notes Transportation Transportation to the financial statement. and and communication Miscellaneous communication Miscellaneous (16) Appropriation working fund equipment equipment Total equipment equipment Total The working fund appropriated to Securities Dept. if the Bank assumes Accumulated securities brokerage concurrently. depreciation Balance, 3. Reasons and effects of changes in accounting principles beginning $ 115 $ 4,682 $ 4,797 $ 77 $ 3,645 $ 3,722 Accounting for financial instruments Increase 70 1,946 2,016 38 1,329 1,367 Decrease - ( 757 ) ( 757 ) - ( 292 ) ( 292 ) Effective January 1, 2011, the Bank adopted revised SFAS No. 34 “Accounting for Balance, ending 185 5,871 6,056 115 4,682 4,797 Financial Instruments”. Main revisions include: (1) the application of SFAS No. 34 to Net, ending $ 848 $ 15,431 $ 16,279 $ 123 $ 5,082 $ 5,205 original loans and receivables; (2) a new regulation concerning impairment of financial assets measured at amortized cost when related conditions are revised at financial 8. Business guarantee difficulties; and (3) the debtor’s accounting treatment when debt terms are revised. This accounting change had no significant impact on 2011 net income. December 31, 2011 December 31, 2010 4. Cash and cash equivalents Securities Brokerage business December 31, 2011 December 31, 2010 security bond $ 80,000 $ 50,000 Current deposits $ 5,446 $ 18,495 Financing and financing instrument security bond 50,000 50,000 5. Accounts receivable $ 130,000 $ 100,000 December 31, 2011 December 31, 2010 Interests receivable $ 9,260 $ 10,624 (1) According to the Regulations Governing Securities Firms, a securities firm, upon Other receivables 670 1,435 incorporation, shall lodge an operation bond of NTD50,000 thousand for the 9,930 12,059 headquarters and of NTD10,000 thousand for each branch with the designated bank Less: allowance for bad debt - - in cash, government bonds, or bank debentures. $ 9,930 $ 12,059 (2) According to Regulations Governing the Conduct of Securities Trading Margin Purchase and Short Sale Operations by Securities Firms, a securities firm shall lodge

an operation bond NTD50,000 thousand for securities trading margin purchase and 6. Held-to-maturity financial assets short sale operations. December 31, 2011 December 31, 2010 Government bonds $ 324,540 $ 355,918

- 226226 - - 227 - 7. Fixed assets 2011 2010 Transportation Transportation and and communication Miscellaneous communication Miscellaneous equipment equipment Total equipment equipment Total Cost Balance, beginning $ 238 $ 9,764 $ 10,002 $ 223 $ 8,958 $ 9,181 Increase 795 12,305 13,100 15 1,098 1,113 Decrease - ( 767 ) ( 767 ) - ( 292 ) ( 292 ) Balance, ending 1,033 21,302 22,335 238 9,764 10,002

2011 2010 Transportation Transportation and and communication Miscellaneous communication Miscellaneous equipment equipment Total equipment equipment Total Accumulated depreciation Balance, beginning $ 115 $ 4,682 $ 4,797 $ 77 $ 3,645 $ 3,722 Increase 70 1,946 2,016 38 1,329 1,367 Decrease - ( 757 ) ( 757 ) - ( 292 ) ( 292 ) Balance, ending 185 5,871 6,056 115 4,682 4,797 Net, ending $ 848 $ 15,431 $ 16,279 $ 123 $ 5,082 $ 5,205

8. Business guarantee December 31, 2011 December 31, 2010 Securities Brokerage business security bond $ 80,000 $ 50,000 Financing and financing instrument security bond 50,000 50,000 $ 130,000 $ 100,000

(1) According to the Regulations Governing Securities Firms, a securities firm, upon incorporation, shall lodge an operation bond of NTD50,000 thousand for the headquarters and of NTD10,000 thousand for each branch with the designated bank in cash, government bonds, or bank debentures. (2) According to Regulations Governing the Conduct of Securities Trading Margin Purchase and Short Sale Operations by Securities Firms, a securities firm shall lodge an operation bond NTD50,000 thousand for securities trading margin purchase and short sale operations.

- 227227 - 9. Settlement security bond 11. Debit (credit) items for trade brokerage - net December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010 TSEC settlement payment fund $ 17,621 $ 8,454 Debit items for trade brokerage: GreTai Securities Market Receivable price of securities settlement fund 8,507 3,812 purchased for customers $ 120,829 $ 335,716 $ 26,128 $ 12,266 Receivable accounts of sale for customers 108,849 227,623

(1) According to the “Regulations Governing Joint-Responsibility Settlement Fund of 229,678 563,339 TSEC”, a securities firm shall allocate the settlement fund in the following manners: Credit items for trade brokerage: 1. Prior to starting business, the securities broker shall lodge NTD15,000 Payable price of securities sold thousand, and continue lodging the amount within 10 days at the end of each for customers ( 108,357 ) ( 226,616 ) quarter when the brokerage trading amount reaches the specific rate after starting business. After the year following business start, the amount to be Payable accounts of purchase lodged shall be reduced to NTD7,000 thousand, and calculated based on said for customers ( 120,658 ) ( 335,245 ) proportion subject to the brokerage trading amount in the preceding year, per ( 229,015 ) ( 561,861 ) year, to lodge the deficit to or receive overpayment from TSEC before January 31 of each year. Debit items for trade brokerage - net $ 663 $ 1,478 2. Whenever adding a branch, the securities firm shall lodge the settlement fund NTD3,000 thousand to TSEC prior to starting business. Notwithstanding, after the year following business start, the amount to be lodged shall be 12. Other payables reduced to NTD2,000 thousand. December 31, 2011 December 31, 2010 (2) According to the “Regulations Governing Joint-Responsibility Settlement Fund of GTSM”, the securities broker’s head office shall lodge the settlement fund of Payable income tax $ 4,242 $ 8,327 NTD3,000 thousand. When a new branch is set up, a fund of NTD1,500 thousand Accrued expenses 4,433 4,361 should be paid before business start. However, from the next year after business start, the original amount paid reduces to NTD1,000 thousand. And a settlement fund shall Others 343 787 be continually lodged in accordance with a certain percentage of the transaction $ 9,018 $ 13,475 amount of securities transactions upon customers’ commission.

(3) According to the “GTSM Regulations Governing the Electronic Bond Trading System Bond Payment and Settlement Reserve”, the head office of the securities firm 13. Reserve for default loss engaged in trading of bonds in Electronic Bond Trading System (EBTS) shall pay the 2011 2010 minimum reserve in full in cash. Balance, beginning $ 23,507 $ 21,878 10. Deferred charges Deposit in the current period - 1,629 2011 2010 Write off in the current period ( 23,507 ) - Balance, beginning $ 6,497 $ 6,707 Balance, ending $ - $ 23,507 Increase 13,393 1,601

Amortization in the current period ( 2,654 ) ( 1,811 ) In accordance with Directive Jin-Guan-Yin-Fa-Zi No. 10010000440 and Directive Balance, ending $ 17,236 $ 6,497 Jin-Guan-zheng-Quan-Zi No. 0990073857, effective January 1, 2011, reserve for default loss is transferred as special reserve. However, the Securities Department is the concurrently operating securities firm of the Bank, therefore, internal transaction is written off.

- 228228 - - 229 - 11. Debit (credit) items for trade brokerage - net December 31, 2011 December 31, 2010 Debit items for trade brokerage: Receivable price of securities purchased for customers $ 120,829 $ 335,716 Receivable accounts of sale for customers 108,849 227,623 229,678 563,339 Credit items for trade brokerage: Payable price of securities sold for customers ( 108,357 ) ( 226,616 ) Payable accounts of purchase for customers ( 120,658 ) ( 335,245 ) ( 229,015 ) ( 561,861 ) Debit items for trade brokerage - net $ 663 $ 1,478

12. Other payables December 31, 2011 December 31, 2010 Payable income tax $ 4,242 $ 8,327 Accrued expenses 4,433 4,361 Others 343 787 $ 9,018 $ 13,475

13. Reserve for default loss 2011 2010 Balance, beginning $ 23,507 $ 21,878 Deposit in the current period - 1,629 Write off in the current period ( 23,507 ) - Balance, ending $ - $ 23,507

In accordance with Directive Jin-Guan-Yin-Fa-Zi No. 10010000440 and Directive Jin-Guan-zheng-Quan-Zi No. 0990073857, effective January 1, 2011, reserve for default loss is transferred as special reserve. However, the Securities Department is the concurrently operating securities firm of the Bank, therefore, internal transaction is written off.

- 229229 - 14. Employee expenses, depreciation, depletion, and amortization 2011 2010 (2) Securities Dept. applies the following methods and hypotheses for the valuation of Employee expenses fair value of financial instruments: Salaries and wages $ 22,979 $ 18,697 1. The Book Value of short-term financial instruments stated in the balance sheet Labor insurance and national shall be the fair value of such instruments. The reason is that the maturity health insurance 1,932 1,444 date of these instruments is close and it would be reasonable to use the Book Pension expenses 895 565 Value in the valuation of fair value. This method is applied to cash and cash equivalents, receivable accounts, securities receivable financing, refinancing Other employee expenses 868 517 deposit receivable, guarantee deposits received for financing instruments, Depreciation expenses 2,016 1,367 deposit payable for securities financing, other payables (exclusive of payable Amortization expenses 2,654 1,811 income tax), and debit (credit) items for trade brokerage. 2. The open market price of held-to-maturity financial assets, if any, shall be the 15. Important transactions with stakeholders: fair value of such assets. Where there is no such market price available, the fair value shall be estimated using the evaluation method. The estimation and December 31, December 31, hypotheses used in the evaluation method adopted by the Bank’s Securities Name Title 2011 2010 Dept. are identical to information regarding the estimation and hypotheses Taichung Commercial Balance of $ 88,738 $ 57,955 applied by market participants in setting the price of the financial instruments, Bank Co., Ltd. inter-branch and such information is available to the Bank’s Securities Dept. transactions 3. The book value of operation bond, settlement fund, and inter-branch transaction shall be the fair value thereof. Brokerage fees generated from brokerage trading between Securities Dept. and (3) The fair value of financial assets and financial liabilities is determined by open Treasury Dept. is the adjustment of inter-branch transactions. The trading price thereof market quotation and evaluated using the evaluation method: is not materially different from that offered to the general customers. Determined by open market Evaluated under evaluation 16. Pledged assets quotation method The pledged assets of Securities Dept. are stated as follows: December December December December 2011 2010 31, 2011 31, 2010 31, 2011 31, 2010 Held-to-maturity financial Financial assets assets-government bond $ 130,000 $ 100,000

Securities Brokerage business security bond Held-to-maturity financial assets $ 326,853 $ 360,156 $ - $ - 17. Significant undertaking or contingent liabilities: None 18. Significant disaster loss: None 19. Information regarding transactions of derivatives: None (4) The financial assets recognized in December 31, 2011 and 2010 based on the changes in fair value estimated under interest rate changes were NTD324,540 20. Significant subsequent events: None thousand and NTD355,918 thousand. 21. Disclosure of financial instruments (5) Securities Dept.’s total interest revenues of financial instruments other than those at (1) Information regarding fair value fair value, and those at fair value through income statement, in 2011 and 2010 were December 31, 2011 December 31, 2010 NTD25,115 thousand and NTD26,680 thousand. The total interest expenses thereof Non-financial derivatives Book Value Fair value Book Value Fair value were NTD10 thousand and NTD42 thousand. Assets (6) Information regarding financial risk: Financial assets at fair value equivalent to Book 1. Market Risk Value $ 482,528 $ 482,528 $ 531,103 $ 531,103 The equity securities and instruments contracts traded by Securities Dept. Held-to-maturity financial are evaluated based on fair value and increased/decreased subject to the assets 324,540 326,853 355,918 360,156 variation in evaluation parameters, e.g. object market price, market interest rate Liabilities and maturity date, and risk exposure reduced by hedging strategies. Financial liabilities at fair value equivalent to Book 2. Credit Risk Value 16,936 16,936 29,743 29,743 The source of credit risk is brokerage trading. Prior to the transaction, Securities Dept. will evaluate the trading counterpart’s credit and invoke the

- 230230 - - 231 -

(2) Securities Dept. applies the following methods and hypotheses for the valuation of fair value of financial instruments: 1. The Book Value of short-term financial instruments stated in the balance sheet shall be the fair value of such instruments. The reason is that the maturity date of these instruments is close and it would be reasonable to use the Book Value in the valuation of fair value. This method is applied to cash and cash equivalents, receivable accounts, securities receivable financing, refinancing deposit receivable, guarantee deposits received for financing instruments, deposit payable for securities financing, other payables (exclusive of payable income tax), and debit (credit) items for trade brokerage. 2. The open market price of held-to-maturity financial assets, if any, shall be the fair value of such assets. Where there is no such market price available, the fair value shall be estimated using the evaluation method. The estimation and hypotheses used in the evaluation method adopted by the Bank’s Securities Dept. are identical to information regarding the estimation and hypotheses applied by market participants in setting the price of the financial instruments, and such information is available to the Bank’s Securities Dept. 3. The book value of operation bond, settlement fund, and inter-branch transaction shall be the fair value thereof. (3) The fair value of financial assets and financial liabilities is determined by open market quotation and evaluated using the evaluation method: Determined by open market Evaluated under evaluation quotation method December December December December 31, 2011 31, 2010 31, 2011 31, 2010 Financial assets Held-to-maturity financial assets $ 326,853 $ 360,156 $ - $ -

(4) The financial assets recognized in December 31, 2011 and 2010 based on the changes in fair value estimated under interest rate changes were NTD324,540 thousand and NTD355,918 thousand. (5) Securities Dept.’s total interest revenues of financial instruments other than those at fair value, and those at fair value through income statement, in 2011 and 2010 were NTD25,115 thousand and NTD26,680 thousand. The total interest expenses thereof were NTD10 thousand and NTD42 thousand. (6) Information regarding financial risk: 1. Market Risk The equity securities and instruments contracts traded by Securities Dept. are evaluated based on fair value and increased/decreased subject to the variation in evaluation parameters, e.g. object market price, market interest rate and maturity date, and risk exposure reduced by hedging strategies. 2. Credit Risk The source of credit risk is brokerage trading. Prior to the transaction, Securities Dept. will evaluate the trading counterpart’s credit and invoke the

- 231231 - credit rating issued by an external organization. Meanwhile, Securities Dept. 25. Information regarding investees will set the trading limit with respect to the trading counterparts or customers No. Item Remark of different credit ratings to control the default loss, if any. 3. Liquidity Risk 1 Information regarding investee’s name and location, et al. None The transactions conducted by Securities Dept. are of specific liquidity in 2 Loans to others by investee None the market and, therefore, the liquidity risk is low. The Bank has set the limit 3 Endorsement/guarantee to others by investee None of quantity for the trading objects of marketable securities. Acquisition amount of real estate reaching NTD100 million 4. Cash flow risk estimated under interest rate changes 4 None or more than 20% of the Paid-in capital. The bond investment by Securities Dept. is investment at fixed interest rate. Therefore, the fluctuation in market interest rate will not vary the Disposition amount of real estate reaching NTD100 million 5 None effective interest rate of bond investment or cause fluctuation in future cash or more than 20% of the Paid-in capital. flow. Total discount of service charges in transaction with 6 None (7) Information regarding concentrated credit risk stakeholder reaching more than NTD5 million. Securities Dept. did not concentrate any transactions of marketable securities on Accounts receivable-stakeholder reaching NTD100 million any specific object or trading counterpart. In addition to regulations defined by the 7 None or more than 10% of the Paid-in capital. securities competent authority, it also defines its own management regulations providing that concentrated transactions shall exceed the specific ratio or limit. 22. Others: None 26. Information regarding investment in the territory of mainland china: None 23. Financial information for operating segments The Bank's Securities Dept. primarily engages in brokerage trading. The income and identifiable assets account for more than 90% of the consolidated income and assets of Securities Dept. Therefore, it is not necessary to disclose the information by operating segments. 24. Information regarding important transactions No. Item Remark 1 Loans to others. None 2 Endorsements/guarantees to others. None Acquisition amount of real estate reaching NTD100 million 3 None or more than 20% of the Paid-in capital. Disposition amount of real estate reaching NTD100 million 4 None or more than 20% of the Paid-in capital. Total discount of service charges in transaction with 5 None stakeholder reaching more than NTD5 million. Accounts receivable-related party reaching NTD100 million 6 None or more than 20% of the Paid-in shares capital.

- 232232 - - 233 - 25. Information regarding investees No. Item Remark 1 Information regarding investee’s name and location, et al. None 2 Loans to others by investee None 3 Endorsement/guarantee to others by investee None Acquisition amount of real estate reaching NTD100 million 4 None or more than 20% of the Paid-in capital. Disposition amount of real estate reaching NTD100 million 5 None or more than 20% of the Paid-in capital. Total discount of service charges in transaction with 6 None stakeholder reaching more than NTD5 million. Accounts receivable-stakeholder reaching NTD100 million 7 None or more than 10% of the Paid-in capital.

26. Information regarding investment in the territory of mainland china: None

- 233 - Stock Code: 2812

Declaration Statement

The companies to be included by the Bank into the consolidated financial statements of affiliates, in accordance with the “Criteria Governing Preparation of Report on Affiliations, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” in 2011 (from Jan. 1 to Dec. 31, 2011) are identical to those to be included into the consolidated financial statements of Parent enterprise and subsidiaries prepared under Statement of Financial Accounting Standards No. 7 on “Consolidated Financial Statements”. As well, the information to be disclosed in the consolidated financial statements of affiliated enterprises has been disclosed in said consolidated financial statements of Parent enterprise and subsidiaries. Therefore, the Bank will not prepare the consolidated financial statements of affiliated enterprises separately. In witness thereof, the Declaration is hereby presented.

Taichung Commercial Bank Co., Ltd. and Subsidiaries

Consolidated Financial Statements and External Auditor’s Audit Report 2011 and 2010 Taichung Commercial Bank Co., Ltd.

Responsible person: Jin-Fong Soo

March 8, 2012

Address: No. 87, Min Chuan Road, West District, Taichung City, TEL : (04) 22236021

- 234 - - 235 - Declaration Statement

Taichung Commercial Bank Co., Ltd.

Responsible person: Jin-Fong Soo

March 8, 2012

- 235 - Auditor’s Report In our opinion, based on our audit result and the other auditors’ report, the financial statements referred to in the first paragraph present fairly, in all material respects, the consolidated Financial Status of the Bank and its subsidiaries as of December 31, 2011 and 2010, To: Taichung Commercial Bank Co., Ltd. and their consolidated operations results and cash flows for the years then ended in conformity with the “Rules Governing the Preparation of Financial Statements of Public Issued Banks” and We have audited the accompanying consolidated balance sheet of Taichung Commercial generally accepted accounting principles in the Republic of China. Bank Co., Ltd. and its subsidiaries as of December 31, 2011 and 2010, and the related As described in Note 3 to the financial statements, Taichung Commercial Bank Co., Ltd. consolidated statements of income, consolidated statement of changes in shareholders’ equity and its subsidiaries, since January 1, 2011, have adopted revised SFAS No. 34 “Accounting for and consolidated statement of cash flows for the years then ended. Said financial statements are Financial Instruments” and newly issued SFAS No. 41 “Disclosure of Operating Segments” and the responsibility of the Bank’s management. Our responsibility is to express an opinion on the adopted early the provision concerning the grant date for capital increase by cash retained for consolidated financial statement based on our audits. Among the investees evaluated under the subscription by employees stated in Letter (2012) Ji-Mi-zi No. 038 issued by Accounting equity method as identified in said consolidated financial statements, the financial statement of Research and Development Foundation. Reliance Securities Investment Trust Co., Ltd. was audited by a third party auditor instead of by our firm. Therefore, our opinion on the values stated by Reliance Securities Investment Trust Co., Ltd. in said consolidated financial statements was made based on another auditor’s report. The equity investment of Reliance Securities Investment Trust Co., Ltd. under equity method was NT$127,811 thousand and NT$144,073 thousand on December 31, 2011 and 2010, accounting for 0.03% and 0.04% of total consolidated assets. The net equity investment of Reliance Securities Investment Trust Co., Ltd. recognized under equity method from January 1 Deloitte & Touche to December 31 2011 and 2010 were NT$(10,262) thousand and NT$4,085 thousand, accounting Wun-Ya Syu, CPA Zih-Jyun Wang, CPA for (0.53)% and 0.47% of the consolidated income before income tax.

We conducted our audit in accordance with the “Guidelines for Certified Public

Accountants’ Examination and Reports on Financial Statements”, and generally accepted auditing standards in the Republic of China. Those standards require that we plan and perform SFC Approval Document No. SFC Approval Document No. the audit to obtain reasonable assurance as to whether the consolidated financial statement is free Tai- Cai-Jheng (6) No. 0920123784 Tai- Cai-Jheng (6) No. 0920123784 of material misstatement. An audit includes examining, through random sampling, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit and the other auditors' report may provide a reasonable basis for our opinion. March 8, 2012

- 236 - - 237 - In our opinion, based on our audit result and the other auditors’ report, the financial statements referred to in the first paragraph present fairly, in all material respects, the consolidated Financial Status of the Bank and its subsidiaries as of December 31, 2011 and 2010, and their consolidated operations results and cash flows for the years then ended in conformity with the “Rules Governing the Preparation of Financial Statements of Public Issued Banks” and generally accepted accounting principles in the Republic of China. As described in Note 3 to the financial statements, Taichung Commercial Bank Co., Ltd. and its subsidiaries, since January 1, 2011, have adopted revised SFAS No. 34 “Accounting for Financial Instruments” and newly issued SFAS No. 41 “Disclosure of Operating Segments” and adopted early the provision concerning the grant date for capital increase by cash retained for subscription by employees stated in Letter (2012) Ji-Mi-zi No. 038 issued by Accounting Research and Development Foundation.

Deloitte & Touche Wun-Ya Syu, CPA Zih-Jyun Wang, CPA

SFC Approval Document No. SFC Approval Document No. Tai- Cai-Jheng (6) No. 0920123784 Tai- Cai-Jheng (6) No. 0920123784

March 8, 2012

- 237 - Taichung Commercial Bank Co., Ltd. and Subsidiaries Consolidated Balance Sheets December 31, 2011 and 2010 Unit: NTD thousand

Percentage Percentage December 31, 2011 December 31, 2010 December 31, 2011 December 31, 2010 of Variation of Variation Code Assets Amount Amount （%） Code Liabilities and Shareholders’ Equity Amount Amount （%） 11000 Deposits of Central Bank and other banks Cash and cash equivalents (Note 4) $ 8,349,905 $ 4,669,331 79 21000 (Note 16) $ 3,462,519 $ 2,306,957 50

11500 Due from Central Bank of China and other Funds borrowed from CBC and other banks banks (Note 5) 74,267,724 68,612,460 8 21500 (Notes 17 and 30) 2,877,550 1,602,150 80

12000 Financial assets at fair value through profit or Financial liabilities at fair value through profit loss (Note 2, 22000 or loss (Notes 2 6 & 30) 1,096,769 1,646,562 ( 33 ) & 6) 51,804 110,069 ( 53 )

13000 Receivables – net (notes 2, 7, 9, 27 and 22500 RP (Debt) (Notes 2 & 18) - 1,477,800 ( 100 ) 29) 2,868,589 3,373,510 ( 15 ) 23000 Payables (Note 19) 7,721,427 3,908,419 98 13400 Assets held for sale (Notes 2 & 8) 41,639 150,763 ( 72 ) 23500 Deposits and remittances (notes 20 and 29) 333,691,650 302,604,873 10 13500 Discounts and loans – net (Notes 2, 9 and 29) 277,756,366 244,463,233 14 24000 Financial bonds payable (Note 2& 21) 10,512,559 8,300,000 27 14000 Available-for-sale financial assets (Notes 2, 10 and 30) 4,211,580 1,099,035 283 25000 Accruable pension liabilities (notes 2 and 22) 136,764 122,602 12 238 14500 Held-to-maturity financial assets - net (Notes 2, 11 and 30) 9,439,040 10,382,868 ( 9 ) 29500 Other liabilities ( Notes 2 and 23) 328,241 408,742 ( 20 )

15000 Equity investment under equity method (Notes 2 and 12) 127,811 144,073 ( 11 ) 20000 Total liabilities 358,782,514 320,841,612 12

15500 Other financial assets, net (Notes 2, 9 and 13) 850,396 144,453 489 Shareholders' equity of parent (Note 24) 31000 Capital stock 22,338,576 17,319,006 29 Fixed assets, net (Notes 2 & 14) Capital surplus Cost 31501 Stock premiums 569,058 775,256 ( 27 ) 18501 Land 1,619,635 1,573,782 3 31599 Other capital surplus 106,479 16,813 533 18521 Buildings and structures 1,852,015 1,838,114 1 Retained earnings 18541 Transportation and communication equipment 34,821 40,446 ( 14 ) 32001 Legal reserve 723,937 600,350 21 18551 Miscellaneous equipment 1,074,996 1,069,843 - 32003 Special reserve 32,599 16,987 92 Total cost 4,581,467 4,522,185 1 32011 Undistributed earnings 1,455,841 411,956 253 Revaluation increment 605,170 605,170 - 32501 Unrealized appreciations (Note 2) 283,744 283,744 - Less: accumulated depreciation ( 1,858,980 ) ( 1,817,457 ) 2 32523 Unrealized loss on available-for-sale Less: accumulated impairment ( 77,000 ) ( 77,000 ) - financial assets (Note 2) 10,960 ( 9,092 ) 221 18575 Prepayments for equipment 88,550 - - 32544 Net loss not recognized as pension cost 18500 Net 3,339,207 3,232,898 3 (Note 22) ( 60,140 ) - - 30000 Total shareholders’ equity 25,461,054 19,415,020 31 19500 Other assets (Notes 2, 15 and 27) 1,894,542 2,337,446 ( 19 )

10000 Total assets $ 384,243,568 $ 340,256,632 13 Total liabilities and shareholders’ equity $ 384,243,568 $ 340,256,632 13

The notes attached shall constitute an integral part of this consolidated financial statement. (Refer to Auditor’s Report presented by Deloitte & Touche dated March 8, 2012)

Chairman: Jin-Fong Soo Manager: Jyun-Sheng Li Chief accountant: Yi-Ying, Jhong

- 238 - Taichung Commercial Bank Co., Ltd. and Subsidiaries Consolidated Statement of Income Years Ended December 31, 2011 and 2010 Unit: NTD thousand, except Earnings Per Share ($)

Percentage 2011 2010 change Code Amount Amount (%) 41000 Interest revenues (Notes 2 and 29) $ 7,415,723 $ 6,110,218 21

51000 Interest expenses (Notes 2 and 29) ( 2,471,799 ) ( 1,726,604 ) 43

Net interest income 4,943,924 4,383,614 13

Non-interest income 42000 Net income from service fees (Notes 2, 25 and 29) 1,033,579 1,275,813 ( 19 ) 49200 Net (loss) gain on financial assets and liabilities at fair value through profit or loss (Notes 2 & 6) ( 503,030 ) 888,832 ( 157 ) 44000 Net (loss) profit from equity investment under equity method (Notes 2 and 12) ( 10,262 ) 4,085 ( 351 ) 49600 Net gain (loss) on foreign exchange (note 2) 323,494 ( 806,485 ) 140 48063 Net loss on disposal of Fixed assets (Note 2) ( 33,264 ) ( 13,416 ) 148 49700 Gain (loss) on recovery of asset impairment (Notes 2, 7, 8, 11, 13 and 15) 10,741 ( 707,188 ) 102 49805 Net gain from financial assets carried at cost 24,861 21,027 18 58023 Net (loss) gain on disposal of collateral accepted ( 45,657 ) 32,730 ( 239 ) 58089 Other provision (Note 31) ( 5,050 ) ( 483,334 ) ( 99 ) 58099 Other non-interest income (Notes 2 and 23) 40,416 689 5,766

Income - net 5,779,752 4,596,367 26

(Continued on next page)

-239 239 - (Continued from previous page)

Percentage 2011 2010 change Code Amount Amount (%) 51500 Bad debts expense (Notes 2 and 9) ( $ 664,948 ) ( $ 933,359 ) ( 29 )

Operating expenses (Note 26) 58500 Employee expenses ( 1,943,884 ) ( 1,792,287 ) 8 59000 Depreciation and amortization expenses ( 141,526 ) ( 159,153 ) ( 11 ) 59500 Business and administrative expenses ( 1,096,107 ) ( 835,574 ) 31 Total operating expenses ( 3,181,517 ) ( 2,787,014 ) 14

61001 Income before income tax 1,933,287 875,994 121

61003 Income tax expenses (Notes 2 & 27) ( 479,287 ) ( 464,038 ) 3

69000 Net income of current period $ 1,454,000 $ 411,956 253

Attributable to: 69901 Shareholders of parent $ 1,454,000 $ 411,956 253 69903 Minority equity - - - 69900 $ 1,454,000 $ 411,956 253

Code Before After Before After Income Tax Income tax Income Tax Income tax Consolidated EPS (Note 28) 69500 Basic earnings per share $ 1.03 $ 0.79 $ 0.59 $ 0.29 69700 Diluted earnings per share $ 0.99 $ 0.75 $ 0.59 $ 0.29

The notes attached shall constitute an integral part of this consolidated financial statement. (Refer to Auditor’s Report presented by Deloitte & Touche dated March 8, 2012)

Chairman: Jin-Fong Soo Manager: Jyun-Sheng Li Chief accountant: Yi-Ying, Jhong

-240 240 - Taichung Commercial Bank Co., Ltd. and Subsidiaries Consolidated Statement of Changes in Shareholders’ Equity Years Ended December 31, 2011 and 2010 Unit: NTD thousand Other shareholders’ equity Capital stock Capital surplus Retained earnings Unrealized Unrealized gain （loss）from Net loss not Total Common stock Other capital Undistributed Revaluation financial recognized as shareholders’ capital Stock premiums surplus Legal reserve Special reserve earnings increment instruments pension cost equity Balance as of January 1, 2010 $ 13,719,006 $ 750,000 $ 16,813 $ 594,653 $ - $ 22,684 $ 283,744 ( $ 25,897 ) $ - $ 15,361,003

Allocation of earnings 2009 Legal reserve - - - 5,697 - ( 5,697 ) - - - - Special reserve - - - - 16,987 ( 16,987 ) - - - -

Issuance of common stock for cash 3,600,000 ------3,600,000

Recognition of employee stock option compensation cost - 25,256 ------25,256

Available-for-sale financial asset price difference adjustment ------16,805 - 16,805

Consolidated Net income 2010 - - - - - 411,956 - - - 411,956

Balance as of December 31, 2010 17,319,006 775,256 16,813 600,350 16,987 411,956 283,744 ( 9,092 ) - 19,415,020

241 Allocation of earnings 2010 Legal reserve - - - 123,587 - ( 123,587 ) - - - - Special reserve - - - - 9,092 ( 9,092 ) - - - - Reversal of special reserve - - - - ( 16,987 ) 16,987 - - - - Stock dividends 294,423 - - - - ( 294,423 ) - - - -

Issuance of common stock for cash 4,500,000 ------4,500,000

Capital surplus transferred to capital 225,147 ( 225,147 ) ------

Equity component of convertible financial bonds - - 83,039 ------83,039

Recognition of employee stock option compensation cost - 18,949 6,627 ------25,576

Available-for-sale financial asset price difference adjustment ------20,052 - 20,052

Default loss reserve transferred as special reserve - - - - 23,507 - - - - 23,507

Net loss not recognized as pension cost ------( 60,140 ) ( 60,140 )

2011 Consolidated net income - - - - - 1,454,000 - - - 1,454,000

Balance as of December 31, 2011 $ 22,338,576 $ 569,058 $ 106,479 $ 723,937 $ 32,599 $ 1,455,841 $ 283,744 $ 10,960 ( $ 60,140 ) $ 25,461,054

The notes attached shall constitute an integral part of this consolidated financial statement. (Refer to Auditor’s Report presented by Deloitte & Touche dated March 8, 2012) Chairman: Jin-Fong Soo Manager: Jyun-Sheng Li Chief accountant: Yi-Ying, Jhong

- 241 - Taichung Commercial Bank Co., Ltd. and Subsidiaries Consolidated Statements of Cash Flow Years Ended December 31, 2011 and 2010 Unit: NTD thousand 2011 2010 Cash flow from operating activities Consolidated income-net $ 1,454,000 $ 411,956 Provision of allowance for bad debts 664,948 933,359 Recovery of bad debts 230,394 232,419 Write-off of non-performing loans ( 553,966 ) ( 1,115,982 ) Provision for reserve accounts - 1,629 Loss (income) of investment under the equity method 10,262 ( 4,085 ) Cash dividends under equity method 6,000 - Available-for-sale financial asset premium/discount amortization 2,599 ( 1,397 ) Gain from disposal of financial assets carried at cost ( 12,327 ) ( 1,365 ) Amortization of premium on held-to-maturity financial assets 64,910 78,522 Amortization of discount on convertible financial bonds 19,518 - Depreciation and amortization (depreciation of assets not for business operation included) 141,634 159,263 Net loss (gain) on disposal of fixed assets , available-for-sale assets and collateral accepted 78,921 ( 19,314 ) Asset impairment loss (reversal gain) ( 10,741 ) 707,188 Deferred income tax expenses 455,370 427,743 Defined benefit pension fund 5,284 ( 6,657 ) Recognition of employee stock option compensation cost 25,576 25,256 Unrealized exchange (gain) loss ( 257,127 ) 1,159,241 Decrease (increase) in operating assets Financial assets-Trading 549,793 ( 1,151,850 ) Accounts receivable 250,908 169,255 Other assets 14,275 641 Increase (decrease) in operating liabilities Financial liabilities-Trading ( 82,185 ) 42,721 Payables 3,813,008 362,023 Other liabilities ( 19,188 ) ( 12,466 ) Net cash inflow from operating activities 6,851,866 2,398,100

(Continued on next page)

242 - 242 - (Continued from previous page)

2011 2010 Proceeds from acquisition of available-for-sale financial assets ( $ 3,119,816 ) ( $ 419,637 ) Redemption of held-to-maturity financial assets 550,000 1,265,385 Proceeds from acquisition of held-to-maturity financial assets - ( 922,079 ) (Increase) decrease in other financial assets ( 116,795 ) 12,590 Proceeds from disposal of Fixed assets , available-for-sale assets and collateral accepted 166,604 217,726 Purchase of Fixed assets and deferred expenses ( 210,872 ) ( 54,521 ) (Increase) decrease in refundable deposits ( 31,859 ) 38,383 Net cash outflow from investing activities ( 41,973,425 ) ( 32,067,232 )

Cash flow from financing activities Issuance of common stock for cash 4,500,000 3,600,000 Increase (decrease) in deposits of Central Bank of China and other banks 1,155,562 ( 4,163,428 ) Increase in due to Central Bank of China and other banks 1,275,400 1,281,850 (Decrease) increase in RP (Debt) ( 1,477,800 ) 1,477,800 Increase in deposits and remittances 31,086,777 26,211,302 Issuance of financial bonds 2,300,000 1,700,000 Decrease in guarantee deposits received ( 37,806 ) ( 9,216 ) Net cash inflow from financing activities 38,802,133 30,098,308

Net increase in cash and cash equivalents 3,680,574 429,176

Balance of cash and cash equivalents, beginning of period 4,669,331 4,240,155

Balance of cash and cash equivalent, end of period $ 8,349,905 $ 4,669,331

Supplementary disclosures of cash flow Interest payment $ 2,419,773 $ 1,635,832 Income tax payment $ 97,512 $ 93,925

Non-cash investing and financing cash flow Undistributed earnings and capital surplus transferred to capital increase $ 519,570 $ -

The notes attached shall constitute an integral part of this consolidated financial statement. (Refer to Auditor’s Report presented by Deloitte & Touche dated March 8, 2012)

Chairman: Jin-Fong Soo Manager: Jyun-Sheng Li Chief accountant: Yi-Ying, Jhon

243 - 243 -

Taichung Commercial Bank Company Limited No. 87, Min Chuan Road, Taichung, Taiwan, R.O.C. Tel.:(04)2223-6021 Website:http://www.tcbbank.com.tw

Company Spokesman Name:Chi-Chuang Fang Taichung Commercial Bank Job title:Executive Vice President Tel.:(04)2223-6021 Email:[email protected]

Acting Spokesman Name:Hsueh-Hsien Liao Job title:Executive Vice President Tel.:(04)2223-6021 Email:[email protected]

Shares Registrar Name:by internal function Address:11F., No. 50, Sec. 1, XinSheng South Road, ZhongZheng District, Taipei, Taiwan, R.O.C. Website:http://www.tcbbank.com.tw Tel.:(02)2395-7388 Credit Rating Agency Chairman : Jin-Fong Soo Name:Fitch Ratings Limited, Taiwan Branch Address:Suite 1306, 13F., No. 205, Tun Hwa N. Road, Taipei, Tawian, R.O.C. Tel.:(02)8175-7600

External Auditors in the Most Recent Year Name of CPA firm:Deloitte & Touche Name of CPA:Wen-Ya Hsu & Tze-Chun Wang, Address:12F., No. 156, MinSheng East Road, Sec. 3, Song Shan District, Taipei, Taiwan, R.O.C. Website:http://www.deloitte.com.tw Tel.:(02)2545-9988

Name of any exchanges where the Company's securities are traded overseas, and the method by which to access information on said offshore securities : None Stock Code:2812

Annual Report 2011 Annual Report 2011

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