2014 Annual Performance Financial Supervisory Commission January 6, 2015 Note: This document has been written in both Chinese and English. In case of any discrepancy between two versions, the Chinese version shall prevail.

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Stock market stimulation plan Quotes for the purchase (or sale) of securities at the limit-up (or limit- down) price Initially adopted for six months; made permanent on March 9, Expansion of short selling at below the previous trading day’s closing price Including around 1200 listed securities/stocks,TDR and ETF Allowing day trading (where the purchase precedes the sale) Further deregulation of day trading (where the sale precedes the purchase) Netted margin purchases and short sales need not be counted against caps on margin and short trades. Maximum leverage for margin trades in OTC securities has been. Caps on the value of total margin purchases and short sales by any single customer have been raised. 3

Stock market stimulation plan Growth rate Daily average trading volume NT$96.4 billionNT$ billion23.7% December 31, 2013December 31, 2014 Increase rate Index8, points9, points8.08% The 2014 closing index was the highest for 25 years

5 Price and volume of Taiwan stock both rose Stock market (TAIEX-Listed and OTC-Listed) value: NT$26.8 trillion on Dec.31, 2013 NT$29.6 trillion on Dec.31, 2014, up by NT$2.8 trillion Stock market stimulation plan Primary Market Weighted Index Technical Index Market Graph

6 Comparison of TAIEX and major international exchanges 101/12/31102/12/31103/12/31 102/1/1~10 2/12/31 % rise or fall 103/1/1 ~103/12/31 % rise or fall TAIEX 7, , , %8.08% Nikkei 10, , , %7.12% HSI 22, , , %1.28% Kospi 1, , , %-4.76% SHI 2, , , %52.87% STI 3, , , %6.24% DJIA 13, , , %7.52% Stock market stimulation plan

7 Comparison of TAIEX and major international exchanges 2013 (1/1 to12/31) daily average turnover 2014 (1/1 to12/31) daily average turnover Amount of increase or decrease % increase or decrease TWSE (NT$) % TSE (Billion YEN) 2, , % HKEX (Million HKD ) 62, , , % KRX (Million WON) 3,993,4223,983,580-9, % SSE (Billion RMB) % SGX (Million SGD ) 1, , % NYSE (Billion USD) % Stock market stimulation plan

Financial support of innovative industries 8 Cultural and creative industries At the end of Nov. 2014, the domestic banks’ loan balance to the cultural and creative industries was NT$250 billion, up by NT$68.3 billion on the NT$181.7 billion of the end of 2013, achieving the annual target early. ( 2014 target was loan increase of NT$50 billion; the target achievement rate was 136.6%.) (business with capitalization under NT$1 million or annual turnover under NT$10 million ） With respect to loans to creative micro-business The Loan balance achieved NT$21.3 billion, an increase of 140% on the NT$8.9 billion at the end of Jan The number of loan increase was 5,391.

－ Fund-raising support for micro-businesses and creative enterprises 9 From opening on Jan. 3, 2014 to the present ：  114 companies applied 105 companies received guidance by the GreTai Securities Market 60 companies registered (16 biomedical companies, 16 electronics companies and 13 cultural and creative companies) One company successfully transformed into a public company  NT$198 million raised

Strengthen business presence in Asia Enhance the insurers’ foreign business investment capability  The insurer may apply for approval by the competent authority a special quota excluded from the 45% foreign investment limit for the insurers. (Amendment to the Insurance Act announced on June 4, 2014) The scope of the foreign business investment expanded to foreign banks, securities firms, trust and bills firms 10

Strengthen business presence in Asia Speeding up of administrative process Eased rules governing applications by banks to set up overseas branch units, adopting an automatic approval system. (Dec. 3, 2013) Expanding bank investment and acquisition capability Amendment of Article 74 of the Banking Act changing investment limitation from 40% of a bank's “paid-in capital” to 40% of its “net worth”. (under examination in the Legislative Yuan) Raised the limit on overseas reinvestment by securities companies Raised the limit on capital loans between the subsidiary businesses of a securities firm from 40% to 100% of net worth (Jun. 18, 2014) 11

Strengthen business presence in Asia Banking industry:  361 overseas bases in Q3 of 2014, with 268 in Asia, or 74% of the total, up by 86 bases on the 182 of Q3, 2013, a 47% increase. Securities industry:  From 2013 to Q4, 2014, securities firms have set up 21 subsidiaries in Asia financial holding companies have been invited to put forward concrete development plans for Asia and the most direct guidance and assistance will be provided with respect to their requirements.

Strong steps to build up Asian presence E.Sun Bank acquired Cambodia’s Union Commercial Bank Plc. (May 27, 2013) 2. Cathay Bank acquired Cambodia’s Singapore Banking Corporation Limited (Sep. 18, 2013) 3. Yuanta Financial Holdings acquired the South Korea’s Tongyang Securities Inc (Jun. 11, 2014) 4. Yuanta Financial Holdings acquired the Tongyang Saving Bank of the Philippines(Jun. 11, 2014) 5. CTBC Bank acquired Japan’s Tokyo Star bank (Jun. 20, 2014) 6. Cathay Life acquired US’s Conning Holding Corporation 7. Cathay Life acquired 40% of stock rights of Indonesia’s Bank Mayapada 8. Cathay FHC invested NT$12.5 billion in acquiring 20% of stock rights of RCBC of the Philippines

Financial import substitution Allow insurers to invest in foreign-denominated bonds (including Formosa bond) without being counted into the cap of 45% limit for insurer’s foreign investments, so as to boost bond market demand. Amendment of the Banking Act and Regulations Governing Issuance of Bank Debentures by Banks, easing restrictions on the issuance of debentures by banks, so as to enhance bond market supply. 14

Allow domestic banks to provide overseas derivative financial product information and consulting services to domestic institutional investors Allow domestic banks’ foreign units to conduct NT Dollar NDF business 15 Financial import substitution

16 International bond scale growth: The issuance amount of international bonds (including Formosa bonds) achieved NT$694.4 billion, up by NT$137.3 billion a total of 406% increase since the deregulation on June 3, Offshore structured product growth ： The average number of new structured products per month has increased to 205, up by 21% on the pre- implementation average of 169. Financial import substitution

Dealing with troubled financial institutions Purpose: to ensure the policyholder right protection and the stability of the financial markets Administrative receiver: The Taiwan Insurance Guaranty Fund was appointed as administrative receiver to conduct subsequent tender offer and accompanying administrative measures. Assistant measures Increased foreign investment limit ( Global Life 35%, Sing for Life 30%) Lifted restrictions in investment in international bonds 17 The receivership of Global Life and Sing For Life insurance companies in Aug, 2014

Banking OBU product negative listing  Fully open in principle, apart from NT$ and complex credit related derivatives. Securities firms allowed to engage in OSU business;17 companies established to date  The scope of OSU business has been expanded and includes securities-related forex business. The Insurers allowed to engage in OIU business  Amendment of the Act Governing International Financial Business; encouraging insurance companies to design and develop attractive insurance products aimed at the different needs of overseas people. 18 FEPZ deregulatory measures

19 From January to November, 2014 DBU profit NT$305 billion Up by NT$61.9, a yearly increase of 25.5% OBU profit NT$81 billion Up by 29.7 billion, a yearly increase of 57.97%

Loan Encouragement to SMEs At the end of Nov. 2014, the domestic banks’ loan balance to SMEs was NT$ trillion up by NT$341.9 billion on the end of 2013 The private enterprise loan balance was 58.6% Overdue Loan Rate was 0.52% The domestic SME loan balance

58.22% 21 Unit ： 100 million NT$; % Loan encouragement to SMEs

Thank you for your attention Any comments are welcome