We can be the best · SME bank. In line with this government policy, the Taiwan Mutual Loans and Savings Co. was reorganized into the Medium Business Bank of Taiwan (later to be known

Stock Code：2834

Taiwan Stock Exchange Market Observation Post System：

http://mops.twse.com.tw

TBB’s annual report is available at：http://www.tbb.com.tw

PUBLISHED IN APRIL 2013

NOTICE TO READERS

This English version annual report is a summary translation of the Chinese version and is not

an official document of the shareholders’ meeting. If there is any discrepancy between the

English version and Chinese version, the Chinese version shall prevail.

Taiwan Business Bank Head Office

Address: No. 30, Ta Cheng St., Taipei, Taiwan, R.O.C. Tel: 886-2-25597171 Web Site: http://www.tbb.com.tw

Spokesperson

Name: Tzeng-Show Lin Title: Executive Vice President Tel: 886-2-25597108 / 886-2-25597171 ext:1211 E-mail Address: [email protected]

Deputy Spokesperson

Name: Yen-Yi Cheng Title: S.V.P & Chief Secretary Tel: 886-2-25505726 / 886-2-25597171 ext: 1511 E-mail Address: [email protected]

Stock Registration Agent

Name: Capital Securities Corp. Address: B2, No. 97, Sec.2, Tun-Hua South Road, Taipei, Taiwan, R.O.C. Tel :886-2- 27023999 Web Site: http://www.capital.com.tw

Rating Agency

Name: Taiwan Ratings Co. Address: 49F, No.7, Sec.5, Xinyi Road., Taipei, Taiwan, R.O.C. Tel: 886-2- 87225800 Web Site: http://www.taiwanratings.com

The CPA-auditor of the Financial Report

Name: Phoebe Chung, Dannie Lee Name of Employer: KPMG Certified Public Accountants Address: 68F, Taipei 101 Tower, No.7, Sec. 5, Xinyi Road, Taipei, Taiwan, R.O.C. Tel: 886-2- 81016666 Web Site: http://www.kpmg.com.tw

Flotation at Overseas Stock Exchange and Information Inquiry: None

We can be the best !

Taiwan Business BankContents

I Message from the Management

II Bank Profile

III Organizational Framework1. Organization Chart

2. Directors information

3. List of major shareholders

4. Operations of Major TBB Units

IV Business Performance in 20121. The Domestic and Overseas Financial Environment

2. Restructure of TBB’s Organization

3. Results of Operating Plans and Strategies

4. Budget Implementation

5. Revenues, Expenditures, and Profitability

6. Research and Development

V Business Plans for 2013 1. Operating Directions and Policies

2. Business Targets

3. Future Development Strategies

4. The impact of intensifying competition 、 government regulations and global economic

5. Results of Latest Credit Rating

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VI Financial Statements1. Independent Auditors' Report

2. Financial Statement in FY2012 and notes to Financial Statement

VII Implementation of Social Responsibility

VIII Directory of Head Office and Branch Units

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Message fromthe ManagementI

Major economic institutions repeatedly lowered their global economic growth forecasts in 2012 under the impact of

the spread of the European debt crisis, the "fiscal cliff" threat in the United States, the cooling of growth in China,

and other factors. Taiwan’s economy too was affected by the international economic slowdown, and export growth

momentum slackened and private consumption and investment willingness weakened. Thanks to the support

of our customers and the efforts of all our staff, however, the Taiwan Business Bank enjoyed growth in both

profitability and business development; our before-tax profit for 2012 reached NT$3.728 billion, an improvement of

14.04% over 2011 and our best profit performance in 13 years.

In 2013 the European debt crisis is gradually coming under control and global economic growth will likely stabilize.

These factors, together with the continued economic improvement in the U.S. and China, are boosting Taiwan's

export momentum; and, with the steady recovery of domestic demand, the island's economy is obviously on the

road to recovery. The government has also been implementing the upgrading of the domestic financial market

to international norms in recent years, along with the orderly promotion of the financial business between the

two sides of the Taiwan Strait, and these efforts will expand the space for development of the banking business.

TBB will extend the profit growth momentum we enjoyed last year by continuously strengthening our operating

performance and enlarging our deposit-loan interest gap and fee income in order to reach our profit growth target

and realize our four major operating principles—the pursuit of business performance, upgrading of employee

value-added, emphasis on shareholder rights, and fulfillment of corporate social responsibility—as we advance

vigorously toward the ranks of superior banks and create an outstanding record.

Tsan- Chang LiaoChairman

President

Tien- Chang Huang

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Bank ProfileII

1. Establishment and HistoryThe forerunners of the Taiwan Business Bank were two private cooperative savings institutions, one established in

Taipei in June of 1915 and the other in Tainan the following month. The Taipei institution was merged into another

company in 1920 and the Tainan institution was reorganized under a different name in 1926.

Following the restoration of Taiwan to China on Oct. 25, 1945, these two savings institutions, along with two others,

were taken over by the Taiwan Provincial Government and, on Sep. 1, 1946 were combined and reorganized into

the Taiwan Mutual Financial Co. On May 31 the following year this new financial institution absorbed the Tokiwa

Real Estate Co., bringing its capitalization to NT$10 million. Its name was changed to the Taiwan Provincial Loans

and Savings Co. on June 1, 1947 and again to the Taiwan Mutual Loans and Savings Co. in January 1948.

The government moved to promote Taiwan's economic development and boost the growth of its small and medium

enterprises (SMEs) in 1975 by revising the Banking Law and writing in an additional provision for a specialized

SME bank. In line with this government policy, the Taiwan Mutual Loans and Savings Co. was reorganized into

the Medium Business Bank of Taiwan (later to be known as the Taiwan Business Bank, or TBB) on July 1, 1976,

whereupon it became a specialized bank charged with the provision of financial assistance and guidance to SMEs.

It has been cultivating the SME financial services field now for more than 30 years.

To adapt to the liberalized and internationalized financial environment, and work toward the government's vision of

building Taiwan into an Asia-Pacific operations center, the TBB was converted into a private bank on Jan. 22, 1998

and entered a brand-new era of operation. At the time of its reorganization in 1976 the Bank had a capitalization

of only NT$500 million, 50 branches, and 58 sub-branches; repeated capital increases, undertaken to augment

operating funds and strengthen the Bank's operating foundation, have boosted capitalization to NT$48,982.19

million today. The Bank has also continuously restructured its organizational framework in response to business

needs and the changing financial environment. Today, in addition to the Auditing Department and Secretarial

Department that operate under the Board of Directors, the Bank's headquarters management units include 18

departments under three major business groups and three major management centers. Domestic business units

number 125, including the Banking Department; besides the Offshore Banking Unit, there are also three overseas

branches: Hong Kong, Los Angeles, Sydney and one representative office in Shanghai. Regional Operation Centers

were set up to handle business development and supervision, centralized business management, operational

services, and other kinds of business support so as to upgrade business development capability and strengthen the

control of asset quality. Domestic Processing Centers have also been established in northern, central, and southern

Taiwan to enhance operating efficiency through the centralized handling of domestic remittances and bills collection

and withdrawal.

Executive Vice President

Ching-Hua HsuExecutive Vice President

Tzeng-Show LinExecutive Vice President

Chang-Yi ChenChief Auditor

Chien-Hwa Tu

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2. Bank M&A, reinvestment in related enterprises, and reorganization in 2011 and up to the end of February 2012

The Bank has undertaken no M&A or reorganization during this period. The Bank has reinvested in 2 enterprises,

including the Taiwan Business Bank Life Insurance Agency Co., Ltd. and Taiwan Business Bank Property Insurance

Agency Co., Ltd., in which it owns 100% of shares.

3. Membership in a designated financial holding company, and date of membership: None.

4. Major exchanges or transfers of shares by directors, supervisors, and others required to report shareholdings under Article 25, Paragraph 3 of the Banking Law: None.

5. Major changes in operating rights, operating methods, or business content; Other major events of sufficient import to affect shareholder rights; and their influence on the Bank: None.

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T a i w a n B u s i n e s s B a n k Annual Report 2012

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1. Organization Chart



4. Operations of Major TBB Units

OrganizationalFrameworkIII

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1. Organization Chart

DomesticProcessing Center

Securities Branches

Shareholders'Meeting President Executive Vice

President

CorporateBanking Group

Treasury Group

OperatingManagement Center

RiskManagement Center

AdministrationManagement Center

HumanResources Dept.

Risk ManagementDept.

Legal AffairsDept.

Loan SupervisionDept.

General AffairsDept.

Credit InvestigationDept.

Accounting Dept.

Overdue Loan &Control Dept.

InternationalBanking Dept.

CorporateBanking Dept.

Overseas Branches

Treasury Dept.

ALM Committee

Business StrategyCommittee

Remuneration Committee

Audit Committee

Risk Management Committee

Credit Card Dept.

Wealth ManagementDept.

Loan Supervision Committee

NPL Management Committee

Trust Asset Evaluation Committee

Personnel Evaluation Committee

IT Planning & DevelopmentCommittee

Securities Dept.

PersonalBanking Dept.

OffshoreBanking Branch

PersonalBanking Group

Auditing Dept.

Secretarial Dept.

General Auditor

Trust Dept.

Board of DirectorsChairman of the

Board

BusinessManagement Dept.

InformationTechnology Dept.

Taiwan Business Bank Organization Chart

Regional Operation Center

Loan Supervision Div.

Appraisal Div.

Business Development Div.

Loan Review Div.

Overdue Loan& Control Div.

Banking Dept.Domestic Branches

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Dec.31 2012

Title Name

Chairman of the Board Tsan-Chang Liao

President & Managing Director Tien-Chang Huang

Managing Director Lin Tieh Hai

Managing Director Lin Li Ling

Independent Managing Director Len-Yu Liu

Director William Liang Wang

Director Chen, Hsueh-Shiang

Director Wan Fu Lin

Director Lee Hong-Yen

Director Huang Chung-Min

Director Hsu Chien-Hua

Director Kau Jong-Jyr

Director Wang Che Nan

Independent Director Chau-Chen Yang

Independent Director Chih Yu Cheng


Dec.31 2012

Name Shares %

Bank of Taiwan 843,676,422 17.22%

Mega Financial Group 588,463,090 12.01%

Land Bank of Taiwan 118,906,613 2.43%

Ministry of Finance 108,060,467 2.21%

Fui Industrial Co., Ltd. 80,979,684 1.65%

Taichung Bank 54,340,000 1.11%

Vanguard Emerging Markets Stock Index Fund, A Series Of Vanguard International Equity Index Funds

53,759,129 1.10%

Shi Chun Jin 50,810,875 1.037%

BEB Engineering Corporation 48,880,000 0.998%

CitiBank Taiwan was commissioned and management investor account of Dimension emerging marketestimate fund

48,257,906 0.99%

Note: The holding shares accords with the book records of last ex-dividend date. Fu Yi Industrial Co., Ltd. holds shares of 77,865,081 shares had been transferred to Kin Ming investment Co., Ltd on 2012/8/17.

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4. Operations of Major TBB Units(1) Corporate Banking Group

This unit handles financial services for corporate customers, including business planning, promotion, and

improvement in respect to loan products, forex products, and corporate financial planning products. It understands

customers' needs and proactively carries out marketing, and is responsible for development and service in regard to

the Group's products and customers as well as for improvement of the Bank's asset quality, operating income, and

profit. The Corporate Banking Dept. and International Banking Dept. operate under the Corporate Banking Group.

(2) Personal Banking Group

This unit handles planning, promotion, and improvement of the Bank's personal loan products, financial planning for

customers, and marketing services for financial planning products. It carries out proactive marketing based on an

understanding of customers' needs, is responsible for development and service in regard to the Group's products

and customers, and maintains improvement of the Bank's asset quality, operating income, and profit. The Personal

Banking Dept., Credit Card Dept., Wealth Management Dept., Securities Dept., and Trust Dept. operate under the

Personal Banking Group.

(3) Treasury Group

The Treasury Group handles planning, promotion, and improvement of the Bank's financial businesses, and is

responsible for development and service in regard to the Group's products and customers as well as for maintaining

improvement of the Bank's asset quality, operating income, and profit. The Treasury Dept. operates under the

Treasury Group.

(4) Risk Management Center

The Risk Management Center handles risk control, maintenance of the quality of the Bank's loan assets, and

investigation and review of loan cases and products, middle-office risk control for financial planning, economic and

financial are research and industry investigation, and the collection of overdue loans. The Loan Supervision Dept.,

Credit Investigation Dept., Overdue Loan & Control Dept., and Risk Management Dept. operate under the Risk

Management Center.

(5) Operating Management Center

The Operating Management Center is charged with bank-wide performance analysis, management and planning

for operational management and information operations, provision of full and necessary support for business

development, and simplification of the planning process, so as to achieve operational centralization and upgrade

operational efficiency. The Center also handles planning and implementation of bank-wide operating strategy

formulation, confidential matters, and public relations. The Business Management Dept. and Information Technology

Dept. operate under the Center.

(6) Administration Management Center

This Center handles the planning and implementation of document administration, legal affairs, human resources,

and accounting systems, as well as other matters not assigned to other units. The Human Resources Dept., Legal

Affairs Dept., General Affairs Dept., and Accounting Dept. operate under the Center.

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Business Performance in 2012IV

1. The Domestic and Overseas Financial Environment

2. Restructure of TBB’s Organization

3. Results of Operating Plans and Strategies

4. Budget Implementation

5. Revenues, Expenditures, and Profitability

6. Research and Development

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1. The Domestic and Overseas Financial EnvironmentThe European debt problems of 2012 were not resolved by the Greek bailout, but spread to Spain and Italy. In

America, the speed of economic improvement fell into a slump in the second quarter and the Chinese economy also

cooled down, pushing growth there down to 7.6% in the second quarter and 7.4% in the third; these were record

lows for recent years, and they constrained the force for global economic growth. According to the information

released by Global Insight in February 2013, global economic growth in 2012 was 2.6%.

In Taiwan, labor conditions continued to improve in the first quarter of 2012, boosting willingness to consume, but

domestic high-tech companies confronted ever greater competitive pressure from large international companies.

This restrained the room for some exports to grow and led to excess production capacity, so that technology

companies continuously reduced their capital spending; imports of capital equipment continued the declining

trend of the last half of 2011, and the economic growth rate amounted to a mere 0.59%. The second quarter was

even worse, with a growth of minus 0.12%--the first negative growth since the resumption of positive growth in the

fourth quarter of 2009. This was caused mainly by the weakening of the international economy, which resulted in a

significant reduction in exports of ICT, plastic, machinery, optical instruments, and other products. The weakness in

import demand that resulted from poor exports and investment promoted companies into a continuous reduction in

capital spending. In the third quarter the domestic labor market turned weaker, commodity price growth increased,

the stock market slumped, and the growth in private consumption lost strength. Fortunately, semiconductor

manufacturers increased their capital outlays, leading to increased imports of capital equipment and allowing capital

formation to break away from four quarters of continuous contraction; the rate of export contraction also lessened,

and the economy resumed a positive growth of 0.73%. Growth in the fourth quarter strengthened to 3.72% under

the force of expanding exports and capital formation. According to the Directorate General of Budget, Accounting

and Statistics, Taiwan's economy grew by 1.26% in 2012.

2. Restructure of TBB's Organization(1) To get close to the market and boost the momentum of sales channel business promotion, the TBB readjusted

and upgraded its six regional centers into Regional Operation Centers with marketing functions and a

new division of business promotions. This expanded the business functions of the centers to include front,

middle, and back offices, not only strengthening marketing and business support functions but also allowing

for implementation of the profit-center system. This will heighten the Bank's profitability, improve its capital

structure, and build up market and channel expansion capacity.

(2) To reinforce and integrate the promotion of the e-banking business, e-banking planning and promotion

operations were transferred from the Information Technology Department to the Business Management

Department.

3. Results of Operating Plans and Strategies(1) Profitability

Profitability and the different areas of business have recorded stable growth. Before-tax profit in 2012 reached

NT$3.728 billion, representing a growth of 14.04% over 2011 and the best performance in 13 years. A stock

dividend of NT$0.4 per share was distributed for 2011.

(2) Corporate Governance

In the field of implementation of corporate governance, the Bank won the highest rating of A++ from the

Securities & Futures Institute in its ninth information disclosure evaluation.

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(3) Core Business

A. The Bank has performed exceedingly well in the extension of project loans to small and medium enterprises,

as well as in the Financial Supervisory Commission's Program for the Strengthening of SME Loans by

Domestic Banks. As a result, the TBB was assessed as a Grade A bank for outstanding performance in

2011.

B. Excellent performance in SME financing services, winning the Economic Ministry's "credit guarantee

partner award," "Phoenix loan-collection award," "outstanding direct insurance performance award," and

"outstanding SME guidance and service personnel" award.

C. Best performance in Taiwan in implementation of Youth Entrepreneurship Loans and Micro-Business Startup

Phoenix Loans, winning an "outstanding youth loan headquarters bank award" presented by the Premier as

well as an "outstanding youth loan branch bank award."

D. The Bank's performance in the electronic cash-flow business was outstanding, winning it an "Award for

Excellence in the Promotion of the Electronic Cash-flow Business – Interbank Business" and "Award for

Excellence in Electronic Cash-flow Business Innovation – Domestic US Dollar Remittance Business" from

the Financial Information Service Co.

E. ALL of the Bank's 125 business units throughout Taiwan were established as designated foreign exchange

branches, bringing more convenient forex services to our customers.

F. The home-procurement needs of the public were satisfied by carrying out the Ministry of the Interior's "Home

Purchase and Improvement Loans" (with the amount of outstanding loans standing at NT$709 million at the

end of 2012) and "Young Family Home Loans with Zero Interest for the First Two Years" (NT$1.239 billion

outstanding at the end of 2012), and the Ministry of Finance's "Young Family Preferential Interest Home

Loans (Second Program)" (NT$17.504 billion outstanding at the end of 2012).

G. The new version of the financial planning website was put on line with new information on the foreign

exchange market, interest rates, commodities futures, and economic indicators. The website also provides

simulated investment trial calculation to enrich the reference sources available to customers.

H. A mobile securities ordering system was introduced to enhance customer service quality and conform to

current trends.

I. A co-branded EasyCard was issued in order to strengthen product competitiveness, and 57,041 of the cards

were in circulation at the end of 2012. The FamilyMart convenience store payment channel was added in

order to boost the convenience of paying credit-card bills.

(4) Corporate Social Responsibility

A. Realization of the ideal of care for society and the fulfillment of corporate social responsibility by carrying out

of activities to help disadvantaged groups, resulting in donations to 38 disadvantaged groups and subsidies

for primary-school breakfasts in remote areas.

B. A policy of energy conservation and carbon reduction was vigorously carried out, with outstanding results.

The TBB headquarters building's energy-conservation performance won first place in the Industrial and

Commercial Division A of the Taipei City Golden Energy Saving Awards, and the Ta An Branch won an

Outstanding Award in the Office Division of the 2012 Taipei City Industrial and Commercial Office and

Hypermarket Energy Conservation and Carbon Reduction Awards.

(5) Information Operations

A. To cope with the trend toward globalized competition in the finance industry, the information system at the

TBB's Los Angeles Branch was upgraded and its installation was centralized in Taiwan.

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B. Computerized operation of interest-income supplementary second-generation national health insurance

premiums was completed in line with the implementation of second-generation national health insurance by

the Bureau of National Health Insurance.

(6) Human Resources

A. To upgrade the professionalism of the Bank's staff, employees were encouraged to register for license

examination in order to obtain financial planner qualification. The bank-wide ratio of personnel with financial

planner licenses reached 86.08% in 2012.

B. To invigorate human resources, training was provided for different areas of business, the recruitment of new

personnel was planned to meet manpower needs, and 243 employees were given preferential retirement.

Savings on manpower costs will amount to approximately NT$200 million per year beginning in 2014.

4. Budget Implementation (1) Average TWD deposits in the Bank in 2012 were NT$969.869 billion, for a target achievement ratio of 96.22%.

(2) Average foreign currency deposits in the Bank in 2012 were equal to NT$108.8 billion, for a target achievement

ratio of 102.55%。

(3) Average TWD loans outstanding amounted to NT$843.963 billion, for 95.34% of the target.

(4) Average foreign currency loans outstanding

A. Domestic Branches: NT$ 44.296 billion, for 88.59% of the target.

B. Oversea Branches: NT$ 47.015 billion, for 104.62% of the target.

(5) Average custodian assets in the Bank in 2012 were NT$ 66.566 billion, for 72.35% of the target.

(6) Fee income from life and property insurance in 2012 was 0.642 billion, for 106.51% of the target.

(7) Profit from treasury in 2012 was 1.28 billion, for 102.19% of the target.

5. Revenues, Expenditures, and ProfitabilityNet income for 2012 was NT$17.528 billion, costs related to bad loans amounted to NT$3.266 billion, and operating

expenditures totaled NT$10.534 billion. Before-tax net profit on business operations amounted to NT$3.728 billion

and after-tax net profit to NT$3.404 billion, for a return on assets of 0.27%, return on shareholder equity of 6.68%,

net profit margin of 19.42%, and earnings per share of NT$0.70.

The Bank worked vigorously to improve its asset quality and strengthen its financial structure in 2012 by writing off

bad loans in the amount of NT$3.269 billion, bringing its broadly defined non-performing loan ratio down to 0.92%.

This substantially facilitated the Bank's development of new types of business and the upgrading of its profitability.

6. Research and Development(1) The Bank has established a unit charged exclusively with research and analysis in regard to the status of and

trends in major industries, and with compiling industry reports for publication in the Bank's e-library.

(2) To strengthen the Bank's business competitiveness, employees are encouraged to innovate and to propose

new financial products and business improvement programs in line with the needs of business development. A

total of 74 such proposals were adopted and rewarded in 2012.

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1. Operating Directions and Policies

2. Business Targets

3. Future Development Strategies

4. The impact of intensifying competition、 government regulations and global economic


Business Plans for 2013V

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1. Operating Directions and Policies(1) Organizational Change to Reinforce Operating Performance

A. The six regional centers were upgraded to Regional Operation Centers to strengthen marketing capability.

B. The staff key performance indicator (KPI) mechanism and revised assessment and promotion system were

implemented to effect a performance-oriented upgrading of business development capability.

C. Channels were developed and their management strengthened in order to upgrade operating performance.

(2) Core Consolidation and SME Cultivation

A. Graded management was carried out, with "Small but Beautiful, Small but Rich, and Little Giant" loans being

offered to enterprises with operating revenue of no more than NT$30 million in order to provide services to

Taiwan SMEs.

B. The Bank's core SME loan business was expanded and a full spectrum of financial services was offered to

fill customers' business development needs.

C. The TBB's specialized balance of emphasis on financing and guidance was established in order to realize

the function of a specialized SME bank.

(3) Augmentation of Reserves and Emphasis on Risk Control

A. Equal emphasis was places on risk control and business development, and capital adequacy in accordance

with Basel III was maintained.

B. Allocation for reserves against bad debt was increased to strengthen risk-bearing ability.

C. Risk control was reinforced and asset quality upgraded.

(4) Reinforcement of Management; Emphasis on Compliance and Internal Controls

A. Budget auditing and management supervisory methods were used to guide business units in the vigorous

development of key businesses.

B. Service quality was strengthened so as to upgrade customer satisfaction.

C. Staff risk control ability and concept of law were strengthened so as to reduce operating risk.

(5) Opening of New Revenue Sources and Saving of Expenditures to Boost Profitability

A. Business units were guided in heightening the ratio of fee income.

B. The interest rate gap between deposits and loans was widened to increase operating revenue.

C. Financial investment was strengthened to upgrade profit.

D. Operating expenses were economized to reduce the cost ratio.

2. Business TargetsThe following targets for 2013 are set primarily in reference to the 2013 economic growth forecast announced

by the Directorate General of Budget, Accounting and Statistics, and in line with the adoption of the International

Financial Reporting Standards (IFRS), a two-year plan for raising our ratios of Tier 1 loan asset reserves and

guarantee reserves from 0.5% to 1% was implemented, and Basel III was implemented at the same time. In

addition, the historical trends of growth in business, increase in market share, and protection of shareholders' rights

of the Bank's different business units were used as a basis for forecasting operating revenue and profitability for the

next year.

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(1) Average TWD deposits: NT$ 1,008.034 billion.

(2) Average foreign currency deposits: NT$ 111.2 billion.

(3) Average TWD loans outstanding: NT$ 889.008 billion.

(4) Average foreign currency loans outstanding:

A. Domestic branches: NT$ 49.847 billion.

B. Oversea branches: NT$ 51.422 billion.

(5) Average custodian assets: NT$ 75 billion.

3. Future Development Strategies(1) The core SME businesses will be cultivated and the Bank will commit itself to the role of specialized bank for

SME financing and services so as to maintain its advantage in this niche.

(2) Integrated business marketing will be strengthened and management by objectives will be carried out; cross-

marketing will be used to expand core-customer business relations, enhance profitability, and create corporate

value and shareholder equity.

(3) Core customers will be cultivated and attention will be focused on core products; the spirit of all-staff marketing

will be translated into action, expanding the scale of key businesses while boosting business competitiveness

and market share.

(4) Overseas and cross-straits businesses will be vigorously expanded and deployment in mainland China and

overseas will be strengthened to meet customer needs and new trends in the development of cross-straits

financing.

(5) Adjustment of the quality of the asset structure to upgrade income from risk-based capital, and upgrading of the

ratio of fee income to improve the revenue structure.

(6) Strengthening of risk controls to maintain asset quality and lower the non-performing-loan ratio, and increasing

of coverage against bad debt so as to boost operating performance and propel the Bank into the ranks of

quality banks.

4. The impact of intensifying competition、government regulations and global economic(1) The U.S. Foreign Account Tax Compliance Act

The U.S. announced the Foreign Account Tax Compliance Act (FATCA), designed to prevent taxpayers from

avoiding taxes by using overseas accounts and to grasp an understanding of their overseas assets, on Jan. 18,

2013. Under the Act, Taiwan's financial institutions must provide information on their accounts held by American

citizens to the U.S. Internal Revenue Service; the TBB will evaluate the impact and influence of the Act, and

establish the most suitable strategy for compliance with it.

(2) MOU on Cooperation in Cross-Strait Currency Settlement

To stimulate cross-strait economic activity and financial cooperation, the monetary authorities on the two

sides of the Taiwan Strait signed a Memorandum of Understanding on Cooperation in Cross-Strait Currency

Settlement on Aug. 31, 2012. Through the establishment of a cross-strait currency settlement mechanism, the

MOU heightens the adequacy of renminbi (RMB) currency sources, eliminates informal cross-strait remittance

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channels, and promotes the flow back to Taiwan of the RMB funds of Taiwanese enterprises in China; at

the same time, in addition to the use of RMB settlement for mainland Chinese purchases in Taiwan and for

trade between the two sides, mainland Chinese can also use RMB for direct investment in Taiwan, thereby

stimulating the island's economic development and strengthening the competitiveness of its financial industry.

The TBB will vigorously develop its RMB business and introduce niche products, in accordance with market

needs, to meet the demand of its customers and the trends in cross-strait financial development.


Date of Rating Rating CompanyRatings

OutlookLong-term Credit Short-term Credit

Feb. 8, 2013 Taiwan Ratings twA+ twA-1 Stable

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Financial StatementsVI

1. Independent Auditors' Report

2. Financial Statement in FY2012 and notes to Financial Statement

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1. Independent Auditors' Report

The Board of Directors

Taiwan Business Bank Co., Ltd.

We have audited the accompanying balance sheets of Taiwan Business Bank Co., Ltd. as of December 31, 2012 and

2011, and the related statements of income, changes in stockholders' equity, and cash flows for the year then ended.

These financial statements are the responsibility of the Bank's management. Our responsibility is to express an opinion

on these financial statements based on our audits.

We conducted our audits in accordance with the Rules Governing Auditing and Certification of Financial Statements

of Financial Institutions by Certified Public Accountants and generally accepted auditing standards in the Republic of

China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about

whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,

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

accounting principles used and significant estimates made by management, as well as evaluating the overall financial

statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of

Taiwan Business Bank Co., Ltd. as of December 31, 2012 and 2011, and the results of its operations and cash flows for

the year then ended, in conformity with the Regulations Governing the Preparation of Financial Reports by Public Held

Banks, the Regulations Governing the Preparation of Financial Reports by Securities Firms and the generally accepted

accounting principles in the Republic of China.

Taipei, Taiwan, R.O.C.

March 21, 2013

Notice to Readers

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

The audiotrs' report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of, the English and Chinese language audiotrs' report and financial statements, the Chinese version shall prevail.

TAIWAN BUSINESS BANK CO., LTD.

BALANCE SHEETS

DECEMBER 31, 2012 AND 2011(Expressed in Thousands of New Taiwan Dollars)

December 31, 2012 December 31, 2011 Change

Amount Amount %

ASSETS

Assets

Cash and cash equivalents (Notes 4(A) and 5) $ 26,149,382 25,579,593 2

Due from the Central Bank and call loans to banks (Notes 4(B) and 5)

67,417,255 56,150,500 20

Financial assets measured at fair value through profit or loss－net (Notes 4(C) and (O))

5,809,037 5,474,966 6

Securities purchased under resell agreements (Note 4(D))

13,239,950 2,337,341 466

Receivables－net (Note 4(E)) 20,215,491 20,250,925 -

Discounts and loans－net (Notes 4(F) and 5) 953,800,832 942,587,857 1

Available-for-sale financial assets－net (Notes 4(G) and (O))

12,368,989 14,850,799 (17)

Held-to-maturity financial assets－net (Notes 4(H) and 6)

167,514,168 177,696,669 (6)

Investments under the epuity method－net (Note 4(I))

81,814 69,732 17

Other financial assets－net (Note 4(J)) 3,638,009 3,656,190 -

Premises and equipment－net (Note 4(K)) 13,614,932 13,759,139 (1)

Intangible assets 193,700 209,819 (8)

Other assets－net (Note 4(L)) 5,963,667 4,380,700 36

Debit items for trade brokerage 12,599 3,900 223

total assets $ 1,290,019,825 1,267,008,130 2

2. Financial Statewent in FY2012 and notes to Financial Statewent

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December 31, 2012 December 31, 2011 Change

Amount Amount %

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Deposits from the Central Bank and other banks (Notes 4(M) and 5)

$ 78,116,260 90,829,825 (14)

Financial liabilities measured at fair value through profit or loss (Note 4(N))

230,833 339,942 (32)

Securities sold under repurchase agreements (Note 4(O))

6,243,040 6,109,713 2

Payables (Note 4(P)) 37,460,977 31,028,411 21

Deposits and remittances (Notes 4(Q) and 5) 1,055,317,011 1,033,945,218 2

Financial debentures (Note 4(R)) 43,900,000 43,900,000 -

Accrued pension liabilities (Note 4(W)) 769,248 257,985 198

Other financial liabilities (Note 4(S)) 11,400,537 12,150,115 (6)

Other liabilities (Note 4(T)) 1,543,424 1,534,009 1

Total liabilities 1,234,981,330 1,220,095,218 1

Stockholders' equity

Common stock (Note 4(U)) 48,982,194 42,098,263 16

Retained earnings:

Legal reserve (Note 4(U)) 2,402,303 1,508,934 59

Special reserve (Note 4(U)) 591,203 360,321 64

Undistributed earnings (Note 4(U)) 3,426,315 3,030,658 13

Total retained earnings 6,419,821 4,899,913 31

Other adjustments to stockholders' equity:

Unrealized revaluation increment 407,442 320,812 27

Cumulative translation adjustments (Note 4(U)) (99,751) (35,991) (177)

Unrealized losses on financial instruments (Note 4(U))

(86,182) (283,648) 70

Net loss not recognized as pension cost (585,029) (86,437) (577)

Total stockholders' equity 55,038,495 46,912,912 17

Significant commitments and contingencies (Note 7)

Total liabilities and stockholders' equity $ 1,290,019,825 1,267,008,130 2

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TAIWAN BUSINESS BANK CO., LTD.STATEMENTS OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2012 AND 2011(Expressed in Thousands of New Taiwan Dollars, Except for EPS)

For TheYear Ended

December 31, 2012

For TheYear Ended

December 31, 2011Change

Amount Amount %

Interest revenue (Note 5) $ 22,933,789 22,100,596 4Less: Interest expenses (Note 5) (10,011,242) (9,313,302) 7Net interest income 12,922,547 12,787,294 1

Non-interest income

Service fee and commission income (Note 5) 2,006,216 2,019,497 (1)Gains (losses) on financial assets or liabilities measured at fair value through profit or loss－net"

397,152 (393,017) 201

Realized gains (losses) of available-for-sale financial assets－net

18,414 (36,358) 151

Gains from equity investment under the equity method(Note 4(I))

56,928 49,578 15

Foreign exchange gains 533,402 595,901 (10)Reversal of impairment recognized in profit or loss on assets

- 428,980 (100)

Other non-interest income－net (Note 5) 133,974 63,138 112Gains on financial assets carried at cost－net (Note 4(J))

135,164 148,505 (9)

Losses on sale of foreclosed properties - (295,850) 100Securities brokerage incomes－net 171,011 228,368 (25)Recovered bad debts and overdue accounts (Note 4(J))

1,153,566 1,559,458 (26)

Net revenue 17,528,374 17,155,494 2Bad debt expenses－loan ( Provision for guarantee liability reserves)(Note 10)

(3,265,885) (3,668,589) (11)

Operating expensesPersonnel expenses (Note 10) (7,049,683) (6,996,221) 1Depreciation and amortization expenses (Note 10)

(459,846) (479,298) (4)

Other general and administrative expenses (3,025,043) (2,742,414) 10

Total operating expenses (10,534,572) (10,217,933) 3Income from continuing operations before income tax

3,727,917 3,268,972 14

Income tax expenses (Note 4(V)) (324,078) (291,074) 11

Net income $ 3,403,839 2,977,898 14

Income tax Income taxBefore After Before After

Basic earnings per share (Note 4(X)) $ 0.76 0.70 0.78 0.71Basic earnings per share-retroactive adjustment 0.75 0.68Diluted earnings per share (Note 4(X)) $ 0.76 0.69 0.77 0.70

Diluted earnings per share-retroactive adjustment 0.74 0.68

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TAIWAN BUSINESS BANK CO., LTD.STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2012 AND 2011(New Taiwan Dollars in Thousands)

Stock Retained earnings Other itemsTotal

Common stock Legal reserve Special reserve Undistributed earnings

Unrealized revaluation increment

Net loss not recognized as pension cost

Unrealized gain and loss on

finanical assets

Cumulative translation

adjustmentsBegninning Balance - January 1, 2011 $ 40,285,419 907,064 301,329 2,341,339 196,068 (15,898) (65,415) (93,880) 43,856,026

Special reserve reversed - - (126,135) 126,135 - - - -

Net income for the year ended December 31, 2011 - - - 2,977,898 - - - - 2,977,898

Appropriation of 2010 earnings:

Legal reserve - 601,870 - (601,870) - - - - -

Common stock dividend 1,812,844 - - (1,812,844) - - - - -

Change of unrealized losses on available-for-sale financial assets - - - - - - (218,233) - (218,233)

Transferred from reserve for default losses - - 96,536 - - - - - 96,536

Transferred from reserve for trading losses - - 88,591 - - - - - 88,591

Net loss not recognized as pension cost - - - - - (70,539) - - (70,539)

Increase in unrealized revaluation increment - - - - 124,744 - - - 124,744

Changes in foreign exchange gain due to the translation of foreign currency financial statements - - - - - - - 57,889 57,889

Ending Balance - December 31, 2011 42,098,263 1,508,934 360,321 3,030,658 320,812 (86,437) (283,648) (35,991) 46,912,912

Issuance of Common Stock 5,000,000 - - - - - - - 5,000,000

Net income for the year ended December 31, 2012 - - - 3,403,839 - - - - 3,403,839

Appropriation of 2011 earnings: -

Legal reserve - 893,369 - (893,369) - - - -

Special reserve - - 230,882 (230,882) - - - - -

Common stock dividend 1,883,931 - - (1,883,931) - - - - -

Change of unrealized losses on available-for-sale financial assets - - - - - - 197,466 - 197,466

Net loss not recognized as pension cost - - - - - (498,592) - - (498,592)

Increase in unrealized revaluation increment - - - - 86,630 - - - 86,630

Changes in foreign exchange gain due to the translation of foreign currency financial statements - - - - - - - (63,760) (63,760)

Ending Balance - December 31, 2012 $ 48,982,194 2,402,303 591,203 3,426,315 407,442 (585,029) (86,182) (99,751) 55,038,495

Note: The employee bonuses $161,424 and $166,762 as well as the board of directors' remunerations $20,178 and $20,845 for the year ended December 31, 2012 and 2011 respectively, have been deducted from the income statement.

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TAIWAN BUSINESS BANK CO., LTD.STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2012 AND 2011 (Expressed in Thousands of New Taiwan Dollars)

For The Year Ended December 31, 2012


Cash flows from operating activities:

Net income $ 3,403,839 2,977,898

Adjustments to Reconcile Net Income to Net Cash (Used in) Provided by Operating Activities:

Depreciation expense 392,093 409,338

Amortization expense 67,753 69,960

Provision of bad debt expenses 3,249,098 3,643,870

Provision for guarantee reserve 16,787 24,719

Investment gains under the equity method (56,928) (49,578)

Cash dividends received from investees under equity method 44,846 25,120

Losses on disposal and retirement of premises and equipment 1,002 2,091

Unrealized (gains) losses on valuation of financial assets and liabilities (261,672) 207,871

Debts written off and recovered bad debt (1,153,566) (1,559,458)

Debit and credit items for trade brokerage－net (8,699) 4,902

Losses on sale of foreclosed properities - 295,850

Gains on reversal of foreclosed properties - (428,980)

Net changes in operating assets and liabilities:

Net changes in operating assets:

Increase in financial assets measured at fair value through profit or loss (177,506) (1,411,414)

(Increase) decrease in securities purchased under resell agreements (10,902,609) 182,007

Increase in receivables (72,078) (605,041)

(Increase) decrease in deferred tax assets (4,529) 139,582

Net changes of operating liabilities:

(Decrease) increase in financial liabilities measured at fair value through profit or loss

(4,002) 25,337

Increase (decrease) in securities sold under repurchase agreements 133,327 (3,840,947)

Increase in payables 6,432,566 7,246,207

Increase in accrued pension liabilities 22,414 24,314

Net cash provided by operating activities 1,122,136 7,383,648

Cash flows from investing activities:

Sales (purchase) of available-for-sale financial assets 2,679,276 (140,677)

Sales (purchase) of held-to-maturity financial assets 10,182,501 (41,601,080)

Purchase of premises and equipment (131,942) (352,078)

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Proceeds from disposition of premises and equipments 200 178

Increase in guarantee deposits paid (4,941) (2,633)

Purchase of intangible assets (47,308) (84,326)

(Increase) decrease in due from the Central Bank and call loans to banks (11,266,755) 15,569,675

Increase in discounts and loans (13,255,282) (17,562,000)

Proceeds from sales of foreclosed properties - 133,130

Decrease in other financial assets 72,892 125,271

Increase in other assets (1,644,695) (163,971)

Net cash used in investing activities (13,416,054) (44,078,511)

Cash flows from financing activities:

Decrease in financial debentures - (100,000)

Decrease in guarantee deposits received (52,194) (132,065)

Increase in lease payable 556 605

(Decrease) increase in other financial liabilities (750,134) 1,597,016

Increase (decrease) in other liabilities 7,251 (800,039)

Issuance of common stock 5,000,000 -

(Decrease) increase in deposits from the Central Bank and other banks (12,713,565) 4,747,893

Increase in deposits and remittances 21,371,793 41,597,025

Net cash provided by financing activities 12,863,707 46,910,435

Net increase in cash and cash equivalents 569,789 10,215,572

Cash and cash equivalents, at the beginning of the period 25,579,593 15,364,021

Cash and cash equivalents, at the end of the period $ 26,149,382 25,579,593

Supplemental disclosures of cash flow information:

Interest paid $ 10,018,260 8,910,839

Income tax paid $ 226,340 163,013

Not affecting cash flows investing and financing activities:

Reserve for retained earnings transferred to capital $ 1,883,931 1,812,844

Reclassified property and equipment to idle assets $ 90 366,159

Reclassified property and equipment to rental assets $ 164 89,271

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TAIWAN BUSINESS BANK CO., LTD.NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2012 AND 2011(Expressed in New Taiwan Dollars in Thousands, Unless Otherwise Stated)

(1) BASIS OF PRESENTATIONTaiwan Business Bank Co., Ltd. (the "Bank") was formerly a general savings union known as "Taiwan Mutual Financing Bank" or "Tai-Shio Mutual Financing Bank" when it was established in 1915. After several mergers and acquisitions, it was renamed Taiwan Business Bank, Ltd. to serve as a financier and provider of banking assistance to small and medium-size businesses on July 1, 1976. The Bank's major lines of business are the following:

(A) As prescribed by the Banking Law, provides professional services tailored to the needs of small and medium-size businesses;

(B) Trust and securities brokerage businesses as approved by the relevant authority;

(C) International banking business; and

(D) Other relevant businesses as authorized by the relevant authority in-charge.

As of December 31, 2012, the Bank not only set up the banking dept., international dept., securities dept. and trust dept. under head office but also has 124 domestic branches, 1 offshore banking unit, 3 overseas branches, 1 foreign office and 18 securities brokerage locations.

The Bank became listed on the Taiwan Stock Exchange on January 3, 1998.

Under the "Statute for Privatization of State Enterprises" and upon the approval of Taiwan Province Government, the shares of the Bank owned by the provincial government were sold to the public. In line with privatization of the three other major Taiwan province government owned run commercial banks, the Bank had completed its own privatization on January 22, 1998.

As of December 31, 2012 and 2011, the Bank had 4,892 and 4,986 employees.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of, the English and Chinese language financial statements, the Chinese version shall prevail.

The Bank's financial statements were prepared in accordance with the Regulations Governing the Preparation of Financial Report by Public Held Banks, the Regulation Governing the Preparation of Financial Reports by Securities Firms and generally accepted accounting principles in the Republic of China. These significant accounting policies and measurement basis are summarized as follows:

(A) Basis of presentationThe financial statements include the accounts of headquarters, domestic and overseas branches. All inter-office balances and transactions are eliminated.

(B) Foreign currency translation The Bank recorded transactions in New Taiwan Dollars. The exchange rate was the foreign currency rate provided by the Bank of Taiwan at ten o'clock in the morning. The non-derivative foreign currency transactions of the Bank are recorded at the rate of exchange prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rate of exchange ruling at the balance sheet date. Any resulting exchange differences are included in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated into the functional currency using the rate of exchange at the date of the initial transaction. Non-monetary assets and liabilities measured at fair value in a foreign currency are

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translated into the functional currency using the rate of exchange ruling at the balance sheet date. Any exchange differences resulting from fair value variation through profit and loss are included in the income statement, and exchange differences resulting from fair value variation through equity are accounted for as equity adjustments.

Assets and liabilities of overseas offices (including the offshore banking unit) are translated into New Taiwan dollars on spot rate on balance date. The beginning balances of retained earnings of overseas branches are carried from last year's ending balance. The income statement accounts translated into New Taiwan dollars on weighted-average exchange rate. The translation differences are reflected as part of cumulative translation adjustments under stockholders' equity.

(C) Accountant estimatesThe preparation of financial statements requires management to make estimates and assumptions to evaluate and disclose the amounts of assets, liability, revenues, expenses, contingent assets and liabilities. Actual results could differ from those assumptions and estimates.

(D) Cash and cash equivalentsCash and cash equivalent consists of cash on hand, petty cash, foreign currency on hand, cash in banks, but excludes those items which have specified for designated purposes or restricted by contracts and law.

(E) Financial assets and liabilities measured at fair value through profit or lossFinancial assets or liabilities held for trading and financial assets or liabilities designated at fair value at initial recognition are included. Financial assets and liabilities which are measured at fair value are classified as held for trading if they have been acquired principally for the purpose of selling or repurchasing in the near term. Financial instruments held by the Bank are recorded on settlement date except for stocks and beneficiary certificate investment which are recorded on trading date. Financial instruments are initially recognized at fair value and the transaction cost is recognized as current expense. The derivative financial instruments held by the Bank, except for those designated as hedging instruments, are classified under this account. In addition, hybrid instrument and a set of financial assets or liabilities accounted inconsistently are booked as financial assets or liabilities designated at fair value at initial recognition. The set of financial assets or liabilities are booked as financial assets or liabilities designated at fair value through profit or loss at initial recognition in order to eliminate inconsistent accounting. In accordance with the Bank's risk control policy or investment strategy, a set of financial assets or liabilities and its components managed are also designated at fair value.

(F) Available-for-sale financial assetsFinancial assets are measured at fair value and unrealized gains and losses thereon are recognized as an adjustment item of stockholders' equity. Financial instruments held by the Bank are recorded on settlement date except for stocks and beneficiary certificate investment which are recorded on trading date. Financial instruments are initially recognized at fair value plus transaction costs. The impairment loss is recognized if there is evidence indicating that a decline in the value of an investment is other than temporary. If the impairment loss in the following period is reduced, reversal of loss for equity investments is adjusted to stockholders' equity, and reversal of loss for debt instrument is credited to current income if the reduction of impairment loss resulted from a subsequent event.

(G) Held-to-maturity financial assetsFinancial assets are measured at amortized cost and its interest income via effective rate. Debt instruments held by the Bank are recorded on settlement date and are initially recognized at fair value plus transaction costs. The impairment loss is recognized if there is evidence indicating that a decline in the value of an investment is other than temporary. If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previous recognized impairment loss is reversed through the profit and loss. The carrying value after the reversal should not exceed the amortized balance of the assets assuming no impairment loss was recognized.

(H) Financial assets measured at costEquity instruments with no quoted market price and whose fair value cannot be reliably measured are stated at cost. The impairment loss is recognized if there is evidence indicating that a decline in the value of an investment is other than temporary, and the impairment loss is irreversible.

30


(I) Debt instrument with no active marketThese are debt instruments with no active market quote and measured at amortized cost. The impairment loss is recognized if there is evidence indicating that a decline in the value of an investment is other than temporary. If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previous recognized impairment loss is reversed through the profit and loss. The carrying value after the reverse should not exceed the amortized balance of the assets assuming no impairment loss was recognized.

(J) Loans and advancesLoans and advances are recorded as initial fair value (including direct transaction cost), and the subsequent measurement recognizes interest income via effective interest rate method (if there is not much difference then it can adopt straight line method) and is booked as per amortized cost deducted by impairment loss.

Interest accrual on loans and advances is suspended if either of the following occurs:

(a) Payment of principal or interest is very likely not to be redeemed as per contracts.

(b) Non-performing loans are categorized as overdue loans in six months after the settlement period ends.

(K) Allowance for credit losses and reserve for guaranteeAdequate allowance for credit losses is provided by assessing the balance, under the definition of loans and receivables in Republic of China Statement of Financial Accounting Standards (SFAS) No. 34, in accordance with SFAS No. 34, the "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans," and the "Regulations Governing Institutions Engaging in Credit Card Business".

The third amendment of SFAS No. 34 was effective from January 1, 2011; the carrying value of loans and receivables within the applicable scope as of December 31, 2010, should be measured at amortized cost for which SFAS No. 34 was initially applied. Under the definition of loans and receivables in SFAS No. 34, the objective evidence should be identified first to reveal any impairment existing for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If no objective evidence of impairment exists for an individually assessed financial asset, it should be included in a set of financial assets with similar credit risk characteristics and collectively assessed for impairment. Assets that are individually assessed for impairment are not required to be collectively assessed because an impairment is or continues to be recognized.

If there is an objective evidence that an impairment loss on financial assets has been incurred, the amount of the loss is recognized and measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate; the amount of the loss should be recognized as bad debt expenses in profit or loss in the current period. The estimation of future cash flows includes the recoverable amount of collateral and related insurance when determining the amount of the loss.

Above evidences of impairment loss usually includes the following:

(a) Significant financial difficulty occurred to the issuer or the debtor.

(b) There is already default circumstances occurred to the issuer or debtor, for example: default or overdue payment of interest or principal.

(c) The creditor give in to the debtor due to commercial or legal concern.

(d) The debtor is likely to bankrupt or execute certain financial reorganization.

(e) The issuer has financial difficulty and the financial assets can not be traded in the active market.

( f ) The payment status of the debtor worsens.

(g) The national and regional situation related to the default of the asset changes.

The Bank should recognize bad debt expenses when there is an impairment loss occurred in the financial assets measured at amortized cost.

The impaired amount is the difference between the book value of the financial asset and the estimated future

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cash flow discounted by the original effective rate. The book value of the financial assets is reduced by the allowance account and the amount of impairment losses shall be recognized as current gains and losses. When deciding the amount of the impairment loss, the estimate of future cash flow should include the collateral and the recoverable amount of relevant insurance.

According to "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans", the Bank shall provide the sum of the following to be the allowance for bad debts.

(a) 0.5% of the first class credit assets deducted by the amount of credit assets from the government.

(b) 2% of the second class credit assets.

(c) 10% of the third class credit assets.

(d) 50% of the fourth class credit assets.

(e) 100% of the fifth class credit assets.

The allowance for bad debts assessed by the previously stated SFAS No. 34 shall not be less than the amount regulated by "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans".

The Bank provides reserve for guarantee liabilities for off-balance-sheet non-credit assets taking into account the regulation of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans".

Unrecoverable overdue loans and bad debts, which are not able to be recovered after the overdue collection process, are written-off after deducting the recoverable portion. Upon approval by the board of directors and notification to supervisors, the excess amount of written off loans over such allowance or reserve is reflected as a current loss.

Above amounts provided are booked under the account of bad debt expenses.

(L) Impairment of non-financial assetsThe Bank assesses at each balance sheet date whether there is any indication that an asset (individual asset or cash-generating unit other than goodwill) may have been impaired. If any such indication exists, the Bank estimates the recoverable amount of the asset. The Bank recognizes impairment loss for an asset whose carrying value is higher than the recoverable amount. The Bank reverses an impairment loss recognized in prior periods for assets other than goodwill if there is indication that the impairment loss recognized no longer exists or has decreased. The carrying value after the reversal should not exceed the recoverable amount or the depreciated or amortized balance of the assets assuming no impairment loss was recognized in prior periods.

(M) Investments under the equity methodInvestees in which the Bank and its subsidiaries directly or indirectly, hold more than 20% of the outstanding stock with voting power, or hold less than 20% of outstanding stock with voting power but has significant influence over the investees are accounted for under the equity method.

The Bank adopted the amended SFAS No. 5 "Long-term Investments under Equity Method". Under the standard, the difference between the investment cost and the net equity of the investee acquired is recognized in accordance with this amended standard.

Upon disposition, gain or loss on disposal of long-term equity investment is calculated based on the difference between selling price and book value. The remaining capital surplus arising from long-term equity investment is adjusted to profit and loss based on the percentage of sales.

(N) Premises and equipment, and DepreciationPremises and equipment are stated at cost plus revaluation appreciation, if any. The cost for major renovations, additions, and improvements are capitalized, while repairs and maintenance costs are charged to current earnings.

Depreciation is provided by using the straight-line method over the estimated useful lives. Revaluation appreciation is depreciated over the remaining useful lives from the date of revaluation. The economic lives of major premises and equipment are as follows:

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Buildings 10 to 50 years

Machinery 3 to 5 years

Transportation equipment 3 to 6 years

Miscellaneous equipment 5 to 8 years

Leased assets 5 years

Gain or loss from disposition premises and equipment is included in current earnings.

(O) Deferred chargesThe costs of installation for utilities, including electricity and water, as well as security facilities, are capitalized and amortized equally over 5 years.

(P) Collateral assumedCollaterals assumed are stated at the lower of net book value or net realizable value; i.e., the amount the Bank receives when creditors cannot meet obligations and the collaterals and salvages are auctioned off. Under FSC Letter Ruling (2) 094801856 on July 11, 2005, collateral assumed must be disposed before December 31, 2005. If the Bank is unable to dispose the collateral assumed before December 31, 2005, it reserves a provision for loss equal to the carrying value of the collateral assumed. On disposition of collateral, the related provision is reversed. The selling price deducts the original book value of collateral assumed is recognized as gain on sale of collateral assumed.

(Q) Reserve for operation and liabilities(a) Reserve for default losses

In compliance with the Regulations Governing Securities Firms, the Bank provides monthly a default indemnity reserve based on 0.0028% of securities brokerage commissions as reserve for default losses. Since January 11, 2011, based on the No. 09900738571 letter of Financial Commission Supervisory, the regulation which states that securities firms shall provide reserve for default losses is removed.

(b) Reserve for trading losses

In compliance with Regulations Governing Securities Firms, the Bank provides securities trading loss reserve at the rate of 10% of net gain from trading of operating securities when net gain exceeds loss. Since January 11, 2011, based on the No. 09900738571 letter of Financial Commission Supervisory, the regulation which states that securities firms shall provide reserve for trading losses is removed.

In addition, the reserve for default losses and trading losses which securities firms has provided as of December 31, 2010 shall be transferred to special reserve. After the amount is transferred to special reserve, unless it is for the purpose of recovering companies' losses or the amount of special reserve reaches 50% of the paid-in capital, it is not allowed to be used.

(R) Pension planThe Bank adopted SFAS No. 18, "Accounting for Pensions," an actuarial valuation of pension liability for defined benefit plan is performed on balance sheet date, and a minimum pension liability is recorded in the financial statements based on the amount which the accumulated benefit obligation exceeds the fair value of plan assets. The Bank also follows SFAS No. 18 to recognize the pension cost.

Under the "Labor Pension Act" which became effective on July 1, 2005(hereinafter called the "new pension plan'), if an old employee chooses to adopt the "new pension plan" and new employee adopts the contributory defined benefit pension plan, the employer is required to contribute monthly an amount equals not less than 6% of the employees' monthly salary into the employees individual pension fund accounts with the Bureau of Labor Insurance. Such contribution is charged to current expense account.

(S) Income taxesThe Bank adopted SFAS No. 22 "Accounting for Income Tax" to effect inter and intra- period income tax allocation. Income tax effects from taxable temporary differences are reported as deferred tax liabilities, and deductible temporary differences, prior years' loss carry forwards, and investment tax credits are reflected as deferred tax assets. Deferred tax assets are recognized subject to management's judgment that realization is more likely than not. Adjustments to prior year's income tax expenses are reflected as current income tax expense.

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The 10% surtax on undistributed earnings is reported as current expense on the date when the stockholders

decided not to distribute the earnings during their annual meeting.

(T) Employee bonuses and directors' remunerationsEmployee bonuses and directors' remunerations appropriated after 1 January 2008 are accounted for

by Interpretation (96) 052 issued by the Accounting Research and Development Foundation. The Bank

estimates the amount of employee bonuses and directors' remunerations according to the Interpretation

and recognizes it as expenses. Differences between the amounts which are approved in the shareholders'

meeting and the amount recognized in the financial statements, if any, are accounted for as changes in

accounting estimates and recognized as profit or loss in the year of the shareholders' meeting.

(U) Recognition of interest revenue and commissions and handling feesInterest is recognized according to interest method. Interest accrual is suspended from the date when the

loan is reclassified to non-performing loan and only when the Bank received cash, the revenue is recognized.

The revenue of handling fee is recognized when cash collected or when the process of the profit are mostly

completed. In addition, for the individual loan which does not belong to labor service and the handling fee

is over 1% of the principal, the interest rate shall be adjusted from the original agreed interest rate to the

effective interest rate. For the individual loan which does not belong to the service and the handling fee

is less that 1% of the principal, the recognition of the revenue should be deferred and be recognized as

revenue during the loan period.

(V) Significant commitments and contingenciesIf the loss from a commitment or a contingency is deemed highly likely and the amount thereof can be

reasonably estimated, such loss is recognized in the financial statement; otherwise only the commitment and

contingency which the possible loss amount are over 50,000 thousands New Taiwan Dollars are disclosed in

the notes to financial statements.

(W) Operating segmentsOperating segment is the component of the Bank that engages in business activities from which it may

earn revenues and incur expenses (including revenues and expenses relating to transactions with other

components of the Bank). The segment's operating results are reviewed regularly by the Bank's chief

operating decision maker to make decisions pertaining to the allocation of resources to the segment and to

assess the performance for which discrete financial information is available.

(X) Earnings per share (EPS)EPS is based on the weighted-average number of shares outstanding. In the event of capital increase

through capitalization of retained earnings, capital surplus, or employee bonuses, EPS is retroactively

adjusted based on the percentage of capital increase, regardless of the period when the incremental shares

are outstanding.

The Bank's employee bonuses issued by stocks were dilutive potential common shares. If the potential

common shares have a non-dilutive effect, the Bank should only disclose the basic earnings per share. On

the contrary, if the potential common shares have a dilutive effect, the Bank should disclose both the basic

and diluted earnings per share. In calculating the diluted earnings per share, it is based on the assumption

that all dilutive potential common shares are outstanding, and therefore the net income and the shares

outstanding shall be adjusted in accordance with the calculation.

34


(3) REASONS FOR AND EFFECTS OF ACCOUNTING CHANGESEffective from January 1, 2011, the Bank adopted the third amendment of SFAS No. 34 "Financial Instruments:

Recognition and Measurement." In accordance with SFAS No. 34, loans and receivables should apply

the regulations on recognition, subsequent evaluation, and impairment in SFAS No. 34. The troubled debt

restructuring and negotiated debt instruments with new contracts and modification of terms were also in

accordance with the third amendment of SFAS No. 34 effective from January 1, 2011. Please refer to Note 4(E),

4(F), and 10(A) for more information.

Effective from January 1, 2011, the Bank adopted SFAS No. 41 "Operating Segments." In accordance with SFAS

No. 41, an entity shall disclose information to enable users of its financial statements to evaluate the nature and

financial effects of the business activities in which it engages and the economic environments in which it operates.

The Bank determines and presents operating segments based on the information that internally is provided to the

chief operating decision maker. This standard supersedes SFAS No. 20 "Segment Reporting." For the year ended

December 31, 2011, such changes in accounting principle did not have any impact on the Bank's net income.

(4) SUMMARY OF MAJOR ACCOUNTSDecember 31, 2012 December 31, 2011

Petty cash and revolving fund $ 8,321,124 7,932,537Foreign currencies on hand 808,615 1,002,099Checks for clearing 15,296,621 14,660,710Due from other banks 1,723,022 1,984,247

Total $ 26,149,382 25,579,593

December 31, 2012 December 31, 2011Due from Central Bank $ 42,403,407 47,997,565

Deposits transferred to Central Bank 73,171 243,934

Call loans to banks 24,918,003 7,909,001

Bank overdrafts 22,674 -

Trust fund indemnity reserve deposited 70,000 70,000

Securities serving as trust fund indemnity reserve deposited

(70,000) (70,000)

Total $ 67,417,255 56,150,500

(A) Cash and cash equivalents

(B) Due from the Central Bank and call loans to banks

As of December 31, 2012 and 2011, in accordance with the Banking Law and the Central Bank Law, the required reserve deposited by the Bank with the Central Bank amounted to $42,306,937 and $47,906,138, of which $28,355,880 and $28,957,008 respectively, were restricted and such restriction may only be lifted when the required reserve is adjusted to a lower amount.

Effective December 2000, in accordance with the amended "Rules Governing Adjustments to and Review of Deposits in Financial Institutions and Reserve for Other Liabilities", the Bank provides the required additional reserve on foreign currency deposits. As of December 31, 2012 and 2011, the required reserve with the Central Bank amounted to $96,470 and $91,427 respectively, and its use is unrestricted.

As of December 31, 2012 and 2011, deposits collected on behalf of the armed forces, prisons, and other national deposits are restricted.

Effective January 20, 2001, in accordance with the requirement of the Central Bank of China, the Bank complies with Clause 34 of the Trust Law to treat the discretionary trust of investments in overseas marketable securities as a default loss reserve. As of December 31, 2012 and 2011, the Bank deposited marketable securities of both $70,000 as trust fund reserves.

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(C) Financial assets measured at fair value through profit or loss–net

December 31, 2012 December 31, 2011Financial assets held for trading:

Commercial paper $ 1,994,690 1,495,805

Commom Stock 131,141 -

Beneficiary certificates 199,190 -

Foreign exchange forward contracts 63,047 9,401

Currency swap contracts 207,324 164,213

Interest swap contracts 21,394 41,402

Foreign currency options-call options 44,858 49,455

Structured product options-call options 1,164 569

Stock index futures 27,203 27,163

Sub-total 2,690,011 1,788,008

Financial assets designated at fair value through profit or loss:

Overseas bonds 3,119,026 3,686,958

Total $ 5,809,037 5,474,966

December 31, 2012 December 31, 2011

Foreign exchange forward contracts $ 3,993,028 1,813,540

Currency swap contracts 47,525,981 47,773,206

Interest swap contracts 11,713,304 14,091,075

Option contracts-call 2,047,740 1,245,494

Option contracts-put 2,047,740 1,245,494


Securities under resell agreements $ 13,239,950 2,337,341

Resell period 2013.1.2~2013.2.22 2012.1.2

Range of resell interest rate 0.77%~0.79% 0.84%~0.85%

Resell price

Securities purchased under resell agreement $ 13,246,315 $ 2,337,879

(D) Securities purchased under resell agreements

Please refer to Note 4(O) for information with regard to resale conditions for bills and bonds investments

under resale agreements shown above.

Please refer to Note 4(O) for information with regard to repurchase conditions for financial assets held for

trading shown above.

As of December 31, 2012 and 2011, the nominal amounts of unsettled financial derivatives instrument

contracts were as follows:

36


(E) Receivables–net


Interest receivable $ 1,657,017 1,861,149

Acceptances receivable 1,671,142 2,182,647

Accrued incomes 43,955 35,510

Accounts receivable 1,694,857 2,644,311

Tax refund receivable 616,708 666,585

Accounts receivable factoring without recourse 132,331 5,942,385

Spot exchange receivable-foreign currencies 14,394,515 6,138,754

Other receivables 322,215 989,321

Sub-total 20,532,740 20,460,662

Less: Allowance for credit losses (317,249) (209,737)

Net $ 20,215,491 20,250,925

December 31, 2012 December 31, 2011Import/export bills negotiated $ 371,004 727,971Bills and notes discounted 1,409,265 1,248,742Overdrafts 12,825 6,433Secured overdrafts 883,029 834,170Short-term loans 186,922,110 147,113,085Short-term secured loans 130,019,163 115,789,707Margin loans receivable 1,506,400 1,819,376Medium-term loans 168,190,322 198,840,461Medium-term secured loans 121,932,690 125,805,213Long-term loans 20,247,124 19,995,977Long-term secured loans 322,603,620 333,102,519Account receivable financing 17,068 294,170Overdue loans 8,157,280 5,676,843Sub-total 962,271,900 951,254,667Less: Adjustment of discount and premium (169,608) (167,272)

Less: Allowance for credit losses (8,301,460) (8,499,538)

Net $ 953,800,832 942,587,857

(F) Discounts and loans –net

(G) Available-for-sale financial assets–net

Please refer to Note 4(O) for the information with regard to repurchase conditions for available-for-sale

financial assets shown above.


Government bonds $ 4,931,944 5,718,332

Corporate bonds 4,522,797 2,261,229

Overseas bonds 2,358,418 6,197,775

Listed and OTC stocks 555,830 673,463

Total $ 12,368,989 14,850,799

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(H) Held-to-maturity financial assets–net


Certificates of deposit with Central Bank $ 160,700,000 172,200,000

Corporate bonds 1,799,010 2,658,570

Government bonds 1,947,792 1,756,370

Overseas bonds 2,558,522 562,878

Banker's acceptance 447,871 455,273

Negotiable certificates of deposit 60,973 63,578

Total $ 167,514,168 177,696,669

December 31, 2012 December 31, 2011Book Value Ownership% Book Value Ownership%

Taiwan Business Bank Insurance Agency Co., Ltd. (with original investment cost of $2,000)

$ 74,137 100.00 62,558 100.00

Taiwan Business Bank Property Insurance Agency Co., Ltd. (with original investment cost of $3,000)

7,677 100.00 7,174 100.00

Total $ 81,814 69,732

As of December 31, 2012 and 2011, held-to-maturity financial assets provided and deposited as reserve

for provisional seizure by the court, international card payment reserve, trust claim reserve and operating

guaranty funds amounted to $802,700 and $775,800, respectively. As of December 31 2012 and 2011, the

three overseas branches have provided $508,844 and $557,737, respectively, for the reserve of overdraft

guarantee.

In order to comply with the immediate tax settlements mechanism of Central Bank and the interbank funds

transfer system, the Bank provided time deposits with Central Bank amounted to $3,600,000 and $6,000,000

as overdraft guarantee as of December 31, 2012 and 2011, respectively. The amount of the guarantee can

be modified anytime and the remaining amount could be served as liquid reserves.

For the year ended December 31, 2012 and 2011, in compliance with the Article 16 of "Guidelines Governing

Financial Institution in Conducting Treasury Affairs Authorized by Central Bank", the Bank provided secured

central bank certificates of deposit with face value of $15,900,000 and $15,100,000, respectively to the

Central Bank. When certain conditions are satisfied, the Bank will be returned the certificates without interest

from Central Bank.

As of December 31, 2012 and 2011, the Bank provided Central bank certificates of deposit with face value of

$17,000,000 to serve as a guarantee for borrowing US dollars from Central bank.

(I) Investments under the equity method–net

For the year ended December 31, 2012 and 2011, investment income recognized under the equity method

amounted to $56,928 and $49,578 respectively.

The Bank received cash dividends from the investees for the year ended December 31, 2012 and 2011

amounted to $44,846 and $25,120, respectively.

The Bank does not prepare consolidated financial statements for the investee which the Bank possesses

100% shares because the amount does not reach the materiality.

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(J) Other financial assets–netDecember 31, 2012 December 31, 2011

Non-accrual loans transferred from non-loan financial assets

$ 129,971 200,709

Less: Allowance for bad debts non-accrual loans transferred from non-loan financial assets

(49,667) (104,379)

Non-accrual loans transferred from non-loan financial assets net

80,304 96,330

Exchange bills negotiated 284 2,438

Less: Allowance for bad debts-exchange bills negotiated (6) (5)

Exchange bills negotiated-net 278 2,433

Financial assets carried at cost 2,267,427 2,272,385

Less: Accumulated impairment-financial assets carried at cost

(210,000) (214,958)

Financial assets carried at cost-net 2,057,427 2,057,427

Debts investment without active market 1,500,000 1,500,000

Total $ 3,638,009 3,656,190

December 31, 2012 December 31, 2011Investee Book Value Ownership% Book Value Ownership%

Taiwan Power Company 11,427 - 11,427 -Taiwan Sugar Corporation 61,364 0.30 61,364 0.30Sunysino Development Associated Inc. 17,440 3.12 17,440 3.12Taiwan Small & Medium Enterprises

Devel. Co., Ltd. 29,000 4.84 29,000 4.84

Taipei Forex Incorporation 7,000 3.53 7,000 3.53Financial Information Service Co., Ltd. 45,500 1.14 45,500 1.14Evernight Investment Co., Ltd. 500,000 4.95 500,000 4.95Taiwan Stock Exchange Corp. 198,012 0.95 198,012 0.95Asia Pacific Telecom Co., Ltd. 300,000 0.46 300,000 0.46Taiwan Futures Exchange Co., Ltd. 20,000 1.00 20,000 1.00Koyon Capital Corporation - - 4,958 5.00Taiwan Asset Management Corp. 1,000,000 5.68 1,000,000 5.68Taiwan Finance Asset Service Corp. 50,000 2.94 50,000 2.94Financial E-Solution Co., Ltd. 19,285 5.13 19,285 5.13Taiwan Depository and Clearing Corp. 4,639 0.08 4,639 0.08Taiwan Integrated Shareholder's

Service Company 3,300 1.10 3,300 1.10

Yand Guang Asset Management Corp. 460 0.77 460 0.77Subtotal 2,267,427 2,272,385Less: Accumulated impairment - Asia

Pacific Telecom Co, Ltd. (210,000) (210,000)

Accumulated impairment - Koyon Capital Corporation

- (4,958)

Total $ 2,057,427 2,057,427

(a) Financial assets carried at cost are as follows:

There is evidence indicating that a decline in the value of Asia Pacific Telecom Co., Ltd. is other than temporary,

therefore, the Bank recognized impairment loss of $210,000 in the past year. In addition, the investee Koyon

Capital Corporation has been liquidated based on the approval Letter Taiwan Taipei District Court Mu Ming An (97)

No 45 on September 11, 2012.

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Investee December 31, 2012 December 31, 2011

Taiwan High Speed Rail Corp. Preferred Stock $ 1,500,000 1,500,000

December 31, 2012 Cost Revaluationappreciation

Accumulateddepreciation Total

Land $ 6,407,864 2,540,330 - 8,948,194Buildings 7,025,359 31,035 2,885,721 4,170,673Machinery 1,920,343 - 1,621,497 298,846Transportation equipment 316,643 - 283,772 32,871Miscellaneous equipment 579,945 - 528,992 50,953Leasehold improvement 96,383 - 46,819 49,564Prepayment for equipment 61,518 - - 61,518Leased assets 3,282 - 969 2,313

Total $ 16,411,337 2,571,365 5,367,770 13,614,932

December 31, 2011 Cost Revaluationappreciation

Accumulateddepreciation Total

Land $ 6,407,864 2,416,032 - 8,823,896Buildings 7,006,979 31,035 2,719,492 4,318,522Machinery 1,965,373 - 1,560,604 404,769Transportation equipment 319,066 - 281,259 37,807Miscellaneous equipment 582,744 - 526,348 56,396Leasehold improvement 100,544 - 38,586 61,958Construction in progress 5,728 - - 5,728Prepayment for equipment 48,312 - - 48,312Leased assets 2,232 - 481 1,751

Total $ 16,438,842 2,447,067 5,126,770 13,759,139

(b) Debt instrument with no active market are as follows:

(K) Premises and equipment–net

Land and buildings were revalued on June 30, 1975, July 1, 1981, July 1, 1990, July 1, 1992, July 1, 1996, April 10, 1997, January 1, 2006, January 1, 2009, January 1, 2011 and January 1, 2012, in accordance with the "Land Right Equalization Act" or "Profit Seeking Enterprise Asset Revaluation Act."

As of December 31, 2012 and 2011, the appreciation from revaluation of properties (including rental assets under operating lease and reflected as other assets) amounted to $3,017,345 and $2,893,047, respectively. The reserve for land incremental tax thereon amounted to $879,056 and $841,388, respectively (reflected as other liabilities), and the net amount is classified under unrealized revaluation appreciation.

(L) Other assetsDecember 31, 2012 December 31, 2011

Office supplies $ 27,559 26,723

Prepayments 3,253,038 1,425,369

Non-operating assets-net 857,242 864,422

Operating guaranty deposits and settlement fund 32,620 77,467

Guarantee deposits paid 187,547 182,606

Less: Accumulated impairment (28,710) (28,710)

Guarantee deposits paid-net 158,837 153,896

Collaterals 3,150 3,150


Collaterals-net - -

Deferred income tax assets-net (Note 4(V)) 1,622,816 1,618,287

Deferred charges 506 764

Temporary payments and suspense accounts 11,049 213,772

Total $ 5,963,667 4,380,700

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Non-operating assets consisted of rental or idle land or buildings are as follows:

Rental Assets December 31, 2012 December 31, 2011

Cost

Land $ 55,755 55,755

Buildings 97,034 96,870

Sub-total 152,789 152,625

Revaluation appreciation

Land 85,161 85,161

Buildings 149 149

Sub-total 85,310 85,310

Cost plus revaluation appreciation 238,099 237,935

Less: Accumulated depreciation (38,374) (36,248)


Net $ 197,987 199,949

As of December 31, 2012 and 2011, land amounted to $69,925 and $69,205 was illegally occupied. Part of the illegally occupied land would be disposed after the Bank received the certificate of legal costs and the rest would be auctioned at appropriate time.

(M) Deposits from the Central Bank and other banks

Idle Assets December 31, 2012 December 31, 2011

Cost

Land $ 162,208 162,208

Buildings 268,315 268,225

Sub-total 430,523 430,433

Revaluation appreciation

Land 360,670 360,670

Cost plus revaluation appreciation 791,193 791,103

Less: Accumulated depreciation (98,109) (92,801)


Net $ 659,255 664,473

Net of rental assets and idle assets $ 857,242 864,422


Deposits from the Central Bank $ 284,358 276,409

Call loans from the Central Bank 3,774,550 6,357,750

Deposits from banks 126,311 119,482

Call loans from banks 19,960,949 24,047,753

Overdrafts on banks 1,400,895 1,066,360

Deposits transferred from Chunghwa Post Co., Ltd. 52,569,197 58,962,071

Total $ 78,116,260 90,829,825

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(N) Financial liabilities measured at fair value through profit or loss


Foreign exchange forward contracts $ 10,870 18,865

Currency swap contracts 57,236 71,938

Interest swap contracts 116,705 199,115

Foreign currency option-put 44,858 49,455

Structured product option-put 1,164 569

Total $ 230,833 339,942

Please refer to 4(C) for the nominal amount of unsettled financial derivatives instrument contracts of December

31, 2012 and 2011.

(O) Securities sold under repurchase agreements

Assets

December 31, 2012

Par value Selling Price(Note)

Designated repurchase

amount

Designated repurchase date

Financial assets measured at fair value through profit or loss $ 370,000 369,657 369,731 Prior to January

22, 2013

Securities purchased under resell agreements 300,000 299,841 299,931

Prior to February 5, 2013

Available-for-sale financial assets 5,437,600 5,573,542 5,576,296 Prior to June 28, 2013

Total $ 6,107,600 6,243,040 6,245,958

Assets

December 31, 2011

Par value Selling Price(Note)

Designated repurchase

amount

Designated repurchase date

Financial assets measured at fair value through profit or loss $ 350,000 349,789 349,868

Prior to February 6, 2012

Securities purchased under resell agreements 380,000 379,505 379,550

Prior to January 2, 2012

Available-for-sale financial assets 5,264,700 5,380,419 5,382,787 Prior to June 29, 2012

Total $ 5,994,700 6,109,713 6,112,205

December 31, 2012 December 31, 2011Interest payable $ 2,019,219 2,026,237Accounts payable 15,296,628 14,660,908Acceptances 1,805,314 2,379,772Accrued expenses 1,887,336 1,817,658Collection payable 658,750 547,833Accounts payable factoring 3,416 2,108,981Spot exchange payable-foreign currencies 14,393,127 6,138,061Deposits received from securities borrowers 84,023 87,849Guaranteed price deposits received from securities

borrowers94,041 124,887

Other payables 1,216,993 1,133,880Others 2,130 2,345Total $ 37,460,977 31,028,411

(P) Payables

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Savings deposits $ 527,036,965 521,211,312

Time deposits 266,705,244 265,118,547

Demand deposits 234,635,957 221,132,489

Check deposits 26,444,788 26,068,177

Remittances 494,057 414,693

Total $ 1,055,317,011 1,033,945,218

(Q) Deposits and remittances

(R) Financial debentures

Bonds

Terms of Transactions Bond Issued

Issue date

Maturity date

Interest Rate and the method of refunding of bonds Type

Amount

December 31, 2012

December 31, 2011

2007-1 08/23/2007 08/23/2014 The debentures bear annual interest rate, which is the index rate plus 0.49%. The index rate is the average offer of 90-days CP which is indicated in Reuters page 6165 at 11 A.M Taipei time, 2 operation days prior to the interest commencement date. Simple interest is accrued quarterly and paid annually. The principal will be repaid in full at maturity.

Unsecured subordinated long-term financial debentures

$ 5,000,000 5,000,000

2008-1 A 03/13/2008 09/13/2013 The debentures bear annual interest rate, which is the index rate plus 0.75%. The index rate is the average offer of 90-days CP which is indicated in Reuters page 6165 at 11 A.M Taipei time, 2 operation days prior to the interest commencement date. Simple interest is accrued quarterly and paid twice a year. The principal will be repaid in full at maturity.


3,000,000 3,000,000

2008-1 B 03/13/2008 09/13/2013 The debentures bear annual interest rate of 3.1%.Simple interest is accrued and paid twice a year. The principal will be repaid in full at maturity.

Unsecured Subordinated long-term financial debentures

450,000 450,000

2008-1 C 03/13/2008 03/13/2014 The debentures bear annual interest rate of 3.15%.Simple interest is accrued and paid twice a year. The principal will be repaid in full at maturity.


1,100,000 1,100,000

2008-2 04/30/2008 04/30/2015 The debentures bear annual interest rate, which is the index rate plus 1.02%. The index rate is the average offer of 90-days CP which is indicated in Reuters page 6165 at 11 A.M Taipei time, 2 operation days prior to the interest commencement date. Simple interest is accrued quarterly and paid annually. The principal will be repaid in full at maturity.


5,200,000 5,200,000

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Bonds


Issue date

Maturity date


Amount

December 31, 2012

December 31, 2011

2008-3 12/30/2008 06/30/2014 The debentures bear annual interest rate of 3.2%. Simple interest is accrued and paid twice a year. The principal will be repaid in full at maturity.


2,150,000 2,150,000

2009-1 06/10/2009 12/10/2014 The debentures bear annual interest rate of 2.45%. Simple interest is accrued and paid twice a year. The principal will be repaid in full at maturity.


1,400,000 1,400,000

2009-2 08/27/2009 08/27/2015 The debentures bear annual interest rate of 2.35%. Simple interest is accrued and paid once a year. The principal will be repaid in full at maturity.


1,000,000 1,000,000

2009-1P 10/23/2009 None The debentures bear annual interest rate which is the seven Banks' board floating average interest rate for 1-year time deposit plus 1.29% for the seven years after the issue date. The interest rate will be the seven Banks' board floating average interest rate for 1-year time deposit plus 2.29% from the eighth year. The bond is redeemable per face at the interest payment date after seven years from the issue date under the consent of the competent authority.

Perpetual accumulated subordinated financial debentures

12,000,000 12,000,000

2009-3 12/18/2009 12/18/2016 The debentures bear an annual interest rate of 2.5%,Simple interest rate is accrued and paid annually. The principal will be repaid in full at maturity.


1,550,000 1,550,000

2010-1 03/05/2010 03/05/2017 The debentures bear an annual interest rate of 2.32%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity.


1,050,000 1,050,000

2010-2 09/02/2010 09/02/2017 The debentures bear an annual interest rate of 1.92%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity.


6,000,000 6,000,000

2010-1P A 09/23/2010 None The debentures bear annual interest rate which is the Chunghwa post's board average interest rate for 1-year time deposit plus 1.34% for the ten years after the issue date.

The interest rate will be the Chunghwa post's board interest rate for 1-year time deposit plus 2.34% from the eleventh year.

The debentures is redeemable per face value plus accrued interest at the interest payment date after ten years from the issue date under the consent of the competent authority.

Perpetual non- accumulated subordinated financial debentures

3,200,000 3,200,000

44


Bonds


Issue date

Maturity date


Amount

December 31, 2012

December 31, 2011

2010-1P B 9/23/2010 None The debentures bear an interest rate of 3.05% for the first ten years. The interest rate will be 4.05% from the eleventh year. The debentures is redeemable per face value plus accrued interest at the interest payment date after ten years from the issue date under the consent of the competent authority.

Perpetual non-accumulatedsubordinatedfinancialdebentures

800,000 800,000

$43,900,000 43,900,000

(S) Other financial liabilities


Appropriated loans funds $ 11,287,868 12,099,668

Lease payable 2,293 1,737

Other 110,376 48,710

Total $ 11,400,537 12,150,115

Cumulative earnings on appropriated loan fund is the project contract signed by Council for Economic Planning

and Development, Small and Medium Enterprise Administration, Ministry of Economic Affairs, and the Bank.

The Bank appropriates the fund to the companies which meet the conditions for loans. The fund is classified as

principal account, interest yielding account, loaned account and un-loaned account. The interests paid to the

government are calculated respectively.

(T) Other liabilities


Advance interest receipts $ 4,665 5,901

Unearned revenue 88,074 87,756

Other advances receipts 38,528 30,359

Reserve for land revaluation incremental tax 879,056 841,388

Reserve for guarantees liabilities 41,379 24,689

Guarantee deposits received 491,722 543,916

Total $ 1,543,424 1,534,009

(U) Stockholders' equity(a) Common stock

As of December 31, 2012 and 2011, both of the Bank's authorized capital was $60,000,000 and the paid-in capital

for common shares of the Bank was $48,982,194 and $42,098,263 and the face value of each share is NTD $10.

The outstanding shares were 4,898,219 thousand shares and 4,209,826 thousand shares, respectively.

Pursuant to the resolution approved by the stockholders' meeting of the Bank on May 25, 2012, the Bank

increased its capital from retained earnings by $1,883,931 and issued 188,393 thousands shares. The capital

increase was approved by Financial Supervisory Commission and came into effect on June 19, 2012. The base

date of the capital increase is set on July 16, 2012 and the legal registration procedures are completed on July

27, 2012.

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The Bank executed a capital increase through issuing 500,000 thousand shares following the decision of the board of directors on July 13, 2011. The face value of the each share is $10 dollars and the proceed of the capital increase amounted to $5,000,000. The capital increase has been reported to Financial Supervisory Commission, Executive Yuan and came into effect on September 23, 2011. The base date of the capital increase is set on January 10, 2012 and the registration was completed on January 20, 2012.

Pursuant to the resolution approved by the stockholders' meeting of the Bank on June 24, 2011, the Bank increased its capital from retained earnings by $1,812,844 and issued 181,284 thousands shares. The capital increase was approved by Financial Supervisory Commission and came into effect on August 8, 2011. The base date of the capital increase is set on September 14, 2011 and the legal registration procedures are completed on September 27, 2011.

(b) Capital surplus

Pursuant to the amendment of the Company Act which was published in January 2012, the Company can only transfer realized capital surplus into capital or distribute cash dividends after the capital surplus be used to offset a deficient. In compliance with the resolution, realized capital surplus includes the income derived from the issuance of new shares at a premium and the income from endowments received by the company. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, the amount of capital surplus to be used to increase capital shall not exceed 10% of total paid-in capital.

(c) Earnings distribution and dividend policy

Under the Bank's Articles of Incorporation, earnings are used initially to pay for income taxes and restore cumulative losses 30% of the remaining earnings is set aside as legal reserve. Special reserve is appropriated from earnings if necessary for business expansion.

The remaining balance of these earnings, if any, is distributed as follows:

1. Add accumulated retained earnings from previous years as distributable dividends and the amount of dividends is resolved by the annual stockholders' meeting according to the proposal submitted by the Board of Directors.

2. Employees bonus: 1% to 8% (recognized as expense).

3. Remuneration to directors: 1% (recognized as expense).

In principle, the aforementioned dividends shall be cash dividends, the stock dividend shall not be over 50%. If the ratio of capital held by the Bank to risk assets is lower than the ratio stipulated by the government plus 1% after the distribution, cash dividends per share shall not exceed $0.5, and the remainder is distributed as stock dividends. Employees' bonus may be in the form of cash or stock dividends, depending on the board of directors' resolution. The Bank annualized the income after tax on December 31, 2012 and 2011 and decucted legal reserve, then multiple the amount by the distribution rate of which employee bonus is 8% and director's remuneration is 1% which the Bank expected to issue. The estimated employee bonus are $161,424 and $166,762 and the director's remuneration are $20,178 and $20,845 for the year ended December 31, 2012 and 2011, respectively. The shares of stock dividends were calculated based on the closing price of the date before stockholder's meeting and it also took into consideration the effect of stock dividends exclusion. Difference between the amount approved at the shareholders' meeting and the amount recognized in the financial statement is accounted for as changes in accounting estimates and is recognized as the profit or loss in the year of the shareholders' meeting.

The Bank decided to distribute earnings an amount of $148,292 to employees' bonus and an amount of $18,536 to directors and supervisors' remuneration based on the resolution of the shareholder's meeting on May 25, 2012. The employees' bonus and directors and supervisors' remuneration recognized on the financial statement amounted to $166,762 and $20,845. Differences between the amount approved at the shareholders' meeting and the amount recognized in the financial statement for employees' bonus and directors and supervisors' remuneration amounted to $18,470 and $2,309 and are accounted for as changes in accounting estimates and recognized as current profit or loss.

The resolved amounts of $112,349 and $14,044 of the employee bonuses and directors and supervisors remuneration were substantially the same as the resolutions of the meeting of the shareholders held on June 24, 2011.

The information about the appropriations of employee bonuses and directors and supervisors remuneration is available at the Market Observation Post System or other sites.

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In compliance with the amendment of the Company Act which was published in January 2012, while a company incurs no loss, pursuant to a resolution to be adopted by a shareholders' meeting, legal reserve is distributed by issuing new shares or by cash, only the portion of legal reserve which exceeds 25 percent of the paid-in capital may be distributed. Furthermore, pursuant to the Banking Act of The Republic of China, before the legal reserve balance reaches the amount of total paid-in capital, cash dividends are limited to 15% of total paid-in capital.

Under the rules set forth by the SFC, special reserve is appropriated from retained earnings based on the equivalent amounts of the contra accounts in the stockholders' equity. This special reserve may not be distributed as dividends to stockholders until the balances of these contra accounts in the stockholders' equity are reversed.

Effective from January 11, 2011, in compliance with FSC Jin-Kuan-Cheng- Chuan No. 09900738571, the Financial Supervisory Commission revoked the rules regarding provision for trading losses reserve and default losses reserve for securities firms As of December 31, 2010, the amount of trading losses reserve and default losses reserve amounted to $185,127 which securities firms and futures commission merchants had made provision for should be reclassified as special reserve. The special reserve can only be used to offset a deficit or when it reaches 50% of total paid-in capital, of which 50% can be capitalized.

The related information regarding the earnings distribution decision of the shareholders' meeting can be acquired on Market Observation Post System or other sites.

(V) Income taxes(a) As of December 31, 2012 and 2011, the components of deferred tax assets were as follows:


Deductible temporary difference due to amortization of pension expense under SFAS 18

$ 77,352 77,352

Deductible temporary difference due to provision for impairment losses on other assets

10,927 10,927

Deductible temporary difference due to provision for impairment losses on other financial assets

35,700 36,543

Deductible temporary difference due to provision for contingent losses of lawsuit

88,439 75,446

(Taxable) deductible temporary difference due to provision for unrealized loss on available-for-sale financial assets

(474) 31,247

Available loss carryforward benefits 3,010,889 3,408,177

Tax effect on unused investment tax credits 10,064 15,348

Deductible (taxable) temporary difference due to cumulative translation adjustments

13,059 (3,782)

$ 3,245,956 3,651,258

(b) Deferred income tax assets and liabilities were as follows:


Deferred income tax assets $ 3,245,956 3,651,258

Allowance for deferred income tax assets (1,623,140) (2,032,971)

Net $ 1,622,816 1,618,287

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For The Year Ended December

31, 2012

For The Year Ended December

31, 2011

Income tax computed on net income before tax $ 633,746 555,725

Permanent differences:

- Tax-exempt securities transaction (income) loss (2,688) 66,011

- Net (income) loss from offshore banking unit (158,668) 29,892

- Recognized (gain) loss from financial assets and liabilities measured at fair value through profit or loss

(32,624) 23,600

- Cash Dividend (25,840) (33,391)

- Gains on investment recognized under the equity method (9,678) (8,428)

- Tax-exempt gains on disposal of land - 48,244

- Reversal of impairment loss on assets - (72,927)

Temporary differences:

- Reveral of contingent loss reserve - (7,024)

- Reversal of impairment loss of other financial assets (843)

- Provisions of reserve for contingencies of lawsuit 12,993 24,333

Taxable income 416,398 626,035

Duduct: Loss carryforward (416,398) (626,035)

Income tax payable (current) - -

Decrease in deferred income tax assets 12,312 130,958

Overseas branch income tax expenses 226,340 163,013

Overestimate prior income tax expense (7,708) (2,897)

Basic tax 93,134 -

Income tax expense $ 324,078 291,074

(c) The statutory income tax rate is 17%. The Bank adopted the "Income Basic Tax Act" in determining the income basic tax. The income tax expense for the year ended December 31, 2012 and 2011 were calculated as follows:

(d) The Bank's income tax returns for years up to 2009 have been approved by the Tax Authority, except for the

year 2008.

(e) Imputation Credit Account and Tax Deductible Ratio


Stockholders' imputation credit account $ 4,947 10,681


Stockholders' tax deductible ratio 0.14%(expected) 2.58%(actual)

As of December 31, 2012 and 2011, all of the ending balance of undistributed retained earnings arose from

earnings in 1998 and thereafter.

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(f) As of December 31, 2012, the loss to reduce future year's income base on Income Tax Law were as follows:

Amount Deductible Year

2004 (authorized) $ 1,324,821 2005~2014

2005 (authorized) 13,799,316 2006~2015

2006 (authorized) 1,021,326 2007~2016

2009 (authorized) 1,565,648 2010~2019

Total $ 17,711,111

(g) As of December 31, 2012, the vocational training expense or venture capital investing that could be used to

reduce future years income tax based on Statute for Upgrading Industries were as follows:

Amount Deductible Year

2008 (declared) $ 7,456 2008~2012

2009 (authorized) 2,608 2009~2013

Total $ 10,064

(W) Retirement plan(a) As of December 31, 2012 and 2011, the balance of pension fund and accrued pension liabilities were as

follows:


Ending balance of pension fund assets $ 5,488,138 5,066,674

Ending balance of accrued pension liabilities 769,248 257,985

(b) For the year ended December 31, 2012 and 2011, the pension expenses were as follows:



Provisions for defined benefit plan $ 508,192 525,387

Provisions for defined contribution plan 69,458 67,450

Borrowed employees pension expense recoverd - (98)

Total $ 577,650 592,739

(c) The information of defined benefit plan of the Bank is listed below:

(1) As of December 31 2012 and 2011, the balance of pension account in Bank of Taiwan amounts to

$469,221 and $488,325, respectively.

(2) Pension reserve is deposited in the pension reserve account of Bank of Taiwan (originally named Central

Trust of China) and is provided as 8% of the total salary amount. Started from October 2001, it was

adjusted to 12%, June 2002 to 11.3%, March 2003 to 11.5%, April 2004 to 12.8%, May 2005 to 11.4%,

January 2006 to 14.6%, January 2007 to 13.09%, January 2008 to 13.35%, June 2009 to 13.67%, June

2010 to 13.80%, August 2011 to 15% and August 2012 to 14.08%. As of December 31, 2012 and 2011,

the accumulated amounts are $5,488,138 and $5,066,674, respectively.

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(3) Actuarial assumptions used in the pension costs calculation were as follows:


Benefit obligation

Vested benefit obligation $ (5,097,451) (4,382,421)

Non-vested benefit obligation (1,159,935) (942,238)

Accumulated benefit obligation (6,257,386) (5,324,659)

Additional benefit based on future salaries (1,005,404) (882,480)

Projected benefit obligation (7,262,790) (6,207,139)

Fair value of pension obligation 5,488,138 5,066,674

Funding status (1,774,652) (1,140,465)

Unrecognized prior service cost - 9,743

Unrecognized gains on pension fund 1,590,433 968,917

Supplementary accrued pension liabilities (585,029) (96,180)

Accrued pension liabilities $ (769,248) (257,985)



Service cost $ 455,570

138,538

(50,908)

(69,411)

(120,319)

34,403

$ 508,192

446,947

123,602

(57,349)

(43,338)

(100,687)

55,525

525,387

Interest cost

Return on plan assets

Loss on plan assets

Expected return on plan assets

Amortization

Net periodic pension cost



Discount rate 1.50% 2.25%

Incremental rate of future compensation levels 1.50% 1.50%

Expected long-term rate of return on plan assets 1.50% 2.25%

(4) As of December 31, 2012 and 2011, the funding status was reconciled with accrued pension liabilities per

books as follows:

(5) The components of net periodic pension costs were as follows:

As of December 31, 2012 and 2011, the vested benefit obligation of the Bank's retirement plan amounted to

$6,199,526 and $5,738,503, respectively.

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Before tax After tax Before tax After tax

Net income $ 3,727,917 3,403,839 3,268,972 2,977,898

Weighted average number of common stock shares outstanding (in thousands)

4,885,432 4,885,432 4,209,826 4,209,826

Basic earnings per share (in dollar) $ 0.76 0.70 0.78 0.71

Basic earnings per share-retroactive adjustment:

Weighted average number of common

stock shares outstanding (in thousands)-retroactive adjustment

4,378,219 4,378,219

Basic earnings per share-retroactive adjustment (in dollars)

0.75 0.68

Dilutive potential common shares

(in thousands) (Note) 18,470 18,470 17,874 17,874

Weighted average number of shares outstanding for diluted EPS

(in thousands)

4,903,902 4,903,902 4,227,700 4,227,700

Diluted earnings per shares (in dollars)

Diluted earnings per shares (in dollars)- retroactive adjustment:

$ 0.76 0.69 0.77 0.70

Weighted average number of common

stock shares outstanding

(in thousands)-retroactive

adjustment

4,396,808 4,396,808

Diluted earnings per share-retroactive adjustment (in dollars) 0.74 0.68

Note： The shares were calculated based on the stockholder's equity at the balance sheet date.

(X) Earnings per share

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(Y) Financial Instruments(a) Fair value information

(1) Fair value information

As of December 31 2012 and 2011, the fair value information of financial assets and liabilities were as

follows:

Non-derivatives financial instruments

December 31, 2012 December 31, 2011Fair value Fair value

Book valueQuoted prices

in active market

Determined value by using

valuation techniques

Book valueQuoted prices

in active market

Determined value by

using valuation

techniquesFinancial assets:

Cash and cash equivalents $26,149,382 - 26,149,382 25,579,593 - 25,579,593

Due from the Central Bank and call loans to banks

67,417,255 - 67,417,255 56,150,500 - 56,150,500

Financial assets measured at fair value through profit or loss - net

5,444,047 5,444,047 - 5,182,763 5,182,763 -

Securities purchased under resell agreements

13,239,950 - 13,239,950 2,337,341 - 2,337,341

Receivables - net 20,215,491 - 20,215,491 20,250,925 - 20,250,925

Discounts and loans - net 953,800,832 - 953,800,832 942,587,857 - 942,587,857

Available-for-sale financial assets-net 12,368,989 12,368,989 - 14,850,799 14,850,799 -

Held-to-maturity financial assets - net 167,514,168 - 167,605,262 177,696,669 - 177,785,536

Other financial assets - net 3,638,009 - 3,638,009 3,656,190 - 3,656,190

Operating guaranty and settlement funds

32,620 - 32,620 77,467 - 77,467

Guarantee deposits paid - net 158,837 - 158,837 153,896 - 153,896

Financial liabilities:

Deposits from the Central Bank and other banks

78,116,260 - 78,116,260 90,829,825 - 90,829,825

Securities sold under repurchase agreements

6,243,040 - 6,243,040 6,109,713 - 6,109,713

Payables 37,460,977 - 37,460,977 31,028,411 - 31,028,411

Deposits and remittances 1,055,317,011 - 1,055,317,011 1,033,945,218 - 1,033,945,218

Financial debentures 43,900,000 - 43,900,000 43,900,000 - 43,900,000

Other financial liabilities 11,400,537 - 11,400,537 12,150,115 - 12,150,115

Guarantee deposits received 491,722 - 491,722 543,916 - 543,916

Derivatives financial instruments

Financial assets:

Foreign exchange forward contracts $ 63,047 - 63,047 9,401 - 9,401

Currency swap contracts 207,324 - 207,324 164,213 - 164,213

Interest swap contracts 21,394 - 21,394 41,402 - 41,402

Foreign currency options-call 44,858 - 44,858 49,455 - 49,455

Structured product option-call 1,164 - 1,164 569 - 569

Stock Index futures 27,203 27,203 - 27,163 27,163 -

Financial liabilities:

Foreign exchange forward contracts 10,870 - 10,870 18,865 - 18,865

Currency swap contracts 57,236 - 57,236 71,938 - 71,938

Interest swap contracts 116,705 - 116,705 199,115 - 199,115

Foreign currency options-put 44,858 - 44,858 49,455 - 49,455

Structured product option-put 1,164 - 1,164 569 - 569

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(2) The Tier information of the fair value of financial instruments

Financial products measured at fair value through profit or loss

December 31, 2012Total 1st Tier 2nd Tier 3rd Tier

Non-derivative financial assets

Assets:Financial assets measured at fair value through

profit or lossFinancial assets held for trading

Security investment $ 131,141 131,141 - -

Other 2,193,880 199,190 1,994,690 -

Financial assets measured at fair value on initial recognition

3,119,026 - 1,561,146 1,557,880

Available-for-sale financial assets

Security investment 555,830 555,830 - -

Bond investment 11,813,159 - 11,075,176 737,983

Other financial assets

Debts investments without active market 1,500,000 - - 1,500,000

Derivative financial assets

Assets:

Financial assets measured at fair value through profit or loss

364,990 27,203 337,787 -

Liabilities:

Financial liabilities measured at fair value through profit or loss

230,833 - 230,833 -

Financial products measured at fair value through profit or loss

December 31, 2011Total 1st Tier 2nd Tier 3rd Tier

Non-derivative financial assets

Assets:

Financial assets measured at fair value through profit or lossFinancial assets held for trading

Security investment $ - - - -

Other 1,495,805 - 1,495,805 -

Financial assets measured at fair value on initial recognition

3,686,958 - 2,219,627 1,467,331


Security investment 673,463 673,463 - -

Bond investment 14,177,336 - 12,152,919 2,024,417


Debts investments without active market 1,500,000 - - 1,500,000

Liabilities:

Derivative financial assets

Assets: -


292,203 27,163 265,040

Liabilities:


339,942 - 339,942 -

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(3) Changes of financial assets measured at fair value through profit or loss and are classified as the 3rd tier financial instrument.

For the years ended December 31, 2012

NameBalance at

the beginning of the year

Net income or

stockholder's equity

Increase Decrease

Balance at the end of the yearPurchase or

issue

Transfer in the 3rd tier out of other tiers

From the 3rd tier

financial liabilities to the 3rd tier financial

asset

Sale, disposal or settlement

Transferring of other tiers and out of the 3rd tier

From the 3rd tier

financial assets to

the 3rd tier financial liabilities

Financial asset measured at fair value through profit or loss

Financial asset measured at fair value on initial recognition

$1,467,331 (55,551) 146,625 - - 525 - - 1,557,880

Available-for-sale financial assets 2,024,417 (564,001) - - - 722,433 - - 737,983


Debts investments without active market 1,500,000 - - - - - - - 1,500,000

Total $4,991,748 (619,552) 146,625 - - 722,958 - - 3,795,863

For the years ended December 31, 2011

NameBalance at

the beginning of the year

Net income or

stockholder's equity

Increase Decrease

Balance at the end of the yearPurchase or

issue

Transfer in the 3rd tier out of other tiers

From the 3rd tier

financial liabilities to the 3rd tier financial

asset

Sale, disposal or settlement

Transferring of other tiers and out of the 3rd tier

From the 3rd tier

financial assets to

the 3rd tier financial liabilities

Financial asset measured at fair value through profit or loss

Financial asset measured at fair value on initial recognition

$1,180,000 11,625 886,051 - - 610,345 - - 1,467,331


2,467,841 (20,055) 261,294 - - 684,663 - - 2,024,417


Debts investments without active market

1,500,000 - - - - - - - 1,500,000

Total $5,147,841 (8,430) 1,147,345 - - 1,295,008 - - 4,991,748

(b) Methods and assumptions used in estimating the fair values of financial instruments are specified below:

(1) The fair value of short-term financial instruments is determined by their face value on the balance sheet.

Because these instruments will mature on short notice, the face value is used as a reasonable basis for

establishing the fair value. This method is applied to cash and cash equivalent, due from the Central Bank

and call loans to banks, securities purchased under resell agreements, receivables, discounts and loans,

other financial assets (excludes financial assets carried at cost), operation guarantee deposits and settlement

fund, guarantee deposits paid, Central Bank deposits and deposits from other banks, securities sold under

repurchase agreements, payables, deposits and remittances, financial bonds payable, other financial liabilities,

and guarantee deposits received,⋯etc.

54


(2) If there is a quoted price in an active market for the financial asset, including financial instruments

measured at fair value through profit or loss, and available-for-sale and held-to-maturity, the quoted

price is regarded as its fair value. If there is no quoted price in an active market for the financial

asset, its fair value is estimated on the basis of the result of a valuation technique that refers to

quoted prices provided by financial institutions. Ask (bid) is used to evaluate the selling (buying)

position by the Bank if the quoted price include ask and bid price. If there is not a quoted price for

the financial asset, transaction price close to the balance sheet date is the fair value.

(3) Financial assets carried at cost are all unlisted companies. The variation of the reasonable estimates

of the investments' fair value is not insignificant, and the probability of the range of the variation

can not be reasonable estimated. As mentioned above, the fair value of the investments can not be

measured reliably and is disclosed its book value.

(4) Fair value of financial derivatives (including foreign exchange forwards, non-delivery forwards,

interest swaps, currency swaps, cross currency swaps, stock index futures and foreign exchange

option) are the amount of cash to be paid or to be received by the Bank, assuming that the contract

will be terminated on the balance sheet date. The Bank adopts mark-to-model prices which are

usually adopted among the banking industry, such as Discounted-Cash-Flow model and Black-

Scholes model. The Bank adopts the price data from Reuters and Bloomberg to calculate the fair

value of the holding position. The aforesaid price data is based upon the middle price and used

consistently by the Bank. Furthermore, the fair value of the embedded financial derivatives are

calculated based upon the quote from the counterparty, and separately calculated in accordance

with the contracts.

(c) Financial risk information

(1) Market risk

Market risk is defined as the effect of the value of the position caused by the change of the market

risk factor (include interest rates, foreign exchange rates, equity securities prices and commodities

price). Market risk management, include identification of the market risk, measurement of the fair

value, risk control and the related report disclosure, is executed by the Bank to control the financial

instruments transactions loss of market risk in the tolerable range, and the limit management of the

open positions and stop loss is executed by the Bank as well.

(2) Credit risk

The Bank's financial instruments may lead to loss when a borrower or counterparty defaults on

payment. Therefore, the credit rating of the securities of the Bank investment must exceed certain

investment degree (BBB－). Major portion of the investment portfolio is denominated in New Taiwan

dollar comprising of certificates of deposit with the Central Bank whose credit rating is superior

and has no credit risk. For high credit risk corporate bonds and foreign securities, the Bank's

management follows strict credit evaluation procedures and authorizes various Bank personnel to

control credit risk.

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Financial Items


Book valueMaximum

credit exposure

Book valueMaximum

credit exposure


Commercial paper $ 1,994,690 1,994,690 1,495,805 1,495,805

Listed and OTC stocks 131,141 131,141 - -

Beneficiary certificates 199,190 199,190 - -

Overseas bonds 3,119,026 3,119,026 3,686,958 3,686,958

Discounts and loans 953,800,832 953,800,832 942,587,857 942,587,857


Government bonds 4,931,944 4,931,944 5,718,332 5,718,332

Corporate bonds 4,522,797 4,522,797 2,261,229 2,261,229

Overseas bonds 2,358,418 2,358,418 6,197,775 6,197,775

Listed and OTC stocks 555,830 555,830 673,463 673,463

Held-to-maturity financial assets

Certificates of deposit with Central Bank 160,700,000 160,700,000 172,200,000 172,200,000

Government bonds 1,947,792 1,947,792 1,756,370 1,756,370

Corporate bonds 1,799,010 1,799,010 2,658,570 2,658,570

Overseas bonds 2,558,522 2,558,522 562,878 562,878

Banker's acceptance 447,871 447,871 455,273 455,273

Negotiable certificates of deposit 60,973 60,973 63,578 63,578

Derivatives financial instrument

Foreign exchange forward contracts 63,047 63,047 9,401 9,401

Currency swaps contracts 207,324 207,324 164,213 164,213

Interest swap contracts 21,394 21,394 41,402 41,402

Foreign currency options-call 44,858 44,858 49,455 49,455

Structured products option-call 1,164 1,164 569 569

Stock index futures 27,203 27,203 27,163 27,163

Total $ 1,139,493,026 1,139,493,026 1,140,610,291 1,140,610,291

Note: The maximum credit exposure amount applies to contracts with positive fair value on the balance sheet date.

The maximum credit exposure amount of the financial instruments the Bank held is as follows:

When the Bank provides loan, loan commitment, and guarantee, the Bank performs strict credit review, under which,

it requires provision of collateral including cash, inventory, currency securities or other assets from loans, loans

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Loans - by region:

Asia $ 929,414,299 914,998,136

Europe 822,068 2,396,236

America 13,290,939 17,148,396

Oceania 10,035,649 10,157,081

Other 551,665 877,975

Total $ 954,114,620 945,577,824


Loans - by industry:

Manufacturing $ 263,115,880 272,639,001

Wholesale, retail and catering 72,629,647 75,055,118

Real Estate 43,742,004 40,250,386

Water, electricity and gas 25,533,390 26,147,918

Government organization 160,161,850 130,556,592

Individual 240,511,800 246,025,905

Other 148,420,049 154,902,904

Total $ 954,114,620 945,577,824


Guarantees and letters of credit$ 21,438,163 25,971,850

Commitments on credit cards 23,237,386 19,463,776

$ 44,675,549 45,435,626

commitment, and guarantee. When the counterparty defaults, the Bank can enforce its right over the collateral or

other guarantee to effectively reduce credit risk.

Credit risk applies to contracts with positive fair value on the balance sheet date, off-balance-sheet commitment

and guarantee contracts. The Bank is exposed to concentration risk if counter-parties to financial instrument

transactions are engaged in similar activities, active in the same geographic region, or share similar economic

features that would cause their abilities to fulfill contractual obligations to be similarly affected by changes in

economic or other conditions.

Amount of contracts with concentration of credit risk were as follows:

Because the Bank provides guarantee endorsements and commercial letters of credit as guarantee, it has

guarantees and credit commitments mostly confined within one year. Further, the Bank issues credit cards and

has loan commitments accordingly.

Contract amounts of financial instruments with off-balance-sheet credit risks were as follows:

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(3) Liquidity risk

The Bank has established a funding liquidity risk crux to control liquidity risk from financial funding. The ratio of

gap to total assets and weekly average liquidity ratio are reported to Assets Liabilities Management Committee

periodically. In addition, in order to control assets liquidity risk and avoid concentration of investment portfolio, the

Bank invests limited amount to the same related enterprise, single stock and single fund.

According to the nature of assets and liabilities, the Bank selects suitable grouping method to make the due

analysis to appraise the Bank's liquidity. The due analysis of December 31, 2012 and 2011 is as follows:

December 31, 2012

Financial Items

Within 1 month 1 month to 3 months

AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets

Cash and cash equivalent $ 26,149,382 26,149,382 - -


56,224,959 56,224,959 8,130,314 8,130,314

Financial assets measured at fair value through profit or loss (Note 1)

2,690,011 2,690,011 290,350 290,350


13,239,950 13,239,950 - -

Interest receivables 1,003,318 1,003,318 329,695 329,695

Accounts receivable factoring without recourse

66,128 66,128 66,203 66,203

Account receivable 771,507 771,507 114,814 114,814


Available-for-sale financial assets 351,365 351,365 653,506 653,506

Held-to-maturity financial assets 144,100,270 144,100,270 17,342,598 17,342,598

Total assets $ 304,305,611 304,305,611 133,194,363 133,194,363

Liabilities

Deposits from the Central Bank and other Banks

$ 22,858,622 22,858,622 29,247,157 29,247,157


230,833 230,833 - -


5,989,160 5,989,160 109,633 109,633

Interest payable 513,053 513,053 540,411 540,411

Deposits and remittances (Note 2) 646,361,054 646,361,054 134,456,618 134,456,618

Financial Debentures - - - -

Appropriated loan fund 3,000 3,000 500 500

Total liabilities $ 675,955,722 675,955,722 164,354,319 164,354,319

Net liquidity gap $ (371,650,111) (371,650,111) (31,159,956) (31,159,956)

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December 31, 2012

Financial Items

3 months to 1 year 1 year to 2 years

AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets

Cash and cash equivalent - - - -


$ 3,061,982 3,061,982 - -


412,297 412,297 1,548,297 1,548,297


- - - -

Interest receivables 321,035 321,035 2,969 2,969


- - - -



Available-for-sale financial assets 2,255,976 2,255,976 2,355,966 2,355,966


Total assets $ 305,351,060 305,351,060 113,375,172 113,375,172

Liabilities


$ 26,010,481 26,010,481 - -


- - - -


144,247 144,247 - -



Financial Debentures 3,450,000 3,450,000 9,650,000 9,650,000

Appropriated loan fund 99,080 99,080 319,750 319,750


Net liquidity gap $ 22,295,361 22,295,361 84,458,615 84,458,615

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December 31, 2012

Financial Items

2 years to 3 years 3 years to 4 years

AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets



- - - -


$ 578,182 578,182 289,900 289,900


- - - -

Interest receivables - - - -


- - - -

Account receivable - - - -



Held-to-maturity financial assets 1,249,212 1,249,212 256,863 256,863

Total assets $ 66,485,580 66,485,580 56,658,307 56,658,307

Liabilities


$ - - - -


- - - -


- - - -

Interest payable 6,403 6,403 18 18

Deposits and remittances (Note 2) 3,136,927 3,136,927 13,506 13,506


Appropriated loan fund 683,000 683,000 1,055,250 1,055,250


Net liquidity gap $ 56,459,250 56,459,250 42,039,533 42,039,533

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December 31, 2012

Financial Items

4 years to 5 years Over 5 years Total

AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Amount

Assets

Cash and cash equivalent $ - - - - 26,149,382


- - - - 67,417,255


- - - - 5,809,037


- - - - 13,239,950

Interest receivables - - - - 1,657,017


- - - - 132,331

Account receivable - - 221,361 221,361 1,694,857

Discounts and loans 39,091,993 39,091,993 234,556,231 226,254,771 962,271,900

Available-for-sale financial assets 1,216,547 1,216,547 2,758,470 2,758,470 12,368,989

Held-to-maturity financial assets 79,962 79,962 960,229 960,229 167,514,168

Total assets $ 40,388,502 40,388,502 238,496,291 230,194,831 1,258,254,886

Liabilities


$ - - - - 78,116,260


- - - - 230,833


- - - - 6,243,040

Interest payable 6 6 - - 2,019,219

Deposits and remittances (Note 2) 6,290 6,290 3,246 3,246 1,055,317,011

Financial Debentures 7,050,000 7,050,000 4,000,000 4,000,000 43,900,000

Appropriated loan fund 942,250 942,250 8,185,038 8,185,038 11,287,868

Total liabilities $ 7,998,546 7,998,546 12,188,284 12,188,284 1,197,114,231

Net liquidity gap $ 32,389,956 32,389,956 226,308,007 218,006,547 61,140,655

Note 1: The amount for financial assets measured at fair value through profit or loss is $5,809,037, which is consisted of financial assets for trading purposes amounting to $2,690,011 and financial assets designated at fair value at initial recognition amounting to $3,119,026.

Note 2: Amount for deposits and remittances shown in column "within 1 month" consists of check deposits amounting to $26,444,788 demand deposits amounting to $234,635,957 and demand savings deposits amounting to $273,834,134.

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December 31, 2011

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets

Cash and cash equivalent $ 25,579,593 25,579,593 - -


52,769,208 52,769,208 3,381,292 3,381,292


1,788,008 1,788,008 - -


2,337,341 2,337,341 - -



5,599,850 5,599,850 201,585 201,585

Account receivable 1,628,568 1,628,568 146,241 146,241


Available-for-sale financial assets 408,751 408,751 1,305,369 1,305,369


Total assets $ 219,113,576 219,113,576 183,770,515 183,770,515

Liabilities


21,139,080 21,139,080 36,243,172 36,243,172


339,942 339,942 - -


5,772,205 5,772,205 161,778 161,778



Financial Debentures - - - -



Net luquidity gap $ (428,021,184) (428,021,184) 18,695,121 18,695,121

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December 31, 2011

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets

Cash and cash equivalent $ - - - -


- - - -


650,874 650,874 581,280 581,280


- - - -



140,950 140,950 - -





Total assets $ 302,223,210 302,223,210 112,636,711 112,636,711

Liabilities


$ 33,447,573 33,447,573 - -


- - - -


175,730 175,730 - -



Financial Debentures - - 3,450,000 3,450,000



Net luquidity gap $ 2,926,042 2,926,042 91,043,151 91,043,151

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December 31, 2011

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets



- - - -


$ 1,600,014 1,600,014 572,143 572,143


- - - -

Interest receivables - - - -


- - - -

Account receivable - - - -



Held-to-maturity financial assets 811,566 811,566 1,248,815 1,248,815

Total assets $ 82,996,754 82,996,754 54,638,415 54,638,415

Liabilities


$ - - - -


- - - -


- - - -

Interest payable 6,813 6,813 227 227

Deposits and remittances (Note 2) 3,924,603 3,924,603 14,274 14,274




Net luquidity gap $ 68,839,508 68,839,508 47,503,164 47,503,164

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December 31, 2011

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Amount

Assets

Cash and cash equivalent $ - - - - 25,579,593


- - - - 56,150,500


282,647 282,647 - - 5,474,966


- - - - 2,337,341

Interest receivables - - - - 1,861,149


- - - - 5,942,385

Account receivable - - 1,058 1,058 2,644,311

Discounts and loans 41,243,066 41,243,066 243,259,146 234,759,608 951,254,667



Total assets $ 43,176,459 43,176,459 245,236,740 236,737,202 1,243,792,380

Liabilities


- - - - 90,829,825


- - - - 339,942


- - - - 6,109,713

Interest payable 99 99 5,155 5,155 2,026,237

Deposits and remittances (Note 2) 13,122 13,122 3,840 3,840 1,033,945,218

Financial Debentures 13,550,000 13,550,000 11,050,000 11,050,000 43,900,000

Appropriated loan fund 1,266,750 1,266,750 8,968,258 8,968,258 12,099,668


Net luquidity gap $ 28,346,488 28,346,488 225,209,487 216,709,949 54,541,777

Note 1: The amount for financial assets measured at fair value through profit or loss is $5,474,966, which is consisted of financial assets for trading purposes amounting to $1,788,008 and financial assets designated at fair value at initial recognition amounting to $3,686,958.

Note 2: Amount for deposits and remittances shown in column "within 1 month" consists of check deposits amounting to $26,068,177 demand deposits amounting to $221,132,489 and demand savings deposits amounting to $263,095,828.

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(4) Cash flow risk from interest-rate fluctuation and fair value risk from interest-rate fluctuationThe Bank's investment in floating rate assets and the floating rate debt that the Bank possesses can have an impact on the future cash flow and cause risks due to interest rate fluctuations. The risk of change in fair value of fixed rate bonds can also result from interest rate fluctuations. In order to hedge against potential risks resulting from interest-rate fluctuation, the Bank has signed interest swap contracts after evaluating positions that are exposed to greater interest rate risk. The Bank has also established interest rate control rules for risk measurement and related limits. In additional, asset and liabilities management committee surveys the evaluation result of each interest rate risk measurement index and related responding measures, which will achieve the Bank's objective to periodically monitor risks attributed by interest rate fluctuations.

Based on the structure of assets and liabilities as of December 31, 2012, net interest revenue increases NT$23.06 million (decreases NT$23.06 million) if interest rate increases (decrease) 1bp (1%), budget ratio of 2012 NII was 0.160%.

Based on the structure of assets and liabilities as of December 31, 2011, net interest revenue increases NT$22.76 million (decreases NT$ 22.76 million) if interest rate increases (decreases) 1bp (1%), budget ratio of 2011 NII was 0.170%.

A. Maturity analysis of expected repricing date or maturity date.

As of December 31, 2012 and 2011, the Bank's expected repricing date and maturity date were not affected by the contract date.

The maturity analysis of the expected repricing date and maturity date were as follows:

December 31, 2012

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets

Cash in banks, due from the Central Bank and call loans to banks (Note 2) $ 43,905,128 43,905,128 7,985,132 7,985,132

Financial assets measured at fair value through profit or loss 1,994,691 1,994,691 311,744 311,744

Securities purchased under resell agreements 13,139,828 13,139,828 100,122 100,122

Accounts receivables 877,989 877,989 - -

Discounts and loans (excluding overdue loans) 772,628,313 772,628,313 65,422,740 65,422,740



Total assets $ 977,148,210 977,148,210 92,614,799 92,614,799

Liabilities

Deposits from the Central Bank and other Banks (exclude deposits from Central Bank) (Note 3)

$ 68,602,757 68,602,757 6,690,787 6,690,787

Financial liabilities measured at fair value through profit or loss - - 116,704 116,704

Securities sold under repurchase agreements 5,989,160 5,989,160 109,633 109,633

Deposits and remittance 309,164,757 309,164,757 90,806,024 90,806,024

Financial debentures payable 4,600,000 4,600,000 7,500,000 7,500,000

Appropriated loan fund 8,796,879 8,796,879 - -


Interest rate sensitivity gap $ 579,994,657 579,994,657 (12,608,349) (12,608,349)

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December 31, 2012

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets

Cash in banks, due from the Central Bank and call loans to banks (Note 2) $ 3,061,982 3,061,982 - -

Financial assets measured at fair value through profit or loss 267,122 267,122 1,258,710 1,258,710

Securities purchased under resell agreements - - - -

Accounts receivables - - - -




Total assets $ 99,691,460 99,691,460 13,522,082 13,522,082

Liabilities


$ 2,506,357 2,506,357 - -

Financial liabilities measured at fair value through profit or loss - - - -

Securities sold under repurchase agreements 144,247 144,247 - -





Interest rate sensitivity gap $ (538,093,229) (538,093,229) (799,342) (799,342)

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December 31, 2012

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets

Cash in banks, due from the Central Bank and call loans to banks (Note 2) $ - - - -

Financial assets measured at fair value through profit or loss 723,357 723,357 579,486 579,486






Total assets $ 7,769,221 7,769,221 6,297,198 6,297,198

Liabilities


$ - - - -

Financial liabilities measured at fair value through profit or loss - - - -

Securities sold under repurchase agreements - - - -

Deposits and remittance 1,337,032 1,337,032 1,678 1,678


Appropriated loan fund - - - -


Interest rate sensitivity gap $ 3,932,189 3,932,189 4,745,520 4,745,520

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December 31, 2012

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Amount

Assets

Cash in banks, due from the Central Bank and call loans to banks (Note 2)

$ - - - - 54,952,242


- - - - 5,135,110

Securities purchased under resell agreements - - - - 13,239,950

Accounts receivables - - - - 877,989

Discounts and loans (excluding overdue loans)

2,997,787 2,997,787 2,591,273 2,591,273 954,114,620



Total assets $ 4,294,296 4,294,296 6,309,972 6,309,972 1,207,647,238

Liabilities


$ - - - - 77,799,901

Financial liabilities measured at fair value through profit or loss - - - - 116,704

Securities sold under repurchase agreements - - - - 6,243,040

Deposits and remittance 3,281 3,281 874 874 1,028,378,166

Financial debentures payable 7,050,000 7,050,000 800,000 800,000 43,900,000

Appropriated loan fund - - - - 11,287,868

Total liabilities $ 7,053,281 7,053,281 800,874 800,874 1,167,725,679

Interest rate sensitivity gap $ (2,758,985) (2,758,985) 5,509,098 5,509,098 39,921,559

Note 1: The above amount included the revenue or cost of interest-yielding assets and interest-bearing liabilities which are affected by interest rate fluctuations.

Note 2: Cash in banks amounted to $1,723,022 which $140,508 is unaccrued interest and $1,582,514 is accrued interest. Total call loans to bank amounted to $24,918,003 which is accrued interest. Due from the Central Bank amounted to $42,403,407 of which $14,047,527 is unaccrued interest and $ 28,355,880 is accrued interest. Deposits transferred to the Central Bank amounted to $73,171 which is accrued interest. Bank overdrafts which is accrued interest amounted to $22,674.

Note 3: Deposits from other banks amounted to $126,311 of which $32,001 is unaccrued interest and $94,310 is accrued interest.

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December 31, 2011

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets


$ 35,485,024 35,485,024 3,381,292 3,381,292


1,495,804 1,495,804 262,545 262,545

Securities purchased under resell agreements 2,337,341 2,337,341 - -

Accounts receivables 4,693,138 4,693,138 - -


816,631,378 816,631,378 58,630,879 58,630,879



Other financial assets-exchange bills negotiated

2,438 2,438 - -

Total assets $ 931,625,612 931,625,612 125,960,329 125,960,329

Liabilities


$ 73,106,473 73,106,473 11,513,307 11,513,307


- - 199,115 199,115


5,772,205 5,772,205 161,778 161,778



Appropriated loan fund 9,324,353 9,324,353 - -


Interest rate sensitivity gap $ 506,466,366 506,466,366 25,764,829 25,764,829

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December 31, 2011

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets


- - - -


$ 650,874 650,874 429,905 429,905




56,817,672 56,817,672 2,915,310 2,915,310




- - - -

Total assets $ 104,516,956 104,516,956 5,635,004 5,635,004

Liabilities


$ 5,910,978 5,910,978 - -


- - - -


175,730 175,730 - -





Interest rate sensitivity gap $ (501,869,478) (501,869,478) (3,137,581) (3,137,581)

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December 31, 2011

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets


- - - -


$ 1,081,267 1,081,267 723,518 723,518




3,397,651 3,397,651 2,192,914 2,192,914

Available-for-sale financial assets 1,748,001 1,748,001 766,205 766,205

Held-to-maturity financial assets 741,335 741,335 1,248,815 1,248,815


- - - -

Total assets $ 6,968,254 6,968,254 4,931,452 4,931,452

Liabilities


$ - - - -


- - - -


- - - -

Deposits and remittance 1,933,037 1,933,037 2,154 2,154


Appropriated loan fund - - - -


Interest rate sensitivity gap $ (914,783) (914,783) 2,429,298 2,429,298

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December 31, 2011

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Amount

Assets

Cash in banks, due from the Central Bankand call loans to banks (Note 2)

- - - - 38,866,316


$ 580,252 580,252 - - 5,224,165


- - - - 2,337,341

Accounts receivables - - - - 4,693,138


1,933,634 1,933,634 3,058,386 3,058,386 945,577,824




- - - - 2,438

Total assets $ 3,863,813 3,863,813 5,034,921 5,034,921 1,188,536,341

Liabilities


$ - - - - 90,530,758


- - - - 199,115


- - - - 6,109,713

Deposits and remittance 1,646 1,646 1,000 1,000 1,007,462,348

Financial debentures payable 1,550,000 1,550,000 7,850,000 7,850,000 43,900,000

Appropriated loan fund - - - - 12,099,668


Interest rate sensitivity gap $ 2,312,167 2,312,167 (2,816,079) (2,816,079) 28,234,739

Note 1 The above amount included the revenue or cost of interest-yielding assets and interest-bearing liabilities which are affected by interest rate fluctuations.

Note 2 Cash in banks amounted to $1,984,247 which $227,874 is unaccrued interest and $1,756,373 is accrued interest. Total call loans to bank amounted to $7,909,001 which is accrued interest. Due from the Central Bank amounted to $47,997,565 of which $19,040,557 is unaccrued interest and $28,957,008 is accrued interest. Deposits transferred to the Central Bank amounted to $243,934 which is accrued interest.

Note 3 Deposits from other banks amounted to $119,482 of which $22,658 is unaccrued interest and $96,824 is accrued interest.

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B. Effective interest rates

As of December 31, 2012 and 2011, the effective interest rates of financial instruments held or issued

by the Bank are as follows:

Financial items December 31, 2012 December 31, 2011

Assets:

Due from other banks 0.36% 0.32%

Due from the Central Bank 0.40% 0.37%

Call loans to banks 0.85% 0.85%

Financial assets held for trading 0.84% 0.88%

Available-for-sale financial assets 1.44% 1.49%

Held-to-maturity financial assets 0.90% 1.00%

Discounts and loans 2.10% 1.99%

Liabilities:

Deposits from other banks 0.13% 0.11%

Call loans from banks 0.45% 0.52%

Deposits 0.81% 0.76%

Financial debentures 2.28% 2.27%

(4) Risk control and hedging strategy

In order to respond to domestic and foreign economic and financial situation and to strengthen asset and liability

structure so as to obtain steady earnings and growth, the Bank set up assets liabilities management committee

which is responsible for corporate-wide capital liquidity risk and bank interest rate risk management. In the Assets

Liabilities Management Committee, the general manager pluralizes director commissioner, the vice-general

manager serves as vice-director commissioner, and the heads of deposits, loans, risk management, financial

trade, and capital deployment are members of Assets Liabilities Management Committee. To control liquidity risk

effectively, the Bank conclude each type of liquidity risk measure index, for example New Taiwan dollars maturity

gap limited amount, U.S. dollars maturity gap limited amount and liquidity preparation ratio, setting up capital

announcement system, and concluding emergency response measure, to deal with the Bank happening liquidity

crisis.

The Bank has set up rules for risk measurement, supervision and control for the new business or product

development.

The Bank set up limits for all the risks and periodically discusses and appropriately amends the limits to strengthen

risk management. In response to all kinds of risk, the Bank appropriately adepts the risk policies by using risk

transfer, avoidance, control and commitment.

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(5) RELATED - PARTY TRANSACTIONS

(A) Names of related parties and relationship with the bank

Name of related party Relationship with the Bank

Bank of Taiwan Corporate director of the Bank

Ministry of Finance, R.O.C Corporate director of the Bank

Land Bank of Taiwan Corporate director of the Bank

Mega Financial Holding Co., Ltd.Corporate supervisor of the Bank (Discharged on May 25, 2012) (Note)

Mega International Commercial Bank Related party in substance (Note)

Chung Kuo Insurance Company., Ltd. Related party in substance (Note)

Mega Bills Finance Co., Ltd. Related party in substance (Note)

Taiwan Business Bank Insurance Agency Co., Ltd.

The Bank's subsidiary

Taiwan Business Bank Property Insurance Agency Co., Ltd.

The Bank's subsidiary

OtherMajor shareholders, directors(including independent directors), supervisors, president, executive vice president, managers and their second tier of kinship.

Note: Mega Financial Holding Co., Ltd was originally the corporate supervisor of the Bank. After discharged on May 25, 2012, it became the shareholder which possessed over 10% of total shares.

(B) Significant related party transactions(a) Due from other Banks


Amount % Amount %

Bank of Taiwan $ 122,030 7.08 207,002 10.43

Land Bank of Taiwan 102 0.01 519 0.03

Mega International Commercial Bank

23,461 1.36 134,275 6.77

Total $ 145,593 8.45 341,796 17.23

Interest rates are the same as those with regular clients.

(b) Deposits from other banks


Amount % Amount %

Land Bank of Taiwan $ 123 0.10 331 0.28

Mega International Commercial Bank 21 0.02 116 0.10

Total $ 144 0.12 447 0.38


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(c) Call loans to banks

Maximumbalance

Endingbalance

Interestincome

Annualinterest rate

For the year ended December 31, 2012

Bank of Taiwan $ 3,786,746 - 630 0.07%~0.60%

Land Bank of Taiwan 4,726,108 1,396,584 8,962 0.12%~0.99%Mega International Commercial Bank

5,891,315 868,408 4,866 0.18%~3.80%

Mega Bills Finance Co.,Ltd. 600,000 - 115 0.55%~0.68%Total $ 15,004,169 2,264,992 14,573


Bank of Taiwan $ 3,210,075 - 1,367 0.19%~0.75%

Land Bank of Taiwan 4,527,500 - 7,363 0.12%~1.65%Mega International Commercial Bank

5,119,250 756,875 1,307 0.25%~1.10%

Mega Bills Finance Co.,Ltd. 2,000,000 - 595 0.32%~0.79%

Total $ 14,856,825 756,875 10,632


(d) Call loans from banks

Maximumbalance

Endingbalance

Interestexpense

Annualinterest rate


Bank of Taiwan $ 11,913,288 871,050 8,821 0.15%~0.90%

Land Bank of Taiwan 12,054,216 290,350 2,275 0.12%~4.03%Mega International Commercial Bank 12,263,356 892,565 23,012 0.06%~5.60%

Total $ 36,230,860 2,053,965 34,108


Bank of Taiwan $ 10,221,425 302,750 1,673 0.05%~1.35%

Land Bank of Taiwan 7,251,525 - 4,014 0.10%~5.10%Mega International Commercial Bank 14,087,783 4,297,113 32,243 0.23%~2.02%

Total $ 31,560,733 4,599,863 37,930


(e) Banks' overdrafts

Maximum balance Ending balance Interest expense Annual

interest rateFor the year ended December 31, 2012Mega International Commercial Bank $ 615,924 110,240 - 0%

For the year ended December 31, 2011Mega International Commercial Bank $ 900,813 89,630 - 2.50%


Note: The differences between book balance and bank balance is due to the account in transit. The above ending balance is the book amount and maximum balance, interest expense are in accordance with the bank statement.

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(f) Deposits


Amount % Amount %


69,129 0.01 68,727 0.01

Taiwan Business Bank Property 6,661 - 7,341 -

Insurance Agency Co., Ltd.

Bank Of Taiwan 3,252 - 3,247 -

Others 987,549 0.09 993,765 0.10

Total $ 1,066,591 0.10 1,073,080 0.11


(g) Credit

December 31, 2012

Category

Number of clients or name of

related party

Maximum balance

Ending balance

Performing situations

Collaterals

Transaction terms are the

same as those with regular

clientsPerforming

loan

Non-performing

Loans

Employee consumer loans

110 306,685 264,737 264,737 -none/real

estatenone

Self-use residence collateral loans

101 362,805 343,185 343,185 - real estate none

Others Sun 2,000 2,000 2,000 - real estate none

Yeh 3,500 - - - real estate none

Lin 3,300 2,400 2,400 - real estate none

Yang 1,007 - - - real estate none

Chiang 150 - - - real estate none

Hou 7,000 200 200 - real estate none

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December 31, 2011

Category

Number of clients or name of

related party

Maximum balance

Ending balance

Performing situations

CollateralsTransaction terms are

the same as those with regular clients

Performing loan

Non-performing

Loans

Employee consumer loans

113 239,162 220,901 220,901 -none/real

estatenone

Self-use residence collateral loans

105 320,363 284,385 284,385 - real estate none

Others Yeh 3,500 - - - real estate none

Li 1,129 - - - real estate none

Cheng 900 - - - real estate none

Lin 3,300 3,300 3,300 - real estate none

Li 3,677 - - - real estate none

Chen 6,738 - - - real estate none

Shih 9,410 - - - real estate none

Lin 1,997 - - - real estate none

Liu 10,000 - - - real estate none

Tsai 2,976 - - - real estate none

Hou 5,160 5,160 5,160 - real estate none

Hsu 524 - - - real estate none

Chu 2,407 - - - real estate none

Yang 3,628 3,628 3,628 - real estate none

Lu 16 - - - real estate none

(h) Guarantees of credit: None.

(i) Commissions and handling fees

The Bank received handling fee for the sale of beneficiary certificates of Chung Kuo Insurance Company, Ltd. amounting to $715 and $1,537 for the year ended December 31, 2012 and 2011, respectively. The Bank received joint marketing fee of $602,500 and $400,963 for the year ended December 31, 2012 and 2011, respectively, for providing personnel and communication resources to Taiwan Business Bank Insurance Agency Co., Ltd. The Bank received joint marketing fee of $39,948 and $35,937 for the year ended December 31, 2012 and 2011, respectively for providing personnel and communication resources to Taiwan Business Bank Property Insurance Agency Co. Ltd.

(j) Rental revenue

The Bank received rental revenue of $807 and $939 for the year ended December 31, 2012 and 2011, respectively, for renting facilities to Taiwan Business Bank Insurance Agency Co., Ltd. The Bank received rental revenue of both $345 for the year ended December 31, 2012 and 2011, for renting facilities to Taiwan Business Bank Property Insurance Agency Co., Ltd.

(k) Derivatives financial instrument transactions: None.

(l) Sales of Non–Performing Loans Transactions: None.

78


(C) Major management remuneration informationThe information related to the remuneration paid to the major management including board of directors, supervisors, general manager and vice presidents is as follows:

For the year ended December 31,2012


Remuneration $ 43,540 44,814

Bonus and extraordinary charge 10,389 8,969

Executive expense 285 44

Employee's bonus 303 272

Total $ 54,517 54,099

Above information includes the estimate of directors' remuneration and employee's bonus, detailed estimative procedure please refer to the information of the stockholder's equity section.

(6) PLEDGED ASSETS: Please refer to note 4(H) for more details.

(7) SIGNIFICANT COMMITMENTS AND CONTINGENCIES

(A) As of December 31, 2012 and 2011, significant commitments and contingencies were as follows:


Marketable securities held for custody $ 4,305,070 4,398,078

Bills collected for others 65,614,356 82,932,904

Bills lent for others 23,647,737 19,222,413

Guarantees and letters of credit 21,438,163 25,971,850

Collaterals received 886 886

Trust liabilities 122,960,282 126,445,211

Travelers' check in custody for sale 193,664 214,450

Items held for custody 8,809,252 11,770,868

Registered government bonds for sale 7,233,500 7,762,100

Registered short-term bills for sale 4,235,200 5,527,146

Notes held for custody 37,313,700 38,876,900

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(B) As of December 31, 2012 and 2011, refundable deposits for operating leases amounted to $93,703 and $90,395, respectively. Estimated future rental commitments were as follows:

Period Amount

1.1.2013 ~ 12.31.2013 $ 292,240

1.1.2014 ~ 12.31.2014 239,661

1.1.2015 ~ 12.31.2015 155,105

1.1.2016 ~ 12.31.2016 96,835

1.1.2017 ~ 12.31.2017 54,150

Total $ 837,991

(C) As of December 31, 2012 and 2011, all the rental assets of the Bank were operating lease. Estimated rental revenues from rental assets were as follows:

Period Amount

1.1.2013~12.31.2013 $ 7,534

1.1.2014~12.31.2014 6,182

1.1.2015~12.31.2015 4,351

1.1.2016~12.31.2016 2,093

Total $ 20,160

(D) As of December 31, 2012 and 2011, major constructions in progress and purchases amounted to $190,479 and $140,380, respectively, of which $105,192 and $61,607, respectively, remained unpaid.

(E) The Bank's trust department plans, manages, and operates trust services in accordance with the Banking Law and Trust Law. Special purpose funds are used to invest in marketable securities and the Bank also manages trust funds. The balance sheet and property accounts of the trust accounts as of December 31, 2012 and 2011 and trust income statement for the year ended December 31, 2012 and 2011 were as follows:

Trust Balance Sheet

Trust Assets December 31, 2012 December 31, 2011 Trust Liabilities December 31, 2012 December 31, 2011

Cash in Bank $ 2,110,421 683,807 Payables $ 126 179

Common stock 303,558 326,806Securities held for custody

61,941,909 67,747,387

Funds 53,077,038 53,593,936 Trust capital 61,007,281 58,866,813

Receivables 84 110 Reserves and retained earnings

249,350 (358,248)

Prepayment 15 15 Net income (238,384) 189,080

Real estate 5,527,257 4,093,150 　　　

Securities custody

61,941,909 67,747,387 　　　

Total trust assets

$ 122,960,282 126,445,211 Total trust liabilities

$ 122,960,282 126,445,211

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Trust Property Accounts

Investment in: December 31, 2012 December 31, 2011

Cash in bank $ 2,110,421 683,807

Common stock 303,558 326,806

Funds 53,077,038 53,593,936

Receivables 84 110

Prepayment 15 15

Real estate

Land 4,786,244 3,116,534

Buildings 23,546 23,008

Construction in progress 717,467 953,608

Securities in custody 61,941,909 67,747,387

Total $ 122,960,282 126,445,211

Note: As of December 31, 2011 and 2010, the amounts above included OBU transaction on "foreign currency designated trust funds investment in foreign negotiable securities business" amounting to $717,444 and $931,646, respectively.

Trust Income Statement of

Investment items: For the year ended December 31,2012 For the year ended December 31,2011

Trust Revenue

Interest income $ 5,895 1,949

Realized cpaital gain-fund 1,225 208

Realized capital gain-stock 7 2,190

Cash dividend income of common stock 830,989 833,658

Gains on property transaction 545,078 1,030,021

Other revenue 596 828

Sub-total 1,383,790 1,868,854

Trust Expense

Administrative expenses 38,417 35,113

Storage expenses 937 980

Postage expenses 2 31

Duties 92,844 265,558

Realized capital loss-fund - 95

Realized capital loss-stock 995 23

Realized capital loss-bond 111 -

Losses on property transaction 1,481,190 1,374,136

Other expense 7,241 3,708

Sub-total 1,621,737 1,679,644

Net (loss) income before tax (237,947) 189,210

Income tax expense (437) (130)

Net (loss) income after tax $ (238,384) 189,080

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(F)(a) In 1996, the Bank's World Trade Center Branch was sued for handling a letter of credit export collection

from Chin Seen Industrial Co., which allegedly used a forged export document and failed to ship the goods

to the importer, the International Comagnie de Commercialization et d'Invertissement (I.C.C.I.) of the

Republic of Zaire, suffered a loss thereon. In November 1998, I.C.C.I. initiated a case with the Court of

Commerce of Brussels in Belgium, requested the L/C opening bank (Banque Bruxelles Lambert, or BBL)

and the Bank to jointly pay compensation of US$7,830 thousand plus interest, losses, and expenses for

the L/C. On August 31, 2005, the Court of Commerce of Brussels rendered its judgment which the Bank

has to make compensation of US$7,674 thousand plus interest to I.C.C.I. The Bank has engaged a local

attorney in Belgium to formally file an appeal. In Feburary 2011, Court of Appeal in Brussels had made an

intermediate adjudication which I.C.C.I and the Bank are both responsible for the offense. Furthermore,

on November 16, 2011, the judgment of the court indicated that the Bank should be responsible for 90%

of the negligence proportion. The Bank filed an appeal in terms of the interim judgment of the second trial

on November 3, 2011. The court overruled the Bank's appeal in the final trial on February 6 2013 and the

Bank confirmed to lose the case. As of December 31, 2012, the Bank has estimated and accrued US$

13,856 thousand for the compensation loss.

(b) In December, 2007, Jin-ye Industry Corporation (JIC) was a check account client of the Bank's Tai Ping

Branch. The JIC's accountant falsified the seal to write checks and steal the deposit from the company.

JIC filed a lawsuit with Taichung District Court according to the claim right of consumption deposit which

required the Bank to return the deposit of $61,751 thousand plus the interest. The Bank lost the first trial

and appealed to Taiwan Taichung High Court. Taichung High Court ruled the case unfavorable to the Bank

and the Bank should pay compensation of $30,876 thousand and interest with annual rate of 5% from April

1, 2008 to settlement date to JIC.

However, the Bank and the JIC were not willing to accept the judgment and appealed to the Supreme

Court and the case had been sent back to Taiwan Taichung High Court to remand. Taiwan Taichung

High Court sentenced the Bank won the re-appeal lawsuit in July 2010. JIC was not willing to accept

the judgment and appealed and Taiwan Supreme Court abandoned the original ruling and sent the case

back to remand. The case is under the trial of Taiwan High Court Taichung branch and Taiwan High Court

Taichung branch abandoned the original ruling and sent it back to remand in April 2011. Taiwan High Court

Taichung branch overruled the appeal for the first trial of the Bank in November 2011. The Bank was not

willing to accept the ruling and appealed. Taiwan Supreme Court overruled the appeal on January 16 2013

and the Bank confirmed to lose the case. As of December 31, 2012, the Bank has estimated and accrued

$76,428 for the compensation loss.

(c) In April 2006, Kang-Cheng Corp., which purchased secured and unsecured non-performing loans

receivable of Wei Lei Food Corporation (WLF), argued that the Bank should allocate the payment that it

received from Ge Riu Wei Assets Management Corporation (GWAM) which resulted from the auction of

the real estate mortgaged to the Bank by Wei Lei Food Corporation on 1996. For this reason, Kang-Cheng

Corp. filed a lawsuit to Shihlin District Court to oblige the Bank to pay Kang-Cheng Corp. $65,399 thousand

plus the interest. Shihlin District court ruled that the Bank should pay compensation amounted to $46,106

thousand and interest with annual rate 5% from May 26, 2006 to the settlement date to Kang-Cheng Corp

in the first trial. However, the Bank has appealed to Taiwan High Court and won the lawsuit. Kang-Cheng

Corp. was unwilling to accept the judgment and, considering the compensation to the extent of $38,941

thousand and interest, appealed to the Taiwan Supreme Court. The case had been sent back to Taiwan

High Court to remand, and Taiwan High Court sentenced Kang-Cheng Corp.won the lawsuit and the Bank

should pay compensation of $38,941 thousand and interest with annual rate 5% from May 26, 2006 to the

settlement date to Kang-Cheng Corp. The Bank appealed to Taiwan Supreme Court and the case is ruled

82


that the original verdict should be abandoned in March 2011. Taiwan High Court ruled that the Bank won

all the cases in September, 2011. Kang-Cheng Corp. was not willing to accept the ruling and appealed,

Taiwan Supreme Court overruled the appeal in April, 2012 and the Bank confirmed to win the case. Upon

learning from the above case, Hua Nan Bank has filed a lawsuit against the Bank in July 2008, stating that

the Bank should return $15,594 plus the interest to Hua Nan Bank from what the Bank received from the

GWAM. The Bank lost the first trial and appealed. Taiwan High Court ruled that the Bank lost the lawsuit in

December, 2010 and should pay Hua Nan Bank $10,250 thousand plus the interest with annual rate of 5%

from July 18, 2008. The Bank has filed an appeal. Taiwan Supreme Court ruled that the original verdict is

abandoned and the case was sent back to remand in September, 2011. It is under the trial of Taiwan High

Court.

(d) October 2008, the Bank received a copy of petition filed by TCM Biotech International Corporation (TCM),

a client of the Bank's Nei Hu Branch, to Shihlin District Court for requesting the Bank to return its deposit plus

the interest. TCM alleged that its deposits in the combinative account amounted to $20,632 thousand were

transferred to third-party accounts. The foregoing was executed via fake fax withdrawal slips provided by

the employee of TCM. In February, 2009, Shinlin District Court ruled the case unfavorable to the Bank and

the Bank should pay compensation of $702 thousand and the interest with annual rate of 5% from October

21, 2008 to the settlement date to TCM. However, the Bank was not willing to accept the judgment and

appealed to Taiwan High Court. Taiwan High Court ruled that the Bank should pay compensation of 15,830

thousands along with the interest with annual rate of 5% from October 21, 2008 to the settlement date to

TCM on March, 2011. The Bank was not willing to accept the judgment and appealed to Taiwan Supreme

Court. In September 2011, the appeals from both sides are rejected by Taiwan Supreme Court. In

accordance with the judement delivered by Taiwan Supreme Court, the Bank had made the compensation.

(e) Since November 1999, a Taiwan Power Company (TPC) employee is suspected to peculate the electricity

fees handed in by customers. TPC investigated the case and claimed that in accordance with the

operating regulations which TPC authorized Taiwan Business Bank to act on the behalf of its receipts

and disbursements business contract, the Bank's superintendent did not handle the authorized affair

personally, and this is a violation of the contract. TPC indicted the Bank and filed a lawsuit to Shihlin

District Court, claiming a compensation loss which amounted to NT$32,568 thousands in August, 2009.

Shihlin District Court and Taiwan High Court ruled that the Bank won the lawsuit in June 2010 and July

2011, respectively. However, TPC was not willing to accept the judgment and appealed to Taiwan High

Court. Taiwan Supreme Court overruled the appeal on November 1, 2012 and the Bank won the case.

(8) SIGNIFICANT CATASTROPHIC LOSSES: None.

(9) SIGNIFICANT SUBSEQUENT EVENTS: None.

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(10) OTHERS

(A) Disclosures Required for Bank Financial Statements(a) Loans and advances


Domestic loans and advances 　　

Private businesses $ 482,160,226 491,210,020

State enterprises 31,673,004 37,838,038

Governmental institutions 160,601,850 130,556,592

Non-profit organizations 3,872,074 4,087,407

Individuals 240,511,800 246,025,905

Sub-total 918,818,954 909,717,962

Foreign loans and advances:

Financial institutions 6,203,785 6,153,874

Non-financial institutions 29,091,881 29,705,988

Sub-total 35,295,666 35,859,862

Total $ 954,114,620 945,577,824

The above loans and advances excluded the overdue loans. Overdue loans and overdue receivables have

stopped accruing internal interest.

(b) Allowance for credit losses



Loans:

Beginning balance $ 8,499,538 8,333,397

Current provision (Note1) 3,349,214 3,582,943

Transfer-out (193,059) (33,101)

Current written-off (3,304,505) (3,352,457)

Exchange rate effects (49,728) (31,244)

Recovery from written-off loans and advances 1,103,018 1,504,835

Transferred into revenue (1,103,018) (1,504,835)

Ending balance (Note 2) $ 8,301,460 8,499,538

Receivables and other financial assets:

Beginning balance $ 314,121 259,075

Current (reversal of ) provision (Note1) (100,116) 60,927

Transfer-in 193,059 33,101

Current written-off (40,084) (39,061)

Exchange rate effects (58) 79

Recovery from written-off loans and advances 50,548 54,623

Transferred into revenue (50,548) (54,623)

Ending balance (Note 2) $ 366,922 314,121

Other financial assets refer to the allowance for bad debts of non-accrual loans transferred from non-loan

financial assets and exchange bills negotiated.

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Note 1: The provision (reversal) for bad debt expenses for the year ended December 31, 2012 and 2011.

For the year ended December 31,2012 For the year ended December 31,2011

Discounts, loans and overdue loans $ 3,349,214 3,582,943

Receivables and other financial assets (100,116) 60,927

Sub-total 3,249,098 3,643,870

Reserve for guarantee 16,787 24,719

Total $ 3,265,885 3,668,589

Note 2: The detail of allowance for credit losses account as for December 31, 2012 and 2011 are as follows:


Allowance for credit losses –discounts and loans $ 8,301,460 8,499,538

Allowance for credit losses –receivables 317,249 209,737

Allowance for bad debts –overdue receivables 49,667 104,379

Allowance for bad debts –exchange bills negotiated 6 5

Ending balance $ 8,668,382 8,813,659

(c) Evaluation table of allowance for loans and receivables:

ItemDecember 31, 2012

Loans Allowance for credit lossesWith objective evidence of impairment

Individually assessment $ 21,847,640 4,634,472

Collective assessment 4,654,878 1,435,258

Without objective evidence of impairment

Collective assessment 935,769,382 2,231,730

Total $ 962,271,900 8,301,460

December 31, 2011

Item Loans Allowance forcredit losses

With objective evidence of impairment


Individually assessmentCollective assessment Collective assessment

$ 15,587,573

5,292,715

930,374,379

$ 951,254,667

5,451,588

1,496,894

1,551,056

8,499,538


Receivables Allowance for credit losses

With objective evidence of impairment Individually assessment $ 231,770 219,980

Without objective evidence of impairment Collective assessment 5,245,792 97,269

$ 5,477,562 317,249

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Note：Receivables do not include accrued incomes, tax refund receivables and spot exchange receivable-foreign currencies.


Receivables Allowance forcredit losses


Collective assessment $ 13,619,813 209,737


Other financial assets Allowance for credit lossesWith objective evidence of impairment

collective assessment $ 129,971 49,667


collective assessment 284 6

Total $ 130,255 49,673


Other financial assets Allowance for credit losses

With objective evidence ofimpairment

Individually assessment $ 44,087 39,526

collective assessment 156,622 64,853


collective assessment 2,438 5

$ 203,147 104,384

(B) Personnel, depreciation, and amortization expenses were as follows：

Nature

For the year ended December 31, 2012 For the year ended December 31, 2011

Operating expense Operating expense

Personnel expenses 　　

Salary expense $ 5,856,523 5,714,958

Insurance expenses 375,213 357,723

Retirement expenses 577,650 592,739

Other personnel expenses 240,297 330,801

Total personnel expenses 7,049,683 6,996,221

Depreciation expenses 392,093 409,338

Amortization expenses 67,753 69,960

Total $ 7,509,529 7,475,519

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(C) Disclosures Required Under the Statement of Financial Accounting Standards No. 28：(a) Loan quality:

Unit: In Thousands of New Taiwan Dollars, %

The information below shows supplemental disclosures of loans and receivables that may be exempted from Momth/Year

Items


Non-performing

loans Total loans

Non-performing loan ratio

Allowance for credit

lossesCoverage

ratioNon-

performing loans

Total loansNon-

performing loan ratio

Allowance for credit

lossesCoverage

ratio

Corporate finance

Secured 5,281,544 361,114,304 1.46 4,707,408 89.13 2,305,943 362,440,096 0.64 2,502,421 108.52

Unsecured 1,944,249 365,862,917 0.53 1,944,249 100.00 2,452,360 347,691,271 0.71 4,261,443 173.77

Consumer finance

Residence mortgages (Note 4)

622,584 129,799,538 0.48 622,584 100.00 807,483 132,086,309 0.61 931,448 115.35

Cash cards 175 824 21.24 175 100.00 154 1,126 13.68 154 100.00

Small sum credit loans (Note 5)

7,472 100,505 7.43 7,472 100.00 11,757 79,960 14.70 50,233 427.26

Others(Note 6)

Secured 931,249 85,081,597 1.09 931,249 100.00 449,329 86,487,967 0.52 520,026 115.73

Unsecured 88,323 20,312,215 0.43 88,323 100.00 132,379 22,467,938 0.59 233,813 176.62

total loan business 8,875,596 962,271,900 0.92 8,301,460 93.53 6,159,405 951,254,667 0.65 8,499,538 137.99

Overdue loans

Total receivables

Overdue ratio

Allowance for doubtful accounts

Ratio of allowance to overdue

loans

Overdue loans

Total receivables

Overdue ratio

Allowance for doubtful

accounts

Ratio of allowance to overdue

loans

Credit cards business 4,028 1,552,979 0.26 39,070 969.96 6,613 1,617,491 0.41 41,763 631.53

Without-revourse factoring (Note 7)

- 132,331 - 789 - - 5,942,385 - 17,097 -

Note 1 Non-performing loans represent the amount of overdue loans as reported in accordance with the "Regulations on the Procedures for Banking Institutions to Evaluate Assets and Deal with Past Due/Non-performing Loans." The credit card overdue loans represent the amount of overdue loans as reported in accordance with Jin-Kuan-Yin-(4)-Zi No. 0944000378, dated July 6,2005.

Note 2 Non-performing loan ratio = Non-performing loans÷ total loans; Credit card delinquency ratio = Overdue receivables÷ balance of receivables

Note 3 Coverage ratio for loans = allowance for credit losses ÷ non-performing loans; Coverage ratio for credit card business = allowance for credit losses ÷ overdue receivables.

Note 4 For residential mortgage loans, a borrower provides his/her (or spouse's or minor child's) house as collateral in full and pledges it to the financial institution for the purpose of obtaining funds to purchase property and to construct or repair a house.

Note 5 Microcredit loans are defined by Jin-Kuan-Yin-(4)-Zi No. 09440010950, dated December 19, 2005, and do not include credit cards or cash cards.

Note 6 Others in consumer finance are secured and unsecured consumer loans other than residential mortgage loans, cash card loans, and microcredit loans, and do not include credit cards.

Note 7 In accordance with Jin-Kuan-Yin-(5)-Zi No. 094000494, dated July 19, 2005, the amounts of without-recourse factoring will be classified as overdue receivables within three months from the date that suppliers or insurance companies resolve not to compensate the loss.

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The information below shows supplemental disclosures of loans and receivables that may be exempted from reporting

as non-performing loans and overdue receivables, respectively.


Loans may be exempted from

reporting as a non-performing loan

Receivables may be exempted from

reporting as overdue receivables

Loans may be exempted from

reporting as a non-performing loan

Receivables may be exempted from

reporting as overdue receivables

Pursuant to a contract under a debt negotiation plan 15,220 29,817 22,412 41,604

Pursuant to a contract under a debt liquidation plan and a debt relief plan

95,463 76,729 97,697 84,965

Total 110,683 106,546 120,109 126,569

Note A: In accordance with Jin-Kuan-Yin-(1)-Zi No. 09510001270, dated April 25, 2006, a bank is required to make supplemental disclosure of credit information which was approved under the debt coordination mechanism of unsecured consumer debts by the Bankers Association of the R.O.C.

Note B: In accordance with Jin-Kuan-Yin-(1)-Zi No. 09700318940, dated September 15, 2008, a bank is required to make supplemental disclosure of credit information once debtors apply for pre-negotiation, relief and liquidation under the "Consumer Debt Clearance Act."

December 31, 2012

Ranking Group enterprise Credit amount Credit amount to stockholders'equity ratio (%)

1 A company. (Railway transportation) 36,012,512 65.43

2B group. (Petroleum and chemical materials

manufacturing)11,336,478 20.60

3C group. (Liquid crystal panel and

components manufacturing)7,273,393 13.22

4 D group. (Steel rolling and extruding) 7,073,613 12.85

5 E company (Real estate development) 5,865,072 10.66

6 F group. (Investment and consulting) 4,739,350 8.61

7G group. (Petroleum and chemical materials

manufacturing)4,318,558 7.85

8 H group. (iron and steel smelting) 4,236,677 7.70

9I group. (Liquid crystal panel and


10 J group. (Computer manufacturing) 4,028,578 7.32

(b) Concentration of credit extensions

Unit：In Thousands of New Taiwan dollars, %

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RankingDecember 31, 2011

Group enterprise Credit amount Credit amount to stockholders'equity ratio (%)

1 A company. (Railway transportation) 36,184,351 77.13

2 B group. (Integrated circuit manufacturing) 15,150,110 32.29

3C group. (Liquid crystal panel and


4 D group. (Steel rolling and extruding) 7,274,926 15.51

5 E company (Real estate development) 5,480,000 11.68

6I group. (Liquid crystal panel and


7 F group. (Investment and consulting) 5,082,000 10.83

8 K group (Integrated circuit manufacturing) 5,023,535 10.71

9 J group. (Computer manufacturing) 4,561,024 9.72

10 K group. (Other financial agency) 4,305,870 9.18

Note 1 The top ten enterprise groups other than government or stated-owned enterprises are ranked according to their total outstanding credit amount. If the borrowers belong to an enterprise group, the aggregate credit balance of the enterprise should be calculated and disclosed as a code number for each such borrower together with an indication of the borrowers' line of business. In addition, if the borrowers are enterprise groups, the enterprise group's industry sector with the maximum exposure to credit risk in its main industry sector should be disclosed, along with the "class" of the industry, in compliance with the Standard Industrial Classification System of the R.O.C. posted by the Directorate-General of Budget, Accounting and Statistics, Executive Yuan, R.O.C.

Note 2 Enterprise group is as defined in Article 6 of the "Supplementary Provisions to the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings."

Note 3 Consists of loans (foreign currency imports financing, foreign currency export financing, notes discounted, customer overdrafts, short-term unsecured loans, short-term secured loans, receivables from securities lending, medium-term unsecured loans, medium-term secured loans, long-term unsecured loans loan-term secured loans, non-performing loans), foreign currency long positions, accounts receivable-factoring discount, bankers' acceptance receivable, guarantees receivable.

Note 4 In the calculation of Credit amount to stockholders' equity ratio, the domestic bank should be calculated in the net value of head office. The Foreign bank should be calculated in the net value of Taiwan branch.

(c) Interest sensitivity information

(1) Analysis of interest rate-sensitive assets and liabilities (New Taiwan dollars)

New Taiwan dollars in thousands, %

December 31, 2012

Item 1~90 days 91~180 days 181days~1year over 1 year Total

Interest rate-sensitive assets

$988,610,297 29,821,829 41,633,449 27,473,780 1,087,539,355

Interest rate-sensitive liabilities

447,881,221 502,378,152 50,655,659 27,564,290 1,028,479,322

Interest rate sensitivity gap

540,729,076 (472,556,323) (9,022,210) (90,510) 59,060,033

Net worth 55,038,495

Ratio of interest rate-sensitive assets to debt (%) 105.74

Ratio of interest rate-sensitive gap to net worth (%) 107.31

Note 1 Listed amounts are denominated in N.T. dollars of the head office and domestic branches, offshore banking unit, overseas branches. (i.e., excluding foreign currency amounts)

Note 2 Interest rate-sensitive assets and liabilities refer to revenue or cost of interest–yielding assets and interest–bearing liabilities, which are affected by interest rate fluctuations.

Note 3 Ratio of interest rate-sensitive assets to liabilities=Interest rate-sensitive assets÷ Interest rate-sensitive liabilities (New Taiwan dollars interest-rate-sensitive assets and New Taiwan dollars interest-rate-sensitive liabilities).

Note 4 Interest rate-sensitivity gap = Interest rate-sensitive assets - Interest-rate-sensitive liabilities.

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(2) Analysis of the interest-sensitive assets and liabilities (U.S. dollars)

US dollars in thousands, %

December 31, 2012

Item 1~90 days 91~180 days 181days~1year over 1 year Total

Interest rate-sensitive assets $ 2,415,237 502,451 55,546 218,422 3,191,656

Interest rate-sensitive liabilities 1,495,453 2,165,314 131,552 - 3,792,319

Interest rate sensitivity gap 919,784 (1,662,863) (76,006) 218,422 (600,663)

Net worth 1,895,591

Ratio of interest rate-sensitive assets to debt (%) 84.16

Ratio of interest rate-sensitive gap to net worth (%) (31.69)

Note 1 Listed amounts are in U.S. dollars (i.e., excluding contingent assets and contingent liabilities) of the head office and domestic branches, offshore banking unit, overseas branches.

Note 2 Ratio of interest rate-sensitive assets to liabilities=Interest rate-sensitive assets÷ Interest rate-sensitive liabilities (U.S. dollars interest-rate-sensitive assets and U.S. dollars interest-rate-sensitive liabilities).

(d) Profitability Unit：%

Item December 31, 2012 December 31, 2011The ratio of return on assets

Before income tax 0.29 0.26

After income tax 0.27 0.24

The ratio of return on shareholders' equity

Before income tax 7.31 7.20

After income tax 6.68 6.56

Net income ratio 19.42 17.36

Note 1 The ratio of return on assets = Income before (after) income tax expense÷ average assetsNote 2 The ratio of return on shareholders' equity = Income before (after) income tax expense ÷ average shareholders'

equityNote 3 Net income ratio = Gain or loss after income tax expense ÷ Net revenueNote 4 Income before (after) income tax expense refers to income accumulated from January of the current year to the

current period.

(e) The maturity analysis of assets and liabilities

(1) Maturity analysis in New Taiwan dollarsNew Taiwan dollars in thousands, %

TotalDecember 31, 2012

Amount during the maturity period from the balance sheet date to due date

1-30days 31-90days 91-180days 181days-1year Over 1 year

Major maturity capital inflow

$1,186,874,547 259,156,459 114,232,157 130,731,004 170,353,722 512,401,205

Major maturity capital outflow

1,515,792,533 179,263,062 198,044,093 175,691,051 286,009,765 676,784,562

Gap (328,917,986) 79,893,397 (83,811,936) (44,960,047) (115,656,043) (164,383,357)

Note: Listed amounts are denominated in New Taiwan dollars (i.e., excluding foreign – currency amounts) of the head office and domestic branches, including commitment of credit agreement and estimates to outflow $330,511,237.

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(2) Maturity analysis in U.S. dollars

New Taiwan dollars in thousands, %

December 31, 2011Amount during the maturity period from the balance sheet date to due date

Total 1-30days 31-90days 91-180days 181days-1year Over 1 year

Major maturity capital inflow

$ 4,671,962 1,842,523 1,331,990 596,595 274,982 625,872

Major maturity capital outflow

5,835,926 1,488,143 1,115,675 400,528 611,761 2,219,819

Gap (1,163,964) 354,380 216,315 196,067 (336,779) (1,593,947)

Note: Including commitment of credit agreement and estimates to outflow US$1,210,520.

(f) Capital adequacy

Item December 31, 2012

December 31, 2011

Eligible

capital

Tier 1 capital 54,671,872 46,757,196Tier 2 captial 17,650,238 25,556,939Tier 3 captial - -Eligible Capital 72,322,110 72,314,135

Risk-

weighted

assets

Credit risk

Standardized approach 657,262,590 672,274,361Internal ratings-based approach - -Securitisation - -

Operational risk

Basic indicator approach 26,997,650 26,585,388Standardized approach - -Advanced measurement approach - -

Market risk

Standardized approach 8,025,900 5,783,563Internal model approach - -

Total 692,286,140 704,643,312Capital adequacy ratio 10.45% 10.26%Tier 1 capital / Risk-weighted assets ratio 7.90% 6.64%Tier 2 capital / Risk-weighted assets ratio 2.55% 3.62%Tier 3 capital / Risk-weighted assets ratio -% -%Common stock equity / Total assets ratio 3.80% 3.32%

Leverage ratio 4.29% 3.77%

Note 1. Eligible Capital = Tier 1 Capital ＋ Tier 2 Capital ＋ Tier 3 CapitalNote 2. Total Capital = Credit risk weighted asset＋(operational risk charge＋market risk charge) × 12.5Note 3. Capital adequacy ratio= Eligible Capital ÷ risk weighted asset. Note 4. Tier 1 capital / Risk-weighted assets ratio= Tier 1 capital ÷ Risk-weighted assetsNote 5. Tier 2 capital / Risk-weighted assets ratio = Tier 2 capital ÷ Risk-weighted assetsNote 6. Tier 3 capital / Risk-weighted assets ratio = Tier 3 capital ÷ Risk-weighted assetsNote 7. Common stock equity / Total assets ratio = Common stock equity ÷ Total assetsNote 8. Leverage ratio = Tier 1 capital / Adjusted average assets. (average asstes are deducted goodwill, unamortized loss

on sale of non-performing loan and the "Explanation of methods for calculating the eligible capital and risk-weighted assets of Banks', which are excluded from Tier 1.)

(D) The maturity analysis of assets and liabilities, interest-yielding assets, interest-bearing liabilities, current average interest rates, and significant net positions of foreign currencies were as follows:(a) The maturity analysis of assets and liabilities: Please refer to note (4)(Y) to the financial statements.

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(b) Interest-yielding assets, interest-bearing liabilities, and current average interest rates were as follows:



Average value

Averageinterest

rate

Averagevalue

Averageinterest

rate

Assets

Cash in banks and call loans to banks $ 34,983,176 0.52% 30,109,755 0.50%

Due from the Central Bank 42,801,748 0.42% 42,678,652 0.41%

Bills purchased under resale agreement

6,936,990 0.82% 2,154,528 0.81%

Bonds purchased under resale agreement

- -% 452 0.66%

Discounts and loans 935,275,049 2.13% 943,748,399 2.03%

Financial assets held for trading 3,482,450 0.90% 2,248,447 0.79%

Financial assets designated at fair value through profit or loss

3,565,501 2.24% 3,410,244 2.13%

Available-for-sale financial assets 12,092,492 2.06% 13,959,966 2.26%

Held-to- maturity financial assets 177,267,763 0.99% 155,623,786 0.96%



Average value

Averageinterest

rate

Averagevalue

Averageinterest

rate

Liabilities

Deposits from the Central Bank $ 306,193 -% 327,767 -%

Deposits from other banks and call loans from banks

42,361,323 0.78% 36,942,386 0.89%

Demand deposits (including foreign currency)

496,872,037 0.32% 487,724,202 0.31%

Government deposits 14,852,985 0.48% 12,808,336 0.48%

Time deposits (including foreign currency)

254,422,571 1.08% 249,935,023 0.94%

Deposits transferred from Chunghwa Post Co., Ltd.

55,355,395 1.37% 59,175,056 1.31%

Time savings deposits 257,131,636 1.33% 260,263,458 1.24%

Bills sold under repurchase agreements

1,872,144 0.76% 2,603,695 0.67%

Bonds sold under repurchase agreements

7,253,500 0.75% 6,060,002 0.58%

Financial debentures 43,900,000 2.28% 43,988,889 2.19%

Funds appropriated for loans 11,680,262 0.34% 11,376,918 0.35%

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(c) Significant net positions of foreign currencies

(1) Significant net positions of foreign currencies

Currency


Foreign currency amount

NT$Amount

Foreign currency amount

NT$Amount

Significant net positions USD 37,771 1,096,681 USD 34,223 1,036,100

of foreign currency CNY 19,209 89,476 CNY 23,257 111,566

(Market risk) EUR 2,235 85,936 HKD 22,194 86,491

AUD 2,010 60,551 JPY 175,966 68,574

JPY 129,828 43,622 AUD 1,131 34,777

Note 1 Main foreign currencies are the top five foreign currencies ranked in NTD value.Note 2 Net foreign currency is the absolute value of the net value of each foreign currency.

(2) Assets and liabilities of foreign currencyDecember 31, 2012 December 31, 2011

Forreign currency amount

Spot rateNTD

amount

Forreign currency amount

Spot rate NTD amount

Financial Assets Monetary Item

USD $ 5,068,532 29.0350 147,164,827 4,771,129 30.2750 144,445,920

AUD 951,956 30.1250 28,677,675 814,902 30.7450 25,054,169

HKD 5,939,560 3.7460 22,249,592 6,419,644 3.8970 25,017,353

ZAR 5,038,103 3.4300 17,280,693 4,009,184 3.7100 14,874,071

EUR 391,034 38.4500 15,035,257 356,629 39.2200 13,986,988

JPY 10,246,137 0.3360 3,442,702 18,086,378 0.3897 7,048,261

NZD 32,144 23.8100 765,349 76,366 23.4100 1,787,724

CNY 161,994 4.6580 754,568 42,384 4.7970 203,314

GBP 14,354 46.7800 671,480 30,818 46.6800 1,438,571

CAD 19,796 29.1900 577,845 33,526 29.6700 994,708

SGD 5,338 23.7400 126,724 4,769 23.3000 111,107

CHF 2,421 31.8050 77,000 4,231 32.1850 136,162

Other (Note) 　- 　- 14,994 - - 5,234Non-Monetary Item

USD $ 2,064 29.0350 59,928 - 30.2750 -

Financial Liabilities

Monetary Item

USD $ 4,990,139 29.0350 144,888,686 4,715,094 30.2750 142,749,482

AUD 941,076 30.1250 28,349,915 804,885 30.7450 24,746,201

HKD 5,937,883 3.7460 22,243,310 6,460,639 3.8970 25,177,109

ZAR 5,039,358 3.4300 17,284,998 4,010,466 3.7100 14,878,827

EUR 391,055 38.4500 15,036,065 356,389 39.2200 13,977,585

JPY 10,204,235 0.3360 3,428,623 18,105,631 0.3897 7,055,765

NZD 31,843 23.8100 758,182 76,092 23.4100 1,781,315

CNY 147,451 4.6580 686,827 15,329 4.7970 73,532

GBP 14,510 46.7800 678,778 30,846 46.6800 1,439,881

CAD 20,019 29.1900 584,355 33,639 29.6700 998,080

SGD 5,161 23.7400 122,522 4,759 23.3000 110,875

CHF 2,541 31.8050 80,817 4,354 32.1850 140,118

Other (Note) 　- - 13,863 - - 9,436

Note: Consolidated disclosure is applied for other currencies not over NT$ 100,000,000.

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(E) Pre-disclosure of IFRSs(a) Under order Jin-Kuan-Cheng-Chuan No.10000073410 issued by the Financial Supervisory Commission,

Executive Yuan, R.O.C. (FSC), starting from 2013, domestic banks are required to prepare financial reports

in conformity with International Financial Reporting Standards(IFRSs) and the explanations of the Standing

Interpretations Committee and the International Financial Reporting Interpretations Committee accepted

by the FSC. To assist in the adjustment, the Bank has formed a special task force and established an IFRS

adoption plan. The management of the Bank's finance department is responsible for the conversion plan.

Significant plan content, expected completion time, and current status are as below:

Project content Major execution unit Current process

1 Project committee established IFRSs subcommittees Completed

2 Establish an IFRSs adoption plan. IFRSs subcommittees Completed

3 Identify differences between current accounting standards and IFRSs IFRSs subcommittees Completed

4 Complete the identification of consolidated entities IFRSs subcommittees Completed

5 Complete the evaluation of the influence of all exemptions and options regarding IFRS1 " First-time Adoption of international Financial Reporting Standards"

IFRSs subcommittees Completed

6 Complete the evaluation of the expected modification of information system IFRSs subcommittees Completed

7 Complete the evaluation of the expected modification of internal control


8 Decide IFRSs accounting policies Board of directors Completed

9 Decide the exemptions and options of IFRS1 " First-time Adoption of international Financial Reporting Standards"

Board of directors Completed

10 Complete preparing the financial statement of the beginning of the accounting period with IFRSs


11 Complete the preparation of comparative financial information of 2012 for IFRSs

IFRSs subcommittees In progress (expected to be completed in December 2012 and scheduled outputs in March 2013)

12 Complete the modification of related internal control (including financial reporting procedure and related information system)


Note: The above task force consists of the people in charge of several functions including Auditing Department of board of directors, Administration Management Center, Risk Management Center, Operating Management Center, Treasury Group, Corporate Banking Group and Personal Banking Group.

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(b) The prelimary evaluation of the major differences between the current accounting policies and the IFRSs

accounting policies are listed below:

The adjustment of the consolidated financial statement on January 1, 2012

Generally accepted accounting principles in the Republic of China

(R.O.C. GAAP)IFRS conversion's impact IFRSs accepted by FSC

Item Amount

Difference in recognition

and measurement

Difference in presentation Amount Item Note

Cash and cash equivalents

$ 25,579,626 - - 25,579,626Cash and cash equivalents


56,150,500 - - 56,150,500



5,474,966 - - 5,474,966


Available-for-sale financial assets－net

14,850,799 14,850,799Available-for-sale financial assets


2,337,341 - - 2,337,341


Receivables－net 20,254,922 - 125,760 20,380,682Receivables－net

(3),(7)

- 666,585 666,585Income tax asset

(3)

Discounts and loans－net

942,587,857 - - 942,587,857Discounts and loans－net

Held-to-maturity financial assets－net

177,696,669 - - 177,696,669

Held-to-maturity financial assets

Other financial assets－net

3,656,190 - - 3,656,190Other financial assets－net

Premises and equipment－net

13,759,230 124,298 864,422 14,747,950Premises and equipment－net

(5),(6)

Intangible assets－net

209,822 (9,743) - 200,079Intangible assets－net

(2)

- - 1,622,069 1,622,069Deferred income tax assets－net

(3)

Other assets－net 4,383,134 - (2,482,456) 1,900,678Other assets－net

(3),

(6),(7)

Debit items for trade brokerage 3,900 - (3,900) - (8)

Total assets $ 1,266,944,956 114,555 792,480 1,267,851,991 Total assets

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Item AmountDifference in

recognition and measurement


Liabilities


$ 90,829,825 - - 90,829,825



339,942 - - 339,942



6,109,713 - - 6,109,713


Payables 31,041,151 261,528 344,896 31,647,575 Payables (1),(7),(8)

Deposits and remittances

1,033,869,151 - - 1,033,869,151Deposits and remittances

Financial debentures

43,900,000 - - 43,900,000Financial debentures

Accrued pension liabilities

257,985 - (257,985) -

Other financial liabilities

12,150,115 - - 12,150,115Other financial liabilities

Provision for operation and liabilities

- 1,771,449 726,476 2,497,925Provision for liabilities

( 1 ) , ( 2 ) , (8),(9)

- - 882,838 882,838Defferred income tax liabilities

(3)

Other liabilities 1,534,162 37,668 (903,745) 668,085Other liabilities

(3),(5),(9)

Total liabilities 1,220,032,044 2,070,645 792,480 1,222,895,169 Total liabilities

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Item Amount


and measurement


Stockholders' equity－Parent Company

Common stock 42,098,263 - - 42,098,263Common stock

Retained earnings: 4,899,913 (1,757,706) - 3,142,207Retained earnings

Other adjustments to stockholders' equity：

-Other adjustments to equity：

Revaluation increment

320,812 (320,812) - - (5)

Cumulative translation adjustments

(35,991) 35,991 - -

Exchange differences of the financial statements of foreign operations

(4)

Unrealized losses on financial instruments

(283,648) - - (283,648)



(86,437) 86,437 - - (2)

Total stockholders' equity

46,912,912 (1,956,090) - 44,956,822 Total equity

Total liabilities and stockholders' equity

$1,266,944,956 114,555 792,480 1,267,851,991Total liabilities and equity

Note: Above disclosure are consolidated numbers

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The adjustment of the consolidated financial statement on December 31, 2012



Item Amount


and measurement


Cash and cash equivalents $ 26,149,415 - - 26,149,415Cash and cash equivalents


67,417,255 - - 67,417,255Due from the Central Bank and call loans to banks


5,809,037 - - 5,809,037


Available-for-sale financial assets－net

12,368,989 - 12,368,989Available-for-sale financial assets


13,239,950 - - 13,239,950Securities purchased under resell agreements

Receivables－net 20,233,056 - 282,083 20,515,139 Receivables－net (3),(7)

- - 616,708 616,708 Income tax asset (3)

Discounts and loans－net 953,800,832 - - 953,800,832 Discounts and loans

Held-to-maturity financial assets－net

167,514,168 - - 167,514,168Held-to-maturity financial assets

Other financial assets－net 3,638,009 - - 3,638,009Other financial assets－net

Premises and equipment－net

13,615,317 - 857,242 14,472,559Premises and equipment－net

(6)

Intangible assets－net 193,700 - - 193,700Intangible assets－net

(2)

- 414,612 1,623,290 2,037,902Deferred income tax assets－net

(3)

Other assets－net 5,966,088 - (2,471,461) 3,494,627 Other assets－net (3),(6),(7)

Debit items for trade brokerage 12,599 - (12,599) - (7)

Total assets $ 1,289,958,415 414,612 895,263 1,291,268,290

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Generally accepted accounting principles in the Republic of

China (R.O.C. GAAP)IFRS conversion's impact IFRSs accepted by FSC




Liabilities


$ 78,116,260 - - 78,116,260Deposits from the Central Bank and other banks


230,833 - - 230,833Financial liabilities at fair value through profit or loss


6,243,040 - - 6,243,040Securities sold under repurchase agreements

Payables 37,474,770 265,477 374,559 38,114,806 Payables(1),(7),(8)

Deposits and remittances

1,055,241,221 - - 1,055,241,221 Deposits and remittances

Financial debentures 43,900,000 - - 43,900,000 Financial debentures

Accrued pension liabilities

769,248 - (769,248) - (8)

Other financial liabilities

11,400,537 - - 11,400,537 Other financial liabilities

Provision for operation and liabilities

- 1,542,885 1,330,857 2,873,742 Provision for liabilities(1),(2),(8),(9)

- - 879,530 879,530Defferred income tax liabilities

(3)

Other liabilities 1,544,011 - (920,435) 623,576 Other liabilities (3),(9)

Total liabilities 1,234,919,920 1,808,362 895,263 1,237,623,545 Total liabilities



Common stock 48,982,194 - - 48,982,194 Common stock

Retained earnings: 6,419,821 (1,607,328) - 4,812,493 Retained earnings:

Other adjustments to stockholders' equity：

Other adjustments to equity:

Revaluation increment

407,442 (407,442) - - (5)

Cumulative translation adjustments

(99,751) 35,991 - (63,760)

Exchanges differences of the financial statements of foreign operations

(4)


(86,182) - - (86,182)Unrealized losses on financial instruments

(2)


(585,029) 585,029 - -

Total stockholders' equity

55,038,495 (1,393,750) - 53,644,745 Total equity

Total liabilities and stockholders' equity

$ 1,289,958,415 414,612 895,263 1,291,268,290 Total liabilities and equity

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The reconciliation report for consolidated income for the year ended December 31,2012.






Interest revenue $ 22,933,789 - (31,229) 22,902,560 Interest revenue (10)

Less: Interest expenses 10,010,976 (146,258) (182,180) 9,682,538 Less: Interest expenses (1)

Net interest income 12,922,813 146,258 150,951 13,220,022 Net interest income

Non-interest income Non-interest income

Service fee and commission income

2,116,573 - - 2,116,573Service fee and commission income

Gains (losses) on financial assets or liabilities measured at fair value through profit or loss

397,152 - 31,229 428,381

Gains on financial assets or liabilities measured at fair value through profit or loss

(10)

Realized gains of available-for-sale financial assets

18,414 - - 18,414Realized gains of available-for-sale financial assets

Foreign exchange gains

533,402 - - 533,402 Foreign exchange gains

Other non-interest income

438,997 - - 438,997Other non-interest income

Recovered bad debts and overdue accounts

1,153,566 - (1,153,566) - (11)

Net revenue 17,580,917 146,258 (971,386) 16,755,789 Net revenue

Bad debt expenses 3,265,885 - (1,153,566) 2,112,319Bad debt expenses and provision for guarantee reserve

(11)

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Operating expenses

Personnel expenses 7,071,125 104,705 182,180 7,358,010Employee benefits expenses

(1),(2)

Depreciation and amortization expenses

459,929 - - 459,929Depreciation and amortization expenses

Other general and administrative expenses

3,044,426 - - 3,044,426Other general and administrative expenses

Income from continuing operations before income tax

3,739,552 41,553 - 3,781,105Income from continuing operations before income tax

Income tax (expenses) benefits

(335,713) 362,628 - 26,915Income tax (expenses) benefits

(3)

Net income 3,403,839 404,181 - 3,808,020 Net income

- (253,803) - (253,803)

Other comprehensive income

Actuarial losses on defined benefit plan

(2)

3,403,839 150,378 - 3,554,217Total comprehensive income

Net income belongs to owners of the parent company

$ 3,403,839 404,181 　 - 3,808,020Net income attributed to owners of the parent company

$ 3,403,839 150,378 　- 3,554,217Comprehensive income attributed to owners of the parent company

Note: Above disclosure are consolidated numbers

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(1) Employee benefits

A. Retiree deposits with favorable rates

According to IAS 19 and the Regulations Governing the Preparation of Financial Reports by Publicly Held Banks

effective from year 2013, when recognizing the retiree deposits with favorable rates which is a post-employment

benefit, the Bank and its subsidiaries should consider the actuarial amount and recognize it accordingly. On

January 1 and December 31, 2012, the effect of this adjustment is as follows: for consolidated provisions,

an increase of $554,409 and $537,482, respectively; for retained earnings, a decrease of $554,409 and

$537,482, respectively. Also, for the consolidated income statement for the year ended December 31, 2012, this

adjustment increases employee benefits expenses by $129,331 and decreases interest expense by $146,258.

In addition, for the deposits with favorable rates of current employees, it is the additional benefit which the

Bank offers its employees. The interest rate which exceeds the market rate shall be recognized as employee

benefits expense. for the consolidated income statement for the year then ended December 31, 2012, this

adjustment increases employee benefits expenses by $182,180 and decreases interest expenses by $182,180,

respectively.

B. Paid leave

According to IAS 19's regulation, when employees provide service and accumulate the future paid leave, the

provision shall be recognized when the service is provided. On January 1 and December 31, 2012, the effect of

this adjustment is as follows: for consolidated payables, an increase of $261,528 and $265,477, respectively;

for retained earnings, a decrease of $261,528 and $265,477, respectively. Also, in the consolidated income

statement for the year ended December 31, 2012, this adjustment increases employee benefits expenses by

$3,949.

(2) Adjustments to pension actuarial gains and losses and pension obligations

Following the instructions related to employee benefits in IFRS 1, the Bank and its subsidiaries elect to apply the

exemption provided therein and adjust items related to unrecognized transitional net benefit obligation to retained

earnings. The Bank also retrospectively apply IAS 19 items related to supplementary pension liability recognition

adjustments recognized under R.O.C. GAAP. On January 1 and December 31, 2012, the effect of this adjustment

on related accounts is as follows: for provisions, an increase of $1,217,040 and $1,005,403; for retained

earnings, a decrease of $1,313,220 and $1,590,432; for intangible assets, a decrease of $9,743 and $0; for other

adjustments to stockholders' equity, an increase of $86,437 and $585,029; for employee benefit expense in the

consolidated statement of income of 2012, a decrease of $28,575 and for actuatrial profit or loss of defined benefit

plan in consolidated statement of income of 2012, a decrease of $253,803 (after tax).

(3) Income tax

Following IAS 12 and SIC 21, the Bank and its subsidiaries reclassify land revaluation increments tax payable, which

is a taxable temporary difference, under deferred tax liabilities. On January 1 and December 31, 2012, the effect of

this adjustment on related accounts is as follows: for consolidated other liabilities, a decrease of $879,056 on both

dates; for deferred tax liabilities, a increase of $879,056 on both dates.

Following IFRS 1, effective from year 2013, the Bank and its subsidiaries reclassify current tax assets, current tax

liabilities, and deferred tax assets out of receivables, payables, and other assets, respectively. On january 1 and

december 31, 2012, the effect of this adjustment on related accounts is as follows: for current consolidated tax

assets, an increase of $666,585 and $616,708, respectively; for receivables, a decrease of $666,585 and $616,708,

respectively; for deferred tax assets, an increase of $1,622,069 and $1,623,290, respectively; for other assets, a

decrease of $1,618,287 and $1,622,816, respectively; for deferred tax liabilities, an increase of $3,782 and $474,

respectively.

The income tax effect resulted from the adjustments of employee benefit obligation of item (1) and (2), as of

January 1 2012 and December 31, 2012, leads to the following changes. For deferred income tax, an increase by $0

and $414,612,; for retained earnings, an increase by $0 and $414,612; for income tax expense in the consolidated

statement of income of 2012, a decrease of $0 and $362,628, respectively.

(4) Cumulative translation adjustments

According to the instructions related to cumulative translation in IAS 1, The Bank and its subsidiaries elect to apply

the exemption provided therein and reset the cumulative translation to zero by writing off retained earnings. On

january 1 and december 31, 2012, the effect of this adjustment on related accounts is as follows: for consolidated

cumulative translation adjustments, an increase of $35,991 for both dates; for retained earnings, an decrease of

$35,991 for both dates The amount of stockholders' equity as a whole is not affected by this adjustment.

(5) Deemed costs of premises and equipment

Following the instructions related to deemed costs of premises and equipment in IFRS 1, the Bank and its

subsidiaries elect to apply the exemption provided therein, and transferred the revaluation of land and buildings,

which followed R.O.C. GAAP, to retained earnings. The aforementioned revaluation resulted in an increase of

$124,298 in consolidated fix assets, an increase of $37,668 in other liabilities, and an increase of $86,630 in other

stockholder's equity. On january 1 and december 31, 2012, the effect of this adjustment on related accounts is as

follows: for consolidated other stockholders' equity, a decrease of $407,442 on both dates; for retained earnings,

an increase of $407,442 on both dates. The amount of stockholders' equity as a whole is not affected by this

reclassification.

(6) Idle and rental premises

Following IAS 16, the Bank and its subsidiaries reclassify under premises and equipment the idle premises

and rental premises originally included in other assets. On january 1 and december 31, 2012, the effect of this

adjustment on related accounts is as follows: for other assets, a decrease of $864,422 and $857,242, respectively;

for premises and equipment, an increase of $864,422 and $857,242, respectively. The amount of assets as a whole

is not affected by this reclassification.

(7) Debits and credits recognized when accepting orders to trade

According to IAS 32, debits and credits recognized when accepting orders to trade do not satisfy the conditions for

offsetting a financial asset and a financial liability, and therefore the Bank and its subsidiaries represent in gross

amount those debits and credits, which were previously represented in net amount. On January 1 and December

31, 2012, the effect of this adjustment on related accounts is as follows: for consolidated receivables, an increase of

$792,345 and $898,791, respectively; for other asset, an increase of $253 and $8,597, respectively; for payables,

an increase of $788,698 and $894,789.

(8) Provisions

According to IAS 1, effective since year 2013, liability reserve should be listed separately and there is no

instructions related to accrued pension liabilities. On january 1 and december 31, 2012, the effect of this

adjustment on related accounts is as follows: for accrued pension liabilities, a decrease of $257,985 and $769,248,

respectively; for liability reserve, an increase of $257,985 and $769,248, respectively. The amount of liabilities as a

whole is not affected by this adjustment.

According to IAS37, effective since year 2013, provision for lawsuit shall be reclassified under liability reserve. On

January 1 and December 31, 2012, the effect of this adjustment on related accounts is as follows: for consolidated

payables, an decrease of $443,802 and $520,230; for consolidated liability reserve, an increase of $443,802 and

$520,230. The amount of liabilities as a whole is not affected by this adjustment.

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The income tax effect resulted from the adjustments of employee benefit obligation of item (1) and (2), as of

January 1 2012 and December 31, 2012, leads to the following changes. For deferred income tax, an increase by $0

and $414,612,; for retained earnings, an increase by $0 and $414,612; for income tax expense in the consolidated

statement of income of 2012, a decrease of $0 and $362,628, respectively.

(4) Cumulative translation adjustments

According to the instructions related to cumulative translation in IAS 1, The Bank and its subsidiaries elect to apply

the exemption provided therein and reset the cumulative translation to zero by writing off retained earnings. On

january 1 and december 31, 2012, the effect of this adjustment on related accounts is as follows: for consolidated

cumulative translation adjustments, an increase of $35,991 for both dates; for retained earnings, an decrease of

$35,991 for both dates The amount of stockholders' equity as a whole is not affected by this adjustment.

(5) Deemed costs of premises and equipment

Following the instructions related to deemed costs of premises and equipment in IFRS 1, the Bank and its

subsidiaries elect to apply the exemption provided therein, and transferred the revaluation of land and buildings,

which followed R.O.C. GAAP, to retained earnings. The aforementioned revaluation resulted in an increase of

$124,298 in consolidated fix assets, an increase of $37,668 in other liabilities, and an increase of $86,630 in other

stockholder's equity. On january 1 and december 31, 2012, the effect of this adjustment on related accounts is as

follows: for consolidated other stockholders' equity, a decrease of $407,442 on both dates; for retained earnings,

an increase of $407,442 on both dates. The amount of stockholders' equity as a whole is not affected by this

reclassification.

(6) Idle and rental premises

Following IAS 16, the Bank and its subsidiaries reclassify under premises and equipment the idle premises

and rental premises originally included in other assets. On january 1 and december 31, 2012, the effect of this

adjustment on related accounts is as follows: for other assets, a decrease of $864,422 and $857,242, respectively;

for premises and equipment, an increase of $864,422 and $857,242, respectively. The amount of assets as a whole

is not affected by this reclassification.

(7) Debits and credits recognized when accepting orders to trade

According to IAS 32, debits and credits recognized when accepting orders to trade do not satisfy the conditions for

offsetting a financial asset and a financial liability, and therefore the Bank and its subsidiaries represent in gross

amount those debits and credits, which were previously represented in net amount. On January 1 and December

31, 2012, the effect of this adjustment on related accounts is as follows: for consolidated receivables, an increase of

$792,345 and $898,791, respectively; for other asset, an increase of $253 and $8,597, respectively; for payables,

an increase of $788,698 and $894,789.

(8) Provisions

According to IAS 1, effective since year 2013, liability reserve should be listed separately and there is no

instructions related to accrued pension liabilities. On january 1 and december 31, 2012, the effect of this

adjustment on related accounts is as follows: for accrued pension liabilities, a decrease of $257,985 and $769,248,

respectively; for liability reserve, an increase of $257,985 and $769,248, respectively. The amount of liabilities as a

whole is not affected by this adjustment.

According to IAS37, effective since year 2013, provision for lawsuit shall be reclassified under liability reserve. On

January 1 and December 31, 2012, the effect of this adjustment on related accounts is as follows: for consolidated

payables, an decrease of $443,802 and $520,230; for consolidated liability reserve, an increase of $443,802 and

$520,230. The amount of liabilities as a whole is not affected by this adjustment.

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(9) Provisions for guarantee reserve

According to IAS 37 and the Regulations Governing the Preparation of Financial Reports by Publicly Held

Banks effective from year 2013, the provision for guarantee reserve shall be reclassify to liability reserve.

On january 1 and december 31, 2012, the effect of this adjustment on related accounts is as follows: for

consolidated other liabilities, an decrease of $24,689 and $41,379 on both dates; for liability reserve, an

increase of $24,689 and $41,379, respectively. The amount of liabilities as a whole is not affected by this

adjustment.

(10) Gains and losses on financial assets or liabilities measured at fair value through profit or loss

Following the Regulations Governing the Preparation of Financial Reports by Publicly Held Banks, effective

from year 2013, the Bank and its subsidiaries reclassify under gains and losses on financial assets or

liabilities at fair value through profit or loss the interest income produced by such financial assets or liabilities

that was originally recognized as interest income. On December 31, 2012, the effect of this adjustment on

related accounts is as follows: for interest income, a decrease of $31,229; for gains and losses on financial

assets or liabilities measured at fair value through profit or loss, an increase of $31,229. The amount of gross

income is not affected by this reclassification.

(11) Revenue from recovered bad debts

According to section 65 of IAS 39 and the subsection 10 of article 10 in Regulations Governing the

Preparation of Financial Reports by Publicly Held Banks,the Bank and its subsidiaries adjusted bad debts

expenses for those which have been written off, returned to normal, or recovered.

On December 31, 2012, the effect of this adjustment on related accounts is as follows: for bad debts

expenses and provision for guarantee reserve, a decrease of $1,153,566; for other non-interest income, a

decrease of $1,153,566. The amount of gross income is not affected by this reclassification.

(c) According to IFRS 1 First-time Adoption of International Financial Reporting Standards, except for the case that

optional exemptions or mandatory exceptions are applied, when an entity adopts IFRSs for the first time, the entity

should prepare its financial statements following those accounting standards effective at the time of the adoption

and make retrospective adjustments. The optional exemptions applied by the Bank are as follows:

(1) The Bank and its subsidiaries elect to use a previous R.O.C. GAAP revaluation of an item of premises and

equipment before the date of transition to IFRSs as deemed cost at the date of the revaluation.

(2) The Bank and its subsidiaries elect to recognize all cumulative actuarial gains and losses at the date of

transition to IFRSs and transfer them to retained earnings

(3) The Bank and its subsidiaries elect to recognize all cumulative translation adjustment generated by overseas

operating units as $0 at the date of transition to IFRSs and executed the accounting procedure of foreign

exchange based on IAS 21 The Effects of Changes in Foreign Exchange Rates.

(d) The Bank and its subsidiaries have conducted the abovementioned evaluation in accordance with IFRSs

approved by FSC. The estimated significant differences and amount of impact from the evaluation as well as the

accounting policies chosen based on IFRS 1 First-time Adoption of International Financial Reporting Standards

are the result of considering the current regulations, accounting principles, and business environment. Thus,

the actual differences in the future may be different, depending on the regulations, accounting principles, and

business environment in the future.

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(11) DISCLOSURES REQUIRED:

(A) Information on Significant Transactions(a) Accumulative purchases or sales of the same investee companies amounting to over $300,000 or 10%

of paid-in capital: None.

(b) Acquisition of real estate amounting to over $300,000 or 10% of paid-in capital: None.

(c) Disposition of real estate amounting to over $300,000 or 10% of paid-in capital: None.

(d) Discount of commissions and handling fees with related parties amounting to over $5,000: None.

(e) Receivables from related parties amounting to over $300,000 or 10% of paid-in capital: None.

(f) Sale of non-performing loans information:

(1)

Trade date Counterparty Debt component Book value Sale price

Gains and losses on disposal

Additional term Relationship

2012.9.28Mega Asset

Management Corporation

Syndication Loan

-

52,958

52,786

None None

Note: The difference between sale price and book value is recognized as bad debt recovered and interest from overdue loans total amounted to $52,958. The exchange rate effect amounted to $172.

(2) Sale of non-performing loans amounting to over $1,000,000 (excluding those sold to related

parties): None

(g) Types of securitization goods and related information approved by financial assets securitization rules or

real estate securitization rules: None.

(h) Other significant transactions that might have influence over the decision making process of the financial

statements users: None.

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(B) Information on Investee Companies:(a) Names, locations, and related information of investees on which the company exercises significant

influence:

Name of investee company

AddressMain

business scope

Shareholding ratio

Book Value

Investment gain or loss recognized

by the Company

Ownership as of December 31, 2012

NoteNumber of shares

Number of profoma shares

Total

Number of shares

Shareholding ratio


2F, No.158, Songjiang Rd Taipei City 104, Taiwan (R.O.C.)

Agent of personal insurance

100% 74,137 52,741 500,000 - 500,000 100% -

Taiwan Business Bank Property Insurance Agency Co., Ltd.

2F, No.158, Songjiang Rd Taipei City 104, Taiwan (R.O.C.)

Agent of property insurance

100% 7,677 4,187 300,000 - 300,000 100% -

Note 1: Shares of investee company held by the Bank, Director, Supervisor, President, Vice-President and related parties under the "Company Act" are included as profoma shares.

Note 2: (1) Proforma shares are the shares obtained from under the assumption that securities with right or derivative instrument contracts (have not been converted into stocks) can be converted into shares of investee company under Article 74 of "Company Act" for investment purposes.

(2) Above mentioned "Securities with Right" is defined in Paragraph 1 of Article 11 "Securities and Exchange Law Enforcement Rules" for example, convertible corporate bonds and warrant certificates.

(3) Above mentioned "Derivative Instrument Contract" conformed with the definition of derivative instrument of SFAS No.34 "Financial Instruments: Recognition and Measurement" for example, stock option.

(b) Loans to others: None.

(c) Endorsement and guarantees for others: None.

(d) Marketable securities held as of December 31, 2012: None.

(e) Cumulative purchases or sales of the same marketable securities amounting to over $300,000 or 10% of paid-in capital: None.

(f) Acquisition of real estate amounting to over $300,000 or 10% of paid-in capital: None.

(g) Disposition of real estate amounting to over $300,000 or 10% of paid-in capital: None.

(h) Discount of commissions of handling fees with related parties amounting to over $5,000: None.

(i) Receivables from related parties amounting to over $300,000 or 10% of paid-in capital: None.

(j) Investee companies' financial derivatives transactions: None.

(k) Sales of non – performing loans amounting to over information: None.

(l) Types of securitization goods and related information approved by financial assets securitization rules or real estate securitization rules: None.

(m) Other significant transactions that might have influence over the decision making process of the financial

statements users: None.

(12) OPERATING SEGMENT:

(A) General informationThe chief operating decision maker is the general manager of the Bank who is in charge of all major

projects approval, budget review and performance measurement. In order to express operating activities

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Bank Department

Other-securities and trust

Inter-department adjustment

Total segment

Interest revenue $ 22,721,401 212,388 - 22,933,789

Interest expenses (9,956,201) (55,041) - (10,011,242)

Net interest income 12,765,200 157,347 - 12,922,547

Service fee income 1,834,789 425,741 - 2,260,530

Service fee expenses (230,782) (23,532) - (254,314)

Service fee and commission income 1,604,007 402,209 - 2,006,216

Gains on financial assets or liabilities measured at fair value through profit or loss-net

396,186 966 - 397,152

Realized gains of available-for-sale financial assets-net

15,964 2,450 - 18,414

Gains from equity investment under the equity method-net

56,928 - - 56,928

Foreign exchange gains-net 533,402 - - 533,402

Other non-interest income-net 131,235 2,739 133,974

Gains on financial assets carried at cost-net

135,164 - - 135,164

Securities brokerage incomes-net - 171,011 - 171,011

Revcovered bad debts and overdue accounts-net

1,153,566 - - 1,153,566

Inter-department income 19,697,961 161,379 (19,859,340) -

Inter-department expense (19,500,795) (358,545) 19,859,340 -

Net income 16,988,818 539,556 - 17,528,374

Bad debt expenses (reversal of bad debt expenses)

(3,267,450) 1,565 - (3,265,885)

Operating expense (10,195,048) (339,524) - (10,534,572)

Net income before tax $ 3,526,320 201,597 - 3,727,917

Total assets $ 1,275,705,137 14,314,688 - 1,290,019,825

Total Liabilities $ 1,223,144,937 11,836,393 - 1,234,981,330

legitimately, the reportable segments of the Bank are Bank segment and others (including securities department and trust department). The major operating activities of securities department are securities brokerage, financing transaction and future auxiliary transaction. It is to provide customer a platform for securities investment. The trust department mainly provides customers relevant financial services,

including securities review and approval, custodian bank service, new type trust business and specific trust

funds investing in domestic or foreign securities. The profit or loss of the operating segments of the Bank is

measured by net income before tax. The reported amount is consistent with the data which was provided

to the chief operating decision maker in order to use it as the base of resource allocation and performance

measurement.

(B) Segment information

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Bank Department

Other-securities and

trust

Inter-department adjustment

Total segment

Interest revenue $ 21,873,139 227,457 - 22,100,596

Interest expenses (9,275,891) (37,411) - (9,313,302)

Net interest income 12,597,248 190,046 - 12,787,294

Service fee income 1,753,516 524,208 - 2,277,724

Service fee expenses (227,510) (30,717) - (258,227)

Service fee and commission income 1,526,006 493,491 - 2,019,497

(Losses) Gains on financial assets or liabilities measured at fair value through profit or loss-net

(395,753) 2,736 - (393,017)

Realized (losses) gains of available-for-sale financial assets-net

(39,208) 2,850 - (36,358)

Gains from equity investment under the equity method-net

49,578 - - 49,578

Gains on financial assets carried at cost-net

148,505 - 148,505

Foreign exchange gains-net 595,901 - - 595,901

Reversal of impairment recognized in profit or loss on assets

428,980 - - 428,980

Other net non-interest income 14,724 48,414 63,138

Losses on sale of foreclosed porperties

(295,850) - - (295,850)

Securities brokerage incomes-net - 228,368 - 228,368

Revcovered bad debts and overdue accounts-net

1,559,458 - - 1,559,458

Inter-department income 15,643,010 189,997 (15,833,007) -

Inter-department expense (15,351,474) (481,533) 15,833,007 -

Net income 16,481,125 674,369 - 17,155,494

Bad debt expenses (3,664,480) (4,109) - (3,668,589)

Operating expense (9,879,978) (337,955) - (10,217,933)

Net income before tax $ 2,936,667 332,305 - 3,268,972

Total assets $1,253,325,984 13,682,146 - 1,267,008,130

Total Liabilities $1,208,963,552 11,131,666 - 1,220,095,218

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(C) Geographic Segments InformationThe Bank, based on the geographic location of foreign operating segments, to disclose information as below:

Location For the years ended December 31,

Income before income tax : 2012 2011

Taiwan $ 3,311,501 2,675,687

America 237,532 380,930

Hong Kong 124,954 135,503

Australia 53,930 76,852

$ 3,727,917 3,268,972

Non-current assets :

Taiwan $ 18,109,388 16,565,334

America 3,957 71,077

Hong Kong 12,484 17,795

Australia 23,654 67,422

$ 18,149,483 16,721,628

(D) Information of Major Customers No single customer represents 10% or more of the Bank's operating revenue. Therefore, no disclosure of major

customer information is required.

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Implementation of Social ResponsibilityVII

Item Status of Operation

Divergence from Corporate

Responsibility Rules for Listed Companies,

and Reasons for Divergence

1. Realizing corporate governance

(1) Establishment by the Company of a corporate social responsibility policy or system, and review of the results of implementation.

(2) Establishment and implementation by the Company of the operation of a unit in charge, either exclusively or concurrently, of corporate social responsibility.

(3) Implementation by the Company of corporate ethics training and education for directors and supervisors on a regular basis, incorporation of same into the performance assessment system, and establishment of a clear and efficient system of rewards and punishments.

1. Corporate responsibility is clearly laid out in the Banks corporate charter.

2. For further information on the implementation of the Bank’s corporate social responsibility, please refer to item 3 (6).

This is carried out by the different headquarters units within their scope of jurisdiction.

1. The Bank provides information on education and training to directors and publishes information of their training on the Market Observation Post System

2. Clear provisions for punishment, up to dismissal, for corporate ethics violations, bribery, and corruption are written into the Bank’s guidelines for employee rewards and punishments and instructions for normal evaluation, and rewards are offered for the prevention or reporting of improper behavior or fraud, This encourages employees to follow the rules of corporate ethics and social responsibility.

No divergence.

No divergence.

No divergence

2. Development of a sustainable environment

(1) Efforts by the Company to enhance the efficiency of resource utilization, and to use recyclable materials with a minimum impact on the environment.

1. Carbon powder ink cartridges are collected for recycling.

2. Double-sided printing.3. Recycling companies are commissioned to

dispose of unusable computer equipment.

No divergence.

1. Implementation of Social Responsibility

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(2) Establishment by the Company, in accordance with its industrial characteristics, of a suitable environmental management system

(3) Establishment of a dedicated environmental management unit or staff members to maintain the environment.

(4) Attention by the Company to the impact of climage change on operational activities, and formulation of a Company strategy for energy conservation, carbon reduction, and greenhouse gas reduction.

Environmental cleaning and maintenance is carried out in accordance with the Bank's "Cleaning and Maintenance Instructions for Business Units."

Business units carry out office environmental cleaning and disinfection on a regular basis, and the 17th of every month is designated as "TBB Environmental Cleanliness Day" in order to maintain the working environment. The deputy chief of each unit is responsible for supervising this effort.

1. Bank-wide water conservation measures have been implemented; use of water and electricity by the different units is monitored regularly, and is included in business performance evaluation.

2. The improvement of energy-saving measures is evaluated, the efficiency of equipment is enhanced, and the conservation of water and electricity is upgraded.

3. The Taipei City Government Statute for Autonomy in Energy Conservation and Carbon Reduction is observed, and air conditioners in offices and business premises are set no lower than 26 degrees Celsius.

No divergence.

No divergence.

No divergence.

3. Maintenance of the public benefit

(1) Conformity with labor regulations, protection of employees' legal rights, and establishment of appropriate management methods and procedures.

(2) Provision by the Company of a safe and healthy work environment for employees, and regular offering of safety and health education.

The Bank's personnel regulations are written to conform to the relevant labor laws and regulations. Matters that affect the rights or welfare of the Bank's employees are reported to the labor-management committee for discussion on a regular basis, or prior labor-management negotiations are carried out. There is also a channel for the expression of opinions by employees, fully protecting the legal rights of the Bank's employees.

The Bank carries out three hours of worker safety education every three years, provides physical exams for new employees and, for existing employees, health exams every two years, taking care of employees' physical health and reminding them of the importance of health.

No divergence.

No divergence.

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(3) A mechanism for regular communication with employees has been set up, and reasonable methods are used to notify employees of operational changes that may have a major influence on them.

Matters that affect the rights or welfare of employees are submitted to labor-management meetings for discussion on a regular basis, or to prior labor-management negotiations. There is also a channel for employees to express their opinions, and their legal rights are fully respected and protected. Changes in operations or regulations that may have a major influence on employees are reported by letter to all units, which are asked to publicize them during business meetings, and bank-wide videoconferences are also used for notification purposes.

No divergence.

(4) Establishment and public announcement by the Company of a cousumer rights policy, and provision of a transparent and effective consumer complaint procedure for its products and services.

1. The Bank's regulations for guarantors and period of guarantee for personal loans were revised in response to the implementation of the revised Article 12-1 and added Article 12-2 of the Banking Act.

2. In compliance with Financial Supervisory Commission rules, details of loan fees are disclosed in contracts and annual percentage rates are used for total loan costs. Charges are posted on the Bank's website and in business halls to help customers understand the real coasts of loans.

3. To carry through with consumer protection and comply with the regulations of the competent authority, when business units extend medium- or long-term secured loans using houses as collateral, or use other real estate as collateral while the actual use of the loan is for housing purchase, the business units should verbally explain the "Special Housing Loan Reminders" so that customers will clearly understanding the risk of changes in loan interest rates.

4. The Bank provides a standard contract for applications for its personal banking products, and the legal affairs unit reviews all product planning, marketing, and outsourced collection to assure compliance with regulations.

5. The Bank's customer rights manual is published on its website, as well as model standard contracts and explanations of related fees.

6. The Bank has established a "TBB Procedure for Handling Customer Complaints" and has installed a toll-free service hotline, with information posted in prominent locations at business offices and ATMs. Complaints are accepted and processed immediately by Business Management Dept., and Credit Card Dept.

No divergence.

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(5) The company cooperates with suppliers to enhance the fulfillment of corporate social responsibility.

BPA-free roll paper is used in ATMs to assure the safety of users.

No divergence

(6) The company uses commercial activities, the donation of materials, corporate volunteer services, and other free professional services to participate in community development and charity activities.

The fulfillment of corporate social responsibility has always been one of the TBB’s four major operating principles. In addition to pursuing business performance in its banking operations, emphasizing shareholder interest, and enhancing the value-added of our employees, the Bank shows its concern for disadvantaged groups with concrete action and carries through with the principle of concern for society, participating vigorously in public-benefit activities in order to carry out its corporate social responsibility. Furthermore, the Bank evidences the service spirit of a local bank through a proactive concern for local small and medium businesses.

No divergence

4. Strengthened information disclosure

(1) Method of disclosing the Company’s information related to the relevance and reliability of corporate social responsibility.

(2) The Company's compilation of a corporate social responsibility report, and disclosure of the status of CSR implementation.

Information on corporate governance and guidelines for the disclosure of information on the evaluation system is disclosed on the Market Observation Post System and the Company’s corporate website.

The Bank does not compile a CSR report, but discloses information on CSR implementation in the relevant portions of its Annual Report.

No divergence

No divergence

5. If the Company compiles its own CSR rules in accordance with the "Corporate Social Responsibility Best Practice Principles for TWSE/GTSM-listed Companies," please describe its operation and divergences by the established rules:

The Company has not formulated its own CSR regulations; but, in accordance with Article 1 of the Bank's corporate charter, "In line with national financial policy, the Bank's goals are to provide financing for the public and small and medium enterprises, and to help SMEs improve their production equipment and financial structure and strengthen their operational management." In pursuit of these goals the Bank fulfills its CSR to stabilize finance and assist enterprises and individuals with financing.

6. For other information to aid understanding of the Bank's CSR operations (including systems and measures, and status of implementation, of environmental protection, social contributions, social service, social benefit, consumer rights, human rights, safety and health, and other CSR activities), please refer to item 3 (6).

7. If the Company's products or CSR report has passed the verification standards of a related verification institution, please explain: None.

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Divergence from Corporate Honest

Operation for Listed Companies, and Reasons for

Divergence

1. Establishment of Ethical Management Policies and Programs

(1) The Bank's clear expression of a policy of ethical management in its charter and its external documents, and the commitment of its Board of Directors and managers to implementing that policy.

(2) The Bank has established a program for the prevention of dishonest behavior, as well as the program's operating procedures, behavioral guidelines, and related education and training conditions.

(3) In the establishment of its program for the prevention of dishonest behavior, the Bank's adoption, for activities within its business scope that have a relatively high risk of dishonest behavior, of bribery prevention measures and provision of information on illicit political contributions.

1. The Bank's establishment, in accordance with the relevant laws and regulations, of auditing, internal controls, and other internal regulations that specify rules which employees must observe.

2. The Bank's work rules clearly specify that employees may not use their positions to perpetrate fraud for personal gain or for the illicit interest of themselves or others, and may not receive gifts of any kind or obtain other improper benefit.

1. When holding basic and management classes for different areas of business, unethical employee behavior and needed legal know-how (including the Personal Information Protection Act, Consumer Protection Act, and the civil and criminal liability of employees) are included in the curricula.

2. "Guidelines for the Construction, Procurement, Customization, and Selling of Property" have been established to serve as a basis for the Bank's procurement operations, and are thoroughly carried out.

According to the provisions of the "Guidelines for the Construction, Procurement, Customization, and Selling of Property," Article 21, which states that "Persons handling the construction, procurement, customization, and sale of property may not engage in the work of inspection and acceptance of a related case, persons involved in inspection may not supervise the inspection of a related case, and persons involved in the sale of property may not handle the work of inspection transfer of a related case." and Article 27, "Personnel of all levels who handle or supervise construction or the procurement, customization, or sale of property are strictly prohibited from accepting invitations to banquets or presentations of gifts from related companies, in order to assure rectitude and fairness, and persons handling procurement should be rotated on a regular basis.", the Bank does in fact demand that such personnel observe these rules, and if there is any misconduct to report it to the personnel unit for reporting to the Personnel Evaluation Committee for review and investigation.

No divergence.

No divergence.

No divergence.

2. Implementation of honest operation

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Divergence

2. Implementation of Ethical Corporate Management

(1) The Bank's avoidance, in its commercial activities, of trading with parties who have a record of dishonest behavior, and inclusion of provisions on dishonest behavior in its commercial contracts.

(2) The Bank's has establishment of operating conditions for a unit specifically charged with the promotion of ethical corporate management and for supervision by the Board of Directors.

(3) The Bank's establishment of conflict-of-interest policies and provision of an appropriate channel for reporting conflicts of interest

Contract provisions clearly state that all hardware and software equipment must be legally authorized, and that if personnel sent by a company that wins the bidding for a procurement contract engage in any illegal behavior, divulging of secrets, or negligence that results in loss for the Bank, then that company may be banned from participation in the bidding and be held jointly liable for payment of compensation for the loss. It is also stipulated in bidding instructions that if a bidding company has a record of unethical behavior, it may be banned from participation in bidding. The relevant bidding instructions also state that if a winning bidder is a party with a material interest in the Bank, that fact must be reported to the Bank's Board of Directors for approval before the winning bid becomes effective.

Related units of the Bank promote ethical management within the scope of their responsibility, and internal auditing reports are submitted to the Board of Directors on a regular basis.

Provisions for recusal for conflict of interest are included in the Bank's Rules and Procedures for Board of Directors Meetings, making discussions more fair and objective. Rules are also established for donations to materially interested parties in order to avoid harming the Bank's interests.

No divergence.

No divergence.

No divergence.

(4) The Bank's reporting on the operation of the accounting system and internal controls that have been established to assure ethical management, and on auditing by internal auditors

1. The Bank operates in accordance with its established accounting system.

2. The Bank does in fact observe the Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries; it has established an internal controls system and implements risk management, and carries out auditing by an impartial and independent auditing unit so as to assure that the design and implementation of its system has sustained effectiveness.

No divergence.

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Divergence

3. The Bank's Board of Directors Auditing Department carries out auditing work in accordance with the Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries and its own Internal Auditing Rules, and reports on its auditing work to the Board of Directors and the Audit Committee every three months.

4. The Bank's Board of Directors Auditing Department carries out at least one general audit and one special audit of domestic business, finance, asset custodial, and information units every year, and one special audit of other management units every year. It also carries out one general audit of the different business centers and overseas business units every year and one special audit of subsidiarys' financial, risk manament and legal compliance every 6 months. Set up dedicated staff to handle internal audit on security business, and the Auditing Department supervise and inspect it every 6 months.

3. Operation of the Bank's establishment of a reporting channel and punishment of violations of management integrity regulations, and complaint system.

Bank employees who want to submit suggestions or report irregularities can do so to the manager of their unit, or in the unit's weekly report. They can also report, by name, concrete evidence to the relevant headquarters unit for action. The Bank's guidelines for employee rewards and punishments contains provisions for rewards to encourage employees to report incidents of fraud, and there are also punitive rules for the perpetration of fraud for personal gain or the procuring of illegal benefit for oneself or others so as to assure the Bank's fulfillment of ethical management.

No divergence.

4. Strengthening of Information Disclosure

(1) The Bank's establishment of a website and disclosure of information on ethical management.

In conformity with the regulations, Rules and Procedures for Board of Directors Meetings, Statement of Internal Controls, procedures for the acquisition and disposition of assets, financial statements, information on major financial businesses, and other important information related to ethical management are posted on the Bank's website, and the website's "Capital Adequacy and Risk Management" section discloses information related to risk management.

No divergence.

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(2) The Bank's adoption of other information disclosure methods (such as the establishment of an English-language website and designation of personnel responsible for the collection of company information and its disclosure on the company website).

1. The Bank has established the "Taiwan Business Bank Operating Procedures for Handling the Disclosure of Information," under which each related unit appoints a designated person to be responsible, within the scope of its business, for handling the collection of relevant information and its disclosure on the Bank's website.

2. Under the following circumstances, the Bank acquiring or disposing of assets shall disclose the relevant information on Market Observation Post System:

A. Acquisition or disposal of real property from or to a related party, or acquisition or disposal of assets other than real property from or to a related party where the transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of the company's total assets, or NT$300 million or more;

B. Where the type of asset acquired or disposed is equipment/machinery for business use, the trading counterparty is not a related party, and the transaction amount reaches NT$500 million.

C. Where land is acquired under an arrangement on engaging others to build on the company's own land, engaging others to build on rented land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale, and the amount reaches NT$500 million.

No divergence.

5. If the Bank establishes its own ethical management rules in accordance with the "Ethical Corporate Management Best Practice Principles for TWSE/GTSM-Listed Companies," please describe differences in their operation and established rules:

Work rules, approved by the Board, has entered into a similar line of integrity service Code, norms for employees should be loyal to their duties, comply with internal and external regulations, and be honesty to implement our business philosophy. The Company observes all the laws and regulations as well as its own related internal rules in its operations in order to advance the benefit of investors.

6. Other important information that will facilitate an understanding of the Bank's ethical management operations (such as the Bank's publicizing of its ethical management determination and policies to companies with which it does business, and its inviting of them to participate in education and training, and review and amendment of the ethical management rules established by the Bank).

The Bank provides its directors with information on corporate governance learning channels so as to improve their competence.

3. For information on corporate governance rules and related regulations, please visit the Market Observsation Post System website (http://mops.twse.com.tw) and click on "corporate governance."

4. For a further understanding of the Bank's governance operations, please visit the Bank's website (http://www.tbb.com.tw) and click on "About TBB" and then "Investor Relations."

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Directory of Head Office and Branch UnitsⅧ

TBB’S OFFICES ADDRESS TEL NO. SWIFT ADDRESS

Head Office 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171Banking Department 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171Trust Department 15F, 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171Securities Department(Banking Broker) 4F, 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171

International Banking Department 3F, 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171 MBBTTWTP

Chi Lin Branch 46, Sec. 2, Min Chen E. Rd., Taipei, Taiwan, R.O.C. (02)25417171 MBBTTWTP001

Chung Ho Branch 634-10 Gin Pin Rd., Chung Ho Dist., New Taipei City, Taiwan, R.O.C. (02)22427171 MBBTTWTP002

Po Ai Branch 419 Min Cheng 2nd Rd., Zuoying Dist Kaohsiung City, Taiwan, R.O.C. (07)5567171

North Taoyuan Branch 985 Chung Zi Rd., Taoyuan City, Taoyuan Hsien, Taiwan, R.O.C. (03)3567171 MBBTTWTP004

Nan Ken Branch 381 Chung Cheng Rd., Luo Chu Shiang, Taoyuan Hsien, Taiwan, R.O.C. (03)3227171 MBBTTWTP005

Si Tuen Branch 107, Sec. 3, Taichung Kang Rd., Taichung City, Taiwan, R.O.C. (04)23587171 MBBTTWTP006

Chung Min Branch 301 Chung Min S. Rd., Taichung City, Taiwan, R.O.C. (04)23057171 MBBTTWTP007

Ta Ya Branch 161 Ta Ya Rd., Ta Ya Dist., Taichung City, Taiwan, R.O.C (04)25687171 MBBTTWTP011

Jen Ta Branch 183 Fengnan Rd., Nanzi Dist., Kaohsiung City, Taiwan, R.O.C. (07)3537171

Jen Ai Branch 357, Sec. 4, Jen Ai Rd., Taipei, Taiwan, R.O.C. (02)27217171 MBBTTWTP020Sung Shan Branch 147, Sec. 4, Nan King E. Rd., Taipei, Taiwan, R.O.C. (02)27167171 MBBTTWTP021Chien Cheng Branch (Banking Broker) 76 Nan King W. Rd., Taipei, Taiwan, R.O.C. (02)25507171 MBBTTWTP022

Shih Lin Branch 601 Chung Cheng Rd., Shih-Lin Chiu, Taipei, Taiwan, R.O.C (02)28117171 MBBTTWTP023

Yung Ho Branch 168 Chu Lin Rd., Yung Ho Dist, New Taipei City, Taiwan, R.O.C. (02)29277171

Hsin Tien Branch 192, Sec. 2, Chung Hsing Rd., Hsin Tien Dist., New Taipei City, Taiwan, R.O.C. (02)29117171 MBBTTWTP025

Hsin Chuang Branch 1&2F, 16, Sec. 1, Chung Hwa Rd., Hsin Chuang Dist., New Taipei City, Taiwan, R.O.C. (02)29907171 MBBTTWTP026

Hwa Cheng Branch 1&2F,25, Tou Chian Rd., Hsin Chuang Dist., New Taipei City, Taiwan, R.O.C. (02)29977171 MBBTTWTP027

Sung Kiang Branch 158 Sung Kiang Rd., Taipei, Taiwan, R.O.C. (02)25377171 MBBTTWTP040Taipei Branch (Banking Broker) 72, Sec. 1, Chung King S. Rd., Taipei, Taiwan, R.O.C. (02)23717171 MBBTTWTP050

Wan Hua Branch 146 Kwang Chow St., Taipei, Taiwan, R.O.C. (02)23387171 MBBTTWTP060South Taipei Branch 93, Sec. 2, Roosevelt Rd., Taipei, Taiwan, R.O.C. (02)23697171 MBBTTWTP061Fu Hsin Branch 390, Sec. 1, Fu Hsing S. Rd., Taipei, Taiwan, R.O.C. (02)27057171 MBBTTWTP070Chung Shan Branch 17 Chang Chuen Rd., Taipei, Taiwan, R.O.C. (02)25517171 MBBTTWTP080Chien Kuo Branch 4, Sec. 3, Min Chen E. Rd., Taipei, Taiwan, R.O.C. (02)25097171 MBBTTWTP081

Nai Hu Branch 15, Alley 360, Sec. 1, Nai Hu Rd. Taipei, Taiwan, R.O.C. (02)27997171 MBBTTWTP082

Nan King East Road Branch 311, Sec. 3, Nan King E. Rd., Taipei, Taiwan, R.O.C. (02)27127171 MBBTTWTP090

Chung Hsiao Branch 267, Sec. 3, Chung Hsiao E. Rd., Taipei, Taiwan, R.O.C. (02)27727171 MBBTTWTP100

East Taipei Branch 135, Sec. 4, Pa Te Rd., Taipei, Taiwan, R.O.C. (02)87877171 MBBTTWTP101World Trade Center Branch 547 Kuang Fu S. Rd., Taipei, Taiwan, R.O.C. (02)23457171 MBBTTWTP102

Yung Trin Branch 552, Sec. 5, Chung Hsiao E. Rd., Taipei, Taiwan, R.O.C. (02)23467171 MBBTTWTP103

Nan Kang Branch 19-2 San Chung Rd., Nan Kang Dist., Taipei, Taiwan, R.O.C. (02)26553771 MBBTTWTP105

Sung Nan Branch 161, Sec. 1, Keelung Rd., Taipei, Taiwan, R.O.C. (02)27647171 MBBTTWTP110Dong Hu Branch 152, Sec. 6, Min Chuan E. Rd., Taipei, Taiwan, R.O.C. (02)87929771 MBBTTWTP111

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Ta An Branch 92, Sec. 2, Tun Hwa S. Rd., Taipei, Taiwan, R.O.C. (02)27007171 MBBTTWTP120

Shuang Ho Branch 356 Chung Ho Rd., Chung Ho Dist., New Taipei City, Taiwan, R.O.C. (02)22327171 MBBTTWTP121

Jim Ho Branch 403, Sec. 2, Chung Shan Rd., Chung Ho Dist., New Taipei City, Taiwan, R.O.C. (02)22287171 MBBTTWTP122

Wu Ku Branch 95 Wu Kung Rd., Wu Ku Industrial Zone, Hsin Chuang Dist., New Taipei City, Taiwan, R.O.C. (02)22987171 MBBTTWTP130

Lin Kou Branch 1F-2, 188 Chung Shan Rd., Lin Kuo Dist., New Taipei City, R.O.C. (02)26037171 MBBTTWTP131

Pan Chiao Branch 2-1 Ming Te St., Pan Chiao Dist., New Taipei City, Taiwan, R.O.C. (02)29687171 MBBTTWTP140

Shu Lin Branch 1&2F-1,217, Sec. 1, Chung Shan Rd., Shu Lin Dist., New Taipei City, Taiwan, R.O.C. (02)26757171 MBBTTWTP141

Tu Cheng Branch 126, Sec. 2, Chung Yang Rd., Tu Cheng Dist., New Taipei City, Taiwan, R.O.C. (02)22737171 MBBTTWTP142

Hwei Long Branch 933 Chung Cheng Rd., Hsin Chuang Dist., New Taipei City, Taiwan, R.O.C. (02)82097171 MBBTTWTP143

Xi Zhi Branch 75, Sec. 1, Shin Tai 5th Rd., Xizhi Dist., New Taipei City, R.O.C. (02)26987171 MBBTTWTP144

Kee Lung Branch 9 Ai 3rd Rd., Keelung, Taiwan, R.O.C. (02)24237171Pu Chya Branch(Banking Broker)

62-1, Sec. 2, Chung Shan Rd., Pan Chiao Dist., New Taipei City, Taiwan, R.O.C. (02)29547171

North San Chung Branch 137, Sec. 4, San Ho Rd., San Chung Dist., New Taipei City, Taiwan, R.O.C. (02)22867171 MBBTTWTP152

South San Chung Branch 232, Sec. 1, Chi Cheng Rd., San Chung Dist., New Taipei City, Taiwan, R.O.C. (02)29827171 MBBTTWTP153

Lu Chow Branch 42 Yeong Loh St., Lu Chow Dist., New Taipei City, Taiwan, R.O.C. (02)28477171 MBBTTWTP154

I Lan Branch 305 Sec. 2,Chung Shan Rd., I Lan City, I Lane Hsien, Taiwan, R.O.C. (03)9367171

Lo Tung Branch 15 Chung Cheng N. Rd., Lo Tung Chen, I Lan Hsien, Taiwan, R.O.C. (03)9567171

Su Aw Branch 96-1,Sec. 1, Chung Shan Rd., Su Aw Chen, I Lan Hsien, Taiwan, R.O.C. (03)9965051

Yang Mei Branch 146 Ta Cheng Rd., Yang Mei Chen, Taoyuan Hsien, Taiwan, R.O.C. (03)4786111 MBBTTWTP290

Hu Kou Branch 76, Sec. 1, Chung Cheng Rd., Hu Kou Shiang, Hsin Chu Hsien, Taiwan, R.O.C. (03)5997171 MBBTTWTP291

Taoyuan Branch (Banking Broker) 99 Chung Hwa Road Tao Yuan City, Taiwan, R.O.C. (03)3317171 MBBTTWTP300

Ta Yuan Branch 80 Chung Shan S. Rd., Ta Yuan Shiang, Taoyuan Hsien, Taiwan, R.O.C. (03)3857171 MBBTTWTP301

Ta Shi Branch 80 Fu Hsin Rd., Ta Shi Chen, Taoyuan Hsien, Taiwan, R.O.C. (03)3887171 MBBTTWTP302

Chung Li Branch 157 Chung Shan Rd., Chung Li City, Taoyuan Hsien, Taiwan, R.O.C. (03)4277171 MBBTTWTP310

Nei Li Branch 74 Chung Hsiao Rd., Chung Li City, Taoyuan Hsien, Taiwan, R.O.C. (03)4557171 MBBTTWTP311

Hsin Ming Branch 282 Min Tsu Rd., Chung Li City, Taoyuan Hsien, Taiwan, R.O.C. (03)4027171 MBBTTWTP312

East Taoyuan Branch 1223, Sec. 2, One Shou Rd., Guei Shan Shiang, Taoyuan Hsien, Taiwan, R.O.C. (03)3297171

Hsin Wu Branch 257 Chung Shan Rd., Hsin Wu Shiang, Taoyuan Hsien, Taiwan, R.O.C. (03)4777171

Hsin Chu Branch 154 Tung Men St., Hsin Chu City, Taiwan, R.O.C. (03)5277171 MBBTTWTP320Chu Pei Branch

(Banking Broker) 128 Hsien Cheng 9th Rd., Chu Pei City, Hsin Chu Hsien, Taiwan, R.O.C. (03)5517171 MBBTTWTP321

Hsinchu Science Based Industrial Park Branch

489, Sec. 1, Guang Fu Rd., Hsin Chu City, Taiwan, R.O.C. (03)5637171 MBBTTWTP322

Pa Te Branch 789, Sec. 1, Chien Shou Rd., Pa Te City, Taoyuan Hsien, Taiwan, R.O.C. (03)3767171 MBBTTWTP330

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Luong Tan Branch 64 Luong Yuan Rd., Luong Tan Shiang, Taoyuan Hsien, Taiwan, R.O.C. (03)4807171 MBBTTWTP332

Chu Tung Branch 6 Tung Lin Rd., Chu Tung Chen, Hsin Chu Hsien, Taiwan, R.O.C. (03)5947171 MBBTTWTP340

Chu Nan Branch 29 Po Ai St., Chu Nan Chen, Maio Li Hsien, Taiwan, R.O.C. (037)467171 MBBTTWTP350

Tou Fen Branch 90 Hsin Yi Rd., Tou Fen Chen, Maio Li Hsien, Taiwan, R.O.C. (037)687171 MBBTTWTP351

Maio Li Branch 606 Chung Cheng Rd., Maio Li City, Taiwan, R.O.C. (037)327171 MBBTTWTP360Feng Yuan Branch

(Banking Broker) 1 San Feng Rd., Feng Yuan Dist., Taichung City, Taiwan, R.O.C. (04)25267171 MBBTTWTP460

Houli Branch 1F., No.51, Wenming Rd., Houli Dist., Taichung City 421, Taiwan, R.O.C. (04)25587171

Tai Ping Branch

(Banking Broker) 27 Chung Hsin E. Rd., Tai Ping Dist., Taichung City, Taiwan, R.O.C. (04)22707171 MBBTTWTP470

Ta Chia Branch 14 Chen Cheng Rd., Ta Chia Dist., Taichung City, Taiwan, R.O.C. (04)26867171 MBBTTWTP480

Sha Lu Branch 355 Chung Chew Rd., Sha Lu Dist., Taichung City, Taiwan, R.O.C. (04)26657171 MBBTTWTP482

Wu Jih Branch 616 Chung Hwa Rd., Wu Jih Dist., Taichung City, Taiwan, R.O.C. (04)23387171 MBBTTWTP483

Taichung Branch(Banking Broker) 224 Chung Cheng Rd., Taichung City, Taiwan, R.O.C. (04)22297171 MBBTTWTP490Min Chen Branch 84 Min Chen Rd., Taichung City, Taiwan, R.O.C. (04)22267171 MBBTTWTP491Hsing Chung Branch 136 Taichung Rd., Taichung City, Taiwan, R.O.C. (04)22877171 MBBTTWTP500Pei Tuen Branch 53 Chin Hwa N. Rd., Taichung City, Taiwan, R.O.C. (04)22307171 MBBTTWTP501

Nan Tou Branch 139 Fu Shing Rd., Nan Tou City, Nan Tou Hsien, Taiwan, R.O.C. (049)2237171

Tsao Tuen Branch 604 Chung Cheng Rd., Tsao Tuen Chen, Nan Tou Hsien, Taiwan, R.O.C. (049)2357171 MBBTTWTP511

Pu Li Branch 434 Chung Cheng Rd., Pu Li Chen, Nan Tou Hsien, Taiwan, R.O.C. (049)2997171

Tan Tze Branch 135, Sec. 2, Chung Shan Rd., Tan Tze Dist., Taichung City, Taiwan, R.O.C. (04)25317171 MBBTTWTP521

Chu Shan Branch 919, Sec. 3, Chi Shan Rd., Chu Shan Chen, Nan Tou Hsien,Taiwan, R.O.C. (049)2637171

Chang Hwa Branch 61 Kuang Fu Rd., Chang Hwa City, Chang Hwa Hsien, Taiwan, R.O.C. (04)7257171 MBBTTWTP540

Ho Mei Branch 8 Ho An St., Ho Mei Chen, Chang Hwa Hsien, Taiwan, R.O.C. (04)7558131 MBBTTWTP541

Yuan Lin Branch 16 Min Chuan St., Yuan Lin Chen, Chang Hwa Hsien, Taiwan, R.O.C. (04)8377171 MBBTTWTP550

Pei Tou Branch 62 Kung Chien St., Pei Tou Chen, Chang Hwa Hsien, Taiwan, R.O.C. (04)8877171 MBBTTWTP560

Erh Lin Branch 2 Chung Cheng Rd., Erh Lin Chen, Chang Hwa Hsien, Taiwan, R.O.C. (04)8957171

Tou Liu Branch 109 Ta Tung Rd., Do Lui City, Yun Lin Hsien, Taiwan, R.O.C. (05)5347171 MBBTTWTP660

Pei Kang Branch 65 Wen Hwa Rd., Pei Kang Chen, Yun Lin Hsien, Taiwan, R.O.C. (05)7827171

Hu Wei Branch 45 Ho Ping Rd., Hu Wei Chen, Yun Lin Hsien, Taiwan, R.O.C. (05)6337171

Chia Yi Branch(Banking Broker) 132 Kuang Hwa Rd., Chia Yi City, Taiwan, R.O.C. (05)2287171 MBBTTWTP680

Ming Hsiung Branch(Banking Broker)

83, Sec. 3, Chien Kuo Rd., Ming Hsiung Shiang, Chia Yi Hsien, Taiwan, R.O.C. (05)2207171

South Chia Yi Branch 766 Shin Min Rd., Chia Yi City, Taiwan, R.O.C. (05)2867171

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Hsin Ying Branch 216 Chung Shan Rd., Hsin Ying Dist., Tainan City, Taiwan, R.O.C. (06)6357171

Kai Yuan Branch 12 Chung Hwa Rd., Yun Kang Dist., Tainan City, Taiwan, R.O.C. (06)3117171

Yun Kang Branch 79 Chung Cheng S. Rd., Yun Kang Dist., Tainan City, Taiwan, R.O.C. (06)2517171 MBBTTWTP700

Shiue Chia Branch 87 Chung Shan Rd., Shiue Chia Dist., Tainan City, Taiwan, R.O.C. (06)7837171

Shan Hwa Branch 352 Chung Shan Rd., Shan Hwa Dist., Tainan City, Taiwan, R.O.C. (06)5816111

Yung Ta Branch 1532, Sec. 2, Yung Ta Rd., Yun Kang Dist., Tainan City, Taiwan, R.O.C. (06)2337171

Tainan Branch(Banking Broker) 185 Chung Cheng Rd., Tainan City, Taiwan, R.O.C. (06)2247171 MBBTTWTP710

Jen Te Branch 339 Chung Shan Rd., Jen Te Dist., Tainan City, Taiwan, R.O.C. (06)2797171 MBBTTWTP711

Cheng Kung Branch 25 Kuong Yuan Rd., Tainan City, Taiwan, R.O.C. (06)2217171 MBBTTWTP720

East Tainan Branch 75, Sec. 2, Chung Hwa E. Rd., Tainan City, Taiwan, R.O.C. (06)2687171 MBBTTWTP721

An Ping Branch 67, Sec. 1, Chung Hwa W. Rd., Tainan City, Taiwan, R.O.C (06)2657171 MBBTTWTP730

Hua Lien Branch 247 Chung Shan Rd., Hua Lien City, Hua Lien Hsien, Taiwan, R.O.C. (03)8357171 MBBTTWTP760

Taitung Branch 335, Sec. 1, Chung Hwa Rd., Taitung City, Taitung Hsien, Taiwan, R.O.C. (089)327171

East Kaohsiung Branch 249 Chung Cheng 1st Rd., Kaohsiung City, Taiwan, R.O.C. (07)7167171 MBBTTWTP820

Kang Shan Branch(Banking Broker)

412 Kang Shan Rd., Kang Shan Dist., Kaohsiung City, Taiwan, R.O.C. (07)6227171 MBBTTWTP830

North Feng Shan Branch 28, Sec. 3, Chien Kuo Rd., Feng Shan Dist., Kaohsiung City, Taiwan, R.O.C. (07)7767171

Ling Ya Branch 31 Chingnian 1st Rd., Ling Ya Dist., Kaohsiung City, Taiwan, R.O.C. (07)5377171

Kaohsiung Branch 79 Wu Fu 3rd Rd., Kaohsiung City, Taiwan, R.O.C. (07)2717171 MBBTTWTP850North Kaohsiung Branch(Banking Broker)

90 Fu Shing 1st Rd., Fu Shing Dist., Kaohsiung City, Taiwan, R.O.C. (07)2387171 MBBTTWTP851

Ta Chang Branch 116 Ta Chang 2nd Rd., Kaohsiung City, Taiwan, R.O.C. (07)3827171

Chien Chen Branch 378-3 Min Chien 2nd Rd., Chien Chen Dist., Kaohsiung City, Taiwan, R.O.C. (07)5355171

Jeou Ru Branch(Banking Broker) 255 Jeou Ru 2nd Rd., Kaohsiung City, Taiwan, R.O.C. (07)3137171 MBBTTWTP860

San Ming Branch(Banking Broker)

153 Chung Shan 1st Rd., Kaohsiung City, Taiwan, R.O.C. (07)2867171

Feng Shan Branch 157 Chung Shan Rd., Feng Shan Dist., Kaohsiung City, Taiwan, R.O.C. (07)7107171

Ta Fa Branch 1 Hwa Chung Rd., Ta Fa Industrial Zone, Ta Liao Dist., Kaohsiung City, Taiwan, R.O.C. (07)7887171 MBBTTWTP881

Ping Tung Branch(Banking Broker)

7 Han Kou St., Ping Tung City, Ping Tung Hsien, Taiwan, R.O.C. (08)7327171

Xiao Gang Branch 718 Hongping Rd., Xiaogang Dist., Kaohsiung City, Taiwan, R.O.C. (08)8016171

Chiao Chou Branch 100 Hsin Sheng Rd., Chiao Chou Chen, Ping Tung Hsien,Taiwan, R.O.C. (08)7807171

Offshore Banking Branch 3F, 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171 MBBTTWTP893Los Angeles Branch 633, West 5TH St. Suite 2280 LA CA 90071 U.S.A. 213-8921260 MBBTUS6L

Hong Kong Branch Suite 2705-9,27/F, Tower The Gateway, Harbour City, Kowloon,H.k, 852-29710111 MBBTHKHH

Sydney Branch Suite 3, Level 24, 363 George Street Sydney, N.S.W.2000 Australia 612-92623356 MBBTAU2S

Shanghai Representative Office

38F,Longemont Yes Tower,399 Kaixuan Road, Shanghai 200051 China 86-21-62627171

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Taiwan Business Bank, Ltd.

Documents

We can be the best · SME bank. In line with this government policy, the Taiwan Mutual Loans and Savings Co. was reorganized into the Medium Business Bank of Taiwan (later to be known