We can be the best · 2017-03-15 · of 2011 and a record high for recent years. These ﬁgures show a signiﬁcant improvement in our asset quality. The global economy will be remain

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: Ching-Hua Hsu Title: Executive Vice President Tel: 886-2-25509179 /886-2-25597171 ext:1411 E-mail Address: [email protected]

Deputy Spokesperson

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

Deputy Spokesperson

Name: Tzeng-Show Lin Title: Executive Vice President. Tel: 886-2-25597108 / 886-2-25597171 ext: 1211 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, Winnie Fang Name of Employer: KPMG Certified Public Accountants Address: 68F, Taipei 101 Tower, No.7, Sec. 5, Xinyi Road, Taipei, 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 !

Contents

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0609

I Message from the Management

II Bank Profile

III Organizational Framework1. Organization Chart

2. Directors and supervisors information

3. List of major shareholders

4. Operations of Major TBB Units

IV Business Performance in 20111. 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 20121. 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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T a i w a n B u s i n e s s B a n k

VI Financial Statements1. Independent Auditors' Report

2. Financial Statement in FY2011 and notes to Financial Statement

VII Implementation of Social Responsibility

VIII Directory of Head Office and Branch Units

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Message fromthe Management

I

The effects of the Mar. 11 earthquake disaster in Japan, the European debt problems, weakness in the U.S. job

market, the contraction policy adopted by mainland China to fight inflation, and other factors caused a slowdown

in global economic growth in 2011. Under the impact of this slackening in the international economy, numerous

economic indexes in Taiwan also evidenced a slowing trend.

Countries everywhere cut their forecasts of economic growth because of the European debt crisis and the

weakness in U.S. demand; thanks to the support of our customers and the hard work of our entire staff, however,

the Taiwan Business Bank was able to register growth in our profitability and in various areas of business

development in 2011. Our before-tax profit reached NT$3.269 billion, an increase of 36.70% over 2010 and the

best performance in 11 years. Our deposit and loan businesses also grew at a steady pace to reach record levels

for recent years.

The TBB has been working vigorously in recent years to upgrade the quality of its assets and strengthen its loan

risk controls. At the end of 2011 our non-performing-loan ratio was down to just 0.65%, a reduction of 0.48% from

1.13% a year earlier, and our coverage against bad debts was up to 137.99%, up 58.82% from 79.17%, at the end

of 2011 and a record high for recent years. These figures show a significant improvement in our asset quality.

The global economy will be remain mired in uncertainty in 2012 because of the lack of clarity about such factors

as the European debt crisis and the recovery of demand in the American market. The government’s planning

and implementation of the development of financial businesses of a cross-straits nature, however, will expand

the room available for expansion in the banking industry. The TBB will keep up the momentum of last year’s

profit growth; constantly reinforce its operating performance, and increase fee income as well as the interest-rate

gap between deposits and loans in order to meet its profit targets. We will also carry through with our four major

operating principles--pursuit of business performance, attention to shareholder interest, enhancement of employee

value-added, and fulfillment of corporate social responsibility—as we move aggressively toward the ranks of top-

rated banks and the creation of the brilliant performance we need to repay the support and encouragement of our

shareholders.

Peter T.C. LoChairman

President Tsan-Chang Liao

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Message fromthe Management

Bank ProfileII

1. Establishment and History The 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$47,098.26

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. In addition, Regional

Centers have been set up to reinforce control of the Bank’s asset quality through the centralized management

of valuation, review, post-loan management, and non-performing loans. 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

Tian-Chang HuangExecutive Vice President

Ching-Hua HsuExecutive Vice President

Tzeng-Show LinChief Auditor

Chien-Hwa Tu

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2. Bank M&A, reinvestment in related enterprises, and reorganization in 2010 and up to the end of February 2011The 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: 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

Taiwan Business Bank ︱ Annual Report 201108

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1. Organization Chart



4. Operations of Major TBB Units

OrganizationalFramework

III

1. Organization Chart

Securities Branches

DomesticProcessing Center

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.

InformationTechnology Dept.

InternationalBanking Dept.

BusinessManagement Dept.

CorporateBanking Dept.

Overseas Branches

Treasury Dept.

ALM Committee

Business StrategyCommittee

Remuneration 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.

Banking Dept.Domestic branches

Corporate AO

Personal AO

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Branch Operation

PersonalBanking Dept.

OffshoreBanking Branch

PersonalBanking Group

Auditing Dept.

Secretarial Dept.

General Auditor

Trust Dept.

Regional Center

Loan Supervision Div.

Appraisal Div.

Loan Review Div.

Overdue Loan& Control Div.

SupervisorsResident

Supervisors

Board of DirectorsChairman of the

Board



Jan.10 2012

Title Name

Chairman of the Board Peter T.C. Lo

President & Managing Director Tsan-Chang Liao

Managing Director Shih-Tien Chiang

Managing Director Tieh-Hei Lin

Independent Managing Director Len-Yu Liu

Director Liang Wang

Director Wan-Fu Lin

Director Hsueh-Shiang Chen

Director Pei-Ming Huang

Director Chau-Jung Kuo

Director Leonard F.S. Wang

Director Tsai-Yuan Lin

Director Hong-Yen Lee

Director Tien-Chai Su

Director Jong-Jyr Kau

Resident Supervisor Yung-Ming Chen

Supervisor Rui-YingTsai

Supervisor Lan-Zhong An

Supervisor Ning-Zhi Lu

Supervisor Chung-Min Huang


Jan.10 2012

Name Shares %

Bank of Taiwan 811,265,329 17.22%

Mega Financial Group 565,829,895 12.01%

Land Bank of Taiwan 114,333,282 2.43%

Ministry of Finance 103,904,296 2.21%

Fui Industrial Co., Ltd. 77,865,081 1.65%

Taichung Bank 52,250,000 1.11%

Shi Chun Jin 49,156,611 1.04%

BEB Engineering Corporation 47,000,000 0.998%

China Man-Made Fiber Corporation 42,274,392 0.90%

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

40,406,471 0.86%

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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 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 2011

IV

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

1. The Domestic and Overseas Financial Environment The heavy burden of sovereign debt in Europe and America, the greatly reduced space available for the use of

fiscal policies, and the continuing high level of unemployment in the United States caused the pace of recovery in

the advanced countries to waver and the risk of a weakening global economy to rise in 2011, leading international

economic forecasting institutions to lower their predictions of global growth several times. Data released by Global

Insight at the end of February put global economic growth for the year at 3.0%. Taiwan’s domestic economy

performed brilliantly in 2010, growing by 10.72%--the highest rate since 1987. The growth momentum continued

into the first quarter of 2011, with the ongoing expansion of private consumption and investment keeping the

economic growth rate at 6.62%. After that, however, Japan suffered its disastrous earthquake and Europe its debt

crisis, and uncertainty over global economic trends began to rise. At the same time, emerging-market countries

responded to inflationary pressure by contracting the supply of money, leading to a slow-down in the pace of

economic growth. Taiwan’s own growth momentum weakened under the impact of these factors; according to

statistics compiled by the Directorate General of Budget, Accounting and Statistics, the island’s growth rate for

2012 was 4.04%.

2. Restructure of TBB’s Organization(1) To strengthen the Bank’s image for legal compliance in the face of increasing, and increasingly complex,

financial legal affairs, and to comply with related regulations, the Legal Affairs Section of the Administration

Management Department was upgraded into a Legal Affairs Department, with a Legal Affairs Section and

Legal Compliance Section under its jurisdiction. The Administration Management Department was disbanded,

and the legal and related affairs which it originally handled were turned over to the Legal Affairs Department.

The other matters originally handled by the Administration Management Department were transferred to the

Business Management Department and General Affairs Department.

(2) In response to business needs and the organizational structures of numerous other financial institutions, the

organizational framework of the Auditing Department under the Board of Directors was readjusted, with the

abolishment of the title “deputy chief auditor” and the establishment of the posts of one senior vice president

and general manager, one or two vice president and general manager(s), and several assistant vice president

and managers.

3. Results of Operating Plans and Strategies(1) Strengthened risk control, substantially improved asset quality, stable growth of profitability and all areas of

business, and issuance of a 2010 stock bonus of NT$0.45 per share.

(2) Completion of a 2011 capital increase of NT$5 billion to strengthen the Bank’s capital structure; rising of

capital was completed in January 2012, facilitating future operational and profit growth.

(3) Receipt of permission from the Financial Supervisory Commission to upgrade the Bank’s representative office

in Shanghai to the status of a branch so as to boost business deployment in mainland China and strengthen

services to Taiwanese businesses, and submission of an application to the Shanghai Branch of the China

Banking Regulatory Commission to set up the Shanghai Branch, which is expected to open for business in

the second half of 2012.

(4) Implementation of small and medium business loan programs in line with government policy, with excellent

results, and good performance in carrying out the FSC’s “Program to Encourage Lending by Domestic Banks

to Small and Medium Enterprises.” The TBB was selected as a “bank with grade-A performance.”


(5) 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.”

(6) 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”.

(7) Obtaining of permission from the Central Bank to establish 16 more business units as foreign exchange

branches so as to provide more convenient foreign-exchange services for customers: Tan Tze, North San

Chung, Wu Jih, Chu Tung, Hwa Cheng, Pa Te, South Taipei, Chung Ho, Yung Ho, Sha Lu, Shih Lin, I Lan, Kai

Yuan, Ta Fa, Hsing Chung, and Dong Hu.

(8) Establishment of the Nan King East Road Securities Branch in June of 2011 to enhance the quality of

securities services and to expand the scale of the securities brokerage business.

(9) Vigorous extension of policy loans under the “Home and Home-improvement Loan” and “First-two-years

Interest-free Youth Home Loan” programs of the Ministry of the Interior’s Construction and Planning Agency,

and the “Preferential Home Loans for Young People (Program Two)” of the Ministry of Finance” in line with the

government’s efforts to help citizens purchase their own homes.

(10) Installation and online implementation of the Fund Transfer Pricing (FTP) system in order to upgrade the

performance of funds and risk capital management.

(11) Installation of an internal credit rating system, and use of credit scorings as a reference in loan approval and

pricing, thereby strengthening risk control on the loan business.

(12) Completion of explanations of the fair value of regulated financial instruments by category and level in line

with the disclosure of qualitative and quantitative risk information required under the International Financial

Reporting Standards (IFRS).

(13) Winning by the Bank’s e-banking business of the “Outstanding Interbank Business Contribution Award” and

“Performance Award for New Business Promotion” presented by the Financial Information Service Co., and of

the “Glorious Centennial – Financial XML Golden Rudder Award” presented by the Bankers Association of the

ROC.

(14) Signing of a collective agreement with the corporate union, marking an important milestone in labor-

management harmony.

(15) Introduction of a series of Gold Passbook “Gold to Encourage Marriage and Child-bearing” public-benefit

activities in response to the government’s policy of encouraging marriage and child-bearing.

(16) 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 40 disadvantaged groups and subsidies

for primary-school breakfasts in remote areas.

4. Budget Implementation (1) Average deposits in the Bank in 2011 were NT$1,069.9 billion, for a target achievement ratio of 99.63%.

(2) Average loans outstanding amounted to NT$943.7 billion, or 99.48% of the target.

(3) Foreign exchange transactions undertaken during the year totaled US$60.4 billion, for a target achievement

ratio of 110.91%.

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(4) The volume of securities brokerage was NT$277.1 billion, or 73.50% of the target.

(5) Mutual fund business amounted to NT$24.9 billion, achieving 59.20% of the target.

5. Revenues, Expenditures, and ProfitabilityNet income for 2011 was NT$17.155 billion, costs related to bad loans amounted to NT$3.668 billion, and

operating expenditures totaled NT$10.218 billion. Before-tax net profit on business operations amounted to

NT$3.269 billion and after-tax net profit to NT$2.978 billion, for a return on assets of 0.24%, return on shareholder

equity of 6.56%, net profit margin of 17.36%, and earnings per share of NT$0.71.

The Bank worked vigorously to improve its asset quality and strengthen its financial structure in 2011 by writing off

bad loans in the amount of NT$3.392 billion, bringing its broadly defined non-performing loan ratio down to 0.65%.

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 58 such proposals were adopted and rewarded in 2011.


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V Business Plans for 2012

1. Operating Directions and Policies

2. Business Targets

3. Future Development Strategies

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


1. Operating Directions and Policies(1) Operations

a. Strengthening of operating efficiency, improvement of business management performance, and devotion

of efforts to the upgrading of performance ratings in various banking performance indexes.

b. Fulfillment of the function of an SME bank by helping companies make the best use of government

assistance systems and financing resources, by expanding the scale of SME loans, and by maintaining the

Bank’s No. 1 share of the SME Credit Guarantee Fund market, thus enhancing its image as a specialized

bank.

c. Reinforcement of the integrated marketing concept, full realization of cross-marketing synergies, upgrading

of overall customer contribution, strengthening of the professional quality of financial marketing, and

provision of a diverse range of customized products so as to increase investment and risk-hedging

channels for customers.

d. Adjustment of the loan structure to focus on core products, expands the scale of key businesses, and

strengthens competitiveness.

e. Reinforcement of channel management, vigorous deployment in mainland China and enhancement of

competitiveness and strengthening of customer services through interbank and cross-industry strategic

alliances.

(2) Management

a. Placing of emphasis on the protection of personal data, fulfillment of legal compliance and risk

management, lowering of the Bank’s operating risk, and promotion of healthy business development.

b. Strengthening of SME loan transfers to the Small and Medium Business Credit Guarantee Fund, expansion

of the scale of and number of central-satellite factory supply chain customers, and reinforcement of post-

loan management and early-warning functions so as to maintain asset quality.

c. Use of budget evaluation and supervisory management measures to guide business units in the vigorous

expansion of business in all areas, and improvement of the operating performance of middle- and back-

office business support units to strengthen customer satisfaction and business competitiveness.

d. Strengthening of the functions of manpower education platforms, development of international financial

specialists, and continuous encouragement of employees to test for financial management licenses.

e. Effective use of media promotion in line with product and service innovation to brighten the Bank’s

business visibility, realization of the care-for-society concept, fulfillment of social responsibility, and

enhancement of the Bank’s public-benefit image.

(3) Earnings

a. Vigorous development of the wealth management business, integration of marketing resources to expand

customer contacts, and heightening of the ratio of fee income so as to improve the revenue structure.

b. Adjustment of the deposit structure, reinforcement of the management of large time deposits, and

heightening of the yield on loans so as to widen the deposit-loan interest rate spread and increase

revenue.


c. Reinforcement of financial operating capabilities and heightening of earnings from investment.

d. Implementation of the energy conservation and carbon reduction policy, vigorous enhancement of the self-

development capability for information systems, and saving on business costs.

e. Reinforcement of risk quota and capital allocation management, and setting of risk-based asset quotas

and related management measures for each business unit,so as to adjust the Bank’s asset structure and

reinforce its capital in compliance with Basel III.

2. Business TargetsThe following targets for 2012 are set primarily in consideration of historical growth in the different areas of

business, growth projections of forecasting institutions for the next year, the development of the banking

environment and competitiveness of other banks, and maintenance and enhancement of the TBB’s position in the

market:

(1) Average deposits: NT$1,114.1 billion

(2) Average loans outstanding: NT$980.2 billion

(3) Foreign exchange transactions: US$64.5 billion

(4) Stock brokerage transactions: NT$346.5 billion

(5) Mutual fund business: NT$45.5 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.

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4. The impact of intensifying competition, government regulations and global economic(1) Global trends in economic growth

Recent economic figures from Europe and America have been weak and the European debt crisis has not yet fully

dissipated, leading international financial institutions to lower their global economic growth forecasts for this year

and next. The TBB will pay close attention to global economic changes and carefully choose its investment targets

with the aim of improving the quality of and income from its overall asset portfolio.

(2) Disclosure of income from the sale of funds

The Financial Supervisory Commission promulgated revisions of the Regulations Governing Offshore Funds and

the Regulations Governing the Public Offering of Securities Investment Trust Funds by Securities Investment Trust

Enterprises, clearly stipulating that institutions selling funds must notify investors, prior to sale, of the distribution

remuneration they collect. In case there is a change in the contents of the notification, the institution should notify

investors. The TBB added a “Fund Distribution Fee Disclosure” measure on Aug. 1, 2011, requiring that investors

be notified of remuneration, fees, and other benefits prior to the sale of funds, and that the investors be notified

again should the contents change after notification. This reinforces the protection of consumer interests by

increasing the transparency of fund marketing charges and income.


Date of Rating Rating CompanyRatings

OutlookLong-term Credit Short-term Credit

Jan. 19, 2012 Taiwan Ratings twA+ twA-1 Stable


22 1. Independent Auditors' Report

2. Financial Statement in FY2011 and notes to Financial Statement

23

VI FinancialStatements


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, 2011 and

2010, 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, 2011 and 2010, 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”, the “Regulations

Governing Securities Firms”, the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”

and the general accepted accounting principles in the Republic of China.

Taipei, Taiwan, R.O.C.

March 19, 2012

Notice to Readers

The accompanying financial statements are intended only to present the financial position, results of operations, 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 auditors' 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 auditors' report and financial statements, the Chinese version shall prevail.

TAIWAN BUSINESS BANK CO., LTD.BALANCE SHEETS

DECEMBER 31, 2011 AND 2010(Expressed in Thousands of New Taiwan Dollars)

December 31, 2011 December 31, 2010 Change

Amount Amount %

ASSETS

Assets

Cash and cash equivalents (Notes 4(A) and 5) $ 25,579,593 15,364,021 66

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

56,150,500 71,720,175 (22)

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

5,474,966 4,282,763 28

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

2,337,341 2,519,348 (7)

Receivables-net (Note 4(E)) 20,250,925 19,710,207 3

Discounts and loans-net (Notes 4(F) and 5) 942,587,857 926,970,266 2

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

14,850,799 14,928,355 (1)

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

177,696,669 136,095,589 31

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

69,732 45,274 54

Other financial assets-net (Note 4(J)) 3,656,190 3,772,184 (3)

Premises and equipment-net (Note 4(K)) 13,759,139 14,185,884 (3)

Intangible assets 209,819 192,567 9

Other assets-net (Note 4(L)) 4,380,700 3,845,926 14

Debit items for trade brokerage-net 3,900 8,802 (56)

TOTAL ASSETS $ 1,267,008,130 1,213,641,361 4

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December 31, 2011 December 31, 2010 Change

Amount Amount %

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

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

$ 90,829,825 86,081,932 6

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

339,942 325,945 4

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

6,109,713 9,950,660 (39)

Payables (Note 4(P)) 31,028,411 23,782,204 30

Deposits and remittances (Notes 4(Q) and 5) 1,033,945,218 992,348,193 4

Financial debentures (Note 4(R)) 43,900,000 44,000,000 -

Accrued pension liabilities (Note 4(W)) 257,985 176,479 46

Other financial liabilities (Note 4(S)) 12,150,115 10,552,494 15

Other liabilities (Note 4(T)) 1,534,009 2,567,428 (40)

Total liabilities 1,220,095,218 1,169,785,335 4

Stockholders' equity

Common stock (Note 4(U)) 42,098,263 40,285,419 5

Retained earnings:

Legal reserve (Note 4(U)) 1,508,934 907,064 66

Special reserve (Note 4(U)) 360,321 301,329 20

Undistributed earnings (Note 4(U)) 3,030,658 2,341,339 29

Total retained earnings 4,899,913 3,549,732 38

Other adjustments to stockholders' equity:

Unrealized revaluation increment 320,812 196,068 64

Cumulative translation adjustments (Note 4(U)) (35,991) (93,880) 62

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

(283,648) (65,415) (334)

Net loss not recognized as pension cost (86,437) (15,898) (444)

Total stockholders' equity 46,912,912 43,856,026 7

Significant commitments and contingencies (Note 7)

Total liabilities and stockholders' equity $ 1,267,008,130 1,213,641,361 4


TAIWAN BUSINESS BANK CO., LTD.STATEMENTS OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010(Expressed in Thousands of New Taiwan Dollars, Except for EPS)

For TheYear Ended

December 31, 2011

For TheYear Ended

December 31, 2010Change

Amount Amount %

Interest revenue (Note 5) $ 22,100,596 18,583,298 19

Less: Interest expenses (Note 5) (9,313,302) (7,370,087) 26

Net interest income 12,787,294 11,213,211 14

Non-interest income

Service fee and commission income (Note 5) 2,019,497 1,995,236 1

"(Losses) gains on financial assets or liabilities measured at fair value through profit or loss-net"

(393,017) 361,581 (209)

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

(36,358) 152,058 (124)

Realized Gains on held-to-maturity financial assets-net

- 15 (100)

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

49,578 88,503 (44)

Foreign exchange gains 595,901 322,096 85

Reversal of impairment recognized in profit or loss on assets

428,980 51,210 738

Other net non-interest income (Note 5) 63,138 229,521 (72)

Gains on financial assets carried at cost-net (Note 4(J))

148,505 129,552 15

(Losses) gains on sale of foreclosed properties (295,850) 12,934 (2,387)

Securities brokerage incomes-net 228,368 279,050 (18)

Recovered bad debts and overdue accounts-net (Note 4(J))

1,559,458 1,410,830 11

Net revenue 17,155,494 16,245,797 6

"Bad debt expenses-loan (including provision for guarantee reserve) (Note 10)"

(3,668,589) (4,116,458) (11)

Operating expenses

Personnel expenses (Note 10) (6,996,221) (6,764,199) 3

Depreciation and amortization expenses (Note 10)

(479,298) (521,653) (8)

Other general and administrative expenses (2,742,414) (2,452,214) 12

Total operating expenses (10,217,933) (9,738,066) 5

Income from continuing operations before income tax 3,268,972 2,391,273 37

Income tax expenses (Note 4(V)) (291,074) (385,039) (24)

Net income $ 2,977,898 2,006,234 48

Income tax Income tax

Before After Before After

Basic earnings per share (Note 4(X)) $ 0.78 0.71 0.59 0.50

Basic earnings per share-retroactive adjustment 0.57 0.48

Diluted earnings per share (Note 4(X)) $ 0.77 0.70 0.59 0.50

Diluted earnings per share-retroactive adjustment 0.57 0.48

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

FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010(New Taiwan Dollars in Thousands)

Capital stock Retained earnings Other adjustments to

stockholders' equity

TotalCommon

stockLegal

reserveSpecial reserve

Undistributed earnings

Unrealized revaluation increment

Net loss not recognized as pension

cost

Unrealized losses on finanical

instruments

Cumulative translation

adjustments

Beginning balance - January 1, 2010 $38,735,980 477,443 1,003,370 1,612,124 196,068 - (301,329) 3,348 41,727,004

Reversal of special reserve - - (702,041) 702,041 - - - - -

Net income for the year ended December 31, 2010

- - - 2,006,234 - - - - 2,006,234

Appropriation and distribution of 2009 earnings

- - -

Legal reserve - 429,621 - (429,621) - - - - -

Common stock dividends 1,549,439 - - (1,549,439) - - - - -

Changes of unrealized loss on available-for-sale financial assets

- - - - - - 235,914 - 235,914

Net loss not recognized as pension cost

- - - - - (15,898) - - (15,898)

Changes in foreign exchange gain due to the translation of foreign currency financial statements

- - - - - - - (97,228) (97,228)

Ending balance - December 31, 2010 $40,285,419 907,064 301,329 2,341,339 196,068 (15,898) (65,415) (93,880) 43,856,026

Reversal of special reserve - - (126,135) 126,135 - - - - -

Net income for the year ended December 31, 2011

- - - 2,977,898 - - - - 2,977,898

Appropriation and distribution of 2010 earnings

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

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

Changes in unrealized revaluation increment

- - - - 124,744 - - - 124,744

Changes of unrealized losses on available-for-sale financial assets

- - - - - - (218,233) - (218,233)

Net loss not recognized as pension cost

- - - - - (70,539) - (70,539)

Transferred from reserve for default losses

- - 96,536 - - - - - 96,536

Transferred from reserve for trading losses

- - 88,591 - - - - - 88,591

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

Note: The employee bonuses : $166,762 and $112,349 as well as the board of directors' remunerations $20,845 and $14,044

of 2011 and 2010 respectively, have been deducted from the income statement.


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

FOR THE YEAR ENDED DECEMBER 31, 2011 AND 2010(Expressed in Thousands of New Taiwan Dollars)

For The Year Ended December 31, 2011


Cash flows from operating activities:

Net income $ 2,977,898 2,006,234

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

Depreciation expense 409,338 454,062

Amortization expense 69,960 67,591

Provision of bad debt expenses 3,643,870 4,116,305

Provision for trading losses reserve - 1,168

Provision for default losses reserve - 9,414

Provision for guarantee reserve 24,719 153

Provision for contingencies losses reserve - 6,471

Investment gains under the equity method (49,578) (26,419)

Cash dividends received from investees under equity method 25,120 13,989

Losses on disposal and retirement of premises and equipment 2,091 2,902

Gains on disposal of long-term equity investment under the equity method

- (62,084)

Unrealized losses (gains) on valuation of financial assets and liabilities

207,871 (221,497)

Gains on disposal amortisation of non-performing loan - (120,497)

Debts written off and recovery bad debt (1,559,458) (1,410,830)

Debit and credit items for trade brokerage-net 4,902 9,768

Losses on sales of loans - 50,619

Losses (gains) on sale of foreclosed properities 295,850 (12,934)

Gains on reversal of foreclosed properties (428,980) (51,211)

Net changes in operation assets and liabilities:

Net changes in operation assets:

Increase in financial assets measured at fair value through profit or loss

(1,411,414) (1,693,131)

Decrease (increase) in securities purchased under resell agreements

182,007 (1,285,450)

Increase in receivables (605,041) (1,128,916)

Decrease in deferred tax assets 139,582 250,000

Net changes of operation liabilities:

Increase in financial liabilities measured at fair value through profit or loss

25,337 6,821

(Decrease) increase in securities purchased under repurchase agreements

(3,840,947) 5,820,612

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Increase (decrease) in payables 7,246,207 (1,876,443)

Increase in accrued pension liabilities 24,314 34,047

Net cash provided by operating activities 7,383,648 4,960,744

Cash flows from investing activities:

(Purchase) sales of available-for-sale financial assets (140,677) 2,208,795

Purchase of held-to-maturity financial assets (41,601,080) (5,778,085)

Decrease in equity investment under equity method - 113,820

Purchase of premises and equipment (352,078) (174,117)

Proceeds from disposition of premises and equipments 178 -

Increase in guarantee deposits paid (2,633) (8,138)

Purchase of intangible assets (84,326) (110,515)

Decrease (increase) in due from the Central Bank and call loans to banks

15,569,675 (5,857,799)

Increase in discounts and loans (17,562,000) (17,302,176)

Proceeds from disposition of non-performing loan - 254,903

Proceeds from sales of foreclosed properties 133,130 64,145

Decrease (increase) in other financial assets 125,271 (58,119)

Increase in other assets (163,971) (19,526)

Net cash used in investing activities (44,078,511) (26,666,812)

Cash flows from financing activities:

(Decrease) increase in financial bonds payable (100,000) 10,950,000

(Decrease) increase in guarantee deposits received (132,065) 109,959

Increase in lease payable 605 1,132

Increase in other financial liabilities 1,597,016 807,998

(Decrease) increase in other liabilities (800,039) 732,977

Increase (decrease) in deposits from the Central Bank and other banks

4,747,893 (20,989,814)

Increase in deposits and remittances 41,597,025 28,260,288

Net cash provided by financing activities 46,910,435 19,872,540

Net increase (decrease) in cash and cash equivalents 10,215,572 (1,833,528)

Cash and cash equivalents, at the beginning of the period 15,364,021 17,197,549

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

Supplemental disclosures of cash flow information:

Interest paid $ 8,910,839 7,434,938

Income tax paid $ 163,013 91,835

Investing and financing activities not affecting cash flows:

Capital increase through capitalization of retained earnings $ 1,812,844 1,549,439

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

Reclassified property and equipment to rental assets $ 89,271 16


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

DECEMBER 31, 2011 AND 2010 (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, 2011, the Bank not only set up the banking dept., international dept., securities dept. and trust dept. under head office but also has 125 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, 2011 and 2010, the Bank had 4,986 and 5,010 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 “Regulations Governing the Preparation of Financial Report by Public Banks”, “Regulation Governing the Preparation of Financial Reports by Securities Firms”, “Regulation Governing Securities Firms”, “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and generally accepted accounting principles of 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 Central Bank, but started from January 1, 2011 the rate adopts the foreign currency rate of 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 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-

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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.

(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 advances

Loans 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”.

When the third modification of SFAS No. 34 first applied in 2011, it uses the book value of the assets which are in the applicable scope on December 31 2010 to be the amortized cost for the first adoption. In order to conform to the definition of loans and receivables in SFAS No. 34, one should first identify if there is evidence shows that there is impairment loss occurred on significant individual asset or impairment loss occurred solely or jointly on non-significant financial assets.

If it assessed that there is no evidence to show an impairment loss on individual asset, then it has to be included in a group of financial assets with similar credit risk characteristic to evaluate if there is any impairment loss on the group of financial assets. For those financial assets which are assessed impaired and has recognized or continuously recognized impairment losses, they do not need to be evaluated per aforementioned method.

If there is evidence of the impairment loss, then it should recognize the impairment loss based on the difference between the book value of the financial asset and the estimated future cash flow discounted by the original effective rate. The amount of impairment loss should be recognized as current bad debts expense. 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.

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 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.

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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”.

Before January 1 2011, the Bank, based on the regulation of “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans”, following GAAP and other relevant rules, based on the principle of conservatism and the characteristics of respective assets to evaluate possible losses in order to provide sufficient reserve.

The normal credit assets are classified as first class and the other bad credit assets are classified according to different classes, namely, second class “need to pay attention”, third class” expected to regain”, fourth class” difficult to recover”and fifth class as “irrecoverable”depending on the status of guarantee and length of time overdue.

Aside from the above-mentioned regulation, the Bank also recognizes the minimum amounts of bad debt expense and reserve for guarantee based on certain percentage of each class of credit assets such as 2% of the balance of second class credit assets, 10% of the balance of third class credit assets, 50% of the balance of fourth class credit assets and 100% of the balance of fifth class credit assets.

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 supervisor is notified, 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:

Buildings 10 to 50 yearsMachinery 3 to 5 yearsTransportation equipment 3 to 6 yearsMiscellaneous equipment 5 to 8 yearsLeased assets 5 yearsGain 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 SFB 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 difference between the accumulated benefit obligation and 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 equal to not be 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.

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 are approved in the shareholders' meeting and recognized in the financial statements, if any, and accounted for as changes in accounting estimates and recognized as profit or loss.

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(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 currently; otherwise only the nature of commitment and contingency which the possible loss amount is over 50,000 thousands New Taiwan Dollars is 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 segament'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 which should take the effect of potential common shares to net income and the weighted-average number of common shares outstanding share into consideration is based on the assumption that all dilutive potential common shares are outstanding and of the current period.

(3) REASONS FOR AND EFFECTS OF ACCOUNTING CHANGES: Effective 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).

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. The Bank has prepared segment information for the prior period for comparison and reference.

(4) SUMMARY OF MAJOR ACCOUNTS: (A) Cash and cash equivalents

December 31, 2011 December 31, 2010Petty cash and revolving fund $ 7,932,537 7,725,985Foreign currencies on hand 1,002,099 957,117Checks for clearing 14,660,710 4,077,457Due from other banks 1,984,247 2,603,462Total $ 25,579,593 15,364,021


As of December 31, 2011 and 2010, in accordance with the Banking Law and the Central Bank Law, the required reserve deposited by the Bank with the Central Bank amounted to $47,906,138 and $50,658,745, of which $28,957,008 and $27,164,755 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, 2011 and 2010, the required reserve with the Central Bank amounted to $91,427 and $92,916 respectively, and its use is unrestricted.

As of December 31, 2011 and 2010, 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, 2011 and 2010, the Bank deposited marketable securities of both $70,000 as trust fund reserves.

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

December 31, 2011 December 31, 2010Financial assets held for trading: Commercial paper $ 1,495,805 1,568,213 Beneficiary certificates - 111,391 Foreign exchange forward contracts 9,401 142,369 Currency swap contracts 164,213 143,814 Non-delivery forwards - 4,552 Interest swap contracts 41,402 50,576 Foreign currency options-call options 49,455 24,685 Structured product options-call options 569 396 Stock index futures 27,163 23,486 Sub-total 1,788,008 2,069,482"Financial assets designated at fair value through profit or loss:" Overseas bonds 3,686,958 2,213,281Total $ 5,474,966 4,282,763

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, 2011 and 2010, the nominal amounts of unsettled financial derivatives instrument contracts were as follows:

December 31, 2011 December 31, 2010Foreign exchange forward contracts $ 1,813,540 5,188,541Currency swap contracts 47,773,206 47,891,798Non-delivery forwards contracts - 771,775Interest swap contracts 14,091,075 13,408,538Option contracts 1,245,494 1,694,449

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

December 31, 2011 December 31, 2010Due from Central Bank $ 47,997,565 50,751,661Deposits transferred to Central Bank 243,934 142,261Call loans to banks 7,909,001 20,826,253Trust fund indemnity reserve deposited 70,000 70,000"Securities serving as trust fund indemnity reserve deposited"

(70,000) (70,000)

Total $ 56,150,500 71,720,175

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(D) Securities purchased under resell agreements

December 31, 2011 December 31, 2010

Securities under resell agreements $ 2,337,341 2,519,348

Resell period 101.1.2 100.1.3~100.1.19

Range of resell interest rate 0.84%~0.85% 0.49%~0.53%

Resell price

Securities purchased under resell agreement $ 2,337,879 2,519,669

(E) Receivables–net


Interest receivable $ 1,861,149 1,570,055

Acceptances receivable 2,182,647 2,488,679

Accrued incomes 35,510 24,173

Accounts receivable 2,644,311 2,654,317

Tax refund receivable 666,585 646,496

Accounts receivable factoring without recourse 5,942,385 433,997

Spot exchange receivable-foreign currencies 6,138,754 11,558,357

Other receivables 989,321 479,547

Sub-total 20,460,662 19,855,621

Less: Allowance for credit losses (209,737) (145,414)

Net $ 20,250,925 19,710,207

(F) Discounts and loans –net


Import/export bills regotiated $ 727,971 374,912

Bills and notes discounted 1,248,742 2,065,473

Overdrafts 6,433 42,441

Secured overdrafts 834,170 1,250,785

Short-term loans 147,113,085 119,894,984

Short-term secured loans 115,789,707 112,276,504

Margin loans receivable 1,819,376 2,827,001

Medium-term loans 198,840,461 217,914,601

Medium-term secured loans 125,805,213 125,019,211

Long-term loans 19,995,977 21,780,148

Long-term secured loans 333,102,519 321,581,535

Account receivable financing 294,170 177,478

Overdue loans 5,676,843 10,098,590

Sub-total 951,254,667 935,303,663

Less: Adjustment of discount and premium (167,272) -

Less: Allowance for credit losses (8,499,538) (8,333,397)

Net $ 942,587,857 926,970,266


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


Government bonds $ 5,718,332 5,748,892

Corporate bonds 2,261,229 705,536

Beneficiary certificate - 16,318

Overseas bonds 6,197,775 7,847,252

Listed and OTC stocks 673,463 610,357

Total $ 14,850,799 14,928,355

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

financial assets shown above.

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


Certificates of deposit with Central Bank $ 172,200,000 127,900,000

Corporate bonds 2,658,570 4,280,309

Government bonds 1,756,370 2,378,146

Beneficiary certificates - 133,467

Overseas bonds 562,878 895,367

Banker's acceptance 455,273 446,350

Non-negotiable certificates of deposit - 61,950

Negotiable certificates of deposit 63,578 -

Total $ 177,696,669 136,095,589

As of December 31, 2011 and 2010, held-to-maturity financial assets provided and deposited as reserve for

trust loss and operational guaranty for provisional seizure by the court, international card payment reserve,

trust claim reserve and operating guaranty funds amounted to $775,800 and $797,600, respectively.

As of December 31 2011 and 2010, the three overseas branches have provided 557,737 and 546,097,

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 $23,000,000 and

$24,100,000 as overdraft guarantee as of December 31, 2011 and 2010, 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, 2011 and 2010, in compliance with the Article16 of “Guidelines Governing

Financial Institution in Conducting Treasury Affairs Authorized by Central Bank”, the Bank had both provided

secured central bank certificates of deposit with face value of 15,100,000 thousand to the Central Bank.

While the certain conditions are satisfied, the Bank will be returned the certificates without interest from the

Central Bank.

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(I) Investments under the equity method–net


Book Value Ownership% Book Value Ownership%

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

$ 62,558 100.00 41,459 100.00

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

7,174 100.00 3,815 100.00

Total $ 69,732 45,274

In October 2010, the Bank disposed 6,000,000 shares of Primasia Investment Trust Co., Ltd which is

evaluated under the equity method. The execution proceeds and profit amounted to 113,820 and 62,084

respectively and were recognized as gains and losses under the equity method investment.

For the year ended December 31, 2011 and 2010, investment income recognized under the equity method

per the results of the financial statements audited by certified public accountants, amounted to $49,578 and

$26,419 respectively.

The Bank received cash dividends from the investees amounted to $25,120 and $13,989, respectively as of

December 31, 2011 and 2010.

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.

(J) Other financial assets–net


"Non-accrual loans transferred from non- loan financail assets"

$ 200,709 309,519

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

(104,379) (113,661)

"Non-accrual loans transferred from non-loan financail assets-net"

96,330 195,858

Exchange bills negotiated 2,438 18,899

"Less: Allowance for bad debts-exchange bills negotiated"

(5) -

Exchange bills negotiated-net 2,433 18,899

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

"Less: Accumulated impairment-financial assets carried at cost"

(214,958) (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 $ 3,656,190 3,772,184


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


Investee Amount % Amount %

Taiwan Power Company $ 11,427 - 11,427 -

Taiwan Sugar Corporation 61,364 0.30 61,364 0.30

Sunysino Development Associated Inc.

17,440 3.12 17,440 3.96

Taiwan Small & Medium Enterprises Devel. Co., Ltd.

29,000 4.84 29,000 4.84

Taipei Forex Incorporation 7,000 3.53 7,000 3.53

Financial Information Service Co., Ltd. 45,500 1.14 45,500 1.14

Evernight Investment Co., Ltd. 500,000 4.95 500,000 4.95

Taiwan Stock Exchange Corp. 198,012 0.95 198,012 0.95

Asia Pacific Telecom Co., Ltd. 300,000 0.46 300,000 0.46

Taiwan Futures Exchange Co., Ltd. 20,000 1.00 20,000 1.00

Koyon Capital Corporation 4,958 5.00 4,958 5.00

Taiwan Asset Management Corp. 1,000,000 5.68 1,000,000 5.68

Taiwan Finance Asset Service Corp. 50,000 2.94 50,000 2.94

Financial E-Solution Co., Ltd. 19,285 5.13 19,285 5.13

Taiwan Depository and Clearing Corp. 4,639 0.08 4,639 0.08

Taiwan Integrated Shareholder's Service Company

3,300 1.10 3,300 1.10

Yand Guang Asset Management Corp.

460 0.77 460 0.77

Subtotal 2,272,385 2,272,385

Less: Accumulated impairment - Asia Pacific Telecom Co, Ltd.

(210,000) (210,000)

Accumulated impairment - Koyon Capital Corporation

(4,958) (4,958)

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

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. The Bank

recognized impairment loss of $4,958 of Koyon Capital Corporation which is conducting liquidation

procedures at present.

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

Investee December 31, 2011 December 31, 2010

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

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(K) Premises and equipment–net

December 31, 2011

CostRevaluationappreciation

Accumulateddepreciation

Total

Land $ 6,407,864 2,416,032 - 8,823,896

Buildings 7,006,979 31,035 2,719,492 4,318,522

Machinery 1,965,373 - 1,560,604 404,769

Transportation equipment

319,066 - 281,259 37,807

Miscellaneous equipment

582,744 - 526,348 56,396

Leasehold improvement

100,544 - 38,586 61,958

Construction in progress

5,728 - - 5,728

Prepayment for equipment

48,312 - - 48,312

Leased assets 2,232 - 481 1,751

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

December 31, 2010

CostRevaluationappreciation

Accumulateddepreciation

Total

Land $ 6,538,600 2,422,644 - 8,961,244

Buildings 7,199,472 31,035 2,628,220 4,602,287

Machinery 2,180,087 - 1,780,970 399,117

Transportation equipment

332,854 - 288,180 44,674

Miscellaneous equipment

579,776 - 520,893 58,883

Leasehold improvement

87,002 - 33,977 53,025

Construction in progress

3,034 - - 3,034

Prepayment for equipment

62,472 - - 62,472

Leased assets 1,305 - 157 1,148

Total $ 16,984,602 2,453,679 5,252,397 14,185,884

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, and January 1, 2011, in accordance with the “Land Right

Equalization Act” or “Profit Seeking Enterprise Asset Revaluation Act.”

As of December 31, 2011 and 2010, the appreciation from revaluation of properties (including rental assets

under operating lease and reflected as other assets) amounted to $2,893,047 and $2,709,196, respectively.

The reserve for land incremental tax thereon amounted to $841,388 and $782,281, respectively (reflected

as other liabilities), and the net amount is classified under unrealized revaluation appreciation.


(L) Other assets


Office supplies $ 26,723 23,783

Prepayments 1,425,369 1,423,851

Non-operating assets-net 864,422 414,261

"Operating guaranty deposits and settlement

fund"77,467 74,347

Guarantee deposits paid 182,606 179,973

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

Guarantee deposits paid-net 153,896 151,263

Collaterals 3,150 432,130


Collaterals-net - -

Deferred income tax assets-net (Note 4(V)) 1,618,287 1,757,869

Deferred charges 764 552

Temporary payments and suspense accounts 213,772 -

Total $ 4,380,700 3,845,926

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

Rental Assets December 31, 2011 December 31, 2010

Cost

Land $ 55,755 37,250

Buildings 96,870 52,449

Sub-total 152,625 89,699

Revaluation appreciation

Land 85,161 43,967

Buildings 149 149

Sub-total 85,310 44,116

Cost plus revaluation appreciation 237,935 133,815

Less: Accumulated depreciation (36,248) (19,714)


Net $ 199,949 112,363

Idle Assets December 31, 2011 December 31, 2010

Cost

Land $ 162,208 49,976

Buildings 268,225 97,244

Sub-total 430,433 147,220

Revaluation appreciation

Land 360,670 211,401

Cost plus revaluation appreciation 791,103 358,621

Less: Accumulated depreciation (92,801) (22,894)


Net $ 664,473 301,898

Net of rental assets and idle assets $ 864,422 414,261

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As of both December 31, 2011 and 2010, land amounted to $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


Deposits from the Central Bank $ 276,409 394,246

Call loans from the Central Bank 6,357,750 6,490,000

Deposits from banks 119,482 1,523,718

Call loans from banks 24,047,753 17,013,375

Overdrafts on banks 1,066,360 747,455

"Deposits transferred from Chunghwa Post

Co., Ltd." 58,962,071 59,913,138

Total $ 90,829,825 86,081,932

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


Foreign exchange forward contracts $ 18,865 23,634

Currency swap contracts 71,938 66,511

Non-delivery forward contract - 4,497

Interest swap contracts 199,115 206,616

Foreign currency option-put 49,455 24,685

Structured product option-put 569 2

Total $ 339,942 325,945

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

December 31, 2011 and 2010.

(O) Securities sold under repurchase agreements

Assets

December 31, 2011

Par valueSelling Price

(Note)Designated repurchase

amountDesignated

repurchase date

Financial assets measured at fair value through profit or loss

$ 730,000 729,294 729,418Prior to Feburary 6, 2012

Available-for-sale financial assets

5,264,700 5,380,419 5,382,787Prior to June 29, 2012

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

Assets

December 31, 2010

Par valueSelling Price

(Note)Designated repurchase

amountDesignated

repurchase date


$ 3,860,000 3,858,724 3,859,097Prior to January 19, 2011


5,785,700 6,091,936 6,093,684Prior to June 8, 2011

Total $ 9,645,700 9,950,660 9,952,781

Note: Accounted for under securities sold under repurchase agreements.


(P) Payables


Interest payable $ 2,026,237 1,623,774

Accounts payable 14,660,908 4,089,147

Acceptances 2,379,772 2,580,237

Accrued expenses 1,817,658 1,771,339

Collection payable 547,833 678,532

Deposits received from securities borrowers 87,849 132,305

"Guaranteed price deposits received from

securities borrowers" 124,887 145,898

Accounts payable factoring 2,108,981 69,860

Spot exchange payable-foreign currencies 6,138,061 11,577,585

Other payables 1,133,880 1,111,155

Others 2,345 2,372

Total $ 31,028,411 23,782,204

(Q) Deposits and remittances


Savings deposits $ 521,211,312 515,891,876

Time deposits 265,118,547 235,371,020

Demand deposits 221,132,489 219,065,510

Checking deposits 26,068,177 21,472,847

Remittances 414,693 546,940

Total $ 1,033,945,218 992,348,193

(R) Financial debentures

Terms of Transactions Bond Issued

Bonds Issue date

Maturity date Interest Rate Type

AmountDecember 31, 2011

December 31, 2010

2001-1Ⅱ 11/20/2001 11/20/2011 The debentures bear annual interest rate of 3.7%.Simple interest is accrued and paid annually. One-fifth of the principal will be repaid annually from the sixth year.

Unsecured subordinated long-term financial debentures

$ - 100,000

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Bonds Issue date



December 31, 2010

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.


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.


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



Bonds Issue date



December 31, 2010

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

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Bonds Issue date



December 31, 2010

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

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- accumulated subordinated financial debentures

800,000 800,000

$ 43,900,000 44,000,000

(S) Other financial liabilities


Appropriated loans funds $ 12,099,668 10,373,287

Lease payable 1,737 1,132

Other 48,710 178,075

Total $ 12,150,115 10,552,494

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 $ 5,901 1,552

Unearned revenue 87,756 155,783

Other advances receipts 30,359 29,072

Reserve for land Revaluation incremental tax 841,388 782,281

Reserve for guarantees liabilities 24,689 1

Reserve for trading losses - 88,591

Reserve for default losses - 96,536

Reserve for contingencies losses - 41,321

Guarantee deposits received 543,916 675,964

Temporary receipts and suspense accounts - 696,327

Total $ 1,534,009 2,567,428

(U) Stockholders’ equity(a) Common stock

As of December 31, 2011 and 2010, both of the Bank’s authorized capital was $60,000,000 and the paid-in

capital for common shares of the Bank was $42,098,263 and $40,285,419 and the face value of each share

is NTD $10. The outstanding shares were 4,209,826 thousand shares and 4,028,542 thousand shares,

respectively.

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 is approved by Financial Supervisory Commission 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.

Pursuant to the resolution approved by the stockholders’ meeting of the Bank on June 23, 2010, in order

to meet the need to increase capital and issue new shares, the Bank increased its authorized capital

to $60,000,000; the paid-in capital for common shares of the Bank was $40,285,419. Furthermore, in

accordance with the approval, the Bank using the reserve for capitalization of $1,549,439 from share

premium-common stock to increase capital and issue 154,944 thousand shares. The case of capital

increase has been approved by Financial Supervisory Commission, Executive Yuan on August 11, 2010.

Capital increase date set on September 14, 2010, the replenishment of the case, the legal registration

procedures have been completed.

(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.

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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 and supervisor: 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 estimated employee bonuses $166,762 and 112,349, and the

directors’ remuneration $20,845 and 14,044 for the year ended December 31, 2011 and 2010, respectively.

This estimate was calculated based on the net income for the year ended December 30, 2011 and 2010,

deducted by legal reserve and special reserve, then multiplied by the distribution rate of employee bonuses

and directors’ remuneration, which are 8% and 1%.

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. 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 in the profit or loss of the next year.

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 resolved amounts of $80,196 and $10,024 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 23, 2010.

The information about the appropriations of employee bonuses and directors and supervisors remuneration

is available at the Market Observation Post System or other sites.

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 an amount equal to 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, 2011and 2010, the components of deferred tax assets were as follows:

December 31, 2011

December 31, 2010

　 Deductible temporary difference due to　　provision for reserve for default liabilities"

$ - 16,440

　 Deductible temporary difference due to　　provision for reserve for contingent losses"

- 11,910

Deductible temporary difference due to provision for reserve for trading losses"

- 15,032

　 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"

36,543 36,543

Deductible temporary difference due to provision for contingent losses of lawsuit"

75,446 51,113

Deductible temporary difference due to provision for unrealized loss on available-for-sale financial assets"

31,247 23,290

Available loss carryforward benefits 3,408,177 4,061,049

Tax effect on unused investment tax credits"

15,348 16,876

　 Deductible temporary difference due to　 cumulative translation adjustments"

(3,782) 3,314

$ 3,651,258 4,323,846

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

December 31, 2011

December 31, 2010

Deferred income tax assets $ 3,651,258 4,323,846

Allowance for deferred income tax assets (2,032,971) (2,565,977)

Net $ 1,618,287 1,757,869

(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, 2011 and 2010 were

calculated as follows:

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For The Year Ended

December 31, 2011

For The Year Ended

December 31, 2010

Income tax caculated on net income before tax

Permanent differences:

$ 555,725 406,516

- Tax-exempt securities transaction loss (income) 66,011 (34,299)

- Net loss (income) from offshore banking unit 29,892 (50,243)

- Recognized loss (gain) from financial assets

and liabilities measured at fair value through

profit or loss

23,600 (58,089)

- Cash Dividend (33,391) (25,104)

- Gain on investment recognized under the

equity method

(8,428) (4,491)

-Tax-exempt gains on disposal of land 48,244 574

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

Temporary differences:

- Provisions for reserve for default liabilities - 1,601

- Reversal of provisions for reserve for

contingent losses

(7,024) 1,100

- Provisions for reserve for trading losses - 199

- Deferred loss on disposal of non-performing loans - (51,420)

- Provision for contingencies of lawsuit 24,333 -

- Write-off of allowance for bad debts - (34,326)

Taxable income 626,035 152,018

Duduct: Loss carryforward (626,035) (152,018)

Income tax payable (current) - -

Cumulative effect of changes in income tax rate - 762,145

Net decrease (increase) in deferred income tax assets 130,958 (515,651)

Overseas branch income tax expenses 163,013 91,835

10% surtax on undistributed earnings - 15,505

(Overestimate) underestimate prior income

tax expense

(2,897) 10,374

Basic tax - 20,831

Income tax expense $ 291,074 385,039

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

the year 2007 and 2008.

(e) Imputation Credit Account and Tax Deductible Ratio


Stockholders' imputation credit account $ 10,681 400,226


Stockholders' tax deductible ratio 0.35%(expected) 16.32%(actual)


As of December 31, 2011 and 2010, all of the ending balance of undistributed retained earnings arose from

earnings in 1998 and thereafter.

(f) As of December 31, 2011, the loss to reduce future year’s income base on Income Tax Law were as

follows:

Amount Deductible Year

2004 (authorized) $ 3,661,811 2005~20142005 (authorized) 13,799,316 2006~20152006 (authorized) 1,021,326 2007~20162009 (authorized) 1,565,648 2010~2019Total $ 20,048,101

(g) As of December 31, 2011, 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

2007 (declared) $ 5,284 2007~2011

2008 (declared) 7,456 2008~2012

2009 (authorized) 2,608 2009~2013

Total $ 15,348

(W) Retirement plan(a) As of December 31, 2011 and 2010, the balance of pension fund and accrued pension liabilities were as

follows:


Ending balance of pension fund assets $ 5,066,674 4,783,189

Ending balance of accrued pension liabilities 257,985 176,479

(b) For the year ended December 31, 2011 and 2010, the pension expenses were as follows:



Provisions for defined benefit plan $ 525,387 480,991

Provisions for defined contribution 67,450 62,417

Borrowed employees pension expense recoverd (98) (165)

Total $ 592,739 543,243

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

(1) As of December 31 2011 and 2010, the balance of pension account in Bank of Taiwan amounts to

$488,325 and $446,496, 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%, and August 2011 to 15%. As of December 31, 2011 and 2010, the

accumulated amounts are $5,066,674 and $4,783,189, respectively.

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



Discount rate 2.25% 2.00%

Incremental rate of future compensation levels

1.50% 2.00%

Expected long-term rate of return on plan assets

2.25% 2.00%

(4) As of December 31, 2011 and 2010, the funding status was reconciled with accrued Pension

liabilities per books as follows:


Benefit obligation

Vested benefit obligation $ (4,382,421) (3,953,162)

Non-vested benefit obligation (942,238) (1,006,506)

Accumulated benefit obligation (5,324,659) (4,959,668)

Additional benefit based on future salaries (882,480) (1,220,443)

Projected benefit obligation (6,207,139) (6,180,111)

Fair value of pension obligation 5,066,674 4,783,189

Funding status (1,140,465) (1,396,922)

Unrecognized prior service cost 9,743 23,090

Unrecognized gains on pension fund 968,917 1,236,341

Supplementary accrued pension liabilities (96,180) (38,988)

Accrued pension liabilities $ (257,985) (176,479)

The components of net periodic pension costs were as follows:



Service cost $ 446,947 431,741

Interest cost 123,602 132,371

Return on plan assets $ (57,349) (70,708)

Loss on plan assets (43,338) (43,674)

Expected return on plan assets (100,687) (114,382)

Amortization 55,525 31,261

Net periodic pension cost $ 525,387 480,991

As of December 31, 2011 and 2010, the vested benefit obligation of the Bank’s retirement plan amounted

to $5,738,503 and $5,114,473, respectively.


(X) Earnings per share



Before tax After tax Before tax After tax

Net income $ 3,268,972 2,977,898 2,391,273 2,006,234

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

4,209,826 4,209,826 4,028,542 4,028,542

Basic earnings per share (in dollar) $ 0.78 0.71 0.59 0.50

Basic earnings per share-retroactive adjustment:

Weighted average number of common

stock shares outstanding (in thousands)-retroactive adjustment

4,209,826 4,209,826

Basic earnings per share-retroactive adjustment (in dollars)

0.57 0.48

Dilutive potential common shares

(in thousands) (Note) 17,874 17,874 8,511 8,511

Weighted average number of shares outstanding for dulited EPS

(in thousands)

4,227,700 4,227,700 4,037,053 4,037,053

Diluted earnings per shares (in dollars)

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

$ 0.77 0.70 0.59 0.50

Weighted average number of common

stock shares outstanding

(in thousands)-retroactive

adjustment

4,218,720 4,218,720

Diluted earnings per share-retroactive adjustment (in dollars)

0.57 0.48

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

(Y) Financial Instruments(a) Fair value information

1. Fair value information

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As of December 31 2011 and 2010, the fair value information of financial assets and liabilities were as

follows:

December 31, 2011 December 31, 2010Fair value Fair value

Non-derivatives financial instruments Book value

Quoted prices

in active market

Determined value by

using valuation

techniques Book value

Quoted prices

in active market

Determined value by

using valuation

techniques

Financial assets: Cash and cash equivalents $ 25,579,593 - 25,579,593 15,364,021 - 15,364,021

Due from the Central Bank and call loans to banks

56,150,500 - 56,150,500 71,720,175 - 71,720,175

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

5,182,763 5,182,763 - 3,892,885 3,892,885 -

Securities purchased under resell agreements

2,337,341 - 2,337,341 2,519,348 - 2,519,348

Receivables- net 20,250,925 - 20,250,925 19,710,207 - 19,710,207

Discounts and loans- net 942,587,857 - 942,587,857 926,970,266 - 926,970,266

Available-for-sale financial assets- net

14,850,799 14,850,799 - 14,928,355 14,928,355 -

Held-to-maturity financial assets- net

177,696,669 - 177,785,536 136,095,589 - 136,095,768

Other financial assets- net 3,656,190 - 3,656,190 3,772,184 - 3,772,184

Operating guaranty and settlement funds

77,467 - 77,467 74,347 - 74,347

Guarantee deposits paid- net 153,896 - 153,896 151,263 - 151,263

Financial liabilities:

Deposits from the Central Bank and other banks

90,829,825 - 90,829,825 86,081,932 - 86,081,932

Securities sold under repurchase agreements

6,109,713 - 6,109,713 9,950,660 - 9,950,660

Payables 31,028,411 - 31,028,411 23,782,204 - 23,782,204

Deposits and remittances 1,033,945,218 - 1,033,945,218 992,348,193 - 992,348,193

Financial debentures 43,900,000 - 43,900,000 44,000,000 - 44,000,000

Other financial liabilities 12,150,115 - 12,150,115 10,552,494 - 10,552,494

Guarantee deposits received 543,916 - 543,916 675,964 - 675,964

Derivatives financial instrumentsFinancial assets:

Foreign exchange forward contracts

9,401 - 9,401 142,369 - 142,369

Currency swap contracts 164,213 - 164,213 143,814 - 143,814

Non-delivery forwards - - - 4,552 - 4,552

Interest swap contracts 41,402 - 41,402 50,576 - 50,576

Foreign currency options-call 49,455 - 49,455 24,685 - 24,685

Structured product option-call 569 - 569 396 - 396

Stock Index futures 27,163 27,163 - 23,486 23,486 -

Financial liabilities:


18,865 - 18,865 23,634 - 23,634

Currency swap contracts 71,938 - 71,938 66,511 - 66,511

Non-delivery forward contracts - - - 4,497 - 4,497

Interest swap contracts 199,115 - 199,115 206,616 - 206,616

Foreign currency options-put 49,455 - 49,455 24,685 - 24,685

Structured product option-put 569 - 569 2 - 2


2. The Tier information of the fair value of financial instruments

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 Held for Trading

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

Available-for-Sale Financial Assets

Security Investment 673,463 673,463 - -

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

Other Financial Assets

Debts Investments without Active Market

1,500,000 - - 1,500,000

Liabilities:

Derivative financial assets

Assets:

Financial Assets Measured at Fair Value through Profit or Loss

292,203 27,163 265,040 -

Liabilities:

Financial Liabilities Measured at Fair Value through Profit or Loss

339,942 - 339,942 -

3. Changes of financial assets measured at fair value through profit or loss and are classified as the

3rd tier financial instrument.

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

Other financial assets

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

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(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.

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 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 adapts mark-to-model prices which are usually adopted among the

banking industry, such as Discounted-Cash-Flow model and Black-Scholes model. The Bank adapts

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.


The maximum credit exposure amount of the financial instruments the Bank held is as follows:


Financial instruments Book value"Maximum

credit exposure"

Book value"Maximum

credit exposure"


Commercial paper $ 1,495,805 1,495,805 1,568,213 1,568,213

Beneficiary certificates - - 111,391 111,391

Overseas bonds 3,686,958 3,686,958 2,213,281 2,213,281

Discounts and loans 942,587,857 942,587,857 926,970,266 926,970,266


Government bonds 5,718,332 5,718,332 5,748,892 5,748,892

Corporate bonds 2,261,229 2,261,229 705,536 705,536


Overseas bonds 6,197,775 6,197,775 7,847,252 7,847,252

Listed and OTC stocks 673,463 673,463 610,357 610,357

Held-to-maturity financial assets

Certificates of deposit with Central Bank

172,200,000 172,200,000 127,900,000 127,900,000

Government bonds 1,756,370 1,756,370 2,378,146 2,378,146

Corporate bonds 2,658,570 2,658,570 4,280,309 4,280,309


Overseas bonds 562,878 562,878 895,367 895,367

Banker's acceptance 455,273 455,273 446,350 446,350

Non-negotiable certificates of deposit

- - 61,950 61,950

Negotiable certificates of deposit

63,578 63,578 - -

Derivatives financial instrument


9,401 9,401 142,369 142,369

Currency swaps contracts 164,213 164,213 143,814 143,814

Non-delivery forwards - - 4,552 4,552

Interest swap contracts 41,402 41,402 50,576 50,576

Foreign currency options-call 49,455 49,455 24,685 24,685

Structured products option-call

569 569 396 396

Stock index futures 27,163 27,163 23,486 23,486

Total $ 1,140,610,291 1,140,610,291 1,082,276,973 1,082,276,973

Note: The maximum credit exposure amount applies to contracts with positive fair value on the balance

sheet date.

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 commitment, and guarantee. When the counterparty defaults, the Bank can

enforce its right over the collateral or other guarantee to effectively reduce credit risk.

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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:


Loans - by region:

Asia $ 914,998,136 900,129,070

Europe 2,396,236 1,357,590

America 17,148,396 13,292,110

Oceania 10,157,081 9,679,304

Other 877,975 746,999Total $ 945,577,824 925,205,073

December 31, 2011 December 31, 2010Loans - by industry:

Manufacturing $ 272,639,001 252,200,147

Wholesale, retail and catering 75,055,118 75,930,789

Real Estate 40,250,386 36,376,573

Water, electricity and gas 26,147,918 33,291,562

Government organization 130,556,592 132,476,085

Individual 246,025,905 241,202,329

Other 154,902,904 153,727,588

Total $ 945,577,824 925,205,073

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:

December 31, 2011 December 31, 2010Guarantees and letters of credit $ 25,971,850 26,201,152

Commitments on credit cards 19,463,776 19,845,768

$ 45,435,626 46,046,920

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, 2011 and 2010

is as follows:


December 31, 2011

Financial Items

Within 1 month 1 month to 3 months

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

Financial assets measured at fair value through profit or loss (Note 1)

1,788,008 1,788,008 - -


2,337,341 2,337,341 - -

Interest receivables 958,201 958,201 307,449 307,449

Accounts receivable factoring without recourse

5,599,850 5,599,850 201,585 201,585

Account receivable 1,628,568 1,628,568 146,241 146,241



408,751 408,751 1,305,369 1,305,369


68,770,036 68,770,036 59,186,115 59,186,115

Total assets $ 219,113,576 219,113,576 183,770,515 183,770,515

Liabilities

Deposits from the Central Bank and other Banks

$ 21,139,080 21,139,080 36,243,172 36,243,172

Financial liabilities measured at fair value through profit or loss

339,942 339,942 - -


5,772,205 5,772,205 161,778 161,778

Interest payable 466,245 466,245 541,716 541,716

Deposits and remittances (Note 2)

619,404,038 619,404,038 128,126,228 128,126,228

Financial Debentures - - - -

Appropriated loan fund 13,250 13,250 2,500 2,500

Total liabilities $ 647,134,760 647,134,760 165,075,394 165,075,394

Net liquidity gap $ (428,021,184) (428,021,184) 18,695,121 18,695,121

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December 31, 2011

Financial Items

3 months to 1 year 1 year to 2 years

AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets

Cash and cash equivalent $ - - - -


- - - -


650,874 650,874 429,905 429,905


- - - -



140,950 140,950 - -

Account receivable 859,439 859,439 9,005 9,005



4,007,181 4,007,181 2,744,048 2,744,048


46,167,681 46,167,681 902,438 902,438

Total assets $ 302,223,210 302,223,210 112,485,336 112,485,336

Liabilities


$ 33,447,573 33,447,573 - -


- - - -


175,730 175,730 - -



264,656,011 264,656,011 17,803,102 17,803,102

Financial Debentures - - 3,450,000 3,450,000



Net liquidity gap $ 2,926,042 2,926,042 90,891,776 90,891,776


December 31, 2011

Financial Items

2 years to 3 years 3 years to 4 years

AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets

Cash and cash equivalent - - - -


- - - -


$ 1,302,410 1,302,410 723,518 723,518


- - - -

Interest receivables - - - -


- - - -

Account receivable - - - -



2,186,510 2,186,510 1,181,676 1,181,676


811,566 811,566 1,248,815 1,248,815

Total assets $ 82,699,150 82,699,150 54,789,790 54,789,790

Liabilities


$ - - - -


- - - -


- - - -

Interest payable 6,813 6,813 227 227


3,924,603 3,924,603 14,274 14,274

Financial Debentures 9,650,000 9,650,000 6,200,000 6,200,000




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December 31, 2011

Financial Items

4 years to 5 years Over 5 years Total

AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Amount

Assets

Cash and cash equivalent $ - - - - 25,579,593


- - - - 56,150,500


580,251 580,251 - - 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


1,530,516 1,530,516 1,486,748 1,486,748 14,850,799


120,230 120,230 489,788 489,788 177,696,669

Total assets $ 43,474,063 43,474,063 245,236,740 236,737,202 1,243,792,380

Liabilities


$ - - - - 90,829,825


- - - - 339,942


- - - - 6,109,713

Interest payable 99 99 5,155 5,155 2,026,237


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

Total liabilities $ 14,829,971 14,829,971 20,027,253 20,027,253 1,189,250,603

Net liquidity gap $ 28,644,092 28,644,092 225,209,487 216,709,949 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 checking deposits

amounting to $26,068,177 demand deposits amounting to $221,132,489 and demand savings deposits

amounting to $263,095,828.


December 31, 2010

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets

Cash and cash equivalent $ 15,364,021 15,364,021 - -


52,623,966 52,623,966 14,662,982 14,662,982


2,069,482 2,069,482 - -


2,519,348 2,519,348 - -



383,199 383,199 44,043 44,043




277,012 277,012 184,242 184,242


65,386,137 65,386,137 35,515,368 35,515,368

Total assets $ 183,339,561 183,339,561 138,050,161 138,050,161

Liabilities


$ 13,509,118 13,509,118 35,522,758 35,522,758


325,945 325,945 - -


9,726,587 9,726,587 149,160 149,160



625,631,388 625,631,388 108,832,908 108,832,908

Financial Debentures - - - -



Net liquidity gap $ (466,207,015) (466,207,015) (6,908,079) (6,908,079)

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December 31, 2010

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets

Cash and cash equivalent - - - -


$ 4,433,227 4,433,227 - -


233,351 233,351 771,666 771,666


- - - -



6,755 6,755 - -




2,960,705 2,960,705 5,013,689 5,013,689


30,368,159 30,368,159 1,718,992 1,718,992

Total assets $ 304,388,098 304,388,098 126,120,935 126,120,935

Liabilities


$ 37,050,056 37,050,056 - -


- - - -


74,913 74,913 - -



237,999,504 237,999,504 16,839,987 16,839,987

Financial Debentures 100,000 100,000 - -





December 31, 2010

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets

Cash and cash equivalent $ - - - -


- - - -


885,000 885,000 175,764 175,764


- - - -

Interest receivables - - - -


- - - -

Account receivable - - - -



2,494,473 2,494,473 2,229,790 2,229,790


855,869 855,869 631,028 631,028

Total assets $ 93,052,109 93,052,109 57,991,938 57,991,938

Liabilities


$ - - - -


- - - -


- - - -

Interest payable 6,411 6,411 178 178


3,021,581 3,021,581 8,080 8,080

Financial Debentures 3,450,000 3,450,000 9,650,000 9,650,000




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December 31, 2010

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Amount

Assets

Cash and cash equivalent $ - - - - 15,364,021


- - - - 71,720,175


147,500 147,500 - - 4,282,763


- - - - 2,519,348

Interest receivables - - - - 1,570,055


- - - - 433,997

Account receivable - - - - 2,654,317

Discounts and loans 38,601,996 38,601,996 239,791,505 231,458,108 935,303,663


754,876 754,876 1,013,568 1,013,568 14,928,355


1,248,427 1,248,427 371,609 371,609 136,095,589

Total assets $ 40,752,799 40,752,799 241,176,682 232,843,285 1,184,872,283

Liabilities


$ - - - - 86,081,932


- - - - 325,945


- - - - 9,950,660

Interest payable 120 120 4,928 4,928 1,623,774


11,946 11,946 2,799 2,799 992,348,193

Financial Debentures 6,200,000 6,200,000 24,600,000 24,600,000 44,000,000

Appropriated loan fund 137,700 137,700 8,239,507 8,239,507 10,373,287


Net liquidity gap $ 34,403,033 34,403,033 208,329,448 199,996,051 40,168,492

Note 1: The amount for financial assets measured at fair value through profit or loss is $4,282,763, which is consisted

of financial assets for trading purposes amounting to $2,069,482 and financial assets designated at fair value

at initial recognition amounting to $2,213,281.

Note 2: Amount for deposits and remittances shown in column “within 1 month” consists of checking deposits

amounting to $21,472,847 demand deposits amounting to $219,065,510 and demand savings deposits

amounting to $256,614,400.


4. Cash flow risk from interest-rate fluctuation and fair value risk from interest-rate fluctuation.

The 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, 2011, net interest revenue

increases NT$22.76 million (decreases NT$22.76 million) if interest rate increases (decrease) 1bp

(1%), budget ratio of 2011 NII was 0.170%.

Based on the structure of assets and liabilities as of December 31, 2010, net interest revenue

increases NT$20.93 million (decreases NT$ 20.93 million) if interest rate increases (decreases) 1bp

(1%), budget ratio of 2010 NII was 0.170%.

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A. Maturity analysis of expected repricing date or maturity date.

As of December 31, 2011 and 2010, 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, 2011

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets

Cash in banks, due from theCentral Bank and call loans to banks (Note 2)

$ 35,485,024 35,485,024 3,381,292 3,381,292


1,495,804 1,495,804 262,545 262,545


2,337,341 2,337,341 - -

Accounts receivables 4,693,138 4,693,138 - -

Discounts and loans (excluding overdue loans)

816,631,378 816,631,378 58,630,879 58,630,879


1,686,460 1,686,460 4,499,497 4,499,497


69,294,029 69,294,029 59,186,116 59,186,116

Other financial assets-exchange bill negotiated

2,438 2,438 - -

Total assets$ 931,625,612 931,625,612 125,960,329 125,960,329

Liabilities

Deposits from the Central Bank and other Banks (exclude deposits from Central Bank) (Note 3)

$ 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

Savings deposits, time deposits and demand deposits

332,356,215 332,356,215 80,821,300 80,821,300

Appropriated loan fund 9,324,353 9,324,353 - -

Financial debentures payable 4,600,000 4,600,000 7,500,000 7,500,000

Total liabilities$ 425,159,246 425,159,246 100,195,500 100,195,500

Interest rate sensitivity gap $ 506,466,366 506,466,366 25,764,829 25,764,829


December 31, 2011

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets


- - - -


$ 650,874 650,874 429,905 429,905


- - - -

Accounts receivables - - - -


56,817,672 56,817,672 2,915,310 2,915,310


1,071,016 1,071,016 1,689,713 1,689,713


45,977,394 45,977,394 600,076 600,076


- - - -

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 - -


588,258,476 588,258,476 4,088,520 4,088,520

Appropriated loan fund 41,250 41,250 2,734,065 2,734,065



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


1,748,001 1,748,001 766,205 766,205


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


- - - -


- - - -


- - - -


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


December 31, 2011

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Amount

Assets


- - - - 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


1,229,697 1,229,697 1,486,747 1,486,747 14,177,336


120,230 120,230 489,788 489,788 177,657,783


- - - - 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


1,646 1,646 1,000 1,000 1,007,462,348

Appropriated loan fund - - - - 12,099,668

Financial debentures payable 1,550,000 1,550,000 7,850,000 7,850,000 43,900,000


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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December 31, 2010

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets


$ 31,508,624 31,508,624 14,662,982 14,662,982


1,568,213 1,568,213 45,239 45,239


2,519,348 2,519,348 - -

Accounts receivables 1,381,081 1,381,081 - -


816,958,939 816,958,939 67,899,625 67,899,625


1,515,754 1,515,754 6,440,752 6,440,752


65,282,302 65,282,302 36,438,976 36,438,976


18,899 18,899 - -

Total assets$ 920,753,160 920,753,160 125,487,574 125,487,574

Liabilities


66,955,595 66,955,595 7,082,076 7,082,076


- - 195,589 195,589


9,726,587 9,726,587 149,160 149,160

Deposits and remittance 367,094,120 367,094,120 48,899,085 48,899,085


Appropriated loan fund 9,199,212 9,199,212 - -


Interest rate sensitivity gap $ 463,177,646 463,177,646 61,661,664 61,661,664


December 31, 2010

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets


$ 4,433,227 4,433,227 - -


684,159 684,159 501,959 501,959


- - - -



27,284,094 27,284,094 4,723,966 4,723,966


493,788 493,788 1,138,840 1,138,840


29,952,851 29,952,851 1,571,654 1,571,654


- - - -

Total assets $ 62,848,119 62,848,119 7,936,419 7,936,419

Liabilities


11,620,385 11,620,385 - -


11,027 11,027 - -


74,913 74,913

Deposits and remittance 547,899,386 547,899,386 5,612,266 5,612,266

Financial debentures payable 12,100,000 12,100,000

Appropriated loan fund 69,000 69,000 1,105,075 1,105,075


Interest rate sensitivity gap $ (508,926,592) (508,926,592) 1,219,078 1,219,078

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December 31, 2010

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Assets


- - - -


$ 885,000 885,000 - -


- - - -



2,541,085 2,541,085 1,700,484 1,700,484


1,713,097 1,713,097 1,764,611 1,764,611


560,945 560,945 631,027 631,027


- - - -

Total assets $ 5,700,127 5,700,127 4,096,122 4,096,122

Liabilities


- - - -


- - - -


Deposits and remittance 822,351 822,351 448 448


Appropriated loan fund - - - -


Interest rate sensitivity gap $ 2,927,776 2,927,776 (1,854,326) (1,854,326)


December 31, 2010

Financial Items


AmountEstimated

receipt/Payment

AmountEstimated

receipt/Payment

Amount

Assets


- - - - 50,604,833


$ 147,500 147,500 - - 3,832,070


- - - - 2,519,348

Accounts receivables - - - - 1,381,081


1,530,846 1,530,846 2,566,034 2,566,034 925,205,073


313,793 313,793 921,045 921,045 14,301,680


1,248,427 1,248,427 371,610 371,610 136,057,792


- - - - 18,899

Total assets $ 3,240,566 3,240,566 3,858,689 3,858,689 1,133,920,776

Liabilities


- - - - 85,658,056


- - - - 206,616


9,950,660

Deposits and remittance 750 750 970,328,406

Financial debentures payable 2,500,000 2,500,000 9,400,000 9,400,000 44,000,000

Appropriated loan fund - - - - 10,373,287


Interest rate sensitivity gap $ 739,816 739,816 (5,541,311) (5,541,311) 13,403,751

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 $2,603,462 which $131,898 is unaccrued interest and $2,471,564 is accrued

interest. Total call loans to bank amounted to $20,826,253 which is accrued interest. Due from the Central Bank

amounted to $50,751,661 of which $23,586,906 is unaccrued interest and $27,164,755 is accrued interest.

Deposits transferred to the Central Bank amounted to $142,261 which is accrued interest.

Note 3 Deposits from other banks amounted to $1,523,718 of which $29,630 is unaccrued interest and $1,494,088 is

accrued interest.

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B. E�ective interest rates

As of December 31, 2011 and 2010, the effective interest rates of financial instruments held or

issued by the Bank are as follows:

Financial items December 31, 2011 December 31, 2010

Assets:

Due from other banks 0.01% -%

Due from the Central Bank 0.37% 0.36%

Call loans to banks 0.85% 0.64%

Financial assets held for trading 0.88% 0.58%

Available-for-sale financial assets 1.49% 1.50%

Held-to-maturity financial assets 1.00% 0.82%

Discounts and loans 1.99% 1.76%

Liabilities:

Deposits from other banks 0.11% 0.07%

Call loans from banks 0.52% 0.27%

Deposits 0.76% 0.62%

Financial debentures 2.27% 2.12%

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.


(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 supervisor of the Bank

Mega Financial Holding Co., Ltd. Corporate supervisor of the Bank

Mega International Commercial Bank Related party in substance

Chung Kuo Insurance Company., Ltd. Related party in substance

Mega Bills Finance Co., Ltd. Related party in substance

Primasia Investment Trust Co., Ltd. Investee company under the equity method (Sold on October 2010)

Taiwan Business Bank Insurance Agency Co., Ltd.

The Bank's subsidiary

Taiwan Business Bank Property Insurance Agency Co., Ltd.

The Bank's subsidiary

Other Major shareholders, directors, supervisors, president, executive vice president, managers and their second tier of kinship.

(B) Significant related party transactions(a) Due from other Banks


Amount % Amount %

Bank of Taiwan $ 207,002 10.43 126,247 4.85

Land Bank of Taiwan 519 0.03 98 -

Mega International Commercial Bank

134,275 6.77 2,038 0.08

Total $ 341,796 17.23 128,383 4.93

Interest rates are the same as those with regular clients.

(b) Deposits from other banks


Amount % Amount %

Land Bank of Taiwan $ 331 0.28 1,038 0.07


116 0.10 86 -

Total $ 447 0.38 1,124 0.07


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(c) Call loans to banks

Maximumbalance

Endingbalance

Interestincome

Annualinterest rate

For the year ended December 31, 2011

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


Bank of Taiwan $ 4,801,185 295,000 2,796 0.108%~1.00%

Land Bank of Taiwan 5,108,650 2,492,650 8,286 0.107%~1.32%Mega International Commercial Bank

7,043,700 442,500 1,652 0.106%~4.68%

Total $ 16,953,535 3,230,150 12,734


(d) Call loans from banks

Maximumbalance

Endingbalance

Interestexpense

Annualinterest rate


Bank of Taiwan $ 10,221,425 302,750 1,673 0.05%~1.35%

Land Bank of Taiwan 7,251,525 - 4,014 0.1%~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


Bank of Taiwan $ 12,696,500 1,121,000 9,749 0.1%~0.83%

Land Bank of Taiwan 2,826,000 295,000 406 0.12%~4.17%Mega International Commercial Bank

12,068,799 3,253,850 18,488 0.107%~4.55%

Total $ 27,591,299 4,669,850 28,643


(e) Banks’overdrafts

Maximum balance (note)

Ending balance(note) Interest expense Annual

interest rate



$ 900,813 89,630 - 2.5%



$ 145,738 41,364 3 2.5%



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 according to bank

amount.

(f) Deposits


Amount % Amount %

"Taiwan Business Bank Insurance

Agency Co., Ltd."68,727 0.01 46,815 -

"Taiwan Business Bank Property

Insurance Agency Co., Ltd."7,341 - 3,688 -

Bank Of Taiwan 3,247 - 3,243 -

Others 993,765 0.10 1,087,780 0.11

Total $ 1,073,080 0.11 1,141,526 0.11


(g) Credit

December 31, 2011

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 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

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December 31, 2010

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 clients

Performing loan

Non-performing

Loans

Employee consumer loans

119 258,507 239,353 239,353 -none/real

estatenone

Self-use residence collateral loans

103 308,628 282,620 282,620 - real estate none

Others Sun 13,000 - - - real estate none

Yeh 3,500 3,500 3,500 - real estate none

Li 7,948 1,797 1,797 - real estate none

Cheng 900 900 900 - real estate none

Wen 199 - - - real estate none


Li 4,700 3,677 3,677 - real estate none

Chen 6,035 4,032 4,032 - real estate none

Huang 3,965 3,965 3,965 - real estate none

Hung 2,636 - - - real estate none

Shih 12,410 12,410 12,410 - real estate none

Tsai 3,386 - - - real estate none

Hsu 3,176 - - - real estate none

Wu 60 - - - none none

Chen 1,000 - - - real estate none

Hsiao 978 - - - real estate none

Hsu 698 524 524 - real estate none

Chu 3,199 3,148 3,148 - real estate none

Lu 1,997 - - - real estate none


Lin 200 - - - none none



Liao 100 - - - none none

Song 10 - - - none 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 $1,537 and $1,203 for the year ended December 31, 2011 and 2010, respectively. The

Bank received manpower support fee of $400,963 and $246,186 for the year ended December 31, 2011

and 2010, respectively, for providing personnel and communication resources to Taiwan Business Bank

Insurance Agency Co., Ltd. The Bank received manpower support fee of $35,937 and $26,718 for the years

ended December 31, 2011 and 2010, respectively for providing personnel and communication resources to

Taiwan Business Bank Property Insurance Agency Co. Ltd. The Bank received handling fee for the sale of

funds of Primasia Investment Trust Co., Ltd., amounting to $187 for the year ended December 31, 2010.

(j) Rental revenue:

The Bank received rental revenue of $939 and $968 for the year ended December 31, 2011 and 2010,

respectively, for renting to the Taiwan Business Bank Insurance Agency Co., Ltd.

The Bank received rental revenue of both $345 for the year ended December 31, 2011 and 2010, for renting

to the Taiwan Business Bank Property Insurance Agency Co., Ltd.

(k) Derivatives financial instrument transactions: None.

(l) Sales of Non–Performing Loans Transactions: None.

(C) Key management personnel compensation in totalFor the years ended December 31, 2011 and 2010, the aggregate fees and compensation paid to the

directors, supervisors, general managers, vice general managers and other senior management of the Bank

was as follows:

For the year ended December 31,2011


Salaries $ 44,814 42,764

Cash awards and special allowances 8,969 6,671

Transportation allowances and business expenses

44 68

Employee bonuses 272 187

Total $ 54,099 49,690

Above information includes the estimated of directors' remuneration and employee bonuses. Stockholders’

Equity for detailed information regarding the estimation method.

(6) PLEDGED ASSETS: please refer to note 4(H) for more details.

(7) SIGNIFICANT COMMITMENTS AND CONTINGENCIES

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(A) As of December 31, 2011 and 2010, significant commitments and contingencies were as follows:


Marketable securities held for custody $ 4,398,078 4,892,865

Bills collected for others 82,932,904 93,013,266

Bills lent for others 19,222,413 15,786,615

Guarantees and letters of credit 25,971,850 26,201,152

Collaterals received 886 1,369

Trust liabilities 126,445,211 136,918,584

Travelers’check in custody for sale 214,450 226,417

Items held for custody 11,770,868 13,770,905

Registered government bonds for sale 7,762,100 7,628,600

Registered short-term bills for sale 5,527,146 4,845,300

Notes held for custody 38,876,900 16,898,100

(B) As of December 31, 2011 and 2010, refundable deposits for operating leases amounted to $90,395 and $89,790, respectively. Estimated future rental commitments were as follows:

Period Amount

01.01.2012~12.31.2012 $ 286,624

01.01.2013~12.31.2013 269,027

01.01.2014~12.31.2014 213,740

01.01.2015~12.31.2015 128,189

01.01.2016~12.31.2016 70,233

Total $ 967,813

(C) Estimated rental revenues from rental assets for the next 5 years are as follows:

Period Amount01.01.2012~12.31.2012 $ 7,17201.01.2013~12.31.2013 6,29101.01.2014~12.31.2014 4,87601.01.2015~12.31.2015 3,59701.01.2016~12.31.2016 1,966 Total $ 23,902

(D) As of December 31, 2011 and 2010, major constructions in progress and purchases amounted to $140,380 and $289,200, respectively, of which $61,607 and $187,683, 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, 2011 and 2010 and trust income statement for the year ended December 31, 2011 and 2010 were as follows:


Trust Account Balance SheetTrust Assets December 31, 2011 December 31, 2010 Trust Liabilities December 31, 2011 December 31, 2010

Cash in bank $ 683,807 402,893 Payables $ 179 239

Common stock 326,806 339,980Securities held for custody

67,747,387 80,773,146

Funds 53,593,936 51,864,267 Trust capital 58,866,813 56,167,468Receivables 110 53 Reserves and

retained earnings(358,248) (1,816,216)

Prepayment 15 1Real estate 4,093,150 3,538,244 Net income 189,080 1,793,947Securities in custody

67,747,387 80,773,146

Total trust assets

$ 126,445,211 136,918,584 Total trust liabilities

$ 126,445,211 136,918,584

Trust Account Property CatalogueInvestment in: December 31, 2011 December 31, 2010

Cash in bank $ 683,807 402,893Common stock 326,806 339,980Funds 53,593,936 51,864,267Receivables 110 53Prepayment 15 1Real estate Land 3,116,534 2,425,568 Buildings 23,008 1,989 Construction in progress 953,608 1,110,687Securities in custody 67,747,387 80,773,146Total $ 126,445,211 136,918,584

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

$931,646 and 796,347, respectively.

Trust Account Statement of IncomeInvestment items: For the year ended December 31,2011 For the year ended December 31,2010

Trust Income Interest income $ 1,949 582 Realized cpaital gain-fund 208 4,803 Realized capital gain-stock 2,190 713 Cash dividend income of common stock 833,658 770,425 Gains on property transaction 1,030,021 2,242,489 Other revenue 828 691 Sub-total 1,868,854 3,019,703Trust Expenses Administrative expenses 35,113 36,469 Storage expenses 980 929 Postage expenses 31 133 Duties 265,558 81,394 Realized capital loss-fund 95 - Realized capital loss-stock 23 - Losses on property transaction 1,374,136 1,093,725 Other expense 3,708 12,120 Sub-total 1,679,644 1,224,770Net income before tax 189,210 1,794,933Income tax expense (130) (986)Net income after tax $ 189,080 1,793,947

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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. In terms of the judgment of the court of the second instance The Bank has filed an appeal on November 3, 2011. With regard to the ruling of negligence, the Bank has consulted the attorney to issue an opinion in relation to the appeal. For the sake of conservatism, The Bank has accrued the potential compensation of US$7,674 thousand in

2005 and provided an additional US$ 6,182 thousand during the fourth quarter of 2011.

(b) Jin-ye Industry Corporation (JIC) was a checking 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 $61,751thousand 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 sends 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. It is under the trial of Taiwan Supreme Court.

(c) 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).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 of $46,106 thousand and interest with annual rate 5% from May 26, 2006 to 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 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 settlement date to Kang-Cheng Corp. The Bank appealed to Taiwan Supreme Court and the case is ruled 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, it under the trial of Taiwan Supreme Court. 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 they received from the GWAM. The Bank lost the first trial and appealed. Taiwan High Court ruled that the Bank lost the lawsuit and should pay Hua Nan Bank 10,250 thousand plus the interest with annual rate of 5% from July, 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 consumption 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 withdraw slips provided by the employee of TCM. 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 settlement date to TCM. However, the Bank was not willing to accept the judgment and appealed and it is under the trial of 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 settlement date to TCM on March, 2011. The Bank is not willing to accept the judgment and appealed to Taiwan Supreme Court. On September 2011, the appeals from both sides are rejected by the Taiwan Supreme Court. In accordance with the judement delivered by the 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 against 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. It is under the trial of Taiwan High Court.

(8) SIGNIFICANT CATASTROPHIC LOSSES: None.

(9) SIGNIFICANT SUBSEQUENT EVENTS:The Bank, in order to strengthen capital structure and expand operation scale to support long term business development, has decided to execute cash capital increase, under the approval of the board of directors’ on July 13, 2011, through issuing 500,000 thousands shares. The issuing price of each share is TWD 10 dollars and the proceed from the issuing shares amounts to 5,000,000 thousand. The capital increase is approved per Bank Ruling Securities Development Letter No. 1000044831 issued by Financial Supervisory Commission (the “FSC”), Executive Yuan on September 23, 2011. Considering the market environment and the stock price fluctuation of the Bank, the board of directors decided to apply for extension of the payment period of specific people and this is approved by FSC per Bank Ruling Securities Development Letter No. 1000062949 on December 23, 2011. The capital increase has collected the proceeds and the base date is set on January 10, 2012. The Bank has completed the registration on January 20, 2012.

(10) OTHERS (A) Disclosures Required for Bank Financial Statements

(a) Loans and advances

December 31, 2011 December 31, 2010Domestic loans and advances

Private businesses $ 491,210,020 470,180,947State enterprises 37,838,038 50,175,292Governmental institutions 130,556,592 132,476,085Non-profit organizations 4,087,407 4,241,342Individuals 246,025,905 241,202,329

Sub-total 909,717,962 898,275,995Foreign loans and advances:

Financial institutions 6,153,874 1,464,198Non-financial institutions 29,705,988 25,464,880

Sub-total 35,859,862 26,929,078Total $ 945,577,824 925,205,073

The above loans and advances excluded the overdue loans. Overdue loans and overdue receivables have stopped accruing internal interest.

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(b) Allowance for credit losses



Loans:Beginning balance $ 8,333,397 8,184,528Current provision (Note1) 3,582,943 4,040,152Transfer-out (33,101) (24,199)Current charge-off (3,352,457) (3,652,101)Exchange rate effects (31,244) (214,983)"Recovery from written-off loans and advances"

1,504,835 1,347,750

Transferred into revenue (1,504,835) (1,347,750)Ending balance (Note 2) 8,499,538 8,333,397

Receivables and other financial assets:Beginning balance 259,075 233,696Current provision (Note1) 60,927 76,153Transfer-in 33,101 298,397Current charge-off (39,061) (325,989)Exchange rate effects 79 (23,182)Recovery from written-off loans and advances 54,623 63,080Transferred into revenue (54,623) (63,080)Ending balance (Note 2) $ 314,121 259,075

Other financial assets refer to the allowance for bad debts of non-accrual loans transferred from non-loan financial assets and exchange bills negotiated.Note 1: The provision for bad debt expenses for the year ended December 31 2011 and 2010.

For the year ended December 31,2011 For the year ended December 31,2010Discounts, loans and overdue loans $ 3,582,943 4,040,152Receivables and other financial assets

60,927 76,153

Sub-total 3,643,870 4,116,305Reserve for guarantee 24,719 153Total $ 3,668,589 4,116,458

Note 2: The detail of allowance for credit losses account as for December 31, 2011 and 2010 are as follows:


Allowance for credit losses –discounts and loans $ 8,499,538 8,333,397

Allowance for credit losses –receivables 209,737 145,414

Allowance for bad debts –overdue receivables 104,379 113,661

Allowance for bad debts –exchange bills negotiated 5 -

Ending balance $ 8,813,659 8,592,472

(c) Evaluation table of allowance for loans and receivables:

ItemDecember 31, 2011

Loans Allowance for credit lossesWith objective evidence of impairment

Individually assessment of impairment

$ 15,587,573 5,451,588

Collective assessment of impairment 5,292,715 1,496,894Without objective evidence of impairment

Collective assessment of impairment 930,374,379 1,551,056

Total $ 951,254,667 8,499,538


Item Receivables (Note) Allowance for credit losses

Without obejective evidence of impairment

Collective assessment of impairment

$ 13,619,813 209,737

Note: Receivables do not include accrued incomes, tax refund receivables and spot exchange receivable-foreign currencies.

ItemOther Financial Assets

Other Financial Assets Other Financial AssetsWith objective evidence of

impairmentIndividually assessment

of impairment$ 44,087 39,526

Collective assessment of impairment 156,622 64,853

Without objective evidence of impairment

Collective assessment of impairment

2,438 5

Total $ 203,147 104,384

(B) Personnel, depreciation, and amortization expenses were as follows:

NatureFor the year ended December 31, 2011 For the year ended December 31, 2010

Operating expense Operating expensePersonnel expenses Salary expense $ 5,714,958 5,703,041 Insurance expenses 357,723 343,422 Retirement expenses 592,739 543,243 Other personnel expenses

330,801 174,493

Total personnel expenses

6,996,221 6,764,199

Depreciation expenses 409,338 454,062Amortization expenses 69,960 67,591Total $ 7,475,519 7,285,852

(C) Disclosures Required Under the Statement of Financial Accounting Standards No. 28:(a) Loan quality:

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 2,305,943 362,440,096 0.64 2,502,421 108.52 3,755,212 347,408,194 1.08 2,554,750 68.03

Unsecured 2,452,360 347,691,271 0.71 4,261,443 173.77 4,510,633 345,924,795 1.30 4,510,445 100.00

Consumer finance

Residence mortgages (Note 4)

807,483 132,086,309 0.61 931,448 115.35 1,417,819 115,999,738 1.22 688,689 48.57

Cash cards 154 1,126 13.68 154 100.00 1,762 1,762 100.00 1,762 100.00Small sum credit loans (Note 5)

11,757 79,960 14.70 50,233 427.26 48,000 107,349 44.71 48,000 100.00

Others(Note 6)

Secured 449,329 86,487,967 0.52 520,026 115.73 645,201 106,142,704 0.61 382,273 59.25Unsecured 132,379 22,467,938 0.59 233,813 176.62 147,484 19,719,121 0.75 147,478 100.00

total loan business 6,159,405 951,254,667 0.65 8,499,538 137.99 10,526,111 935,303,663 1.13 8,333,397 79.17

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 6,613 1,617,491 0.41 41,763 631.53 5,447 1,748,823 0.31 30,756 564.64Without-revourse factoring (Note 7)

- 5,942,385 - 17,097 - - 433,997 - 182 -

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/

Unit: In Thousands of New Taiwan Dollars, %

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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.

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

22,412 41,604 11,664 56,981

Pursuant to a contract under a debt liquidation plan and a debt relief plan

97,697 84,965 104,712 93,295

Total 120,109 126,569 116,376 150,276Note 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.”

(b) Concentration of credit extensions

December 31, 2011

Ranking Group enterprise Credit amount Credit amount to stockholders'equity ratio (%)

1 A company. (Railway transportation) 36,184,351 77.13

2B group. (Petroleum and coal products

manufacturing)15,150,110 32.29

3C group. (Liquid crystal panel and

components manufacturing)10,100,945 21.53

4 D group. (Steel rolling and extruding) 7,274,926 15.51

5E company. (Other amusement and

recreation)5,480,000 11.68

6F group.(Liquid crystal panel and


7 G group. (Investment and consulting) 5,082,000 10.83

8H group. (Integrated circuits


9 I group. (Computer manufacturing) 4,561,024 9.72

10 J group. (Other financial agency) 4,305,870 9.18



December 31, 2010

Ranking Group enterprise Credit amount Credit amount to stockholders'equity ratio (%)

1 A company. (Railway transportation) 36,349,996 82.88

2B group. (Petroleum and coal products


3 D group. (Steel rolling and extruding) 7,721,122 17.61

4C group. (Liquid crystal panel and


5H group. (Integrated circuits


6F group. (Liquid crystal panel and


7E company. (Other amusement and

recreation)4,700,000 10.72

8 J group. (Other financial agency) 3,964,500 9.04

9K group. (Real estate for sale and rental

with own or leased property)3,371,760 7.69

10 L company. (Universities and colleges) 2,150,000 4.90

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.


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(c) Interest sensitivity information

1. Analysis of interest rate-sensitive assets and liabilities (New Taiwan dollars) New Taiwan dollars in thousands, %

December 31, 2011

Item 1~90 days 91~180 days 181days~1year over 1 year Total

Interest rate-sensitive assets

$ 960,315,242 81,163,524 5,078,774 23,040,520 1,069,598,060

Interest rate-sensitive liabilities

466,211,100 480,968,546 48,825,135 28,494,551 1,024,499,332

Interest rate sensitivity gap

494,104,142 (399,805,022) (43,746,361) (5,454,031) 45,098,728

Net worth 46,912,912

Ratio of interest rate-sensitive assets to debt (%) 104.40

Ratio of interest rate-sensitive gap to net worth (%) 96,13

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.

2. Analysis of the interest-sensitive assets and liabilities (U.S. dollars) US dollars in thousands, %

December 31, 2011

Item 1~90 days 91~180 days 181days~1year over 1 year Total

Interest rate-sensitive assets $ 2,470,164 494,695 30,483 94,449 3,089,791

Interest rate-sensitive liabilities 1,500,072 1,832,102 110,249 2,000 3,444,423

Interest rate sensitivity gap 970,092 (1,337,407) (79,766) 92,449 (354,632)

Net worth 1,549,559

Ratio of interest rate-sensitive assets to debt (%) 89.70

Ratio of interest rate-sensitive gap to net worth (%) (22.89)

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

Item December 31, 2011 December 31, 2010The ratio of return on assets

Before income tax 0.26 0.20

After income tax 0.24 0.17The ratio of return on shareholders' equity

Before income tax 7.20 5.59

After income tax 6.56 4.69

Net income ratio 17.36 12.35

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 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

1,170,635,360 173,462,382 168,193,652 191,507,064 108,607,504 528,864,758

Major maturity capital outflow

1,528,113,200 171,153,641 195,595,719 176,869,728 305,359,872 679,134,240

Gap (357,477,840) 2,308,741 (27,402,067) 14,637,336 (196,752,368) (150,269,482)

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 $361,055,405.

2. Maturity analysis in U.S. dollars US 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

4,301,823 1,914,266 994,662 572,886 133,216 686,793

Major maturity capital outflow

5,572,854 1,703,611 1,042,250 425,592 540,096 1,861,305

Gap (1,271,031) 210,655 (47,588) 147,294 (406,880) (1,174,512)

Note: Including commitment of credit agreement and estimates to outflow US$1,317,941.

(F) Capital adequacy

Item December 31,

2011December 31,

2010

Eligible

capital

Tier 1 capital 46,757,196 44,163,618Tier 2 captial 25,556,939 32,191,330Tier 3 captial - -Eligible Capital 72,314,135 76,354,948

Risk-

weighted

assets

Credit risk

Standardized approach 672,274,361 649,541,639Internal ratings-based approach - -Securitisation - 66,734

Operational risk

Basic indicator approach 26,585,388 27,584,963Standardized approach/Alternative standard approach

- -

Advanced measurement approach - -

Market risk

Standardized approach 5,783,563 6,271,788Internal model approach - -

Total risk-weighted sssets 704,643,312 683,465,124Capital adequacy ratio 10.26% 11.17%Tier 1 capital / Risk-weighted assets ratio 6.64% 6.46%Tier 2 capital / Risk-weighted assets ratio 3.62% 4.71%Tier 3 capital / Risk-weighted assets ratio -% -%Common stock equity / Total assets ratio 3.32% 3.32%

Leverage ratio 3.77% 3.68%

Note 1. Eligible Capital = Tier 1 Capital + Tier 2 Capital + Tier 3 CapitalNote 2. Total risk-weighted assets = Credit risk weighted asset+(operational risk charge+market risk charge) × 12.5Note 3. Capital adequacy ratio= Eligible Capital ÷Total risk-weighted assets 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.)

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(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.

(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

$ 30,109,755 0.50% 36,026,109 0.97%

Due from the Central Bank 42,678,652 0.41% 43,467,007 0.40%

Bills purchased under resale agreement

2,154,528 0.81% 1,457,178 0.38%

Bonds purchased under resale agreement

452 0.66% 138 -%

Discounts and loans 943,748,399 2.03% 895,497,159 1.80%

Financial assets held for trading 2,248,447 0.79% 1,649,251 0.42%

Financial assets designated at fair value through profit or loss

3,410,244 2.13% 1,827,914 2.07%

Available-for-sale financial assets 13,959,966 2.26% 15,133,969 1.62%

Held-to- maturity financial assets 155,623,786 0.96% 131,515,644 0.80%



Average value

Averageinterest

rate

Averagevalue

Averageinterest

rateLiabilities

Deposits from the Central Bank $ 327,767 -% 447,985 -%

Deposits from other banks and call loans from banks

36,942,386 0.89% 29,507,097 0.66%

Demand deposits (including foreign currency)

487,724,202 0.31% 448,009,412 0.27%

Government deposits 12,808,336 0.48% 12,809,805 0.38%

Time deposits (including foreign currency)

249,935,023 0.94% 235,564,864 0.70%

Deposits transferred from Chunghwa Post Co., Ltd.

59,175,056 1.31% 73,835,325 1.08%

Time savings deposits 260,263,458 1.24% 255,521,113 1.04%

Bills sold under repurchase agreements

2,603,695 0.67% 2,760,206 0.32%

Bonds sold under repurchase agreements

6,060,002 0.58% 5,078,643 0.31%

Financial debentures 43,988,889 2.19% 36,975,099 2.05%

Funds appropriated for loans 11,376,918 0.35% 10,123,617 0.34%


(c) Significant net positions of foreign currencies

1. Significant net positions of foreign currencies


CurrencyForeign

currency amount

NT$Amount

Foreign currency amount

NT$Amount

Significant net positions USD 34,223 1,036,100 USD 36,016 1,062,465

of foreign currency CNY 23,257 111,566 JPY 251,401 91,057

(Market risk) HKD 22,194 86,491 CNY 18,480 82,540

JPY 175,966 68,574 HKD 14,354 54,403

AUD 1,131 34,777 AUD 1,348 40,463

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 currency

December 31, 2011 December 31, 2010Amount Rate NT$ Amount Amount Rate NT$ Amount

Financial Assets Monetary Item

USD $ 4,771,129 30.2750 144,445,920 4,971,561 29.5000 146,661,054

AUD 814,902 30.7450 25,054,169 869,872 30.0281 26,120,560

HKD 6,419,644 3.8970 25,017,353 5,039,049 3.7900 19,098,097

ZAR 4,009,184 3.7100 14,874,071 2,105,749 4.4426 9,355,079

EUR 356,629 39.2200 13,986,988 199,103 39.2468 7,814,156

JPY 18,086,378 0.3897 7,048,261 27,099,382 0.3622 9,815,000

NZD 76,366 23.4100 1,787,724 126,994 22.7593 2,890,288

GBP 30,818 46.6800 1,438,571 36,966 45.5510 1,683,836

CAD 33,526 29.6700 994,708 35,938 29.5118 1,060,595

CHF 4,231 32.1850 136,162 4,203 31.5339 132,537

SGD 4,769 23.3000 111,107 7,975 22.8718 182,402

CNY 42,384 4.7970 203,314 71,741 4.4664 320,427

KRW - - - 5,762,080 0.0261 150,559

Other (Note) - - 5,234 - - 28,210

Non-Monetary Item

USD $ - 30.2750 - 369 29.5000 10,891

Financial Liabilities

Monetary Item

USD $ 4,715,094 30.2750 142,749,482 4,913,223 29.5000 144,940,079

AUD 804,885 30.7450 24,746,201 923,251 30.0281 27,723,427

HKD 6,460,639 3.8970 25,177,109 5,126,253 3.7900 19,428,602

GBP 30,846 46.6800 1,439,881 36,942 45.5510 1,682,743

ZAR 4,010,466 3.7100 14,878,827 2,105,504 4.4426 9,353,991

EUR 356,389 39.2200 13,977,585 - - -

JPY 18,105,631 0.3897 7,055,765 27,118,881 0.3622 9,822,062

NZD 76,092 23.4100 1,781,315 126,981 22.7593 2,889,992

CAD 33,639 29.6700 998,080 36,043 29.5118 1,063,694

CHF 4,354 32.1850 140,118 4,360 31.5339 137,488

SGD 4,759 23.3000 110,875 7,664 22.8718 175,289

CNY 15,329 4.7970 73,532 53,254 4.4664 237,856

KRW - - - 5,761,150 0.0261 150,535

Other (Note) - - 9,436 - - 20,687

Note: Consolidated disclosure is applied for other currencies not over NT$ 100,000,000.

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(E) Account ReclassificationCertain accounts in the financial statements for the year ended December 31, 2010, have been

reclassified to be consistent with the presentation of the current-period financial statements.

(F) Pre-disclosure of IFRSs1. 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

IFRSs subcommittees In progress (expected to be completed in December 2012)

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

IFRSs subcommittees In progress (expected to be completed in March 2012)

11 Complete the preparation of comparative financial information of 2012 for IFRSs

IFRSs subcommittees In progress (expected to be completed in December 2012)

12 Complete the modification of related internal control (including financial reporting procedure and related information system)

IFRSs subcommitteesIn progress (expected to be completed in December 2012)

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.

2. The evaluation of the major differences between the current accounting policies and the IFRSs

accounting policies is listed below:


Accounting Issue Difference

Employee benefits

According to the regulation of SFAS No. 18, the profit and loss of the defined benefit plan annuity is amortized by Corridor test. In the future it will follow the regulation of International Accounting Standards No. 19 approved by Financial Supervisory Commission and recognized the actuarial profit and loss as other miscellaneous profit and loss.

According to the regulation of the SFAS No. 18, the Bank shall only estimate employee pension liability in terms of defined benefit plan, but according to the rules of IAS No. 19 and the “Regulations Governing the Preparation of Financial Reports by Public Banks” adopted from 2013, the Bank shall further estimate other employee benefit related liabilities such as preferential interest deposit of retired employees.

The annual leave with salary of the Bank's employee can be deferred to the next year. According to IAS No. 19, the Bank shall measure its obligation based on the concept of best estimate of employee benefits on balance sheet date.

Regular way transactionsinvolving financial products

The Bank follows settlement-date accounting in its treatment of debt securities. However, under IAS 39 as approved by the FSC, financial assets classified in the same way should be recognized using the same method. Thus the Bank will replace settlement-date accounting with trade-date accounting in the accounting treatment of the above-mentioned financial products.

3. The Bank has conducted the above mentioned evaluation in accordance with IFRSs, IASs, IFRICs,

and SICs approved by the FSC. The estimated significant differences drawn from the evaluation are

the result of considering current regulations, accounting principles, and the business environment.

Thus the actual differences in the future may be different, depending on regulations, accounting

principles, and the business environment in the future.

(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. Summary table of NPL disposal:

Trade date Counterparty Debt component Book value Sale price

Gains and losses on disposal

Additional term Relationship

2011.6.28 Yi Da United Co., LtdSyndication

Loan180,511 501,094 320,583 None None

Note: The difference between sale price and book value is recognized as recovery of bad debt and interest of overdue loans.

2. Disposal of a single batch of NPL up to $1,000,000 (excluding sales 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, 2011

NoteNumber of shares

Number of profoma shares

Total

Number of shares

Shareholding ratio

Taiwan Business Bank Insurance Agency Co., Ltd.

2F, No.158, Songjiang Rd Taipei City 104, Taiwan (R.O.C.)

Agent of personal insurance

100% 62,558 45,495 500,000 - 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% 7,174 4,083 300,000 - 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, 2011: 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

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


Bank Department

Securities and Trust

Inter-department adjustment

Total segment

Interest income $ 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

49,578 - - 49,578

Foreign exchange gains 595,901 - - 595,901


428,980 - - 428,980

Gains on financial assets carried at cost- net

148,505 - - 148,505

Losses on sale of foreclosed properties (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

Other net non-interest income 14,724 48,414 - 63,138

Inter-department income 15,643,010 189,997 (15,833,007) -

Inter-department expenses (15,351,474) (481,533) 15,833,007 -

Net revenue 16,481,125 674,369 - 17,155,494

Bad debt expenses (3,664,480) (4,109) - (3,668,589)

Operating expenses (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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Bank Department

Securities and Trust

Inter-department adjustment

Total segment

Interest income $ 18,378,628 204,670 - 18,583,298

Interest expenses (7,353,843) (16,244) - (7,370,087)

Net interest income 11,024,785 188,426 - 11,213,211

Service fee income 1,651,427 594,254 - 2,245,681

Service fee expenses (223,371) (27,074) - (250,445)

Service fee and commission income 1,428,056 567,180 - 1,995,236

Gains on financial assets or liabilities measured at fair value through profit or loss-net

360,877 704 - 361,581

Realized gains of available-for-sale financial assets-net 142,775 9,283 - 152,058

Realized gains of held-to-maturity financial assets-net 15 - - 15

Gains from equity investment under the equity method 88,503 - - 88,503

Foreign exchange gains-net 322,096 - - 322,096


51,210 - - 51,210

Proprietary and brokering sales revenues

2,052 - - 2,052

Gains on financial assets carried at cost -net

129,552 - - 129,552

Other net non-interest income 243,399 (15,930) - 227,469

Gains on sale of foreclosed prperties 12,934 - - 12,934

Securities brokerage income-net - 279,050 - 279,050

Revcovered bad debts and overdue accounts-net

1,410,830 - - 1,410,830

Inter-department income 14,861,145 194,004 (15,055,149) -

Inter-department expenses (14,476,804) (578,345) 15,055,149 -

Net revenue 15,601,425 644,372 - 16,245,797

Total bad debts expenses (4,116,958) 500 - (4,116,458)

Operating expenses (9,379,143) (358,923) - (9,738,066)

Net income before tax $ 2,105,324 285,949 - 2,391,273

Total assets $ 1,199,843,078 13,798,283 - 1,213,641,361

Total Liabilities $ 1,158,540,196 11,245,139 - 1,169,785,335


(C) Geographic segments informationThe Bank is classified by the geographic locations of overseas operating segments, and the geographic

segment information is as below:

Region For the years ended December 31,

Income before income tax : 2011 2010

Taiwan $ 2,675,687 1,816,729

America 380,930 250,274

Hong Kong 135,503 213,458

Australia 76,852 110,812

$ 3,268,972 2,391,273

Non-current assets :

Taiwan $ 16,565,334 16,303,277

America 71,077 71,218

Hong Kong 17,795 17,685

Australia 67,422 51,239

$ 16,721,628 16,443,419

(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 Responsibility

VII

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.

1. Corporate responsibility is clearly laid out in Article 1 of the Bank's corporate charter.

2. For further information on the implementation of the Bank's corporate social responsibility, please refer section 3 item 5.

No divergence.

(2) Establishment and implementation by the Company of the operation of a unit in charge, either exclusively or concurrently, of corporate social responsibility.

This is under the centralized handling of the Administration Management Dept. and carried out by the different headquarters units within their scope of jurisdiction. The status of implementation is reported to the Board of Directors on an irregular basis.

No divergence.

(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 and establishment of a clear and efficient system of rewards and punishments.

1. The Bank provides information on education and training to directors and supervisors when necessary, and publishes information on their training on the Market Observation Post System.

2. The Bank provides instruction in corporate ethical standards and legal compliance in basic and professional training courses for new and on-the-job employees.

3. 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

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 and the recycling of copy paper with blank reverse are carried out.

3. Recycling companies are commissioned to dispose of unusable computer equipment.

No divergence

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for Divergence

(2) Establishment by the Company, in accordance with its industrial characteristics, of a suitable environmental management system.

Environmental cleaning and maintenance is carried out in accordance with the Bank's “Cleaning and Maintenance Instructions for Business Units.”

No divergence

(3) Establishment of a dedicated environmental management unit or staff members to maintain the environment.

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.

No divergence

(4) Attention by the Company to the impact of climate change on operational activities, and formulation of a Company strategy for energy conservation, carbon reduction, and greenhouse gas reduction.

1. Bank-wide water conservation measures have been announced; 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

3. Maintenance of the public benefit

(1) Conformity with labor regulations, protection of employees' legal rights, and establishment of appropriate management methods and procedures.

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.

No divergence

(2) Provision by the Company of a safe and healthy work environment for employees, and regular offering of safety and health education.

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





for Divergence

(3) Establishment and public announcement by the Company of a consumer 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 the Administration Management Dept., Business Management Dept., and Credit Card Dept.

No divergence

(4) The company cooperates with suppliers to enhance the fulfillment of corporate social responsibility.

The Bank's procurement projects are handled by open tender, open price comparison or price negotiation in accordance with the “Guidelines for Construction and the Procurement, Ordering, and Sale of Property”. In addition, BPA-free roll paper is used in ATMs to assure the safety of users.

No divergence

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for Divergence

(5) 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.

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.

No divergence

(2) The Company's compilation of a corporate social responsibility report, and disclosure of the status of CSR implementation.

The Bank does not compile a CSR report, but discloses information on CSR implementation in the relevant portions of its Annual Report.

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 Bank 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 section 3 item 5.

7. If the Company's products or CSR report has passed the verification standards of a related verification institution, please explain: none.


(7) Implementation of honest operation, and measures adopted1. The Bank observes the relevant regulations in all its operating activities, and fulfills its tax obligations.

2. The Bank's work rules state clearly that employees may not take advantage of their jobs to perpetrate fraud or

seek improper benefits for themselves or others, nor may they accept gifts or enjoy other improper benefits.

The Bank's guidelines for employee rewards and punishments contain related punitive provisions to assure

the Bank's honest operation.

3. For the Bank's public tender projects, the “Guidelines for Construction Works and the Procurement and Sale

of Assets” state that “If companies that win bid tenders have a material relationship with the Bank, the matter

must be reported to the Bank's Board of Directors for approval before the bidding result becomes effective”

In addition, the bidding company must assure that it has acted in accordance with the tender instructions,

supplementary explanations, and standards stipulated in the relevant laws and regulations, and that there

was no fixing of bid prices, borrowing of licenses to rig the bidding, or other illegal behavior, and confirm its

material relationship with the Bank during the bidding process; should there be any violation or concealing of

facts, the bidder will allow the Bank to confiscate the bid bond and discrepancy (performance) bond, and to

cancel the business relationship, without objection. The above-mentioned Guidelines also stipulate work rules

and ethics:

(1) The acceptance of construction work or procurement or sale of assets should be completed immediately

after acquisition or disposition, with no delay allowed, unless otherwise agreed with the counterparty.

(2) Personnel engaged in construction work or the procurement of property may not take charge of

inspection and acceptance of related cases, and accompanying inspection personnel may not supervise

the inspection of related cases. Personnel who handle the sale of property may not take charge of the

inspection and delivery of related cases.

(3) Personnel at all levels who handle or supervise construction or the procurement or sale of property are

strictly prohibited from accepting banquet invitations or gifts from related companies so as to assure

cleanness and integrity, and persons in charge of procurement should be regularly rotated.

4. The Auditing Dept. of the Board of Directors carries out general or special audit every year in accordance with

the regulations comply by internal controls system and submits audit reports to the Board of Directors.

5. To identify, weigh, monitor, and report on major risks faced by the Bank, and to achieve the goals of

rationalized risk and compensation, the Bank has established a risk management policy and, in accordance

with the principles of that policy, has set up management systems for different kinds of risk.

(8) For information on corporate governance rules and related regulations, please visit the Market Observation Post System website (http://newmops.twse.com.tw) and click on “corporate governance.”

(9) 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 Units

Ⅷ

TBB'S OFFICES ADDRESS TEL NO. SWIFT ADDRESS

Head Office 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171

Banking Department 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171

Trust Department 15F, 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171

Securities 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 Branch46, Sec. 2, Min Chen E. Rd., Taipei, Taiwan, R.O.C.

(02)25417171 MBBTTWTP001

Chung Ho Branch634-10 Gin Pin Rd., Chung Ho Dist., New Taipei City, Taiwan, R.O.C.

(02)22427171

Po Ai Branch419 Min Cheng 2nd Rd., Zuoying Dist Kaohsiung City, Taiwan, R.O.C.

(07)5567171

North Taoyuan Branch985 Chung Zi Rd., Taoyuan City, Taoyuan Hsien, Taiwan, R.O.C.

(03)3567171 MBBTTWTP004

Nan Ken Branch381 Chung Cheng Rd., Luo Chu Shiang, Taoyuan Hsien,Taiwan, R.O.C.

(03)3227171 MBBTTWTP005

Si Tuen Branch107, Sec. 3, Taichung Kang Rd., Taichung City, Taiwan, R.O.C.

(04)23587171 MBBTTWTP006

Chung Min Branch301 Chung Min S. Rd., Taichung City, Taiwan, R.O.C.

(04)23057171

Ta Ya Branch161 Ta Ya Rd., Ta Ya Dist., Taichung City, Taiwan, R.O.C

(04)25687171 MBBTTWTP011

Jen Ta Branch183 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 MBBTTWTP020

Sung Shan Branch147, Sec. 4, Nan King E. Rd., Taipei, Taiwan, R.O.C.

(02)27167171 MBBTTWTP021

Chien Cheng Branch (Banking Broker)

76 Nan King W. Rd., Taipei, Taiwan, R.O.C. (02)25507171 MBBTTWTP022

Shih Lin Branch601 Chung Cheng Rd., Shih-Lin Chiu, Taipei, Taiwan, R.O.C

(02)28117171

Yung Ho Branch168 Chu Lin Rd., Yung Ho Dist, New Taipei City, Taiwan, R.O.C.

(02)29277171

Hsin Tien Branch192, Sec. 2, Chung Hsing Rd., Hsin Tien Dist., New Taipei City,Taiwan, R.O.C.

(02)29117171 MBBTTWTP025

Hsin Chuang Branch1&2F, 16, Sec. 1, Chung Hwa Rd., Hsin Chuang Dist., New Taipei City, Taiwan, R.O.C.

(02)29907171 MBBTTWTP026

Hwa Cheng Branch1&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 MBBTTWTP040

Taipei 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

South Taipei Branch 93, Sec. 2, Roosevelt Rd., Taipei, Taiwan, R.O.C. (02)23697171

Fu Hsin Branch390, Sec. 1, Fu Hsing S. Rd., Taipei, Taiwan, R.O.C.

(02)27057171 MBBTTWTP070

Chung Shan Branch 17 Chang Chuen Rd., Taipei, Taiwan, R.O.C. (02)25517171 MBBTTWTP080

Chien Kuo Branch4, Sec. 3, Min Chen E. Rd., Taipei, Taiwan, R.O.C.

(02)25097171 MBBTTWTP081

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Nai Hu Branch15, Alley 360, Sec. 1, Nai Hu Rd. Taipei, Taiwan, R.O.C.

(02)27997171 MBBTTWTP082

Nan King East Road Branch(Banking Broker)

311, Sec. 3, Nan King E. Rd., Taipei, Taiwan, R.O.C.

(02)27127171 MBBTTWTP090

Chung Hsiao Branch267, 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 MBBTTWTP101

World Trade Center Branch

547 Kuang Fu S. Rd., Taipei, Taiwan, R.O.C. (02)23457171 MBBTTWTP102

Yung Trin Branch552, Sec. 5, Chung Hsiao E. Rd., Taipei, Taiwan, R.O.C.

(02)23467171

Nan Kang Branch19-2 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 MBBTTWTP110

Dong Hu Branch152, Sec. 6, Min Chuan E. Rd., Taipei, Taiwan, R.O.C.

(02)87929771

Ta An Branch92, Sec. 2, Tun Hwa S. Rd., Taipei, Taiwan, R.O.C.

(02)27007171 MBBTTWTP120

Shuang Ho Branch356 Chung Ho Rd., Chung Ho Dist., New Taipei City, Taiwan, R.O.C.

(02)22327171

Jim Ho Branch403, Sec. 2, Chung Shan Rd., Chung Ho Dist., New Taipei City, Taiwan, R.O.C.

(02)22287171

Wu Ku Branch95 Wu Kung Rd., Wu Ku Industrial Zone, Hsin Chuang Dist., New Taipei City, Taiwan, R.O.C.

(02)22987171 MBBTTWTP130

Lin Kuo Branch1F-2, 188 Chung Shan Rd., Lin Kuo Dist., New Taipei City, R.O.C.

(02)26037171 MBBTTWTP131

Pan Chiao Branch2-1 Ming Te St., Pan Chiao Dist., New Taipei City, Taiwan, R.O.C.

(02)29687171 MBBTTWTP140

Shu Lin Branch1&2F-1,217, Sec. 1, Chung Shan Rd., Shu Lin Dist., New Taipei City, Taiwan, R.O.C.

(02)26757171 MBBTTWTP141

Tu Cheng Branch126, Sec. 2, Chung Yang Rd., Tu Cheng Dist., New Taipei City, Taiwan, R.O.C.

(02)22737171 MBBTTWTP142

Hwei Long Branch933 Chung Cheng Rd., Hsin Chuang Dist., New Taipei City, Taiwan, R.O.C.

(02)82097171 MBBTTWTP143

Xi Zhi Branch75, 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)24237171

Pu 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 Branch137, Sec. 4, San Ho Rd., San Chung Dist., New Taipei City, Taiwan, R.O.C.

(02)22867171 MBBTTWTP152

South San Chung Branch232, Sec. 1, Chi Cheng Rd., San Chung Dist., New Taipei City, Taiwan, R.O.C.

(02)29827171 MBBTTWTP153

Lu Chow Branch42 Yeong Loh St., Lu Chow Dist., New Taipei City, Taiwan, R.O.C.

(02)28477171

I Lan Branch305 Sec. 2,Chung Shan Rd., I Lan City, I Lane Hsien, Taiwan, R.O.C.

(03)9367171

Lo Tung Branch15 Chung Cheng N. Rd., Lo Tung Chen, I Lan Hsien, Taiwan, R.O.C.

(03)9567171



Su Aw Branch96-1,Sec. 1, Chung Shan Rd., Su Aw Chen, I Lan Hsien, Taiwan, R.O.C.

(03)9965051

Yang Mei Branch146 Ta Cheng Rd., Yang Mei Chen, Taoyuan Hsien, Taiwan, R.O.C.

(03)4786111

Hu Kou Branch76, Sec. 1, Chung Cheng Rd., Hu Kou Shiang, Hsin Chu Hsien, Taiwan, R.O.C.

(03)5997171

Taoyuan Branch (Banking Broker)

99 Chung Hwa Road Tao Yuan City, Taiwan, R.O.C.

(03)3317171 MBBTTWTP300

Ta Yuan Branch80 Chung Shan S. Rd., Ta Yuan Shiang, Taoyuan Hsien, Taiwan, R.O.C.

(03)3857171 MBBTTWTP301

Ta Shi Branch80 Fu Hsin Rd., Ta Shi Chen, Taoyuan Hsien, Taiwan, R.O.C.

(03)3887171

Chung Li Branch157 Chung Shan Rd., Chung Li City, Taoyuan Hsien, Taiwan, R.O.C.

(03)4277171 MBBTTWTP310

Nei Li Branch153 Chung Hsiao Rd., Chung Li City. Taoyuan Hsien, Taiwan, R.O.C.

(03)4557171 MBBTTWTP311

Hsin Ming Branch282 Min Tsu Rd., Chung Li City, Taoyuan Hsien, Taiwan, R.O.C.

(03)4027171

East Taoyuan Branch1223, Sec. 2, One Shou Rd., Guei Shan Shiang, Taoyuan Hsien, Taiwan, R.O.C.

(03)3297171

Hsin Wu Branch257 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 MBBTTWTP320

Chu 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 Branch789, Sec. 1, Chien Shou Rd., Pa Te City, Taoyuan Hsien, Taiwan, R.O.C.

(03)3767171 MBBTTWTP330

Luong Tan Branch64 Luong Yuan Rd., Luong Tan Shiang, Taoyuan Hsien, Taiwan, R.O.C.

(03)4807171

Chu Tung Branch6 Tung Lin Rd., Chu Tung Chen, Hsin Chu Hsien, Taiwan, R.O.C.

(03)5947171 MBBTTWTP340

Chu Nan Branch29 Po Ai St., Chu Nan Chen, Maio Li Hsien, Taiwan, R.O.C.

(037)467171

Tou Fen Branch90 Hsin Yi Rd., Tou Fen Chen, Maio Li Hsien, Taiwan, R.O.C.

(037)687171 MBBTTWTP351

Maio Li Branch606 Chung Cheng Rd., Maio Li City, Taiwan, R.O.C.

(037)327171

Feng Yuan Branch (Banking Broker)

1 San Feng Rd., Feng Yuan Dist., Taichung City, Taiwan, R.O.C.

(04)25267171 MBBTTWTP460

Houli Branch1F., 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 Branch14 Chen Cheng Rd., Ta Chia Dist., Taichung City, Taiwan, R.O.C.

(04)26867171

Sha Lu Branch355 Chung Chew Rd., Sha Lu Dist., Taichung City, Taiwan, R.O.C.

(04)26657171

Wu Jih Branch616 Chung Hwa Rd., Wu Jih Dist., Taichung City, Taiwan, R.O.C.

(04)23387171 MBBTTWTP483

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Taichung Branch (Banking Broker)

224 Chung Cheng Rd., Taichung City, Taiwan, R.O.C.

(04)22297171 MBBTTWTP490

Min Chen Branch 84 Min Chen Rd., Taichung City, Taiwan, R.O.C. (04)22267171 MBBTTWTP491

Hsing Chung Branch 136 Taichung Rd., Taichung City, Taiwan, R.O.C. (04)22877171

Pei Tuen Branch53 Chin Hwa N. Rd., Taichung City, Taiwan, R.O.C.

(04)22307171

Nan Tou Branch139 Fu Shing Rd., Nan Tou City, Nan Tou Hsien, Taiwan, R.O.C.

(049)2237171

Tsao Tuen Branch604 Chung Cheng Rd., Tsao Tuen Chen, Nan Tou Hsien, Taiwan, R.O.C.

(049)2357171

Pu Li Branch434 Chung Cheng Rd., Pu Li Chen, Nan Tou Hsien, Taiwan, R.O.C.

(049)2997171

Tan Tze Branch135, Sec. 2, Chung Shan Rd., Tan Tze Dist., Taichung City, Taiwan, R.O.C.

(04)25317171 MBBTTWTP521

Chu Shan Branch919, Sec. 3, Chi Shan Rd., Chu Shan Chen, Nan Tou Hsien,Taiwan, R.O.C.

(049)2637171

Chang Hwa Branch61 Kuang Fu Rd., Chang Hwa City, Chang Hwa Hsien, Taiwan, R.O.C.

(04)7257171 MBBTTWTP540

Ho Mei Branch8 Ho An St., Ho Mei Chen, Chang Hwa Hsien, Taiwan, R.O.C.

(04)7558131

Yuan Lin Branch16 Min Chuan St., Yuan Lin Chen, Chang Hwa Hsien, Taiwan, R.O.C.

(04)8377171 MBBTTWTP550

Pei Tou Branch62 Kung Chien St., Pei Tou Chen, Chang Hwa Hsien, Taiwan, R.O.C.

(04)8877171

Erh Lin Branch2 Chung Cheng Rd., Erh Lin Chen, Chang Hwa Hsien, Taiwan, R.O.C.

(04)8957171

Tou Liu Branch109 Ta Tung Rd., Do Lui City, Yun Lin Hsien, Taiwan, R.O.C.

(05)5347171

Pei Kang Branch65 Wen Hwa Rd., Pei Kang Chen, Yun Lin Hsien, Taiwan, R.O.C.

(05)7827171

Hu Wei Branch45 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

Hsin Ying Branch216 Chung Shan Rd., Hsin Ying Dist., Tainan City, Taiwan, R.O.C.

(06)6357171

Kai Yuan Branch12 Chung Hwa Rd., Yun Kang Dist., Tainan City, Taiwan, R.O.C.

(06)3117171

Yun Kang Branch79 Chung Cheng S. Rd., Yun Kang Dist., Tainan City, Taiwan, R.O.C.

(06)2517171 MBBTTWTP700

Shiue Chia Branch87 Chung Shan Rd., Shiue Chia Dist., Tainan City, Taiwan, R.O.C.

(06)7837171

Shan Hwa Branch352 Chung Shan Rd., Shan Hwa Dist., Tainan City, Taiwan, R.O.C.

(06)5816111

Yung Ta Branch1532, 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 Branch339 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 Branch75, Sec. 2, Chung Hwa E. Rd., Tainan City, Taiwan, R.O.C.

(06)2687171

An Ping Branch67, Sec. 1, Chung Hwa W. Rd., Tainan City, Taiwan, R.O.C

(06)2657171 MBBTTWTP730

Hua Lien Branch247 Chung Shan Rd., Hua Lien City, Hua Lien Hsien, Taiwan, R.O.C.

(03)8357171 MBBTTWTP760

Taitung Branch335, Sec. 1, Chung Hwa Rd., Taitung City, Taitung Hsien, Taiwan, R.O.C.

(089)327171

East Kaohsiung Branch249 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 Branch28, Sec. 3, Chien Kuo Rd., Feng Shan Dist., Kaohsiung City,Taiwan, R.O.C.

(07)7767171

Ling Ya Branch31 Chingnian 1st Rd., Ling Ya Dist., Kaohsiung City, Taiwan, R.O.C.

(07)5377171

Kaohsiung Branch79 Wu Fu 3rd Rd., Kaohsiung City, Taiwan, R.O.C.

(07)2717171 MBBTTWTP850

North Kaohsiung Branch (Banking Broker)

90 Fu Shing 1st Rd., Fu Shing Dist., Kaohsiung City, Taiwan, R.O.C.

(07)2387171

Ta Chang Branch116 Ta Chang 2nd Rd., Kaohsiung City, Taiwan, R.O.C.

(07)3827171

Chien Chen Branch378-3 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 Branch157 Chung Shan Rd., Feng Shan Dist., Kaohsiung City,Taiwan, R.O.C.

(07)7107171

Ta Fa Branch1 Hwa Chung Rd., Ta Fa Industrial Zone, Ta Liao Dist., Kaohsiung City, Taiwan, R.O.C.

(07)7887171

Ping Tung Branch (Banking Broker)

7 Han Kou St., Ping Tung City, Ping Tung Hsien, Taiwan, R.O.C.

(08)7327171

Xiao Gang Branch718 Hongping Rd., Xiaogang Dist., Kaohsiung City, Taiwan, R.O.C.

(08)8016171

Chiao Chou Branch100 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 MBBTTWTP893

Los Angeles Branch633, West 5TH St. Suite 2280 LA CA 90071 U.S.A.

213-8921260 MBBTUS6L

Hong Kong BranchSuite 2705-9,27/F,Tower The Gateway,Harbour City,Kowloon,H.k,

852-29710111 MBBTHKHH

Sydney BranchSuite3,Level24,363 George Street Sydney, N.S.W.2000 Australia

612-92623356 MBBTAU2S

Shanghai Representative Office

47/F, Hong Kong New World Tower,300 Huaihai Zhong Road, Shanghai 200021, China

86-21-51162823

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Chairman

Taiwan Business Bank, Ltd.

Documents

We can be the best · 2017-03-15 · of 2011 and a record high for recent years. These ﬁgures show a signiﬁcant improvement in our asset quality. The global economy will be remain