Stock Code ： 2834

Taiwan Stock Exchange Market Observation Post System ： http://mops.twse.com.tw

TBB’s Annual Report is available at ： https://www.tbb.com.tw

中華民國一○五年年報[2016]

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Notice to readers

This English version annual report is a summary translation of the Chinese version and is not an official document of the shareholders’ meeting. If there is any discrepancy between the English version and Chinese version, the Chinese version shall prevail.

Published in March 2017

Taiwan Business Bank Head Office

Address: No. 30, Ta Cheng St., Taipei, Taiwan, R.O.C. Tel: 886-2-2559-7171 Web Site: https://www.tbb.com.tw

Spokesperson

Name: Chang-Yi Chen Title: Executive Vice President Tel: 886-2-2559-7222/886-2-2559-7171 ext:1711 E-mail Address: [email protected]

Deputy Spokesperson

Name: Jun-Shen Tseng Title: V.P. & Chief Secretary Tel: 886-2-2550-5726 / 886-2-2559-7171 ext: 1511 E-mail Address: [email protected]

Deputy Spokesperson

Name: Chih-Chien Chang Title: Executive Vice President Tel: 886-2-2550-9179 / 886-2-2559-7171 ext: 1411 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 :886-2-2703-0999

Web Site: https://www.capital.com.tw

Rating Agency

Name: Taiwan Ratings Co. Address: 49F, No.7, Sec.5, Xinyi Road, Taipei, Taiwan, R.O.C. Tel: 886-2-8722-5800 Web Site: http://www.taiwanratings.com

The CPA-auditor of the Financial Report

Name: CHUNG, TAN TAN ・ LEE, FENG HUI Name of Employer: KPMG Certified Public Accountants Address: 68F, No.7, Sec. 5, Xinyi Road, Taipei, R.O.C. Tel: 886-2- 8101-6666 Web Site: http://www.kpmg.com.tw

Flotation at Overseas Stock Exchange and Information Inquiry: None

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We can be the best !

04 I. Message from the Management

06 II. Bank Profile

09 III. Organizational Framework

10 1. Organization Chart
11 2. Directors information
11 3. List of major shareholders
12 4. Operations of Major TBB Units

13 IV. Business Performance in 2016

14 1. The Domestic and Overseas Financial Environment
15 2. Changes in the Bank's Organization
15 3. Implementation of Business Plans and Operating Strategies
19 4. Budget Implementation
20 5. Revenues, Expenditures, and Profitability
20 6. Research and Development

21 V. Business Plans for 2017

22 1. Operating Directions and Policies
22 2. Business Targets
22 3. Future Development Strategies
23 4. The Impact of the External Competition Environment,Regulatory Environment, and Overall Operating Environment
23 5. Results of Latest Credit Rating

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24 VI. Financial Statements

25 1. Representation Letter
26 2. Independent Auditors' Report

118 VII. Corporate Social Responsibility

119
120 2. Customer Care
121 3. Environmental Protection
122 4. Social Benefit and Community Participation
123 5. Support for Academic, Cultural, and Sports Activities
124 6. Employee Care
125 7. Continuity of Operations and Creation of Shareholder Value

126 VIII. Directory of Head Office and Branch Units

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Message from I the Management

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Global recovery was weak in 2016, mainly because of disappointing economic performance by the advanced countries of America, Japan, and Europe; a slowdown in growth in emerging markets; and the uncertainties brought on by the Brexit referendum in June, impacting financial markets, global trade, and consumer and investor confidence. Despite the drop in global economic growth to 2.5%, the lowest level in seven years, Taiwan Business Bank posted growth in both profitability and business development in 2016 thanks to the support of all our shareholders and clients along with the dedicated efforts of our entire staff.

Looking ahead to 2017, following the weakness in economic growth in the first half of 2016, economic activity in numerous major economies strengthened in the second half of 2016. The IMF has predicted that global economic growth rate will rise to 3.4% in 2017. However, the world's economic prospects are still facing many uncertainties, mainly because of concerns about the possibility that the economic and trade policies of the new American administration will spark a rise in trade protectionism that will suppress global trade and obstruct global economic growth. Forecasts by the Directorate General of Budget, Accounting and Statistics and other domestic institutions put Taiwan's economic growth rate for 2017 in the range of 1.68% to 1.92%, indicating the possibility of an improvement over 2016. However, the domestic and international economies will be affected by uncertainties in the future. Among these are the influence on the global economy and financial markets of the economic and trade policies of the new American government. The localization of supply chains and economic restructuring in mainland China, and the direction taken by cross-strait relations, will affect Taiwan's economic performance. In addition, the implementation and progress of the government's innovation industry policy will have a further impact on domestic economic performance. Overall, the banking industry is expected to experience growth in its various items of business in 2017 and to work vigorously to develop the fintech market; given the narrow interest-rate spread, however, many variables will continue to exist in the overall environment, adding to the difficulty of operating in the domestic and overseas investment markets. Taiwan's banking industry is predicted to maintain a slight profit growth in 2017. The TBB will continue its profit growth momentum of the past year with a focus on the development of key businesses having growth potential as our entire staff exerts its utmost concerted efforts toward the goal of upgrading overall operating performance, achieving profit growth targets, and realizing our four prime operating principles—pursuit of business performance, enhancement of employee value-added, emphasis on shareholder equity, and fulfillment of corporate social responsibility—as we progress toward joining the ranks of outstanding banks and creating an even better business performance.

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Chairman President
Robert Rueen-Fong Chu Tsan-Huang Chou
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Taiwan Business Bank Annual Report 2016

II

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Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Chief Auditor
(Chief Compliance Officer)
Chang-Yi Chen Chih-Chien Chang Gordon Y. Wang Mei-Yeh Wu Kun-Shan Chen Chiu-Yen Chen
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Chang-Yi Chen Chih-Chien Chang Gordon Y. Wang

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.

At the time of the TBB's reorganization in 1976, it had a capitalization of NT$500 million, 50 branches, and 58 sub-branches. To build up the Bank's operating capital and strengthen its operating structure, repeated capital increases have brought total capitalization to NT$59,688.95 million today. The Bank's structural framework has also been readjusted constantly in response to changes in the financial environment and in business needs. An Auditing Depatment and a Secretarial Department were set up under the Board of Directors in the headquarters. Apart from Compliance and Legal Department, the Bank's management units include 18 departments under three major business groups and three major management centers. The Bank has 125 domestic business units (including the Banking Department) and an Offshore Banking Unit, and also operates seven overseas branches, in Hong Kong, Los Angeles, New York, Sydney, Brisbane, Shanghai, and Wuhan, along with the Yangon Representative Office. Regional Operation Centers were set up to handle business development and supervision, centralized business managemenet, operational services, and other business support functions in order to enhance business promotion capability and reinforce asset quality control. In addition, Domestic Processing Centers were established to upgrade operating performance through the centralized handling of domestic remittances, bills collection and withdrawal.

Taiwan Business Bank Annual Report 2016

2. Bank M&A, reinvestment in related enterprises, and reorganization in 2016 and to the end of February 2017

The Bank carried out no M&A or reorganization during this period. Reinvestment was made in 100% ownership in four enterprises—the Taiwan Business Bank Life Insurance Agency Co., Ltd, Taiwan Business Bank Property Insurance Agency Co., Ltd, TBB International Leasing Co., Ltd and TBB (Cambodia) Microfinance Instituion PLC— and the TBB International Leasing Co., Ltd reinvested in 100% ownership in a firm, the Taiwan Business Bank International Leasing Co., Ltd.

4. Major exchanges or transfers of shares by directors, supervisors, and others required to report shareholding 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

Organizational III Framework

1. Organization Chart

11 11 12

2. Directors information

3. List of major shareholders

4. Operations of Major TBB Units

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Taiwan Business Bank Annual Report 2016

1. Organization Chart

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Compliance and Legal Compliance
Affair Center 人力資源處 and Legal Dept.
人力資源處 Human
Resources Dept.
Administration General Affairs 總務處
Management Center Dept.
會計處
Accounting Dept.
Personal Information
Protection Management
Committee
AML and CFT Committee Risk Management 風險管理部 Dept.
Loan Supervision 授信管理部
Audit Committee Dept.
Risk
Remuneration 風險管理中心 Management Center
Committee Credit Investigation 徵信部 Dept. 國內作業中心 Domestic
Processing Center
債權管理部 Overdue Loan &
Control Dept.
Risk Management
Committee Regional
Operation Center
Business
Management Dept. Business Banking Dept.
Development Div. Domestic Branches
Chief Compliance 營運管理中心 Management CenterOperating Technology Dept.Information Loan Supervision Div.
Offcer Appraisal Div.
SharehoMeetinglders' DirectorsBoard of Chairman of the Board President Digital Banking Dept. Loan Review Div.
Executive Vice Overdue Loan
President & Control Div.
財務運籌事業群財務部
Treasury Group Treasury Dept.
國際部 Corporate
Banking D ept.
ALM Committee 企業金融事業群 B anCor ki ng porate G roup Banking BranchOffshore
International
Business Strategy Banking Dept.
Committee
Overseas Branches
個人金融部 Banking Dept.Personal
Credit Card Dept. 信用卡部
Loan Supervision Committee
NPL Management Committee 個人金 Banking GroupPe 融事業群 rsonal Wealth Management 財富管理部 Dept.
Trust Asset Evaluation Committee
Personnel Evaluation Committee
Securities Dept. 證券部 S 證券分公司 ecurities Branches
IT Planning & Development
Committee
Trust Dept. 信託部
董 Secretarial Dept. 事會秘書處
General Auditor 總稽核董事會稽核處 Auditing Dept.
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III

2. Directors information

Dec.31 2016

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Title Name
Acting Chairman of the Board Robert Rueen-Fong Chu
Managing Director & President Tsan-Huang Chou
Managing Director Shiu-Yen Lin
Managing Director Hong-Chi Chang
Independent Managing Director Chau-Chen Yang
Director Hung-Sheng Yu
Director Jong-Jyr Kau
Director Pei-Ming Huang
Director Chung-Min Huang
Director Che-Nan Wang
Director Li-Ling Lin
Director Chih-Chang Chiang
Director Wen-Chieh Wang
Independent Director Chih-Yu Cheng
Independent Director Yaw-Huei Huang
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3. List of major shareholders

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Apr.17 2017
Name Shares %
Bank of Taiwan 1,028,091,127 17.22%
Hua Nan Commercial Bank Trustee Account- Mega Financial
717,092,080 12.01%
Holding Company
Kin Ming Investment Co., Ltd. 157,506,248 2.64%
Land Bank of Taiwan 144,897,770 2.43%
Ministry of Finance 131,680,823 2.21%
Chen Hai Lin 94,521,518 1.58%
Vanguard Emerging Markets Stock Index Fund, A Series Of
83,357,215 1.40%
Vanguard International Equity Index Funds
Chun Jin Shi 61,917,351 1.04%
BES Engineering Corporation 59,451,751 0.996%
CitiBank Taiwan was commissioned and management investor
57,902,335 0.97%
account of Dimension emerging market estimate fund
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Note: The holding shares accords with the book records of last ex-dividend date. Hua Nan Commercial Bank Trustee Account-exchangeable/ non-exchangeable stock is a trust property of Mega Financial Holding Company which was trusted on April 16, 2013. Mega Financial Holding Company remains the right of deposal.

Taiwan Business Bank Annual Report 2016

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.

(7) Compliance and Legal Department

Compliance and Legal Department handles the planning, management and implementation of legal compliance system and legal affair conduct.

IV

20 20

Business Performance in 2016

1. The Domestic and Overseas Financial Environment

2. Changes in the Bank's Organization

3. Implementation of Business Plans and Operating Strategies

4. Budget Implementation

6. Research and Development

Taiwan Business Bank Annual Report 2016

1. The Domestic and Overseas Financial Environment

With the turmoil caused by America's disappointing economic growth in the first half of the year, the Brexit referendum, the American presidential election, and the timetable for the hiking of American interest rates, plus the weakness of the Japanese economy, slow recovery in the euro zone, the slowdown in Chinese economic growth, and turbulence in worldwide financial markets, global economic growth in 2016 did not match the optimistic expectations at the start of the year and the pace of recovery slackened. According to data released by Global Insight Inc. (GII) in February 2017, the global economy grew by 2.5% for the year of 2016 as a whole, 0.3 percentage points below the January 2016 forecast and less than the 2.8% growth rate recorded in 2015. This indicates that while the global economy continued to recover, performance was sluggish.

Statistics compiled by the Directorate General of Budget, Accounting and Statistics put Taiwan's economic growth for 2016 at 1.5%. In the first quarter of 2016, the growth of Taiwan's merchandise exports continued at a negative rate because of the weak growth of the global economy and slow demand for electronic end-consumer products, plus the crowding-out effect caused by the localization of Chinese supply chains and the drop in crude oil and other raw materials prices. The government's implementation of consumption-boosting measures bore fruit, however, stimulating private consumption and reducing the extent of economic decline. Taiwan's economy growth rate only slightly decreased by 0.23%. In the second quarter, private consumption grew moderately, the semiconductor market warmed up, the fall in raw materials prices slowed down, and the reduction in Taiwan's commodity exports (calculated in US dollars) diminished appreciably. Figured in New Taiwan dollars on an inflation-adjusted basis, and with exports of services added, the growth in the real value of Taiwan's exports of goods and services turned positive and the rate of economic growth switched from negative to a positive 1.13%. In the third quarter, the global economy grew at a moderate pace. Taiwan's merchandise exports grew only slightly; in the field of domestic demand, however, sales in the auto market continued strong and demand in the retail industry heated up, boosting growth in private consumption. Furthermore, government spending increased due to the budget execution, the semiconductor industry increased the investment in advanced production processes, and the domestic airline industry expanded its fleet, bringing growth in private investment. The economic growth rate for the quarter rose to 2.12%. In the fourth quarter, raw materials prices bottomed out and began rising and semiconductor demand expanded strongly, heating up export performance; with the continued addition of advanced production processes by the semiconductor industry and the expansion of the airline fleet, private investment continued to expand and the economy growth rate rose to 2.88%.

In the field of interest rates, the domestic economic recovery remained sluggish in the first half of 2016 and inflation expectations stayed moderate. The Central Bank adjusted the policy interest rate downward by 0.125 percentage points in March and again in June, for a total reduction of 0.25 percentage points, with the aim of stimulating economic growth. In the field of exchange rates, despite the initiation of interest-rate hikes in America at the end of 2015, which caused an outflow of foreign currency and a weakening of the New Taiwan dollar relative to the U.S. dollar, after the U.S. slackened its rate increases, international capital flowed into emerging Asian markets and the NT dollar strengthened slightly relative to the U.S. dollar in the first half of the year. With American economic growth in the first half proving disappointing and the U.S. taking a cautious attitude toward interest rate hikes, plus the ongoing influx of foreign capital, the NT dollar continued strengthening in the third quarter; but with the election of Donald Trump and the accompanying interest rate increases in the U.S., the greenback strengthened and Asian currencies weakened. At the end of 2016, the NT dollar was trading at 32.279 to the U.S. dollar, a rise of 2.44% compared with a year earlier; the average exchange rate for the year as a whole was NT$32.318:US$1, down 1.30% from the previous year.

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2. Changes in the Bank's Organization

(1) The Taiwan Business Bank Anti-Money Laundering and Combatting the Financing of Terrorism Committee was set up in accordance with the Regulations for Taiwan Business Bank Anti-Money Laundering and Combatting the Financing of Terrorism Committee.
(2) In line with the evaluation operations of the Asia/Pacific Group on Money Laundering (APG) scheduled for the 4th quarter of 2018, and with the demand of the competent authority for reinforcement of the prevention of money laundering and terrorism financing, the Anti-Money Laundering Section of the Compliance and Legal Department is serving as a dedicated unit for the handling of matters related to anti-money laundering and combatting the financing of terrorism.
(3) To clearly delineate the division of responsibilities in post-loan management and reinforce risk controls, the name of the Post-Loan Management Division of the different Regional Operation Centers has been renamed “Loan Review Division” to bring it more in line with reality.

3. Implementation of Business Plans and Operating Strategies

(1) Profitability

The Bank's profitability and its various areas of business experienced stable growth in 2016, resulting in an after-tax net profit of NT$5.196 billion (and a before-tax net profit of NT$6.323 billion). It carried out a capital increase of NT$2.842 billion via transferred earnings, and issued stock and cash dividends of NT$0.50 and NT$0.10 per share, respectively, for the previous year (2015).

(2) Corporate Governance
Reinforcement of information disclosure channels and upgrading of transparency in corporate governance
A. The Bank has long strived to enhance its corporate governance. It received the highest honors in the Securities & Futures Institute's Information Disclosure Evaluation for seven years in a row, from the sixth to the twelfth evaluations, and ranked in the top 5% in both the First and Second Annual Corporate Governance Evaluation held by the Taiwan Stock Exchange.
B. Each investor has immediate access to information on the Market Observation Post System, and can obtain the same information simultaneously on the official TBB website. The Bank also issues press releases on an irregular basis, giving investors multiple channels for acquiring TBB information.
(3) Core Businesses
A. Corporate Banking

Outstanding awards affirm top performance in Credit Guarantee Fund business

a. The Bank received an Outstanding award in the “Best Small and Medium Enterprise Banking” category at the Taiwan Academy of Banking and Finance's Eighth Taiwan Banking and Finance Best Practice Awards, burnishing the Bank's image as a specialized small and medium enterprise bank.
b. In recognition of the Bank's outstanding performance in small and medium enterprise financing, it was presented with four Outstanding Bank for Small and Medium Enterprise Credit Guarantee Financing awards by the Ministry of Economic Affairs: the Credit Guarantee Partner Award, Direct Guarantee Performance Award, Young Entrepreneur Support Award, and Small and Medium Enterprise Innovation Development Support Award.

Taiwan Business Bank Annual Report 2016

  - c. The Bank won Outstanding awards from the Financial Supervisory Commission for the Program to Encourage Lending by Domestic Banks to Small and Medium Enterprises (Division A) and the Program to Encourage Lending by Domestic Banks to Creative Enterprises (Division A). It was also presented a Special Award for Balanced Regional Development.

  - d. In the extension of small and medium enterprise loans, the Bank ranked No. 1 in Taiwan in both total amount and ratio of loans transferred for guarantees to the Small and Medium Enterprise Credit Guarantee Fund.

B. Foreign Exchange Operations
- Stable growth in the foreign exchange business and continued expansion of forex market share
- a. The Bank strengthened the absorption of foreign-currency deposit and expanded the scale of its deposits. The accumulated average balance of foreign-currency deposits in 2016 grew 9.72% over 2015.
- b. The export/import financing business was vigorously developed and share of the forex market was expanded. The Bank's share of the export bills negotiation market rose from 1.6% in 2015 to 2.12% in 2016, and its share of the import LC issuance market climbed from 3.36% to 3.82%.
C. Wealth Management
- Stable growth in wealth-management fee income
- a. The Bank focused on strengthening its wealth-management business by vigorously expanding fee income from the insurance and fund businesses, thereby increasing bank-wide fee income, boosting revenue, and establishing income as the priority goal.
- b. With vigorous promotion of a special program aimed at the marketing of designated products, fee income from the wealth-management business rose 8.97% in 2016.
(4) Innovative Products
A. Approval of 8 e-banking utility model patents and continuous development of innovative digital banking businesses so as to provide more convenient services
- a. The Bank submitted applications for new fintech invention and utility model patents, including two-factor credential, Hi-Bank digital banking, a medical care payment system, a cash-flow system for temples, smart branches, and multimedia digital content. The Bank has applied for 23 financial patents by the end of 2016, and the Intellectual Property Office has approved 8 utility model patents as of February 2017.
- b. Customers were provided with cross-strait e-commerce cash-flow services with the introduction of CrossBorder e-Remittance Service.
- c. Customers were offered a diversity of payment methods. They can use smart phones to scan the QR codes on their credit-card statements and make payment directly online.
B. Establishment of Smart Branches to Provide an Innovative Service Model
- a. A smart branch was set up at the Fu Hsin Branch on Aug. 4, 2016 to provide the public with five convenient services: pre-arranged number assignment, pre-arranged transactions, SmartTable, automatic check-deposit machines, and interbank ATM deposits.
- b. The SmartTable provides online pre-arranged form-filling and number assignment services, thereby simplifying teller operations and creating customer-centric digital financial services.
C. Provision of Diversified Services by Developing Products that Conform to Social Trends
- a. The Bank introduced long-term care products (under the Elderly Care Program) in combination with trust, home loans, and annuity insurance in March of 2016 in order to expand the long-term care trust business and satisfy the needs of customers for financial management trust services, and carried out island-wide employee training by regions for promoting these services.

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  - b. In line with the government's policy of encouraging childbirth, the Bank introduced a Pregnancy Support consumer loan with the aim of increasing Taiwan's fertility rate.

  - c. The Bank began offering escrow trust for third-party payments, allowing third-party payment businesses to turn payments for credit-card transactions that they take in via their web platform's collection and payment service over to the Bank's trust account, thereby assuring the security of payments for Internet transactions.

  - d. A sales contract was signed with the Concord Capital Management Corp. in January of 2016 for the sale of Concord's Income Partners funds as a means of expanding the OBU's investment client group.

  - e. The Digital Deposit Account (Type 2) business was inaugurated to enhance the Bank's digitized services.

(5) Expansion of Scope of Channel Services
Expansion of New York, Tokyo, and Philippine branches to expand overseas deployment and increase overseas revenue
A. The New York Branch opened for business on Feb. 27, 2017, expanding the Bank's operating bases in the United States so as to increase its operating efficiency.
B. The Bank applied to open a branch in the world's fifth-largest financial center, Tokyo, in order to expand its global deployment and increase its overseas revenue; the Financial Supervisory Commission granted approval on Jan. 4, 2016, and the Japanese Financial Services Agency began preparatory examination on Oct. 14, 2016. The new branch is expected to open for business before the end of September 2017.
C. In line with the New Southbound Policy and in consideration of the Philippines' rapid economic growth in recent years as well as the advantage of its demographic dividend, the Bank evaluated the feasibility of establishing a branch in Manila and submitted the relevant materials to the Financial Supervisory Commission for review on July 15, 2016. In compliance with FSC instructions, the Bank provided materials on its prevention of money-laundering and financing of terrorism, and commissioned an accounting office to provide opinions on the anti-money laundering and compliance mechanism for the Manila branch. The FSC's approval for the establishment of the branch is expected to be received soon so as to reinforce the Bank's Southeast Asian deployment.
(6) Information Operations
A. Implementation of information upgrading to meet international standards and provide safer and more convenient transaction services
- a. To comply with the safety guidelines for international organizations, the Bank carried out ATM EMV software upgrading and the replacement of old machines. EMV chip upgrading is projected for completion at the end of December 2017.
- b. To meet the diverse demands of the Real-Time Gross Settlement system from the Financial Information Service Co., Ltd., the Bank added domestic Australian Dollar remittance services, greatly reducing the time required for such remittances and achieving the goal of same-day remittance.
- c. To promote international cash withdrawal services, the Bank, in cooperation with the Financial Information Service Co., Ltd., completed the provision of services that allow customers to withdraw funds or check account balances at ATMs in Hong Kong and Macau using TBB bank cards.
- d. In accordance with the Central Bank's plan for renewal of the forex data processing system framework, the TBB completed the establishment of an online forex declaration system for teller and corporate Internet banking operations, and switched to real-time online forex balance enquiry and notification of block expenditures to the Central Bank's billing servers. This improves transmission efficiency and simplifies the integration of teller operations.
B. Continued promotion of the e-banking business and broad development of customer groups
- a. In recognition of outstanding performance in the promotion of e-banking business, the Bank received the Best Development Award for Electronic Payment Business from the Financial Information Service Co.

Taiwan Business Bank Annual Report 2016

  - b. The Bank designed activities to increase interaction between fans and its Facebook Fans page and to boost customer loyalty, and effectively attracted the participation of mobile and Internet communities by different age groups via the smart bank and online Facebook.

(7) Realization of Anti-Money Laundering, Internal Control, Internal Auditing, and Legal Compliance Operations
A. Establishment of a dedicated unit and hiring of professional consultants to ensure full compliance of AntiMoney Laundering and Combatting the Financing of Terrorism.
- a. The Anti-Money Laundering Section of the Compliance and Legal Department is the Bank's dedicated unit charged with for the prevention of money laundering and terrorism financing. In 2016, the Bank also set up a Anti-Money Laundering and Combatting the Financing of Terrorism Committee.
- b. Deloitte Taiwan was hired as consultant and an anti-money laundering and counter-terrorist financing system developed by SIORK Corporation was adopted to implement the Bank's Anti-Money Laundering and Combatting the Financing of Terrorism and the domestic AML/CFT systems.
- c. In conformity with the 2018 fourth-quarter evaluation operations of the Asia Pacific Group on Money Laundering (APG), and to meet the supervisory requirements of the competent authority in regard to the anti-money laundering and counter-terrorist financing mechanism, the TBB established an AML/CFT system in accordance with the Banking Association's Directions Governing Anti-Money Laundering and Countering Terrorism Financing of Banking Sector.
- d. A transaction monitoring system (TMS) was completed, providing for the monitoring of client transactions and warning of suspicious activities and abnormal transactions to facilitate follow-up verification and disposition by business units.
B. Holding of regular Compliance Officer Seminars and continued reinforcement of overseas compliance operations.
- a. A Compliance Officer Seminar was held in each the first and second halves of 2016, with the content covering the propagation of the TBB's compliance framework and major compliance regulations, explanations of compliance assessment, guidelines for handling self-assessments on compliance, and guidance on important recent laws and decrees. The aim is to assure the effective conveyance of laws and decrees and implementation of the compliance system by making sure that compliance officers have a continuing knowledge of laws and decrees related to their jobs and to compliance regulations.
- b. In addition to strengthening liaison and supervision by headquarters with the handling of compliance by overseas branches, the Bank has also strengthened implementation of the principles of localization and professionalism, and the appointment of dedicated compliance or anti-money laundering personnel to assure compliance by the branch's business and its personnel and its anti-money laundering operations. It has also reinforced the qualifications and the training of overseas branch personnel.
C. Law-related documents received from external sources and self-collected information on changes in laws requiring action by the Bank are listed as “compliance follow-up cases” pursuant to the Control Mechanism for Compliance Follow-up Cases. A total of 42 cases were listed as compliance follow-up cases in 2016. The responsible units fill out monthly reports on the status of follow-up on these cases, and these reports are compiled and submitted to Chief Compliance Officer.
(8) Corporate Social Responsibility
A. Active implementation of corporate social responsibility and realization of the value of sustainable operation
- a. For the 2015 CSR Report, the British Standards Institution (BSI) was entrusted for the first time to certify the report, which passed certification as complying with the Guideline Ver.4 of the Global Reporting Initiative. This indicates that the TBB's CSR actions have won international professional recognition, and enable the public and stakeholders to understand clearly the Bank's principles and actions in regard to social responsibility, further realizing the Bank's corporate spirit of care and sharing.

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b. The exchange and interest rate enquiry webpage that the Bank has set up on its official website in order to provide friendly financial services was honored with the highest AAA barrier-free public information page rating by the NCC in 2016. The Bank's mobile banking services have added credit-card activation and loss reporting functions for the disabled, fulfilling its corporate social responsibility and enhancing its public image.
B. Continued contribution to disadvantaged groups and active participation in social benefit activities
a. The TBB has manifested its spirit of “sending warmth in the chill winter” for six years in a row, mobilizing branches throughout Taiwan to visit disadvantaged groups within their areas of operation. The Bank has made donations to 46 disadvantaged groups totaling NT$1,585,000, and actively participated in social benefit activities.
b. The TBB exerted efforts toward the propagation of financial know-how on campuses and in communities in order to promote correct financial management concepts and provide education about the prevention of financial fraud, laying down a solid foundation for financial education. In recognition of these efforts, the Bank was awarded by the Financial Supervisory Commission for the “Promotion of Financial Literacy on Campus and in the Community.”
C. Fulfilling responsibility for environmental protection and continued energy conservation and carbon reduction efforts
a. The Environmental Protection Administration of the Executive Yuan and the Department of Environment Protection of the Taipei City Government cited the TBB five years in a row for outstanding performance in green procurement.
b. The Taipei City Government publicly cited the TBB for receiving ISO 50001 Energy Management Systems certification and the designation of its headquarters as an energy-saving-label building.
c. The New Taipei City Government awarded 11 TBB branches—Pu Chya, Lu Chow, Jim Ho, North San Chung, Tu Cheng, Hsin Tien, Shuang Ho, Hwa Cheng, Pan Chiao, Shu Lin, and Hsin Chuang— along with the Linkou Computer Room of the Information Technology Department for achievements in electricity-conservation activities.
D. Provision of a friendly working environment and upgrading of employee well-being
a. The TBB promotes occupational safety and health and a friendly working environment, and was awarded by the Department of Health, Taipei City Government with outstanding breast-feeding room certification. In 2016, it provided free workplace influenza vaccinations and participated in community health promotional activities held by the Taipei City Government, and received an Outstanding Cancer Prevention Workplace Award and Best Cancer Prevention Partner Workplace Award.
b. Headquarters personnel were provided with automatic meal voucher management service, marking a simplification from the paper meal voucher process which involved monthly printing, issuance, and retrieval. The switch to the systematic automatic issuance of electronic meal vouchers allows for payment via the scanning of QR codes.

4. Budget Implementation

(1) The annual average balance of deposits was NT$1,259.305 billion, for an achievement rate of 103.02%.
(2) The annual average balance of loans outstanding was NT$1,010.824 billion, for an achievement rate of 95.25%.
(3) Fee income from life insurance and property insurance was NT$1.922 billion, for an achievement rate of 115.46%.

Taiwan Business Bank Annual Report 2016

(1) Net income in 2016 amounted to NT$20.657 billion, bad debt expenses and guarantee liability provisions were NT$2.504 billion, operating expenses were NT$11.793 billion, and net income before tax from continuing operations was NT$6.359 billion (a growth of 2.63% from 2015); net profit after-tax was NT$5.196 billion, giving a return on assets (after tax) of 0.35%, return on equity (after tax) of 7.50%, profit margin (after tax) of 25.15%, and after-tax earnings per share of NT$0.87.
(2) The various items of pre-provision, pre-tax net income totaled NT$8.864 billion, an increase of NT$258 million over 2015. To strengthen loan risk appetite, the Bank allocated NT$2.504 billion in reserves against bad debts. Before-tax profit in 2016 amounted to NT$6.359 billion, an increase of NT$163 million compared with 2015; this was due primarily to the expansion of the wealth management business, leading to an increase in net fee income.
(3) Non-performing loan ratio in 2016 was 0.43%, a decrease of 0.05% compared with 2015, giving a coverage ratio of 277.63%, an increase of 46.41% over 2015.

6. Research and Development

(1) Establishment of an Exclusive Unit for Industry Research
A. A total of 174 industry analysis reports were written and published in the Bank's E-Library in 2016 for colleagues to peruse.
B. Elite professionals from industry, government, and academe are invited to speak on an irregular basis to help the Bank's employees understand the latest trends in industrial development.
(2) Encouragement of Innovation and Professionalism in Line with Business Development Needs
A. Employees are encouraged to take the initiative in carrying out innovation and suggesting new financial products and methods of business improvement that will enhance the Bank's business competitiveness. A total of 97 employee suggestions were accepted in 2016.
B. Business lectures are held on a scheduled basis and a rich variety of digital learning courses are offered to encourage employees to engage in further on-the-job studies and absorb new knowledge that will strengthen their competitiveness and enhance their professional know-how.

V

Business Plans for 2017

1. Operating Directions and Policies

2. Business Targets

3. Future Development Strategies

4. The Impact of the External Competition Environment, Regulatory Environment, and Overall Operating Environment

5. Results of Latest Credit Rating

Taiwan Business Bank Annual Report 2016

1. Operating Directions and Policies

In response to such developmental trends as the internationalization of financial markets, the ageing population, and digitization, and in coordination with such key points of administration as the Financial Supervisory Commission's promotion of support for the real economy by financial institutions, the development of fintech, the New Southbound Policy, green finance, and legal compliance, besides giving equal emphasis to financing and guidance in cultivating the specialized field of small and medium enterprise finance and continuously working to lay down a foundation of customer service, the TBB also strives to escape the bonds of traditional thinking and reinforce the development of digital banking.

(1) Augmentation of Equity Capital and Expansion of Business Capabilities

A Reinforcement of investor relations and highlighting of the Bank's reasonable share value.

B. Augmentation of capital and enhancement of business expansion capability.
(2) Addition of Overseas Units and Integration of Channel Services
A. Reinforcement of overseas deployment and the reinvestment business to upgrade profit contribution.
B. Focus on niche markets and the cultivation of core customers to upgrade customer value.
(3) Optimization of Human Resources and Strengthening of Manpower Training
A. Improvement of the manpower structure and optimization of human resources.
B. Strengthened training of all types of personnel.
(4) Reinforcement of Technological Investment and Development of Digital Finance
A. Strengthening of information infrastructure investment in line with business needs, and enhancement of overall operating performance of information systems.
B. Simultaneous real/virtual integration for optimization of the customer experience.
C. Renovation of old premises and remolding of the TBB's brand image.
(5) Optimization of Internal Processes and Strengthening of Risk Management
A. Reinforcement of operational and customer management processes.
B. Strengthening of strategic alliances and introduction of innovation capacity.
C. Implementation of various risk management mechanisms and enhancement of asset quality.
(6) Reinforcement of Corporate Governance and Fulfillment of Corporate Social Responsibility
A. Reinforcement of corporate governance and implementation of three lines of defense for internal control.
B. Realization of care for society and fulfillment of corporate social responsibility.

2. Business Targets

To give equal weight to the protection of shareholder interests, improvement of the capital structure, and enhancement of asset quality, the Bank has set the following targets in consideration of the economic growth forecast of the Directorate General of Budget, Accounting and Statistics for 2017 and the reduction in the life insurance commission rate:

(1) Annual average deposit balance: NT$1,275.815 billion.
(2) Annual average balance of loans outstanding: NT$1,061.339 billion.
(3) Total foreign exchange transactions: US$65.845 billion.

3. Future Development Strategies

(1) Focus on key businesses that have development advantage, manifestation of the full-staff marketing spirit in the form of action, and overall enhancement of operating performance.

(2) With the aim of supporting millions of SMEs, serving in the role of a specialized bank for SME financing and guidance by helping customers procure financing and bringing in guidance resources to facilitate corporate operation and sustainable development; further, the molding of a professional brand image through close customer relations.
(3) Full use of the advantage of a specialized SME bank to reinforce integrated business marketing; continuous expansion of brand visibility to deeper customer loyalty, enhancement of profitability, and creation of corporate value and shareholder benefit.
(4) Deep cultivation of the Asia-Pacific region, global deployment, deepening of relations with core customers, and expansion of the foreign-exchange business with target customers, so as to enlarge the Bank's market share of the forex business and ratio of profit from overseas markets.
(5) Integration of real and digital channels and use of big data, smart customer service applications, and community operations to reinforce product development capability and precision marketing so as to build an alldimensional digital financial business.
(6) Continuous development of outstanding core customers and focusing on wealth-management products, implementation of the all-staff marketing strategy, and manifestation of the TBB's momentum in concerted efforts to expand business scale and market share.
(7) Augmentation of equity capital, strengthening of risk controls, maintenance of asset quality, upgrading of risk appetite and operating performance, and advancement toward the ranks of outstanding banks.
(8) Continuous implementation of information security upgrading and improvement measures so as to assure the enhanced security of information operations and the reduction of information security incidents, and the strengthening of the TBB's information security defense capabilities.
(9) Reinforcement of equity management in the reinvestment business, effective implementation of healthy corporate governance for reinvested enterprises, vigorous encouragement of subsidiaries to reinforce their risk controls, and enhancement of operating performance so as to enhance overall profit from reinvestment.

4. The Impact of the External Competition Environment, Regulatory Environment, and Overall Operating Environment

The TBB has adopted the following strategies in response to the entry of non-financial institutions into fundsflow services and the problems of banking transition resulting from the passage of the Rules Governing the Administration of Electronic Payment Business and the impact of the Bank 3.0 development trend:

(1) Establishment of electronic payment in combination with the Bank's SME customers, and enhancement of competitiveness through cross-industry alliances with third-party businesses.
(2) Vigorous expansion of smart branches and strengthening of digitized banking services.
(3) Expansion of mobile payments with the Bank playing a funds-flow role; in addition to increasing demand deposits and fee income, this will also boost customer loyalty.

5. Results of Latest Credit Rating

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Ratings
Date of Rating Rating Company Outlook
Long-term Credit Short-term Credit
Jan. 25, 2017 Taiwan Ratings twAA- twA-1+ Stable
Jan. 25, 2017 Standard & Poors BBB+ A-2 Stable
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Note: The TBB’s level of capital has been raised to and can be maintained at an appropriate level, and the Bank can obtain a certain amount of covert support from the Taiwan government. Taiwan Ratings and Standard & Poors have, therefore, adjusted the Bank's ratings upward.

Taiwan Business Bank Annual Report 2016

VI Financial Statements

25 26

1. Representation Letter

2. Independent Auditors' Report

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Representation Letter

The entities that are required to be included in the combined financial statements of TAIWAN BUSINESS BANK, LTD. as of and for the year ended December 31, 2016 under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with International Financial Reporting Standards No. 10 by the Financial Supervisory Commission, "Consolidated and Spearate Financial Statements." In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, TAIWAN BUSINESS BANK, LTD. and its Subsidiaries do not prepare a separate set of combined financial statments.

Company name: TAIWAN BUSINESS BANK, LTD. Chairman: Rueen Fong Chu Date: March 22, 2017

Taiwan Business Bank Annual Report 2016

Independent Auditors ’ Report The Board of Directors

Taiwan Business Bank, Ltd.

Opinion

We have audited the consolidated financial statements of Taiwan Business Bank, Ltd. "the Bank" and its subsidiaries which comprise the consolidated statement of financial position as of December 31, 2016 and 2015, the consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2016 and 2015, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Bank and its subsidiaries as of December 31, 2016 and 2015, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Public Held Banks, and with the International Financial Reporting Standards ("IFRSs"), International Accounting Standards ("IAS"), interpretations as well as related guidance endorsed by Fiancial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audit in accordance with the Rules Governing Auditing and Certification of Financial Statements by Certified Public Accountants and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Bank and its subsidiaries in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

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

1. The assessment of loans impairment

Please refer to Note(4) (F) "Financial Instruments" for related accounting policy, Note 5 (A) for accounting assumptions and estimates, and Note 6 (F) "Discount and loans–net" and Note 6 (AK) "Financial Risk Information" for details of loans impairment, respectively.

The management of the Bank and its subsidiaries assess the impairment of loans by determining if there is any observable evidence indicating impairment, and dividing them into collective assessment and individual assessment based on the materiality levels to measure by different impairment method. For the individual assessment with objective evidence of impairment, the measurement is based on expected future cash flow. For the collective assessment with objective evidence of impairment, the Bank and its subsidairies need to calculate the recovery rate of each group to measure the impairment amount. For the collectively assessed loans without objective evidence of impairment, the impairment is calculated by establishing an impairment model using the previous loss experience on assets with similiar credit risk characteristic to form basic estimation. Besides the methods mentioned above, the management of the Bank and its subsidairies should inspect weather the amount of impairment is in compliance with the minimum level made by the authority. Both the evaluation of impairment evidences and its methods, as well as the uses of assumptions, such as the expected losses rates, recovery rates and default rates, which are applied to determine the future cash flow, involved significant judgements and estimations. Therefore, the assessment on the impairment of loans has been identified as a key audit matter in our audit.

How the matter was addressed in our audit

Our principal audit procedures included : understanding the methodology and related control procedure about how the management asseses and measures the impairment amount of loans. For individual assessment, we used sampling test to evaluate the use of the original effective interest rate, the appropriateness of the estimation of future recoverable amounts and value of collateral. For collective assessment, we assessed the impairment model adopted by the management and reviewed the appropriated of the calculation of the impairment parameters and verified the

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completeness of the loans portfolio via sampling. Meanwile, we assessed whether allowance for the loans meets the requirements.

2. The valuation of employee benefit obligation

Please refer to Note(4) (M) "Employee benefit" for related accounting poicy, Note(5) (B) "Retirement benefit" for accounting assumptions and estimates, and Note(6) (W) "Provision for liabilities" for details of the valuation of employee benefit obligation.

The management of the Bank and its subsidiaries evaluates parameters of employees benefit obligation not only include discount rate and the rate of increase in future pay levels but also consider the current market conditons. Those parameters which involved the excercise of professional judgements will affect the amount recognized as employee liabilities. Therefore the valuation of employee benefit obligation has been identified as a key audit mater in our ardit.

How the matter was addressed in our audit

The primary audit process of key audit matter mentioned above included: acquiring the actuary report of liabilities and deposit with favorable rates, as well as the pension from external actuary expert to inspect professional qualification and independence of external expert; sampling and testing the accuracy and completeness of employees' information and financial information that the management offer to the actuary expert while analyzing the variation of employee benefit liability, which includes understanding the market and the reasonableness of assumption parameter.

Other Matters

We have also audited the financial report which was prepared separately as of and for the years ended December 31 of 2016 and 2015 of Taiwan Business Bank Ltd. and expressed an unqualified opinion.

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Public Held Banks, and with the IFRSs, IASs, interpretations as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance are responsible for overseeing the Bank and its subsidiaries’ financial reporting process.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

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

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

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank and its subsidiaries’ internal control.

Taiwan Business Bank Annual Report 2016

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank and its subsidiaries’ ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Bank and its subsidiaries to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

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

The engagement partners on the audit resulting in this dependent auditor's report are CHUNG, TAN TAN and LEE, FENG HUI.

KPMG

Taipei, Taiwan (Republic of China) March 22, 2017

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated statement of financial position, financial performance and its 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 review such consolidated financial statements are those generally accepted and applied in the Republic of China.

The auditors’ report and the accompanying consolidated 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 consolidated financial statements, the Chinese version shall prevail.

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TAIWAN BUSINESS BANK, LTD.

AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2016 AND 2015

INDEPENDENT ACCOUNTANTS' AUDIT REPORT

(Expressed In Thousands of New Taiwan Dollars)

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December 31, 2016 December 31, 2015
Assets
Amount ％ Amount ％
Cash and cash equivalents (Notes 6(A) and 7) $ 49,564,948 3 41,061,810 3
Due from the Central Bank and call loans to banks (Notes 6(B) and 7) 90,619,262 6 118,884,771 8
Financial assets at fair value through profit or loss (Note 6(C)) 1,443,693 - 2,082,611 -
Securities purchased under resell agreements (Note 6(D)) 619,201 - 26,784,515 2
Receivables － net (Note 6(E)) 24,000,980 2 24,697,758 2
Current Income tax assets 116,062 - 293,454 -
Discounts and loans － net (Notes 6(F) and 7) 1,045,014,647 70 1,007,398,302 68
Available-for-sale financial assets － net (Notes 6(G) and (N)) 73,330,688 5 25,668,785 2
Held-to-maturity financial assets － net (Note 6(H)) 192,523,259 13 206,277,479 14
Other financial assets － net (Note 6(I)) 2,132,723 - 2,086,966 -
Premises and equipment － net (Note 6(J)) 14,120,706 1 14,105,378 1
Intangible assets － net 183,061 - 131,292 -
Deferred income tax assets － net (Note 6(V)) 1,240,678 - 1,437,671 -
Other assets － net (Note 6(K)) 3,819,074 - 4,980,803 -
Total assets $ 1,498,728,982 100 1,475,891,595 100
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Taiwan Business Bank Annual Report 2016

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December 31, 2016 December 31, 2015
Liabilities and equity
Amount % Amount %
Liabilities
Deposits from the Central Bank and other banks (Notes 6(L) and 7) $ 75,817,857 5 77,857,537 5
Financial liabilities at fair value through profit or loss (Note 6(M)) 214,259 - 219,999 -
Securities sold under repurchase agreements (Note 6(N)) 2,758,905 - 4,163,147 -
Payables (Note 6(O)) 35,412,594 2 30,924,431 2
Current income tax liabilities 310,077 - - -
Deposits and remittances (Notes 6(P) and 7) 1,253,804,477 84 1,232,320,685 84
Financial debentures (Note 6(Q)) 42,750,000 3 45,600,000 3
Other financial liabilities (Note 6(R)) 10,819,145 1 12,197,117 1
Provision for liabilities (Note 6(S)) 3,606,753 - 3,321,737 -
Deferred income tax liabilities (Note 6(V)) 884,569 - 920,890 -
Other liabilities (Note 6(T)) 1,480,006 - 706,923 -
Total liabilities 1,427,858,642 95 1,408,232,466 95
Equity parent company
Common stock (Note 6(U)) 59,688,949 4 56,846,618 4
Retained earnings:
Legal reserve (Note 6(U)) 7,088,772 1 5,626,631 1
Special reserve (Note 6(U)) 185,128 - 185,128 -
Undistributed earnings (accumulated deficit)(Note 6(U)) 4,936,973 - 4,873,804 -
Other items in equity ( 1,029,482 ) - 126,948 -
Total equity 70,870,340 5 67,659,129 5
Total liabilities and equity $ 1,498,728,982 100 1,475,891,595 100
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TAIWAN BUSINESS BANK, LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED DECEMBER 31, 2016 AND 2015

(Expressed In Thousands of New Taiwan Dollars)

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For the year ended December 31,
2016 2015 Percent
Amount ％ Amount ％ Change%
Interest revenue (Notes 6(Z) and 7) $ 24,191,265 117 25,853,374 128 ( 6 )
Less: Interest expenses (Notes 6(Z) and 7) ( 9,195,062 ) ( 44 ) ( 10,384,359 ) ( 51 ) ( 11 )
Net interest income 14,996,203 73 15,469,015 77 ( 3 )
Non-interest income
Service fee and commission income (Notes 6(AA) and 13) 3,866,295 19 3,540,500 17 9
Gains (losses) on financial assets or liabilities at fair value 596,551 3 185,112 1 222
through profit or loss - net (Note 6(AB))
Realized (losses) gains on available-for-sale financial assets - 103,019 - 90,107 - 14
net (Note 6(AC))
Realized losses on held-to-maturity financial assets - net - - ( 13 ) - 100
Foreign exchange gains (losses) 35,767 - 524,206 3 ( 93 )
Reversal of impairment loss on assets 6,782 - 6,104 - 11
Net other non-interest income (Notes 6(AD) and 7) 96,009 - 43,861 - 119
Net profit or loss on financial assets measured at cost 174,670 1 131,489 1 33
Securities brokerage income - net 137,765 1 171,503 1 ( 20 )
Other miscellaneous income (Note 6(AE)) 643,973 3 - - 100
Net revenue 20,657,034 100 20,161,884 100 2
Bad debt expenses and guarantee liability provisions ( 2,504,194 ) ( 12 ) ( 2,409,189 ) ( 12 ) 4
(miscellaneous provision)(Note 6(AF))
Operating expenses ：
Employee benefit expenses (Notes 6(AG) and 12) ( 7,414,913 ) ( 36 ) ( 7,157,141 ) ( 35 ) 4
Depreciation and amortization expenses ( 387,602 ) ( 2 ) ( 380,054 ) ( 2 ) 2
(Notes 6(AH) and 12)
Other general and administrative expenses (Note 6(AI)) ( 3,990,909 ) ( 19 ) ( 4,019,336 ) ( 20 ) ( 1 )
Total operating expenses ( 11,793,424 ) ( 57 ) ( 11,556,531 ) ( 57 ) 2
Income from continuing operations before income tax 6,359,416 31 6,196,164 31 3
Income tax expenses (Note 6(V)) ( 1,163,717 ) ( 6 ) ( 1,083,128 ) ( 5 ) 7
Net income 5,195,699 25 5,113,036 26 2
Other comprehensive income ：
Items not to be reclassified into profit or loss
Remeasurements of defined benefit plans ( 312,761 ) ( 2 ) ( 306,693 ) ( 1 ) ( 2 )
Income tax of items not to be reclassified 53,169 - 52,138 - 2
Total items not to be reclassified into profit or loss ( 259,592 ) ( 2 ) ( 254,555 ) ( 1 ) ( 2 )
Items that are or may be reclassified subsequently to profit or
loss
Difference of foreign exchange in translating financial ( 286,061 ) ( 1 ) 151,731 1 ( 289 )
statements of foreign operating units
Unrealized (losses) gains on available-for-sale financial ( 915,842 ) ( 4 ) ( 66,530 ) ( 1 ) ( 1,277 )
assets-net
Income tax related to items that are or may be reclassified 45,473 - ( 22,470 ) - 302
to profit or loss
Total items that are or may be reclassified subsequently ( 1,156,430 ) ( 5 ) 62,731 - ( 1,943 )
to profit or loss
Other comprehensive income (net amount after tax) ( 1,416,022 ) ( 7 ) ( 191,824 ) ( 1 ) ( 638 )
Total comprehensive income $ 3,779,677 18 4,921,212 25 ( 23 )
Earnings per share (in NT dollar)(Note 6 (X))
Basic earnings per share (in NT dollar) $ 0.87 0.86
Diluted earnings per share (in NT dollar) $ 0.86 0.85
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Taiwan Business Bank Annual Report 2016

TAIWAN BUSINESS BANK, LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

(Expressed In Thousands of New Taiwan Dollars)

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Equity attributed to the parent company
Stock Retained earnings Other item in equity
Difference
of foreign
exchange in Unrealized
translating gains and
financial losses on
statements available
of foreign -for-sale
Undistributed
Common Special operating financial
stock Legal reserve reserve earnings Total units assets Total
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	Equity attributed to the parent company	Equity attributed to the parent company	Equity attributed to the parent company	Equity attributed to the parent company	Equity attributed to the parent company	Equity attributed to the parent company	Equity attributed to the parent company	Total
	Stock	Retained earnings				Other item in equity
	Common stock	Legal reserve	Special reserve	Undistributed earnings	Total	Difference of foreign exchange in translating fnancial statements of foreign operating units	Unrealized gains and losses on available -for-sale fnancial assets

Balance─January 1, 2015 Net Income for the year ended December 31, 2015 Other comprehensive income (losses) for the year ended December 31, 2015 Total comprehensive income for the year ended December 31, 2015 Earnings appropriation and distribution Legal reserve appropriated Reversal of special reserve Common stock dividend Balance - December 31, 2015 Net Income for the year ended December 31, 2016 Other comprehensive income (losses) for the year ended December 31, 2016 Total comprehensive income for the year ended December 31, 2016 Earnings appropriation and distribution Legal reserve appropriated Common stock dividend Cash dividends on ordinary shares Balance─December 31, 2016	$ 52,979,141 - - - - - 3,867,477 56,846,618 - - - - 2,842,331 - $ 59,688,949	4,032,090 - - - 1,594,541 - - 5,626,631 - - - 1,462,141 - - 7,088,772	281,365 - - - - ( 96,237 ) - 185,128 - - - - - - 185,128	5,381,104 5,113,036 (254,555 ) 4,858,481 ( 1,594,541 ) 96,237 (3,867,477 ) 4,873,804 5,195,699 (259,592 ) 4,936,107 ( 1,462,141 ) ( 2,842,331 ) (568,466 ) 4,936,973	9,694,559 5,113,036 (254,555 ) 4,858,481 - - (3,867,477 ) 10,685,563 5,195,699 (259,592 ) 4,936,107 - ( 2,842,331 ) (568,466 ) 12,210,873	91,858 - 129,784 129,784 - - - 221,642 - (241,279 ) (241,279 ) - - - ( 19,637)	(27,641 ) - (67,053 ) (67,053 ) - - - ( 94,694 ) - (915,251 ) (915,251 ) - - - ( 1,009,845)	62,737,917 5,113,036 (191,824 ) 4,921,212 - - - 67,659,129 5,195,699 (1,416,022 ) 3,779,677 - - (568,466 ) 70,870,340

Ⅵ

TAIWAN BUSINESS BANK, LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

(Expressed In Thousands of New Taiwan Dollars)

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For the years ended December 31,
2016 2015
Cash flows from operating activities:
Net income before tax $ 6,359,416 6,196,164
Adjustments ：
Accounts that do not affect cash flow
Depreciation expenses 311,826 303,565
Amortization expenses 75,776 76,489
Provision of bad debt expenses 2,454,355 2,404,596
Net (gain) loss on financial assets and liabilities at fair value through ( 38,075 ) 94,369
profit or loss
Interest expenses 9,195,062 10,384,359
Interest revenues ( 24,191,265 ) ( 25,853,374 )
Net change of provision for guarantee liabilities 49,839 4,593
-
Net change of other miscellaneous provision for liabilities ( 10,046 )
Losses on disposal and retirement of premises and equipment 2,044 595
-
Reversal of impairment loss on non-financial assets ( 6,782 )
Other ( 111,693 ) ( 126,000 )
Total ( 12,258,913 ) ( 12,720,854 )
Change in assets and liabilities related to operating activities ：
Net change in assets related to operating activities ：
Decrease (increase) in due from the Central Bank and call loans to 28,262,722 ( 57,040,327 )
banks
Decrease in financial assets at fair value through profit or loss 672,520 308,411
Decrease (increase) in securities purchased under resell agreements 26,165,314 ( 21,256,678 )
Decrease (increase) in receivables 1,177,326 ( 2,858,038 )
Increase in discounts and loans ( 39,936,798 ) ( 8,471,950 )
(Increase) decrease in other financial assets ( 95,038 ) 22,124
Decrease in other assets 151,408 2,313,112
Total 16,397,454 ( 86,983,346 )
Net change in liabilities related to operating activities ：
Decrease in deposits from the Central Bank and other banks ( 2,039,680 ) ( 2,737,535 )
(Decrease) increase in financial liabilities at fair value through profit or ( 1,267 ) 42,102
loss
-
Decrease in provisions for lawsuit ( 51,118 )
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Taiwan Business Bank Annual Report 2016

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For the years ended December 31,
2016 2015
(Decrease) increase in securities sold under repurchase agreements ( 1,404,242 ) 267,839
Increase in payables 4,659,942 428,957
Increase in deposits and remittances 21,483,792 80,163,687
Decrease in other financial liabilities ( 1,370,057 ) ( 3,548,270 )
Increase in provision for employee benefits 42,279 74,698
Total 21,319,649 74,691,478
Total change in assets and liabilities related to operating activities 37,717,103 ( 12,291,868 )
Total adjustments 25,458,190 ( 25,012,722 )
Cash provided by operating activities 31,817,606 ( 18,816,558 )
Interest collected 23,642,414 25,743,075
Interest paid ( 9,366,841 ) ( 10,445,687 )
Income tax paid ( 328,614 ) ( 326,191 )
Net cash provided by (used in) operating activities 45,764,565 ( 3,845,361 )
：
Cash flows from investing activities
Purchase of available-for-sale financial assets ( 48,577,054 ) ( 9,692,299 )
Proceeds from repayments of debt investment without active market - 1,500,000
-
Purchase of hold-to-maturity financial assets ( 11,735,908 )
Proceeds from repayments of hold-to-maturity financial assets 13,754,220 -
-
Purchase of financial assets carried at cost ( 328,104 )
Purchase of premises and equipment ( 342,304 ) ( 315,739 )
Proceeds from disposition of premises and equipment 219 10,000
-
Increase in guarantee deposits paid ( 412,409 )
Decrease in guarantee deposits paid - 53,035
Purchase of intangible assets ( 109,187 ) ( 55,015 )
Net cash used in investing activities ( 35,686,515 ) ( 20,564,030 )
：
Cash flows from financing activities
Issuance of financial debentures 10,700,000 10,000,000
Redemption of financial debentures ( 13,550,000 ) ( 6,200,000 )
Increase in guarantee deposits received 34,286 33,854
(Decrease) increase in lease payable ( 7,915 ) 6,127
Increase(decrease) in other liabilities 1,844,788 ( 2,568,532 )
Cash dividends ( 568,466 ) -
Net cash (used in) provided by financing activities ( 1,547,307 ) 1,271,449
Foreign exchange effect ( 27,605 ) ( 42,493 )
Net increase (decrease) in cash and cash equivalents 8,503,138 ( 23,180,435 )
Cash and cash equivalents, at the beginning of the period 41,061,810 64,242,245
Cash and cash equivalents, at the end of the period $ 49,564,948 41,061,810
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Ⅵ

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) TAIWAN BUSINESS BANK, LTD.AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016 and 2015

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Stated)

1. COMPANY HISTORY

TAIWAN BUSINESS BANK, 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 as Taiwan Business Bank, Ltd. in order to finance and provide 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, 2016, the Bank not only set up the banking dept., international dept., securities dept. and trust dept. under head office but also has 124 domestic branches, 1 offshore banking unit, 6 overseas branches, oversea representative office and 17 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.

2. APPROVAL DATE AND PROCEDURES OF THE CONSOLIDATED FINANCIAL STATEMENTS

3. NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS ADOPTED

(A) Impact of the International Financial Reporting Standards ("IFRSs") endorsed by the Fi‑ nancial Supervisory Commission, R.O.C. ("FSC") but not yet in effect

According to Ruling No. 1050026834 issued on July 18, 2016, by the FSC, public entities are required to conform to the IFRSs which were issued by the International Accounting Standards Board (IASB) before January 1, 2016, and were endorsed by the FSC on January 1, 2017 in preparing their financial statements. The related new standards, interpretations and amendments are as follows:

Taiwan Business Bank Annual Report 2016

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New, Revised or Amended Standards and Interpretations Effective date per IASB
Amendments to IFRS 10, IFRS 12 and IAS 28 "Investment Entities: Applying the January 1, 2016
Consolidation Exception"
Amendments to IFRS 11 "Accounting for Acquisitions of Interests in Joint January 1, 2016
Operations"
IFRS 14 "Regulatory Deferral Accounts" January 1, 2016
Amendment to IAS 1 "Disclosure Initiative" January 1, 2016
Amendments to IAS 16 and IAS 38 "Clarification of Acceptable Methods of January 1, 2016
Depreciation and Amortization"
Amendments to IAS 16 and IAS 41 "Agriculture: Bearer Plants" January 1, 2016
Amendments to IAS 19 "Defined Benefit Plans: Employee Contributions" July 1, 2014
Amendment to IAS 27 "Equity Method in Separate Financial Statements" January 1, 2016
Amendments to IAS 36 "Recoverable Amount Disclosures for Non-Financial January 1, 2014
Assets"
Amendments to IAS 39 "Novation of Derivatives and Continuation of Hedge January 1, 2014
Accounting"
Annual improvements cycles 2010-2012 and 2011-2013 July 1, 2014
Annual improvements cycle 2012-2014 January 1, 2016
IFRIC 21 "Levies" January 1, 2014
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Except for the following items, the Bank and its subsidiaries believes that the adoption of the above IFRSs would not have a material impact on the consolidated financial statements:

(a) Amendments to IAS 36 "Recoverable Amount Disclosures for Non Financial Assets"
Under the amendments, the recoverable amount is required to be disclosed only when an impairment loss has been recognized or reversed. In such cases, the amendments also require that the following be disclosed if the recoverable amount is based on fair value less costs of disposal:
(1) the level of the fair value hierarchy within which the fair value measurement is categorized; and
(2) the valuation technique(s) used for fair value measurements categorized within Levels 2 and 3 of the fair value hierarchy, and the key valuation assumptions made.

The Bank and its subsidiaries expects the aforementioned amendments will result in a broader disclosure

(B) Newly released or amended standards and interpretations not yet endorsed by the FSC

A summary of the new standards and amendments issued by the IASB but not yet endorsed by the FSC. The FSC announced IFRS 9 and IFRS 15 should be applied starting at January 1, 2018. As of the date the consolidated financial statements were issued, the FSC has yet to announce the effective dates of the other IFRSs. As of the end of reporting date is as follows:

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New, Revised or Amended Standards and Interpretations Effective date per IASB
IFRS 9 "Financial Instruments" January 1, 2018
Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets Between an Effective date to be
Investor and Its Associate or Joint Venture" determined by IASB
IFRS 15 "Revenue from Contracts with Customers" January 1, 2018
IFRS 16 "Leases" January 1, 2019
Amendment to IFRS 2 "Clarifications of Classification and Measurement of January 1, 2018
Share-based Payment Transactions"
Amendment to IFRS 15 "Clarifications of IFRS 15" January 1, 2018
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Ⅵ

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New, Revised or Amended Standards and Interpretations Effective date per IASB
Amendment to IAS 7 "Disclosure Initiative" January 1, 2017
Amendment to IAS 12 "Recognition of Deferred Tax Assets for Unrealized Losses" January 1, 2017
Amendments to IFRS 4 "Insurance Contracts" (Applying IFRS 9 Financial January 1, 2018
Instruments with IFRS 4 "Insurance Contracts")
Annual Improvements to IFRS Standards 2014-2016 Cycle:
IFRS 12 "Disclosure of Interests in Other Entities" January 1, 2017
IFRS 1 "First-time Adoption of International Financial Reporting Standards" and January 1, 2018
IAS 28 "Investments in Associates and Joint Ventures"
IFRIC 22 "Foreign Currency Transactions and Advance Consideration" January 1, 2018
Amendments to IAS 40 Investment Property January 1, 2018
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The Bank and its subsidiaries are still currently determining the potential impact of the standards listed below:

Issuance / Release Dates	Standards or Interpretations	Content of amendment
May 28, 2014 April 12, 2016	IFRS 15 "Revenue from Contracts with Customers"	IFRS 15 establishes a five-step model for recognizing revenue that applies to all contracts with customers, and will supersede IAS 18 "Revenue," IAS 11 "Construction Contracts," and a number of revenue-related interpretations. Final amendments issued on April 12, 2016, clarify how to (i) identify performance obligations in a contract; (ii) determine whether a company is a principal or an agent; (iii) account for a license for intellectual property (IP); and (iv) apply transition requirements.
November 19, 2013 July 24, 2014	IFRS 9 "Financial Instruments"	The standard will replace IAS 39 "Financial Instruments: Recognition and Measurement", and the main amendments are as follows: ‧Classification and measurement: Financial assets are measured at amortized cost, fair value through profit or loss, or fair value through other comprehensive income, based on both the entity's business model for managing the financial assets and the financial assets' contractual cash flow characteristics. Financial liabilities are measured at amortized cost or fair value through profit or loss. Furthermore, there is a requirement that "own credit risk" adjustments be measured at fair value through other comprehensive income. ‧Impairment: The expected credit loss model is used to evaluate impairment. ‧Hedge accounting: Hedge accounting is more closely aligned with risk management activities, and hedge effectiveness is measured based on the hedge ratio.
January 13, 2016	IFRS 16 "Leases"	The new standard of accounting for lease is amended as follows: ‧For a contract that is, or contains, a lease, the lessee shall recognize a right-of-use asset and a lease liability in the balance sheet. In the statement of proft or loss and other comprehensive income, a lessee shall present interest expense on the lease liability separately from the depreciation charge for the right-of use asset during the lease term. ‧A lessor classifes a lease as either a fnance lease or an operating lease,and therefore,the accountingremains similar to IAS 17.

the initial adoption of the abovementioned standards or interpretations. The results thereof will be disclosed when the Bank and its subsidiaries completes its evaluation.

Taiwan Business Bank Annual Report 2016

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) Statement of compliance

the Preparation of Financial Reports by Public Held Banks (hereinafter referred to as the Regulations), and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed by the Financial Supervisory Commission, ROC.

(B) Basis of preparation

(a) Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis except for the following material items in the statement of financial position:

derivative instruments);
defined benefit obligation and the effect of the asset ceiling in Note 4(M).

branches and its subsidiaries. The internal transactions within the headquarter, the domestic branches and the foreign branches are offset when preparing the consolidated financial statements.

The functional currency of each entities is determined based on the primary economic environment in which the entities operate. The consolidated financial statements are presented in New Taiwan Dollar, which is the Bank's functional currency. All financial information presented in New Taiwan Dollar has been rounded to the nearest thousand.

(C) Basis of consolidation

(a) Subsidiary

in the consolidated financial statements from the date that control commences until the date that control ceases.

Gains or losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

(b) Elimination of inter-group transaction

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. The unrealized profits arising from the transactions with the investments under the equity method are eliminated to the extent of the percentage of shares possessed by the group over the investee. The unrealized losses are eliminated in the same way as the unrealized profit, but only under the circumstances that there are no evidences of impairment.

Ⅵ

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Shareholding(Holding %)
Established Main business December 31, December 31,
location scope 2016 2015
Taiwan Business Bank Insurance Taiwan Agent of personal 100 100
Agency Co., Ltd. insurance
Taiwan Business Bank Property Taiwan Agent of property 100 100
Insurance Agency Co., Ltd. insurance
Taiwan Business Bank International Taiwan Leasing business 100 100
Leasing Co., Ltd.
Taiwan Business Bank International China Leasing business 100 100
Financing Leasing Co., Ltd.
TBB (Cambodia) Microfinance Kampuchea Financial 100 100
Institution Plc company
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(D) Foreign currency

(a) Foreign currency transaction

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies on the reporting date are retranslated to the functional currency at the exchange rate of Bank of Taiwan at 10 AM. The foreign currency gain or loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of translation. Foreign currency differences arising on retranslation are recognized in profit or loss, except for the available-for-sale equity investment which are recognized in other comprehensive income arising on the retranslation.

(b) Foreign operations

The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Group's functional currency by the following procedures:

(1) Assets and liabilities are translated to the Group's functional currency at exchange rates at the reporting date;
(2) Profit and loss are translated to the Group's functional currency by the average rate (unless the exchange rate of the period fluctuates intensively, then it applies the exchange rate on the trade date);
(3) Foreign currency differences are recognized in other comprehensive income.

All the translation differences arising from above procedures are presented in the foreign currency translation reserve in equity. The exchange difference from translating net investments in foreign operations is recognized in other comprehensive income. When a foreign operation is wholly or partially disposed, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.

Taiwan Business Bank Annual Report 2016

(E) Cash and cash equivalent

Cash and cash equivalent comprise cash on hand, petty cash, foreign currency on hand and cash in banks, but excludes those items which are designated for specific purposes or restricted by contracts and law.

(F) Financial Instruments

and financial assets and liabilities designated as at fair value through profit or loss on initial recognition. Financial instrument is classified in this category if acquired principally for the purpose of selling or repurchasing in the short term. This type of financial asset is measured at fair value at the time of initial recognition, and attributable transaction costs are recognized in profit or loss as incurred. A regular way purchase or sale of financial assets shall be recognized and derecognized, as applicable, using trade-date accounting. The derivative financial instruments held by the Bank and its subsidiaries, except for those designated as hedging instruments, are classified under this account. In addition, the Bank and its subsidiaries designates financial assets, other than ones classified as held-for-trading, as at fair value through profit or loss at initial recognition under one of the following situations:

(1) A hybrid instrument contains one or more embedded derivatives;
otherwise arise; and
(3) In accordance with the Bank and its subsidiaries' risk control policy or investment strategy, a set of financial assets or liabilities and its components managed are also designated at fair value.

Financial assets are measured at fair value and unrealized gains and losses thereon are recognized as an adjustment item of equity. Financial instruments held by the Bank and its subsidiary are recorded on the trade dates. 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 equity, and reversal of loss for debt instrument is credited to current income if the reduction of impairment loss resulted from a subsequent event.

Financial assets are measured at amortized cost and its interest income via effective rate. Financial assets held by the Bank and its subsidiary are recorded on the trade dates 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 or loss. The carrying value after the reversal should not exceed the amortized balance of the assets assuming no impairment loss was recognized.

(d) Financial assets measured at cost

Equity 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.

Ⅵ

(e) Debt instrument with no active market

These 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 or loss .The carrying value after the reverse should not exceed the amortized balance of the assets assuming no impairment loss was recognized.

The Bank and its subsidiaries shall derecognize a financial asset when the contractual rights to the cash flows from the financial asset expire or when the Bank and its subsidiaries transfer substantially all the risks and rewards of ownership of the financial assets. A financial liability should be removed from the balance sheet when, and only when, it is extinguished, that is, when the obligation specified in the contract is either discharged or cancelled or expires. If the bonds or stocks are taken as collateral, shall not be derecognized because the Bank and its subsidiaries have retained substantially all the risks and rewards of ownership.

(g) Financial instruments offsetting

when, an entity has a legally enforceable right to set off the amounts; and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

(h) 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:

(1) Payment of principal or interest is very likely not to be redeemed as per contracts.
(2) Non-performing loans are categorized as overdue loans in six months after the settlement period ends.
(i) Allowance for bad debts and provision for guarantee liabilities

Adequate allowance for bad debts is provided for loans and receivables by assessing whether there is evidence indicating that a single financial asset or a group of financial assets are impaired per 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".

For loans and receivables, the objective evidence should be identified first to reveal any impairment existing for financial assets that are individually significant, and individual or collective impairment for financial assets that are not individually significant. If no objective evidence of impairment exists in an individually assessed financial asset, it should be included in a group of financial assets with similar credit risk characteristics and collectively assessed for impairment. For assets which have recognized impairment losses or continue to recognize impairment losses, the aforementioned assessment method is not required.

Taiwan Business Bank Annual Report 2016

of the loss is recognized and measured via the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the financial asset's original effective interest rate; the amount of the loss should be recognized as bad debt expenses in profit or loss of the current period. The estimate of future cash flows includes the recoverable amount of collaterals and related insurances when determining the amount of the loss.

Above evidences of impairment loss usually include the following:

(2) There are already default circumstances occur to the issuer or debtor, for example: default or overdue payment of interest or principal.
(3) The creditor give in to the debtor due to commercial or legal concern.
(6) The payment status of the debtor worsens.
(7) The national and regional situation related to the default of the asset changes.

The Bank and its subsidiaries should recognize bad debt expenses when there is an impairment loss on

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

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:

(2) 2% of the second class credit assets.
(3) 10% of the third class credit assets.
(4) 50% of the fourth class credit assets.

The allowance for bad debts assessed by the previously stated method shall not be less than the amount regulated by "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans ".

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

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

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

Ⅵ

(G) Impairment loss on non‑financial assets

The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value less costs to sell or its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or loss.

An impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. If this is the case, the carrying amount of the asset shall be increased to its recoverable amount, as a reversal of a previously recognized impairment loss.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(H) Property, Plant and Equipment

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset.

with the expenditure will flow to the Group. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance is expensed as incurred.

Land has an unlimited useful life and therefore is not depreciated. The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

(a) Buildings 35‑50 years

(b) Equipment and machine 3‑8 years

The Bank and its subsidiaries reviews and adjusts the residual value and the useful lives of assets at the end of each fiscal year. Whenever there is evidence indicating that the carrying amount is unable to be recovered due to environmental activities or changes, the Bank and its subsidiaries evaluate the impairment loss of assets.

If the carrying amount is higher than the recoverable amount, the carrying amount is adjusted to the recoverable amount. The recoverable amount is the fair value or the use value deducted by the disposition expense.

The gain or loss on disposal is the difference between the carrying amount and net disposal proceeds, and gain or loss on disposal shall be recognized as net gain or loss on non-other interest of consolidated comprehensive income.

When purchasing machinery equipment and computer software, the education fee implied in the contract is not recognized as the cost of machinery equipment and is recognized as expense.

For the lease contracts which regulate the Bank and its subsidiaries to restore the property to the original status, the Group reviews the terms of each contract and calculated the present value of the restoration expenses when signing the contracts. The decommissioning liability reserve is provided based on the calculation and the discount rate is determined based on the Bank's policy.

(I) Leasehold

Leases contract can be divided into operating lease contracts and financing (capital) lease contracts. If a lease contract transfers almost all the risk and reward comes with the leasehold, the leasehold is considered

Taiwan Business Bank Annual Report 2016

leasehold, the leasehold is considered operating lease.

Depreciation is calculated per the regulation of IAS 16 "Property, Plant and Equipment" and IAS 38 "Intangible Assets". If there is no reason to be sure that the lessee will obtain the ownership of the assets at the end of the lease period for financing leasehold, the assets shall be depreciated within the lease period or the durable service time, whichever is shorter. The lease contracts of the Bank and its subsidiaries include operating lease and financing lease.

(J) Deferred assets

The costs of installation for utilities, including electricity and water, as well as security facilities, are capitalized and amortized equally over 5 years.

(K) Collateral assumed

Collaterals assumed are stated at the lower of net book value or net realizable value; i.e., the amount the Bank receives when creditors cannot meet obligations and the collaterals and salvages are auctioned off. Under FSC Letter Ruling (2)0948010856 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.

(L) Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probably that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. Amortization of the discount is recognized as interest expense. Future operating loss cannot be recognized as liability reserve.

Contingent liability refers to the possible obligation results from past events. The existence of contingent liability can only be proved by whether one or more uncertain events which can not be controlled by the Bank and its subsidiaries occurs or not. Contingent liability also refers to the current obligation results from a past event, but not likely to cause outflow of economic resource to redeem the obligation or the amount of the obligation cannot be measured reliably. The Bank and its subsidiaries do not recognized contingent liability and disclose it per related regulations.

(M) Employee benefit

the related service is provided.

benefit plan. For the personnel of foreign offices, the Bank provides pension fund per the regulations of the local authorities.

amount of money to funds to fulfill the obligation. The Bank and its subsidiaries provide pension based on compulsory obligation, contracts or voluntary will to public or private managed pension funds. If certain

Ⅵ

Bank and its subsidiary do not hold legal or constructive obligation to pay additional provision. The Bank and its subsidiaries recognize the pension fund provided as current pension cost on accrual basis.

plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognized past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on government bonds that have maturity dates approximating the terms of the Bank's obligations and that are denominated in the same currency in which the benefits are expected to be paid.

the calculation results in a benefit to the Bank, the recognized asset is limited to the total of the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Bank. An economic benefit is available to the Bank if it is realizable during the life of the plan, or on settlement of the plan liabilities.

past service by employees, is recognized immediately in profit or loss to the extent that the benefits vest immediately.

(1) Actuarial gains and losses;

with a corresponding debit or credit to retained earnings in the period in which they occur.

curtailment or settlement occurs. The gain or loss on curtailment comprises any resulting change in the fair value of plan assets and change in the present value of defined benefit obligation.

(c) Deposits with favorable rate

deposits with favorable rate and retired employee fix amount deposits with favorable rate. The rate difference between the favorable rate and the market rate belongs to the category of employee benefit.

According to article 28 of "Regulations Governing the Preparation of Financial Report by Public Banks", the additional interests result from the difference between deposit with favorable rate and the deposits with market interest rate shall be calculated by actuary per the regulations related to defined benefit plan in IAS 19 . The parameters of actuarial assumptions shall follow the regulations of the competent authority.

matter for adopting IAS 19 with respect to the additional interest of employee deposits with favorable rate" issued by the Banking Bureau, the difference between the actual payment and the estimated retirement benefit obligation is deemed as changes in accounting estimate and is recognized in profit or loss.

Taiwan Business Bank Annual Report 2016

realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. The Bank and its subsidiaries recognize liabilities when a formal irrevocable termination project is undertaken or when benefit is provided for encouraging voluntary resignation. If benefits are payable more than 12 months after the reporting period, then they are discounted to their present value.

(N) Income tax

Income tax expenses refer to current and deferred income taxes. Current and deferred income taxes shall be recognized as profit or loss except for the items related to corporate merger or recognized under the equity and other comprehensive income. Current income tax includes expected tax payable or tax refundable calculated based on the taxable income (loss) multiplied by the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period and the adjustments of tax payables from prior years.

Deferred income tax is measured and recognized based on the temporary difference between the carrying amount of the assets and liabilities for financial reporting purpose and the amount served as the taxable basis. It is measured by the tax rate which the assets expected to be realized or liabilities to be settled and is based on tax rates that have been enacted or substantively enacted on the balance sheet date.

The land incremental tax results from the revaluation per relevant regulations is categorized as taxable temporary difference and is recognized as deferred tax liabilities.

Deferred tax assets are recognized for loss carried forward, unused tax credit and deductible temporary differences to the extent that the future taxable income is likely to be available to apply against the deferred tax assets. The carrying amount of deferred tax assets should be reviewed at the end of each reporting period and the amount is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of partial or entire deferred tax asset to be utilized.

The 10% surtax on undistributed earnings is recognized as current expense on the date when the stockholders decide not to distribute the earnings in the annual meeting.

(O) Revenue recognition

Interest 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 and its subsidiaries receive cash, the revenue is recognized.

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.

(P) Operating segments

Operating segment is the component of the Bank and its subsidiaries 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 and its subsidiaries). The segment's operating results are reviewed regularly by the Bank's chief operating decision maker to make decisions pertaining to the allocation of resources to the segment and to assess the performance for which discrete financial information is available.

Ⅵ

(Q) 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 employee bonuses of the Bank and its subsidiaries issued by stocks were dilutive potential common shares. If the potential common shares have a non-dilutive effect, the Bank and its subsidiaries should only disclose the basic earnings per share. On the contrary, if the potential common shares have a dilutive effect, the Bank and its subsidiaries should disclose both the basic and diluted earnings per share. In calculating the diluted earnings per share, it is based on the assumption that all dilutive potential common shares are outstanding, and therefore the net income and the shares outstanding shall be adjusted in accordance with the calculation.

5. SIGNIFICANT ACCOUNTING ASSUMPTIONS AND JUDGMENTS, AND MAJOR SOURCES OF ESTIMATION UNCERTAINTY

by the FSC requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The management inspects estimates and basic assumptions continuously, changes in accounting estimate will be recognized in the periods which the change occurred and future periods effected.

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is as following :

(A) Impairment losses on loans

The Bank and its subsidiaries review loan portfolios quarterly to evaluate impairment losses. When deciding whether to recognize impairment or not, the Bank and its subsidiaries observe evidences indicating the possibilities of impairment. The observable evidence may include the unfavorable changes of payment status or the economic conditions of the countries or areas related to the default loan. The management applies past loss experience of assets with similar credit risk characteristic to analyze the expected cash flows. The Bank and its subsidiary regularly review the methods and assumptions applied for calculating the amount and timing of the expected cash flows in order to diminish the difference between the estimated amount and the actual amount.

(B) Retirement benefit

Any change of the assumptions may influence the carrying amount of the retirement benefit obligation.

The assumptions applied to determine net pension cost (revenue) include the discount rate. The Bank and its subsidiaries determine the appropriate discount rate at the end of each year and apply it to calculate the present value of the future cash outflows which are to be paid to the retirement benefit obligation. To determine the appropriate discount rate, the Bank and its subsidiaries should consider the interest rate of high quality corporate bonds and government bonds. The currency of the retirement benefit shall be the same as that of the high quality corporate bond or government bonds and the duration till maturity date shall comply with the duration of the related pension obligation. Other significant assumptions of retirement benefit obligation are based on the current market situation.

Taiwan Business Bank Annual Report 2016

6. EXPLANATION OF SIGNIFICANT ACCOUNTS

(A) Cash and cash equivalents

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December 31, 2016 December 31, 2015
Petty cash and revolving fund $ 8,693,045 8,522,890
Foreign currencies on hand 981,889 1,017,077
Checks for clearing 12,020,489 3,844,857
Due from other banks 27,869,525 27,676,986
Total $ 49,564,948 41,061,810
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(B) Due from the Central Bank and call loans to banks

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December 31, 2016 December 31, 2015
Due from the Central Bank $ 52,131,770 65,326,427
Deposits transferred to the Central Bank 172,915 178,826
Call loans to banks 38,314,577 53,379,518
Trust fund indemnity reserve deposited 70,000 70,000
Securities served as trust fund indemnity reserve deposited （ 70,000 ) （ 70,000 )
Total $ 90,619,262 118,884,771
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As of December 31, 2016 and 2015, in accordance with the Banking Law and the Central Bank Law, the required reserve deposited by the Bank with the Central Bank amounted to $51,994,051 and $65,064,860, of which $35,822,502 and $32,419,372 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, 2016 and 2015, the required reserve with the Central Bank amounted to $137,719 and $261,567 respectively, and its use was unrestricted.

As of December 31, 2016 and 2015, deposits collected on behalf of the armed forces, prisons, and other national deposits were 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, 2016 and 2015, the Bank deposited marketable securities of both $70,000 as trust fund reserves.

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

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December 31, 2016 December 31, 2015
Financial assets held for trading:
Commercial paper $ 939,345 209,896
Common Stock 22,473 133,842
Beneficiary certificates 15,660 290,215
Foreign exchange forward contracts 105,172 61,679
Currency swap contracts 301,114 321,258
Foreign currency options-call 47,345 68,067
Structured product options-call 2 287
Stock index futures 12,582 27,324
Sub-total 1,443,693 1,112,568
Financial assets designated at fair value through profit or loss:
Overseas bonds - 970,043
Total $ 1,443,693 2,082,611
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Ⅵ

As of December 31, 2016 and 2015, the nominal amounts of unsettled financial derivative instrument contracts were as follows:

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December 31, 2016 December 31, 2015
Foreign exchange forward contracts $ 4,019,898 4,338,602
Currency swap contracts 75,681,956 63,859,563
Non-delivery forward contracts - 328,325
Interest swap contracts - 986,400
Option contracts-call 4,246,411 3,125,120
Option contracts-put 4,246,411 3,126,106
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(D) Securities purchased under resell agreements

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December 31, 2016 December 31, 2015
Securities under resell agreements $ 619,201 26,784,515
Face amount 620,000 26,811,300
Resell period 106.1.4~106.1.13 105.1.4~105.1.29
Range of resell interest rate 0.4%~0.55% 0.37%~0.42%
Resell price $ 619,327 26,791,690
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(E) Receivables–net

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December 31, 2016 December 31, 2015
Interest receivable $ 2,947,889 2,408,377
Acceptances receivable 1,213,733 1,264,956
Accrued incomes 159,554 84,908
Accounts receivable 256,744 548,203
Accounts receivable factoring without recourse 319,040 -
Spot exchange receivable-foreign currencies 16,322,243 17,789,230
Refinancing guaranty deposits 1,132 -
Guaranteed proceeds receivable from refinancing 1,190 -
Receivable from credit card 1,292,977 1,318,632
Receivable from security brokerage 76,324 113,278
Settlement fund 254,063 69,953
Installment receivables and leases 936,813 927,857
Other receivables 332,013 261,999
Sub-total 24,113,715 24,787,393
Less: Allowance for bad debts （ 112,735 ) （ 89,635 )
Net $ 24,000,980 24,697,758
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The change in allowance for bad debts was as follows:

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For the years ended December 31
Receivables
2016 2015
Beginning balance $ 89,635 116,135
Provision 24,340 61,218
Transfer in 35,580 -
Write off （ 35,864 ) （ 87,826 )
Foreign exchange （ 956 ) 108
Ending balance $ 112,735 89,635
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Taiwan Business Bank Annual Report 2016

(F) Discounts and loans–net

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December 31, 2016 December 31, 2015
Import/export bills negotiated $ 397,578 215,381
Bills and notes discounted 1,202,635 1,232,112
Overdrafts 40,485 12,687
Secured overdrafts 1,980,738 764,276
Short-term loans 265,430,634 222,558,470
Short-term secured loans 164,465,443 156,523,049
Margin loans receivable 1,708,746 1,717,363
Medium-term loans 102,042,620 133,863,586
Medium-term secured loans 146,321,825 133,160,273
Long-term loans 17,243,249 15,750,630
Long-term secured loans 352,502,256 348,360,399
Account receivable financing 596,752 575,588
Overdue loans 3,857,556 4,241,327
Sub-total 1,057,790,517 1,018,975,141
Less: Adjustment of discount and premium （ 225,907 ) （ 235,246 )
Less: Allowance for bad debts （ 12,549,963 ) （ 11,341,593 )
Net $ 1,045,014,647 1,007,398,302
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The change in allowance for bad debts is as follows:

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For the years ended December 31
Loan
2016 2015
Beginning balance $ 11,341,593 10,933,661
Provision 2,606,874 2,418,854
Transfer out （ 264,507 ) （ 62,605 )
Write-off （ 2,841,380 ) （ 2,793,281 )
Foreign exchange （ 12,575 ) （ 16,818 )
Written-off recovered 1,719,958 861,782
Ending balance $ 12,549,963 11,341,593
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(G) Available‑for‑sale financial assets–net

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December 31, 2016 December 31, 2015
Government bonds $ 43,523,682 6,121,612
Corporate bonds 19,096,625 10,457,790
Overseas bonds 8,151,648 6,943,965
Listed and OTC stocks 2,558,733 2,145,418
Total $ 73,330,688 25,668,785
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Please refer to Note 6(N) for the information with regard to repurchase conditions for available-for-sale

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

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December 31, 2016 December 31, 2015
Certificates of deposit with the Central Bank $ 125,475,000 165,115,000
Government bonds 26,293,871 10,936,236
Corporate bonds 13,300,376 11,602,452
Overseas bonds 27,386,350 18,554,743
Negotiable certificates of deposit 67,662 69,048
Total $ 192,523,259 206,277,479
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Ⅵ

As of December 31, 2016, and 2015, held-to-maturity financial assets provided and deposited as reserve for provisional seizure by the court, international card payment reserve, trust claim reserve and operating guaranty funds amounted to $681,500 and $701,100, respectively. As of December 31, 2016 and 2015, the overseas branches have provided $67,662 and $69,048, 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 the Central Bank all amounting to $8,200,000 as overdraft guarantee as of December 31, 2016 and 2015, respectively. The amount of the guarantee could be modified anytime and the remaining amount could be served as liquid reserves.

As of December 31, 2016 and 2015, in compliance with the item 16 of "Guidelines Governing Financial Institution in Conducting Treasury Affairs Authorized by Central Bank", the Bank provided secured central bank certificates of deposit with face value of $1,505,000 and $825,000, respectively to the Central Bank. When certain conditions are satisfied, the Bank will be returned the certificates without interest from Central Bank.

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

(I) Other financial assets–net

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December 31, 2016 December 31, 2015
Non-accrual loans transferred from non-loan financial assets $ 157,421 70,842
Less: Allowance for bad debts － non-accrual loans transferred from （ 60,198 ) （ 20,285 )
non-loan financial assets
Non-accrual loans transferred from non-loan financial assets － net 97,223 50,557
Exchange bills negotiated 383 1,303
Less: Allowance for bad debt － exchange bills negotiated （ 4 ) （ 15 )
Exchange bills negotiated － net 379 1,288
Financial assets carried at cost 2,035,121 2,035,121
Total $ 2,132,723 2,086,966
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(a) Financial assets carried at cost were as follows:

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December 31, 2016 December 31, 2015
Investee
Amount % Amount %
Taiwan Power Company $ 11,427 - 11,427 -
Taiwan Sugar Corporation 58,294 0.30 58,294 0.30
Sunysino Development Associated Inc. 17,440 3.12 17,440 3.12
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
Taiwan Futures Exchange Co., Ltd. 20,000 1.00 20,000 1.00
Taiwan Asset Management Corp 750,000 5.68 750,000 5.68
Taiwan Finance Asset Service Corp 50,000 2.94 50,000 2.94
Financial E-Solution Co., Ltd. 9,245 4.12 9,245 4.12
Taiwan Depository and Clearing Corp. 4,639 0.08 4,639 0.08
Yand Guang Asset Management Corp. 460 0.77 460 0.77
Taiwan Trusted Service Manager Co., Ltd. 6,000 1.00 6,000 1.00
Taipei Financial Center Corp. 328,104 0.80 328,104 0.80
Total $ 2,035,121 2,035,121
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Taiwan Business Bank Annual Report 2016

(b) The change in allowance for bad debts was as follows:

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Other financial assets For the years ended December 31
2016 2015
Beginning balance $ 20,300 273,329
Reversal （ 179,646 ) （ 75,476 )
Transfer in 228,927 62,605
Write-off （ 36,593 ) （ 271,960 )
Written-off recovered 27,214 31,802
Ending balance $ 60,202 20,300
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(J) Premises and equipment–net

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Revaluation Accumulated Accumulated
December 31, 2016 Cost Total
appreciation depreciation impairment
Land $ 6,678,952 2,986,161 - 14,031 9,651,082
Buildings 7,486,854 31,184 3,682,819 14,754 3,820,465
Machinery 1,966,592 - 1,733,509 - 233,083
Transportation equipment 286,164 - 244,838 - 41,326
Miscellaneous equipment 580,418 - 509,879 - 70,539
Leasehold improvement 69,916 - 22,725 - 47,191
Construction in progress 153,162 - - - 153,162
Prepayment for equipment 62,933 - - - 62,933
Leased assets 72,495 - 31,570 - 40,925
Total $ 17,357,486 3,017,345 6,225,340 28,785 14,120,706
Revaluation Accumulated Accumulated
December 31, 2015 Cost Total
appreciation depreciation impairment
Land $ 6,678,952 2,986,161 - 14,156 9,650,957
Buildings 7,439,580 31,184 3,520,394 21,411 3,928,959
Machinery 1,967,149 - 1,790,698 - 176,451
Transportation equipment 290,326 - 248,268 - 42,058
Miscellaneous equipment 586,357 - 522,051 - 64,306
Leasehold improvement 71,008 - 38,373 - 32,635
Construction in progress 101,726 - - - 101,726
Prepayment for equipment 58,325 - - - 58,325
Leased assets 70,577 - 20,616 - 49,961
Total $ 17,264,000 3,017,345 6,140,400 35,567 14,105,378
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Change of cost

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Foreign December 31,
January 1, 2016 Increase Decrease
Exchange 2016
Land $ 9,665,113 - - - 9,665,113
Buildings 7,470,764 47,274 - - 7,518,038
Machinery 1,967,149 147,687 148,546 302 1,966,592
Transportation equipment 290,326 12,394 16,794 238 286,164
Miscellaneous equipment 586,357 24,748 30,907 220 580,418
Leasehold improvement 71,008 30,649 31,335 ( 406 ) 69,916
Construction in progress 101,726 51,436 - - 153,162
Prepayment for equipment 58,325 37,025 32,417 - 62,933
Leased assets 70,577 1,918 - - 72,495
Total $ 20,281,345 353,131 259,999 354 20,374,831
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Ⅵ

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Foreign December 31,
January 1, 2015 Increase Decrease
Exchange 2015
Land $ 9,665,113 - - - 9,665,113
Buildings 7,451,540 19,224 - - 7,470,764
Machinery 1,908,648 103,661 47,164 2,004 1,967,149
Transportation equipment 293,201 9,977 14,108 1,256 290,326
Miscellaneous equipment 577,301 21,418 15,044 2,682 586,357
Leasehold improvement 79,605 20,575 28,398 ( 774 ) 71,008
Construction in progress 11,105 99,066 8,445 - 101,726
Prepayment for equipment 36,622 26,463 4,760 - 58,325
Leased assets 55,222 15,355 - - 70,577
Total $ 20,078,357 315,739 117,919 5,168 20,281,345
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Change of depreciation

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Foreign December 31,
January 1, 2016 Increase Decrease
Exchange 2016
Buildings $ 3,520,394 162,425 - - 3,682,819
Machinery 1,790,698 91,136 147,636 ( 689 ) 1,733,509
Transportation equipment 248,268 13,190 16,550 ( 70 ) 244,838
Miscellaneous equipment 522,051 18,785 30,529 ( 428 ) 509,879
Leasehold improvement 38,373 15,128 30,604 ( 172 ) 22,725
Leased assets 20,616 11,162 - ( 208 ) 31,570
Total $ 6,140,400 311,826 225,319 ( 1,567 ) 6,225,340
Foreign December 31,
January 1, 2015 Increase Decrease
Exchange 2015
Buildings $ 3,356,676 163,718 - - 3,520,394
Machinery 1,754,836 83,037 46,573 ( 602 ) 1,790,698
Transportation equipment 250,246 11,983 13,893 ( 68 ) 248,268
Miscellaneous equipment 519,885 17,093 14,987 60 522,051
Leasehold improvement 49,810 16,780 27,872 ( 345 ) 38,373
Leased assets 9,907 10,954 - ( 245 ) 20,616
Total $ 5,941,360 303,565 103,325 ( 1,200 ) 6,140,400
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Accumulated impairment

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Foreign December 31,
January 1, 2016 Increase Decrease Exchange 2016
Land $ 14,156 - 125 - 14,031
Buildings 21,411 - 6,657 - 14,754
Total $ 35,567 - 6,782 - 28,785
Foreign December 31,
January 1, 2015 Increase Decrease
Exchange 2015
Land $ 14,156 - - - 14,156
Buildings 21,411 - - - 21,411
Total $ 35,567 - - - 35,567
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GAAP of R.O.C as the original cost on the transition date.

As of December 31, 2016 and 2015, the appreciation from revaluation of properties all amounted to $3,017,345. Reserve for land incremental tax all amounted to $879,056 (Recognized under deferred tax liabilities). The difference of revaluation was recognized as retained earnings.

Taiwan Business Bank Annual Report 2016

As of December 31, 2016 and 2015, land which was illegally occupied amounted to $5,496, respectively. 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.

(K) Other assets‑net

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December 31, 2016 December 31, 2015
Office supplies $ 27,554 27,936
Prepayments 3,134,882 4,164,850
Operating guaranty deposits and settlement fund 32,721 32,510
Guarantee deposits paid 621,768 209,359
Less: Accumulated impairment - （ 22,606 )
Guarantee deposits paid － net 621,768 186,753
Deferred assets 117 238
Temporary payments and suspense accounts - 364,740
Proceeds of settlement and credit transaction 2,032 203,776
Total $ 3,819,074 4,980,803
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(L) Deposits from the Central Bank and other banks

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December 31, 2016 December 31, 2015
Deposits from the Central Bank $ 155,958 233,999
Call loans from the Central Bank 9,827,100 8,055,600
Deposits from banks 80,933 186,609
Call loans from banks 27,354,665 30,790,166
Overdrafts on banks 1,187,819 870,323
Deposits transferred from Chunghwa Post Co., Ltd. 37,211,382 37,720,840
Total $ 75,817,857 77,857,537
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(M) Financial liabilities at fair value through profit or loss

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December 31, 2016 December 31, 2015
Foreign exchange forward contracts $ 28,543 65,580
Currency swap contracts 138,273 84,950
Non-delivery forward contracts - 472
Foreign currency option-put 47,441 68,710
Structured product option-put 2 287
Total $ 214,259 219,999
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Please refer to 6(C) for the nominal amount of unsettled financial derivatives instrument contracts of December 31, 2016 and 2015.

Ⅵ

(N) Securities sold under repurchase agreements

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December 31, 2016
Selling Price
(Recognized in Designated
securities sold under repurchase Designated
Assets Par value repurchase agreements) amount repurchase date
Available-for-sale financial Prior to August 31,
$ 2,631,300 2,758,905 2,760,319
assets 2017
December 31, 2015
Selling Price
(Recognized in Designated
securities sold under repurchase Designated
Assets Par value repurchase agreements) amount repurchase date
Available-for-sale financial Prior to June 30,
$ 3,924,900 4,163,147 4,165,361
assets 2016
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(O) Payables

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December 31, 2016 December 31, 2015
Interest payable $ 1,505,823 1,677,603
Accounts payable 12,022,274 5,257,427
Acceptances 1,258,085 1,293,501
Accrued expenses 2,251,579 2,290,385
Collection payable 576,282 1,015,038
Deposits received from securities borrowers 91,888 88,669
Guaranteed price deposits received from securities borrowers 117,170 98,577
Accounts payable factoring 87,050 -
Spot exchange payable － foreign currencies 16,313,119 17,790,115
Other payables 836,438 1,196,408
Trusted security payable 326,830 180,620
Others 26,056 36,088
Total $ 35,412,594 30,924,431
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(P) Deposits and remittances

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December 31, 2016 December 31, 2015
Savings deposits $ 597,431,556 576,072,578
Time deposits 283,317,117 315,174,807
Demand deposits 343,623,036 315,517,530
Checking account deposits 29,065,712 25,056,541
Remittances 367,056 499,229
Total $ 1,253,804,477 1,232,320,685
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Taiwan Business Bank Annual Report 2016

(Q) Financial debentures

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Terms of Transactions Bond Issued
Amount
Bonds
Issue Maturity
date date Interest Rate & repayment Type December December
31, 2016 31, 2015
2009-1P 10/23/2009 None The debentures bear annual interest rate Perpetual $ - 12,000,000
which is the seven Banks' board floating accumulated
average interest rate for 1-year time subordinated
deposit plus 1.29% for the seven years financial debentures
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.
2009-3 12/18/2009 12/18/2016 The debentures bear an annual interest Unsecured - 1,550,000
rate of 2.5%. Simple interest rate is accrued subordinated
and paid annually. The principal will be long-term financial
repaid in full at maturity. debentures
2010-1 03/05/2010 03/05/2017 The debentures bear an annual interest 〞 1,050,000 1,050,000
rate of 2.32%. Simple interest is accrued
and paid annually. The principal will be
repaid in full at maturity.
2010-2 09/02/2010 09/02/2017 The debentures bear an annual interest 〞 6,000,000 6,000,000
rate of 1.92%. Simple interest is accrued
and paid annually. The principal will be
repaid in full at maturity.
2010-1P A 09/23/2010 None The debentures bear annual interest Perpetual 3,200,000 3,200,000
rate which is the Chunghwa post's board non-accumulated
average interest rate for 1-year time subordinated
deposit plus 1.34% for the ten years after financialdebentures
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.
2010-1P B 09/23/2010 None The debentures bear an interest rate 〞 $800,000 800,000
of 3.05% for the first ten years after the
issue date. 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.
2013-1 03/25/2013 03/25/2020 The debentures bear an annual interest Unsecured 5,000,000 5,000,000
rate of 1.68%. Simple interest is accrued subordinated
and paid annually. The principal will be long-term financial
repaid in full at maturity. debentures
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Ⅵ

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Terms of Transactions Bond Issued
Amount
Bonds
Issue Maturity
date date Interest Rate & repayment Type December December
31, 2016 31, 2015
2013-2A 11/25/2013 11/25/2020 (A) The debentures bear annual interest " 3,100,000 3,100,000
rate, which is the index rate plus 0.52%.
The index rate is the average offer of
90-days CP which is indicated in Reuter's
page 6165 at 11 A.M Taipei time, 2
operation days prior to the interest
commencement date.
(B) Since January 1, 2015 according to
various indicators of interest rate changes
during the value date two business days
before the pricing (FIXING) Bank of the
Republic of China Business Association
National Union RCAs website "Taipei fixing
the financial sector call loan rate (TAIBOR)"
three-month interest rate fixing. Simple
interest rate is accrued four times a year
and paid annually. The principal will be
repaid in full at maturity.
2013-2B 11/25/2013 11/25/2020 The debentures bear an annual interest 〞 2,900,000 2,900,000
rate of 1.92%. Simple interest is accrued
and paid annually. The principal will be
repaid in full at maturity.
2015-1P 06/18/2015 None The debenture bear an annual interest Perpetual 5,000,000 5,000,000
rate of 3.9%. Simple interest is accrued non-accumulated
and paid annually. The debentures is subordinated
redeemable per face value plus accrued financialdebentures
interest at interest payment date after
five years from the issued date under the
consent of the competent authority.
2015-2A 08/31/2015 08/31/2023 The debenture bear an annual interest rate Unsecured 4,700,000 4,700,000
of 2.05%. Simple interest is accrued and subordinated
paid annually. The principal will be repaid in long-term financial
full at maturity. debentures
2015-2B 08/31/2015 08/31/2025 The debenture bear an annual interest rate 〞 300,000 300,000
of 2.10%. Simple interest is accrued and
paid annually. The principal will be repaid in
full at maturity.
2016-1P 09/20/2016 None The debenture bear an annual interest Perpetual 8,000,000 -
rate of 3.2%. Simple interest is accrued non-accumulated
and paid annually. The debentures is subordinated
redeemable per face value plus accrued financialdebentures
interest at interest payment date after five
years and three months from the issued
date under the consent of the competent
authority
2016-2 12/20/2016 12/20/2023 The debentures bear an annual interest Unsecured 2,700,000 -
rate of 1.40%. Simple interest is accrued subordinated
and paid annually. The principal will be long-term financial
repaid in full at maturity. debentures
$ 42,750,000 45,600,000
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Taiwan Business Bank Annual Report 2016

(R) Other financial liabilities

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December 31, 2016 December 31, 2015
Appropriated loans funds $ 10,780,543 12,150,600
Lease payable 38,602 46,517
Total $ 10,819,145 12,197,117
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Cumulative earnings on appropriated loan fund is the project contract signed by National Development Council, 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.

(S) Provision for liabilities

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December 31, 2016 December 31, 2015
Provision for guarantee liabilities $ 147,491 97,708
Provision for lawsuit 346,491 413,129
Provision for employee benefit 3,112,771 2,810,900
Total $ 3,606,753 3,321,737
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Change of provision

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January 1, Provision Foreign December
2016 Increase Decrease Use (Reversal) exchange 31, 2016
Provision for guarantee $ 97,708 66,139 - - ( 16,300 ) ( 56 ) 147,491
liabilities
Provision for lawsuit 413,129 - - 51,118 - ( 15,520 ) 346,491
Provision for employee 2,810,900 285,549 214,113 82,326 312,761 - 3,112,771
benefit
Total $ 3,321,737 351,688 214,113 133,444 296,461 ( 15,576 ) 3,606,753
January 1, Provision Foreign December
2015 Increase Decrease Use (Reversal) exchange 31, 2015
Provision for guarantee $ 93,009 23,270 - - ( 18,677 ) 106 97,708
liabilities
Provision for lawsuit 444,135 - - - ( 10,046 ) ( 20,960 ) 413,129
Provision for employee 2,481,647 265,420 225,039 17,821 306,693 - 2,810,900
benefit
Total $ 3,018,791 288,690 225,039 17,821 277,970 ( 20,854 ) 3,321,737
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(T) Other liabilities

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December 31, 2016 December 31, 2015
Advance interest receipts $ 5,364 3,857
Unearned revenue 115,673 86,554
Other advances receipts 70,705 62,078
Guarantee deposits received 583,388 549,102
Temporary receipts and suspense accounts 698,698 -
Other 6,178 5,332
Total $ 1,480,006 706,923
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Ⅵ

(U) Equity

(a) Common stock

As of December 31, 2016 and 2015, the Bank's authorized capital were all $60,000,000 and the paid-in capital for common shares of the Bank were $59,688,949 and $56,846,618 and the face value of each share is NTD $10. The outstanding shares were 5,968,895 thousand shares and 5,684,662 thousand shares, respectively.

Pursuant to the resolution approved by the stockholders' meeting of the Bank on June 24, 2016, the Bank increased its capital from the retained earnings by $2,842,331 and issued 284,233 thousand shares. The capital increase has been approved by Financial Supervisory Commission and came into effect on August 17, 2016. The base date of the capital increase is set on September 10, 2016. The Bank has completed the registration of change in paid-in capital on September 26, 2016.

Pursuant to the resolution approved by the stockholders' meeting of the Bank on June 26, 2015, the Bank increased its capital from the retained earnings by $3,867,477 and issued 386,748 thousand shares. The capital increase has been approved by Financial Supervisory Commission and came into effect on August 4, 2015. The base date of the capital increase is set on August 31, 2015. The Bank has completed the registration of change in paid-in capital on September 14, 2015.

(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 total 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, and 30% of the remaining earnings is set aside as legal reserve. Special reserve is appropriated from or reversed to earnings per other regulations. 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.

In order to continuously expand scale and increase profitability, the Bank, based on the future capital budget plan, adopts residual dividend policy and primarily distributes stock dividend to ensure the capital is sufficient. When there is surplus of capital, the remaining capital can be distributed by cash dividend. Cash dividend shall not be lower than 10% of the total dividend distributed. If the cash dividend distributed per share is lower than NTD$ 0.1, except for otherwise resolved by the shareholder's meeting, it is not distributed. If there is any situation conforms to that is regulated in article 44 item 1 of the Banking Act of The Republic of China, the Bank is not allowed to distribute earnings by cash or purchase shares outstanding. The maximum cash earning distribution is not allowed to be over 15% of the total paid in capital unless the legal reserve reaches the total paid-in capital.

In compliance with the amendment of Company Act published in January 2012, if the Company incurs no loss, under the consent of the shareholder's meeting, the Company is allowed to distribute new shares or cash dividends from legal reserve to the extent that the legal reserve issued is the surplus exceeding 25% of the paid in capital.

Taiwan Business Bank Annual Report 2016

Under the Ruling No. 1010012865 issued on April 6, 2012 by the FSC, special reserve is appropriated from retained earnings based on the equivalent amounts of the contra accounts in equity. This special reserve may not be distributed as dividends to stockholders until the balances of these contra accounts in equity are reversed.

The Bank resolved the earning distribution for the earnings of 2015 and 2014 in the shareholder's meeting on June 24, 2016 and June 26, 2015, respectively. The dividends distributed were as follows:

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2015 2014
Distribution rate Distribution rate
(NT dollar) Amount (NT dollar) Amount
Dividends to common share holders
Share $ 0.50 2,842,331 0.73 3,867,477
Cash 0.10 568,466 - -
Total 3,410,797 3,867,477
(d) Other equity items
Difference of foreign
Unrealized losses exchange in translating
of available-for-sale financial statements of
financial assets foreign operating unit Total
January 1, 2016 $ （ 94,694 ) 221,642 126,948
Available-for-sale financial assets
-Valuation adjustment （ 875,586 ) - （ 875,586 )
-Realized amount （ 39,565 ) - （ 39,565 )
Currency translation difference - （ 241,279 ) （ 241,279 )
-Current exchange difference
December 31, 2016 $ （ 1,009,845 ) （ 19,637 ) （ 1,029,482 )
January 1, 2015 $ （ 27,641 ） 91,858 64,217
Available-for-sale financial assets
-Valuation adjustment （ 4,670 ） - （ 4,670 ）
-Realized amount （ 62,383 ） - （ 62,383 ）
Currency translation difference - 129,784 129,784
-Current exchange difference
December 31, 2015 $ （ 94,694 ） 221,642 126,948
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(V) Income taxes

(a) The amount of income tax for the years ended December 31, 2016 and 2015 were as follows:

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For the years ended December 31
2016 2015
Current tax expense
Current period $ 871,699 184,557
Adjustment for prior periods 32,704 16,686
Basic tax - 141,634
904,403 342,877
Deferred tax expense
Origination and reversal of temporary different 259,314 740,251
Income tax expenses $ 1,163,717 1,083,128
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Ⅵ

(b) The amount of expense (income) tax recognized in other comprehensive income for the years ended December 31, 2016 and 2015 were as follows:

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For the years ended December 31
2016 2015
Items that will not reclassified subsequently to profit or loss:
Remeasurements of defined benefit plans $ 53,169 52,138
For the years ended December 31
2016 2015
Items that may be reclassified subsequently to profit or loss:
Foreign exchange difference in translating financial statements of $ 44,782 （ 21,947 )
foreign operations
Unrealized valuation gains on available-for-sale financial asset 691 （ 523 )
$ 45,473 （ 22,470 )
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The reconciliation between the income tax expense (income) and net income before tax of the Bank and its subsidiaries for 2016 and 2015 is as follows:

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For the years ended December 31
2016 2015
Income tax computed on net income before tax $ 1,083,114 1,054,392
Permanent differences:
-Tax-exempt securities transaction loss 5,979 4,045
- Net income from offshore banking unit ( 214,284 ) （ 200,734 ）
- Recognized loss (gain) from financial assets and liabilities 9,828 16,279
measured at fair value through profit or loss
- Cash Dividend ( 41,556 ) （ 27,860 ）
- Reversal of impairment gain on assets ( 1,153 ) （ 1,038 ）
- Non-deductible expense 52 39
Temporary differences:
-Difference between the actual allowance for bad debts and the 188,410 12,512
statutory allowance for bad debts amount regulated in the Tax Law
-Difference between the actual pension and the statutory pension ( 1,772 ) 5,259
amount regulated in the Tax Law
-Loss on other assets impairment ( 6,034 ) -
- Other ( 133 ) （ 150 ）
Taxable income 1,022,451 862,744
Duduct: Loss carryforward ( 439,785 ) （ 849,483 ）
Income tax payable 582,666 13,261
Decrease in deferred income tax assets 259,134 740,229
Additional tax resulted from Alternative Minimum Tax - 141,634
Overseas branch income tax expenses 284,153 158,026
Underestimate prior income tax expense 32,704 16,686
Other 5,060 13,292
Income tax expense $ 1,163,717 1,083,128
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Taiwan Business Bank Annual Report 2016

(c) Changes in deferred tax assets and liabilities of the Bank and its subsidiaries are as follows:

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For the years ended December 31,2016
Recognized
in other
Beginning Recognized in comprehensive Ending
balance profit or loss income Others balance
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	For theyears ended December 31,2016	For theyears ended December 31,2016	For theyears ended December 31,2016	For theyears ended December 31,2016	For theyears ended December 31,2016	For theyears ended December 31,2016	For theyears ended December 31,2016	For theyears ended December 31,2016	For theyears ended December 31,2016	For theyears ended December 31,2016
	Beginning balance		Recognized in proft or loss		Recognized in other comprehensive income		Others		Ending balance
Temporary difference Deferred tax assets resulted from allowance for bad debts exceeding the limit regulated in Tax Law Loss on assets impairment Indemnity reserve Reserve for employee beneft liabilities Land value increment tax Exchange differences from the translation of fnancial statements of foreign operations Exchange differences from the translation of fnancial statements of foreign operations-subsidiaries Unrealized valuation proft or loss on available-for-sale fnancial assets Actuarial gains and losses Other Subtotal Losses carried forward Net deferred tax assets (liabilities) The information stated on the balance sheet is as follows: Deferred tax assets Deferred tax liabilities		$ 358,236 46,627 75,446 403,851 ( 879,056 ) ( 38,991 ) ( 1,770 ) ( 1,072 ) 113,611 114 76,996 439,785 $ 516,781 $ 1,437,671 $ 920,890		188,410 ( 6,034 ) - ( 1,772 ) - - - - - 47 180,651 (439,785 ) ( 259,134)		- - - - - 33,859 10,923 691 53,169 - 98,642 - 98,642		( 168 ) - - - - - - - - (12 ) ( 180 ) - ( 180)		546,478 40,593 75,446 402,079 ( 879,056 ) ( 5,132 ) 9,153 ( 381 ) 166,780 149 356,109 - 356,109 1,240,678 884,569

		For theyears ended December 31,2015	For theyears ended December 31,2015	For theyears ended December 31,2015	For theyears ended December 31,2015	For theyears ended December 31,2015	For theyears ended December 31,2015	For theyears ended December 31,2015	For theyears ended December 31,2015
		Beginning balance	Recognized in proft or loss		Recognized in other comprehensive income			Others		Ending balance
Temporary difference Deferred tax assets resulted from allowance for bad debts exceeding the limit regulated in Tax Law Loss on assets impairment Indemnity reserve Reserve for employee beneft liabilities Land value increment tax Exchange differences from the translation of fnancial statements of foreign operations Exchange differences from the translation of fnancial statements of foreign operations-subsidiaries Unrealized valuation proft or loss on available-for-sale fnancial assets Actuarial gains and losses Other Subtotal Losses carried forward Net deferred tax assets (liabilities) The information stated on the balance sheet is as follows: Deferred tax assets Deferred tax liabilities		$ 345,724 46,627 75,446 398,592 ( 879,056 ) ( 13,970 ) ( 4,844 ) ( 549 ) 61,473 264 29,707 1,197,657 $ 1,227,364 $ 2,125,784 $ 898,420		12,512 - - 5,259 - - - - - (128 ) 17,643 (757,872 ) ( 740,229)		- - - - ( 25,021 ) 3,074 ( 523 ) 52,138 - 29,668 - 29,668		( 17 ) - - - - - - - (5 ) ( 22 ) - ( 22)		358,219 46,627 75,446 403,851 ( 879,056 ) ( 38,991 ) ( 1,770 ) ( 1,072 ) 113,611 131 76,996 439,785 516,781 1,437,671 920,890

Ⅵ

(d) The Bank's income tax returns for years up to 2012 and 2014 have been approved by the Tax Authority.

The income tax returns of the subsidiaries Taiwan Business Bank International Leasing Co., Ltd. have been approved until 2013 by the Tax authority. Taiwan Business Bank Insurance Agency Co., Ltd. have been approved until 2015 by the Tax authority. Taiwan Business Bank Property Insurance Agency Co., Ltd. have been approved until 2014 by the Tax authority.

(e) Imputation Credit Account and Tax Deductible Ratio were summarized below ：

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December 31, 2016 December 31, 2015
Balance of imputation credit account $ 262,143 125,593
2016(estimated) 2015(actual)
Creditable ratio for earnings distribution to ROC residents 5.29% 4.00%
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As of December 31, 2015 and 2014, all of the ending balance of undistributed retained earnings arose from earnings in 1998 and thereafter. The above imputation information is calculated based on the Decree No.10204562810 issued by the Ministry of Finance, R.O.C on October 17, 2013.

(W) Provision for employee benefit

As of December 31, 2016 and 2015, the balance of provision for employee benefit of the Bank and its subsidiaries were as follows:

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December 31, 2016 December 31, 2015
Recognized on the balance sheet
Defined benefit plan $ 2,313,473 2,061,094
Employee deposit with favorable rate 799,298 749,806
Total $ 3,112,771 2,810,900
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Composition of plan assets:

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December 31, 2016 December 31, 2015
Present value of defined benefit obligation $ 7,241,938 7,237,239
Less: Fair value of defined benefit plan assets （ 4,928,465 ）（ 5,176,145 ）
Net defined benefit liability $ 2,313,473 2,061,094
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provides pensions for employees upon retirement. The plans (covered by the Labour Standards Law) entitle a retired employee to receive an annual payment based on years of service and average salary for the six months prior to retirement.

(1) Composition of plan assets

The Group allocates pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Labour Pension Fund Supervisory Committee. With regard to the utilization of the funds, minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with interest rates offered by local banks.

The Bank of Taiwan labour pension reserve account balance for the Bank and its subsidiaries amounted to $4,928,465 and $5,176,145 on December 31, 2016 and 2015. For information on the utilisation of the labour pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Labour Pension Fund Supervisory Committee.

Taiwan Business Bank Annual Report 2016

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For the years ended December 31
2016 2015
Defined benefit obligation on January 1 $ 7,237,239 6,864,745
Current service and interest cost 303,273 326,980
Remeasurements of the net defined benefit liability
Actuarial gain and loss on experience adjustment 215,444 56,576
Actuarial gain and loss on financial assumptions changed 65,631 297,296
Benefits paid by the plan （ 579,649 ）（ 308,358 ）
Defined benefit obligation on December 31 $ 7,241,938 7,237,239
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For the years ended December 31
2016 2015
Fair value of plan assets on Junuary 1 $ 5,176,145 5,113,524
Interest income 67,216 89,164
Remeasurements of the net defined benefit liability （ 31,686 ） 47,179
-plan assets revenue (excluded of current interest)
Contributions made 296,439 234,636
Benefits paid by the plan （ 579,649 ）（ 308,358 ）
Fair value of plan assets on December 31 $ 4,928,465 5,176,145
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For the years ended December 31
2016 2015
Current service costs $ 211,050 209,480
Net interest on the net defined benefit liability 25,007 28,336
$ 236,057 237,816
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Actuarial gains and losses recognised in other comprehensive income for the year ended December 31 2016 and 2015 were as follows ：

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For the years ended December 31
2016 2015
Amount on January 1 $ 668,295 361,602
Recognised during the period 312,761 306,693
Amount on December 31 $ 981,056 668,295
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(6) Actuarial assumptions

the reporting date as follow :

Ⅵ

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December 31, 2016 December 31, 2015
Discount rate of defined benefit plan 1.20% 1.30%
Future salary increase rate 1.50% 1.50%
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The expected allocation payment made by the Bank to the defined benefit plans for the one year period after the reporting dates is $230,922 in 2016.

(7) Sensitivity analysis

The effects of changes in major actuarial assumptions adopted in defined benefit obligation on December 31, 2016 and 2015 were as follows :

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Influence of defined benefit plan obligation
Increase0.25% Decrease0.25%
December 31, 2016
Discount rate(Change0.25%) (2.24)% 2.32%
Future salary increase rate(Change0.25%) 2.25% (2.18)%
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	Infuence of defned beneft plan obligation	Infuence of defned beneft plan obligation
	Increase0.25%	Decrease0.25%
December 31, 2015 Discount rate(Change0.25%) Future salary increase rate(Change0.25%)		2.40% (2.25)%
	(2.32)%
	2.33%

The above sensitivity analysis is based on the effects of changes in assumptions single analysis under other assumptions remain unchanged .

In practice many changes in assumptions may be moving .

consistent method.

The Bank and its subsidiaries allocates 6% of each employee's monthly wages to the labour pension personal account at the Bureau of the Labour Insurance in accordance with the provisions of the Labour Pension Act. Under this defined contribution plans, the Bank and its subsidiaries allocates a fixed amount to the Bureau of the Labour Insurance without additional legal or constructive obligations.

The pension costs incurred from the contributions to the Bureau of the Labor Insurance amounted to $90,742 and $83,170 for the years ended December 31, 2016 and 2015, respectively.

(c) Employee deposit with favorable rate

fair value of assets are as follows:

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December 31, 2016 December 31, 2015
Present value of defined benefit obligation (Liabilities recognized in $ 799,298 749,806
separate financial statement)
- -
Less: Fair value of defined benefit plan assets
Net defined benefit liability $ 799,298 749,806
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The Bank conducted the obligation of time deposit with favorable rate for retired and current employees based on the internal regulation "Saving Deposits for Employees".

Taiwan Business Bank Annual Report 2016

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For the years ended December 31
2016 2015
Defined benefit obligation on January 1 $ 749,806 730,426
Interest cost 28,312 27,604
Remeasurements of the net defined benefit liability 192,630 153,897
-current actuarial gains and losses
Benefits paid by the plan （ 171,450 ）（ 162,121 ）
Defined benefit obligation on December 31 $ 799,298 749,806
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For the years ended December 31
2016 2015
Fair value of plan assets on January 1 $ - -
Contributions made 171,450 162,121
Benefits paid by the plan （ 171,450 ）（ 162,121 ）
Fair value of plan assets on December 31 $ - -
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		For theyears ended December 31	For theyears ended December 31	For theyears ended December 31
		2016		2015
Net interest on the net defned beneft liability		$ 220,942		181,501

(4) Actuarial assumption

the reporting date as follow :

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December 31, 2016 December 31, 2015
Discount rate of employee deposit with favorable rate 4.00% 4.00%
Rate of return for capital deposited 2.00% 2.00%
Annual Diminishing rate of account balance 1.00% 1.00%
Possibility that employee deposit with favorable rate be modified 50.00% 50.00%
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(X) Earnings per share

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For the years ended December 31
2016 2015
Net income $ 5,195,699 5,113,036
Weighted average number of common stock shares outstanding (in 5,968,895 5,968,895
thousands) (Note 1)
Basic earnings per shares (in dollars) $ 0.87 0.86
Dilutive potential common shares (in thousands) (Note 2) 42,066 42,935
Weighted average number of shares outstanding for diluted EPS (in 6,010,961 6,011,830
thousands) (Note 1)
Diluted earnings per shares (in dollars) $ 0.86 0.85
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Note1: The basic earnings per share for year 2015 has applied retrospective adjustments.

Note 2: The shares were calculated based on the stock price on the balance sheet date.

Ⅵ

(Y) Employees and directors' remuneration

aside to employees' remuneration from 1% to 6% and no more than 0.6% shall be aside to board of directors as remuneration. But when there are accumulated losses, the Bank shall first remain earning for the deficit.

For the years ended December 31, 2016 and 2015, the estimated employee remuneration were $342,837 and $334,482, and the estimated directors' remuneration were $40,239 and $39,259, the estimates are based on pre-tax net profit for the period, before deducting employee and director's remuneration, multiplied by the elaboration of the Bank's Articles of Association of employee and the directors remuneration ratio, and recognized as operating cost. There is no difference between the amount of employees and directors' remuneration allocated by the directors resolutions and the amount of the Bank's individual financial report in 2016 and 2015. The information is available at the Market Observation Post System website.

(Z) Net interest income

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For the years ended December 31
2016 2015
Interest revenue:
Loan $ 5,805,311 6,599,264
Secured loans 13,670,902 14,589,753
Bills negotiated 5,049 4,337
Bank overdraft 17,367 18,806
Discount 29,421 24,670
Time deposit from Central Bank 949,488 1,448,492
Due from the Central Bank 140,271 182,589
Call loans to banks 640,869 532,131
Bond 1,713,016 754,024
International credit card 59,911 69,110
Overdue loans 253,273 313,419
Bills 140,578 123,507
Due from other Banks 564,314 986,622
Other 201,495 206,650
Subtotal 24,191,265 25,853,374
Interest expense:
Deposits 7,710,985 9,026,917
Deposits from banks 53 101
Call loans from banks 388,243 334,052
Fund 10,968 22,370
Financial debentures 1,077,439 973,407
Bond sold under repurchase agreement 6,623 26,566
Other 751 946
Subtotal 9,195,062 10,384,359
Total $ 14,996,203 15,469,015
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Taiwan Business Bank Annual Report 2016

(AA) Service fee and commission income

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For the years ended December 31
2016 2015
Service charge income:
Remittance service fee $ 101,597 105,182
Import bills negotiated service fee 63,706 59,143
Export bills negotiated service fee 20,008 20,368
Letter of credit service fee 10,435 12,189
Certification service fee 1,426 1,071
Acceptance service fee 1,694 2,012
Trust service fee 388,653 495,304
Guarantee service fee 114,993 94,390
Agency service fee 100,556 84,143
Interbank service fee 66,126 67,196
Card service fee 131,550 133,656
Commission revenue of insurance premium 2,212,389 1,857,340
Custodian service fee 139,743 134,553
Foreign currency service fee 105,260 114,316
Commission of futures 6,640 7,791
Loan service fee 249,931 208,187
Miscellaneous fees 444,271 430,640
Subtotal 4,158,978 3,827,481
Service fee expense:
Foreign currency service fee 25,013 23,093
Interbank service fee 128,299 126,920
Trust service fee 5,492 5,410
Agency service fee 3,715 4,035
IC card service fee 62,630 63,851
Check clearing service fee 11,460 13,247
Remittance service fee 3,618 3,195
Custodian service fee 32,566 29,267
Call loans service fee 122 1,794
Miscellaneous fees 19,768 16,169
Subtotal 292,683 286,981
Total $ 3,866,295 3,540,500
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(AB) Gains (losses) on financial assets and liabilities at fair value through profit or loss‑net

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For the years ended December 31
2016 2015
Valuation profit and loss:
Corporate bonds $ 15,842 ( 9,338 )
Financial debentures 176 1,603
Stock of listed company 6,359 ( 7,208 )
Beneficiary certificates 4,558 ( 4,557 )
Commercial paper 85 8
Option contracts 3,284 1,500
Interest swap contracts - 10,247
Foreign exchange forward contracts 80,767 51,133
Currency swap contracts ( 73,468 ) ( 137,285 )
Non-delivery forward contracts 472 ( 472 )
Subtotal 38,075 ( 94,369 )
Disposition profit and loss:
Stock of listed company ( 14,775 ) ( 47,928 )
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Ⅵ

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For the years ended December 31
2016 2015
Beneficiary certificates ( 12,805 ) ( 80,772 )
Commercial paper - 8
Option contracts 18,552 12,505
Interest swap contracts 11,778 ( 3,520 )
Foreign exchange forward contracts 125,925 ( 132,220 )
Currency swap contracts 448,902 505,109
Non-delivery forward contracts 5,676 ( 3,523 )
Stock index futures ( 38,060 ) -
Subtotal 545,193 249,659
Dividend revenue 6,323 4,671
Interest income 6,960 25,151
Total $ 596,551 185,112
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(AC) Realized (losses) gains on available‑for‑sale financial assets

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For the years ended December 31
2016 2015
Gains on disposal of government bond $ 35,504 39,117
Gains on disposition of corporate bonds 245 18,759
Gains from disposal of stock of listed company 3,816 4,507
Dividend revenue 63,454 27,724
Total $ 103,019 90,107
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(AD) Net other non‑interest income

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For the years ended December 31
2016 2015
Rental revenue of operating assets $ 6,698 7,507
Loss on disposal and retirement of premises and equipment ( 2,044 ) ( 595 )
Loss of account error ( 359 ) ( 96 )
Gold deposit book 4,861 6,331
Gains on sale of collateral assumed - 3,337
Other operating expense ( 6,647 ) ( 31,918 )
Other miscellaneous income 93,500 59,295
Total $ 96,009 43,861
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(AE) Other miscellaneous income

		For theyears ended December 31	For theyears ended December 31	For theyears ended December 31
		2016		2015
Compensation of Taiwan High Speed Rail's accumulated dividend of preferred stock		$ 643,973		-

(AF) Bad debt expenses and guarantee liability provisions

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For the years ended December 31
2016 2015
Discounts, loans and overdue loans $ 2,606,874 2,418,854
Call loans to banks 2,787 -
Receivables and other financial assets ( 155,306 ) ( 14,258 )
Subtotal 2,454,355 2,404,596
Guarantee liabilities 49,839 4,593
Total $ 2,504,194 2,409,189
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Taiwan Business Bank Annual Report 2016

(AG) Employee benefit expenses

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For the years ended December 31
2016 2015
Salary expense $ 5,778,016 5,636,070
Labor and health insurance 406,773 401,788
Pension expense 326,799 320,986
Other employee benefit 903,325 798,297
Total $ 7,414,913 7,157,141
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(AH) Depreciation and amortization expenses

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For the years ended December 31
2016 2015
Property and equipment depreciation $ 311,826 303,565
Amortization
Computer software 75,660 76,312
Other deferred charges 116 177
Total $ 387,602 380,054
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(AI) Other general and administrative management expenses

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For the years ended December 31
2016 2015
Compensation loss $ 570 846
Water and electricity fee 96,365 106,953
Postage and telecommunication 153,788 152,462
Transportation fee 42,198 38,441
Printing and advertisement fee 175,326 170,902
Maintenance fee 41,343 39,157
Insurance fee 354,665 343,718
Professional service fee 234,460 177,537
Materials and supplies 95,366 107,877
Rental expenses 684,106 639,926
Duties and levies 1,337,788 1,485,430
Membership, donation and partaking 537,725 528,229
Storage, packing and processing 43,956 41,700
Cash transit 125,132 124,170
Other 68,121 61,988
Total $ 3,990,909 4,019,336
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(AJ) Financial Instruments

(a) Fair value information

(1) General description

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The financial instruments are record as fair value when original recognizing, usually refer to the transaction price in many circumstances. Except some amortized cost financial instruments, the financial instruments are measured in fair value. A quoted market price in an active market provides

Ⅵ

adopted the value technique, refer to Bloomberg, Reuters or the price at which the asset could be bought or sold in a current transaction between willing parties.

A. First tier

active market is a market in which transactions for the homogenous assets or liabilities take place with sufficient frequency and volume to provide pricing information. The stock of listed company and the beneficiary certificates, government bonds and the derivative financial instruments with public quote inactive market procrssed by the Bank belong to the First tier.

B. Second tier

The input of this tier are other than quoted market prices included within First tier that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e. derived from prices). The government bonds with lower trade volume, corporate bonds, financial debentures, convertible corporate bonds and derivative instruments, including financial debentures the bank issued are belong to second tier.

C. Third tier

The input are unobservable for the asset or liability in market. Unobservable inputs like: Option pricing model using the historical volatility. Because the historical volatility cannot represent the future volatility expected value of whole market participants. The equity instruments with no active market which the Bank invested are third tier.

(3) Based on fair value measurement
A. The fair value hierarchy of information

value hierarchy of information were as follows:

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December 31, 2016
Assets and Liabilities
Total 1st Tier 2nd Tier 3nd Tier
Instruments measured at fair value on a recurring
basis
Non-derivative fnancial assets:
Financial assets at fair value through profit or loss
Financial assets held for trading
Security Investment $ 22,473 22,473 - -
Other 955,005 15,660 939,345 -
Available-for-Sale Financial Assets
Security Investment 2,558,733 2,558,733 - -
Bond Investment 70,771,955 62,620,306 8,151,649 -
Derivative fnancial assets and liabilities
Assets:
Financial assets at fair value through profit or $ 466,215 12,582 453,633 -
loss
Liabilities:
Financial liabilities at fair value through profit or 214,259 - 214,259 -
loss
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Taiwan Business Bank Annual Report 2016

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December 31, 2015
Assets and Liabilities
Total 1st Tier 2nd Tier 3nd Tier
Instruments measured at fair value on a recurring
basis
Non-derivative fnancial assets
Financial assets at fair value through profit or loss
Financial assets held for trading
Security Investment $ 133,842 133,842 - -
Other 500,111 290,215 209,896 -
Financial assets designated at fair value on 970,043 - 970,043 -
initial recognition
Available-for-Sale Financial Assets
Security Investment 2,145,418 2,145,418 - -
Bond Investment 23,523,367 - 23,523,367 -
Derivative fnancial assets and liabilities
Assets:
Financial assets at fair value through profit or loss $ 478,615 27,324 451,291 -
Liabilities:
Financial liabilities at fair value through profit or 219,999 - 219,999 -
loss
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its fair value.

If the financial instruments of quoted price, which are from the Stock Exchange, Brokers, Pricing service agencies or Government institutions, are timely and frequently, and reflects the actual price, then the financial instruments has a quoted price in an active market. If the above conditions are not fulfilled, the market is inactive.

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 considered the identical financial instrument with same characteristics and essential terms of transaction, Discounted-Cash-Flow model and other valuation techniques including the model using market information to be made of the calculation at the balance sheet date(eg Taipei Exchange reference yield curve, Reuters quoted the average commercial paper rate, the Taipei Financial industry call loan rate fixing TAIBOR).

the Bank adopted 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.

Fair value of financial derivatives are the amount of cash to be paid or to be received by the Bank, assuming that the contract will be terminated on the balance sheet date. The Bank adopts mark-to-model prices which are usually adopted among the banking industry, such as Discounted-Cash-Flow model and Black-Scholes model. The Bank adopts the price data from Reuters and Bloomberg to calculate the fair value of the holding position. The aforesaid price

Ⅵ

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. Adjustment for fair value
a. The restraint of evaluation model and uncertain inputs

The estimates of output-based value using the evaluation model, which may not reflect the Bank's all related factors. Therefore the estimated value of the evaluation model will be appropriately adjusted according to the extra parameters such as model risk or liquidity risk. Information and price parameters used in the evaluation process after careful assessment, and appropriately adjusted according to the current market situation.

b. Credit risk value adjustment

The Bank's credit risk value adjustment of OTC transaction derivative instruments can be divided to Credit value adjustments (CVA) and debit value adjustments (DVA). To reflect the fair value of the Group's counterparty or the Bank likely to default, and the Group may not be received or paid full market value of trading possibilities.

The Bank would calculate credit valuation adjustment (CVA) by assessing probability of default (PD) and loss given default (LGD) of the counterparty before multiplying exposure at default (EAD) of the counterparty. On the contrary, debit valuation adjustment (DVA).

The Bank assess the probability of default on the assumption of 60%, but at the risk of the nature and circumstances of available data, we may use other loss given default assumptions.

(4) Not based on fair value measurement
A. Fair value information

the Bank have. Except those items, others' fair value are reasonably approximate value, the Bank does not disclosure their fair value.

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December 31, 2016
Book value Fair value
Held-to-maturity financial assets － net $ 192,523,259 192,110,053
December 31, 2015
Book value Fair value
Held-to-maturity financial assets － net $ 206,277,479 206,473,302
B. The fair value hierarchy of information
December 31, 2016
Assets and Liabilities
Total 1st Tier 2nd Tier 3nd Tier
Held-to -maturity financial assets-net $ 192,110,053 39,402,776 152,707,277 -
December 31, 2015
Assets and Liabilities
Total 1st Tier 2nd Tier 3nd Tier
Held-to -maturity financial assets-net $ 206,473,302 - 206,473,302 -
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Taiwan Business Bank Annual Report 2016

C. Valuation techniques

Methods and assumptions used by the Bank for fair value evaluation of financial instruments were as follows:

a. Cash and cash equivalents, due from Central Bank and call loans to banks, securities purchased under resell agreements, receivables, non-accrual loans transferred from non-loan financial assets, exchange bills negotiated guarantee deposits paid, temporary payments and suspense accounts, proceeds of settlement and credit transaction, deposits from Central Bank and other banks, securities sold under repurchase agreements, payables, other financial liabilities , guarantee deposits received and temporary receipts and suspense accounts: since these instruments have short maturities, the book value is adopted as a reasonable basis in estimating the fair value.
b. Discounts and loans(including non-performing loans): the interest rate of bank loans, dependent on the benchmark interest rate which plus or minus the input value(i.e. motorized interest rate), said market rates, therefore, the book value of financial assets is equivalent to their fair value. Among the case of fixed interest rate, the estimated fair value of long-term loans using the discounted value of its expected cash flows, but this is minority, so the book value of financial assets is equivalent to their fair value.
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.
1) Central Government Securities (NTD): using the comment of "Bonds a fair price for each of times" from Taipei Exchange.
2) Corporate bonds and financial bonds (NTD): the present value or fair price of Taipei Exchange determined using the future cash flow of yield curve discounting evaluation.
d. Deposits and remittance: to determine the fair value, considered Banking industry characteristics, the market interest rates (i.e. market price) is the fair value. And deposits are mostly due within one year, the carrying amounts is the fair value of reasonable basis. The fixed interest rate of long-term deposits should be estimated by the discounted value of its expected cash flows at fair value, and its maturity date no longer than three years, so its estimated fair value of the carrying amount is considered reasonable.
e. Bank debentures payable: The bank debentures payable, issued by the Bank, whose stated rate was equal the effective rate, using discounted cash flow projections to estimate the fair value, equivalent to its book value.
using the price to evaluate the fair value. If there is not market value, using evaluation model to estimate the fair value.
g. Other financial assets–the financial assets using cost method: Because there is without active price and estimated fair value's variation material or the variation estimates cannot be reasonable assessment, the fair value cannot be reliably measured, the Bank does not disclose their fair value.

Ⅵ

(AK) Financial Risk Information

(a) General description

The goal of the financial risk management of the Bank is to effectively diversify, transfer and avoid risks by taking customer service, financial business operating target, overall risk tolerance and external limitation of laws into consideration and provide benefit to customers, shareholders and employees.

The Bank's Financial Risk Management policy is to establish a risk management mechanism in terms of risk identification, risk measurement, risk monitoring, and risk control and to construct the overall risk management system. It is to facilitate the business model with appropriate risk management and to control the rationality between risks and rewards under the premise of legal capital ratio in order to achieve operating targets and increase the value of the Bank for the shareholders. The scope covers the management of credit risk, market risk, operation risk, banking book interest rate risk, capital liquidity risk, and capital adequacy.

(b) Risk management organization structure

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Board of directors
President
Risk Management Committee
General manager
Assets and liabilities Management Committee
Vice president
Credit Examination Committee
Overdue Loans Clearing Committee
Risk management center
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(1) Risk Management Committee

The chairperson of the Risk Management Committee is appointed by the president. The chairpersons include general manager, deputy general manager of the non-regulatory compliance in head office and department directors of head office (excluding the director of audit department in the Board). This Committee is set up for the purpose of establishing a sound risk management system, strengthening risk management and the implementation of the Bank's risk management and monitoring. The meeting will be held once a month in principle. The meeting can be held by the chairman of the Committee when it necessary. The duties are as follows:

and industrial risk management occur.
B. Risk management report of various risk exposure and agenda processing.
C. The processing of examination of the risk management relevant policy of the Bank and limitations, management indices and the response project when the risk exceeds the limitations.
D. Supervise the Bank's capital adequacy management.
E. Conduct or supervise the issues that have to report to Risk Management Committee according to the regulations drawed by the competent authority at home and abroad.
F. Conduct or supervise other risk management related issues.

Risk Management Department is the assistant unit of the Risk Management Committee. The responsibility of the Risk Management Department is to execute preparing sittings agenda,

Taiwan Business Bank Annual Report 2016

convening sittings, agenda processing, taking meeting minutes and tracking resolution and regularly report the important resolution and various risk exposure to the board of (executive) directors.

(2) Assets and Liabilities Management Committee

The chairperson of the Assets and Liabilities Management Committee is the general manager, and the members are formed by the vice assistant general manager and the department heads of deposit, loan, financial transaction, capital deployment and risk management units. The responsibility of the Assets and Liabilities Management Committee is to monitor and manage the banking book interest rate risk and capital liquidity risk and convenes meetings regularly, to approve the analyzing and measurement methods of the capital liquidity risk and banking book interest rate risk exposure, to examine the capital liquidity risk and banking book interest rate risk management policy as well as the relevant limitations and management indices, to receive interest rate risk and capital liquidity risk exposure reports and adjust the assets and liabilities interest rate duration structure and capital maturity structure.

(3) Credit Examination Committee

The convener of the Credit Examination Committee is the assistant general manager supervising Risk Management Center. The Committee in principle convenes weekly to examine the modification and establishment of the regulations (including main points, measures and procedures) for significant loans, foreign exchange and guarantee cases.

(4) Overdue Loans Clearing Committee

The convener of the Overdue Loans Clearing Committee is the supervising vice president and the executive secretary is the manager of the Creditor's Right Management Department. The convener holds meetings based on the necessity to clear the non-performing loans and non-accrual loans and bad debts in order to improve the quality of the credit assets of the Bank and its subsidiaries.

(c) Credit risk

to deteriorating financial status of trade counterparties, pessimistic external economic situation or other factors. The primary source of the credit risk of the Bank is the loan business, such as loans of various terms, guarantees and letters of credit, loan commitments, etc., in addition, other sources of credit risk include call loans from banks, securities investments, derivative financial instrument transactions, etc.

(2) Credit risk management policy

In order to control the credit risk to a tolerable scope, the Bank continuously conduct below operations:

A. Fully understand the credit status and ratings of loan customers and trade counterparties as well as the purposes and payments of loans.
B. Prudently evaluates the credit risk status of loan customers and trade counterparties and consider the adequacy of collaterals and guarantees to assess risk and profit.
C. Establish credit rating mechanism for loan customers or apply the ratings from outside credit rating institutions as the reference for undertaking credit cases or interest rate determination.
D. Modify relevant regulations to control the credit risk to a tolerable extent for the Bank.

Ⅵ

The credit risk management procedure and measurement methods of the Bank's major business are as follows:

A. Credit Business (Including loan commitments and guarantees)

The categorization and credit quality rating of credit assets are as follows:

a. Categorization of credit assets

classified as the first category, others are classified, based on the assurance status and the time overdue, as second category (need attention), third category (possible to recover), fourth category (difficult to retrieve) and the fifth category (unable to retrieve). In order to manage creditor's rights, the Bank established "Regulations Governing the Procedures to Evaluate Assets and Deal with Non-performing/Non-accrual Loans", "Regulations Governing the Reconciliation of Non-performing/Non-accrual Loans" and its operating procedure "Operating procedure Governing the Collection of Non-performing/Non-accrual Loans" and "Code of Conduct to Deal With Non-Performing Loans" to serve as the guidelines for dealing with non-performing credit and overdue loans collection.

b. Categorization of credit quality

Based on historical default data, the Bank established internal credit rating model and completed internal rating system to serve as a reference to credit risk control.

In order to develop an appropriate credit rating model for the Bank to evaluate the credit risk for corporate banking customers and private banking customers, it applied statistical methods, professional expert judgments and relevant customer information to fulfill the requirements. The Bank examined whether the internal credit rating model is in conformity with the actual scenario based on practical default data quarterly and adjusted all parameters to optimize the estimated results.

B. Due from other banks and call loans to banks

The Bank evaluates the credit status of counterparties before transaction and takes the rating information from domestic and foreign credit rating institutions into consideration to determine various credit risk facilities for the counterparties.

The Bank manages credit risk of debt instruments through credit rating data of external institutions, credit quality of bonds, geographic situations and counterparties' risk so as to identify credit risk.

quality and are controlled based on the trade amount (including loans at call). Counterparties which do not have credit rating or which are of low quality shall be examined individually. For counterparties which are general customers, the Bank controls the credit risk exposure based on the derivative instrument risk facilities and conditions approved by general credit procedures.

(3) Credit risk hedging or diminishing.

A. Collaterals

The Bank adopts a series of policies and procedures to mitigate credit risk and enhance credit risk tolerance. The method applied most is to request customers to provide collaterals. The Bank

Taiwan Business Bank Annual Report 2016

established collateral accreditation code of conduct in term of collateral management and total loan amount to regulate the scope of collaterals and the accreditation method and regularly inspects the collaterals. When the collaterals devaluate or the concern of devaluation occurs, the Bank shall increase collaterals or retrieve part of the loans to ensure the creditor's right is intact.

B. Limit of credit risk and the control of credit risk concentration
a. In order to avoid the situation that the credit risk of single customer being too high, the credit limit of an individual, a related party or a related enterprise shall be in conformity with "Authorization method for subsection 3 of Article 33 of the Banking Act of the Republic of China" and the credit limit authorization steps are regulated in the Key Points of Credit Engagement Authorization and the Key Points of Credit Engagement Authorization for Overseas Branches of the Bank.
b. To enhance the risk concentration management, the Bank established regulations in terms of countries, financial institutions, industries and group enterprises. The relevant limits are reviewed and approved annually and the usage of the credit is monitored on a daily basis. In addition, the results are reported regularly.
C. General agreement of net amount settlement

The transactions of the Bank are mostly settled with gross amount. Part of the transactions agreed on net amount settlement. When a default occurs, the Bank terminates all the transactions with the counterparty and settles by net amount to further lower credit risk.

D. Enhancement of other credit

The assessment of credit business apply to credit 5P principles, credit risk is offset by dividing self-liquidating loan commitments as the main, and set the accounts to master the repayment of cash flow. Also in terms of the credit agreement stipulates the offset.(i.e. all kinds of deposits, except prohibition of low or the parties agreement, the Bank can set off all the debts), thus to reduce the loan amount, shorter loan repayment period or are considered part or all of expiration of acceleration clauses. To strengthen the protection of creditor and reduce credit risk, using qualified and effective enhancement, such as the requirement of real property, personal property, demand deposits, time deposits, securities and the guarantee of financial institution or the credit guarantee mechanism approved by government.(ig R.O.C SMEG, Agricultural Credit Guarantee Fund, Overseas Credit Guarantee Fund)

(4) Maximum credit risk exposure of the Bank.

the book value when not considering collaterals or other credit enhancement instruments. The maximum credit exposure off the consolidated balance sheet (when not considering collaterals or other credit enhancement instruments and not revocable) was as follows:

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Maximum credit risk exposure
Off balance sheet items
December 31, 2016 December 31, 2015
Loan commitment signed and irrevocable $ 93,069,743 100,771,521
Signed but not used L/C credit amount 9,350,457 8,030,146
Various guarantee proceeds 14,670,384 9,129,331
Total $ 117,090,584 117,930,998
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Ⅵ

The Management of the Bank evaluated the credit risk exposure and believed that the Bank is able to continuously control and minimize the off-balance-sheet credit risk exposure due to its strict appraisal process and regular subsequent examination.

(5) Credit risk concentration

The Bank and its subsidiaries do not conduct significant transaction with single customer or single trade counterparty. The total amount of discounts and loans, overdue loans in terms of individual customer or individual trade counterparty is not significant. The information of credit risk concentration of the Bank's discounts and loans and overdue loans are divided by industries, geographic areas and collaterals and listed as follows:

A. By industry

Distribution of discounts and loans, overdue loans based on industries.

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December 31, 2016 December 31, 2015
Industry
Amount % Amount %
Private business $ 574,400,741 54.30% 544,785,919 53.46%
Public business 17,127,308 1.62% 29,127,243 2.86%
Government institution 157,538,499 14.89% 138,480,450 13.59%
Nonprofit organization 3,630,663 0.35% 3,679,363 0.36%
Individual 268,176,536 25.35% 265,399,186 26.05%
Foreign financial institution 7,385,582 0.70% 3,214,584 0.32%
Foreign non-financial institution 29,531,188 2.79% 34,288,396 3.36%
Total $ 1,057,790,517 100.00% 1,018,975,141 100.00%
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B. By geographic area

Distribution of discounts and loans, overdue loans based on geographic area.

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December 31, 2016 December 31, 2015
Area
Amount % Amount %
Domestic $ 1,021,032,082 96.52% 981,757,378 96.35%
Foreign 36,758,435 3.48% 37,217,763 3.65%
Total $ 1,057,790,517 100.00% 1,018,975,141 100.00%
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C. By collateral

Distribution of discounts and loans, overdue loans based on collateral.

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December 31, 2016 December 31, 2015
Collateral
Amount % Amount %
Unsecured $ 331,635,937 31.35% 323,627,725 31.76%
Stock 8,355,354 0.79% 9,307,171 0.91%
Bond 8,204,126 0.77% 5,849,312 0.57%
Real estate 576,184,860 54.47% 546,080,256 53.59%
Chattel 11,913,083 1.13% 10,265,366 1.01%
Notes receivable 1,682,824 0.16% 1,380,450 0.14%
Guarantee 112,962,902 10.68% 116,442,766 11.43%
Other 6,851,431 0.65% 6,022,095 0.59%
Total $ 1,057,790,517 100.00% 1,018,975,141 100.00%
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Note: Secured credit are categorized in its respective item per the type of the collaterals. Non‑secured credit (no collateral pro‑ vided) is classified in fiduciary credit. If the credit amount is higher than the accreditation value, the credit amount within the accreditation is classified in the respective item, the credit amount exceeds the accreditation value is classified in fiduciary credit. The accreditation value is the value calculated per the accreditation regulations of the Bank and its subsidiaries, not the discounted value of the signed contract.

Taiwan Business Bank Annual Report 2016

loans to banks, financial assets at fair value through profit or loss, bills and bonds purchased under resell agreement, guarantee deposits paid and operation guarantee deposits and settlement funds are considered of minimum credit risk due to the good credit ratings of the trade counterparties.

were as follows:

A. Credit quality analysis of discounts and loans as well as receivables

December 31, 2016	Not overdue and not impairment amount	Not overdue and not impairment amount	Not overdue and not impairment amount	Not overdue and not impairment amount	Not overdue and not impairment amount	Not overdue and not impairment amount	Not overdue and not impairment amount				Loss provided (D)	Loss provided (D)
	Excellent	Good	Medium	Acceptable	Under standard	No rating	Subtotal (A)	Overdue but not impaired (B)	Impaired amount (C)	Total (A)+(B)+ (C)	With objective evidence of impairment	Without objective evidence of impairment	Net Amount (A)+(B)+ (C)-(D)
Receivable -Credit card -Other Discounts and loans Other fnancial assets Total	$ 396,034 400,589 212,553,044 - $ 213,349,667	260,472 1,401,566 317,772,953 - 319,434,991	280,608 362,045 263,411,813 112 264,054,578	48,894 18,767 46,550,494 - 46,618,155	8,922 - 11,542,857 - 11,551,779	288,706 3,727,078 189,461,418 - 193,477,202	1,283,636 5,910,045 1,041,292,579 112 1,048,486,372	9,341 - 2,812,587 271 2,822,199	- 96,187 13,685,351 157,421 13,938,959	1,292,977 6,006,232 1,057,790,517 157,804 1,065,247,530	- 60,152 2,983,450 60,198 3,103,800	3,273 49,310 9,566,513 4 9,619,100	1,289,704 5,896,770 1,045,240,554 97,602 1,052,524,630

	Not overdue and not impairment amount	Not overdue and not impairment amount	Not overdue and not impairment amount	Not overdue and not impairment amount	Not overdue and not impairment amount	Not overdue and not impairment amount	Not overdue and not impairment amount				Loss provided (D)	Loss provided (D)
December 31, 2015	Excellent	Good	Medium	Acceptable	Under standard	No rating	Subtotal (A)	Overdue but not impaired (B)	Impaired amount (C)	Total (A)+(B)+ (C)	With objective evidence of impairment	Without objective evidence of impairment	Net Amount (A)+(B) +(C)-(D)
Receivable -Credit card -Other Discounts and loans Other fnancial assets Total	$ 403,996 333,578 172,504,775 412 $ 173,242,761	272,814 1,508,769 328,480,930 286 330,262,799	282,456 236,492 227,063,228 - 227,582,176	82,916 11,501 44,927,496 - 45,021,913	12,632 3,943 45,282,263 - 45,298,838	254,041 3,188,786 181,807,637 82 185,250,546	1,308,855 5,283,069 1,000,066,329 780 1,006,659,033	9,777 - 3,000,061 523 3,010,361	- 128,323 15,908,751 70,842 16,107,916	1,318,632 5,411,392 1,018,975,141 72,145 1,025,777,310	- 61,102 3,435,569 20,285 3,516,956	3,888 24,645 7,906,024 15 7,934,572	1,314,744 5,325,645 1,007,633,548 51,845 1,014,325,782

The abovementioned "Excellent" refers to the position which belongs to level 1 to level 4 of the Bank's internal credit rating system, "Good" refers to the position belongs to level 5 to level 9, "Medium" refers to the position belongs to level 10 to level 17, "Acceptable" refers to the position belongs to level 18 to level 23, "under standard" refers to the position belongs to level 24 to level 26 and "No rating" refers to the position which possesses no credit rating in the Bank's internal rating system.

Ⅵ

B. Credit quality analysis based on internal credit rating criteria of the not overdue and not impaired discounts and loans and expressed by customer types

December 31, 2016	Excellent	Good	Medium	Acceptable	Under standard	No rating	Total
Private banking Secured Non-secured Corporate banking Government and public institution Financial institution Margin loans receivable Large Enterprise- credit and guarantee fund Large Enterprise-secured Large Enterprise-unsecured Medium and small enterprises-credit and guarantee fund Medium and small enterprises-secured Medium and small enterprises-unsecured Total	$ 75,184,115 920,335 - 579,960 - 98,657 50,656,118 24,555,855 5,600,410 42,576,682 12,380,912	95,847,141 4,355,783 5,000,073 6,843,476 - 172,376 17,719,414 39,306,610 29,109,628 96,721,445 22,697,007	67,821,656 6,711,990 10,000,000 322,200 - 23,825 3,270,544 14,091,585 43,230,476 96,982,654 20,956,883	6,124,027 871,247 - - - 11,875 1,435,726 4,653,681 4,590,697 20,982,398 7,880,843	2,493,083 266,981 2,127,235 - - - 250,000 236,973 887,130 3,185,713 2,095,742	3,106,026 1,488,162 157,521,969 289,980 1,708,746 - - 2,591,521 328,827 5,741,430 16,684,757	250,576,048 14,614,498 174,649,277 8,035,616 1,708,746 306,733 73,331,802 85,436,225 83,747,168 266,190,322 82,696,144
	$ 212,553,044	317,772,953	263,411,813	46,550,494	11,542,857	189,461,418	1,041,292,579


December 31, 2015	Excellent	Good	Medium	Acceptable	Under standard	No rating	Total
Private banking Secured Non-secured Corporate banking Government and public institution Financial institution Margin loans receivable Large Enterprise- credit and guarantee fund Large Enterprise-secured Large Enterprise-non secured Medium and small enterprises-credit and guarantee fund Medium and small enterprises-secured Medium and small enterprises- non secured Total	$ 77,364,965 1,536,573 - - - 5,089 6,977,631 17,666,315 7,244,085 45,835,415 15,874,702	67,967,149 4,562,469 27,000,007 2,721,189 - 150,245 9,457,158 37,054,388 30,699,103 114,527,619 34,341,603	70,469,211 9,169,406 - 828,850 - 5,293 1,507,565 8,404,114 44,447,272 78,223,109 14,008,408	16,430,699 1,250,647 - 164,302 - - 3,027,538 2,686,100 3,710,278 11,106,153 6,551,779	3,776,645 193,573 2,127,236 - - - 35,473,646 481,030 321,307 1,743,649 1,165,177	7,672,746 1,653,922 138,461,969 328,800 1,717,363 10,000 - 3,924,910 952,635 8,677,618 18,407,674	243,681,415 18,366,590 167,589,212 4,043,141 1,717,363 170,627 56,443,538 70,216,857 87,374,680 260,113,563 90,349,343
	$ 172,504,775	328,480,930	227,063,228	44,927,496	45,282,263	181,807,637	1,000,066,329

Taiwan Business Bank Annual Report 2016

C. Credit quality analysis of security investments

December 31, 2016	Not overdue and impaired position	Not overdue and impaired position	Not overdue and impaired position	Not overdue and impaired position	Not overdue and impaired position	Overdue but not impaired position (B)	Impairment position (C)	Total (A)+(B)+(C)	Loss provided (D)	Net amount (A)+(B)+ (C)-(D)
	Investment	Sub investment	High risk	No rating	Subtotal (A)
Available-for-sale financial assets-net -Overseas bonds -'NT bonds Hold-to-maturity financial assets-net -Overseas bonds -'NT bonds	$ 7,874,215 62,620,307 27,454,012 39,594,247	- - - -	- - - -	277,433 - - -	8,151,648 62,620,307 27,454,012 39,594,247	- - - -	- - - -	8,151,648 62,620,307 27,454,012 39,594,247	- - - -	8,151,648 62,620,307 27,454,012 39,594,247

December 31, 2015	Not overdue and impaired position					Overdue but not impaired position (B)	Impairment position (C)	Total (A)+(B)+(C)	Loss provided (D)	Net amount (A)+(B)+ (C)-(D)
	Investment	Sub investment	High risk	No rating	Subtotal (A)
Financial assets at fair value through proft or loss -Overseas bonds Available-for-sale financial assets-net -Overseas bonds -'NT bonds Hold-to-maturity financial assets-net -Overseas bonds -'NT bonds	$ 328,621 6,423,359 16,579,402 18,130,591 22,538,688	- - - 493,200 -	- - - - -	641,422 520,606 - - -	970,043 6,943,965 16,579,402 18,623,791 22,538,688	- - - - -	- - - - -	970,043 6,943,965 16,579,402 18,623,791 22,538,688	- - - - -	970,043 6,943,965 16,579,402 18,623,791 22,538,688

For the investment ratings of above tables, investment grade refers to AAA to BBB-, Sub investment grade refers to BB+ ~B-, high risk refers to CCC+ and below. No rating refers to the bonds not graded by credit rating institution.

Operation process delay of loan borrowers and other administrative factors may cause financial assets to be overdue but not impaired. According to the internal risk management regulations of the Bank and its subsidiaries, financial assets overdue within 90 days are not considered impaired unless there are other evidence indicates otherwise.

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December 31, 2016
within 1month 1~3 months over 3 months Total
Account receivables
-Credit card $ 3,852 5,489 - 9,341
Discounts and loans
Private banking
-Secured 1,363,945 416,999 - 1,780,944
-Unsecured 75,328 26,146 - 101,474
Corporate banking
-Large enterprise unsecured 48,225 - - 48,225
-Medium and small enterprises- credit and guarantee fund 258,843 74,242 - 333,085
-Medium and small enterprises- secured 334,165 55,816 - 389,981
-Medium and small enterprises-unsecured 147,478 11,400 - 158,878
Other financial assets - Exchange bills negotiated 271 - - 271
Total $ 2,232,107 590,092 - 2,822,199
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December 31, 2015
within 1month 1~3 months over 3 months Total
Account receivables
-Credit card $ 6,219 3,558 - 9,777
Discounts and loans
Private banking
-Secured 1,559,118 530,781 - 2,089,899
-Unsecured 123,500 17,628 - 141,128
Corporate banking
-Large enterprise secured 33,713 - - 33,713
-Medium and small enterprises-credit and guarantee fund 272,496 73,554 - 346,050
-Medium and small enterprises- secured 305,710 1,362 - 307,072
-Medium and small enterprises-unsecured 69,021 13,178 - 82,199
Other financial assets - Exchange bills negotiated 523 - - 523
Total $ 2,370,300 640,061 - 3,010,361
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A. Discounts and loans

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December 31, 2016
Item
Discounts and loans Allowance for bad debts
With objective evidence of impairment
Individual assessment $ 9,012,502 1,533,524
Collective assessment
Government and public institution 16,530 16,530
Medium and small enterprises-credit and guarantee fund 2,109,832 677,215
Medium and small enterprises-secured 513,017 237,858
Medium and small enterprises-unsecured 60,927 58,975
Private banking-secured 1,812,207 358,447
Private banking-unsecured 158,768 99,916
Preliminary negotiation projects 1,568 985
Subtotal 13,685,351 2,983,450
Without objective evidence of impairment
Collective assessment
Government and public institution 174,649,277 149,389
Financial institution 8,035,616 6,873
Margin loans receivables 1,708,746 1,462
Large Enterprise- credit and guarantee fund 306,733 15,900
Large enterprise secured 73,331,802 1,334,473
Large enterprise-unsecured 85,484,450 2,120,490
Medium and small enterprises-credit guarantee fund 84,080,253 1,595,071
Medium and small enterprises-secured 266,580,303 1,666,660
Medium and small enterprises-unsecured 82,855,022 2,026,346
Private banking-secured 252,356,993 580,697
Private banking-unsecured 14,715,971 69,152
Subtotal 1,044,105,166 9,566,513
Total $ 1,057,790,517 12,549,963
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Taiwan Business Bank Annual Report 2016

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December 31, 2015
Item
Discounts and loans Allowance for bad debts
With objective evidence of impairment
Individual assessment $ 11,287,196 1,838,436
Collective assessment
Large enterprise-secured 27,927 12,173
Large enterprise-unsecured 18,481 15,226
Medium and small enterprises-credit and guarantee fund 2,019,867 739,118
Medium and small enterprises-secured 509,332 158,753
Medium and small enterprises-unsecured 155,403 110,941
Private banking-secured 1,711,220 432,784
Private banking-unsecured 178,171 127,481
Preliminary negotiation projects 1,154 657
Subtotal 15,908,751 3,435,569
Without objective evidence of impairment
Collective assessment
Government and public institution 167,589,212 138,271
Financial institution 3,714,536 3,065
Margin loans receivables 1,717,363 1,417
Large Enterprise- credit and guarantee fund 170,627 8,540
Large enterprise secured 56,477,252 969,564
Large enterprise-unsecured 70,545,462 1,551,049
Medium and small enterprises-credit guarantee fund 87,720,731 1,821,217
Medium and small enterprises-secured 260,409,846 972,283
Medium and small enterprises-unsecured 90,431,541 1,619,055
Private banking-secured 245,782,102 710,058
Private banking-unsecured 18,507,718 111,505
Subtotal 1,003,066,390 7,906,024
Total $ 1,018,975,141 11,341,593
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B. Receivables

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December 31, 2016
Item
Receivables Allowance for bad debts
With objective evidence of impairment
Individual assessment $ 67,631 48,974
Collective assessment 28,556 11,178
Subtotal 96,187 60,152
Without objective evidence of impairment
Collective assessment
Credit card proceeds receivable 1,292,977 3,273
Accounts receivable 256,744 2,321
Installment accounts receivable and rents receivable 912,753 13,933
Other receivables 259,886 8,881
Acceptances receivable 1,213,733 12,137
Accounts receivable factoring 319,040 3,190
Interest receivable 2,947,889 8,848
Subtotal 7,203,022 52,583
Total $ 7,299,209 112,735
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Ⅵ

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December 31, 2015
Item
Receivables Allowance for bad debts
With objective evidence of impairment
Individual assessment $ 102,837 51,253
Collective assessment 25,486 9,849
Subtotal 128,323 61,102
Without objective evidence of impairment
Collective assessment
Credit card proceeds receivable 1,318,632 3,888
Accounts receivable 546,752 -
Installment accounts receivable and rents receivable 864,654 -
Other receivables 198,331 4,591
Acceptances receivable 1,264,956 12,650
Interest receivable 2,408,376 7,404
Subtotal 6,601,701 28,533
Total $ 6,730,024 89,635
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Item December 31, 2016
Other financial assets Allowance for bad debts
With objective evidence of impairment
Individual assessment $ 90,965 1,341
Collective assessment
Guarantee, acceptance and other advances 9,440 47,901
Credit card 57,016 10,956
Subtotal 157,421 60,198
Without objective evidence of impairment
Collective assessment
Exchange bills negotiated 383 4
Total $ 157,804 60,202
Item December 31, 2015
Other financial assets Allowance for bad debts
With objective evidence of impairment
Individual assessment $ 1,712 1,510
Collective assessment
Guarantee, acceptance and other advances 3,631 7,837
Credit card 65,499 10,938
Subtotal 70,842 20,285
Without objective evidence of impairment
Collective assessment
Exchange bills negotiated 1,303 15
Total $ 72,145 20,300
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(9) Collateral management policy

A. Collaterals are recognized under the account of other assets per the rules of "Regulations Governing the Preparation of Financial Reports by Public Held Banks".
B. Details were as follows:

Collaterals refer to the collaterals provided by clients as guarantee which are undertaken through public auction when the debtor is not able to fulfill its obligation. The collaterals assumed are recognized using the prices undertaken per the rules of "Regulations Governing the Preparation of Financial Reports by Public Banks" and measured by the book value or the fair value deducted by cost of sale, whichever is lower, at the end of the period. Collaterals will be sold when they

Taiwan Business Bank Annual Report 2016

are available to be sold and the proceeds received will be used to reduce the book amount of collaterals.

(10) Disclosure required under "Regulations Governing the Preparation of Financial Reports by Public Held Banks "

A. Loan quality:

Unit ： In Thousands of New Taiwan Dollars, %

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Month/Year December 31, 2016
Non-performing Non-performing Allowance for
Items loans Total loans loan ratio credit losses Coverage ratio
Corporate Secured 2,702,366 417,320,736 0.65% 4,725,318 174.86%
finance Unsecured 1,017,223 377,249,746 0.27% 4,730,164 465.01%
Residence mortgages(Note 4) 447,319 140,996,715 0.32% 1,580,928 353.42%
Cash cards - 114 -% - -%
Consumer
finance Small sum credit loans(Note 5) 11,495 849,136 1.35% 13,581 118.15%
Others Secured 277,251 107,758,146 0.26% 1,202,590 433.75%
(Note 6) Unsecured 64,728 13,615,924 0.48% 297,382 459.43%
total loan business 4,520,382 1,057,790,517 0.43% 12,549,963 277.63%
Allowance Ratio of
Total for doubtful allowance to
Overdue loans receivables Overdue ratio accounts overdue loans
Credit cards business 2,070 1,349,993 0.15% 14,229 687.39%
Account receivable factoring-without recourse - 319,040 -% 3,190 -%
Month/Year December 31, 2015
Non-performing Non-performing Allowance for
Items loans Total loans loan ratio credit losses Coverage ratio
Corporate Secured 3,295,371 401,332,844 0.82% 7,321,836 222.19%
finance Unsecured 1,004,890 358,722,393 0.28% 2,322,989 231.17%
Residence mortgages(Note 4) 357,191 135,910,901 0.26% 1,195,030 334.56%
Cash cards 2 154 1.30% 2 100.00%
Consumer
finance Small sum credit loans(Note 5) 2,756 571,709 0.48% 2,756 100.00%
Others Secured 185,001 104,802,110 0.18% 372,074 201.12%
(Note 6) Unsecured 59,797 17,635,030 0.34% 126,906 212.23%
total loan business 4,905,008 1,018,975,141 0.48% 11,341,593 231.22%
Allowance Ratio of
Total for doubtful allowance to
Overdue loans receivables Overdue ratio accounts overdue loans
Credit cards business 951 1,384,131 0.07% 14,826 1,558.99%
Account receivable factoring-without recourse - - -% - -%
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Note 1. Non‑performing loans represent the amount of overdue loans as reported in accordance with the "Regulations on the Proce‑ dures for Banking Institutions to Evaluate Assets and Deal with Past Due/Non‑performing Loans". The credit card overdue loans represent the amount of overdue loans as reported in accordance with Jin‑Kuan‑Yin‑(4)‑Zi No. 0944000378, dated July 6, 2005.

Note 2. Non‑performing loan ratio = Non‑performing loans÷ total loans; Credit card delinquency ratio = Overdue receivables÷ bal‑ ance of receivables

Note 3. Coverage ratio for loans = allowance for credit losses ÷ non‑performing loans; Coverage ratio for credit card business = al‑ lowance 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. 0944000494, 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.

Ⅵ

B. Overdue loans and receivables exempted from reporting

Unit : In Thousands of New Taiwan Dollars

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December 31, 2016 December 31, 2015
Loans may be exempted Receivables may be Loans may be exempted Receivables may be
from reporting as a exempted from reporting from reporting as a exempted from reporting
non-performing loan as overdue receivables non-performing loan as overdue receivables
Pursuant to a contract under $ 2,847 7,546 4,587 10,749
a debt negotiation plan
Pursuant to a contract under 83,998 47,400 90,441 57,811
a debt liquidation plan and a
debt relief plan
Total $ 86,845 54,946 95,028 68,560
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Note A: In accordance with Jin‑Kuan‑Yin‑(1)‑Zi No. 09510001270, dated April 25, 2006, a bank is required to make supplemental disclosure of credit information which was approved under the debt coordination mechanism of unsecured consumer debts by the Bankers Association of the R.O.C.

Note B: In accordance with Jin‑Kuan‑Yin‑(1)‑Zi No. 09700318940, dated September 15, 2008, a bank is required to make supple‑ mental disclosure of credit information once debtors apply for pre‑negotiation, relief and liquidation under the “Consumer Debt Clearance Act.”

C. Concentration of credit extensions

Unit ： In Thousands of New Taiwan Dollars, %

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December 31, 2016
Ranking Group enterprise Credit amount Credit amount to equity ratio (%)
1 A company. (Railway transportation) 31,900,542 45.01%
2 B group. (Petroleum and chemical material manufacturing) 9,491,629 13.39%
3 C group. (Steel rolling and extruding) 8,406,097 11.86%
4 D company. (Real estate development) 6,521,072 9.20%
5 E group. (Real estate development) 6,508,160 9.18%
6 F group. (Integrated Circuits Manufacturing) 6,000,000 8.47%
7 G group. (Computer manufacturing) 5,513,184 7.78%
8 H group. (Petroleum and chemical material manufacturing) 4,674,109 6.60%
9 I group. (Steel smelting) 3,869,721 5.46%
10 J group. (Liquid crystal panel and components manufacturing) 3,520,717 4.97%
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Unit ： In Thousands of New Taiwan Dollars, %

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December 31, 2015
Ranking Group enterprise Credit amount Credit amount to equity ratio (%)
1 A company. (Railway transportation) 35,037,426 51.79%
2 B group. (Petroleum and chemical material manufacturing) 8,801,707 13.01%
3 C group. (Steel rolling and extruding) 7,345,220 10.86%
4 D group. (Real estate development) 6,145,072 9.08%
5 G group. (Computer manufacturing) 6,004,799 8.88%
6 E group. (Real estate development) 4,803,740 7.10%
7 H group. (Petroleum and chemical material manufacturing) 4,606,778 6.81%
8 J group. (Liquid crystal panel and components manufacturing) 3,844,646 5.68%
9 I group. (Steel smelting) 3,576,033 5.29%
10 K group. (Computer manufacturing) 3,487,934 5.16%
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Note 1 The top ten enterprise groups other than government or stated‑owned enterprises are ranked according to their total out‑ standing 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 expo‑ sure 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 Statis‑ tics, 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 over‑ drafts, 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 cur‑ rency long positions, accounts receivable‑factoring discount, bankers’ acceptance receivable, guarantees receivable.

Note 4 In the calculation of Credit amount to 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.

Taiwan Business Bank Annual Report 2016

(d) Liquidity risk

finance to fulfill the financial obligation which is going to mature with sufficient fund, such as early rescind of time deposits, the channels and terms to call loan from other bank are deteriorated due to the influence of specific markets and the default of loan customers worsen and it is harder for the Bank to receive payments and liquidate financial instruments. The abovementioned situations may diminish the source of cash for the Bank to undertake loan business, trades and investment activities. Under some extreme circumstances, the lack of liquidity may increase the potential possibility of reduction of the overall position of consolidated financial statement, sale of assets and inability to fulfill loan obligation. Liquidity risk is an inherent risk of bank operations and is influenced by specific or overall events in various markets. Those events include but not limited to: Credit event, merger or buyout, systematic strike and natural disaster.

(2) The management policy, process and measurement of liquidity risk

A. Policy

a. In accordance with the target and limit for liquidity risk management approved by the board of directors and monitor all liquidity risk positions.
b. Established "Directions Governing the Capital Liquidity Risk Management of Taiwan Business Bank" and "Remarks Governing the Capital Liquidity Risk Management of Taiwan Business Bank" to serve as guidance to effectively control capital liquidity risk.
c. Overseas branches shall regulate the code of conduct for liquidity risk management based on business characteristics and the regulations of local authorities. After being approved by the general manager, the Risk Management Department will be in charge of monitoring liquidity risk.

B. Process

a. Finance Department is in charge of daily capital deployment to ensure that the capital is sufficient to cope with various demands for capital.
b. Risk Management Department is in charge of the identification, measurement, supervision and control of capital liquidity risk to establish a firm operation process and structure.
c. Risk Management Department reports the result of capital liquidity risk measurement to the Assets and Liabilities Management Committee on a monthly basis and reports the results of capital liquidity risk and pressure test to the board of directors quarterly.

C. Measurement

based on the remaining days to maturity and calculate the gap of capital of each time zone in order to measure the capital deficiency of each time zone.
b. Loan-deposit ratio: To calculate the deposits the Bank received which are used to conduct loan business. In other words, the percentage of the total loan amount accounts for the total deposit amount.
c. Capital concentration and stability: In order to prevent the Bank from over-relying on single trade counterparty, product or market, the Bank observes several aspects such as the changes in large time deposit customers, the percentage of demand deposits and the continuity of deposits.
d. Pressure test: Except for monitoring the capital demand under normal circumstances, the Bank conducts pressure test regularly in order to evaluate the capital liquidity under abnormal circumstances and ensure that the Bank is equipped with sufficient capital.

Ⅵ

(3) Financial assets possessed for managing liquidity risk and maturity analysis for non-derivative financial liability
A. Financial assets possessed for managing liquidity risk

The Bank possesses cash and other high liquidity interest yielding assets to cope with payment obligations and potential emergent capital demands in the market. The assets possessed for managing liquidity risk include cash and cash equivalent, due from the Central Bank and call loans to banks, financial assets at fair value through profit or loss, discounts and loans, available-for-sale financial assets, held-to-maturity financial assets, debts investment without active market.

possessed by the Bank based on the remaining days from the consolidated financial statement date to the contract maturity date. The amount disclosed is based on the cash flows of the contracts and thus part of the amount disclosed may not correspond to the amount disclosed in

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December 31, 2016
0-30 days 31-90 days 91 days-1 year 1-5 years Over 5 years Total
Major matured cash outflow $ 828,893,113 147,388,362 332,031,736 65,885,099 13,219,295 1,387,417,605
Deposits from the Central Bank 236,891 - - - - 236,891
and banks
Overdrafts on banks 1,187,819 - - - - 1,187,819
Call loans from the Central Bank 26,311,984 10,869,781 - - - 37,181,765
and banks
Securities sold under repurchase 1,772,500 325,799 660,606 - - 2,758,905
agreement
Interest payable 337,226 309,866 799,102 59,594 35 1,505,823
Deposits transferred from 6,048,474 21,060,355 10,102,553 - - 37,211,382
Chunghwa Post Co., Ltd.
Demand deposits 699,189,213 - - - - 699,189,213
Time deposits 93,431,200 113,763,731 314,329,475 32,718,085 5,717 554,248,208
Remittance 367,056 - - - - 367,056
Financial debentures - 1,050,000 6,000,000 28,000,000 7,700,000 42,750,000
Appropriated loan fund 10,750 8,830 140,000 5,107,420 5,513,543 10,780,543
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December 31, 2015
0-30 days 31-90 days 91 days-1 year 1-5 years Over 5 years Total
Major matured cash outflow $ 790,522,579 152,524,106 353,076,340 66,722,424 10,924,123 1,373,769,572
Deposits from the Central Bank 420,608 - - - - 420,608
and banks
Overdrafts on banks 870,323 - - - - 870,323
Call loans from the Central Bank 26,911,653 9,925,836 2,008,277 - - 38,845,766
and banks
Securities sold under repurchase 3,283,045 240,944 639,158 - - 4,163,147
agreement
Interest payable 423,253 371,486 825,145 57,713 6 1,677,603
Deposits transferred from 843,570 18,931,583 17,945,687 - - 37,720,840
Chunghwa Post Co., Ltd.
Demand deposits 650,175,296 - - - - 650,175,296
Time deposits 107,088,602 123,052,097 317,869,993 33,632,791 2,677 581,646,160
Remittance 499,229 - - - - 499,229
Financial debentures - - 13,550,000 27,050,000 5,000,000 45,600,000
Appropriated loan fund 7,000 2,160 238,080 5,981,920 5,921,440 12,150,600
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Taiwan Business Bank Annual Report 2016

The derivative instruments of the Bank's possession which are settled by net amount include foreign derivative instruments, such as non-delivery forward contracts, foreign exchange options settled by net amount. After evaluation the Bank concluded that the maturity date is the basic element to comprehend all the derivative financial instruments listed in the consolidated financial statement. The amount disclosed is based on the cash flows of the contracts and thus part of the amount disclosed may not correspond to the amount disclosed in the consolidated financial statement.

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December 31, 2016
0-30 days 31-90 days 91-180 days 181 days to 1 year Over1 year Total
Derivative financial liabilities at
fair value through profit or loss
Foreign exchange derivative
instrument $ - 980 - 280 - 1,260
December 31, 2015
0-30 days 31-90 days 91-180 days 181 days to 1 year Over1 year Total
Derivative financial liabilities at
fair value through profit or loss
Foreign exchange derivative
instrument $ 475 - - - - 475
----- End of picture text -----

The derivative instruments of the Bank's possession settled by gross amount include the following:

amount, foreign exchange forward contracts and currency swap contracts.

are settled by gross amount based on the remaining days from the consolidated financial statement date to the contract maturity date. The amount disclosed is based on the cash flow of the contracts and thus part of the amount disclosed may not correspond to the amount disclosed in the consolidated financial statement. The maturity analysis for derivative financial liabilities settled by gross amount is as follows:

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December 31, 2016 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total
Derivative financial
instruments at fair value
through profit or loss
Foreign exchange
derivative instrument
Cash outflow $ 34,409,631 22,383,020 5,836,494 716,221 - 63,345,366
Cash inflow 34,401,750 21,827,320 5,690,894 745,027 - 62,664,991
Total cash outflow 34,409,631 22,383,020 5,836,494 716,221 - 63,345,366
Total cash inflow 34,401,750 21,827,320 5,690,894 745,027 - 62,664,991
Net cash flow $ 7,881 555,700 145,600 ( 28,806 ) - 680,375
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Ⅵ

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December 31, 2015 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total
Derivative financial
instruments at fair value
through profit or loss
Foreign exchange
derivative instrument
Cash outflow $ 22,660,960 12,542,840 2,515,524 842,038 - 38,561,362
Cash inflow 22,748,215 12,784,232 2,521,002 893,631 - 38,947,080
Total cash outflow 22,660,960 12,542,840 2,515,524 842,038 - 38,561,362
Total cash inflow 22,748,215 12,784,232 2,521,002 893,631 - 38,947,080
Net cash flow $ ( 87,255 ) ( 241,392 ) ( 5,478 ) ( 51,593 ) - ( 385,718 )
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(5) Maturity analysis of off balance sheet items

The table below shows the maturity analysis of the off-balance-sheet items of the Bank based on the remaining days from the consolidated financial statement date to the contract maturity date. For the financial guarantee contracts issued, the maximum amount of the guarantee is listed in the earliest time zone that the guarantee may be executed. The amount disclosed is based on the cash flows of the contracts and thus part of the amount disclosed may not correspond to the amount disclosed in

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December 31, 2016 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total
Issued and irrevocable loan $ 153,450 196,726 40,959,262 33,153,734 18,606,571 93,069,743
commitment
Issued but not yet executed 3,138,218 5,023,578 467,989 337,231 383,441 9,350,457
letter of credit
Miscellaneous guarantee 14,670,384 - - - - 14,670,384
Total $ 17,962,052 5,220,304 41,427,251 33,490,965 18,990,012 117,090,584
December 31, 2015 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total
Issued and irrevocable loan $ 6,390,851 15,955,553 1,577,133 30,860,170 45,987,814 100,771,521
commitment
Issued but not yet executed 2,731,882 4,245,628 758,790 265,792 28,054 8,030,146
letter of credit
Miscellaneous guarantee 9,129,331 - - - - 9,129,331
Total $ 18,252,064 20,201,181 2,335,923 31,125,962 46,015,868 117,930,998
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(6) Maturity analysis of lease contract commitments

Operating lease commitment refers to, when the Bank is the lessor or lessee and under the irrevocable operating lease conditions, the minimum total future rent payment. Below tables show the maturity analysis of the Bank's operating lease contract commitments:

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December 31, 2016 Below 1 year 1-5 years Over 5 years Total
Operating lease expense (lessee) $ 70,329 69,346 - 139,675
Operating lease income (lessor) 3,934 2,410 - 6,344
December 31, 2015 Below 1 year 1-5 years Over 5 years Total
Operating lease expense (lessee) $ 79,092 138,614 - 217,706
Operating lease income (lessor) 1,506 114 - 1,620
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Taiwan Business Bank Annual Report 2016

The capital expenditure commitment of the Bank refers to the contract signed to obtain buildings and equipment. The maturity analysis of the capital expenditure commitment of the Bank is as follows:

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December 31, 2016 Below 1 year 1-5 years Over 5 years Total
Machinery and equipment $ 653,130 - - 653,130
Lease property 9,878 28,380 25 38,283
Miscellaneous equipment 11,213 - - 11,213
Total $ 674,221 28,380 25 702,626
December 31, 2015 Below 1 year 1-5 years Over 5 years Total
Buildings and constructions $ 54,518 - - 54,518
Machinery and equipment 593,308 13,180 - 606,488
Communication and transportation 2,698 - - 2,698
equipment
Lease property 9,287 36,575 175 46,037
Miscellaneous equipment 4,399 - - 4,399
Total $ 664,210 49,755 175 714,140
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(7) Disclosures required by "Regulations Governing the Preparation of Financial Reports by Public Held Banks"

A. Maturity analysis in New Taiwan dollars

Unit : In Thousands of New Taiwan Dollars

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December 31, 2016
Amount during the maturity period from the balance sheet date to due date
Total 0-10days 11-30days 31-90days 91-180days 181days-1year Over 1 year
Major maturity
capital inflow $ 1,291,674,625 93,072,084 148,945,573 130,659,717 187,702,413 197,681,634 533,613,204
Major maturity
capital outflow 1,640,504,835 60,126,831 79,718,754 162,421,241 173,761,581 296,143,485 868,332,943
Gap (348,830,210 ) 32,945,253 69,226,819 (31,761,524 ) 13,940,832 (98,461,851 ) (334,719,739 )
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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 $346,854,347.

Unit : In Thousands of New Taiwan Dollars

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December 31, 2015
Amount during the maturity period from the balance sheet date to due date
Total 0-10days 11-30days 31-90days 91-180days 181days-1year Over 1 year
Major maturity
capital inflow $ 1,272,950,880 129,497,755 177,607,743 111,154,135 153,934,463 157,183,362 543,573,422
Major maturity
capital outflow 1,635,584,929 43,476,796 81,759,354 159,703,330 185,925,242 316,623,714 848,096,493
Gap (362,634,049 ) 86,020,959 95,848,389 (48,549,195 ) (31,990,779 ) (159,440,352 ) (304,523,071 )
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B. Maturity analysis in U.S. dollars

Unit : In Thousands of US Dollars

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December 31, 2016
Amount during the maturity period from the balance sheet date to due date
Total 0-30days 31-90days 91-180days 181days-1year Over 1 year
Major maturity $ 7,826,263 2,618,874 1,522,669 992,539 922,752 1,769,429
capital inflow
Major maturity 8,791,509 2,045,754 1,575,051 981,556 1,272,230 2,916,918
capital outflow
Gap (965,246 ) 573,120 (52,382 ) 10,983 (349,478 ) (1,147,489 )
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Note: Including commitment of credit agreement and estimates to outflow US$1,014,871.

Ⅵ

Unit : In Thousands of US Dollars

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December 31, 2015
Amount during the maturity period from the balance sheet date to due date
Total 0-30days 31-90days 91-180days 181days-1year Over 1 year
Major maturity
$ 7,029,595 2,279,080 1,462,367 782,629 1,032,682 1,472,837
capital inflow
Major maturity
8,246,927 2,495,283 1,317,464 586,146 615,002 3,233,032
capital outflow
Gap (1,217,332 ) (216,203 ) 144,903 196,483 417,680 (1,760,195 )
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Note: Including commitment of credit agreement and estimates to outflow US$1,269,182.

(e) Market risk

Market risk refers to the possible loss of the Bank's business in or off the balance sheet results from the disadvantageous fluctuation in market price in terms of interest rates, stock prices, foreign exchange rates and commodity prices.

(2) Policies and procedures of market risk management
A. Strategy
- a. To carry out market risk management, achieve operation target and maintain healthy capital adequacy by following "Directions Governing the Market Risk Management of Taiwan Business Bank" and other relevant regulations.
- b. Under the risk tolerance approved by the board of directors, the Bank applies various risk control mechanism to effectively deploy and manage capital in order to maintain the market risk exposure within the tolerable extent and achieve earning target.
B. Policies and procedures

In order to establish the market risk management mechanism and ensure that the market risk is within the tolerable extent, the Bank set up directions governing the market risk management, remarks governing the limit of market risk and financial product valuation procedures as the primary management guidance. Other than what is stated above, the Bank also establish limit control mechanism in terms of trade positions, stop-limit, suspensions and lines of alert based on the operation notices and procedures of different financial products (including fix income products, equity securities, foreign exchange transaction and derivative financial products).

(3) Process for market risk management

In accordance with the rules of "Directions Governing the Market Risk Management of Taiwan Business Bank", the Bank shall conduct appropriate market risk evaluation and document the process for later review before financial products are promoted. The content of evaluation includes risk factors identification, evaluation methods, cost-benefit analysis, market liquidity, risk strategy, adequacy of risk management mechanism and the influence on the Bank for undertaking market risk.

B. Risk measurement
a. Annually based on the business development of transaction units and submit to the board of directors for approval. For the units which the positions and limits remain unchanged after evaluation, they can put the positions and limits into practice after receiving the approval from the general manager.

Taiwan Business Bank Annual Report 2016

through different information systems. For the market data and parameters of the models applied for evaluation, they shall be inspected regularly to determine the rationality.
C. Risk monitoring
to review and serve as the guidance for daily risk management operation.
stop-limit. Provided that the valuation loss amount is over the limit, a stop-limit, suspension and subsequent risk control will be executed.

D. Risk report

Risk management department report current market risk management status of the Bank to directors (executive directors) and high rank management to facilitate the directors and management to control the risk exposure status and adjust management procedures properly.

(4) Scope and method of market risk management
A. Foreign exchange risk management

Foreign exchange risk refers to the potential profit or loss of the foreign currency financial instruments which results from the transition among fluctuating currencies.

b. Applicable scope

and involve in foreign currencies.

c. Purpose for foreign exchange risk management

To avoid loss of earnings or deterioration of financial status due to intensive fluctuation of foreign exchange and to increase capital deployment efficiency and business operation integrity.

d. Procedures of foreign exchange risk management
1) In order to control foreign exchange transaction risk, the Bank established trade position authorization standard for financial transaction operations, trade units and traders in current regulations. In addition, for non-commercial business foreign exchange operation, all trade units submit the required amounts of position annually based on operation status. Risk management department will evaluated the requirement and submit to the board of directors' (executive directors) for approval. The demand will be executed after the board of directors approved. For the units which the positions remain unchanged after evaluation, they can put the positions into practice after receiving the approval from the general manager.
2) The trade units conduct various foreign financial product business, they shall fully understand the content of commodities, the risk tolerance and trade purpose. Trade units shall establish financial products trading strategies based on market status in the meeting every morning and submit the risk-benefit evaluation in the meeting minutes for the department heads to review. The trading shall follow the relevant authorization rules of the Bank and the stop-limit of all trade positions shall be executed reliably. 1) Identification and measurement

Ⅵ

e. Process of foreign exchange risk management

transactions to effectively identify risk factors and market risk resources. In addition, the financial transactions which the Bank conducts deal with simple type financial products. For complex financial products, the Bank conducts back-to-back hedge covering to effectively avoid market risk.
B) Risk Management department has used Greek to measure the influnce level of exchange rate for held-for-trading spot exchange and exchange rate derivative, also draft Greek's sensitivity allowance according to the yearly demand of trade units and the state of utilization, and monitor the load of fluctuation of exchange rate in an acceptable range each.
C) Positions of the trading book shall be evaluated daily where the positions of the banking book shall be evaluated monthly. When there are public quotes for financial instruments, the quotes shall be the prior evaluation prices. If the financial instruments are evaluated by models, then they shall be evaluated by mathematic models prudently and the assumptions and parameters of the models shall be reviewed regularly.
2) Monitoring and report
A) When the evaluation loss of non-commercial foreign exchange transactions is over the limit, the trade units shall execute a stop-limit per the regulations. If the loss amount reaches the suspension warning line or suspension limit of the financial transaction, risk management units shall report to the general manager. Provided that the loss amount reaches the annual suspension line, risk management department shall report to the board of directors (executive directors).
B) Reports of operation results shall be prepared and submitted to the department heads for approval on a daily basis.

B. Equity security risk management

The market risks of the equity securities possessed by the Bank include the individual risk results from the market price fluctuation of individual equity security and the general market risk results from overall market price fluctuation.

b. Applicable scope

Financial instruments similar to equity security in all trading books.

c. Purpose of equity security risk management

To avoid loss of earnings or deterioration of financial status due to intensive fluctuation of equity securities and to increase capital deployment efficiency and business operation integrity.

d. Procedures of equity security risk management
1) All trade units submit the required amounts of position annually base on operation status. Risk management department will evaluate the requirement and submit to the board of directors' (executive directors) for approval. The demand will be executed after the board of directors approved. For the units which the positions remain unchanged after evaluation,

Taiwan Business Bank Annual Report 2016

they can put the positions into practice after receiving the approval from the general manager.

  - 2) The trade units shall predict the possible trend of domestic stock market based on the information of foreign and domestic security markets so as to set up the operation strategies and directions. The traders shall pay close attention to the market trend when the market opens so as to conduct security transactions and the operations as well as the meeting minutes shall be submitted to the department heads to review.

e. Process of equity security risk management

 - A) The risk management department apply Value at Risk models to measure the market risk of equity security investment. Furthermore, based on the trade units' operation demand and the risk limit established by the Bank's risk tolerance, the risk management units effectively control the variation of risk factors under an acceptable extent.

 - B) Trading book position shall be evaluated daily. When there is a public quote in the market, the quote shall be adopted as the prior evaluation price (If the transaction is in secondary market and the liquidity is high, the closing price can be adopted as the evaluation price); If the financial instruments are evaluated by models, then they shall be evaluated by mathematic models prudently and the assumptions and parameters of the models shall be reviewed regularly.

2) Monitoring and report
- A) When the evaluation loss of equity security investment is over the limit, the trade units shall execute a stop-limit per regulations. If the loss amount reaches the suspension warning line or suspension limit of the financial transaction, risk management units shall report to the general manager. Provided that the loss amount reaches the annual suspension line, risk management department shall report to the board of directors (executive directors).
- B) Transaction reports shall be prepared and submitted to the department heads for approval on a daily basis.

C. Interest rate risk management

Interest rate risk refers to the price decline of the Bank's financial products which contain interest risk factors due to the disadvantageous changes in interest rate.

b. Applicable scope

Financial instruments which contain interest rate factors in all trading books.

c. Purpose of interest rate risk management

To avoid loss of earnings or deterioration of financial status due to intensive fluctuation of interest rate and to increase capital deployment efficiency and business operation integrity.

d. Procedures of interest rate risk management
1) In order to control interest rate risk, the Bank established trade position authorization standard for financial transaction operations, trade units and trade counterparties in current

Ⅵ

regulations. In addition, for the positions held for trading, all trade units submit the required amounts of position annually based on operation status. Risk management department will evaluated the requirement and submit to the board of directors' (executive directors) for approval. The demand will be executed after the board of directors approved. For the units which the positions remain unchanged after evaluation, they can put the positions into practice after receiving the approval from the general manager.

2) The trade units shall consider safety, liquidity and profitability and gather market information to assess the potential risk and benefit. In additional, the trade units shall choose investment target prudently through analyzing the issuers' credit, financial status, country risks and interest rate trends.
e. Process of interest rate risk management
- transaction to effectively identify risk factors and market risk resources. In addition, the financial transactions which the Bank conducts deal with simple type financial products. For complex financial products, the Bank conducts back-to-back hedge covering to effectively avoid market risk.
- B) Position of the trading book shall be evaluated daily. When there are public quotes for financial instruments, the quotes shall be the prior evaluation prices. If the financial instruments are evaluated by models, then they shall be evaluated by mathematic models prudently and the assumptions and parameters of the models shall be reviewed regularly.
2) Monitoring and report
- A) The risk management department apply DV01 to measure to what extent the trading book bond positions are influenced by the interest rate risk and set up interest rate sensitivity limit base on the requirements of the trade units and the risk tolerance of the Bank annually.
- B) The trade units shall prepare the income assessment tables of trade positions and traders for the department heads to review. In addition, when the evaluation loss of the position is over the limit, the trade units shall execute a stop-limit per the regulations. If the loss amount reaches the suspension warning line or suspension limit of the financial transaction, risk management department shall report to the general manager. Provided that the loss amount reaches the annual suspension line, risk management units shall report to the board of directors (executive directors).

D. Concentration management

over concentrated and enhance credit risk management, the Bank established financial institution credit risk limit based on the world ranking of tier 1 capital and credit ratings from The Banker. The trade units shall also pay attention to the changes of the credit status of individual financial institution as well as the changes of the national credit rating to conduct the transaction prudently.
b. For equity security investments, the Bank set up limits for single institution and single related party.

Taiwan Business Bank Annual Report 2016

(5) Interest rate risk management of the banking book
- a. The interest rate risk of the banking book refers to the negative effect towards the future net interest income or economic value of equity results from the fluctuation of interest rate. Net Interest Income (hereafter NII) is the total amount of interest revenue deducted by the total amount of interest expense; Economic Value of Equity (hereafter EVE) is the total discounted future cash inflow from assets deducted by the total discounted future cash outflow from liabilities.
- b. The management purpose of the interest rate risk management of the banking book is to control the negative effect from the interest rate risk fluctuation towards NII or EVE within the approved limit extent.
B. The process for the interest rate risk management of the banking book

curve risk, basis risk and option characteristic risk and measures the possible influence on the earnings and economic value results from interest rate fluctuation.

b. Monitoring and report

The Bank established limits of the ratio between interest-rate-sensitivity assets and interest-rate-sensitivity liabilities, the effect to NII in 1 year when the market interest rate parallel changes 1 BP and the effect to EVE when the market interest rate parallel changes 200 BP to control the banking book interest rate risk. The results of interest rate risk measurement are reported to the Assets and Liabilities Management Committee monthly and to the board of directors (executive directors) quarterly. When the measurement result is over the limit, relevant units shall be convened to establish responding plan and the plan shall be submitted to the Assets and Liabilities Management Committee for discussion. After the plan is approved by the general manager, it shall be executed by the relevant business units and report to the board of directors (executive directors).

(6) Value at Risk
A. Description of Value at Risk

Value at Risk (VaR) is a statistical amount used to evaluate the maximum possible loss of portfolio results from the changes of market risk factors within a certain period of time and a fixed

B. Value at Risk models and assumptions

market risk for the equity security position of the trading book. Based on the historical information of the last 1 year and applies Historical Simulation Method (with the confidence interval being 99% and the duration of possession being 1 day), the Bank calculates and monitors the trend of Value at Risk.

C. The limit of Value at Risk model

Value at Risk is a tool to measure market risk under normal circumstance. The limits of the model are listed below:

Ⅵ

  - liquidity risk.

  - b. Value at Risk measures the possible loss of the position on hand at the end of the transaction day, but it can not reflect the distribution of the part which actual loss exceeds Value at Risk

  - c. Value at Risk model is based on historical data to evaluate the amount, and therefore it may not be able to predict the future changes of risk factors, especially for those exceptions result from significant market fluctuation.

(7) Foreign exchange risk disclosure and sensitivity analysis
A. Foreign exchange risk exposure

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December 31, 2016
Currency Foreign currency amount NT$ amount
USD $ 209,668 6,755,503
JPY 6,760,895 1,873,444
AUD 21,484 501,544
HKD 46,044 191,267
EUR 4,599 156,274
December 31, 2015
Currency Foreign currency amount NT$ amount
USD $ 240,196 7,897,644
AUD 15,022 360,152
ZAR 76,029 161,181
EUR 2,576 92,530
GBP 717 34,954
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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.

b. Assets and liabilities of foreign currency

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December 31, 2016
Monetary Financial assets Monetary Financial liabilities
Foreign Foreign
currency currency
amount amount
Currency (in thousands) Spot rate NTD amount (in thousands) Spot rate NTD amount
USD $ 7,498,326 32.2200 241,596,064 7,150,191 32.2200 230,379,154
AUD 3,067,824 23.3450 71,618,351 3,035,025 23.3450 70,852,659
CNY 6,098,123 4.6240 28,197,721 6,098,569 4.6240 28,199,783
HKD 5,027,848 4.1540 20,885,681 4,904,884 4.1540 20,374,888
JPY 63,840,614 0.2771 17,690,234 63,842,974 0.2771 17,690,888
EUR 244,797 33.9800 8,318,202 236,899 33.9800 8,049,828
ZAR 3,494,742 2.3700 8,282,539 3,495,193 2.3700 8,283,607
CAD 57,314 23.9200 1,370,951 57,531 23.9200 1,376,142
NZD 35,690 22.4600 801,597 35,659 22.4600 800,901
GBP 20,119 39.6100 796,914 20,253 39.6100 802,221
CHF 3,667 31.6050 115,896 3,666 31.6050 115,864
SGD 5,078 22.3100 113,290 5,017 22.3100 111,929
Other (Note) - - 47,841 - - 52,494
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100

Taiwan Business Bank Annual Report 2016

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December 31, 2015
Monetary Financial assets Monetary Financial liabilities
Foreign Foreign
currency currency
amount (in amount (in
Currency thousands) Spot rate NTD amount thousands) Spot rate NTD amount
USD $ 6,273,977 32.8800 206,288,364 5,965,598 32.8800 196,148,862
HKD 7,830,359 4.2420 33,216,383 7,760,162 4.2420 32,918,607
AUD 1,369,945 23.9750 32,844,431 1,335,805 23.9750 32,025,925
CNY 5,948,664 4.9930 29,701,679 5,951,689 4.9930 29,716,783
ZAR 6,298,577 2.1200 13,352,983 6,300,039 2.1200 13,356,083
EUR 211,216 35.9200 7,586,879 206,446 35.9200 7,415,540
JPY 14,652,399 0.2730 4,000,105 14,874,789 0.2730 4,060,817
CAD 40,911 23.7200 970,409 41,256 23.7200 978,592
GBP 13,463 48.7500 656,321 13,546 48.7500 660,368
NZD 27,392 22.5000 616,320 27,508 22.5000 618,930
Other (Note) - - 180,082 - - 204,752
Non-monetary Financial assets Non-monetary Financial liabilities
USD 1,561 32.8800 51,326 - - -
EUR 3,022 35.9200 108,550 - - -
JPY 159,979 0.2730 43,674 - - -
CNY 2,100 4.9930 10,485 - - -
----- End of picture text -----

Note ： Consolidated disclosure is applied for other currencies not over NT$100,000.

B. Foreign exchange risk sensitivity analysis (Change by 1%)

Foreign exchange risk sensitivity analysis is the analysis that given other conditions remain the same, the influence on profit or loss and equity when each respective currency depreciate or appreciate by 1%.

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December 31, 2016
Depreciate by 1% Appreciate by 1%
Currency Income Equity Income Equity
USD $ 63,165 ( 46,371 ) ( 63,165 ) 46,371
AUD 8,130 ( 12,302 ) ( 8,130 ) 12,302
HKD 3,239 ( 8,827 ) ( 3,239 ) 8,827
CAD 83 - ( 83 ) -
GBP 24 - ( 24 ) -
SGD ( 13 ) - 13 -
ZAR 2 - ( 2 ) -
SEK 14 - ( 14 ) -
JPY 353 - ( 353 ) -
THB 32 - ( 32 ) -
EUR ( 22 ) - 22 -
NZD ( 23 ) - 23 -
CNY ( 23,564 ) - 23,564 -
Total $ 51,420 ( 67,500 ) ( 51,420 ) 67,500
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Ⅵ

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December 31, 2015
Depreciate by 1% Appreciate by 1%
Currency Income Equity Income Equity
USD $ 63,352 ( 61,796 ) ( 63,352 ) 61,796
AUD 8,436 ( 13,119 ) ( 8,436 ) 13,119
HKD 3,347 ( 5,134 ) ( 3,347 ) 5,134
CAD 85 - ( 85 ) -
GBP 83 - ( 83 ) -
SGD 39 - ( 39 ) -
ZAR 27 - ( 27 ) -
SEK ( 17 ) - 17 -
CHF 66 - ( 66 ) -
JPY 90 - ( 90 ) -
THB 159 - ( 159 ) -
EUR 111 - ( 111 ) -
NZD 26 - ( 26 ) -
CNY ( 25,335 ) - 25,335 -
Total $ 50,469 ( 80,049 ) ( 50,469 ) 80,049
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(8) Interest rate risk disclosure and sensitivity analysis

A. Interest rate sensitivity analysis

The assumption of interest rate sensitivity analysis is, under the circumstance that other conditions remain the same, the yield of the market increase or decrease by 1 basis point (1 bp).

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December 31, 2016
Interest rate increases by 1 bp Interest rate decreases by 1 bp
Currency Income Equity Income Equity
Trading book
TWD $ 13 ( 7,589 ) ( 13 ) 7,589
Banking book
TWD - ( 58,243 ) - 58,243
USD - ( 6,005 ) - 6,005
AUD - ( 68 ) - 68
ZAR - ( 87 ) - 87
HKD - ( 196 ) - 196
CNY - ( 706 ) - 706
Total $ 13 ( 72,894 ) ( 13 ) 72,894
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December 31, 2015
Interest rate increases by 1 bp Interest rate decreases by 1 bp
Currency Income Equity Income Equity
Trading book
TWD $ ( 61 ) ( 5,557 ) 61 5,557
Banking book
TWD - ( 12,155 ) - 12,155
USD ( 8 ) ( 2,423 ) 8 2,423
AUD - ( 82 ) - 82
ZAR - ( 196 ) - 196
HKD - ( 300 ) - 300
CNY - ( 701 ) - 701
Total $ ( 69 ) ( 21,414 ) 69 21,414
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B. Sensitivity analysis of expected net revenue/Sensitivity of equity in terms of interest rate

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December 31, 2016
Effect on NII in 1 year Effect on EVE in 1 year
TWD USD TWD USD
Scenario
Interest rate increases by 100 bp 3,189,673 ( 15,668 ) ( 1,474,526 ) ( 17,478 )
Interest rate decreases by 100 bp ( 5,680,182 ) ( 3,261 ) 2,437,609 18,331
December 31, 2015
Effect on NII in 1 year Effect on EVE in 1 year
TWD USD TWD USD
Scenario
Interest rate increases by 100 bp 2,995,305 ( 11,765 ) 2,538,545 ( 8,657 )
Interest rate decreases by 100 bp ( 5,625,249 ) ( 3,688 ) ( 2,260,172 ) 8,400
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(9) Equity security risk disclosure and sensitivity analysis
A. Equity security sensitivity analysis (Changes by 1%)

The assumption of equity security sensitivity analysis is, under the circumstance that other conditions remain the same, the price of equity security increased or decreased by 1%.

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December 31, 2016
Change
Currency Income Equity
Equity security price increases by 1 % TWD 381 15,847
Equity security price decreases by 1 % TWD ( 381 ) ( 15,847 )
December 31, 2015
Change
Currency Income Equity
Equity security price increases by 1 % TWD 2,100 15,083
USD 16 -
EUR 30 -
JPY 1,600 -
CNY 21 -
Equity security price decreases by 1 % TWD ( 2,100 ) ( 15,083 )
USD ( 16 ) -
EUR ( 30 ) -
JPY ( 1,600 ) -
CNY ( 21 ) -
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B. Value at Risk of equity security

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For the years ended December 31, 2016
Value at Risk Average Maximum Minimum
Equity security risk 36,450 59,010 29,974
For the years ended December 31, 2015
Value at Risk Average Maximum Minimum
Equity security risk 48,134 74,035 33,445
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Ⅵ

(10) Disclosures required by "Regulations Governing the Preparation of Financial Reports by Public Held Banks"

A. Analysis of interest rate-sensitive assets and liabilities (New Taiwan dollars)

Unit : In Thousands of New Taiwan Dollars, %

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December 31, 2016
Item 1~90 days 91~180 days 181days~1year over 1 year total
Interest rate-sensitive assets $ 1,072,077,487 10,565,181 9,471,238 120,528,512 1,212,642,418
Interest rate-sensitive liabilities 932,807,003 59,766,849 105,302,395 39,457,432 1,137,333,679
Interest rate sensitivity gap 139,270,484 ( 49,201,668 ) ( 95,831,157 ) 81,071,080 75,308,739
Net amount 70,870,340
Ratio of interest rate-sensitive assets to debt (%) 106.62
Ratio of interest rate-sensitive gap to net worth (%) 106.26
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Unit : In Thousands of New Taiwan Dollars, %

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December 31, 2015
Item 1~90 days 91~180 days 181days~1year over 1 year total
Interest rate-sensitive assets $ 1,101,376,273 5,738,484 11,848,870 56,178,825 1,175,142,452
Interest rate-sensitive liabilities 924,046,571 79,743,585 92,180,763 34,296,117 1,130,267,036
Interest rate sensitivity gap 177,329,702 ( 74,005,101 ) ( 80,331,893 ) 21,882,708 44,875,416
Net amount 67,659,129
Ratio of interest rate-sensitive assets to debt (%) 103.97
Ratio of interest rate-sensitive gap to net worth (%) 66.33
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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. Interest rate‑sensitivity gap = Interest rate‑sensitive assets ‑ Interest‑rate‑sensitive liabilities.

Note 4. Ratio of interest rate‑sensitive assets to liabilities=Interest rate‑sensitive assets÷ Interest rate‑sensitive liabilities (New Tai‑ wan dollars interest‑rate‑sensitive assets and New Taiwan dollars interest‑rate‑sensitive liabilities).

B. Analysis of the interest-sensitive assets and liabilities (U.S. dollars)

Unit : In Thousands of US Dollars, %

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December 31, 2016
Item 1~90 days 91~180 days 181days~1year over 1 year total
Interest rate-sensitive assets $ 3,358,509 455,403 110,846 432,438 4,357,196
Interest rate-sensitive liabilities 4,527,021 302,360 253,801 - 5,083,182
Interest rate sensitivity gap ( 1,168,512 ) 153,043 ( 142,955 ) 432,438 ( 725,986 )
Net amount 2,199,576
Ratio of interest rate-sensitive assets to debt (%) 85.72
Ratio of interest rate-sensitive gap to net worth (%) ( 33.01 )
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Unit : In Thousands of US Dollars, %

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December 31, 2015
Item 1~90 days 91~180 days 181days~1year over 1 year total
Interest rate-sensitive assets $ 3,632,156 445,654 80,855 313,089 4,471,754
Interest rate-sensitive liabilities 4,128,277 466,743 184,353 - 4,779,373
Interest rate sensitivity gap ( 496,121 ) ( 21,089 ) ( 103,498 ) 313,089 ( 307,619 )
Net amount 2,057,759
Ratio of interest rate-sensitive assets to debt (%) 93.56
Ratio of interest rate-sensitive gap to net worth (%) ( 14.95 )
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Note 1. Listed amounts are in U.S. dollars (i.e., excluding contingent assets and contingent liabilities) of the head office and domes‑ tic branches, offshore banking unit, overseas branches.

Note 2. Interest rate‑sensitive assets and interest rate‑sensitive liabilities refer to the interest yielding assets and interest paying lia‑ bilities which the revenue and cost are affected by interest rate fluctuation.

Note 3. Interest rate sensitivity gap=interest rate‑sensitive assets‑interest rate‑sensitive liabilities.

Note 4. Ratio of interest rate‑sensitive assets to liabilities=Interest rate‑sensitive assets÷ Interest rate‑sensitive liabilities (U.S. dol‑ lars interest‑rate‑sensitive assets and U.S. dollars interest‑rate‑sensitive liabilities).

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The transactions, relating to transferred financial assets not qualifying for full derecognition, the Bank conduct during daily operation mostly involve securities lending in accordance to repurchase agreements. Since the right to receive contractual cash flow has been transferred to others and the Bank's obligation to repurchase the transferred assets for a fixed price at a future date is recognized under liability, for these transactions, the Bank can not use, sell or pledge those transferred financial assets in availability period, the Bank have interest rate risk and credit risk, the said transferred assets are not fully derecognized.

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December 31, 2016
Carrying amount Carrying amount Fair value of Fair value of
of transferred of associated transferred associated
Types of financial assets financial assets financial liabilities financial assets financial liabilities Net fair value
Available-for-sale financial assets
Repurchase agreement $ 917,453 900,000 917,453 900,000 17,453
December 31, 2015
Carrying amount Carrying amount Fair value of Fair value of
of transferred of associated transferred associated
Types of financial assets financial assets financial liabilities financial assets financial liabilities Net fair value
Available-for-sale financial assets
Repurchase agreement $ 1,329,694 1,249,798 1,329,694 1,249,798 79,896
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The Bank has an exercisable master netting arrangement or similar agreement in place with counterparties. When both parties reach a consensus regarding net settlement, the aforesaid exercisable master netting arrangement or similar agreement can be net settled by offsetting financial assets and financial liabilities. If not, the transaction can be settled at total amount. In the event of default involving one of the parties, the other party can have the transaction net settled.

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December 31, 2016
Financial assets that are offset, have an exercisable master netting arrangement or similar agreement
Gross amounts Net amount of Amounts not set off in thebalance
Gross amounts of financial financial assets sheet(d)
of recognized liabilities offset presented in the Financial
financial in the balance balance sheet instruments Cash collateral Net amount
Item assets(a) sheet(b) (c)=(a)-(b) (Note) received (e)=(c)-(d)
Derivative financial
instruments $ 156,238 - 156,238 - 67,763 88,475
December 31, 2016
Financial liabilities that are offset, have an exercisable master netting arrangement or similar agreement
Net amount Amounts not set off in the
Gross amounts of financial balance sheet(d)
Gross amounts of financial liabilities
of recognized assets offset presented in the Financial
financial in the balance balance sheet instruments Cash collateral Net amount
Item liabilities(a) sheet(b) (c)=(a)-(b) (Note) pledged (e)=(c)-(d)
Derivative financial
instruments $ 48,674 - 48,674 - - 48,674
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Ⅵ

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December 31, 2015
Financial assets that are offset, have an exercisable master netting arrangement or similar agreement
Amounts not set off in the
Gross amounts Net amount of
Gross amounts of financial financial assets balance sheet(d)
of recognized liabilities offset presented in the Financial
financial in the balance balance sheet instruments Cash collateral Net amount
Item assets(a) sheet(b) (c)=(a)-(b) (Note) received (e)=(c)-(d)
Derivative financial
instruments $ 131,745 - 131,745 - 37,367 94,378
December 31, 2015
Financial liabilities that are offset, have an exercisable master netting arrangement or similar agreement
Net amount Amounts not set off in the
Gross amounts of financial balance sheet(d)
Gross amounts of financial liabilities
of recognized assets offset in presented in the Financial
financial the balance balance sheet instruments Cash collateral Net amount
Item liabilities(a) sheet(b) (c)=(a)-(b) (Note) pledged (e)=(c)-(d)
Derivative financial
instruments $ 72,202 - 72,202 - - 72,202
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Note ：

(AL) Capital Management

(a) The Bank takes business development and risk control into consideration and calculates capital adequacy per "Regulations Governing the Capital Adequacy Ratio and Capital Category of Banks" and "Calculation Methods and Forms of Proprietary Capital and Risk Capital of Banks". The ratio between proprietary capital and risk capital shall remain above the regulated minimum ratio.
(b) In order to maintain adequate capital and reach a balance between risk control and business development, the Bank established "Directions Governing Capital Adequacy" as the guidance for controlling capital adequacy. The scope of the directions include, except for the least capital requirements for credit risk, market risk and operation risk, significant risk such as banking book interest rate risk, liquidity risk and concentration risk. In addition, in order to link business strategies, capital and risk management, the Bank sets up capital management plan annually for the president's approval and reports to Risk Management Committee and the board of directors quarterly about relevant risks and capital control status.
(c) The Bank identifies, measures, monitors and reports various risks based on the directions, notices and relevant rules of competent authority regarding credit risk, market risk, operation risk, legal and compliance risk, interest rate risk of the banking book, liquidity risk and concentration risk so as to be familiar with current business environment and monitors and adjusts capital adequacy effectively.
(d) To cope with the implementation of new Basel Accord, the Bank set up complete risk management system, risk management operation tracking procedures to provide the management with appropriate risk management information for making decisions. Therefore, the Bank is able to maintain adequate capital within the tolerable extent and to ensure the provision of proprietary capital of the Bank corresponds with the overall operating risk characteristics of the Bank.
(1) Tier 1 capital
- A. Common stock equity: The item includes common stock deducted by treasury stock, goodwill and other intangible assets, deferred tax assets based on future profit status of the Bank, unrealized gain on available-for-sale financial assets, operating reserve and deficiency of allowance for bad debts, real estate retained earning increment arising from applying the fair value or the revaluation reserve as the deemed cost when first adopting IFRSs, and 25% of the investment on financial related business which is classified in banking book.

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debentures deducted by the investment on financial related business which is classified in banking book.
(2) Tier 2 capital

debenture, real estate retained earning increment arising from applying the fair value or the revaluation reserve as the deemed cost when first adopting IFRSs, 45% of unrealized gain on available-for-sale financial assets, and 50% of the investment on financial related business which is classified in banking book.

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Item December 31, 2016 December 31, 2015
Common stock equity 68,922,354 65,662,491
Other tier 1 capital 14,664,225 7,057,157
Eligible capital
Tier 2 captial 20,221,002 19,689,051
Eligible Capital 103,807,581 92,408,699
Standardized approach 818,988,412 770,946,612
Credit - -
Internal ratings-based approach
risk
Securitization - -
- -
Basic indicator approach
Risk-weighted
Operational Standardized approach/selective 34,024,618 32,741,848
assets
risk standardized approach
- -
Advanced measurement approach
Market Standardized approach 18,539,100 18,682,350
risk - -
Internal model approach
Total risk-weighted assets 871,552,130 822,370,810
Capital adequacy ratio 11.91% 11.24%
Common stock equity/ Risk-weighted assets ratio 7.91% 7.98%
Tier 1 capital / Risk-weighted assets ratio 9.59% 8.84%
Leverage ratio 5.30% 4.69%
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The formulas of the table are listed as follows:

A. The eligible capital, risk-weighted assets and exposure are calculated per "Regulations Governing the Capital Adequacy and Capital Category of Banks" and "The Calculation and Forms of Eligible Capital and Risk Assets of Banks".
report, the Bank shall disclose the capital adequacy of this period and last period and additionally disclose the capital adequacy of the previous period ended December 31.
C. Note 1. Eligible Capital = Common stock equity ＋ Other Tier 1 Capital ＋ Tier 2 Capital
Note 2. Total risk-weighted assets = Credit risk weighted asset ＋ (operational risk charge ＋ market risk charge) × 12.5

Note 3. Capital adequacy ratio= Eligible Capital ÷ Risk weighted asset.

Note 4. Common stock equity / Risk-weighted assets ratio= Common stock equity / total risk weighted assets
Note 5. Tier 1 capital / Risk-weighted assets ratio = (Common stock equity ＋ other tier 1 capital)/ Risk-weighted assets

Note 6. Leverage ratio = Net Tier 1 capital / Total risk exposure.

and third quarter.

Ⅵ

7. RELATED PARTY TRANSACTIONS

(A) Names of related parties and relationship with the Bank

Name of relatedparty	Relationship with the Bank and its subsidiaries
Bank of Taiwan Ministry of Finance, R.O.C Land Bank of Taiwan Other	Corporate director of the Bank Corporate director of the Bank Corporate director of the Bank Major shareholders, directors (includes independent directors), president, executive vice president, managers and their second tier of kinship.

(B) Significant related party transactions

(a) Due from other Banks

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December 31, 2016
Amount %
Bank of Taiwan $ 143,919 0.52
Land Bank of Taiwan 3,498 0.01
Total $ 147,417 0.53
December 31, 2015
Amount %
Bank of Taiwan $ 171,246 0.62
Land Bank of Taiwan 1,589 0.01
Total $ 172,835 0.63
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Interest rates are the same as those with regular clients.

(b) Deposits from other banks

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December 31, 2016
Amount %
Land Bank of Taiwan $ 1,350 1.67
December 31, 2015
Amount %
Land Bank of Taiwan $ 507 0.27
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Interest rates are the same as those with regular clients.

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Maximum balance December 31, 2016 Interest income Annual interest rate
Bank of Taiwan $ 8,497,798 - 3,973 0.176~9.00%
Land Bank of Taiwan 1,250,239 - 1,675 0.34~1.95%
Total $ 9,748,037 - 5,648
Maximum balance December 31, 2015 Interest income Annual interest rate
Bank of Taiwan $ 129,850 - 7 2%
Land Bank of Taiwan 1,149,900 328,800 1,171 0.15%~4.3%
Total $ 1,279,750 328,800 1,178
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Interest rates are the same as those with regular clients.

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(d) Call loans from banks

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Maximum balance December 31, 2016 Interest expense Annual interest rate
Bank of Taiwan $ 15,858,624 1,127,700 16,018 0.19~13%
Land Bank of Taiwan 11,522,250 2,416,500 13,731 0.01~8.00%
Total $ 27,380,874 3,544,200 29,749
Maximum balance December 31, 2015 Interest expense Annual interest rate
Bank of Taiwan $ 6,491,130 1,350,520 9,672 0.14%~15%
Land Bank of Taiwan 11,300,729 2,506,730 15,738 0.03%~3.8%
Total $ 17,791,859 3,857,250 25,410
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Interest rates are the same as those with regular clients.

(e) Deposits

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December 31, 2016
Amount %
Others $ 1,810,161 0.14
December 31, 2015
Amount %
Bank of Taiwan $ 3,267 -
Others 1,397,770 0.11
Total $ 1,401,037 0.11
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Interest rates are the same as those with regular clients.

(f) Credit

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December 31, 2016
Number of Performing situations Transaction terms
clients or are the same as
name of Maximum Ending Performing Non-performing those with regular
Category related party balance balance loan Loans Collaterals clients
Employee consumer 123 321,561 307,360 307,360 - none none
loans
Self-use residence 134 503,468 461,734 461,734 - real estate none
collateral loans
Others Du ○ ○ 4,667 4,667 4,667 - real estate none
Chen ○ ○ 3,654 - - - real estate none
Chiang ○ ○ 3,025 2,418 2,418 - real estate none
Hung ○ ○ 1,317 - - - real estate none
Liu ○ ○ 1,765 1,762 1,762 - real estate none
Cho ○ ○ 300 - - - real estate none
Wu ○ ○ 1,152 264 264 - real estate none
Lu ○ ○ 1,705 2 2 - real estate none
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Ⅵ

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December 31, 2015
Number of Performing situations Transaction terms
clients or are the same as
name of Maximum Ending Performing Non-performing those with regular
Category related party balance balance loan Loans Collaterals clients
Employee consumer 123 310,774 291,995 291,995 - none none
loans
Self-use residence 113 383,793 365,071 365,071 - real estate none
collateral loans
Others Du ○ ○ 2,323 2,323 2,323 - real estate none
Chen ○ ○ 3,531 2,932 2,932 - real estate none
Chiang ○ ○ 3,981 1,812 1,812 - real estate none
Hung ○ ○ 2,326 2,326 2,326 - real estate none
Hsiao ○ ○ 566 566 566 - real estate none
Lu ○ ○ 1,001 967 967 - real estate none
Cho ○ ○ 423 - - - real estate none
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(g) Guarantees of credit: None.
(h) Service fees: None.
(i) Rental revenue: None.
(k) Sales of Non–Performing Loans Transactions: None.

(C) Major management salary information

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For the years ended December 31
2016 2015
Salary and other short-term employee benefit $ 133,251 104,713
Retirement Benefit 1,682 1,529
Total $ 134,933 106,242
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8. PLEDGED ASSETS : Please refer to note 6(H) for more details.

9. COMMITMENTS AND CONTINGENCIES

(A) Significant commitments and contingencies were as follows:

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December 31, 2016 December 31, 2015
Marketable securities held for custody $ 13,620,094 14,792,705
Bills collected for others 52,582,087 57,060,916
Bills lent for others 25,617,527 21,966,839
Guarantees and letters of credit 24,020,841 17,159,477
Collaterals received 426 426
Trust liabilities 124,653,387 127,155,475
Travelers' check in custody for sale 100,238 126,303
Items held for custody 4,012,754 4,253,437
Registered government bonds for sale 67,970,300 17,208,500
Registered short-term bills for sale 1,958,553 3,713,900
Guarantee notes payable 27,369,420 26,726,100
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Taiwan Business Bank Annual Report 2016

(B) Unrecognized contractual commitments:

As of December 31, 2016 and 2015, major constructions in progress and purchases amounted to $520,138 and $672,851 respectively, of which $448,327 and $467,391 respectively, remained unpaid.

(C) 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 trust information as of December 31, 2016 and 2015 is as follows:

Trust Balance Sheet

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Trust Assets December 31, 2016 December 31, 2015
Cash in Bank $ 2,469,413 2,260,436
Common stock 188,230 202,743
Funds 53,521,066 52,456,093
Receivables - 90
Prepayment - 2
Real estate 12,723,672 11,115,380
Securities custody 55,355,186 61,120,731
Other assets 395,820 -
Total trust assets $ 124,653,387 127,155,475
Trust Liabilities December 31, 2016 December 31, 2015
Payables $ 165 102
Securities held for custody 55,355,186 61,120,731
Trust capital 69,261,666 66,023,908
Reserves and accumulated loss ( 988,660 ) ( 1,527,014 )
Net income 1,025,030 1,537,748
Total trust liabilities $ 124,653,387 127,155,475
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Trust Property Accounts

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Investment in December 31, 2016 December 31, 2015
Cash in bank $ 2,469,413 2,260,436
Common stock 188,230 202,743
Funds 53,521,066 52,456,093
Receivables - 90
Prepayment - 2
Real estate
Land 11,590,733 10,493,581
Buildings 47,422 51,100
Construction in progress 1,085,517 570,699
Securities in custody 55,355,186 61,120,731
Other assets 395,820 -
Total $ 124,653,387 127,155,475
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Note: As of December 31, 2016 and 2015, the amounts above included OBU transaction on “foreign currency designated trust funds investment in foreign negotiable securities business” amounting to $857,312 and $873,807, respectively.

Ⅵ

Trust Income Statement

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For the years ended December 31
Investment in
2016 2015
Trust Revenue
Interest income $ 6,838 13,065
Realized cpaital gain-fund 2,710 -
Realized capital gain-stock 1,133 1,440
Cash dividend income of common stock 1,560,040 1,540,375
Gains on property transaction 579,907 1,434,819
Other revenue 194 225
Sub-total 2,150,822 2,989,924
Trust Expense
Administrative expenses 36,087 55,972
Custody expenses - 604
Postage and phone/fax expense 1 1
Realized capital loss-fund 432 933
Realized capital loss-stock 1 19
Losses on property transaction 1,089,135 1,393,000
Other expense 76 753
Sub-total 1,125,732 1,451,282
Net income before tax 1,025,090 1,538,642
Income tax expense ( 60 ) ( 894 )
Net income after tax $ 1,025,030 1,537,748
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(D) (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 thousands 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 thousands plus interest to I.C.C.I.. The Bank has engaged a local attorney in Belgium to formally file an appeal. In February 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. On February 6, 2013, the court overruled the Bank's appeal and the Bank lost the case. As of December 31, 2016, the Bank has accrued the compensation of NT$74,650 thousands and EUR$8,000,000. Please refer to Note 6(S) for relevant provision.
(b) In July 2008, Hua Nan Bank, which purchased secured and unsecured non-performing loans receivable of Wei Lei Food Corporation (WLF), argued that the Bank should allocate the payment that it received from Ge Riu Wei Assets Management Corporation (GWAM) which resulted from the auction of the real estate mortgaged to the Bank by Wei Lei Food Corporation on 1996. For this reason, Kang-Cheng Corp. filed a lawsuit to Shihlin District Court to oblige the Bank to pay Kang-Cheng Corp. $15,594 thousands plus the interest. The Bank lost the first trial and appealed. Taiwan High Court ruled that the Bank lost the lawsuit in December, 2010 and should pay Hua Nan Bank $10,250 thousands plus the interest with annual rate

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ruled that the original verdict was abandoned and the case was sent back to remand in September, 2011. Taiwan High Court ruled that the Bank lost the lawsuit on October 23, 2013 and should pay Hua Nan Bank $249 thousands plus the interest with annual rate of 5% from July 18, 2008 to the settlement date. The counterparty has filed an appeal and Taiwan Supreme Court overruled the appeal On February 11, 2015. The case is closed.

10. LOSSES DUE TO MAJOR DISASTERS: None.

11. SUBSEQUENT EVENTS: None.

12. OTHER

(A) Employee benefits, depreciation, depletion and amortization expenses were as follows:

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For the years ended December 31
Nature 2016 2015
Operating expense Operating expense
Employee benefit expenses
Salary expense $ 5,778,016 5,636,070
Labor and health insurance expenses 406,773 401,788
Pension expenses 326,799 320,986
Other employee benefit 903,325 798,297
Total employee benefit 7,414,913 7,157,141
Depreciation expenses 311,826 303,565
Amortization expenses 75,776 76,489
Total $ 7,802,515 7,537,195
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The employee numbers amounted to 4,966 and 4,993 people as of December 31, 2016 and 2015, respectively.

(B) Profitability

Unit: %

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----- Start of picture text -----

Item December 31, 2016 December 31, 2015
The ratio of return on Before income tax 0.43 0.43
assets After income tax 0.35 0.36
The ratio of return on Before income tax 9.18 9.50
equity After income tax 7.50 7.84
Net income ratio 25.15 25.36
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Note 1 The ratio of return on assets = Income before (after) income tax expense÷ average assets. Note 2 The ratio of return on equity = Income before (after) income tax expense ÷ average equity. Note 3 Net income ratio = Gain or loss after income tax expense ÷ Net revenue.

Note 4 Income before (after) income tax expense refers to income accumulated from January of the current year to the current peri‑ od.

13. OTHER DISCLOSURES

(A) Information on significant transactions:

(a) Cumulative purchase or sale of the same investee's capital stock up to $300,000 or 10% of paid-in capital: None.

Ⅵ

(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: None.
real estate securitization rules: None.

==> picture [456 x 423] intentionally omitted <==

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Transaction status For the year ended December 31, 2016
Percentage
accounted for
No Trader Counterparty Relationship Account Amount Terms consolidated net
revenue or total
assets
0 TAIWAN BUSINESS Taiwan Business 1 Account 172,261 No difference with 0.01%
BANK, LTD. Bank Insurance Receivables non-related parties
Agency Co., Ltd.
0 TAIWAN BUSINESS Taiwan Business 1 Deposits and 180,637 No difference with 0.01%
BANK, LTD. Bank Insurance remittances non-related parties
Agency Co., Ltd.
0 TAIWAN BUSINESS Taiwan Business 1 Service 1,881,680 No difference with 9.11%
BANK, LTD. Bank Insurance revenue non-related parties
Agency Co., Ltd.
0 TAIWAN BUSINESS Taiwan Business 1 Other net 1,466 No difference with 0.01%
BANK, LTD. Bank Insurance non-interest non-related parties
Agency Co., Ltd. income
0 TAIWAN BUSINESS Taiwan Business 1 Account 4,033 No difference with -%
BANK, LTD. Bank Property Receivables non-related parties
Insurance Agency
Co., Ltd.
0 TAIWAN BUSINESS Taiwan Business 1 Deposits and 9,093 No difference with -%
BANK, LTD. Bank Property remittances non-related parties
Insurance Agency
Co., Ltd.
0 TAIWAN BUSINESS Taiwan Business 1 Service 42,507 No difference with 0.21%
BANK, LTD. Bank Property revenue non-related parties
Insurance Agency
Co., Ltd.
0 TAIWAN BUSINESS Taiwan Business 1 Other net 163 No difference with -%
BANK, LTD. Bank Property non-interest non-related parties
Insurance Agency income
Co., Ltd.
0 TAIWAN BUSINESS Taiwan Business 1 Deposits and 230,022 No difference with 0.02%
BANK, LTD. Bank International remittances non-related parties
Leasing Co., Ltd.
0 TAIWAN BUSINESS Taiwan Business 1 Other net 691 No difference with -%
BANK, LTD. Bank International non-interest non-related parties
Leasing Co., Ltd. income
----- End of picture text -----

Note: The meaning of the number is as follows.

Zero stands for the parent company
2 .Subsidiaries are coded from No 1 per respective companies.
statements users: None.

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(B) Information of investees:

(a) The following is the information on investees for the year 2016 (excluding investment in mainland China):

(Unit : In Thousands of New Taiwan Dollars ； thousand shares)

==> picture [456 x 249] intentionally omitted <==

----- Start of picture text -----

The cross holding of the Bank and its related
parties
Main
Name of Shareholding Book Investment Total
Location business Number Note
investee ratio value gain (loss)
scope Number of
of prefomat Number of Shareholding
shares shares shares ratio
Taiwan Business 2F, No.158, Agent of 100.00% 150,144 140,144 500 - 500 100.00% Already written-off
Bank Insurance Songjiang Rd personal when preparing
Agency Co., Ltd. Taipei City insurance the consolidated
financial
statements
Taiwan Business 2F, No.158, Agent of 100.00% 8,815 3,919 300 - 300 100.00% 〞
Bank Property Songjiang Rd property
Insurance Agency Taipei City insurance
Co., Ltd.
Taiwan 5F., No.151, Sec. Leasing 100.00% 1,375,344 ( 8,498 ) 150,000 - 150,000 100.00% 〞
Business Bank 4, Nanjing E. business
International Rd.,Taipei City
Leasing Co., Ltd.
TBB (Cambodia) Kampuchea SMEs and 100.00% 317,943 ( 1,050 ) 10 - 10 100.00% 〞
Microfinance personal
Institution Plc finance
business
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(b) Loans to others:

(Unit : In Thousands of New Taiwan Dollars)

NO.											The		Guarantee	Guarantee	Limited amount for individual object	Total limited amount for loan
	Loan from	Loan to	Main Account	Related party	Maximum Amount	Ending balance	Actual amount	Range of intrest rate	Main loan nature	Dealing amount	neccessary reason for short-term loans	Allowancefor bad debts	Name	Value
1	Taiwan Business Bank International Financing leasing Co., Ltd.	PRO-TEK (XIAMEN) ELECTROPLATING DEVELOPMENT CO., LTD.	Entrusted loan	No	59,650	59,650	59,650	8%	1	59,650		895	None	-	343,836	1,375,344
1	Taiwan Business Bank International Financing leasing Co., Ltd.	SHANGHAI BUYNOW ELECTRONIC INFORMATION CO., LTD.	Entrusted loan	No	74,909	74,909	83,232	6.5%.~6.8%	1	83,232		1,124	None	-	343,836	1,375,344
1	Taiwan Business Bank International Financing leasing Co., Ltd.	SANYUAN CONSTRUCTION (QINGDAO) DEVELOPMENT CO., LTD.	Entrusted loan	No	106,352	106,352	106,352	10%	2	-	To the lender for building commercial facilities and buying equipment	1,595	Construction land use right、 Commercial and residential buildings 4F&13F	1,842,872	343,836	1,375,344

Note 1: The meaning of the number is as follows.

(1) Zero stands for issuer.

(2) Investee companies are coded from NO 1 per respective companies. Note 2: The quota / amount is still valid up to now.

Note 3: The meaning of the loan nature is as follows.

(1) 1 stands for business dealing.

(2) 2 stands for the neccessary for short‑term loans.

Note 4: Limited amount for individual object: 25% net value of parent company.

Note 5: Total limited amount for loan: 100% net value of parent company.

Ⅵ

(d) Acquisition of securities:

(Unit : In Thousands of New Taiwan Dollars)

Company acquired	Type and name of the security	Relationship with the security issuer	Account	At the end of theperiod	At the end of theperiod	At the end of theperiod	At the end of theperiod	Note
				Number of shares	Carrying amount	Share proportion (Note 2)	Market price (Note 1)
Taiwan Business Bank International Financing leasing Co., Ltd.	Not public	The investee under the equity method of the subsidiary Taiwan Business Bank International Leasing Co., Ltd.	Investment under equity method	-	812,856	100.00%	812,856	The transaction has been written off when preparing the consolidated fnancial statements.

Note 1: Listed companies apply the market price to calculate the net amount of the shares possessed. Not listed companies and companies that are not in the over‑the‑counter market apply the share proportion to calculate the net amount of the shares possessed. The net amount of preferred stock is calculated based on the settlement.
Note 2: The share proportion of the preferred stock is calculated based on the shares the Company possessed divided by the shares issued.
(e) Accumulative purchases or sales of the same investee companies 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 and 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.
(k) Sale of non-performing loans information: None.
- real estate securitization rules: None.
statements users: None.

(C) Information on investment in mainland China:

(a) Name and major business item of the investee in China ：

(Unit : In Thousands of New Taiwan Dollars)

Name of investee company in Mainland China	Major business	Paid-in capital	Investment method	Accumulated amount transferred from Taiwan, beginning of the period	Investment transferred out or recovered	Investment transferred out or recovered	Accumulated amount transferred from Taiwan, end of the period	The current proft or loss of the investee	Shares directly or indirectly possessed by the Bank	Proft or loss recognized	Ending book value of investment	Investment proft transferred in
					Transferred out	Recovered
Taiwan Business Bank , Ltd. Shanghai branch	Banking business	3,910,537 (CNY 800 million) (Operating capital)	(e)	3,910,537 (CNY 800 million)	-	-	3,910,537 (CNY 800 million)	-	Shanghai branch of the Bank, not an investee company	-	4,019,049	None
Taiwan Business Bank , Ltd. Wuhan branch	Banking business	3,942,815 (CNY 500 million) (Operating capital)	(e)	2,552,375 (CNY 500 million)	1,390,440 (CNY 300 million)	-	3,942,815 (CNY 800 million)	-	Wuhan branch of the Bank, not an investee company	-	3,884,487	"
Taiwan Business Bank International Financing leasing Co., Ltd.	Leasing business	838,305 (CNY 170 million) (Operating capital)	(d)	838,305 (CNY 170 million)	-	-	838,305 (CNY 170 million)	18,812	100%	18,812	812,856	"

Investment method is divided into 5 categories and are listed as follows:

(a) Invest in a Chinese Company through remittance from the third party.
(b) Establish a company in the third party and use the company to invest in a Chinese Company.
(c) Reinvest in the existing company in the third party and use the company to invest in a Chinese company.
(d) Directly invest in a Chinese company.
(e) Other: establish a foreign branch.

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(b) Limit of investment in China ：

(Unit : In Thousands of New Taiwan Dollars)

Name of Company	Accumulated outfow of investment from Taiwan to Mainland China as of December 31, 2016	Investment amount authorized by Investment Commision, MOFA	Upper limit on investment authorized by Investment Commission, MOEA
Taiwan Business Bank Co., Ltd.(Note)	8,691,657 (CNY 1,770 million)	8,691,657 (CNY 1,770 million)	42,522,204

Note: The investment amount in China of the subsidiary Taiwan Business Bank International Leasing Co, Ltd is included.

14. SEGMENT INFORMATION

(A) General information

The chief operating decision maker is the general manager of the Bank and its subsidiaries 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, Securities department, Trust department and Others. In 2016 and 2015, Securities department, Trust department and Other segments didn't meet the quantitive thresholds, therefore regarded as the same reporting department. The main operations of the banking sector are engaged in the exchange of foreign currency in connection with exports and imports and the securities investment business. 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. Other segments include all the business of subsidiaries, which are Taiwan Business Bank Insurance Agency Co, Ltd. Taiwan Business Bank Property Insurance Agency Co, Ltd, Taiwan Business International Leasing Co, Ltd. and TBB (Cambodia) Microfinance Insititution Plc. The profit or loss of the operating segments of the Bank and its subsidiaries is measured by net income before tax. The reported amount is consistent with the data which was provided to the chief operating decision maker in order to use it as the base of resource allocation and performance measurement.

(B) Segment information

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For the years ended December Securities, Trust Inter-department
31, 2016 Bank Department and others adjustment Total segment
Net interest income $ 14,596,577 399,626 - 14,996,203
Non-interest income 5,203,156 594,510 ( 136,835 ) 5,660,831
Net revenue 19,799,733 994,136 ( 136,835 ) 20,657,034
-
Bad debt expenses ( 2,463,865 ) ( 40,329 ) ( 2,504,194 )
Operating expense ( 11,306,988 ) ( 488,756 ) 2,320 (11,793,424 )
Net income before tax $ 6,028,880 465,051 ( 134,515 ) 6,359,416
Total assets $ 1,474,854,875 26,297,847 ( 2,423,740 ) 1,498,728,982
Total liabilities $ 1,406,432,468 21,997,668 ( 571,494 ) 1,427,858,642
For the years ended December Securities, Trust Inter-department
31, 2015 Bank Department and others adjustment Total segment
Net interest income $ 15,178,778 290,237 - 15,469,015
Non-interest income 3,984,645 756,571 ( 48,347 ) 4,692,869
Net revenue 19,163,423 1,046,808 ( 48,347 ) 20,161,884
-
Bad debt expenses ( 2,332,061 ) ( 77,128 ) ( 2,409,189 )
Operating expense ( 11,052,134 ) ( 506,427 ) 2,030 ( 11,556,531 )
Net income before tax $ 5,779,228 463,253 ( 46,317 ) 6,196,164
Total assets $ 1,454,594,712 23,593,212 ( 2,296,329 ) 1,475,891,595
Total liabilities $ 1,389,654,273 18,994,003 ( 415,810 ) 1,408,232,466
----- End of picture text -----

Ⅵ

(C) Geographic information:

The Bank and its subsidiaries, based on the geographic location of foreign operating segments, to disclose the information as below:

Net income before tax:

==> picture [456 x 118] intentionally omitted <==

----- Start of picture text -----

For the years ended December 31
Area 2016 2015
Taiwan $ 6,032,221 5,470,517
USA 280,522 267,559
Hong Kong 310,289 227,902
Australia 12,813 153,363
China （ 276,429 ） 76,823
Total $ 6,359,416 6,196,164
----- End of picture text -----

Non-current assets:

==> picture [456 x 117] intentionally omitted <==

----- Start of picture text -----

Area December 31, 2016 December 31, 2015
Taiwan $ 18,020,172 19,144,084
USA 3,726 1,187
Hong Kong 23,474 20,125
Australia 11,792 13,230
China 43,012 17,062
Cambodia 20,664 21,785
Total $ 18,122,840 19,217,473
----- End of picture text -----

(D) Significant client information:

No single customer represents 10% or more of the Bank and its subsidiaries' operating revenue. Therefore,

no disclosure of major customer information is required.

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Corporate Social VII Responsibility

119 120 121 122 123

2. Customer Care

3. Environmental Protection

5. Support for Academic, Cultural, and Sports Activities

124 125

6. Employee Care

7. Continuity of Operations and Creation of Shareholder Value

Ⅶ

In addition to the pursuit of business performance, the provision of employee value-added, and an emphasis on shareholder interests, the Bank uses concrete action to fulfill its CSR by starting out from the banking industry itself and participating actively in public-benefit activities, showing care for society, enhancing customer benefits, reinforcing care for employees, and striving to become an outstanding bank with sustainable operation.

(1) Continuous Development of the Core SME Business

The TBB's performance in the extension of Young Entrepreneur and Start‑up Capital Loans, and in the provision of Phoenix Micro Start‑up Loans, is tops in Taiwan. The following promotional activities related to government assistance information and resource integration were carried out in 2016:

A. To deeply cultivate the Bank's customers, "Dinner Parties in Celebration of Chinese New Year" were held in Taipei, Tainan, New Taipei City, Kaohsiung, Hsinchu, Taichung, and Yilan from Feb. 16 to Mar. 18, 2016, to strengthen interaction between the Bank and its customers and expand all kinds of business relations.
B. A "Credit Guarantee Heritage Lecture" was given in Pingtung in cooperation with the SME Credit Guarantee Fund on Feb. 26, 2016, providing bank financing information and consultation services.
C. In coordination with the Small and Medium Enterprise Administration of the Ministry of Economic Affairs, the TBB, together with the Small Business Integrated Assistance Center, organized the 2016 "Care and Service for SMEs and Upgrading of Financial Competitiveness" seminar on Mar. 18, 2016, carrying out the government's policy of vigorous assistance for SMEs and helping SMEs reinforce their financial management and their acquisition of necessary financing so as to enhance their competitive advantage.
D. In coordination with the Small and Medium Enterprise Administration of the Ministry of Economic Affairs, the TBB, together with the Chinese Management Association, held two "Finance and Accounting – Zero Distance" classes in Taichung on Apr. 25 and Taipei on Apr. 28, 2016 to carry through with the government's policy of providing guidance for SMEs and strengthening of risk prevention and management awareness by SMEs, helping them upgrade their operating efficiency, improve their financial structure, and strengthen their competitiveness.
E. A "Credit Guarantee Heritage Lecture" was held in Keelung, in conjunction with the SME Credit Guarantee Fund, on May 26, 2016 to provide consultation services for bank financing.
F. The TBB provided bank financing consultation at the Kaohsiung International Maritime & Defense Expo held in Kaohsiung, in conjunction with the Taiwan Shipbuilding Industry Association, on Sep. 16‑18, 2016. Besides responding to the government's policy of promoting innovation industries, this also promoted the Bank's "Preferential Loans for Five Major Innovative Industries."

(2) Loan Policy

In carrying out the "Equator Principles" and its own corporate social responsibility, when the Bank engages in the extension of loans, it places emphasis in loan evaluation on the borrower's fulfillment of food safety, worker safety, environmental protection responsibilities, and corporate social responsibility.

(3) Donation to the SME Credit Guarantee Fund to Support SME Development

In accordance with the provisions of Article 13 of the Act for the Development of Small and Medium Enterprises, and as approved by its Board of Directors on Oct. 28, 2016, the Bank's apportioned contribution to the SME Credit Guarantee Fund for 2017 amounted to NT$306,949,868.

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2. Customer Care

(1) Implementation of Customer Service and Care

A. In carrying out the Financial Supervisory Commission's "Measures for the Enhancement of Friendly Financial Services for the Disabled," and in consideration of the inconvenience of the hearing challenged in using telephone and teller services, the Bank reinforced the publicizing of the credit card activation and loss reporting function via ordinary Internet banking, and constantly expanded service channels by adding mobile banking credit card activation and loss reporting services. This enhanced the quality of the Bank's service.
B. In February of 2016, the Bank proactively sought out credit card customers in the disaster area of the great Tainan earthquake, offering extended payments of principal and interest, reducing interest by half, and canceling penalty fees on credit card bills, helping disaster‑struck families to weather the crisis.
C. To take care of young people and disadvantaged groups, the Bank carried out the Ministry of Finance's "Preferential Home Loans for Young Couples" and the Construction and Planning Agency, Ministry of the Interior's "Housing Subsidy and Home Improvement Loans". By the end of 2016, a total of 19,752 and 947 of these loans, respectively, had been extended, with the accumulated value amounting to a respective NT$75.706 billion and NT$1.832 billion.

(2) Creating Financial Products that Conform to Social Trends and Customer Needs

A. In response to Taiwan's ageing population and low birth rate, the Bank constantly introduces trust products including nursing care trust, disability trust, and insurance trust, and has planned out a trust model that combines asset management and nursing care. This adds assurance and peace of mind for customers, and fulfills the Bank's corporate social responsibility while offering a full range of financial services.
B. In October of 2016, the TBB participated in the "2016 New Taipei City Property Trust Seminar for Seniors and the Disabled" organized by the New Taipei City Government and the Trust Association of R.O.C., providing trust service consultation for elders and people with difficulty of movement. The event was covered positively by the media, establishing the Bank's brand image for the cultivation of nursing care trust.
C. According to statistics compiled by the Trust Association, of the 44 banks evaluated for "accumulated business volume of property trust for the elderly and disabled" in the third quarter of 2016, the TBB ranked third in "property trust scale" and fifth in "number of beneficiaries".
D. In coordination with the "Youth Overseas Life Experience Loans" program of the Youth Development Administration, Ministry of Education, the TBB provides young people aged 20 to 30 with loans for overseas study, self‑guided travel, and working holidays, helping them to realize their dreams of living overseas. As of the end of 2016, the Bank had provided NT$464 million in these loans to 3,985 persons.
E. In 2016, the TBB extended childbirth consumer loans, lightening the burden on family finances by providing the capital needed to pay for bearing children. By the end of the year, 848 of these loans for a total of NT$283 million had been extended.

(3) Reinforcement of Consumer Protection

A. The TBB has established a Consumer Protection Policy and Consumer Protection Operating Procedures to protect the interests of consumers, clearly stipulating measures for the implementation measures of the consumer protection policy, and designating a dedicated unit to monitor whether the consumer protection mechanism is being implemented effectively. The Auditing Department of the Board of Directors is responsible for checking on the status of implementation.
B. In accordance with the Consumer Insolvency Act, the Bank has set up a single window for the application and consultation on preliminary negotiations, helping consumers lighten the burden of their debts. To date, 4,427 people have been helped to start new lives in this way.
C. To carry through with consumer protection and comply with the regulations of the competent authority, the Bank's business units have strengthened their verbal explanation of "Special Reminders for Home Loans"

Ⅶ

in reference to medium and long term home loans secured by houses, or loans secured by other real estate and the actual purpose of which is to purchase houses. This helps customers to better understand the risk of changing interest rates.

D. The TBB has established an "Operating Procedure for the Handling of Credit Card Disputes" and has set up a toll‑free hotline, allowing the Trust Department to handle customer complaints immediately.

(4) Holding of a Series of Activities to Boost Customers’ Knowledge of Financial Management

A. To reduce the risk of loss for investors, the TBB held six small‑scale community lectures to promote basic concepts on stocks and futures and financial management knowledge, providing customers a strategic reference for use in investment.
B. "Smart Wealth Management Lectures" were held, with famous instructors explaining to customers that "In Turbulent Times—Dollar‑Cost Averaging Investment is the Best Way" to let them know that today's investment market offers opportunities but is filled with variables. These lectures gave customers a new global outlook, strengthened the Bank's persuasiveness in product promotion, and enhanced the sales momentum of branches while boosting the visibility of the TBB's wealth management and brightening its professional brand image.
C. To serve existing discretionary investment‑oriented insurance customers and satisfy customers' various financial management/tax reduction needs, the Bank held lectures to provide after‑sales service to discretionary investment‑oriented insurance customers. A number of tax experts were invited to offer financial management tips for operating in a negative‑interest investment environment with the aim of deepening the business relations with existing customers and strengthening customer services.

3. Environmental Protection

(1) Promotion of Environmentally Friendly Enterprise Loans
The TBB works hard to lower energy consumption, reduce pollution, and carry out other means of protecting environmental sustainability. Besides considering the fulfillment of environmental responsibility by enterprises applying for loans, the Bank constantly promotes "Preferential Loans for the Procurement of Renewable Energy Equipment", "Project Loans for a Low Carbon Sustainable Home", and "Machinery and Equipment Upgrading Loans", and in October of 2016 inaugurated "Preferential Loans for Startups in Key Industries", helping enterprises to upgrade their production machinery and equipment. The Bank also installed anti‑pollution and energy conserving equipment so as to create a win‑win for both economic development and environmental protection.

(2) Implementation of the Energy Conservation and Carbon Reduction Policy to Stimulate Sustainable Environmental Development

A. LED Energy Label lighting is used in office premises bank‑wide, with more than 28,000 lights installed, greatly reducing the electricity used for lighting at business premises. About 3.54 million kilowatt‑hours are saved annually, reducing carbon dioxide emissions by 1,845 metric tons—equivalent to the planting of 168,000 trees a year, enough to develop 4.7 Da'an Forest Parks. In this way, the Bank contributes to energy conservation and carbon reduction, and to protection of the environment.
B. The Bank implemented its "Measures for Water and Electricity Conservation," with scheduled follow‑up on the status of water and electricity conservation by different units and inclusion of the results in business performance assessments. Various energy conservation improvement programs were forcefully carried out in order to enhance the energy efficiency of equipment and save on electricity costs.
C. The Bank's headquarters carried out the renewal of a 500‑ton VSD chiller and installed an energy management system as well as LED lighting for public areas. Third party verification showed that these improvements boosted the energy efficiency of equipment by more than 37.2%, saving about 273,000

121

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Taiwan Business Bank Annual Report 2016

kilowatt‑hours per year, reducing carbon dioxide emissions by 167 metric tons, and saving NT$1.55 million in electricity costs annually. The electricity contract capacity of the Bank's headquarters was cut twice from 1,150 kilowatts to 750 kilowatts in recent years.

D. The main source of the Bank's energy use is electrical power, which causes indirect greenhouse gas emission. According to statistics, the electricity used in office premises bank‑wide in 2016 was 20,936,724 kilowatt‑hours, resulting in approximately 10,908 metric tons of carbon dioxide emissions. Compared with the previous year, the Bank has reduced electricity consumption by 5.05% and carbon dioxide emissions by 580 metric tons.
E. In coordination with the "Low‑energy‑use Residential and Commercial Energy‑conservation and Carbon‑ reduction Technology Integration and Demonstration/Application Plan" conducted by the Bureau of Energy, Ministry of Economic Affairs, the Bank provided information on electricity use for the establishment of a domestic energy database. The Bank also participated in the low‑carbon management cloud alliance plan of the New Taipei City Government, installing smart electric meters and informatized electricity‑use management systems in the Chongnan Building, Lin Kou generator room, and other energy‑consuming structures.

(3) Superior Performance Record in Implementing Environmental Protection

A. In response to the Taipei City Government's "Smart Electricity Conservation Plan for Commercial Enterprises", 10 branches, including the Sung Nan Branch, reduced electricity consumption by 4.9% compared with the same period of the previous year. The Bank was awarded for this achievement.
B. In response to the New Taipei City Government's "Voluntary Recording of Electricity Use and Electricity Conservation Plan for Service Industries", 12 branches in New Taipei City were awarded for outstanding performance in electricity conservation. Of these, the Pu Chya Branch received an Exceptional Award and the Lu Chow Branch won an Outstanding Award.
C. The Bank signed a "Letter of Intent for Green Procurement by Private Enterprises and Groups" with the Environmental Protection Administration, Executive Yuan, and has been cited by the Environmental Protection Administration and the Taipei City Government's Department of Environmental Protection for "Outstanding Performance in Green Procurement" for five years in a row.
D. The Bank continuously implements the ISO 50001 Energy Management System in its headquarters building, and has been cited by the Taipei City Government for acquiring this certification.

(1) Public Benefit Activities and Charity Donations

A. The TBB helped establish linkage between its credit card customers and public benefit and charity groups, allowing the disclosure, on the credit card area of the Bank's website, of information on donations to such charity organizations as World Vision Taiwan, Sunshine Social Welfare Foundation, Eden Social Welfare Foundation, Children Are Us Foundation, Genesis Social Welfare Foundation, and Waker Welfare Action Association.
B. The Bank donated NT$2.5 million for disaster relief following the Tainan earthquake in 2016.
C. In response to the heavy damage inflicted on the Taitung area by Typhoon Nepartak in July of 2016, the Bank donated NT$1.5 million for local relief and reconstruction.
D. To strengthen public‑benefit activities and show care for disadvantaged groups, the Bank has held year‑ end "Sending Warmth in the Chill Winter" activities for six years in a row, mobilizing visits to disadvantaged groups in their areas by 125 branches throughout Taiwan. Forty‑six disadvantaged groups and social welfare institutions were helped with donations totaling NT$1,585,000 in 2016.

Ⅶ

E. Sponsorship in the amount of NT$300,000 was provided the Love and Life Cultural and Educational Foundation in organizing the "2016 Christmas Gift Collection and Loving Care Garden Party for Disadvantaged Primary School Students".
F. To support mentally and physically challenged children, the Bank donated NT$60,000 to the Nicaraguan Embassy in Taipei for the purchase of wheelchairs for children with movement difficulties.
G. To help lessen the digital divide, the Bank responded to the ASUS Foundation's "Second Life for Computers Project" by donating 2,771 computers and 1,586 monitors in 2016. These recycled computers were refurbished and given to domestic and overseas non‑profit organizations, primary schools in remote areas, and community institutions.

(2) Participation in Community Development

A. The bank vigorously promotes urban renewal trust to advance toward the goals of urban renewal and city beautification, and to establish a foundation of trust between developers and residents. In December of 2016, the Bank participated in the "Second Seminar for Financial Institutions on Taipei City Government‑Led Urban Renewal" organized by the Taipei City Government, and provided opinions on financing, trust, and investment matters related to urban renewal projects, in response to the government policy of encouraging financial institutions to actively participate in urban renewal.
B. The Bank donated to the "Food (and Goods) Bank" program organized by the Taiwan Futures Exchange in the amount of NT$1,000,000 to invigorate community benevolence and resources, help build a localized goods mutual aid system, and add a level of care to the social safety net.
C. The Bank provided sponsorship for activities in celebration of the National Palace Museum's 90th anniversary and the opening of the Museum's Southern Branch, promoting an atmosphere of art and culture and helping balance development between northern and southern Taiwan.
D. To pay back to VIP wealth management customers and continue the promotion of art and cultural activities, the Bank held a VIP Night at the National Palace Museum for "Viewing Nature in Chinese Art: A Special Exhibit of Select Artifacts to Celebrate the 2016 Tang Prize" in October of 2016, allowing the guests to enjoy the multifaceted and rich array of the Museum's artifacts and exquisite cuisine, and repaying them for their long‑term support and trust.

5. Support for Academic, Cultural, and Sports Activities

(1) Assistance for Educational Development

A. The Bank devoted efforts to financial know‑how publicity on campuses and in communities, laying a deep foundation for financial education by promoting proper financial management concepts and the prevention of financial fraud. The Bank was recognized for these efforts with a "Financial Knowledge Campaigns of Entering Campus and Community Award", presented by the Banking Bureau of the Financial Supervisory Commission.
B. Tickets for the "Jurassic Adventure‑The Return of the King" dinosaur exhibit at the National Museum of Natural Science were purchased by the Bank, and given to 10 elementary schools in remote areas to increase the knowledge and interest of children in science education.
C. Assistance was provided for the rooting of Hakka culture. The Bank donated to the Meinong Elementary School in the Meinong District of Kaohsiung City in the amount of NT$36,000 for the procurement of Hakka cultural clothing in order to promote traditional Hakka cultural values on campus.
D. The Bank vigorously promoted "Ministry of Science and Technology Subsidy Program for University‑Industry Collaboration Projects for the Production and Broadcasting of Products of Popular Science" trust, with the provision of financial planning services from the banking standpoint, to assist colleges, universities, schools, research institutions, and domestic and overseas media by cooperating in the production and promotion of

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high‑quality popular science products in order to expand the dissemination of popular science and enhance the scientific literacy of Taiwan's people.

E. The Bank sponsored the cost of nutritious breakfasts totaling NT$1,551,000 at remote elementary schools in Saijia, Duona, Nanfeng and Shuanglong in the 2016 school year.

(2) Upgrading of the Atmosphere of Art and culture, and Promotion of Sports Activities

A. To encourage all the people to exercise for health, the Bank sponsored the Kaohsiung road race of the Ministry of Finance Uniform Invoice Cup, providing free participation for people of the Kaohsiung area. Almost 10,000 people joined the race. The Bank also raised funds and collected uniform invoices at the site of the road race, gathering a total of 50,000 invoices which were donated to numerous disadvantaged groups.
B. To help nurture the movie and cultural/creative industries, the Bank carried out the Ministry of Culture's film production subsidy trust with the aim of training film talent and supporting the development of the native cultural/creative industry.
C. The Bank sponsored the filming of the documentary Travel with a Mission – Peru Justice and Tourism Tour/2016 by the World Citizen Cultural Association R.O.C., assisting with the development of cultural/ creative industry and encouraging young students to chase their dreams.
D. To encourage local sports activities, the Bank sponsored the Keelung Social Basketball Association in organizing the Keelung City 25th New Park Cup Basketball Championships, thereby enriching the atmosphere for local sports.
E. The Bank sponsored the co‑organizing of the 2016 Meinong Hakka Heritage Succession Cup Folk Sport Championships by the Longshan Elementary School in the amount of NT$100,000, thereby helping to promote the atmosphere for school sports.
F. To reinforce the development of local sports and boost the power of ballplayers, the Bank sponsored training expenses for the Chinese Taipei Volleyball Association in the amount of NT$1,000,000.

6. Employee Care

Employees are a company's assets, and the Bank never spares any effort to take care of its employees. In addition to establishing work rules and human resources management rules in accordance with the Labor Standards Act and other relevant labor regulations, the Bank also complies with the law in providing labor insurance, national health insurance, and allocations for retirement funds. Employee health exams are carried out on a regular basis, and group medical care and accident insurance are offered on preferential terms in order to protect the living of employees so that they can fully express their professional skills at work.

(1) Upgrading of Employees’ Professional Know‑how

A. To strengthen the competitiveness of employees and upgrade their professional knowledge, the Bank holds training classes focused on different businesses in accordance with its annual manpower training plans, and provides a rich diversity of courses on its digital learning website along with video lectures and professional speeches by prominent speakers on an irregular basis.
B. To provide employees with high teaching quality in simultaneous distance learning, the Bank carried out overall improvement of hardware and software facilities at domestic video points so that interactive learning can be more convenient, thereby effectively enriching the competence of employees.

(2) Creation of a Superior Workplace

A. In compliance with the laws governing gender equality in the workplace, the Bank has established regulations for sexual harassment measures, complaints, and punishments so that employees will have a work environment free of sexual harassment.

Ⅶ

B. To upgrade the safety of the Bank's work environment, whenever unexpected construction anomalies occur, the contractor is notified via a "Contractor Operating Environment and Hazard Factors Notice" so as to reduce occupational accidents. The Bank also organizes general worker safety and health training periodically to provide employees with proper concepts of safety and health.
C. The Bank provides its employees with a safe and healthy workplace, with central air conditioning systems and lighting equipment, as well as emergency escape routes and exits. Elevators are maintained regularly, firefighting equipment has been installed and regular fire drills are held. Environmental disinfection and cleaning are carried out on a regular basis, and door access safety controls are in place.
D. To provide employees with a safe and healthy work environment including necessary health and first‑ aid equipment, reduce factors that are hazardous to worker safety and health, and prevent occupational accidents, the Bank has formulated "Work Rules for Occupational Safety and Health", and special personnel are designated to carry out safety and health inspections and assure that the related equipment is able to operate normally. This reduces accidents and guarantees the personal safety of Bank employees.
E. To protect the safety and health of its employees, the Bank's Occupation Safety and Health Section is charged with handling occupational safety and health affairs, and temporary doctors and full‑time nurses are hired to provide health consultation services for employees.
F. Occupational safety and health management and a friendly occupational environment are implemented. The Bank received Excellent Breast Feeding Room certification from the Taipei City Government's Department of Health, carried out free workplace Influenza vaccination in 2016, and participated in promotion of community health activities organized by the Taipei City Government, and received an Outstanding Cancer Prevention Workplace award and Best Cancer Prevention Partner Workplace award.

(3) Establishment of Smooth Channels for Promotion and Communication

A. The Bank has a complete salaries/rewards system and promotion channels, as well as diversified training and welfare measures designed to recruit and retain outstanding personnel who will work hard in concert with the Bank.
B The Bank places utmost emphasis on employee rights and regularly calls labor‑management meetings where the two sides can fully communicate and negotiate on employee rights and welfare issues, and sign group agreements, thereby maintaining harmonious labor‑management relations.

7. Continuity of Operations and Creation of Shareholder Value

The Bank is engaged in a long-term effort to upgrade corporate governance in which no effort is spared, and demonstrates its capacity to act through full-marketing in the pursuit of outstanding operating performance. The TBB works ceaselessly to upgrade asset quality and competitiveness with the aim of reinforcing its operating structure and creating the greatest values for all its shareholders.

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Directory of Head VIII Office and Branch Units

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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
4F, 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171
(Banking Broker)
International Banking
3F, 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171 MBBTTWTP
Department
46, Sec. 2, Minquan E. Rd., Zhongshan Dist.,
Chi Lin Branch (02)25417171 MBBTTWTP001
Taipei, Taiwan, R.O.C.
634-10, Jingping Rd., Zhonghe Dist, New Taipei
Chung Ho Branch (02)22427171 MBBTTWTP002
City, Taiwan, R.O.C.
419, Mingcheng 2nd Rd., Zuoying Dist.,
Po Ai Branch (07)5567171
Kaohsiung City, Taiwan, R.O.C.
985 Chunri Rd., Taoyuan Dist., Taoyuan City,
North Taoyuan Branch (03)3567171 MBBTTWTP004
Taiwan, R.O.C.
381 Zhongzheng Rd., Luzhu Dist., Taoyuan City,
Nan Ken Branch (03)3227171 MBBTTWTP005
Taiwan, R.O.C.
839/847 Sec. 4, Taiwan Blvd., Xitun Dist.,
Si Tuen Branch (04)23587171 MBBTTWTP006
Taichung City , Taiwan R.O.C.
301 Zhongming S. Rd., West Dist., Taichung
Chung Min Branch (04)23057171 MBBTTWTP007
City, Taiwan, R.O.C.
116, Minquan Rd., Jincheng Township, Kinmen
Kinmen Branch (082) 316871 MBBTTWTP009
County, Taiwan, R.O.C.
161 Daya Rd., Daya Dist., Taichung City, Taiwan,
Ta Ya Branch (04)25687171 MBBTTWTP011
R.O.C
183 Fengnan Rd., Nanzi Dist., Kaohsiung City,
Jen Ta Branch (07)3537171 MBBTTWTP012
Taiwan, R.O.C.
357, Sec. 4, Ren'ai Rd., Da'an Dist., Taipei City,
Jen Ai Branch (02)27217171 MBBTTWTP020
Taiwan, R.O.C.
147, Sec. 4, Nanjing E. Rd., Songshan Dist.,
Sung Shan Branch (02)27167171 MBBTTWTP021
Taipei City, Taiwan, R.O.C.
Chien Cheng Branch 76 Nanjing W. Rd., Datong Dist., Taipei City,
(02)25507171 MBBTTWTP022
(Banking Broker) Taiwan, R.O.C.
601 Zhongzheng Rd., Shilin Dist., Taipei City,
Shih Lin Branch (02)28117171 MBBTTWTP023
Taiwan, R.O.C
168 Zhulin Rd., Yonghe Dist., New Taipei City,
Yung Ho Branch (02)29277171 MBBTTWTP024
Taiwan, R.O.C.
192, Sec. 2, Zhongxing Rd., Xindian Dist., New
Hsin Tien Branch (02)29117171 MBBTTWTP025
Taipei City, Taiwan, R.O.C.
16, Sec. 1, Zhonghua Rd., Xinzhuang Dist., New
Hsin Chuang Branch (02)29907171 MBBTTWTP026
Taipei City, Taiwan, R.O.C.
25, Touqian Rd., Xinzhuang Dist., New Taipei
Hwa Cheng Branch (02)29977171 MBBTTWTP027
City, Taiwan, R.O.C.
158 Songjiang Rd., Zhongshan Dist., Taipei City,
Sung Kiang Branch (02)25377171 MBBTTWTP040
Taiwan, R.O.C.
Taipei Branch (Banking 72, Sec. 1, Chongqing S. Rd., Zhongzheng Dist.,
(02)23717171 MBBTTWTP050
Broker) Taipei City, Taiwan, R.O.C.
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TBB'S OFFICES ADDRESS TEL NO. SWIFT ADDRESS
146 Guangzhou St., Wanhua Dist., Taipei City,
Wan Hua Branch (02)23387171 MBBTTWTP060
Taiwan, R.O.C.
93, Sec. 2, Roosevelt Rd., Da'an Dist., Taipei
South Taipei Branch (02)23697171 MBBTTWTP061
City, Taiwan, R.O.C.
390, Sec. 1, Fuxing S. Rd., Da'an Dist., Taipei
Fu Hsin Branch (02)27057171 MBBTTWTP070
City, Taiwan, R.O.C.
17 Changchun Rd., Zhongshan Dist., Taipei City,
Chung Shan Branch (02)25517171 MBBTTWTP080
Taiwan, R.O.C.
4, Sec. 3, Minquan E. Rd., Zhongshan Dist.,
Chien Kuo Branch (02)25097171 MBBTTWTP081
Taipei CIty, Taiwan, R.O.C.
15, Alley 360, Sec. 1, Naihu Rd., Naihu Dist.,
Nai Hu Branch (02)27997171 MBBTTWTP082
Taipei City, Taiwan, R.O.C.
Nan King East Road 311, Sec. 3, Nanjing E. Rd., Songshan Dist.,
(02)27127171 MBBTTWTP090
Branch Taipei City, Taiwan, R.O.C.
267, Sec. 3, Chung Hsiao E. Rd., Taipei City,
Chung Hsiao Branch (02)27727171 MBBTTWTP100
Taiwan, R.O.C.
135, Sec. 4, Bade Rd., Songshan Dist., Taipei
East Taipei Branch (02)87877171 MBBTTWTP101
City, Taiwan, R.O.C.
World Trade Center 547 Guangfu S. Rd., Xinyi Dist., Taipei City,
(02)23457171 MBBTTWTP102
Branch Taiwan, R.O.C.
552, Sec. 5, Chung Hsiao E. Rd., Taipei City,
Yung Trin Branch (02)23467171 MBBTTWTP103
Taiwan, R.O.C.
19-2 Sanchong Rd., Nangang Dist., Taipei City,
Nan Kang Branch (02)26553771 MBBTTWTP105
Taiwan, R.O.C.
161, Sec. 1, Keelung Rd., Xinyi Dist., Taipei City,
Sung Nan Branch (02)27647171 MBBTTWTP110
Taiwan, R.O.C.
152, Sec. 6, Minquan E. Rd., Naihu Dist., Taipei
Dong Hu Branch (02)87929771 MBBTTWTP111
City, Taiwan, R.O.C.
92, Sec. 2, Dunhua S. Rd. Da'an Dist., Taipei
Ta An Branch (02)27007171 MBBTTWTP120
City, Taiwan, R.O.C.
356 Zhonghe Rd., Zhonghe Dist., New Taipei
Shuang Ho Branch (02)22327171 MBBTTWTP121
City, Taiwan, R.O.C.
403, Sec. 2, Zhongshan Rd., Zhonghe Dist.,
Jim Ho Branch (02)22287171 MBBTTWTP122
New Taipei City, Taiwan, R.O.C.
95 Wugong Rd., Wu Ku Industrial Zone,
Wu Ku Branch (02)22987171 MBBTTWTP130
Xinzhuang Dist., New Taipei City, Taiwan, R.O.C.
1F-2, 188 Zhongshan Rd., Linkou Dist., New
Lin Kou Branch (02)26037171 MBBTTWTP131
Taipei City, R.O.C.
2-1 Mingde St., Banqiao Dist., New Taipei City,
Pan Chiao Branch (02)29687171 MBBTTWTP140
Taiwan, R.O.C.
217, Sec. 1, Zhongshan Rd., Shulin Dist., New
Shu Lin Branch (02)26757171 MBBTTWTP141
Taipei City, Taiwan, R.O.C.
126, Sec. 2, Zhongyang Rd., Tucheng Dist., New
Tu Cheng Branch (02)22737171 MBBTTWTP142
Taipei City, Taiwan, R.O.C.
933 Zhongzheng Rd., Xinzhuang Dist., New
Hwei Long Branch (02)82097171 MBBTTWTP143
Taipei City, Taiwan, R.O.C.
75, Sec. 1, Xintai 5th Rd., Xizhi Dist., New Taipei
Xi Zhi Branch (02)26987171 MBBTTWTP144
City, R.O.C.
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TBB'S OFFICES ADDRESS TEL NO. SWIFT ADDRESS
9 Ai 3rd Rd., Ren'ai Dist., Keelung City, Taiwan,
Kee Lung Branch (02)24237171
R.O.C.
Pu Chya
62-1, Sec. 2, Zhongshan Rd., Banqiao Dist.,
Branch(Banking (02)29547171 MBBTTWTP151
New Taipei City, Taiwan, R.O.C.
Broker)
North San Chung 137, Sec. 4, Sanhe Rd., Sanchong Dist., New
(02)22867171 MBBTTWTP152
Branch Taipei City, Taiwan, R.O.C.
South San Chung 232, Sec. 1, Ziqiang Rd., Sanchong Dist., New
(02)29827171 MBBTTWTP153
Branch Taipei City, Taiwan, R.O.C.
42 Yongle St., Luzhou Dist., New Taipei City,
Lu Chow Branch (02)28477171 MBBTTWTP154
Taiwan, R.O.C.
305 Sec. 2,Zhongshan Rd., Yilan City, Yilan
I Lan Branch (03)9367171 MBBTTWTP160
County, Taiwan, R.O.C.
15 Zhongzheng N. Rd., Luodong Township, Yilan
Lo Tung Branch (03)9567171
County, Taiwan, R.O.C.
96-1,Sec. 1, Zhongshan Rd., Su' ao Township,
Su Aw Branch (03)9965051
Yilan County, Taiwan, R.O.C.
146 Dacheng Rd., Yangmei Dist., Taoyuan City,
Yang Mei Branch (03)4786111 MBBTTWTP290
Taiwan, R.O.C.
76, Sec. 1, Zhongcheng Rd., Hukou Township,
Hu Kou Branch (03)5997171 MBBTTWTP291
Hsinchu County, Taiwan, R.O.C.
Taoyuan Branch 99 Zhonghua Rd. Taoyuan Dist., Taoyuan City,
(03)3317171 MBBTTWTP300
(Banking Broker) Taiwan, R.O.C.
80 Zhongshan S. Rd., Dayuan Dist., Taoyuan
Ta Yuan Branch (03)3857171 MBBTTWTP301
City, Taiwan, R.O.C.
80 Fuxing Rd., Daxi Dist., Taoyuan City, Taiwan,
Ta Shi Branch (03)3887171 MBBTTWTP302
R.O.C.
157 Zhongshan Rd., Zhongli Dist., Taoyuan City,
Chung Li Branch (03)4277171 MBBTTWTP310
Taiwan, R.O.C.
153 Zhongxiao Rd., Zhongli Dist., Taoyuan City,
Nei Li Branch (03)4557171 MBBTTWTP311
Taiwan, R.O.C.
282 Minzu Rd., Zhongli Dist., Taoyuan City,
Hsin Ming Branch (03)4027171 MBBTTWTP312
Taiwan, R.O.C.
1223, Sec. 2, Wanshou Rd., Guishan Dist.,
East Taoyuan Branch (03)3297171 MBBTTWTP313
Taoyuan City, Taiwan, R.O.C.
257 Zhongshan Rd., Xinwu Dist., Taoyuan CIty,
Hsin Wu Branch (03)4777171
Taiwan, R.O.C.
Hsin Chu Branch 154 Dongmen St., Hsinchu City, Taiwan, R.O.C. (03)5277171 MBBTTWTP320
Chu Pei Branch 128 Xianzheng 9th Rd., Zhubei City, Hsinchu
(03)5517171 MBBTTWTP321
(Banking Broker) County, Taiwan, R.O.C.
Hsinchu Science
NO. 190, 192, 196, 198, Guanxin Rd., Hsinchu
Based Industrial Park (03)5637171 MBBTTWTP322
City 300, Taiwan, R.O.C.
Branch
789, Sec. 1, Jieshou Rd., Bade Dist., Taoyuan
Pa Te Branch (03)3767171 MBBTTWTP330
City, Taiwan, R.O.C.
64 Longyuan Rd., Longtan Dist., Taoyuan City,
Luong Tan Branch (03)4807171 MBBTTWTP332
Taiwan, R.O.C.
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TBB'S OFFICES ADDRESS TEL NO. SWIFT ADDRESS
6 Donglin Rd., Zhudong Township, Hsinchu
Chu Tung Branch (03)5947171 MBBTTWTP340
County, Taiwan, R.O.C.
29 Bo'ai St., Zhunan Township, Miaoli County
Chu Nan Branch (037)467171 MBBTTWTP350
Taiwan, R.O.C.
90 Xinyi Rd., Toufen City, Miaoli County, Taiwan,
Tou Fen Branch (037)687171 MBBTTWTP351
R.O.C.
Maio Li Branch 606 Zhongzheng Rd., Miaoli City, Taiwan, R.O.C. (037)327171 MBBTTWTP360
Feng Yuan Branch 1 Sanfeng Rd., Fengyuan Dist., Taichung City,
(04)25267171 MBBTTWTP460
(Banking Broker) Taiwan, R.O.C.
Tai Ping Branch 27 Zhongxing E. Rd., Taiping Dist., Taichung
(04)22707171 MBBTTWTP470
(Banking Broker) City, Taiwan, R.O.C.
14 Zhenzheng Rd., Dajia Dist., Taichung City,
Ta Chia Branch (04)26867171 MBBTTWTP480
Taiwan, R.O.C.
1023 Sec. 7, Taiwan Blvd., Shalu Dist., Taichung
Sha Lu Branch (04)26657171 MBBTTWTP482
City , Taiwan R.O.C.
616 Zhonghua Rd., Wuri Dist., Taichung City,
Wu Jih Branch (04)23387171 MBBTTWTP483
Taiwan, R.O.C.
Taichung Branch 400 Sec. 1, Taiwan Blvd., Central Dist., Taichung
(04)22297171 MBBTTWTP490
(Banking Broker) City, Taiwan R.O.C.
84 Minquan Rd., Central Dist., Taichung City,
Min Chen Branch (04)22267171 MBBTTWTP491
Taiwan, R.O.C.
136 Taizhong Rd., South Dist., Taichung City,
Hsing Chung Branch (04)22877171 MBBTTWTP500
Taiwan, R.O.C.
53 Jinhua N. Rd., Beitun Dist., Taichung City,
Pei Tuen Branch (04)22307171 MBBTTWTP501
Taiwan, R.O.C.
139 Fuxing Rd., Nantou City, Nantou County,
Nan Tou Branch (049)2237171 MBBTTWTP510
Taiwan, R.O.C.
604 Zhongzheng Rd., Caotun Township, Nantou
Tsao Tuen Branch (049)2357171 MBBTTWTP511
County, Taiwan, R.O.C.
434 Zhongzheng Rd., Puli Township, Nantou
Pu Li Branch (049)2997171
County, Taiwan, R.O.C.
135, Sec. 2, Zhongshan Rd., Tanzi Dist.,
Tan Tze Branch (04)25317171 MBBTTWTP521
Taichung City, Taiwan, R.O.C.
919, Sec. 3, Jishan Rd., Zhushan Township,
Chu Shan Branch (049)2637171 MBBTTWTP530
Nantou County, Taiwan, R.O.C.
61 Guangfu Rd., Changhua City, Changhua
Chang Hwa Branch (04)7257171 MBBTTWTP540
County, Taiwan, R.O.C.
8 He'an St., Hemei Township, Changhua County,
Ho Mei Branch (04)7558131 MBBTTWTP541
Taiwan, R.O.C.
16 Minquan St., Yuanlin Township, Changhua
Yuan Lin Branch (04)8377171 MBBTTWTP550
County, Taiwan, R.O.C.
62 Gongqian St., Beidou Township, Changhua
Pei Tou Branch (04)8877171 MBBTTWTP560
County, Taiwan, R.O.C.
2 Zhongzheng Rd., Erlin Township, Changhua
Erh Lin Branch (04)8957171 MBBTTWTP561
County, Taiwan, R.O.C.
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TBB'S OFFICES ADDRESS TEL NO. SWIFT ADDRESS
109 Datong Rd., Douliu City, Yunlin County,
Tou Liu Branch (05)5347171 MBBTTWTP660
Taiwan, R.O.C.
65 Wenhua Rd., Beigang Township, Yunlin
Pei Kang Branch (05)7827171
County, Taiwan, R.O.C.
45 Heping Rd., Huwei Township, Yunlin County,
Hu Wei Branch (05)6337171
Taiwan, R.O.C.
Chia Yi Branch
132 Guanghua Rd., Chiayi City, Taiwan, R.O.C. (05)2287171 MBBTTWTP680
(Banking Broker)
Ming Hsiung Branch 83, Sec. 3, Jianguo Rd., Minxiong Township,
(05)2207171 MBBTTWTP681
(Banking Broker) Chiayi County, Taiwan, R.O.C.
766 Hsinming Rd., West Dist., Chiayi City,
Chia Hsin Branch (05)286-7171 MBBTTWTP686
Taiwan, R.O.C.
216 Zhongshan Rd., Xinying Dist., Tainan City,
Hsin Ying Branch (06)6357171 MBBTTWTP690
Taiwan, R.O.C.
12 Zhonghua Rd., Yongkang Dist., Tainan City,
Kai Yuan Branch (06)3117171 MBBTTWTP691
Taiwan, R.O.C.
79 Zhongzheng S. Rd., Yongkang Dist., Tainan
Yun Kang Branch (06)2517171 MBBTTWTP700
City, Taiwan, R.O.C.
87 Zhongshan Rd., Xuejia Dist., Tainan City,
Shiue Chia Branch (06)7837171 MBBTTWTP701
Taiwan, R.O.C.
352 Zhongshan Rd., Shanhua Dist., Tainan City,
Shan Hwa Branch (06)5816111 MBBTTWTP702
Taiwan, R.O.C.
1532, Sec. 2, Yongda Rd., Yongkang Dist.,
Yung Ta Branch (06)2337171 MBBTTWTP703
Tainan City, Taiwan, R.O.C.
Tainan Branch 185 Zhongzheng Rd., Tainan City, Taiwan,
(06)2247171 MBBTTWTP710
(Banking Broker) R.O.C.
339 Zhongshan Rd., Rende Dist., Tainan City,
Jen Te Branch (06)2797171 MBBTTWTP711
Taiwan, R.O.C.
25 Gongyuan Rd., West Central Dist., Tainan
Cheng Kung Branch (06)2217171 MBBTTWTP720
City, Taiwan, R.O.C.
75, Sec. 2, Zhonghua E. Rd., East Dist., Tainan
East Tainan Branch (06)2687171 MBBTTWTP721
City, R.O.C.
67, Sec. 1, Zhonghua W. Rd., East Dist., Tainan
An Ping Branch (06)2657171 MBBTTWTP730
City, R.O.C
247 Zhongshan Rd., Hualien City, Hualien
Hua Lien Branch (03)8357171 MBBTTWTP760
County, Taiwan, R.O.C.
335, Sec. 1, Zhonghua Rd., Taitung City, Taitung
Taitung Branch (089)327171
County, Taiwan, R.O.C.
East Kaohsiung 249 Zhongzheng 1st Rd., Lingya Dist.,
(07)7167171 MBBTTWTP820
Branch Kaohsiung City, Taiwan, R.O.C.
Kang Shan Branch 412 Gangshan Rd., Gangshan Dist., Kaohsiung
(07)6227171 MBBTTWTP830
(Banking Broker) City, Taiwan, R.O.C.
North Feng Shan 28, Sec. 3, Jianguo Rd., Fengshan Dist.,
(07)7767171 MBBTTWTP840
Branch Kaohsiung City, Taiwan, R.O.C.
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131

132

Taiwan Business Bank Annual Report 2016

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TBB'S OFFICES ADDRESS TEL NO. SWIFT ADDRESS
31 Qingnian 1st Rd., Lingya Dist., Kaohsiung
Ling Ya Branch (07)5377171 MBBTTWTP841
City, Taiwan, R.O.C.
79 Wufu 3rd Rd., Qianjin Dist., Kaohsiung City,
Kaohsiung Branch (07)2717171 MBBTTWTP850
Taiwan, R.O.C.
North Kaohsiung
Branch 90, Fuxing 1st Rd., Xinxing Dist., Kaohsiung City, (07)2387171 MBBTTWTP851
Taiwan, R.O.C.
(Banking Broker)
116 Dachang 2nd Rd., Sanmin Dist., Kaohsiung
Ta Chang Branch (07)3827171
City, Taiwan, R.O.C.
378-3 Minquan 2nd Rd., Qianzhen Dist.,
Chien Chen Branch (07)5355171 MBBTTWTP853
Kaohsiung City, Taiwan, R.O.C.
Jeou Ru Branch 255 Jiuru 2nd Rd., Sanmin Dist., Kaohsiung City,
(07)3137171 MBBTTWTP860
(Banking Broker) Taiwan, R.O.C.
San Ming Branch 153 Zhongshan 1st Rd., Xinxing Dist., Kaohsiung
(07)2867171 MBBTTWTP870
(Banking Broker) City, Taiwan, R.O.C.
157 Zhongshan Rd., Fengshan Dist., Kaohsiung
Feng Shan Branch (07)7107171
City, Taiwan, R.O.C.
No.5-3, Guanghua Rd., Daliao Dist., Kaohsiung
Ta Fa Branch (07)7887171 MBBTTWTP881
City 831, Taiwan, R.O.C.
Ping Tung Branch 7 Hankou St., Pingtung City, Pingtung County,
(08)7327171
(Banking Broker) Taiwan, R.O.C.
718 Hongping Rd., Xiaogang Dist., Kaohsiung
Xiao Gang Branch (07)8016171 MBBTTWTP891
City, Taiwan, R.O.C.
100 Xinsheng Rd., Chaozhou Township,
Chiao Chou Branch (08)7807171
Pingtung County, Taiwan, R.O.C.
Offshore Banking
3F, 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171 MBBTTWTP893
Branch
633, West 5TH St. Suite 2280 LA CA 90071
Los Angeles Branch 1-213-8921260 MBBTUS6L
U.S.A.
Suite 2705-9,27/F, Tower The Gateway, Harbour
Hong Kong Branch 852-29710111 MBBTHKHH
City, Kowloon,H.k,
Suite 3, Level 24, 363 George Street Sydney,
Sydney Branch 61-2-92623356 MBBTAU2S
N.S.W.2000 Australia
38F,Longemont Yes Tower,399 Kaixuan Road,
Shanghai Branch 86-21-62627171 MBBTCNSH
Shanghai 200051 China
Suite 903,Level 9,239 George Street, Brisbane,
Brisbane Branch 61-7-33173000 MBBTAU2SBRI
QLD. 4000 Australia
Floor 17, Building 2, No. 108, Zhongbei Road,
Wuhan Branch Wuchang District, Wuhan, Hubei Province 86-27-59817171 MBBTCNSHWUH
430077, China
New York Branch 5F, 32 Old Slip, New York, New York, U.S.A. 1-213-304-3628 MBBTUS33
422 Strand Road (Corner of Botahtaung Pagoda
Yangon Representative
Road), #04-08, Botahtaung Township, Yangon, 95-1-202101
Office
Myanmar
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Taiwan Business Bank, Ltd.

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==> picture [231 x 69] intentionally omitted <==

Chairman

==> picture [141 x 133] intentionally omitted <==

AI assistant

TBB — Annual Report 2016

52201_rns_2017-07-17_2639a04b-f0c5-420e-a8a0-ccb62c52673e.pdf

Notice to readers

Taiwan Business Bank Head Office

Spokesperson

Deputy Spokesperson

Deputy Spokesperson

Stock Registration Agent

Rating Agency

The CPA-auditor of the Financial Report

We can be the best !

Contents

04 I. Message from the Management

06 II. Bank Profile

09 III. Organizational Framework

13 IV. Business Performance in 2016

21 V. Business Plans for 2017

24 VI. Financial Statements

118 VII. Corporate Social Responsibility

II

1. Establishment and History

Organizational III Framework

1. Organization Chart

2. Directors information

3. List of major shareholders

4. Operations of Major TBB Units

(1) Corporate Banking Group

(2) Personal Banking Group

(3) Treasury Group

(4) Risk Management Center

(5) Operating Management Center

(6) Administration Management Center

(7) Compliance and Legal Department

IV

Business Performance in 2016

1. The Domestic and Overseas Financial Environment

2. Changes in the Bank's Organization

3. Implementation of Business Plans and Operating Strategies

(1) Profitability

4. Budget Implementation

6. Research and Development

V

Business Plans for 2017

1. Operating Directions and Policies

1. Operating Directions and Policies

2. Business Targets

3. Future Development Strategies

4. The Impact of the External Competition Environment, Regulatory Environment, and Overall Operating Environment

5. Results of Latest Credit Rating

VI Financial Statements

Representation Letter

Independent Auditors ’ Report The Board of Directors

Taiwan Business Bank, Ltd.

Opinion

Basis for Opinion

Key Audit Matters

1. The assessment of loans impairment

2. The valuation of employee benefit obligation

How the matter was addressed in our audit

Other Matters

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

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

KPMG

Notice to Readers

TAIWAN BUSINESS BANK, LTD.

AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

TAIWAN BUSINESS BANK, LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

TAIWAN BUSINESS BANK, LTD. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY

TAIWAN BUSINESS BANK, LTD. AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) TAIWAN BUSINESS BANK, LTD.AND ITS SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. COMPANY HISTORY

2. APPROVAL DATE AND PROCEDURES OF THE CONSOLIDATED FINANCIAL STATEMENTS

3. NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS ADOPTED

(B) Newly released or amended standards and interpretations not yet endorsed by the FSC

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

TBB Annual Report 2016