TBB - Annual Report 2018 | FinancialReports.eu

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

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

Stock Code ： 2834 中華民國一○七年年報[2018]

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Notice to readers

If there is any discrepancy between the English version and Chinese version, the Chinese version shall prevail.

Published in March 2019

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: Tseng-Hsiang Yu Title: S.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: Yuanta Securities Co., Ltd.

Address: B1, No. 210, Sec. 3, Chengde Rd., Datong Dist., Taipei, Taiwan, R.O.C. Tel: 886-2-2586-5859

Web Site: https://www.yuanta.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: Tan-Tan Chung, Fung-Huei Lee Name of Employer: KPMG Certified Public Accountants Address: 68F, No. 7, Sec. 5, Xinyi Road, Taipei, Taiwan, R.O.C. Tel: 886-2- 8101-6666 Web Site: http://www.kpmg.com.tw

Flotation at Overseas Stock Exchange and Information Inquiry: None Please refer to Chapter X for the Directory of Head Office and Branch Units.

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深耕臺灣連結亞太布局全球 We can be the best !

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21 37 56 57 57

65 68 74

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04 I. Letter to Shareholders

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Operation Results in 2018
Business Plans for 2019
Future Development Strategies
Influences from the external competitive environment, legal environment, and the overall economy
Results of Latest Credit Rating

15 18

II. Bank Profile

III. Corporate Governance Report

1. Organization

Directors and Major Managers
Operations of Corporate Governance
Accounting Expenses
Information on switching CPA
who has, in the most recent year, held a position at the accounting firm of its CPA or at an affiliated enterprise
to the Regulations Governing the Same Person or Same Concerned Party Holding the Issued Shares with Voting Rights over a Particular Ratio of a Bank, Article 11
Information Disclosing the Relationship among Top Ten Shareholders in the Relationship of Related Parties or Spouses, Blood Relatives within the Second Degree of Kinship
The joint venture directly or indirectly controlled and managed by Directors, President, Executive Vice Presidents and General Manager of each division or branch

IV. Fund-Raising Status

Shares and Dividends
Issuance Status of Financial Bonds
Preferred Stocks, Global Depository Receipts, and Employee Stock Warrants, New Restricted Employee Shares, Any Merger and Acquisition Activities, and Acceptance of Transfer of the Shares of Another Financial Institution

Status of Implementation of Capital Allocation Plans

V. Operation Summary

76 90 92 92

Business Activities
Employees
Corporate responsibilities and moral conducts
The number of non-managerial employees and the annual average employee benefit expenses

92 93

Information Equipment
Labor-Management Relations

94 95

Important contracts
Relevant information on securitization products

T a i w a n B u s i n e s s B a n k

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VI. Financial Status

97 1 Brief Consolidated Balance Sheets and Consolidated Statements of Comprehensive Income for the Past Five Years

101 2. Financial Analysis for the Past Five Years 106 3. Audit Committee's Audit Report on the 2018 Financial Statements 107 4. Representation Letter for 2018 Consolidated Financial Statements 108 5. Independent Auditors' Report for 2018 Consolidated Financial Statements 111 6. 2018 Consolidated Financial Statements and Notes 213 7. Independent Auditors' Report for 2018 Individual Financial Statements 216 8. 2018 Individual Financial Statements Audited and Certified by Accountants 223 9. Financial Difficulties Confronted by the Bank or Its Subsidiaries and the Related Impacts

224

VII. Review, Analysis, and Risks of Financial Conditions and Performance

225 1. Financial position analysis 226 2. Financial performance analysis 226 3. Analysis of cash flow 226 4. Impact of major capital expenditure on the company's financial business in 2018
227 5. Reinvestment policy for 2018, the main reasons for the profits/losses generated thereby, the plan for improving profitability, and investment plans for the coming year
227 6. Risk management 239 7. Crisis management and response mechanism 239 8. Other significant events

VIII. Special Notes 240

241 1. Information Regarding the Bank's Subsidiaries 243 2. Progress of Private Placement of Securities and Financial Bonds 243 3. The Bank's Subsidiaries' Shareholding or Disposal of the Bank's Shares 243 4. Additional Disclosure 243 5. Pursuant to Item 2, Paragraph 3, Article 36 of Security and Exchange Act, the Incidence Exerting Material Influence on Shareholders' Rights or Security Prices

244

IX. Corporate Social Responsibility Report

245 1. Environment 246 2. Social 250 3. Corporate Governance

X. Directory of Head Office and Branch Units 252

I

Letter to Shareholders

05 10 12 13 14

1. Operation Results in 2018

2. Business Plans for 2019

3. Future Development Strategies

environment, legal environment, and the overall economy

5. Results of Latest Credit Rating

The upward trend of the global economy in 2017 persisted through the beginning of 2018 and remained in sustained expansion. However, under the effects of tariffs imposed by major economies such as the US and the corresponding retaliatory measures implemented by other economies, global financial markets remained turbulent. Nevertheless, with the support of all our shareholders and clients, along with the dedicated efforts of our entire staff, the Bank managed to deliver brilliant results. In 2018, our profit before tax from continuing operations was NT$9.198 billion, representing an annual growth of 56.67%. Our non-performing loan ratio was 0.30%, and the coverage ratio of allowance for bad debts was 394.08%, both setting new best records.

In the future, the Bank will continue to carry through the internal controls using three lines of defense, strengthen the overall risk control, and promote relevant business according to the policies of the government; also, deepen fintech development with equal focuses on IT and information security control. We will continue to fulfill corporate social responsibility (CSR) initiatives and strengthen our momentum in charitable activities to attend to and care for the disadvantaged. With an aim of providing customers with satisfactory and comprehensive financial services, the Bank will continue to facilitate a cultural transformation for the corporate brand, endeavor to turn the Bank into a leading brand in the field of SME financing, and establish a solid foundation for the sustainable development of the Bank upon stepping into the next century.

The operation results in 2018 and the business plans for 2019 are summarized below:

1. Operation Results in 2018

(1) The Domestic and Overseas Financial Environments

Benefiting from the stable growth in the global economy, market conditions for semiconductors and the demand for machinery experienced an upward trend in the first quarter of 2018, leading to an expansion in the commodity exports for Taiwan. Healthy growth in public salaries and the heated stock market led to an increase in private consumption as well as government spending. However, capital formation had recorded real negative growth due to the slowdown in capital expenditures of major semiconductor companies in Taiwan. The improving employment condition in Taiwan gave rise to the robust growth of salaries in the 2nd quarter of 2018. The increase in income helped increase the consumption power of the public. The commodity exports in Taiwan had recorded an expansion together with the contribution from the stable growth of the global economy, application for emerging technologies, and the strong demand for machinery.

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Benefited from the sustainable growth of the global economy in the third quarter, the application for emerging technologies remained active. With the global oil price hovering on the high end, Taiwan's commodity exports denominated in US dollars in the third quarter had recorded a new high. Alongside the picking up of semiconductor device purchases, the investment in construction engineering achieved robust growth, and government investment had realized substantial growth. In the fourth quarter, the growth rates of commodity exports were flattened by the slowdown in economic growth of major trading partners. Furthermore, the turbulence of global financial markets had affected the domestic stock market and consumer confidence. Also, the delayed capital expenditure project of semiconductor companies in Taiwan had restricted the growth momentum of private investments.

(2) Changes in the Bank's Organization

A. Considering the higher risks of real estate loans, the Appraisal Division of the Regional Operation Center was re-established to strengthen the risk control and professional division of work

Chairman

Bor-Yi Huang

for the real estate loans.

B. Adjusted the organization of the Bank according to the "Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries" as amended by the Financial Supervisory Commission:
a. Compliance & Legal Department was renamed as Compliance Department; legal affairs were handed over to the Administration Management Department.
b. Information Security Section under the Information Technology Department was upgraded as the Information Security Department, subordinate to the Risk Management Center.
c. General Affairs Department was renamed as Administration Management Department.
C. Established the Strategy Development Committee, CSR Committee, and Cyber Security Management Committee; renamed the Operating Management Center and the Business Management Department as the Operating Development Center and the Business Development Department, respectively. The Innovative Finance Project Office was otherwise established to strengthen the support for material policy-oriented loans of green finance, urban renewal, and cultural innovation industries.

(3) Implementation of Business Plans and Operating Strategies

A. Profitability

After-tax net profit for 2018 amounted to NT$7.641 billion (before-tax net profit was NT$9.198 billion). The Bank carried out a capital increase via transferred earnings of NT$2.459 billion and issued stock and cash dividends of NT$0.40 and NT$0.268 per share, respectively, for the previous year (2017).

B. Corporate Governance
a. Reinforcement of information disclosure channels and upgrading of transparency in corporate governance
The Bank has long strived to enhance its corporate governance. In addition to valuing the importance of information disclosure and strengthening the professional knowledge of directors, all directors have completed the required trainings for corporate governance in 2018. To strengthen the independence of the performance evaluation of the board of directors, the Bank has also entrusted an external professional independent institution to conduct performance evaluation of the board of directors at least once every three years.
b. Understanding the shareholder structure, strengthening communication with foreign investors, and coming on track with international trends
We actively increased our communication channels for domestic and overseas investors and a roadshow was respectively held in the first and second half of 2018. 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.
C. Core Businesses:
a. Corporate Banking
1) The Bank was recognized as an Outstanding Bank and received a Special Award for the National Defense Industry from the Financial Supervisory Commission for the Program to Encourage Lending by Domestic Banks to Key Innovative Industries.
2) The Bank was awarded the Outstanding Bank by the Financial Supervisory Commission for the Program to Encourage Loan Projects by Domestic Banks to Target Countries under the New Southbound Policy.
3) In recognition of the Bank's outstanding performance in small and medium enterprise financing, it was presented with three 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, and the Small and Medium Enterprise Financing Service Platform Inquiry Performance Award.
4) The Bank was awarded the Outstanding Bank by the Executive Yuan for the Program of 0206 Hualien Earthquake Guarantee Financing & Loan.
5) The Bank received the Certificate of Appreciation from the Ministry of Labor for the Event of Microscale Entrepreneurship Model in 2018.

Taiwan Business Bank Annual Report 2018

  - 6) The Bank was recognized as the Best Bank for SMEs in Taiwan by Asiamoney.

  - 7) The Bank was awarded the Excellent Bank of Best Corporate Banking and the Excellent Bank of Best Bank for SMEs by Taiwan Academy of Banking and Finance for the Elite Award.

  - 8) The Bank was awarded the 2018 Best from the Best Service Bank for Start-up Enterprises from Excellence Magazine under the category of non-financial holding bank.

  - 9) 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
- 1) The Bank strengthened the absorption of foreign-currency deposits and expanded the scale of its deposits. The accumulated average balance of foreign-currency deposits in 2018 grew 10.85% over 2017.
- 2) The Bank worked vigorously to expand foreign-currency loans and boost interest margin income. Accumulated average loans outstanding in 2018 increased by 12.06% over 2017.
c. Wealth Management
- 1) The Bank focused on strengthening its wealth-management business by vigorously expanding fee income from the insurance and fund businesses, with boosting revenue and generating profit as the priority goal.
- 2) With the vigorous promotion of a special program aimed at the marketing of designated products, fee income from the wealth-management business totaled NT$1.57 billion in 2018.
D. Innovation in Digital Financial Products and Business Development
a. Continuous Innovation in Digital Banking Products to Improve Financial Services
- 1) Mobile Banking Instant Login Function was inaugurated.
- 2) Taiwan Pay Instant Transaction and Small Amount Transaction was inaugurated.
- 3) Taiwan Pay Barcode and QR Code Scanned for Purchase Function were inaugurated for stores to scan the barcode/QR code of the consumer with the code scanner to complete the debit payments for such purchases.
- 4) The transaction functions of TBB Security and Nonpredesignated Transfer were opened up for mobile banking.
- 5) Functions for auditing fixed categories of taxes such as Payment for Individual Income Tax, Vehicle License Tax, House Tax, and Land Value Tax were opened up for Taiwan Pay.
- 6) In response to the policy on the integration of mobile payment and e-invoice promoted by the government, the cloud invoice service for mobile banking was inaugurated.
- 7) Opened up teller services of deposits, withdrawal, and transfer without filling forms.
- 8) Teller operations have been simplified, the operating time for hand-written customer application forms has been eliminated, and a pre-arranged foreign cash function has been opened up for customers.
b. Active promotion of the digital banking business and broad development of customer groups
- 1) The Bank received the Best Service Innovation Award promoted by the Electronic Payment Flow Business from the Financial Information Service Company.

President

Chien-An (James) Shih

  - 2) Participated in the Taiwan Pay QR Code "Marketing Rewards for Banks" organized by Financial Information Service Co., Ltd. and received a reward of NT$0.2 million.

  - 3) Improved the interaction and attachment between the fans on Facebook with the page of the Bank, designed relevant events for the products launched by the Bank, and successfully attracted the mobile and Internet groups from all ages to participate in such events through Facebook as its online media.

E. Expansion of the Scope of Channel Services
a. Make adjustments on the location distribution of the Bank's business units for the increase of value regarding physical channels, so as to provide better and more comprehensive financial services:
- 1) The East Taipei Branch reallocation was completed and re-opened on Mar. 26, 2018; the branch was renamed as the San Xia Branch.
- 2) The Yang Mei Branch relocation was completed and re-opened on Sep. 10th, 2018.
- 3) The Wan Hua Branch relocation was completed and re-opened on Dec. 24th, 2018.
b. In line with the government policy to actively promote the 5+2 Innovative Industry, the Bank established its venture subsidiary, rendering full support to innovation, creativity, and entrepreneurship, and vigorously facilitating the transformation and upgrading of the industrial structure in Taiwan.
c. To help the sustainable growth of Taiwan, optimize the investment environment, and support the development of innovation, creativity, and entrepreneurship, we established the "Innovative Finance Project Office" to strengthen the supports for material loans of green finance, urban renewal and cultural innovation industries.
F. Information System Reinforcement and Information Security Promotion
a. Reinforcement of the information system operation to improve the operating efficiency
- 1) The Bank employed the update and HA system for the drives of its central billing mainframe to accelerate the data access speed and updated the central billing mainframe to establish the SYSPLEX system with local HA gradually.
- 2) Established a data center and completed building data module establishment to accelerate the instant utilization capacity of data.
- 3) The Bank introduced the new multi-factor biometric identification system and improvement measures for the information security protection system of our business system.
b. Implementation of Information Security by the Competent Information Security Department
- 1) Set up the Information Security Department, a competent department for information security with independence in exerting its functional authority, according to Article 38-1 of Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries. The Cyber Security Management Policy and the Cyber Security Management Committee was established in October 2018 to be in charge of the coordination and promotion of matters in relation to the cyber security management of the Bank.
- 2) Carried out the "2018 Financial Institution DDoS Drill" on Dec. 9th, 2018, in line with the Financial Supervisory Commission.
- 3) Completed the assessment on the information security of its computer system in Nov. 2018, according to the "Regulations for Assessing the Information Security of the Computer System of Financial Institutions."
- 4) Self-assessment was carried out in accordance with SWIFT Customer Security Program (CSP) specifications, and was approved by SWIFT in December 2018.
- 5) A professional consultant was commissioned to help carry out the 23 NYCRR Part 500 compliance program in accordance with the network security regulations of the New York State Department of Financial Services (NYDFS), and the consultant confirmed the process completed in December 2018.
G. Implementation of Legal Compliance and Anti-Money Laundering Operations
a. Implementation of legal compliance and anti-money laundering in line with the regulations of the competent authority
- 1) Set up a competent legal compliance department and established the legal compliance risk management and supervision structure.

Taiwan Business Bank Annual Report 2018

  - 2) Enhanced the reporting system and established the "Regulations Governing the Handling of Reporting Cases."

  - 3) The Anti-Money Laundering Section of the TBB's Compliance Department constantly oversees the Bank's implementation of matters regarding anti-money laundering and combatting the financing of terrorism.

  - 4) In response to the on-site evaluation of the Asia/Pacific Group on Money Laundering (APG) held on Nov. 5th-16th, 2018, the Bank established an APG Work Team to provide "high standard" countermeasures for the evaluation.

b. Holding of regular compliance and anti-money laundering training
- 1) Five Anti-money Laundering & Combatting the Financing of Terrorism Seminars were held in the first half of 2018, strengthening the understanding of our employees regarding anti-money laundering and combatting the financing of terrorism and forming an internal compliance culture to anti-money laundering.
- 2) A Compliance Officer Seminar was held in each the first and second halves of 2018.
c. Continued the reinforcement of overseas compliance operations for legal compliance and anti-money laundering and strengthened the relevant qualification and training for staff overseas.
d. Strengthening of the monitoring mechanism for compliance follow-up
e. Carrying out annual project audits for personal information protection and anti-money laundering and combatting the financing of terrorism by accountants in accordance with the Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries. An accounting firm was commissioned to carry out the “2017 Project Audit for Personal Information Protection and the Internal Control System for Anti-Money Laundering and Combatting the Financing of Terrorism.”
H. Corporate Social Responsibility
a. Active implementation of corporate social responsibility and realization of the value of the sustainable operation
- 1) Our “CSR Report” passed two stages of verification by the British Standards Institution (BSI) for three consecutive years, and BSI issued the Bank an Independent Assurance Opinion Statement.
- 2) The Bank received the Silver Award in the financial and insurance group of corporate sustainability report division under the 11th TCSA Taiwan Corporate Sustainability Awards of 2018 organized by the Taiwan Institute for Sustainable Energy and the Sustainability Performance Award from BSI Standards Awards. Such achievements help upgrade the Bank's visibility and its corporate image for CSR implementation.
- 3) The CSR Committee was established to take charge of the proposals and execution of CSR policies or systems and enhance the implementation of CSR of the Bank, demonstrating the importance that the Bank attached to CSR.
b. Implementation of senior caring policy, donations to disadvantaged groups, and active participation in public benefit affairs
- 1) The Bank has initiated the Project of Senior Dining & Learning Center Sponsorship. The Bank exclusively allocated 3‰ of the general card consumption from the Silver Love Credit Card issued by the Bank to help seniors to dine and learn together. This originated from the non-profit fund that was used in building a School for Seniors in the community to help take care of disadvantaged seniors in the local community and improve their living standards.
- 2) Set up senior caring spots to improve the standards of caring services at senior welfare agencies, providing local and appropriate caring services accessible to disadvantaged seniors. The Bank vigorously devotes in the public benefit affairs to achieve the goal of "aging in place."
c. Fulfilling responsibility for environmental protection and continued energy conservation and carbon reduction efforts
- 1) The Environmental Protection Administration of the Executive Yuan and the Department of Environment Protection of the Taipei City Government cited the TBB seven years in a row for outstanding performance in green procurement.

2) 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.
3) The Bank implemented its “Energy Policies” and “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 vigorously implemented in order to enhance the energy efficiency of equipment and save on electricity costs.

(4) Budget Implementation

A. The annual average balance of deposits was NT$1,388.764 billion, for an achievement rate of 102.67%.
B. The annual average balance of loans outstanding was NT$446.579 billion, for an achievement rate of 106.84%.
C. The foreign exchange business amounted to US$69.688 billion, for an achievement rate of 95.46%.
D. The securities brokerage business amounted to NT$291.045 billion, for an achievement rate of 104.58%.

A. Net income for 2018 amounted to NT$23.026 billion; bad debt expense, commitment and provision for guaranteed liabilities totaled NT$794 million; operating expenses were NT$13.034 billion; before-tax net income from continuing operations was NT$9.198 billion; net profit after tax was NT$7.641 billion; return on assets ratio (after tax) amounted to 0.48%; return on equity ratio (after tax) amounted to 9.51%; net profit margin (after tax) was 33.18%; and earnings per share (after tax) was NT$1.19.
B. Net income before taxes (excluding provisions) in 2018 amounted to NT$9.992 billion, an increase of NT$1.093 billion over 2017. NT$794 million was allocated as allowance for bad debts in order to strengthen risk appetite. Before-tax net profit for 2018 amounted to NT$9.198 billion, an increase of NT$3.327 billion over 2017, primarily due to growth in deposits and loans, an increase in net interest income, an increase in the profit or loss of the investments in financial commodities, and a decrease in allowances for bad debts.
C. The non-performing loan ratio at the end of 2018 stood at 0.30%, a reduction of 0.03% compared with the end of 2017; and the bad-debt coverage ratio was 394.08%, an increase of 66.51% over the end of 2017.

(6) Research and Development

A. 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 2018 for colleagues to peruse.
b. Elite professionals from industry, government, and academia are invited to speak on an irregular basis to help the Bank's employees understand the latest trends in industrial development.
B. Encouragement of Innovation and Professionalism in Line with Business Development Needs
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.

2. Business Plans for 2019

(1) Operating Directions and Policies

Facing an upsurge of fintech and a financial environment with increasing competition, the Bank will adhere to its core value of SME Specialized Bank and utilize the four aspects of "Learning & Growth," "Internal Procedures," "Customers," and "Finance" on the strategy map with a bottom-up approach, to create a strategic structure with specified directions and centralized resources. Furthermore, in line with the medium to long term development strategies planned by the Strategy Development Committee, the Bank will achieve its goal of becoming a premium bank with comprehensive financial services by realizing our operating concept of "Progress, Efficiency, and Responsibility."

A. Learning & Growth
a. Improve the professional competencies of our employees: Enhance cultivation of professional talent for digital finance and international finance; value professional personnel for SMEs; strengthen management and talent cultivation for critical posts; establish a talent database by checking through the core human resources.

Taiwan Business Bank Annual Report 2018

b. Cultivate key personnel: Develop the innovative capacities of key personnel through recruitment and training and execute customer-oriented services and product development strategies.
c. Optimize the labor structure: Revitalize retired human resources to enhance the inheritance of experience; connect with the tertiary education sector for industry-academia cooperation; diversify employment channels; recruit suitable personnel to reduce turnover.
d. Improve the performance of information systems: Increase investment in IT building and integrate it closely with our business; enhance the overall efficiency of the information system; improve diversity and innovative capacities of our IT team; reinforce the cultivation and motivation of key IT personnel to lay a solid foundation for information technology.
e. Enhance cybersecurity defense and monitoring capacity: The Bank established its cybersecurity management system and maintenance plan and continues to organize its cybersecurity upgrade and improvement measures, as well as enhancing cybersecurity training to reinforce cybersecurity protection ability and realize cybersecurity compliance.
f. Optimize the accountability mechanism: Enhance the leading capacities of the management team to form the organization and value that allows our fellow colleagues to internalize it as their mission, vision, and core values, so as to strive toward the goal of the Bank's sustainable development.
g. Realize the corporate culture of learning and sharing: Build a "learning" experience inheritance system based on the concept of "learning by doing and doing by learning" and encourage internal innovation by young employees to invigorate corporate human resources.
B. Internal Procedures
a. Improve the management by objectives: Establish the goal through the PDCA cycle and realize the execution, optimize the evaluation management system and reinforce the connection between evaluation and rewards to stimulate boosted performance.
b. Optimize the procedures for better efficiency: Value the management for the internal and operating process, regularly examine the SOP for continuous creation for the best working process, and utilize the information system to assist in the manual examination, improving efficiency.
c. Enhance risk management: Improve asset quality and coverage for allowance for bad debts through understanding, managing and reducing risks, and enhancing risk control.
d. Adopt integrated marketing to increase customer contribution: Integrate marketing resources to increase dealings with customers, increase overall customer contribution, and provide comprehensive financial services according to the requirements for the business development of customers.
e. Provide premium services to build customer loyalty: Bearing customers' interests in mind, design comprehensive financial services based on customers' requirements to meet their expectations and demands, in turn building customer loyalty.
f. Strengthen customer relationships with the second generation upon the succession of the family business: Strengthen the customer relationship with the younger generation or the second generation upon the succession of the family business to improve SME customers' support to the Bank after generational changes.
g. Adopt a clicks-and-mortar method to reinforce digital financing: Adopt innovative thinking to enhance financial products and services, optimize the trading environment for the clicks-and-mortar channel, and reinforce the digital financial landscape.
h. Differentiated products and marketing: Apply Big Data analysis to understand customer behavior patterns to provide customized services and precise marketing services.
i. Adhere to rigorous compliance: Enhance legal compliance and duly comply with the monitoring measures of the competent authorities; uphold provisions for anti-money laundering and combating the financing of terrorism; implement whistle-blower protection and uphold customer interests; thereby forming a corporate culture that prioritizes legal compliance.
j. Strengthen corporate governance: Improve Directors' functions, corporate governance mechanisms, and operations of functional committees; and disclose material information regarding corporate governance to improve transparency for information disclosure.

k. Fulfill corporate social responsibility: Care for disadvantaged groups; participate in charitable activities; attach importance to environmental protection; and internalize the fulfilment of social responsibility to follow the corporate spirit of the Bank regarding our primary business.

C. Customers

a. Improve channel service quality and integrate customer views from all channels: Adjust channel positioning according to the business requirements; improve the value of physical channels; expand the service scope for channels; and establish a data market with the cross-business omnidirectional single view of customers. This shall be done so as to fully present customer preferences and service channels, optimizing service and experiences for customers.
b. Focus on the niche market of SMEs and participate in CSR awards: Specify positioning as an SME specialized bank, focusing on the core business of SMEs, shaping the brand image of a professional bank, and proactively participating in relevant CSR awards to develop a professional image, including the TCSA Taiwan Corporate Sustainability Awards and Elites Award.
c. Enhance wealth management services and gain trust from customers: Develop smart wealth management; provide professional services and diversified wealth management products to satisfy customers' demand; undertake deep-rooted support for investment analysis in order to provide financial planning services for owners and high-asset customers.
D. Finance
a. Increase operating performance and take risk management into account: Expand operating scale, increase the profit margins of overseas branches, improve interest rates and diversify the income sources of service charges to enhance profitability.
b. Enhance capital and uphold shareholders' interests: Comply with the monitoring requirements of the competent authority regarding authorized capital; ensure a healthy capital structure and the goal of optimized resource allocation; strengthen the risk appetite to expand growth of operating income; achieve the goal of maximized shareholders' value.
E. Comply with medium to long term development strategy as planned by the Strategic Development Committee
a. Continue to carry out channel adjustments; focus on the development of the core business; strengthen the value of physical channels to correspond to the mission of the Bank to provide services to SMEs and the requirements for medium to long term business development.
b. Improve the functions of Regional Operation Centers and adjust the functional authority of branches for employees for proper allocation of employees.
c. Improve finance consulting for start-up and micro-corporate clients and assist in inheritance between generations for SMEs.

(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 2019.

A. Annual average deposit balance: NT$1,477.827 billion.
B. Annual average balance of loans outstanding: NT$1,155.93 billion.
C. Total foreign exchange transactions: US$74.003 billion.

3. Future Development Strategies

(1) Turn the corporate culture around, keep pace with the ongoing changes, create a culture of accountability, and follow through with the implementation.
(2) Highlight the brand image of a specialized bank, enhance the policy function of the professional bank, and strengthen the SME financing system with joint efforts of the Bank and the Small and Medium Enterprise Credit Guarantee Fund of Taiwan.

Taiwan Business Bank Annual Report 2018

(3) Keep abreast the trend in the society to develop its business, provide customer-oriented and featured financial products/financial services, and value the succession of generations to improve customer trusts.
(4) Leverage on the banking business as its starting point, care for social issues and public welfare, and implement corporate social responsibilities.
(5) Reinforce the operating efficiency of all business groups through fine adjustments on organization or merges of businesses.
(6) Continue to improve e-banking services and upgrade information system, optimize internal procedures to support various business development.
(7) Cultivate digitalized and internationalized talents, optimize human resources structure, promote the corporate culture of "learning and sharing" through training, and in turns improve employees' loyalty.
(8) Improve the optimal resource allocation through assets activation, and perform cash capital increase to strengthen our capital structure in due course.
(9) Form a corporate culture that prioritizes legal compliance, reinforce our risk control and increase assets quality, and strengthen the three lines of defense for internal control.

4. Influences from the external competitive environment, legal environment, and the overall economy

(1) External competitive environment

A. Impacts of pure online banking on physical banks
a. Pure online banking refers to the existence of only the head office and customer service center with no physical branches or ATMs to provide financial services for account opening, depositing, transfer of transactions, credit loans, or investment and wealth management undertaken exclusively online. The operating cost for pure online banking is relatively low; however, the requirements for information security remain high. Therefore, it is estimated that it may divide up the partial consumer financial market in the short term. However, it would be hard to enter businesses involving a large amount of loans such as real estate credit and corporate financing.
b. Businesses that may be carried out by pure online banking may be performed by online banking services provided by general banks. Facing the challenges imposed by pure online banking, the Bank will fully utilize fintech to make early responses, including the transformation of physical branches as well as continual development and optimization of the online banking business.
B. Effects from open banking
a. Open banking means that, with the prior consent from customers, the Bank may share the customer data with third parties through digital connection methods such as API, allowing companies beyond the scope of the financial industry (i.e., technology companies, e-commerce, e-payment) to join the financial business ecology and utilize such resources to develop innovative and diverse services for consumers.
b. The Bank will open up financial information regarding currency rates and interest rates to third-party companies for connection under regulations prescribed by the Banking Association. Also, within the permissible scope of laws and regulations, the Bank will carry out cross-field cooperation with e-commerce and e-payment companies to provide more humanized commodities and get closer to the public finance so as to realize inclusive finance.

(2) Regulatory Environment

A. Corresponding strategies of the Bank upon the promulgation of the Cyber Security Management Act on June 6, 2018:

a. Established the competent information security department (Information Security Department) on September 1, 2018, to take charge of the planning, monitoring, and execution of information security management operations. Cyber Security Management Policy and Cyber Security Management Committee were also established in October 2018 to respond to the overall management
b. In 2019, the Bank will establish a cybersecurity management and maintenance plan and set up the cybersecurity reporting, countermeasures, and drills systems to ensure the security of cyber systems and information assets of the Bank, optimize the overall cybersecurity structure and reduce the operating risks of the Bank. Information security insurance was planned for the remaining risks, and the Bank is currently looking for suitable cybersecurity insurance products for the Bank.
B. According to the requirements under Article 88 of the Income Tax Act, before transferring the estate to the administrator, the withholding statement may be waived. Upon the transfer of estates by the administrator, the actual successor or the juridical person for remaining assets shall complete the withholding statement to carry out the tax-inheritance reporting tasks. The program of the project had been completed and launched on February 1, 2019 to avoid affecting the reporting of interest income.

(3) Overall Operating Environment

Given turbulence in the global financial markets, alongside a significant slowdown in economic growth in the major countries in Europe, Japan or mainland China, major projections indicate that global economic growth will undergo a downward adjustment in 2019. However, the expected reduction has remained insignificant, primarily due to the decrease in expected growth in the Eurozone. Furthermore, it is expected that the US will experience a slowdown in economic growth upon canceling its fiscal incentives; whereas the downturn in growth in mainland China may be faster than expected. Overall, it is expected that the global economy may experience moderate growth.

5. Results of Latest Credit Rating

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Ratings
Date of Rating Rating Institution Outlook
Long-term Credit Short-term Credit
2019.1.18 Taiwan Ratings twAA- twA-1+ Stable
2019.1.18 Standard & Poor's BBB+ A-2 Stable
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Taiwan Business Bank Annual Report 2018

II Bank Profile

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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 Yu-Min Chang Chiu-Yen Chen
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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 the Republic of 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 40 years. Later, to cope with the liberalized and internationalized financial environment, and to conform to the government's vision of promoting Taiwan to become Asia-Pacific Regional Operations Center, the TBB was transformed into a private bank on January 22, 1998 and entered into a whole new era.

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$63,938.80 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 Department and a Secretarial Department were set up under the Board of Directors in the headquarters. Apart from Compliance Department, the Bank's management units include 19 departments under three major business groups, one development center and two management centers. The Bank has 125 domestic business units (including the Banking Department) and an Offshore Banking Unit, and also operates eight overseas branches, including Hong Kong Branch, Los Angeles Branch, New York Branch, Sydney Branch, Brisbane Branch, Shanghai Branch, Wuhan Branch and Tokyo Branch, along with the Yangon Representative Office in Myanmar. Regional Operation Centers were set up to handle business development and supervision, centralized business management, 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. In addition, the “Innovative Finance Project Office” was established to strengthen the supports for important loans to the green finance, urban renewal and cultural innovation industries. The Customer Service Center was also established to take charge of the customer advisory services.

Taiwan Business Bank Annual Report 2018

2. Bank M&A, reinvestment in related enterprises, and reorganization in 2018 and to the end of February 2019

The Bank carried out no M&A or reorganization during this period. Reinvestment was made in 100% ownership in five enterprises—the Taiwan Business Bank Insurance Agency Co., Ltd, Taiwan Business Bank Property Insurance Agency Co., Ltd, TBB International Leasing Co., Ltd and TBB (Cambodia) Microfinance Instituion PLC, TBB Venture Capital Co., Ltd.—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 in 2018 and to the end of February 2019: None

5. Major changes in operating rights, operating methods, or business content; other major events of sufficient import to affect shareholder rights; and their

III Corporate Governance Report

19 21 37 56 57 57

1. Organization

2. Directors and Major Managers

3. Operations of Corporate Governance

4. Accounting Expenses

5. Information on switching CPA

6. Bank's Chairman, President, or any manager in charge of finance or accounting matters who has, in the most recent year, held a position at the accounting firm of its CPA or at an affiliated enterprise

7. Changes in Shareholdings of Directors, Executive Officers, and Shareholders Conform to the Regulations Governing the Same Person or Same Concerned Party Holding the Issued Shares with Voting Rights over a Particular Ratio of a Bank, Article 11

8. Information Disclosing the Relationship among Top Ten Shareholders in the Relationship of Related Parties or Spouses, Blood Relatives within the Second Degree of Kinship

9. The joint venture directly or indirectly controlled and managed by Directors, President, Executive Vice Presidents and General Manager of each division or branch

Taiwan Business Bank Annual Report 2018

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III
CORPORATE GOVERNANCE REPORT
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1. Organization

==> picture [107 x 9] intentionally omitted <==

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(1) Organization Chart
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==> picture [511 x 568] intentionally omitted <==

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Compliance Affairs Compliance Dept.人人人人人
人人人人人Human
Resources Dept.
Administration AdministrationManagement人人人
Management Center Dept.
人人人
Accounting Dept.
Information security人人人人人
Dept.
Personal Information
Strategy Development Protection Management Committee Risk Management人人人人人Dept.
Committee
Audit CommitteeRemuneration Management Center 人人人人人人 Risk Loan Supervision人人人人人Dept.
Committee
CRS Committee Credit Investigation人人人Dept.
Overdue Loan &人人人人人Control Dept.
Risk Management
Committee
Development Dept.Business Processing Center 人人人人人 Domestic
Banking Dept.
Domestic Branches
Operating Information Customer Service
Chief Compliance Development Center 人人人人人人 Technology Dept. Center
Offcer
SharehoMeetinglders' DirectorsBoard of Chairman of the Board President Digital Banking Dept.
Executive Vice Regional Operation
President Dept.
人人人人人人人人人人
Treasury Group Treasury Dept.
Innovative Finance Project Office人人人
ALM Committee
Business StrategyCommittee Banking Dept.Corporat人人人 e
AML and CFT Committee 人人人人人人人Banking Group Corporate International Banking BranchOffshore
Banking Dept.
Overseas Branches
Personal
Banking Dept. 人人人人人
Loan Supervision Committee Credit Card Dept.人人人人
NPL Management Committee
Trust Asset Evaluation CommitteePersonnel Evaluation Committee 人人人Banking GroupPe 人人人人 rsonal Wealth Mana 人人人人人 Dept.gement
IT Planning & Development
Committee Securities Dept.人人人 S ecurities Branches
Cyber Security Management
Committee
Trust Dept.人人人
Secretarial Dept.人人人人人人
Chief Auditor人人人人人人人人人Auditing Dept.
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Feb. 28, 2019
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(2) Operations of Major TBB Units

A. 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.
B. 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.
C. 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.
D. 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, economic and financial research and industry investigation, collection of overdue loans and information security matters. The Loan Supervision Dept., Credit Investigation Dept., Overdue Loan & Control Dept., Risk Management Dept. and Information Security Dept. operate under the Risk Management Center.
E. Operating Development Center
The Operating Development 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 and public relations. The Business Development Dept. and Information Technology Dept. operate under the Center.
F. Administration Management Center
This Center handles the planning and implementation of document administration, confidential matters, legal affairs, human resources, and accounting systems, as well as other matters not assigned to other units. The Human Resources Dept., Administration Management Dept. and Accounting Dept. operate under the Center.
G. Compliance Affairs
Compliance Dept. handles the planning, management and implementation of legal compliance system and AML & CFT related matters.

20 20

Taiwan Business Bank Annual Report 2018

III

2. Directors and Major Managers

(1) Board of Directors

A. Board of Directors

December 31, 2018

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Being the Spouse or Relative
Title Nationality Name Gender Elected(yy/Date mm) Tenure(15th) InitialInauguration Date On InaugurationShareholding Current Shareholding By Self, Spouse & Minor ChildrenShareholding Under Other's Shareholding Title Prime Experience & Education Current Positions Other Companiesin the Bank and Managers, Directors and within 2 Tiers of Other Supervisors
Shares % Shares % Shares % Shares % Title Name Relationship
Education Supervisor,
Ph.D., Department of Economics, National Taipei University Taiwan Asset
Experience Management
President, Taiwan Academy of Banking and Finance Corporation
JUN 29,
Chairman 2018 Supervisor, Entie Commercial Bank Supervisor,
(Ministry of Finance Representative) R.O.C. HuangBor-Yi M JUN 29, 2018 ToJUN 28, 2021 NOV 24, 2017 135,631,247 2,21 141,056,496 2,21 320,400 0 0 0 Executive Director,Bank OF KoahsiungDirector, E.SUN FHCExecutive Director, Small and Medium Enterprise Credit Guarantee Fund of Taiwan Taiwan Urban Regeneration & Financial Services Co.Ltd. None None None
President, E.SUN Securities Director, Taiwan
Vice President, Times Securities Academy of
Director of College of Management, Dean of Academic Banking and
Affairs,Dean of Student Affairs, Shih Chien University Finance
Education
MBA, Saginaw Valley State University of Michigan, USA
President,Taiwan
Experience Business Bank
Managing President, Chang Hwa Bank
Director and President (Ministry of Finance R.O.C. Chien-An Shih M JUN 29, 2018 JUN 29, 2018ToJUN 28, 2021 MAR 21, 2018 135,631,247 2,21 141,056,496 2,21 416,000 0 0 0 Executive Vice President, Chang Hwa BankSenior Vice President & Division Head, Treasury Division, Chang Hwa BankSenior Vice President & Division Head, Domestic Banlking Director, Sunsino Development Associate Inc.Director, Small & Medium None None None
Representative) Division, Chang Hwa bank
Enterprise Credit
Vice President & Chief Representative, Kunshan Representative Office, Chang Hwa Bank Guarantee Fund of Taiwan
Vice President & Assistant General Manager, Offshore
Banking Branch, Chang Hwa Bank
Education
B.A. ,Money and Banking, National Chengchi University
JUN 29, Experience
Managing 2018 13th & 14th Managing Director, Taiwan Business Bank Executive Vice
Director (Bank of Taiwan R.O.C. Li-Ling Lin F JUN 29, 2018 To OCT 19, 2012 1,058,933,860 17,22 1,101,291,214 17,22 0 0 0 0 Manager,Department of Corporate Finance, Bank Of Taiwan President, BANK None None None
JUN 28, Manager,Department of Risk Management, Bank Of Taiwan OF TAIWAN
Representative) 2021 Manager, Dun hua Branch,Bank Of Taiwan
Deputy General manager, Department of Corporate Finance,
Bank Of Taiwan
Education Full-time
PH.D., Department of Economics, National Taiwan University Researcher &
Experience Director, Research
Managing JUN 29, 2018 Director(Independent), Land Bank of Taiwan Division Ⅲ ,
Directo R.O.C. Xin-Wu Lin M JUN 29, To JUN 29, 0 0 0 0 0 0 0 0 6th Member, Fair Trade Commssion Taiwan Institute None None None
(Independent 2018 2018 Antitrust follows the top executive, AU Optronics Corporation of Economic
Director) JUN 28, 2021 Full-time researcher & Director, Research Division Ⅲ , Taiwan Research
Institute of Economic Research Independent
Full-time associate researcher & Director, Research Division Director, FitTech
Ⅲ , Taiwan Institute of Economic Research Co., Ltd.
Education
PH.D., Department of Agricultural economics, Hokkaido
University, JPN
Experience
Assistant Professor, Department of Finance and banking, Shih Associate
Chien University Professor,
JUN 29,
Managing 2018 Assistant Professor, Department of Finance and Cooperative Department of
Director (Ministry of Finance R.O.C. Lien-Wen Liang F JUN 29, 2018 To JUN 29, 2018 135,631,247 2,21 141,056,496 2,21 0 0 0 0 Economics, National Taipei UniversityVice Director, Financial Research Institute, Taiwan Academy of Finance and Research, None None None
Representative) JUN 28, 2021 Banking and Finance Chinese Culture
Full-Time Associate Researcher, Financial Research institute, University
Taiwan Academy of Banking and Finance
Assistant Researcher, Basic Financial Research and Training
Center
Lecturer, Department of Economics, Fu Jen Catholic University
Columnist, Commercial Times
Education
M.S., Department of Economics, National Taiwan University
Experience
JUN 29, Deputy director,
Director (Ministry of Finance R.O.C. Shiu-Yen Lin F JUN 29, 2018 2018To FEB 27, 2014 135,631,247 2,21 141,056,496 2,21 0 0 0 0 13th & 14th Managing Director, Taiwan Business BankChief Secretary, National Treasury Administration, Ministry of Finance National Treasury Administration, None None None
Representative) JUN 28, Ministry of
2021 Team leader, National Treasury Administration, Ministry of Finance
Finance
Deputy head, National Treasury Administration,Ministry of
Finance
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Being the Spouse or Relative
Title Nationality Name Gender Elected(yy/Date mm) Tenure(15th) InitialInauguration Date On InaugurationShareholding Current Shareholding By Self, Spouse & Minor ChildrenShareholding Under Other's Shareholding Title Prime Experience & Education Current Positions Other Companiesin the Bank and Managers, Directors and within 2 Tiers of Other Supervisors
Shares % Shares % Shares % Shares % Title Name Relationship
Education
Ph.D., College of Law, National Chengchi University
JUN 29, Experience Executive Vice
Director (Ministry of Finance R.O.C. Wen-Chieh Wang M JUN 29, 2018 2018To JUN 10, 2014 135,631,247 2,21 141,056,496 2,21 0 0 0 0 13th,14th Managing Director , Taiwan Business BankVisiting scholar, College of Law, National Harvard University President, National Chengchi None None None
Representative) JUN 28, Director, College of Law, National Chengchi University University
2021 Chief Secretary, Secretariat, National Chengchi University
Director, The Institute of Law and Interdisciplinay Studies,
Chengchi University
Education
M.S., Executive Master of Business Administration, Ling Tung
University
Experience
JUN 29, 13th & 14th Director, Taiwan Business Bank
Director (Ministry 2018 JUL 1, 1TH to 6TH Member & Director & Managing Director, TBB Chairman, TBB
of Finance R.O.C. Hung-Sheng Yu M JUN 29, 2018 To 2013 135,631,247 2,21 141,056,496 2,21 23,617 0 0 0 Industry Union Industry Union None None None
Representative) JUN 28, (Note) Supervisor, Taiwan Federation of Financial Uions
2021 3TH Member, Labor Dispute Arbitration Committee, Ministry of
Labor
Member, Basic Salary Review Committee, Ministry of Labor
Managing Director, Taiwan Confedertion of Trade Unions
Supervisor, Taiwan Federation of Labor
Education
B.A., Department of Business, National Open University Director,
JUN 29,
Director (Bank of Taiwan R.O.C. Pei-Ming Huang M JUN 29, 2018 2018To JUL 16, 2011 1,058,933,860 17,22 1,101,291,214 17,22 0 0 0 0 ExperienceDirector, Department of Human Resourceste, Bank Of TaiwanManager, Nan Xin Zhuang Branch, Bank Of Taiwan Department of Human Resourceste, None None None
Representative) JUN 28, 2021 (Note) Manager, Chong sin Branch, Bank Of Taiwan Bank Of Taiwan
Director, Taiwan Fire & Marine Insurance Company, Ltd.
13th & 14th Director, Taiwan Business Bank
Manager,
Education Department
JUN 29, of Domestic
Director (Bank Cheng- 2018 B.A., Department of Statistics, Tamkang University Operations, Bank
of Taiwan R.O.C. Chuan M JUN 29, 2018 To JUN 29, 2018 1,058,933,860 17,22 1,101,291,214 17,22 0 0 0 0 ExperienceManager, Department of Credit Management, Bank Of Taiwan Of Taiwan None None None
Representative) Kang JUN 28, Supervisor,
2021 Manager, Nai Hu Branch, Bank Of Taiwan Taiwan Asset
Deputy Manager, Department of Planning, Bank Of Taiwan
Management
Corporation
Education
B.A., Department of Business Administration, Chinese Culture
University Executive Vice
JUN 29, Experience
Director (Land Bank of Taiwan R.O.C. Ying-Ming He M JUN 29, 2018 2018To MAY 23, 2017 149,244,703 2,43 155,214,491 2,43 0 0 0 0 EVP & Chief Auditor, Land Bank Of TaiwanEVP & Chief Compliance Officer, Land Bank Of Taiwan President, Land Bank Of TaiwanDirector, None None None
Representative) JUN 28, Manager, Department of Credit Management, Land Bank Of
2021 Taiwan Agricultural Credit
Guarantee Fund
Manager, Department of Credit Review, Land Bank Of Taiwan
Manager, Chung Hsiao Branch, Land Bank Of Taiwan
Manager, Han Ping Branch, Land Bank Of Taiwan
Education
JUN 29, National Tseng-Wen Home Economics & Commercial Managing
Director (TBB 2018 Vocational High School Director, TBB
Industry Union R.O.C. Feng-Yung Liu M JUN 29, 2018 To JUN 29, 2018 2,376,684 0,04 3,555,207 0,04 28,118 0 0 0 Experience Industry Union None None None
Representative) JUN 28, Member, TBB Industry Union Employee, Taiwan
2021 Director,TBB Industry Union Business Bank
Employee, Taiwan Business Bank
Honorary
President of the
Education Republic of China
on the Kindai
JUN 29, B.A., Kindai University, JPN
Director R.O.C. Che-Nan Wang M JUN 29, 2018 2018To JUL 22, 2012 1,276,494 0,02 6,806,753 0,11 6,806,753 0,11 0 0 Experience13th & 14th Director, Taiwan Business Bank UniversityAdvisory Committee None None None
JUN 28, Member,Overseas Community Affairs Council, Republic of
2021 China Member,
Overseas
Director, Taichung Commercial Bank Co., Ltd
Community Affairs
Council, Republic
of China
Education
Professor,
Ph.D., Department of Economics, North Carolina State Graduate Institute
JUN 29, University, USA of Industrial
Director 2018 Experience Economics,
(Independent R.O.C. Jin-Long Liu M JUN 29, 2018 To JUN 29, 2018 0 0 0 0 0 0 0 0 Associate Professor, Grduate Institute of Industrial Economics, National Central University National Central None None None
Director) JUN 28, University
2021 Director, Grduate Institute of Industrial Economics, National Supervisor,
Central University
Integrated Service
Visiting Associate Professor, Duke University
Technology Inc.
Visiting scholar, Foundation for Scholarly Exchange
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22 22

Taiwan Business Bank Annual Report 2018

III

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C. Major Shareholders of Major Juristic Person Shareholders of the Bank

December 31, 2018

==> picture [456 x 37] intentionally omitted <==

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Juristic Person Shareholder Major Shareholders of Juristic Person Shareholders
Taiwan Financial Holding Co., Ltd. Ministry of Finance (100%)
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D. Professional Knowledge and Independence of Directors

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Qualifications Independent Status Number of Other
Qualifications (Note 1) (Note 2) Public Companies
Serving as
Name A B C 1 2 3 4 5 6 7 8 9 10 anIndependent
Director
Bor-Yi Huang           0
Chien-An Shih          0
Li-Ling Lin          0
Xin-Wu Lin            1
Lien-Wen Liang            0
Shiu-Yen Lin          0
Wen-Chieh Wang            0
Hung-Sheng Yu          0
Cheng-Chuan Kang          0
Pei-Ming Huang          0
Ying-Ming He          0
Feng-Yung Liu          0
Che-Nan Wang            0
Jin-Long Liu             0
Wei-Sheng Huang            0
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Note 1: Directors and Supervisors shall meet one of the following professional requirements, together with at least five year work experience:
A. An instructor or higher in a department of commerce, law, finance, accounting or other academic department related to the banking business in a public/private junior college, college or university.
B. A judge, public prosecutor, attorney, certified public accountant, or other professional or technical specialist who has passed a national examination and has been awarded a certificate in a professional necessary for the banking business.
C. With work experience in the fields of commerce, law, finance, accounting or other profession necessary for the banking business.
Note 2: During the two years before being elected or during the term of office, members shall meet the following terms with “  ” mark. (1) Neither employees of the bank nor its affiliates.
(2) Neither a director or a supervisor of the bank nor its affiliates. (This restriction does not apply to independent director positions in the bank, its parent company or subsidiary, which have been appointed in accordance with Securities and Exchange Act or laws of the registered country.)
(3) Individual shareholder who holds shares, together with those held by his/her spouse, minor children, or held under others' names, in an aggregate amount of 1% or more of the total outstanding shares of or natural persons who rank among the top 10 shareholders in terms of the share volume held are excluded.
(4) The spouse or relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs are excluded.
(5) Directors, supervisors, or employees of a juristic person shareholder that directly hold 5% or more of the total outstanding shares of the bank or ranks among the top 5 juristic person shareholders in the terms of share volume held are excluded.
(6) Directors, supervisors, the managerial officer, or the shareholder holding 5% or more shares of a specific company or institution that also have financial or business dealings with the bank are excluded.
(7) A professional, owner, partner, director, supervisor, or the managerial officer and his/her spouse of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting or consulting services to the bank or its affiliates is excluded. However, members of the Remuneration Committee that implement the authority according to the Article 7 of the Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter are included without the abovementioned limitation.
(8) A spouse or relative within the second degree of kinship among directors is excluded.
(9) Any of the circumstances in the subparagraphs of Article 30 of the Company Act doesn't happen.
(10) It isn't in the capacity of a government agency, a juristic person or its representative, as provided in the Article 27 of the Company Act, that has been elected.

24 24

Taiwan Business Bank Annual Report 2018

III

E. Board diversity policy and implementation
a On Oct. 25, 2017, a resolution was passed on the 17th Board Meeting of the 14th Board to amend "Corporate Governance Principles," and Article 34 thereof specified the Board diversity policy. The Bank adopted the candidate nomination system for the selection of the Board members according to Article 20 of the Articles of Association of the Bank and carried out nominations and review on qualifications of director candidates according to Article 192-1 of the Company Law. After the inclusion into the list of the director candidate, an election shall be carried out according to the Regulations Governing the Election of Directors of the Bank to ensure the diversity and independence of the Board.
b Regarding the list of the 15 Board members of the 15th Board, there were 4 directors (26.6%) who are employees, 3 independent directors with job tenure all less than 3 years (20%), 3 female directors (20%) and 12 male directors (80%). There are 6 directors with their age ranging from 50-60, 8 directors with their age ranging from 60-70, and 1 director with age above 70. After an assessment, all the directors are experts in items of operating judgment, operating management, risks management, industrial knowhow, international market, leadership, and decision-making. Bor-Yi Huang, Chien-An Shih, Shiu-Yen Lin, Lien-Wen Liang, Xin-Wu Lin, Jin-Long Liu, Hung-Sheng Yu, Li-Ling Lin, Pei-Ming Huang, YingMing He, Cheng-Chuan Kang, Feng-Yung Liu, Che-Nan Wang, and Wei-Sheng Huang specialize in accounting and financial analysis; Wen-Chieh Wang specializes in legal affairs. Regarding the diversity of the Board, the Bank has complied with Article 34 of the Code of Corporate Governance Practices of the Bank. The profession of directors is sufficient to help the nature of the Bank as an SME Specialized Bank and compliance with government policies, so as to promote businesses of young entrepreneurship and innovative financing, green financing, cultural and creative financing, senior financing, and urban regeneration financing, fulfilling the corporate social responsibilities.
c The diversity policy for the Board of the Bank has been disclosed on the corporate website of the Bank and the Market Observation Post System.

(2) Information of President, Executive Vice President, Vice President and Managers of

Departments and Branches

December 31, 2018

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Shareholding by Shareholding The Spouse or
Title Natio Name Gender [Effective ] Shareholding Amount Spouse & Minor Children Under Others' Title Prime Experience & Services Concurrently with Relative within 2 Tiers of General Managers
nality Date Education the Other Campany
Shares (%) Shares (%) Shares (%) Title Name [Relation- ]
ship
EVP & Chief Auditor R.O.C Chiu-Yen Chen F 20160201 199,337 0 1,049 0 0 0 National Chengchi UniversityStatistics, None None
SVP & Chief Industrial Management,
Secretary, R.O.C Tseng-Hsiang Yi M 20180723 111,491 0 0 0 0 0 Taiwan University of Science None None
Secretarial Dept. And Technology
Director, Taiwan Business
Bank International Leasing
SVP,
Business R.O.C Chang-Yu Lin M 20180723 194,931 0 0 0 0 0 Accounting, Co.,Ltd.Director, TBB (Cambodia) None
Development Dept. Fu Jen University Microfinance Institution Plc
Director, TBB Venture Capital
Co., Ltd.
SVP, Director, Taiwan Business
Loan Supervison R.O.C Yu-Min Chang M 20160715 158,198 0 4,422 0 0 0 MBA, Bank Insurance Agency Co., None
Dept. Tamkang University Ltd.
VP&GM,
Credit R.O.C Chi-Fen Yen F 20180208 117,580 0 0 0 0 0 Business Administration, None None
Investigation Fu Jen University
Dept.
Transportation and
SVP&GM, R.O.C Tzong-Wen Chou M 20180208 110,033 0 0 0 0 0 Communication Mangement None None
Auditing Dept. Science, National Cheng
Kung University
SVP&GM,
Adminstration R.O.C Yung-Yu Song M 20180827 101,466 0 91,409 0 0 0 MBA, None None
Management National Central University
Dept.
SVP&GM, Department of Statistics,
Human R.O.C Jia-Ruey Luan M 20160715 146,874 0 0 0 0 0 National Cheng Kung None None
Resources Dept. University
SVP, Ph.D., Department of Banking
Digital Banking R.O.C Ting-Huei Liao M 20170718 217,389 0 105,040 0 0 0 and Finance, Supervisor, Financial None
e-solution Co.,Ltd.
Dept. Tamkang University
VP&GM,
Overdue Loan&Control R.O.C Li-Yueh Hsu F 20180208 26,647 0 0 0 0 0 Law, National Taiwan University None None
Dept.
SVP, Supervisor, Taiwan Business
Personal Banking R.O.C Yin-Cheng Tseng F 20180208 141,507 0 0 0 0 0 Department of Law, Bank Property Insurance None
National Chengchi University
Dept. Agency Co., Ltd.
Supervisor, TBB International
Leasing Co., Ltd.
Master of Financial Supervisor Taiwan Business
SVP, R.O.C Chih-Wei Chen M 20180723 0 0 0 0 0 0 Management, Bank International Leasing None
Treasury Dept.
National Central University Co., Ltd.
Director, TBB Venture Capital
Co., Ltd.
SVP,
Information R.O.C Ching-Yun Kuo F 20170718 204,054 0 25,078 0 0 0 Law, None None
National Taiwan University
Technology Dept.
SVP&GM,
Compliance R.O.C Hsih-Hui Chen F 20110825 112,674 0 0 0 0 0 Law, None None
Fu Jen University
Dept.
Master of Information
Acting VP&GM,
Information R.O.C Yi-Chin Chai M 20180723 32,172 0 0 0 0 0 Management, None None
National Taiwan University of
Security Dept.
Science and Technology
Director, CDIB & Partners
SVP,
Wealth R.O.C Chu-Jou Chen F 20180718 220,272 0 0 0 0 0 Business Administration, Investment Holding Corp.Director, Taiwan Business None
Management Soochow University
Bank Insurance Agency Co.,
Dept. Ltd.
SVP, Credit Card Dept. [R.O.C] Wen-Shu Lin F 20180208 108,203 0 0 0 0 0 Business Administration, Soochow University None None
Director, Chaofu Real Estate
Management Co., Ltd.
Director, Taiwan Business
SVP, Bank Property Insurance
Corporate R.O.C Tsung-Chu Hsieh M 20180208 117,111 0 0 0 0 0 Public Finance, Agency Co., Ltd. None
National Chengchi University
Banking Dept. Director, TBB International
Leasing Co., Ltd.
Director, TBB Venture Capital
Co., Ltd.
VP&GM,
Risk R.O.C Hsiou-Chen Kang F 20180208 107,120 0 0 0 0 0 Economics, Director, TBB International None
Management National Taiwan University Leasing Co., Ltd.
Dept.
----- End of picture text -----

26 26

Taiwan Business Bank Annual Report 2018

III

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

Shareholding by Shareholding The Spouse or
Title Natio Name Gender [Effective ] Shareholding Amount Spouse & Minor Children Under Others' Title Prime Experience & Services Concurrently with Relative within 2 Tiers of General Managers
nality Date Education the Other Campany
Shares (%) Shares (%) Shares (%) Title Name [Relation- ]
ship
Accounting,
SVP&GM, Accounting Dept. [R.O.C] Yu-Chuan Chou F 20180208 121,446 0 799 0 0 0 National Chung Hsing Supervisor, TBB Venture Capital Co., Ltd. None
University
Accounting,
VP&GM, R.O.C Pi-Yu Chang F 20180723 107,677 0 0 0 0 0 National Chung Hsing None None
Trust Dept.
University
Cooperative Economic,
SVP, R.O.C Li-Hui Chang F 20180723 126,204 0 0 0 0 0 National Chung Hsing None None
Securities Dept.
University
SVP,
International
Banking Dept.
and Authorized R.O.C Sung-Shui Chiu M 20180327 141,308 0 7,910 0 0 0 Economics, Director, Taipai Forex Inc. None
Officer,Yangon National Taiwan University
Representative
Office
VP&GM, Department of Land
Innovative R.O.C Tung- Hsi Chen M 20181221 0 0 0 0 0 0 Economics, None None
Finance Project National Chung Hsing
Office University
VP&GM,
Department of Business
Regional R.O.C Tsun-Lin Yeh M 20170513 112,520 0 0 0 0 0 Administration, None None
Operation Center
North 1 Nanya Institute of Technology
VP&GM,
Regional R.O.C Chiang-Shu Lin M 20181029 118,447 0 0 0 0 0 Testile Department, None None
Operation Center Vanung University
North 2
VP&GM,
Business Management,
Regional R.O.C Mei-Chun Lin F 20180208 253,622 0 0 0 0 0 National Cheng Kung None None
Operation Center
North 3 University
VP&GM,
Master of Finance,
Regional R.O.C Kuo-Liang Tseng M 20181029 107,437 0 0 0 0 0 National Yunlin University of None None
Operation Center
Central Science and Technology
VP&GM,
Department of Business
Regional R.O.C Fu-Ming Hsu M 20170203 324,448 0 0 0 0 0 Administration, None None
Operation Center
South 1 Feng Chia University
VP&GM,
Department of Business
Regional R.O.C Wen-Hsiu Huang M 20180208 146,270 0 0 0 0 0 Administration, None None
Operation Center
South 2 Tunghai University
VP&GM,
Domestic R.O.C Huei-Nai Hung F 20140514 107,174 0 0 0 0 0 Accounting, None None
Processing Fu Jen University
Center
VP&GM, Chi Lin Branch R.O.C Hsiao-Ming Chen M 20170203 106,820 0 0 0 0 0 Master of Economics, National Taiwan University None None
VP&GM,
Chung Ho R.O.C Li-Fang Lee F 20170203 107,641 0 0 0 0 0 Economics, None None
Branch Chinese Culture University
Accounting and Statistics,
VP&GM, Po Ai Branch R.O.C Chih-Yang Huang M 20160715 112,505 0 0 0 0 0 International Business None None
College
Master of Marketing and
VP&GM,
North Taoyuan R.O.C Shuan-Hua Liu F 20180208 39,104 0 0 0 0 0 Logistics management, None None
Branch Hsing Wu University of
Science and Technology
Department of Economics,
VP&GM, Nan Ken Branch R.O.C Yu-Chiao Wei F 20180208 99,172 0 7,949 0 0 0 National Chung Hsing None None
University
EMBA,
VP&GM, Si Tuen Branch R.O.C Yuan-Hsueh Hsiao M 20180208 107,331 0 0 0 0 0 Taichung Health and None None
Management Collage
VP&GM, Department Of Finance,
Chung Min R.O.C Yun-Shiang Tsai M 20181029 50,000 0 0 0 0 0 Chao Yang University Of None None
Branch Technology
Bank Management
VP&GM, Kinmen Branch R.O.C Cheng- Chuan Lin M 20170203 194 0 0 0 0 0 Department, None None
Tamsui Exford College
Department Finance and
VP&GM,
Banking R.O.C Long-Jiunn Wu M 20181029 199,769 0 0 0 0 0 Taxation, None None
National Chung Hsing
Department
University
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Shareholding by Shareholding The Spouse or
Title Natio Name Gender [Effective ] Shareholding Amount Spouse & Minor Children Under Others' Title Prime Experience & Services Concurrently with Relative within 2 Tiers of General Managers
nality Date Education the Other Campany
Shares (%) Shares (%) Shares (%) Title Name [Relation- ]
ship
Applied Business,
VP&GM, Ta Ya Branch R.O.C Chih-Cheng Cho M 20170718 53,051 0 0 0 0 0 National Taichung University None None
of Science and Technology
VP&GM, Jen Ta Branch R.O.C Chien-Chung Lin M 20160715 50,660 0 57,479 0 0 0 International Trade, Chinese Culture University None None
VP&GM, Jen Ai Branch R.O.C Mei-Chih Hou F 20160301 110,997 0 0 0 0 0 Banking, Feng Chia University None None
Department of Finance and
VP&GM,
Sung Shan R.O.C Bi-Chu Chuang F 20181029 107,943 0 0 0 0 0 Taxation, None None
Branch National Chung Hsing
University
Executive Master of
VP&GM, Business Administration in
Chien Cheng R.O.C Guei-Jin Chiou F 20160301 124,422 0 0 0 0 0 None None
Branch International,
National Taipei University
Department of Medical
VP&GM, Shih Lin Branch R.O.C Wen-Fang Lin M 20180827 5,356 0 0 0 0 0 Administration, Yuanpei Junior College of None None
Medical Technology
VP&GM, R.O.C Sung-Nan Chiao M 20170718 41,161 0 891 0 0 0 Accounting, None None
Yung Ho Branch Soochow University
VP&GM, Hsin Tien Branch [R.O.C] Fuh-Yuh Yeh M 20160301 107,303 0 964 0 0 0 National Open UniversityBusiness, None None
VP&GM,
Hsin Chuang R.O.C Ching-Kuei Hsieh F 20170203 113,090 0 0 0 0 0 Insurance, None None
Branch Tamkang University
VP&GM,
Hwa Cheng R.O.C Ruey-shyang Guo M 20181029 110,093 0 0 0 0 0 MBA, None None
Branch Baruch Collge , CUNY
VP&GM,
Sung Kiang R.O.C Chao-Lieh Chen M 20170718 809 0 964 0 0 0 EMBA, None None
Branch Tamkang University
Master of Science in
VP&GM, R.O.C Tien-Hang Tsai M 20180208 144,265 0 0 0 0 0 Management, None None
Taipei Branch
U.S International University
VP&GM, Wan Hua Branch [R.O.C] Yueh-Yen Weng F 20170718 78,425 0 0 0 0 0 Business Administration, National Chengchi University None None
VP&GM,
South Taipei R.O.C Jiunn-chiu Wang M 20181029 22,733 0 0 0 0 0 Statistics, None None
Branch Tamkang University
Department of Applied
VP&GM, Fu Hsin Branch R.O.C Yueh-Chiao Wu F 20170203 112,476 0 0 0 0 0 Business, National Taipei College of None None
Business
VP&GM, Department of Business
Chung Shang R.O.C Yen-Hsueh Chang F 20181029 2,026 0 0 0 0 0 Administration, None None
Branch Tamkang University
VP&GM,
Chien Kuo R.O.C Tien-Chin Lin M 20180208 108,165 0 0 0 0 0 Economics, None None
Branch Tunghai University
VP&GM, Nai Hu Branch R.O.C Tai Sun F 20180208 202,143 0 0 0 0 0 International Trade, Ming Chuan College None None
VP&GM, Master of Finance,
Nan King East R.O.C Kuo-Shu Tseng M 20170513 74,360 0 0 0 0 0 National Chiao Tung None None
Road Branch University
Department of
VP&GM,
Chung Hsiao R.O.C Yen-Ling Chen F 20170718 107,732 0 0 0 0 0 International Trade, None None
Branch Takming Junior College of
Commerce
Dept. of Business
VP&GM,
World Trade R.O.C Chao-Chih Chueh F 20150207 108,229 0 0 0 0 0 Management, None None
Center Branch China Junior College of
Municipality
International Trade,
VP&GM, Yung Trin Branch [R.O.C] Ching-Hsiu Liu F 20170718 21,411 0 0 0 0 0 Chung Yuan Christian None None
University
VP&GM, Nan Kang Branch [R.O.C] Fu-Long Chen M 20170718 99,736 0 0 0 0 0 Engineering Machinery, Pingtung Agricultural None None
Master of Business
VP&GM, Sung Nan Branch [R.O.C] Ming-Hui Chen F 20180208 20,800 0 0 0 0 0 Administration in International Business, None None
National Dong Hwa University
Department of Cooperative
VP&GM, R.O.C Ming-Hsyang Kuo M 20180522 0 0 18,687 0 0 0 Economics, None None
Dong Hu Branch
Tamkang University
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28 28

Taiwan Business Bank Annual Report 2018

III

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

Shareholding by Shareholding The Spouse or
Title Natio Name Gender [Effective ] Shareholding Amount Spouse & Minor Children Under Others' Title Prime Experience & Services Concurrently with Relative within 2 Tiers of General Managers
nality Date Education the Other Campany
Shares (%) Shares (%) Shares (%) Title Name [Relation- ]
ship
Department of Industrial
VP&GM, Ta An Branch R.O.C Hsueh-Ru Liu F 20150207 109,033 0 0 0 0 0 Management, None None
Chinyi Institute of Technology
VP&GM, International Trade,
Shuang Ho R.O.C Chao-Hwa Hsu F 20160301 190,654 0 0 0 0 0 National Taipei College of None None
Branch Business
Department of Finance,
VP&GM, Jim Ho Branch R.O.C Jiann-Yea Shyu M 20180723 9,205 0 0 0 0 0 National Taipei College of None None
Business
Master of Management
VP&GM, Wu Ku Branch R.O.C Ying-Che Fang M 20170203 189,388 0 0 0 0 0 Sciences, None None
TamKang University
Accounting,
VP&GM, Lin Kuo Branch R.O.C Yueh-Chin Wang F 20170718 107,827 0 3,443 0 0 0 Hsing Wu College of None None
Commerce
VP&GM,
Pan Chiao R.O.C Wan-Ju Shih F 20180723 109,383 0 0 0 0 0 Master of Economics, None None
Branch Soochow University
Financial Finance,
VP&GM, Shu Lin Branch R.O.C Yen-Hui Tu M 20171030 217,015 0 0 0 0 0 Takming University of Science None None
and Technology
VP&GM, Tu Cheng Branch [R.O.C] Nien-Tzu Chen F 20180208 108,066 0 0 0 0 0 Fu Jen UniversityAccounting, None None
Department of Business
VP&GM,
Hwei Long R.O.C Chiu-Chin Chen F 20171030 108,191 0 0 0 0 0 Administration, None None
Branch Chung Yuan Christian
University
Department of Transportation
VP&GM, Hsi Chih Branch R.O.C Fang-Chuan Chiu M 20180723 107,751 0 0 0 0 0 and Logistics, None None
Feng Chia University
VP&GM, Sanxia Branch R.O.C Pao-Sheng Lin M 20180208 111,248 0 45,904 0 0 0 Business Administration, Fu Jen University None None
Finance and Taxation,
VP&GM, R.O.C Hsien-Min Chen M 20160715 108,346 0 0 0 0 0 National Taipei College of None None
Keelung Branch Business
Bank Insurance,
VP&GM, R.O.C Mei-Hui Chen F 20140212 183,421 0 190,268 0 0 0 National Taipei College of None None
Pu Chya Branch Business
VP&GM,
North San Chung R.O.C Hsiu-Hsin Hou M 20170203 107,703 0 0 0 0 0 Bank&Insurance Section, None None
Branch Hsing Wu Business College
VP&GM,
South San Chung R.O.C Yen-Huey Wang F 20170718 105,960 0 215 0 0 0 Banking and Insurance, None None
Branch Ming Chuan College
Master of Business
VP&GM, Lu Chow Branch R.O.C Chin-Hsiang Lin M 20180723 164,598 0 0 0 0 0 Administration, None None
Tatung University
Supplementary Open
VP&GM, I Lan Branch R.O.C Pi-Chuan Chien F 20170203 108,807 0 1,131 0 0 0 Junior College For Public Administration, None None
National Chengchi University
VP&GM, R.O.C Shu-Chin Lin F 20160301 107,570 0 0 0 0 0 I-LAN Commercial Vocational None None
Lo Tung Branch Senior High School
Industrial Management,
VP&GM, Su Aw Branch R.O.C Ping-Hui Lee M 20180723 47,628 0 0 0 0 0 Southern Taiwan Industrial None None
College
VP&GM, Yang Mei Branch [R.O.C] Su-Fen Chen F 20160715 107,532 0 9,896 0 0 0 Soochow University Accounting, None None
Master of International
VP&GM, Hu Kou Branch R.O.C Shu-E Chen F 20170718 0 0 98,244 0 0 0 Business, Chung Yuan Christian None None
University
VP&GM,Taoyuan Branch R.O.C Shy-Yuan Wu M 20150207 40,183 0 0 0 0 0 Accounting, Fu Jen University None None
Business Management
VP&GM, Ta Yuan Branch R.O.C Li-Chuan Huang F 20170718 70,997 0 62,400 0 0 0 Institute, None None
Chung Hua University
Department of Cooperative
VP&GM, Ta Shi Branch R.O.C Chin-Ho Huang M 20180723 109,739 0 3,763 0 0 0 Economics, None None
Tamkang University
VP&GM, R.O.C Jiann-Gwo Guu M 20180208 142,304 0 96,107 0 0 0 Accounting Statistics, None None
Chung Li Branch Tamsui Exford College
Master of Accounting and
VP&GM, Nei Li Branch R.O.C Min-Chung Hsieh M 20170718 25,721 0 0 0 0 0 Information Technology, National Chung Cheng None None
University
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Shareholding by Shareholding The Spouse or
Title Natio Name Gender [Effective ] Shareholding Amount Spouse & Minor Children Under Others' Title Prime Experience & Services Concurrently with Relative within 2 Tiers of General Managers
nality Date Education the Other Campany
Shares (%) Shares (%) Shares (%) Title Name [Relation- ]
ship
Department of Business
VP&GM, Hsin Ming Branch [R.O.C] Yu-Pei Liao F 20180208 12,894 0 0 0 0 0 Administration, National Chung Hsing None None
University
VP&GM,
East Taoyuan R.O.C Chiu-Yu Lin F 20170203 42,848 0 64,272 0 0 0 Economics, None None
Branch Fu Jen University
VP&GM, Hsin Wu Branch R.O.C Shu-Fen Li F 20180208 30,841 0 0 0 0 0 International Trade, Hsing Wu Business College None None
VP&GM, Hsin Chu Branch [R.O.C] Kuan-Yau Cheng M 20180208 107,120 0 0 0 0 0 National Hsinchu Commercial & Vocational High School None None
Department of Business
VP&GM, Chu Pei Branch R.O.C Bih-Lien Fang F 20170718 663,612 0 0 0 0 0 National Cheng Kung Administration, None None
University
VP&GM, Graduate Institute of Industrial
Hsinchu Science
Based Industrial R.O.C Nai-Chia Chi M 20170718 177,107 0 0 0 0 0 Economics, None None
Park Branch National Central University
Master of Business
VP&GM, Pa Te Branch R.O.C Li-Huei Chen M 20180208 31,200 0 0 0 0 0 Administration, None None
Tamkang University
Department of Business Man
VP&GM,
Luong Tan Branch R.O.C Sheng-Wang Chang M 20170718 105,763 0 5,930 0 0 0 agement, Chin Min Institute of None None
Technology
Department of Industrial
VP&GM, Chu Tung Branch [R.O.C] Ming-Tang Chen M 20160301 111,671 0 0 0 0 0 Management, Lunghwa University of None None
Science and Technology
VP&GM, Chu Nan Branch R.O.C Hsiu-Chiao Lin F 20170203 229,692 0 380,751 0 0 0 Business Management, Tamkang University None None
Master of Science and
VP&GM, Tou Fen Branch R.O.C Kuan-Yi Huang M 20170203 53,620 0 0 0 0 0 Technology Management, None None
Chung Hua University
Business Administration,
VP&GM, Maio Li Branch R.O.C Shin-Mao Lin M 20160301 52,136 0 0 0 0 0 National Taichung College of None None
Business
VP&GM, Business Administration,
Feng Yuan R.O.C Li-Chung Lin M 20180723 114,127 0 0 0 0 0 National Taichung College of None None
Branch Business
VP&GM, R.O.C Ping-Sung Yang M 20181029 306,419 0 145 0 0 0 Accounting, None None
Tai Ping Branch Feng Chia University
International Trade,
VP&GM, Ta Chia Branch R.O.C Man-Chung Yeh M 20181029 241 0 0 0 0 0 National Taichung College of None None
Business
VP&GM, Sha Lu Branch R.O.C Chih-Cheng Chen M 20170203 115,187 0 0 0 0 0 Department of Business, National Open University None None
VP&GM, Wu Jih Branch R.O.C Meng-Shin Jeng M 20181029 157,592 0 42,838 0 0 0 Public Finance, Feng Chia University None None
Accounting,
VP&GM, R.O.C Meng-Liang Su M 20181029 108,170 0 0 0 0 0 National Chung None None
Taichung Branch
Hsing University
VP&GM, Min Chen Branch [R.O.C] Shun-Tseng Liao M 20160301 159,193 0 0 0 0 0 Business Management, Soochow University None None
VP&GM,
Hsing Chung R.O.C Yih-Shiou Wang M 20160301 137,371 0 0 0 0 0 EMBA, None None
Branch Feng Chia University
VP&GM, Pei Tuen Branch R.O.C Kuo-Tsun Pai M 20180208 108,422 0 0 0 0 0 Department of Business, National Open University None None
Master of Finance,
VP&GM, Nan Tou Branch R.O.C Liang-Pin Chen M 20180723 764 0 737 0 0 0 National Yunlin University of None None
Science and Technology
VP&GM, Master of Finance,
Tsao Tuen R.O.C Tsai-Rong Hung F 20180208 164,825 0 0 0 0 0 National Yunlin University of None None
Branch Science and Technology
Department of Applied
VP&GM, Pu Li Branch R.O.C Fu-Ching Chou M 20170901 104,035 0 0 0 0 0 Business, Taichung University of None None
Science and Technology
VP&GM, Tan Tze Branch R.O.C Cheng-An Hsieh M 20170901 117,384 0 36,880 0 0 0 Master of Insurance, Feng Chia University None None
VP&GM, Chu Shan Branch [R.O.C] Jung-Yu Huang M 20170203 108,310 0 0 0 0 0 Accounting , Feng Chia University None None
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30 30

Taiwan Business Bank Annual Report 2018

III

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

Shareholding by Shareholding The Spouse or
Title Natio Name Gender [Effective ] Shareholding Amount Spouse & Minor Children Under Others' Title Prime Experience & Services Concurrently with Relative within 2 Tiers of General Managers
nality Date Education the Other Campany
Shares (%) Shares (%) Shares (%) Title Name [Relation- ]
ship
Department of Applied
VP&GM,
Chang Hwa R.O.C Ming-Yi Lin M 20180208 335,520 0 240,805 0 0 0 Business, None None
Branch Taichung University of
Science and Technology
Department of International
VP&GM, Ho Mei Branch R.O.C A-Chang Yang M 20170203 165,108 0 0 0 0 0 Trade, None None
Feng Chia University
International Trade,
VP&GM, Yuan Lin Branch R.O.C Yueh-Man Sung F 20181029 129,901 0 0 0 0 0 National Taichung College of None None
Business
VP&GM, Pei Tou Branch R.O.C Chien-Ta Wu M 20181224 65,217 0 0 0 0 0 EMBA, National Chi Nan University None None
VP&GM, Erh Lin Branch R.O.C Li-Mo Yang M 20170203 232,683 0 0 0 0 0 Fu Jen UniversityStatistics, None None
Master of Applied Economics,
VP&GM, Tou Liu Branch R.O.C His-Her Pai M 20180208 172,303 0 79 0 0 0 National Chung Hsing None None
University
Master of Finance,
VP&GM, R.O.C Wen-Chi Chen M 20181029 69,443 0 0 0 0 0 National Yunlin University of None None
Pei Kang Branch
Science and Technology
Department of Accounting
VP&GM, Hu Wei Branch R.O.C Chin-Hsueh Li M 20151103 211,114 0 0 0 0 0 and Statistics, Open College with National None None
Chang Kung University
Department of International
VP&GM, Chia Yi Branch R.O.C Su-Ying Tsai F 20180208 113,022 0 0 0 0 0 Trade, Open College with National None None
Chang Kung University
VP&GM,
Ming Hsiung R.O.C I-Man Chen F 20181029 109,562 0 75 0 0 0 Business, None None
Branch Providence College
Department of Accounting
VP&GM, Chia Hsin Branch [R.O.C] Jiann-Jang Lin M 20160513 57,818 0 69,969 0 0 0 and Statistics, Tatung Institute of Commerce None None
and Technology
Department of Accounting
VP&GM, Hsin Ying Branch [R.O.C] Chia-Cheng Liu M 20180208 55,476 0 0 0 0 0 and Statistics, Tatung Institute of Commerce None None
and Technology
VP&GM, Kai Yuan Branch R.O.C Feng-Fu Chen M 20160715 110,432 0 10,022 0 0 0 Fu Jen UniversityAccounting, None None
Department of Accounting
VP&GM, Yun Kang Branch [R.O.C] Hsin-Chuan Hsiao M 20170203 132,273 0 93,786 0 0 0 and Statistics, Tatung Institute of Commerce None None
and Technology
VP&GM, Statistics,
Shiue Chia R.O.C Chih-Ming Chuang M 20160715 109,352 0 0 0 0 0 National Chung Hsing None None
Branch University
VP&GM, Cooperative Economics,
Shan Hwa R.O.C Guo-Shiang Huang M 20170203 45,576 0 81,004 0 0 0 National Chung Hsing None None
Branch University
Master of Business &
VP&GM, R.O.C Chien-Lai Su M 20181224 736 0 0 0 0 0 Management, None None
Yung Ta Branch
National University of Tainan
Department of Industrial
VP&GM, Tainan Branch R.O.C Yung-Sheng Hu M 20170203 112,420 0 716 0 0 0 Management, Southern Taiwan Institute of None None
Technology
VP&GM, Jen Te Branch R.O.C Chin-Hsiu Chen F 20180208 227,322 0 32,142 0 0 0 Banking and Insurance, Ming Chuan College None None
VP&GM, Department of Bank and
Cheng Kung R.O.C Chang-Hui Hsu F 20180723 91,798 0 10,632 0 0 0 Insurance, None None
Branch Chinese Culture University
VP&GM,
East Tainan R.O.C Shun-Ho Chen M 20180208 109,101 0 0 0 0 0 Business Administration, None None
Branch Feng Chia University
MBA,
VP&GM, R.O.C Mei-Chen Chen F 20180208 126,557 0 10,040 0 0 0 National Cheng Kung None None
An Ping Branch
University
VP&GM, Hua Lien Branch R.O.C Chiou-Hwa Su F 20170203 29,728 0 0 0 0 0 Public Finance and Taxation, Dahan Institute of Technology None None
Master of Tropical
Agriculture and International
VP&GM, R.O.C Wen-Jang Jou M 20180208 102,483 0 0 0 0 0 Cooperation, None None
Tai Tung Branch
Pingtung University of
Science & Technology
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Shareholding by Shareholding The Spouse or
Title Natio Name Gender [Effective ] Shareholding Amount Spouse & Minor Children Under Others' Title Prime Experience & Services Concurrently with Relative within 2 Tiers of General Managers
nality Date Education the Other Campany
Shares (%) Shares (%) Shares (%) Title Name [Relation- ]
ship
VP&GM, Master of Finance,
East Kaohsiung R.O.C Leh-Chin Kuo F 20180208 88,011 0 0 0 0 0 Kaohsiung First University of None None
Branch Science and Technology
VP&GM,
Kang Shan R.O.C Der-Hsung Lin M 20160715 107,651 0 0 0 0 0 Bank Isurance, None None
Branch Meiho University
VP&GM,
North Feng Shan R.O.C Cheng-Hung Wang M 20180208 169,038 0 75 0 0 0 Accounting , None None
Branch Feng Chia University
VP&GM, R.O.C Ya-Hua Su F 20160301 163,010 0 0 0 0 0 Banking, None None
Ling Ya Branch National Chengchi University
VP&GM, Accounting,
Kaohsiung R.O.C Chin-Chuan Su M 20140514 293,415 0 0 0 0 0 National Chung Hsing None None
Branch University
VP&GM, Master of Finance,
North Kaohsiung R.O.C An-Yun Lin F 20170414 213,482 0 46,429 0 0 0 Kaohsiung First University of None None
Branch Science and Technology
VP&GM, Ta Chang Branch [R.O.C] Li-Jung Lin F 20180208 118,631 0 0 0 0 0 Department of Business, National Open University None None
VP&GM,
Chien Chen R.O.C Tzu-I Huang M 20180208 111,291 0 0 0 0 0 Business Administration, None None
Branch Cheng Shiu University
VP&GM, Jeou Ru Branch R.O.C Wen-Tai Yang M 20160301 108,720 0 0 0 0 0 Business Management, Tatung University None None
Department of Statistics,
VP&GM, San Ming Branch [R.O.C] Ching-Wen Lee M 20180827 71,315 0 52 0 0 0 National Cheng Kung None None
University
VP&GM, MBA,
Feng Shan R.O.C Kuang-Tsai Wang M 20170203 107,425 0 0 0 0 0 National Sun Yat-sen None None
Branch University
VP&GM, Ta Fa Branch R.O.C Jung-Ling Wang M 20160715 107,903 0 0 0 0 0 Finace Taxation, Feng Chia University None None
Shipping & Transportation
VP&GM,
Ping Tung R.O.C Hsueh-Hsia Chen F 20180827 227,926 0 0 0 0 0 Management, National Taiwan Ocean None None
Branch
University
VP&GM,
Xiao Gang R.O.C Shih-Yuan Lin M 20160715 125,282 0 100 0 0 0 International Trade, None None
Branch Chinese Culture University
VP&GM,
Chiao Chou R.O.C Shuang-Chen Su M 20160301 107,797 0 0 0 0 0 Business Administration, None None
Branch Tamsui Exford College
VP&GM,
Offshore Banking R.O.C Ching-Yang Lee F 20150403 109,145 0 0 0 0 0 MBA, CMSU None None
Unit
VP&GM,
Los Angeles R.O.C Shenn-Bao Jean M 20180430 110,807 0 0 0 0 0 Economics, None None
Branch Soochow University
Department of Business
VP&GM,
Hong Kong R.O.C Jen-Jung Fan M 20160919 107,685 0 0 0 0 0 National Sun Yat-sen Management, None None
Branch
University
Business & Secretarial
VP&GM, R.O.C Be-Yun Tong F 20140327 169,591 0 0 0 0 0 Science, None None
Sydney Branch
Tamsui Exford College
MBA,
VP&GM, Shanghai Branch [R.O.C] Yuan-Yuan Ying F 20160613 193,271 0 0 0 0 0 National Kaohsiung First Unversity of Science and None None
Technology
Master of International
VP&GM, Brisbane Branch R.O.C Sue-Jen Chen F 20180413 950 0 62 0 0 0 Business, None None
Soochow University
VP&GM, New York Branch [R.O.C] Feng-Ying Chen F 20160609 110,115 0 0 0 0 0 Banking, National Chengchi University None None
MBA,
VP&GM, Wuhan Branch R.O.C Chin-Fu Chiang M 20180516 176,039 0 5,943 0 0 0 National Taiwan University of None None
Science and Technology
VP&GM, R.O.C Cheng-Hung Chang M 20180815 104,572 0 0 0 0 0 MBA, None None
Tokyo Branch University of Wisconsin, USA
----- End of picture text -----

32 32

Taiwan Business Bank Annual Report 2018

III

(3) Compensation for 2018

A. Compensation for Directors

Unit: NT$1,000

==> picture [457 x 79] intentionally omitted <==

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

Compensation Ratio of total Relevant remuneration received by directors who are also employees Ratio of total
Rewards (A) Separation Pay (B)Pension and Earning Distribution (C) Business Affair Expense (D) (A+B+C+D) to net remuneration income (%) Disbursement (E)Salary, Bonus and Special Separation Pay (F)Pension and Employee BonusDistribution (G) (A+B+C+D+E+F+G) to net income (%)compensation Compensation directors from an invested paid to
Title Name
TBB companies in finance All TBB companies in finance All TBB companies in finance All TBB companies in finance All TBB companies in finance All TBB companies in finance All TBB companies in finance All TBB All companies statementin finance TBB companies in finance All other than the companysubsidiarycompany ´ s
statement statement statement statement statement statement statement statement
Cash Stock Cash Stock
----- End of picture text -----

Title	Name	Compensation	Compensation	Compensation	Compensation	Compensation	Compensation	Compensation	Compensation	Ratio of total remuneration (A+B+C+D) to net income (%)	Ratio of total remuneration (A+B+C+D) to net income (%)	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Ratio of total compensation (A+B+C+D+E+F+G) to net income (%)	Ratio of total compensation (A+B+C+D+E+F+G) to net income (%)	Compensation paid to directors from an invested company other than the company´s subsidiary
		Rewards (A)		Pension and Separation Pay (B)		Earning Distribution (C)		Business Affair Expense (D)				Salary, Bonus and Special Disbursement (E)		Pension and Separation Pay (F)		Employee Bonus Distribution (G)
		TBB	All companies in fnance statement	TBB	All companies in fnance statement	TBB	All companies in fnance statement	TBB	All companies in fnance statement	TBB	All companies in fnance statement	TBB	All companies in fnance statement	TBB	All companies in fnance statement	TBB		All companies in fnance statement		TBB	All companies in fnance statement
																Cash	Stock	Cash	Stock

Ministry of Finance Representatives
Ex-Chairman	Rueen-Fong Chu
Chairman	Bor-Yi Huang
Ex-President	Tsan-Huang Chou
President	Chien-An Shih
Director	Shiu-Yen Lin
Director	Wen-Chieh Wang
Managing Director	Lien-Wen Liang
Director	Hung-Sheng Yu
Bank of Taiwan Representatives
Ex- Managing Director	Hong-Chi Chang
Managing Director	Li-Ling Lin
Director	Pei-Ming Huang
Director	Cheng-Chuan Kang
Land Bank of Taiwan Representative
Director	Ying-Ming He
AMIS MACHINERY INDUSTRY CO., LTD. Representatives
Ex- Director	Jong-Jyr Kau
Director	Che-Nan Wang
TBB Industry Union Representatives
Ex-Director	Ming-Hua Shie
Director	Feng-Yung Liu
Ex- Independent Managing Director	Chau-Chen Yang
Ex- Independent Director	Yaw-Huei Huang
Ex- Independent Director	Chih-Yu Cheng
Independent Managing Director	Xin-Wu Lin
Independent Director	Jin-Long Liu
Independent Director	Wei-Sheng Huang
Total		10,964	10,964			58,374	58,374	2,681	2,681	0.94%	0.94%	9,607	9,607	11,185	11,185	368	-	368	-	1.22%	1.22%	187

Note: 1. The Bank paid the drivers for Chairman Bor-Yi Huang, Ex-President Tsan-Huang Chou and current President Chien-An Shih in total of NT$2,010 thousand dollars.
Ex-Chairman Rueen-Fong Chu and Ex-President Tsan-Huang Chou were retired on Nov. 24, 2017 and Mar. 22, 2018, respectively.
Director Che-Nan Wang was the representative of Amis Machinery Industry Co., Ltd. during January 1 ~ June 29, 2018.

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Name of Directors
Classification of Compensation for Directors Amount of total remuneration (A+B+C+D) Amount of total remuneration (A+B+C+D+E+F+G)
All the companies in
TBB the finance statement TBB All Joint Ventures
I J
Hung-Sheng Yu, Hung-Sheng Yu, Hung-Sheng Yu, Hung-Sheng Yu,
Ming-Hua Shie, Ming-Hua Shie, Ming-Hua Shie, Ming-Hua Shie,
Feng-Yung Liu, Feng-Yung Liu, Feng-Yung Liu, Feng-Yung Liu,
Shiu-Yen Lin, Shiu-Yen Lin, Shiu-Yen Lin, Shiu-Yen Lin,
Wen-Chieh Wang, Wen-Chieh Wang, Wen-Chieh Wang, Wen-Chieh Wang,
Lien-Wen Liang, Lien-Wen Liang, Lien-Wen Liang, Lien-Wen Liang,
Li-Ling Lin, Li-Ling Lin, Li-Ling Lin, Li-Ling Lin,
Hong-Chi Chang, Hong-Chi Chang, Hong-Chi Chang, Hong-Chi Chang,
Pei-Ming Huang, Pei-Ming Huang, Pei-Ming Huang, Pei-Ming Huang,
~NT$2,000,000 Cheng-Chuan Kang, Cheng-Chuan Kang, Cheng-Chuan Kang, Cheng-Chuan Kang,
Ying-Ming He, Ying-Ming He, Ying-Ming He, Ying-Ming He,
Jong-Jyr Kau, Jong-Jyr Kau, Jong-Jyr Kau, Jong-Jyr Kau,
Che-Nan Wang, Che-Nan Wang, Che-Nan Wang, Che-Nan Wang,
Chau-Chen Yang, Chau-Chen Yang, Chau-Chen Yang, Chau-Chen Yang,
Chih-Yu Cheng, Chih-Yu Cheng, Chih-Yu Cheng, Chih-Yu Cheng,
Yaw-Huei Huang, Yaw-Huei Huang, Yaw-Huei Huang, Yaw-Huei Huang,
Xin-Wu Lin, Xin-Wu Lin, Xin-Wu Lin, Xin-Wu Lin,
Jin-Long Liu, Jin-Long Liu, Jin-Long Liu, Jin-Long Liu,
Wei-Sheng Huang Wei-Sheng Huang Wei-Sheng Huang Wei-Sheng Huang
Rueen-Fong Chu, Chien- Rueen-Fong Chu, Chien-
NT$2,000,000 (inclusive)~NT$5,000,000 Rueen-Fong Chu Rueen-Fong Chu An Shih An Shih
NT$5,000,000 (inclusive)~NT$10,000,000 (exclusive) Bor-Yi Huang Bor-Yi Huang Bor-Yi Huang Bor-Yi Huang
NT$10,000,000 (inclusive)~NT$15,000,000 (exclusive) - - Tsan-Huang Chou Tsan-Huang Chou
NT$15,000,000 (inclusive)~NT$30,000,000 (exclusive) - - - -
NT$30,000,000 (inclusive)~NT$50,000,000 (exclusive) - - - -
NT$50,000,000 (inclusive)~NT$100,000,000 (exclusive) - - - -
NT$100,000,000~ - - - -
Total 21 Persons 21 Persons 23 Persons 23 Persons
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Note: Compensation for Ex-President Tsan-Huang Chou (retired on March 22, 2018) has included the pension payment.

B. Compensation for President and Executive Vice Presidents

January 1, 2018 ~ December 31, 2018 Unit: NT$1,000

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Ratio of total
Pension and Bonus remuneration
Salary (A) and Special Ratio of Bonus and Special Employee Bonus of Earning Distribution (D) (A+B+C+D) to net Compensation
total Salary Separation Disbursement (C) income (%)All the paid to
Pay (B) companies in the directors from
an invested
Title Name finance statement
company
All the All the All the TBB All the companies in All the other than the
companies companies companies the finance statement companies company´s
TBB finance in the TBB finance in the TBB finance in the Cash Stock Cash Stock TBB finance in the subsidiary
statement statement statement dividends dividends dividends dividends statement
President Chien-An Shih Yes
Executive Vice
President Chang-Yi Chen
Executive Vice Chih-Chien
President Chang
Executive Vice
President Yi-Yun Wang
Executive Vice
Mei-Yeh Wu Yes
President
Executive Vice Chun-Sheng
President Tseng
EVP & Chief
Chiu-Yen Chen
Auditor
President
(Application
for retirement Tsan-Huang
Chou
effective on
2018/3/22)
Executive
Vice President
(Application Kun-Shan
for retirement Chen
effective on
2017/6/28)
Total 17,443 17,443 11,185 11,185 13,052 13,052 1,627 1,627 0.57% 0.57% 194
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Note : The remuneration for drivers of the President and EVPs: The Bank paid the drivers in total of NT$7,052 thousand in 2018.

34 34

Taiwan Business Bank Annual Report 2018

III

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

Classification of Compensation for Name of President and Executive Vice President
President and Executive Vice President TBB All investee companies
~NT$2,000,000 Kun-Shan Chen Kun-Shan Chen
Chien-An Shih, Chang-Yi Chen, Chien-An Shih, Chang-Yi Chen,
Chih-Chien Chang, Yi-Yun Wang, Chih-Chien Chang, Yi-Yun Wang,
NT$2,000,000 (inclusive)~NT$5,000,000 (exclusive)
Mei-Yeh Wu, Chun-Sheng Tseng, Mei-Yeh Wu, Chun-Sheng Tseng,
Chiu-Yen Chen Chiu-Yen Chen
NT$5,000,000 (inclusive)~NT$10,000,000 (exclusive)
NT$10,000,000 (inclusive)~NT$15,000,000 (exclusive) Tsan-Huang Chou Tsan-Huang Chou
Total 9 Persons 9 Persons
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Note: Compensation for Ex-President Tsan-Huang Chou has included the pension payment.

C. Members of the Management Team Receiving Employee Bonus & Bonus Distribution

December 31, 2018 Unit: NT$1,000; %

==> picture [456 x 437] intentionally omitted <==

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

Cash Total/After
Stock
Title Name Dividends Dividends Total tax Profit
Amount (%)
Executive Vice
President Chang-Yi Chen
Executive Vice
President Chih-Chien Chang
Executive Vice
President Yi-Yun Wang
Executive Vice
Mei-Yeh Wu
President
Executive Vice
President Chun-Sheng Tseng
EVP & Chief Auditor Chiu-Yen Chen
SVP & GM,
Chih-Wei Chen
Treasury Dept.
SVP & GM,
Yu-Chuan Chou
Accounting Dept.
Tseng-Hsiang Yi, Chang-Yu Lin, Yu-Min Chang, Chi-Fen Yen, Tzong-Wen Chou, Yung-Yu Song, Jia-
Ruey Luan, Ting-Huei Liao, Li-Yueh Hsu, Yin-Cheng Tseng, Ching-Yun Kuo, Hsih-Hui Chen, Yi-Chin
Chai, Chu-Jou Chen, Wen-Shu Lin, Tsung-Chu Hsieh, Hsiou-Chen Kang, Pi-Yu Chang, Li-Hui Chang,
Sung-Shui Chiu, Tung- Hsi Chen, Tsun-Lin Yeh, Chiang-Shu Lin, Mei-Chun Lin, Kuo-Liang Tseng,
Fu-Ming Hsu, Wen-Hsiu Huang, Huei-Nai Hung, Hsiao-Ming Chen, Li-Fang Lee, Chih-Yang Huang,
Shuan-Hua Liu, Yu-Chiao Wei, Yuan-Hsueh Hsiao, Yun-Shiang Tsai, Cheng-Chuan Lin, Long-Jiunn
Wu, Chih-Cheng Cho, Chien-Chung Lin, Mei-Chih Hou, Bi-Chu Chuang, Guei-Jin Chiou, Wen-Fang
Lin, Sung-Nan Chiao, Fuh-Yuh Yeh, Ching-Kuei Hsieh, Ruey-shyang Guo, Chao-Lieh Chen, Tien-Hang
Tsai, Yueh-Yen Weng, Jiunn-chiu Wang, Yueh-Chiao Wu, Yen-Hsueh Chang, Tien-Chin Lin, Tai Sun,
Kuo-Shu Tseng, Yen-Ling Chen, Chao-Chih Chueh, Ching-Hsiu Liu, Fu-Long Chen, Ming-Hui Chen,
Ming-Hsyang Kuo, Hsueh-Ru Liu, Chao-Hwa Hsu, Jiann-Yea Shyu, Ying-Che Fang, Yueh-Chin Wang,
Wan-Ju Shih, Yen-Hui Tu, Nien-Tzu Chen, Chiu-Chin Chen, Fang-Chuan Chiu, Pao-Sheng Lin, Hsien-
Min Chen, Mei-Hui Chen, Hsiu-Hsin Hou, Yen-Huey Wang, Chin-Hsiang Lin, Pi-Chuan Chien, Shu-
General Managers
Chin Lin, Ping-Hui Lee, Su-Fen Chen, Shu-E Chen, Shy-Yuan Wu, Li-Chuan Huang, Chin-Ho Huang,
of Departments and
Branches Jiann-Gwo Guu, Min-Chung Hsieh, Yu-Pei Liao, Chiu-Yu Lin, Shu-Fen Li, Kuan-Yau Cheng, Bih-Lien
Fang, Nai-Chia Chi, Li-Huei Chen, Sheng-Wang Chang, Ming-Tang Chen, Hsiu-Chiao Lin, Kuan-Yi
Huang, Shin-Mao Lin, Li-Chung Lin, Ping-Sung Yang, Man-Chung Yeh, Chih-Cheng Chen, Meng-Shin
Jeng, Meng-Liang Su, Shun-Tseng Liao, Yih-Shiou Wang, Kuo-Tsun Pai, Liang-Pin Chen, Tsai-Rong
Hung, Fu-Ching Chou, Cheng-An Hsieh, Jung-Yu Huang, Ming-Yi Lin, A-Chang Yang, Yueh-Man Sung,
Chien-Ta Wu, Li-Mo Yang, His-Her Pai, Wen-Chi Chen, Chin-Hsueh Li, Su-Ying Tsai, I-Man Chen,
Jiann-Jang Lin, Chia-Cheng Liu, Feng-Fu Chen, Hsin-Chuan Hsiao, Chih-Ming Chuang, Guo-Shiang
Huang, Chien-Lai Su, Yung-Sheng Hu, Chin-Hsiu Chen, Chang-Hui Hsu, Shun-Ho Chen, Mei-Chen
Chen, Chiou-Hwa Su, Wen-Jang Jou, Leh-Chin Kuo, Der-Hsung Lin, Cheng-Hung Wang, Ya-Hua Su,
Chin-Chuan Su, An-Yun Lin, Li-Jung Lin, Tzu-I Huang, Wen-Tai Yang, Ching-Wen Lee, Kuang-Tsai
Wang, Jung-Ling Wang, Hsueh-Hsia Chen, Shih-Yuan Lin, Shuang-Chen Su, Ching-Yang Lee, Shenn-
Bao Jean, Jen-Jung Fan, Be-Yun Tong, Yuan-Yuan Ying, Sue-Jen Chen, Feng-Ying Chen, Chin-Fu
Chiang, Cheng-Hung Chang
Total 162 Persons
Total 0 40,378 40,378 0.53%
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(4) The analysis of the percentage of total remuneration paid to the Directors, President and Vice Presidents in the last two fiscal years to net profit after tax in the parent company individual financial statements, the policy, standards and package of remuneration payment, the procedures for determination of remuneration and the connection between business performance and future risks
A. In 2017 and 2018, the percentage of the remuneration (including salaries, incentives, retirement allowance, and employee bonus) paid to Directors, President, and Vice Presidents to net profit after tax in the parent company individual financial statements were 1.24%, 0.74%, 1.22%, and 0.57%, respectively.
B. The analysis of policy, standards, and package of remuneration payment a Directors
- According to the requirements under Article 41 of the Articles of Association of the Bank, shall there be profits of the year and except for retaining the compensation amount for losses from previous years, the Bank shall allocate no more than 0.6% as the remuneration of Directors.
- Furthermore, according to the requirements under Article 21 of the Articles of Association of the Bank, the Board was authorized to determine the remuneration of directors, and such amount shall be determined according to the general remuneration offered within the industry.
- The remuneration paid to the directors is based on the standards in the industry, the respective performance of directors, the performance of corporate operations, and the results of the performance assessment by the Board. The remuneration for independent directors shall be subject to the monthly payment plan for remuneration passed at the general shareholders' meeting in 2011. Except for the monthly fixed remunerations payment, such directors shall not receive the director remuneration specified in the Articles of Association.
- Directors' remuneration distributed in 2017 was NT$36,582,000, and the directors' remuneration proposed to be distributed in 2018 shall be NT$58,374,000.
- b President, Vice Presidents, and Chief Auditor
- Regarding the remuneration paid to the President, Vice Presidents, and Chief Auditor, except for giving considerations to the standard in the industry, personal performance and corporate business performance are also taken into account. Moreover, such remuneration shall be based on relevant requirements of "Directions for Salary Payment to Employees," "Directions for Payment of New Year, Festival, and Performance Bonuses," "Directions for Payment of Employee Bonus," and "Remuneration Committee Organizational Procedures."
C. The procedures for the determination of remuneration and connection between business performance and future risks:
- a Directors
- Regarding the bonus of Directors of the Bank, the Articles of Association has provided that, shall there be profits of the year and except for retaining the compensation amount for losses from previous years, the Bank shall allocate no more than 0.6% as the remuneration of Directors. The shareholders' meeting authorized the Board to determine the payment for such remuneration according to the standards in the industry, the respective performance of directors, the performance of corporate operations, and the results of the performance assessment by the Board. Relevant performance assessment was proposed at the meeting of the Remuneration Committee for discussion and was submitted to and approved by the Board meeting. Regarding the remuneration for independent directors, the Board shall determine a reasonable remuneration different from that of the general directors according to the relevant standards within the industry. Except for the monthly fixed remunerations payment, such directors shall not receive the director remuneration specified in the Articles of Association. For losses incurred to the Bank resulting from dubious acts of the directors, the Audit Committee shall exert control and supervision on the existing and potential risks, and impose necessary punishment according to the relevant laws and regulations.
- b President, Vice Presidents, and Chief Auditor
- The approval procedures for the remuneration of President, Vice Presidents, and Chief Auditor shall be based on relevant requirements of "Directions for Salary Payment to Employees," "Directions for Payment of New Year, Festival, and Performance Bonuses" "Directions for Payment of Employee Bonus," and "Remuneration Committee Organizational Procedures." Such remuneration shall be implemented and paid after an assessment of performance based on the "Directions for Employee Audit," "Directions for Performance Audit," and "Directions for Administrative Incentives for Performance Audit" of the Bank, with consideration to the general standard within the industry. Furthermore, the remuneration and relevant performance assessment of the Bank's managers shall be proposed at the meeting of the Remuneration Committee for discussion annually, and the results thereof shall be submitted to the Board for approvals. Among which, the bonus part shall be linked to and subject to the before tax net profit achieving rate,

36 36

Taiwan Business Bank Annual Report 2018

III

business performance financial indications, and personal audit results of the Bank. For losses incurred to the Bank resulting from dubious acts of President, Vice Presidents, and Chief Auditor, the Board shall not only approve the dismissal of them and cease the payment of remuneration, but also impose necessary punishment according to the relevant laws and regulations.

3. Operations of Corporate Governance

(1) Operation of Board of Directors

A total of eleven(11) meetings were held by the Board in the most recent year (2018). The attendance of the members of the Board was as follows:

December 31, 2018

Title	Name	Number of required attendance (A)	Number of actual attendance (B)	Number of delegated attendance	Actual attendance rate (%) (B/A)	Name of the legal entity represented	Remarks
Director	Bor-Yi Huang	11	11	0	100	Ministry of Finance
Managing Director	Chien-An Shih	10	10	0	100	Ministry of Finance	Appointed on March 21, 2018
Managing Director	Tsan-Huang Chou	1	1	0	100	Ministry of Finance	Retired on March 21, 2018
Managing Director	Li-Ling Lin	11	10	1	90.9	Bank of Taiwan Co. Ltd.
Managing Director	Hong-Chi Chang	1	1	0	100	Bank of Taiwan Co. Ltd.	Retired on March 20, 2018
Managing Director (Independent Director)	Xin-Wu Lin	6	5	1	83.3		Appointed on June 29, 2018
Managing Director (Independent Director)	Chau-Chen Yang	5	2	3	40		Retired on June 29, 2018
Managing Director	Lien-Wen Liang	6	6	0	100	Ministry of Finance	Appointed on June 29, 2018
Director	Shiu-Yen Lin	11	11	0	100	Ministry of Finance
Director	Wen-Chieh Wang	11	10	1	90.9	Ministry of Finance
Director	Hung-Sheng Yu	11	11	0	100	Ministry of Finance
Director	Cheng-Chuan Kang	6	6	0	100	Bank of Taiwan Co. Ltd.	Appointed on June 29, 2018
Director	Pei-Ming Huang	11	11	0	100	Bank of Taiwan Co. Ltd.
Director	Ying-Ming He	11	11	0	100	Land Bank of Taiwan Co., Ltd.
Director	Che-Nan Wang	11	10	1	90.9
Director	Jong-Jyr Kau	5	5	0	100	AMIS MACHINERY INDUSTRY CO., LTD.	Appointed on June 29, 2018
Director	Feng-Yung Liu	6	6	0	100	TBB Industry Union	Appointed on June 29, 2018
Director	Ming-Hua Shie	5	5	0	100	TBB Industry Union	Retired on June 29, 2018
Independent Director	Jin-Long Liu	6	6	0	100		Appointed on June 29, 2018
Independent Director	Chih-Yu Cheng	5	3	2	60		Retired on June 29, 2018
Independent Director Independent Director	Wei-Sheng Huang Yaw-Huei Huang	6 5	6 5	0 0	100 100		Appointed on June 29, 2018 Retired on June 29, 2018
Other items that shall be recorded: 1. When one of the following situations occurred to the operations of the board, state the date and term of the board meeting, the content of proposals, opinions of all independent directors and the Company's actions in response to the opinions of the independent directors: (1) Matters included in Article 14-3 of the Securities and Exchange Act: Not applicable, the Company has already established an Audit Committee. (2) Other resolutions of the Board, which the independent director(s) voiced objection or reservation that are documented or issued through a written statement in addition to the above: None. 2. When Directors abstain themselves for being a stakeholder in certain proposals, the name of the Directors, the content of the proposal, reasons for abstentions and the results of voting counts should be stated. (1) Regarding the resolution "President Nomination" at the 7th extraordinary Board meeting of the 14th Board on March 21, 2018, except for the Managing Director Chien-An Shih, who abstained from the discussion of appointment and removal, the remaining directors have approved the resolution as proposed.

(2) Regarding the resolution "Cancel the Non-Competition Restriction on the DIrectors of the Company" at the 20th Board meeting of the 14th Board on March 21, 2018, except for Director Ying-Ming He, as a stakeholder, who abstained from the discussion, the remaining directors have approved the resolution as proposed.
(3) Regarding the resolution "Managing Director Hong-Chi Chang who is originally assigned by the Bank of Taiwan to the Bank as the equity representative has retired from his duty on March 20, 2018; therefore, please carry out the byelection for the Managing Director" at the 21st Board meeting of the 14th Board on May 9, 2018, except for Director Li-Ling Lin, as the nominee and in favor of the discussion among Directors, who abstained from the discussion, the remaining directors have approved unanimously to elect Director Li-Ling Lin as the Managing Director.
(4) Regarding the resolution "Credit Loans for Mega Bills Finance Co., Ltd." at the 22nd Board meeting of the 14th Board on June 14, 2018, except for Managing Director Shiu-Yen Lin, as a stakeholder, who abstained from the discussion, the remaining directors have approved the resolution as proposed.
(5) Regarding the resolution "President Nomination" at the 2nd extraordinary Board meeting of the 15th Board on June 29, 2018, except for the Managing Director Chien-An Shih, who abstained from the discussion of appointment and removal, the remaining directors have approved the resolution as proposed.
(6) Regarding the resolution "Appoint 3 Independent Directors of the Bank as the member of the 4th Remuneration Committee of the Bank" at the 2nd extraordinary Board meeting of the 15th Board on June 29, 2018, except for the Independent Director Xin-Wu Lin, Independent Director Jin-Long Liu, and Independent Director Wei-Sheng Huang, as stakeholders, who abstained from the discussion, the remaining directors have approved the resolution as proposed.
(7) Regarding the donations of NT$2.5 million to "TBB Industry Union" in 2019 described in "Chapter 4. Operating Expense - I. Business Expense - Donations" of the resolution "Budget Draft of the Bank for Next Year (2019)" at the 3rd Board meeting of the 15th Board on October 24, 2018, except for Director Hung-Sheng Yu and Director Feng-Yung Liu, as stakeholders, who abstained from the discussion, the remaining directors have approved the resolution as proposed.
(8) (VI) Regarding the resolution "Drafting the Attendance Payment Standards for Independent Directors of the Bank Participating in Functional Committee Meetings and Other Meetings Other than Managing Directors Meeting, Audit Committee, and Remuneration Committee" at the 3rd Board meeting of the 15th Board on October 24, 2018, except for the Independent Director Xin-Wu Lin, Independent Director Jin-Long Liu, and Independent Director Wei-Sheng Huang, as stakeholders, who abstained from the discussion, the remaining directors have approved the resolution as proposed.
(9) Regarding the resolution "Allocate NT$7 million from the Charitable Payment of our headquarter as the Donation to the TBB Industry Union" at the 4th Board meeting of the 15th Board on December 19, 2018, except for Director Hung-Sheng Yu and Director Feng-Yung Liu, as stakeholders, who abstained from the discussion, the remaining directors have approved the resolution as proposed.
Goals (e.g., establishing an Audit Committee, enhancing information transparency) primed to enhance the Board of Directors' professionalism and the assessment on their execution process for the year and the most recent year:
(1) Continual education for Directors regarding programs on corporate governance. The continuing education hour for each Director in 2018 has complied with the requirements under "Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed Companies."
(2) The Bank amended its regulations governing procedures for the Board of directors meeting according to requirements of Article 7 under the "Regulations Governing Procedure for Board of Directors Meetings of Public Companies," stated that at least one independent director shall attend the Board meeting in person. In the case of a Board meeting concerning any matter required to be submitted for a resolution by the Board, all independent directors shall attend in person; if an independent director is unable to attend in person, he or she shall appoint another independent director to attend as his or her proxy. The Board meetings convened in 2018 have complied with the requirement of having at least one independent director attending the Board meeting in person

Attendance of Independent Directors presenting at the Board meetings

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Number of Number
Number of Actual
Title Name attendance required attendance of actual delegated attendance Remarks
attendance rate (%) (B/A)
(A) (B)
Managing Director Xin-Wu Lin 6 5 1 83.3 Appointed on
(Independent Director) June 29, 2018
Managing Director Chau-Chen Yang 5 2 3 40 Retired on
(Independent Director) June 29, 2018
Independent Director Jin-Long Liu 6 6 0 100 Appointed on
June 29, 2018
Retired on
Independent Director Chih-Yu Cheng 5 3 2 60
June 29, 2018
Independent Director Wei-Sheng 6 6 0 100 Appointed on
Huang Jun. 29, 2018
Retired on
Remarks Yaw-Huei Huang 5 5 0 100
June 29, 2018
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38 38

Taiwan Business Bank Annual Report 2018

III

(2) Audit Committee activities

A total of thirteen (13) meetings (A) were held by the Audit Committee in the most recent year (2018). The attendance of Independent Directors was as follows:

December 31, 2018

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Number of Number of Actual attendance
Number of actual
Title Name required delegated rate (%) Remarks
attendance (A) attendance (B) attendance (B/A)
Managing Director Xin-Wu Lin 5 5 0 100 Appointed on
(Independent Director) June 29, 2018
Managing Director Chau-Chen Yang 8 5 3 62.5 Retired on June
(Independent Director) 29, 2018
Independent Director Jin-Long Liu 5 5 0 100 Appointed on
June 29, 2018
Retired on June
Independent Director Chih-Yu Cheng 8 8 0 100
29, 2018
Independent Director Wei-Sheng Huang 5 5 0 100 Appointed on
June 29, 2018
Retired on June
Independent Director Yaw-Huei Huang 8 8 0 100
29, 2018
Other items that shall be recorded:
1. Where the proceedings of the Audit Committee meeting include one of the following circumstances, then describe the date, session,
and motion of the board meeting, the relevant resolutions of the Audit Committee, and the Company's handling of the comments of
the Audit Committee:
(1) All conditions stated in Article 14-5 of the Securities and Exchange Act.
Board Date/ The resolution results of the Audit Committee and the Company's
Agenda
Period response regarding the Audit Committee's opinions
Resolution of the proposed nomination regarding
The 19th Board the succession of Manager Yu-Juan Chou of the Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the Jianguo Branch as the director of the Accounting Board for consideration.
14th Board on Department to fill in the vacancy of the director of The Company's response to the opinions of the Auditing Committee:
February 7, 2018 Accounting Department upon his/her retirement on Resolution passed by all directors in attendance with consent.
March 1, 2018.
The 20th Board Resolution of "Audited Individual and Consolidated Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the Financial Statement by CPA" and the draft reports of Board for consideration.
14th Board on the Company for 2017 (from January 1 to December The Company's response to the opinions of the Auditing Committee:
March 21, 2018 31, 2017). Resolution passed by all directors in attendance with consent.
The 20th Board Resolution of the proposed amendment to Resolution results of the Audit Committee: Paragraph 2, Article 4 was
meeting of the "Directions for Operating Systems for Banks revised as "...financial products know-how and management, trading
14th Board on Conducting Financial Derivatives Business of Taiwan experience recognition...," the meaning of the text is ambiguous
March 21, 2018 Business Bank" (hereinafter, the "Directions") in that whether the text means "management or trading experience" or
response to the revision of "Regulations Governing "management and trading experience. Please clarify the intent of the
Internal Operating Systems and Procedures for competent authority and revise to text with accurate meaning. Passed after
Banks Conducting Financial Derivatives Business" revision, and submitted to the Board for consideration.
by the Financial Supervision Commission The Company's response to the opinions of the Auditing Committee:
(hereinafter, "FSC"). Resolution passed by all directors in attendance with consent.
The 21st Board Resolution of the proposed procurement of "Central Audit Committee resolution:
meeting of the Account Host and Drive Configuration Update and (I) The resolution relates a procurement that involves procurement demand
14th Board on Project Services" in response to the demand for the at the same time; the proposer was changed; the proposal became jointly
May 9, 2018 business growth of the Bank and the improvement proposed by the Information Technology Department and the General
on the sustainable operating and security protection Affairs Department.
capacities. (II) Regarding the maintenance rate, add the description to specify it is
an "annual" rate; please also make additions to the requirements under
Subparagraph 1, Paragraph 1, Article 10 of "Directions for Construction
Work, Purchase, Customization and Selling of Properties of Taiwan
Business Bank."
(III) Add supplementary notes on the maintenance rate of equipment in
relations to central hosts in the industry when reporting to the Board.
Passed after revision, and submitted to the Board for consideration.
The Company's response to the opinions of the Auditing Committee:
Resolution passed by all directors in attendance with consent.
The 21st Board Resolution of the proposed amendment to Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the "Strategies and Regulations Governing Operating Board for consideration.
14th Board on Systems for Banks Conducting Financial Derivatives The Company's response to the opinions of the Auditing Committee:
May 9, 2018 Business of Taiwan Business Bank" (hereinafter, Resolution passed by all directors in attendance with consent.
the "Strategies & Regulations") in response to
the revision of "Regulations Governing Internal
Operating Systems and Procedures for Banks
Conducting Financial Derivatives Business" by the
Financial Supervision Commission (hereinafter,
"FSC").
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Board Date/ The resolution results of the Audit Committee and the Company's
Agenda
Period response regarding the Audit Committee's opinions
The 22nd Board Resolution of the proposed amendment to Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the "Regulations for Internal Control System for Futures Board for consideration.
14th Board on Introducing Broker Business" (including the internal The Company's response to the opinions of the Auditing Committee:
June 14, 2018 control system, internal audit implementation rules, Resolution passed by all directors in attendance with consent.
audit statement, and audit working paper) of the
Bank.
The 22nd Board Resolution of the proposed amendment to Resolution results of the Audit Committee: Revise the comparison table
meeting of the "Regulations for Internal Control System for and state "Removed" in the revision description column for the removal of
14th Board on Securities Firms" (including the internal control the existing article on page 20, instead of stating "Removed" in the revision
June 14, 2018 system, internal audit implementation rules, audit content column. Passed after revision, and submitted to the Board for
statement, and audit working paper) of the Bank. consideration.
The Company's response to the opinions of the Auditing Committee:
Resolution passed by all directors in attendance with consent.
The 1st Board Resolution of the personal change on financial Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the supervisor according to the business requirements. Board for consideration.
15th Board on The Company's response to the opinions of the Auditing Committee:
July 18, 2018 Resolution passed by all directors in attendance with consent.
The 2nd Board Resolution of "Audited Individual and Consolidated Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the Financial Statement by CPA" and the draft reports of Board for consideration.
15th Board on the Company for the first half of 2018 (from January The Company's response to the opinions of the Auditing Committee:
August 22, 2018 1 to June 30, 2018). Resolution passed by all directors in attendance with consent.
The 2nd Board Resolution of the proposed amendment to Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the "Strategies and Regulations Governing Operating Board for consideration.
15th Board on Systems for Banks Conducting Financial Derivatives The Company's response to the opinions of the Auditing Committee:
August 22, 2018 Business of Taiwan Business Bank" (hereinafter, the Resolution passed by all directors in attendance with consent.
"Strategies & Regulations").
The 3rd Board Resolution of submitting the "Budget Draft of the Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the Bank for Next Year (2019)." Board for consideration.
15th Board on The Company's response regarding the Audit Committee's opinions:
October 24, 2018 Regarding the resolution of donations of NT$2.5 million to "TBB Industry
Union" in 2019 described in "Chapter 4. Operating Expense - I. Business
Expense - Donations," except for Director Hung-Sheng Yu and Director
Feng-Yung Liu, as stakeholders, who abstained from the discussion, the
remaining directors have approved the resolution as proposed.
The 3rd Board Resolution of amending the "Regulations for Internal The Company's response regarding the Audit Committee's opinions:
meeting of the Control System for Securities Firms" (including the Approved for ratification, and submitted for the Board to ratify.
15th Board on internal control system, internal audit implementation The Company's response to the opinions of the Auditing Department:
October 24, 2018 rules, audit statement, and audit working paper) of Resolution passed by all directors in attendance with consent for approving
the Bank. ratification.
The 4th Board Resolution of the proposed engagement of Tan-Tan Resolution results of the Audit Committee: Passed, and submitted to the
meeting of the Chung and Chun-Guang Chen (both accountants) Board for consideration.
15th Board on from KPMG by the Bank regarding its financial The Company's response to the opinions of the Auditing Committee:
Dec. 19, 2018 report, tax assessment and certification, agreement Resolution passed by all directors in attendance with consent.
procedure project auditing and other businesses,
with professional charges on auditing of (similiarly
hereinafter)NT$6.7 million in total.
The 4th Board Resolution of the proposed allocation of NT$7 The Company's response regarding the Audit Committee's opinions: Such
meeting of the million from the charitable payment of our amount shall be donated to the TBB Industry Union for promoting charitable
15th Board on headquarter as the donation to the TBB Industry events while no specific charitable events shall be designated. Please
December 19, Union to foster harmonious labor relations, promote revise and describe. Passed after revision, and submitted to the Board for
2018 charitable events of the Bank and fulfill its corporate consideration.
social responsibility. The Company's response regarding the Audit Committee's opinions: Except
for Director Hung-Sheng Yu and Director Feng-Yung Liu, as stakeholders,
who abstained from the discussion, the remaining directors have approved
the resolution as proposed.
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(2) Except for the items in the preceding issues, other resolutions approved by two-thirds of all the director but yet to be approved by the Audit Committee: None.

40 40 Taiwan Business Bank Annual Report 2018

III

Directors abstaining in certain proposals for being a stakeholder, (the name of the Director(s), the content of the proposal, reasons for abstentions and the results of voting counts shall be stated): No.
Communication between directors and head of internal audit and CPA (including material issues, audit methods and results relating to the Company's finances and business).

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Communication Recommendations from Independent
Date Communication content
target Directors and the Company's response
2018/03/16 CPA Auditing matters to the financial report of 2018 and the No recommendation made during the
description of and discussion on the results. meeting.
2018/05/04 CPA Auditing matters to the financial report of Q1 in 2018 and the No recommendation made during the
description of and discussion on the results. meeting.
2018/08/13 CPA Negotiation to confirm the auditing time and related matters and No recommendation made during the
focuses on the interim report. meeting.
1. Communication regarding the current organization, human
resource, and execution of the Company.
Internal Audit
2. Discussion on the audit conducted by the competent authority
2018/08/17 Officer and the improvement regarding any problem found in the No recommendation made during the
(including audit recent significant audit to domestic and overseas branches. meeting.
personnel)
3. Adoption of a risk-oriented and informational tool-based
approach to exchange opinions on the future audit target.
Discussion on the key audit matters and results regarding the No recommendation made during the
2018/08/17 CPA
individual financial report from January to June 2018. meeting.
Recommendations from Independent
1. Discussion on the changes in the consolidated statement of Directors: It is recommended that the
profit or loss for the recent periods, including effects after the taxing experiences in each country
transformation of operating strategies and potential probability shall be considered before making an
2018/10/22 CPA
risks. appropriate estimation to the tax amount.
2. Discussed on the estimation method for tax amount. The Company's response: Handled
according to the Independent Directors'
recommendation.
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Key annual emphasis in working for the Audit Committee: The Audit Committee aims to assist the Board in using the appropriate expressions of the Company's financial statements; appointing (dismissing) the CPA and assuring its independence and performance; and overseeing effective implementation of internal controls, compliance with laws, regulations, and rules; as well as implementing controls for existing or potential risks.
(1) Supervise the appropriate expressions in the Company's financial statements: Review the annual financial statements, operating reports, and earning distribution each year (considered and passed at the 6th meeting of the 3rd Audit Committee), and issue the review report to the shareholders' meeting according to the requirements under Article 219 of the Company Act approved by paragraph 3, Article 14-4 of the Securities and Exchange Act.
(2) Appointment (dismissal) of the CPA and assuring its independence and performance: Evaluate the appointment (dismissal) of the CPA and undertaking the annual assessment of the independence and performance of the CPA (considered and passed at the 4th meeting of the 3rd Audit Committee); and report to the shareholders' meeting for review (considered and passed at the 4th meeting of the 15th Board).
(3) Effective implementation of internal controls: The Bank has established the organization, structure, and authorization, and has prepared the internal audit workbook and the working paper. These items shall contain evaluations of the requirements and the business process under the internal control system to determine whether the current system and procedures have proper internal controls in place; whether the departments comply with relevant requirements and duly execute the internal controls; and the rationale of the effects of executing such internal controls, and proposals of improvement recommendations at any time. The internal audit shall carry out the audit activity according to the rules, and shall submit reports to the Board and the Audit Committee on a regular basis.
(4) Comply with relevant laws, regulations, and rules as well as control over existing and potential risks: The laws and regulations of the headquarters comply with the provisions of the competent authority, in that it shall report the execution of the Bank's compliance with the system to the Audit Committee and the Board at least every half year. The legal compliance system in place in the second half of 2017 and the first half of 2018 was reported to the 19th meeting of the 2nd Audit Committee on February 2, 2018, and to the 19th Board meeting of the 14th Board on February 7, 2018, as well as to the 2nd meeting of the 3rd Audit Committee on August 17, 2018 and the 2nd Board meeting of the 15th Board on August 22, 2018, respectively.
(5) Others: Personnel changes for the accounting supervisor (discussed during the 19th meeting of the 2nd Audit Committee) and personnel changes for the financial supervisor (discussed during the 1st meeting of the 3rd Audit Committee).

(3) Strategy Development Committee activities

A total of one (1) meeting was held by the Strategy Development Committee in the most recent year (2018). The attendance of committee members was as follows:

December 31, 2018

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Number of Number
Number of Actual
Title Name attendance required attendance of actual delegated attendance Remarks
attendance rate (%) (B/A)
(A) (B)
Chairman Bor-Yi Huang 1 1 0 100
Chien-An
Managing Director Shih 1 1 0 100
Managing Director Xin-Wu Lin 1 1 0 100
(Independent Director)
Independent Director Jin-Long Liu 1 1 0 100
Independent Director Wei-Sheng 1 1 0 100
Huang
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(4) CSR Committee activities

A total of one (1) meeting was held by the CSR Committee in the most recent year (2018). The attendance of committee members was as follows:

December 19, 2018

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Number of Number
Number of Actual
Title Name attendance required attendance of actual delegated attendance Remarks
attendance rate (%) (B/A)
(A) (B)
Chairman Bor-Yi Huang 1 1 0 100
Chien-An
Managing Director Shih 1 1 0 100
Managing Director Xin-Wu Lin 1 1 0 100
(Independent Director)
Independent Director Jin-Long Liu 1 1 0 100
Independent Director Wei-Sheng 1 1 0 100
Huang
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(5) Items disclosed in accordance with the Corporate Governance Best Practice Principles for Banking Industry: Please refer to the Bank's website under About TBB > Corporate Governance and Investor Relations (https://www.tbb.com.tw/).
(6) State of corporate governance, shortcomings in Corporate Governance Best Practice Principles for Banking Industry, and the cause of the said gaps

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State of operations Gaps with the
Corporate Governance
Practices Best Practice
Assessed items Principles for the
Yes No Summary Banking Industry, and
the cause of the said
gaps
1. Structure of the bank's shareholders
and equities
(1) Does the bank stipulate and implement  The Bank has established customer complaints procedures and the customer complaint No gaps
a set of internal procedures to handle and stock affairs contact window, which will look into the circumstances upon receiving
shareholders' suggestions, queries, recommendations, doubts, or disputes, and pass the task to relevant departments for
disputes and litigations? handling. The Bank also has a spokesperson to address the problem to external parties.
(2) Does the bank keep track of the major  The Bank refers to the declaration of changes in the Register of Shareholders when closing No gaps
controlling shareholders as well as the stock transfer and the monthly report for internal parties to keep track and understand
their ownership structures? the shareholding changes of substantial shareholders and analyze the final controller of
substantial shareholders.
(3) Does the bank set up a fire wall and  The directions and procedures for the management of reinvestment business of the Bank No gaps
risk control mechanism to reduce the provide relevant requirements for the supervisors of its related companies, benefitting in
risks involved with the bank's related effective control over its performance and business overview.
companies? In respect of the firewall mechanism, personnel, accounting, assets, and finance departments
all have distinct operations.
Loans to related companies are all subject to the relevant laws and regulations under Article
32 and Article 33 of the Banking Act.
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42 42

Taiwan Business Bank Annual Report 2018

III

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State of operations Gaps with the
Corporate Governance
Practices Best Practice
Assessed items Principles for the
Yes No Summary Banking Industry, and
the cause of the said
gaps
2. Board of directors and its
responsibilities
(1) Apart from the Remuneration  1. The Bank has established the Audit Committee, Remuneration Committee, Corporate No gaps
Committee and Audit Committee, does Social Responsibility Committee, and Strategic Development Committee under the Board.
the bank assembled other functional 2. There is no nomination committee; however, the Articles of Association of the Bank
committees at its own discretion? provide that the election of Directors shall adopt the nomination system. Any re-election of
Directors shall be subject to nomination and subject to the approval of the Board before
being proposed at the Shareholders' meeting for election. The 15th Board was elected at
the Annual Shareholders' Meeting in 2018.
(2) Does the bank regularly evaluate the 
independence of CPAs? Regular assessment on the independence of the appointed CPA is carried out annually No gaps
submitted to the Board meeting for approval before granting the appointment The estimate
had been carried out at the 4th meeting of the 15th Board on December 19, 2018, according
to the requirements under Article 38 of "Corporate Governance Practices Best Practice
Principles for the Banking Industry" and Article 68 of "Statement on Auditing Standards
No.46," with reference to the independence of CPA in the CPA Auditing Plan. The assessing
items are as follow:
1. The CPA appointed by the Bank does not provide account-keeping, financial system
design introduction, appraisal (assessment) business, management function, actuary
services, internal audit outsourcing, human resources services, investment consultancy,
and legal services.
2. The CPA appointed by the Bank does not undertake contingency cases on professional
charges (i.e., proceedings), active or confidential tax avoidance plan and personal taxation
case for financial director (above).
3. The 2 appointed CPAs have not been appointed for over 7 years, which complies with
the requirements under Article 38 of "Corporate Governance Practices Best Practice
Principles for the Banking Industry" and Article 68 of "Statement on Auditing Standards
No.46."
3. In the event the bank is a publicly  Relevant department of the headquarter, such as Board Secretariat Department, shall be the No gaps
listed or OTC- listed company, has department fully (jointly) responsible for the corporate governance. Passed at the 6th meeting
the bank instituted a dedicated (or of the 15th Board, Executive Vice President Chih-Chien Chang was designated as the
concurrent) corporate governance manager for corporate governance to protect the shareholders' interests and strengthen the
unit or personnel to be in charge function of the Board. Mr. Yi has held the post of director in relation to affairs of finance and
of affairs relating to corporate corporate governance for over three years with handling matters concerning the compliance
governance (including but not limited of Board meetings and Shareholders' meetings, preparing the meeting minutes for Board
to the provision of necessary data for meeting and Shareholders' meeting, providing assistance for Directors and Supervisors
Directors and Supervisors to execute when assuming office and continuing education, providing required information for executing
their duties, administering matters business, providing assistance regarding their compliance with the law as his primary duties.
relating to the Board of Directors' Affairs carried out in relation to the corporate governance in 2018 are as follow:
meetings and shareholders' meetings 1. On March 20 and March 21, 2018, the corporate shareholder Bank of Taiwan and
in accordance with law, administering the Ministry of Finance re-assigned the equity representative. The Board Secretariat
company incorporation and change in Department has disclosed material information and reported to the Board meeting
incorporation, and producing minute according to the requirements. Moreover, the Administration Management Department has
books for the Board of Directors' and applied for the alteration registration to the Ministry of Economic Affairs, and both tasks
shareholders' meetings)? were successfully completed.
2. Provide Directors the continuing education information regarding corporate governance
and track the continuing education conditions. In 2018, the continuing education for all
Directors complied with the hours prescribed in the "Directions for the Implementation
of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed
Companies."
3. Providing logistics of Board meetings for 11 times, succeeded in delivering the notice
of meetings and the agenda to Directors 7 days prior to the date of the meeting and
dispatched the meeting minutes within 20 days from the ending of the Board meeting.
4. Providing the logistics for the annual Shareholders' meeting of 2018, including dispatching
the notice of the meeting 20 days prior to the meeting, preparing the agenda of the
Shareholders' meeting, and publishing the meeting minutes of the Shareholders' meeting
within 20 days from the ending of the meeting, and all tasks were successfully completed.
5. The number of cases required tracking for the execution of Board meetings in 2018 was
466 in total, and the executive departments have successfully completed all cases.
4. Does the bank establish a channel  1. Stakeholders may contact the Bank through methods of presenting themselves at the No gaps
to communicate with shareholders bank, letter, phone call, fax, and e-mail. A reporting mailbox and a direct line are also in
(including but not limited to place for reporting matters of breach of trust.
shareholders, employees and 2. Establishing IR tools in the Investors Relations on our corporate website to benefit our
customers, etc.)? services to investors.
3. Set up About TBB > Corporate Social Responsibility > Relationship with Stakeholders on
our corporate website, establishing Audit Committee contact window,
Q&A for stakeholders, contact window for stakeholders, verification of stakeholders, etc., to
respond to the issues our stakeholders' concern, protecting their interests.
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State of operations Gaps with the
Corporate Governance
Practices Best Practice
Assessed items Principles for the
Yes No Summary Banking Industry, and
the cause of the said
gaps
5. Information disclosure
(1) Does the bank set up a website for  1. Disclosure of information such as About Taiwan Business Bank, Financial Information, No gaps
the disclosure of relevant information News & Event, Shareholder Service, and IR Tools in the Investors Relations on the
on financial status and corporate corporate website.
governance?
2. Disclosure of the corporate governance structure, Board, Board resolutions, attendance
of Directors at Board meetings and continuing education circumstances, internal audit,
regulations regarding corporate governance as well as the communication between
Independent Directors, internal audit supervisor, and CPA in About Taiwan Business Bank
> Corporate Governance on the corporate website.
(2) Does the bank take any other methods  1. To realize the open information, the Bank has established the "Procedures for the No gaps
to disclose its information (e.g. English Operations for Disclosing Information Externally." According to the requirements, the
website, a special group engaged on disclosure to be reported such as information on finance and business shall be carried
gathering and compiling the bank's out by designated personnel of the relevant department in accordance with the duties.
information, the information announced Furthermore, information such as About Taiwan Business Bank, Financial Information,
through the bank's spokesman, and News & Event, Shareholder Service, and IR Tools is provided in the Investor Relations on
regular investor conference process the corporate website; an English website was also established for foreign investors to
disclosed on the bank's website)? access relevant information.
2. The mechanism of spokesperson is responsible for providing descriptions and announcing
the news to external parties, so as to ensure investors may receive accurate news.
6. Does the bank have other relevant  1. To clarify the rights and obligations of employees and the employer, the Bank established No gaps
information for better understanding the “Working Rules” according to the Labor Standards Act and relevant laws and
the Bank's corporate governance regulations, with reference to the nature of the banking industry, to regulate employees'
operation(such as employee rights, rights. The Bank also established the “Directions for Measures of Prevention, Complaint,
caring for employees, investors and Punishment of Sexual Harassment at the Workplace of Taiwan Business Bank” as
relationship, stakeholder rights, on- regulations according to the Act of Gender Equality in Employment.
the-job education of directors and 2. Caring for Employees:
supervisors, implementation of (1) Employees are assets of the corporates. The Bank has spared no efforts in caring
risk management policies and risk for its employees. Except for establishing working rules and personnel management
assessment standards, implementation rules according to relevant labor laws such as the Labor Standards Act, the Bank
of customer policies, liability insurance complied with the laws and regulations and insured for the Labor Insurance,
policies purchased by the bank National Health Insurance, and provision of retirement pension for its employees.
for directors and supervisors, and It also organizes health check for employees regularly, provides discounted group
donations to political parties, interested medical insurance and casualty insurance to protect the lives of our employees,
parties, or charity organizations)? allowing employees to exert their talents at work worry-free. Also, to strengthen the
competitiveness of our employees and improve their professional know-how, the Bank
organizes training courses for different businesses according to the annual employee
training plan, provide a diversified programs on the digital learning website, and holds
nonscheduled celebrity seminars and professional lectures via video. The Bank has
a comprehensive system of remuneration and rewards as well as the promotion
channel, diversified training and welfare measures that attract and retain talents,
joining hands for the prosperity of the Company.
(2) The Bank values the rights of our employees and holds the regular labor-
management conferences where employees and the employer may conduct sufficient
communications and negotiations regarding the rights of employees or welfare,
signing the group agreement and maintaining the peaceful labor-management
relationship.
3. To realize the corporate governance, the Bank subscribed for “Directors' and Officers'
Liability Insurance” for Directors and officers of the Bank since January 5, 2016. The latest
insured circumstances have been reported at the 5th Board meeting of the 15th Board.
4. The Bank established the “Directions for Processing of Donations of Taiwan Business
Bank” to regulate the charitable group donation projects where the stakeholder(s) acts as
the representative or the manager.
5. The Bank considers that proper handling of customer complaints may improve the service
quality and realize the control for operating risks. The Bank established the “Customer
Complaint Center” to respond to customer complaints, and established the “Directions for
the Processing of Customer Complaints” of the Bank for compliance.
6. The Bank established the handling procedures and regulations in response to "scams
against financial institutions by scoundrels," "report and contact for major contingencies,"
and "report and contact for disastrous emergencies" to actively care for and effectively
remind our customers to avoid the losses resulting from scams.
7. To improve our attention attaches to the handling of with customers' disputes, increase
the efficiency and quality for handling consumption disputes, and protect the rights of
consumers, the Bank established the "Consumer Disputes Handling System," and the
Auditing Department shall review the execution.
8. To protect customer rights and benefits, optimize the business operation, the Bank
established the "Consumer Protection Policy of Taiwan Business Bank" and "Procedures
for Consumer Protection Procedures of Taiwan Business Bank," and designated the
responsible department to inspect the effectiveness of the consumer protection system.
The Auditing Department shall be responsible for examine the execution and realize the
protection for consumers.
9. To treat Shareholders in a fair manner, the Bank established the "Procedures for the
Operations for Disclosing Information Externally," "Directions for Equity Management,"
and "Ethical Corporate Management Best Practice Principles," which clearly stated
that the internal personnel is prohibited from trading securities of the Bank before the
announcement of relevant information.
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44 44

Taiwan Business Bank Annual Report 2018

III

State of operations Gaps with the Corporate Governance Practices Best Practice
Assessed items Principles for the Yes No Summary Banking Industry, and the cause of the said gaps
1. With respect to the results of annual  The Bank amended the Regulations for Board Performance Assessment, stating that the No gaps corporate governance evaluation assessment for Board performance shall be outsourced every three years. The board most recently issued by the Corporate performance assessment of 2018 had been completed at the end of February 2019 and will Governance Center of Taiwan Stock be reported at the 6th meeting of the 15th Board. Exchange, please describe the improvements and provide priority and measures to enhance those matters that have not yet been improved.

(7) Operations of the Remuneration Committee

A. Members of the Remuneration Committee

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Title Qualifications Qualifications Qualifications (Note 1) Independent Status (Note 2) Number of Serving as the Member of Remuneration Note
(Note 3) Committee for Other
Name A B C 1 2 3 4 5 6 7 8 Public Companies
Managing Director Xin-Wu Lin          0 Appointed on
(Independent Director) 2018/6/29
Independent Director Jin-Long Liu           0 Appointed on 2018/6/29
Independent Director Wei-Sheng Huang          0 Appointed on 2018/6/29
Managing Directo (Independent Director) Chau-Chen Yang           0 Resigned on 2018/6/28
Independent Director Chih-Yu Cheng           0 Resigned on 2018/6/28
Independent Director Yaw-Huei Huang           0 Resigned on 2018/6/28
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Note 1: Directors and Supervisors shall meet one of the following professional requirements, together with at least five-year work experience:
A. An instructor or higher in a department of commerce, law, finance, accounting, or other academic department related to the banking business in a public/private junior college, college, or university.
B. A judge, public prosecutor, attorney, certified public accountant, or other professional or technical specialist who has passed a national examination and has been awarded a certificate in a professional necessary for the banking business.
C. With work experience in the fields of commerce, law, finance, accounting, or other profession necessary for the banking business.
Note 2: During the two years before being elected or during the term of office, members shall meet the following terms with “” mark. (1) Neither employees of the bank nor its affiliates.
(2) Neither a director or a supervisor of the bank nor its affiliates. (This restriction does not apply to independent director positions in the bank, its parent company or subsidiary, which have been appointed in accordance with Securities and Exchange Act or laws of the registered country.)
(3) Individual shareholder who holds shares, together with those held by his/her spouse, minor children, or held under others' names, in an aggregate amount of 1% or more of the total outstanding shares of the bank or natural persons who rank among the top 10 shareholders in terms of the share volume held are excluded.
(4) The spouse or relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs are excluded.
(5) Directors, supervisors, or employees of a juristic person shareholder that directly hold 5% or more of the total outstanding shares of the bank or ranks among the top 5 juristic person shareholders in the terms of share volume held are excluded.
(6) Directors, supervisors, the managerial officer, or the shareholder holding 5% or more shares of a specific company or institution that also have financial or business dealings with the bank are excluded.
(7) A professional, owner, partner, director, supervisor, or the managerial officer and his/her spouse of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting or consulting services to the bank or its affiliates is excluded.
(8)Any of the circumstances in the subparagraphs of Article 30 of the Company Act doesn't happen.

B. Responsibility of the Remuneration Committee

The Remuneration Committee shall exercise the due care of a good administrator and perform the following duties abide by its obligations:
a. Formulate and regularly review the policy, system, standards and structure of the performance appraisal, salary and remuneration of directors and managerial officers.
b. Regularly review and stimulate the salary and remuneration of directors and managerial officers.

C. Operation of Remuneration Committee:

a. The Bank has a Remuneration Committee composed of 3 members.
b. Term of office of the current members: From June 29, 2018 to June 28, 2021. The Remuneration Committee met six(6) times (A) in the most recent year. The table below provides information on the qualifications and attendance of the members.

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Title Name Number of actual Number of delegated Actual attendance rate Remarks
attendance (B) attendance (%)(B/A)(Note)
Committee Chair Xin-Wu Lin 3 100 Appointed on June 29, 2018; required attendance 3
times; with an attendance rate of 100%.
Member Jin-Long Liu 3 100 Appointed on June 29, 2018; required attendance of 3
times; with an attendance rate of 100%.
Member Wei-Sheng Huang 3 100 Appointed on June 29, 2018; required attendance of 3
times; with an attendance rate of 100%
Committee Chair Chih-Yu Cheng 3 100 Resigned on June 28, 2018; required attendance of 3
times; with an attendance rate of 100%.
Member Chau-Chen Yang 3 100 Resigned on June 28, 2018; required attendance of 3
times; with an attendance rate of 100%.
Member Yaw-Huei Huang 3 100 Resigned on June 28, 2018; required attendance of 3
times; with an attendance rate of 100%.
Other items that shall be recorded:
1. If the Board of Directors does not adopt or amend the recommendations made by the Remuneration Committee, the date, and
session of the Board of Directors' meeting, resolutions, voting results and handling of opinions of the Remuneration Committee by the
Bank should be disclosed (if the remuneration approved by the Board of Directors is better than that of the Remuneration Committee,
the discrepancies and related reasons should be stated): None.
2. For the decisions made by the Remuneration Committee, if there are members who vetoed or withheld from the decision and there
are documented records, the date, number, content of the motion, all members' opinions, and ways in handling these opinions should
be elaborated: None.
3. Discussion of the proposal and handling of opinions for 2018
Board Date/Period Agenda The resolution results of the Remuneration Committee and the Company's
response regarding the Remuneration Committee's opinions
The 20th Board The allocated and distributed amount and percentage for Resolution results of the Remuneration Committee: Passed, and submitted to the
meeting of the 14th the remuneration of employees and Directors in 2017 were Board for consideration.
Board on March 21, proposed to be NT$272,350,373 and NT$36,581,648, as The Company's response regarding the Remuneration Committee's opinions:
2018 well as 4.467% and 0.6%, respectively. Resolution passed by all directors in attendance with consent.
The 20th Board Resolution of regular assessment of supervisors and Resolution results of the Remuneration Committee: Passed, and submitted to the
meeting of the 14th managers of the Bank. Board for consideration.
Board on Mar. 21, The Company's response regarding the Remuneration Committee's opinions:
2018 Resolution passed by all directors in attendance with consent.
The 1st Board meeting Resolution of remuneration distribution of the Bank in 2017. Resolution results of the Remuneration Committee: Passed, and submitted to the
of the 15th Board on Board for consideration.
July 18, 2018 The Company's response regarding the Remuneration Committee's opinions:
Resolution passed by all directors in attendance with consent.
The 1st Board meeting Resolution of the personal change on financial supervisor Resolution results of the Remuneration Committee: Passed, and submitted to the
of the 15th Board on according to the business requirements. Board for consideration.
July 18, 2018 The Company's response regarding the Remuneration Committee's opinions:
Resolution passed by all directors in attendance with consent.
The 3rd Board Resolution of the proposed revision of “Directions for Resolution results of the Remuneration Committee: Passed, and submitted to the
meeting of the 15th Retirement, Gratuity, and Layoff of Employees of Taiwan Board for consideration.
Board on October 24, Business Bank.” The Company's response regarding the Remuneration Committee's opinions:
2018 Resolution passed by all directors in attendance with consent.
The 4th Board meeting Resolution of reporting the implementation results of Resolution results of the Remuneration Committee: Passed, and submitted to the
of the 15th Board on the normal discounted retirement plan of the Bank and Board for consideration.
December 19, 2018 proposed to adjust the number of months for incentive The Company's response regarding the Remuneration Committee's opinions:
payment since 2020. Resolution passed by all directors in attendance with consent to adjust the number of
months; the whole case was passed after revision.
The 4th Board meeting Resolution of carrying out the proposed employee Resolution results of the Remuneration Committee: Agreed on amending wordings and
of the 15th Board on shareholding trust and establish the Employee Shareholding adjustments on article sequence. Passed after revision, and submitted to the Board for
December 19, 2018 Trust Committee of the Bank to improve employees' consideration.
benefits, cohesiveness and reinforce the equity of the Bank. The Company's response regarding the Remuneration Committee's opinions:
Resolution passed by all directors in attendance with consent; however, the Human
Resources Department shall determine if it is required to report to the Ministry of
Finance.
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Note 1: Where members of the Remuneration Committee resign before the end of the year, the Notes column shall be annotated with the date of resignation. Actual presence rate (%) shall be calculated using the number of Remuneration Committee meetings convened and actual presence during the term of service.
Note 2: When an election is held for the Remuneration Committee before the end of the year, members of both the new and old committee shall be listed in separate columns and noted as new, old or re-elected members, along with the elected date, in the remark column. The actual presence rate (%) shall be calculated using the number of Remuneration Committee meetings convened and actual presence during the term of service.

46 46

Taiwan Business Bank Annual Report 2018

III

(8) Corporate Social Responsibility

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Current Operation (Note 1) Gaps with the
Corporate Social
Responsibility Best
Assessed items Practice Principles
Yes No Summary for TWSE/GTSM
Listed Companies
and root causes
1. Exercising Corporate
Governance  1. The Bank specified in its Articles of Association that the purpose of the Bank is to comply with No gaps
(1) Does the bank declare its the national fiscal policy, provide credits for the public and SMEs, and help SMEs improving their
corporate social responsibility production facilities, financial structures, and ensure the healthy operations and management. The
policy and examine the results of Bank shall also adopt the Corporate Social Responsibility Best Practice Principles as its standard
the implementation? to realize the responsibilities as the specialized bank for SMEs to maintain the stability of social
finance and actively participate in matters of social environments, promotion of social welfare, and
caring for the underprivileged.
2. To realize the social corporate responsibility and promote the balances and sustainable
development of the economy, society, and ecological environment, the Bank established the
“Corporate Social Responsibility Best Practice Principles” and prepared the Corporate Social
Responsibility Report that published on the website of the Bank, disclosing the promotion of the
Bank's social responsibility.
(2) Does the bank organize social  The training program of the Bank includes contents related to social responsibility; it also assigns No gaps
responsibility training on a employees to participate in external training programs in relation to corporate social responsibility.
regular basis?
(3) Does the bank have a unit that  1. The Bank has established the “CSR Committee” and disclosed information related to the No gaps
specializes (or is involved) in organizational structure of the CSR Committee on the Bank’s website. The "Corporate Social
CSR practices? Is the CSR unit Responsibility Best Practice Principles" was also in place, stating that the CSR Committee shall
run by senior management and report to the Board annually on the implementation of corporate social responsibilities. The meeting
reports its progress to the board of the CSR Committee shall be conducted every half a year and the frequency may be adjusted as
of directors? necessary, but at least annually.
2. Work groups subordinate to the CSR Committee shall compile the results of implementing
 corporate social responsibilities of the year (please refer to IX. “Corporate Social Responsibility
Report”), and set up new targets and execution plans for next year. The relevant report shall be
submitted to the Board for approval and disclosed in the annual report and on the Bank’s website.
(4) Does the bank set up a The Bank has established the "Directions for Salary Payment to Employees" and "Directions for No gaps
reasonable remuneration policy Payment of New Year, Festival, and Performance Bonuses," which awards employee bonus according
commensurate with employees' to the operating performance of the Bank and considers the year-end audit results of the employees as
performance appraisals and the basis for promotion and salary. Furthermore, the Employee Reward and Punishment Regulations
CSR? Is the remuneration policy of the Bank provide clear punishment terms regarding violation of business ethics or conduct of bribery
supported by an effective reward/ and corruption, with dismissal from office as the heaviest punishment. In addition, the Regulations also
discipline system? set out the reward provisions regarding prevention or reporting of misconducts or fraud, effectively
encouraging employees to realize business ethics and fulfill social responsibilities.
2. Fostering the Sustainable
Environment
(1) Does the bank endeavor to  1. Toner cartridges are provided to recycling companies for recycling and reusing. No gaps
utilize all resources more 2. Promotion of double-sided printing to save the usage of paper.
efficiently and use renewable 3. Engaging recycling companies to handle or donate old “computer equipment,”
materials which have a low 4. Continuous using paper rolls free of BPA.
impact on the environment? 5. Fully replacing office lightings at our business promises to LED lightings with “Energy Lable.”
6. Lightings in public areas and emergency lightings in the headquarter building are replaced with
new LED lightings.
(2) Does the bank establish proper  1. Executing environment cleaning and maintenance according to the “Procedure Guidelines for the No gaps
environmental management Cleaning and Maintenance of Business Premises” and implement the waste sorting in response to
systems based on the environmental protection.
characteristics of their industries? 2. To save energy on a sustained basis, the Bank complied with the ISO50001 Energy Management
and published the energy policy on our official website, and built the management system and
regulations for energy usage. The headquarter building was awarded the certificate for ISO50001
Energy Management System.
(3) Does the bank monitor the  1. Compliance with "Rules of Energy Saving for Specified Energy Users" promulgated by the Ministry No gaps
impact of climate changes on its of Economic Affairs and Taipei City Self-Government Ordinance for Energy Saving and Carbon
operating activities, implement Emission Reduction, the average air-conditioning temperature within business promises and offices
greenhouse gas emission- remained at 26°C or above.
checks, formulate energy-saving 2. The Bank implements the water and energy saving measures and tracks the water and energy
and carbon- emission reduction usage of each department as a reference for the evaluation of operating performance.
as well as greenhouse gas- 3. Review of execution in each improvement plan for energy saving to enhance the energy efficiency
reduction strategies? of equipment and cut down the utility expenses.
4. Declaration of "Information on Greenhouse Gases Emission and Reduction" on Market
Observation Post System of TWSE for disclosing the results of the Bank's energy saving and
carbon emission reduction execution.
5. Introduction of ISO 14064 Greenhouse gases Part 1: Specification with Guidance to disclose the
greenhouse gases emission of the headquarter building.
3. Preserving Public Welfare
(1) Does the bank develop its policies  The regulations on personnel affairs of the Bank are established in accordance with the relevant labor No gaps
and procedures in accordance laws, with reference to internationally recognized principles concerning basic human rights of labor.
with laws and the International Bill The Bank adopts an equal employment policy irrespective of gender, race, age, marriage status, and
of Human Rights? family conditions, and delivers equal opportunities principles in respect of compensation, employment
conditions, training, and promotion to protect the legal rights of employees.
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Current Operation (Note 1) Gaps with the
Corporate Social
Responsibility Best
Assessed items Practice Principles
Yes No Summary for TWSE/GTSM
Listed Companies
and root causes
(2) Does the bank have avenues  Employees of the Bank may file a complaint in writing to directors at all levels at any time with No gaps
through which employees may telephone and online complaint methods also available, and the headquarter will assign specialists for
raise complaints? Are employee proper handling.
complaints being handled
properly?
(3) Does the bank provide safe and  The Bank provides regular health check every one-to-two year and three-hour occupational safety
healthy work environments for training for employees on active duties every three-year, respectively. The Bank also engaged visiting No gaps
its employees, and organize service doctors, recruited regular nursing personnel, and established health service rooms and
training on safety and health for breastfeeding rooms to care for the employees' health and address the importance of health.
its employees on a regular basis?
(4) Does the bank have a  Matters involving the rights or welfare of employees are regularly submitted to labor-management No gaps
communication channel between conferences for discussion, or a labor-management negotiation may be initiated in advance. The Bank
the bank and its employees, also set up channels for employees to express their opinions in order to respect and protect the legal
and the means through which rights of our employees fully. For changes in operations or requirements that may have significant
employees are notified of material effects on employees, except for dispatching letters to all departments of the Bank and requiring for
changes in the bank's operations? announcing such changes during business meetings, the Bank also uses video conference for the
entire Bank for effective notice.
(5) Does the bank implement an  The Bank establishes the annual employee training plan according to function and experiences No gaps
effective training program that of employees, including comprehensive programs such as general knowledge program for new
helps employees develop skills employees, foundation program, advance program and workshops for various business, as well as
over the course of their career? officer training and seminars. The Bank also assigns relevant personnel to participate in professional
training programs organized by external institutions or engage external professional lecturers to
provide lessons, cultivating the professional skills and knowledge of our employees, exerting the
effect of training-application integration, so as to improve the career development potentials for our
employees.
(6) Does the bank implement  Please refer to IX. Corporate Social Responsibility Report - 3. (2) Reinforcement of Consumer No gaps
consumer protection policies and Protection.
grievance procedures with regards
to its research, development,
procurement, operation and
service activities?
(7) Does the bank comply with laws  Except for complying with relevant requirements of the Bank, the marketing and description for the No gaps
and international standards with products and services also abide by the relevant regulations, letters, and orders from the competent
regards to the marketing and authority as well as international standards.
labeling of products and services?
(8) Does the bank evaluate suppliers'  The contract of the Bank set out terms that require contractors to fulfill social and environmental No gaps
environmental and social conducts protection responsibilities, to improve the obligations of contractors.
before commencing business
relationships?
(9) Is the bank entitled to terminate  The contract of the Bank provides that where suppliers violate its corporate social responsibility No gaps
supply agreement at any time with policies and generate material effects to the environment and society, the Bank may terminate such
a major supplier, if the supplier contracts upon verifying that the violations were true, so as to require contractors to fulfill the self-
is found to have violated its management regarding their social responsibilities.
corporate social responsibilities
and caused significant impacts
against the environment or the
society?
4. Enhancing Information Disclosure  1. Establishment of "Corporate Social Responsibility" section on the website of the Bank to disclose
Does the bank disclose relevant information related to corporate social responsibility. No gaps
and reliable information relating to 2. Disclosure of the "Corporate Social Responsibility Report" of the Bank on the website of the Bank
their corporate social responsibility and Market Observation Post System.
on its website and the “MOPS”
section of the website for the
Taiwan Stock Exchange?
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Regarding Banks established their Corporate Social Responsibility Best Practice Principles according to "Corporate Social Responsibility Best Practice Principles for TWSE/ GTSM Listed Companies," please specify the gaps between its operations and the provisions in the Code: The Bank established its "Corporate Social Responsibility Best Practice Principles " according to "Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies" to promote the performance of corporate social responsibility, and no such gap exists.
Other important information contributes to understanding the operations of corporate social responsibility: Please refer to IX. Corporate Social Responsibility Report.
Where the corporate social responsibility report of the bank has passed the verification standards of relevant certification institution, please specify: Taiwan Business Bank's Corporate Social Responsibility (CSR) Report has passed the verification conducted by British Standards Institution (BSI) according to AA1000 (Accountability) Type 1 and guidelines of GRI Standards. Content disclosed in the CSR Report of the Bank complied with the core options of GRI Standards 2016; BSI has also issued an Independent Assurance Opinion Statement to the Bank.

Note 1: Provide a brief description in the appropriate column, regardless of whether "yes" or "no" is selected.

48 48 Taiwan Business Bank Annual Report 2018

III

(9) Implementation of Business Integrity

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Gaps with the
State of operations
Ethical Corporate
Management Best
Assessed items Practice Principles for
Yes No Summary TWSE/GTSM Listed
Companies and the
cause of the said gaps
1. Policies and strategies
established to ensure business
integrity
(1) Has the bank stated in its  The Bank engages in business activities on the basis of fairness, honesty, integrity, and transparency, No gaps
Memorandum or external and discloses the Ethical Corporate Management Best Practice Principles of the Bank on Market
correspondence about the Observation Post System and the corporate website of the Bank. To proactively prevent any unethical
policies and practices it has to behavior, the Working Rules of the Bank provides that, an employee shall not take advantage of his/
maintain business integrity? her post to break the rules or commit jobbery for illegal interests of himself/herself or others; also,
Are the board of directors and the employees shall not accept any gifts or enjoy other illegitimate benefits. The Bank continues
the management committed in organizing the relevant training to deepen employee's cognition on moral behavior and ethical
fulfilling this commitment? corporate management as well as its practices.
(2) Does the bank have any  The Bank sets legal compliance as its fundamental premise for materializing ethical corporate No gaps
measures against dishonest management. The Employee Reward and Punishment Regulations and Procedure Guidelines for
conducts? Are these measures General Evaluation provide clear punishment terms regarding violation of business ethics or conduct
supported by proper procedures, of bribery and corruption, with dismissal from office as the heaviest punishment. In addition, the
behavioral guidelines, Regulations also set out the reward provisions regarding prevention or reporting of misconducts or
disciplinary actions and fraud. Article 11 under the “Directions for Handling Reported Cases” of the Bank provides that, upon
complaint systems? the completion of the investigation regarding the reported case, where it is verified that the alleged
personnel did violate relevant laws and regulations or the requirements under the ethical corporate
management policies of the Bank, request the alleged personnel to stop such conducts immediately
and impose proper punishments according to the related requirements of the Bank, so as to effectively
prevent unethical behaviors.
(3) Has the bank taken steps to  Employees of the Bank shall comply with the internal control system of the Bank when carrying No gaps
prevent occurrences listed in out business. The Bank stipulates preventive measures for articulation in its business rules; for
Article 7, Paragraph 2 of “Ethical example, under "Directions for Construction Work as well as Purchase, Customization and Selling of
Corporate Management Best Properties," Article 21 provides that "personnel who manages construction work as well as purchasing,
Practice Principles for TWSE/ and customizing properties shall not direct the inspection of such project, and personnel involved in
GTSM- Listed Companies” or the joint inspection shall not perform the monitoring; personnel who manages selling of properties
business conducts that are prone shall not direct the inspection of such project." Furthermore, Article 27 provides that managing and
to integrity risks? supervising personnel for construction work as well as purchasing, and customizing and selling of
properties at all levels shall be strictly prohibited from accepting meal banquet invitation and gifts
to ensure integrity and justice; regular rotation shall be implemented for managing procurement
personnel." The managing colleagues are required to comply with such provisions. Shall there be any
misconduct, report to the Personnel Evaluation Committee for review and handling, so as to prevent
unethical behaviors. The signed contracts prohibit suppliers from conducting any illegal acts that may
infringe intellectual property rights, etc. Regarding the credit loans for stakeholders, based on Article
32, Article 33 of the Bank Act and its relevant requirements, the Bank established the "Procedures of
Credit Loans for Stakeholders" and carried out the pre-loan review, post-loan review, as well as regular
and nonscheduled reviews to give effect to the preventive measures.
2. Actions to ensure business
integrity
(1) Does the bank evaluate the  Article 20 under the Ethical Corporate Management Best Practice Principles of the Bank provides that, No gaps
integrity of all counterparties it when signing a contract with others, it is required to fully understand the other party's integrity. The
has business relationships with? contract shall include terms of complying with the ethical corporate management of the Bank and shall
Are there any integrity clauses stipulate that when the counterparty in the transaction engages in unethical behaviors, the Bank may
in the agreements it signs with terminate or cancel the terms of the contract at any time. As specified in the business rules for credit
business partners? investigation and SOP, the credit investigation for various types of loans shall be carried out through
searching internal and external databases and field inspection to evaluate the credit records of the
counterparty. Furthermore, when processing purchase or tender, where the assigned personnel from
the awarded supplier of the purchasing project engages in any illegal conducts, leakage of confidential
information or fault that results in losses of the Bank, the supplier shall be jointly responsible for
compensating the losses. In addition, refer to the Government e-Procurement system regarding
suppliers on the blacklist; the Bank may reject such suppliers to participate in the tender.
(2) Does the bank have a unit that  The Board Secretariat Department of the Bank is the responsible department for ethical operations. No gaps
specializes (or is involved) in The department will report to the Board regarding the execution of ethical operations for the previous
business integrity? Does this unit year before Q1 of the year. Performance of integrity operations in 2018 (submitted to the 5th Board
report its progress to the board meeting of the 15th Board on January 20, 2019) focuses on four aspects as follow:
of directors on a regular basis? 1. Legal compliance is the fundamental premise for materializing ethical corporate management: 12
sessions were held for legal compliance training.
2. Ethical training: New employee training was held for 547 employees and digital learning for 4878
employees.
3. Violation of ethical corporate management: None.
4. Protection and conflict of interests concerning stakeholders: Employee communication (5 labor-
management conferences were held), customer communication (handled 293 FSC complaint
cases in total), shareholder/investor communication (Total 2 road shows were held), 9 cases of
conflict of interests for Board (Managing Board) meeting in total.
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Gaps with the
State of operations
Ethical Corporate
Management Best
Assessed items Practice Principles for
Yes No Summary TWSE/GTSM Listed
Companies and the
cause of the said gaps
(3) Does the bank have any policy  Regarding the resolutions at the Board meeting, where such resolutions relate to the interests of Directors, No gaps
that prevents conflict of interest, managers, authorized parties of the Bank, or other stakeholders presenting at or attending the Board, or
and channels that facilitate the the legal entity being one presented, disclose the material content of such interests. If such interests may
reporting of conflicting interests? be harmful to the interests of the Bank, such personnel shall present his/her opinion and answer inquiries,
and shall not participate in the discussion and poll. Also, such personnel shall abstain from the discussion
and the poll, and shall not represent other Directors to exercise their voting rights. Directors shall maintain
discipline among one another and not inappropriately support one another. Furthermore, the Internal Control
System for Securities Firms provides that the Company shall examine the consigned trading by internal
staff of the Company after closing the deal for ensuring whether such transaction involves undisclosed
information, or is in conflicts of interests with the Company or other clients and shall be avoided. The
internal control system shall prescribe the examination procedures. The Bank established the Stakeholders
Relations on its corporate website to provide a communication channel for stakeholders.
1. The Bank adopted the accounting system established according to the International Financial Reporting
(4) Has the bank implemented  Standards recognized by the FSC for its operations. No gaps
effective accounting and internal 2. The Bank has duly complied with “Implementation Rules of Internal Audit and Internal Control System
control systems for maintaining of Financial Holding Companies and Banking Industries,” established an internal control system and
business integrity? Are these implemented risks management; the exclusively independent audit department shall carry out the audit
systems reviewed by internal or to ensure the design and execution of the system being continuingly effective.
external auditors on a regular 3. The Auditing Department shall carry out the audit business according to the “Implementation Rules of
basis? Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries” and
the “Internal Audit Operation Guidelines,” and shall report to the Board and Audit Committee regarding
the audit business at least every six months.
4. The Auditing Department shall conduct: (a) a general audit and a project audit regarding the domestic
operations, finance, assets custody, and information technology departs at least once a year; (b)
a project audit regarding other management departments at least once a year; (c) a general audit
regarding the regional operation centers, domestic processing centers, and overseas branches at least
once a year; (d) audits on overseas representative offices by means of auditing reports or on-sit audits
at a frequency adjusted as necessary; (e) a project audit regarding the finance, risk management, and
legal compliance of subsidiaries every six months; and (f) engage responsible audit personnel for the
securities business to carry out the internal audit operations; the Auditing Department shall supervise
the audit every six months.
(5) Does the bank organize internal or  Regarding the ethical training program of the Bank, the relevant business departments shall promote the No gaps
external training on a regular basis internal and external requirements through managing the training, including contents in relation to ethical
to maintain business integrity? operations such as laws and regulations promotion, legal responsibilities of employees of the Bank, etc. It
shall also organize the business foundation program for new employees upon the date of arriving at his/
her post and arrange programs for "Legislative Requirements for Financial Practitioners," which shall be
primarily based on the regulations (including ethical training). 10 echelons of training were organized during
2018, 547 new employees completed training in total, and the Bank also assigned personnel to participate
in external training regarding ethical operations and corporate social responsibility in due course.
3. Implementation of a misconduct
reporting system No gaps
(1) Does the bank provide incentives  1. To establish an ethical and transparent corporate culture and promoting healthy operations, the Bank
and means for employees to established the “Directions for Handling Reported Cases” based on the “Implementation Rules of
report malpractices? Does the Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries,”
bank assign dedicated personnel “Regulations Governing the Establishment of Internal Control Systems by Service Enterprises in
to investigate the reported Securities and Futures Markets,” and “Ethical Corporate Management Best Practice Principles for
malpractices? TWSE/GTSM Listed Companies.”
2. Publishing the report channel at the integrated entrance webpage for the official website and the internal
system for employees and setting up independent reporting mailbox and direct line that is disclosed on
the corporate website for usage by internal and external parties of the Bank; specialists will be handling
such reporting matters.
(2) Has the bank implemented  The “Directions for Handling Reported Cases” of the Bank has stated the responsible department, SOP for No gaps
any standard procedures or investigation, and execution of related confidentiality system regarding any reported cases.
confidentiality measures for
handling reported malpractices?
(3) Does the bank assure employees  Article 12 under the "Directions for Handling Reported Cases" of the Bank has provided that the Bank shall No gaps
who report malpractices that they keep confidential regarding the information that is sufficient to identify the informant, including name, age,
will not face repercussions for residence, and identity of the informant. Except for otherwise provided by the laws, no third party is allowed
making such reports? to browse or transcribe. The Bank may not carry out dismissal, discharge, demotion, pay cut regarding the
informant, or form damages to the rights that the informant is entitled to according to laws and regulations,
contracts, or practices, or other adverse actions. However, where the informant reported untrue facts or set
unjustified benefits as targets shall be excluded.
4. Enhanced information disclosure  The "Ethical Corporate Management Best Practice Principles" of the Bank is disclosed on the Market No gaps
Has the bank disclosed its integrity Observation Post System and its corporate website. The Bank will facilitate to disclose the ethical operations
principles and progress on its on the corporate website under About TBB > Corporate Governance.
website and MOPS?
5. If the Bank has formulated its own principles of integrity operation based on "Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies," please state
the difference between its principles and its operation: No difference.
6. Other important information contributes to understanding the ethical operations of the Bank (such as the Bank examining and revising its Ethical Corporate Management Best Practice
Principles): Submit annually its execution of ethical operations to the Board and disclose the independent report e-mail and direct line that encourages internal and external personnel to
report unethical behaviors.
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Taiwan Business Bank Annual Report 2018

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(10) Procedures for Handling Material Inside Information:

The Bank reports its information according to the "Taiwan Stock Exchange Corporation Procedures for Verification and Disclosure of Material Information of Companies with Listed Securities," "Taiwan Stock Exchange Corporation Rules Governing Information Filing by Companies with TWSE Listed Securities and Offshore Fund Institutions with Listed Offshore Exchange Traded Funds," and "Taiwan Business Bank Procedures for External Information Disclosures."

(11) Inquiry for Corporate Governance Principles and relevant rules: Please refer to About TBB > Corporate Governance > Rules of Corporate Governance (https://www.tbb.com. tw/web/guest/-429).

(12) Other important information contributes to understanding the operations of corporate governance: Please refer to About TBB > Corporate Governance and Investor Relations (https://www.tbb.com.tw/).

(13) Execution of the internal control system

A. Internal control system statement

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Matters to be improved for the internal control system of Taiwan Business Bank and the improvement plan

(Valuation date: December 31, 2018)

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Estimated time for
Matters to be improved Improvement Measures the completion of the
improvement
For implementing anti-money laundering operations, the 1. The Bank has added the mandatory columns for transaction monitoring in the system, Completed.
background and the rationale for suspicious transactions which shall duly verify the background and the rationale for such transactions; the
showing the signs of money laundering were not duly managers shall perform the review subsequently.
verified. For trust activities and approving subscription of 2. The Bank has added measures for system control, the approval of financial product
financial products, no proper computer control process transactions shall be subject to confirmation with the customers regarding the nature of
was in place. For fund transaction through online banking, investment risk rating.
no proper examination mechanism was in place. The FSC 3. The Bank has improved the fund transaction examination system, fund transactions
has determined that the Bank shall make rectification through online banking using the same IP address of an external computer are also
regarding the abovementioned. included in the scope of the examination control, and the managers shall conduct
monthly reviews.
There were errors in declaration forms filed to competent The Bank has developed the systematic control, established SOP review mechanism in Completed.
authorities. filing, and improved its training to ensure the precision of declaration.
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B. Where CPAs are commissioned to audit the Company's internal control systems, the audit report prepared by the CPAs should be disclosed

52 52

Taiwan Business Bank Annual Report 2018

C. Overall information security implementation statement

III

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Items to be improved and Countermeasures of Overall Information Security Implementation of Taiwan Business Bank

(Base Date: December 31, 2018)

Items to be improved	Countermeasures	Estimated time of completion
None

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Items to be improved and Countermeasures of Overall Information Security Implementation of Taiwan Business Bank

(Base date: December 31, 2018)

Items to be improved	Countermeasures	Estimated time of completion
None

54 54

Taiwan Business Bank Annual Report 2018

III

(14) Sanctions imposed for violation of laws and regulations and corrective actions taken in the most recent two years and up to the end of February 2019
A. Disclose any indictment of a responsible person or employee by a prosecutor for an offense related to the occupation
- During the credit investigation activities regarding loans application made to ○○ Branch by Jin ○○ Co. Ltd., Xiang ○○ Co. Ltd., and Jie ○○ Industrial Co. Ltd., the employee ○○ Hsu from the ○○ Branch was suspected of being working with Gao ○○ Fraudulent Loan Group to improve his/her results. Employee Hsu acknowledged that such companies were not able to secure any loans due to no intention of making repayment or that such companies were shell firms or the actual representatives had questionable credibilities. However, Employee Hsu hid such information from the credit investigation report and resulted in the uninformed Bank and Credit Guarantee Fund granted loans and guarantees in default (the Bank discovered unusual factors in the case for Xiang ○○ Co. Ltd. and did not grant the loan; Credit Guarantee Fund discovered unusual circumstances factors in the case for Jie ○○ Industrial Co. Ltd. and did not provide the guarantee, the Bank therefore rejected the loan). Taiwan Taoyuan District Prosecutors Office initiated an indictment against Employee Hsu for the crimes of violating the breach of trust (committed and attempt) under Article 125-2 of the Bank Act on September 1, 2014, and illegal benefit by fraud under Article 339 of the Criminal Act (pre-revision) on June 18, 2014. After the hearing at Taiwan Taoyuan District Court, the verdict of the first instance delivered that Employee Hsu of the Bank was innocent on June 1, 2018. Taiwan Taoyuan District Prosecutors Office was dissatisfied with the verdict and therefore lodged an appeal on June 29, 2018. The hearing is currently being processed by Taiwan High Court (2018 Jin-shang-su-zi No. 42).
B. Disclose any fine imposed by the Financial Supervisory Commission for violation of a law or regulation:
- a. It was found that the Bank has not filed reports to the Investigation Bureau, Ministry of Justice for currency transactions above a certain amount. On October 27, 2017, the FSC imposed a fine of NT$400,000 according to Paragraph 3, Article 7 of the Money Laundering Control Act.
- b. The background and the rationale for suspicious transactions that shows the signs of money laundering were not duly verified. A judgment was arrived at after re-examination and studying that the Bank did not report to the Investigation Bureau, Ministry of Justice. On October 27, 2017, the FSC imposed a fine of NT$1,000,000 according to Paragraph 4, Article 8 of the Money Laundering Control Act.
- c. The Bank carried out credit investigation and loans activities for Ching Fu Shipbuilding Co. Ltd. without having relevant internal control systems in place and failed to duly implement such system to effectively control the loan risks, which violates the requirements under Paragraph 1, Article 45-1 of the Banking Act. On December 29, 2017, the FSC imposed a fine of NT$2,000,000 according to Paragraph 7, Article 129 of the Banking Act.
C. Disclose any matters in which sanctions were imposed by the Financial Supervisory Commission pursuant to Article 61-1 of the Banking Act:
- a. The review and transaction monitoring for OBU account opening were imprecise. On June 14, 2017, the FSC has determined that the Bank shall make correction regarding the abovementioned according to paragraph 1, Article 61-1 of the Banking Act.
- b. It was verified that defects exist in the derivatives business and information security control activities. On October 27, 2017, the FSC has determined that the Bank shall make correction regarding the abovementioned according to paragraph 1, Article 61-1 of the Banking Act.
- c. It was verified that defects exist in the anti-money laundering activities, trust business, approving financial products subscription and online banking business. On December 5, 2018, the FSC has determined that the Bank shall make correction regarding the above-mentioned according to paragraph 1, Article 61-1 of the Banking Act.
D. Disclose any security incident arising from employee infidelity or material contingencies or failure to faithfully abide by security maintenance work. If actual losses, whether singly or in aggregate, exceed NT$50 million in any given year: None.
E. Other matters that must be disclosed pursuant to Financial Supervisory Commission designation: None.

(15) Material resolutions of a Shareholders' meeting or a Board meeting during 2018 and up to the end of February 2019
A. Resolutions at the Shareholders' meeting of 2018 (2018.6.29) and resolution execution process

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Reason for the
resolution Decision-making and Implementation
Resolution to ratify the The Shareholders' meeting has ratified the annual final statement and statements for
annual final statement 2017.
and statements for 2017
Resolution to ratify The Shareholders' meeting has ratified the surplus distribution from the final
the annual earnings accounts of 2017 and the execution of such distribution (cash dividend per share of
distribution from the final NT$0.268 and stock dividend per share of NT$0.3), and the distribution was made to
accounts of 2017. Shareholders on October 11, 2018.
Resolution to carry out Reported to the Financial Supervisory Commission upon receiving the approval
a capital increase via from the Shareholders' meeting, and was publicly announced and became effective
transferred earnings on August 10, 2018. Also, the alteration registration was completed according to
in accordance with the the approval from the Ministry of Economic Affairs through Letter Jing-shou-shang-
earnings distribution for zi No. 10701121060 on September 21, 2018. Stock certificates were transferred
2017. to shareholders on October 11. 2018, and the listing for trading of our new shares
completed smoothly.
Reported to the Ministry of Economic Affairs upon receiving the approval from the
Resolution of revising the
Articles of Association of Shareholders' meeting. The alteration registration was completed according to the
approval from the Ministry of Economic Affairs through Letter Jing-shou-shang-zi No.
the Company
10701087000 on July 18, 2018.
Removal of non- Canceled the non-competition restriction on the Ministry of Finance (directors of
competition clauses for companies such as Taiwan Financial Holding), Bank of Taiwan Co., Ltd. (directors of
the Company's Directors. companies such as First Financial Holding), Land Bank of Taiwan Co., Ltd. (directors
of companies such as United Taiwan Bank), Li-Ling Lin (representative of Bank of
Taiwan Co., Ltd.), Cheng-Chuan Kang (representative of Bank of Taiwan Co., Ltd.),
and Ying-Ming He (representative of Land Bank of Taiwan Co., Ltd.), upon receiving
the approval from the Shareholders' meeting, and published on the Market Observation
Post System.
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B. Material resolutions of Board meetings for 2018 and up to the end of February 2019: Please refer to About TBB > Corporate Governance > Resolutions of the Board on the website of the Bank (https://www.tbb. com.tw).
(16) For 2018 and up to the end of February 2019, disclose any dissenting opinion of any director regarding any material resolution passed by the Board, where there is a record or written statement of such opinion: None.
(17) For 2018 and up to the end of February 2019, the resignations and dismissals of relevant personnel to the financial report

Dec. 31, 2018

Title	Name	Date of arrival	Date of dismissal	Reason for resignation or dismissal
President	Tsan-Huang Chou	2016.7.13	2018.3.22	Retirement
SVP & GM, Accounting Department	Jin-Fu Yang	2015.12.1	2018.2.8	Retired
SVP & GM, Treasury Department	Chu-Jou Chen	2016.7.15	2018.7.18	Reassigned as the SVP & GM of the Wealth Management Department of the Bank

Note: Relevant personnel of the Bank refers to Chairman, President, financial officer, accounting officer, and internal audit officer.

4. Accounting Expenses

(1) CPA professional charges grading table

Name of the accounting frm	Name of the CPA	Name of the CPA	Audit period	Notes
KPMG	Tan-Tan Chung	Feng-Hui Lee	2018.1.1-2018.12.31

56 56

Taiwan Business Bank Annual Report 2018

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Unit: NTD
Professional charge Accounting charge Non-accounting Total
Fee range charge
1 Less than NT$ 2,000,000
2 NT$ 2,000,000 (inclusive) to NT$ 4,000,000
3 NT$ 4,000,000 (inclusive) to NT$ 6,000,000
4 NT$ 6,000,000 (inclusive) to NT$ 8,000,000
5 NT$ 8,000,000 (inclusive) to NT$ 10,000,000
6 More than NT$ 10,000,000 (inclusive) 12,028 13,206 25,234
Unit: NT$ 1,000
CPA CPA Auditing Non-accounting charge CPA
FirmTitle Name expensesshared System design registrationCorporate ResourcesHuman Others (Note) Subtotal periodAudit Notes
Tan-Tan Chung 2018.1.1-
KPMG 12,028 190 13,016 13,206
Feng-Hui Lee 2018.12.31
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Note: During 2018, the primary content of the service for "Others" included in the non-audit fees is the audit fees for significant bad debts amounted to NT$130,000, legal compliance risk management and supervision amounted to NT$5,040,000, audit fees for personal data protection amounted to NT$1,850,000, audit fees for anti-money laundering and combatting the financing of terrorism controlling project amounted to NT$3,832,000, double examination report for e-payment institution revenue amounted to NT$60,000, and operating assessment report for information system and security control amounted to NT$450,000, issuance of financial debts double examination opinion form amounted to NT$60,000, independent compliance assessment for wealth management and deposit protection amounted to NT$1,491,000, and bridging visas amounted to NT$103,000.
previous year: None.
(3) For companies whose audit shared expenses have decreased by 15% or more, the ratio of the decrease in audit shared expense and the reason should be disclosed: None.

5. Information on switching CPA: None

Conform to the Regulations Governing the Same Person or Same Concerned Party Holding the Issued Shares with Voting Rights over a Particular Ratio of a Bank, Article 11

(1) Changes in Shareholding

Unit: Share

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2018 As of Feb 28, 2019
Title Name Changes in Changes Changes in Changes
in pledged in pledged
shareholding shareholding
shareholding shareholding
Chairman (Ministry of Bor-Yi Huang 320,400 0 0 0
Finance Representative)
Managing Director and
President (Ministry of Chien-An Shih 416,000 0 0 0
Finance Representative)
Managing Director (Bank Li-Ling Lin 0 0 0 0
of Taiwan Representative)
Managing Directo Xin-Wu Lin 0 0 0 0
(Independent Director)
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2018 As of Feb 28, 2019
Title Name Changes in Changes Changes in Changes
in pledged in pledged
shareholding shareholding
shareholding shareholding
Managing Director
(Ministry of Finance Lien-Wen Liang 0 0 0 0
Representative)
Director (Ministry of Shiu-Yen Lin 0 0 0 0
Finance Representative)
Director (Ministry of Wen-Chieh Wang 0 0 0 0
Finance Representative)
Director (Ministry of Hung-Sheng Yu 908 0 0 0
Finance Representative)
Director (Bank of Taiwan Pei-Ming Huang 0 0 0 0
Representative)
Director (Bank of Taiwan Cheng-Chuan Kang 0 0 0 0
Representative)
Director (Land Bank of Ying-Ming He 0 0 0 0
Taiwan Representative)
Director (TBB industry Feng-Yung Liu 1,081 0 0 0
union Representative)
Director Che-Nan Wang 5,530,259 0 1,400,000 0
Director (Independent Jin-Long Liu 0 0 0 0
Director)
Director (Independent Wei-Sheng Huang 0 0 0 0
Director)
Manager Chien-An Shih 416,000 0 0 0
Manager Chang-Yi Chen 19,458 0 0 0
Manager Chih-Chien Chang 7,234 0 0 0
Manager Yi-Yun Wang 7,977 0 0 0
Manager Mei-Yeh Wu 16,086 0 0 0
Manager Chun-Sheng Tseng 7,026 0 0 0
Manager Chiu-Yen Chen 7,666 0 0 0
Manager Tseng-Hsiang Yi 4,288 0 0 0
Manager Chang-Yu Lin 7,497 0 0 0
Manager Yu-Min Chang 6,084 0 0 0
Manager Chi-Fen Yen 14,522 0 0 0
Manager Tzong-Wen Chou 4,232 0 0 0
Manager Yung-Yu Song 3,902 0 0 0
Manager Jia-Ruey Luan 5,649 0 0 0
Manager Ting-Huei Liao 108,361 0 0 0
Manager Li-Yueh Hsu 5,832 0 0 0
Manager Yin-Cheng Tseng 5,442 0 0 0
Manager Chih-Wei Chen 0 0 0 0
Manager Ching-Yun Kuo 7,848 0 0 0
Manager Hsih-Hui Chen 4,333 0 0 0
Manager Yi-Chin Chai 1,237 0 0 0
Manager Chu-Jou Chen 8,472 0 0 0
Manager Wen-Shu Lin 4,161 0 0 0
Manager Tsung-Chu Hsieh 4,504 0 0 0
Manager Hsiou-Chen Kang 4,120 0 0 0
Manager Yu-Chuan Chou 4,671 0 0 0
Manager Pi-Yu Chang 4,141 0 0 0
Manager Li-Hui Chang 4,854 0 0 0
Manager Sung-Shui Chiu 5,434 0 0 0
Manager Tung- Hsi Chen 0 0 0 0
Manager Tsun-Lin Yeh 4,327 0 0 0
Manager Chiang-Shu Lin 4,555 0 0 0
Manager Mei-Chun Lin 9,754 0 0 0
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Taiwan Business Bank Annual Report 2018

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2018 As of Feb 28, 2019
Title Name Changes in Changes Changes in Changes
in pledged in pledged
shareholding shareholding
shareholding shareholding
Manager Kuo-Liang Tseng 4,132 0 0 0
Manager Fu-Ming Hsu 12,478 0 0 0
Manager Wen-Hsiu Huang 5,625 0 0 0
Manager Huei-Nai Hung 4,122 0 0 0
Manager Hsiao-Ming Chen 4,108 0 0 0
Manager Li-Fang Lee 4,140 0 0 0
Manager Chih-Yang Huang 4,327 0 0 0
Manager Shuan-Hua Liu 1,504 0 0 0
Manager Yu-Chiao Wei 3,814 0 0 0
Manager Yuan-Hsueh Hsiao 4,128 0 0 0
Manager Yun-Shiang Tsai 50,000 0 0 0
Manager Cheng- Chuan Lin 7 0 0 0
Manager Long-Jiunn Wu 7,684 0 0 0
Manager Chih-Cheng Cho 2,040 0 0 0
Manager Chien-Chung Lin 1,948 0 0 0
Manager Mei-Chih Hou 4,269 0 0 0
Manager Bi-Chu Chuang 4,151 0 0 0
Manager Guei-Jin Chiou 4,785 0 0 0
Manager Wen-Fang Lin 206 0 0 0
Manager Sung-Nan Chiao 21,583 0 0 0
Manager Fuh-Yuh Yeh 4,127 0 0 0
Manager Ching-Kuei Hsieh 4,349 0 0 0
Manager Ruey-shyang Guo 4,234 0 0 0
Manager Chao-Lieh Chen 31 0 0 0
Manager Tien-Hang Tsai 5,548 0 0 0
Manager Yueh-Yen Weng 61,862 0 0 0
Manager Jiunn-chiu Wang (430) 0 0 0
Manager Yueh-Chiao Wu 4,326 0 0 0
Manager Yen-Hsueh Chang 78 0 0 0
Manager Tien-Chin Lin 4,160 0 0 0
Manager Tai Sun 7,774 0 0 0
Manager Kuo-Shu Tseng 2,860 0 0 0
Manager Yen-Ling Chen 4,143 0 0 0
Manager Chao-Chih Chueh 4,162 0 0 0
Manager Ching-Hsiu Liu 823 0 0 0
Manager Fu-Long Chen 36,528 0 10,000 0
Manager Ming-Hui Chen 20,800 0 0 0
Manager Ming-Hsyang Kuo 0 0 0 0
Manager Hsueh-Ru Liu 4,193 0 0 0
Manager Chao-Hwa Hsu 7,332 0 0 0
Manager Jiann-Yea Shyu 354 0 0 0
Manager Ying-Che Fang 7,284 0 0 0
Manager Yueh-Chin Wang 4,147 0 0 0
Manager Wan-Ju Shih 4,207 0 0 0
Manager Yen-Hui Tu 8,346 0 0 0
Manager Nien-Tzu Chen 4,156 0 0 0
Manager Chiu-Chin Chen 4,161 0 0 0
Manager Fang-Chuan Chiu 4,144 0 0 0
Manager Pao-Sheng Lin 4,278 0 0 0
Manager Hsien-Min Chen 4,167 0 0 0
Manager Mei-Hui Chen 7,054 0 0 0
Manager Hsiu-Hsin Hou 4,142 0 0 0
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2018 As of Feb 28, 2019
Title Name Changes in Changes Changes in Changes
in pledged in pledged
shareholding shareholding
shareholding shareholding
Manager Yen-Huey Wang 4,075 0 0 0
Manager Chin-Hsiang Lin 6,330 0 0 0
Manager Pi-Chuan Chien 4,184 0 0 0
Manager Shu-Chin Lin 4,137 0 0 0
Manager Ping-Hui Lee 1,649 0 0 0
Manager Su-Fen Chen 4,135 0 0 0
Manager Shu-E Chen 0 0 0 0
Manager Shy-Yuan Wu (67686) 0 0 0
Manager Li-Chuan Huang 2,730 0 0 0
Manager Chin-Ho Huang 4,220 0 0 0
Manager Jiann-Gwo Guu 5,473 0 0 0
Manager Min-Chung Hsieh 989 0 0 0
Manager Yu-Pei Liao 495 0 0 0
Manager Chiu-Yu Lin 1,648 0 0 0
Manager Shu-Fen Li 5,993 0 0 0
Manager Kuan-Yau Cheng 4,120 0 0 0
Manager Bih-Lien Fang 25,523 0 0 0
Manager Nai-Chia Chi 6,811 0 0 0
Manager Li-Huei Chen 1,200 0 0 0
Manager Sheng-Wang Chang 4,067 0 0 0
Manager Ming-Tang Chen 4,295 0 0 0
Manager Hsiu-Chiao Lin 8,834 0 0 0
Manager Kuan-Yi Huang 2,062 0 0 0
Manager Shin-Mao Lin (50,995) 0 0 0
Manager Li-Chung Lin 4,389 0 0 0
Manager Ping-Sung Yang 11,785 0 0 0
Manager Man-Chung Yeh 10 0 0 0
Manager Chih-Cheng Chen 4,430 0 0 0
Manager Meng-Shin Jeng 6,061 0 0 0
Manager Meng-Liang Su 4,160 0 0 0
Manager Shun-Tseng Liao 6,122 0 0 0
Manager Yih-Shiou Wang 5,283 0 0 0
Manager Kuo-Tsun Pai 4,170 0 0 0
Manager Liang-Pin Chen 29 0 0 0
Manager Tsai-Rong Hung 6,339 0 0 0
Manager Fu-Ching Chou 4,001 0 0 0
Manager Cheng-An Hsieh 4,514 0 0 0
Manager Jung-Yu Huang 4,165 0 0 0
Manager Ming-Yi Lin 12,904 0 0 0
Manager A-Chang Yang 6,350 0 0 0
Manager Yueh-Man Sung 4,996 0 0 0
Manager Chien-Ta Wu 2,509 0 0 0
Manager Li-Mo Yang 8,949 0 0 0
Manager His-Her Pai 6,627 0 0 0
Manager Wen-Chi Chen 2,671 0 0 0
Manager Chin-Hsueh Li 8,119 0 0 0
Manager Su-Ying Tsai 4,347 0 0 0
Manager I-Man Chen 4,214 0 0 0
Manager Jiann-Jang Lin 2,223 0 0 0
Manager Chia-Cheng Liu 2,133 0 0 0
Manager Feng-Fu Chen 4,247 0 0 0
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Taiwan Business Bank Annual Report 2018

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2018 As of Feb 28, 2019
Title Name Changes in Changes Changes in Changes
in pledged in pledged
shareholding shareholding
shareholding shareholding
Manager Hsin-Chuan Hsiao 5,087 0 0 0
Manager Chih-Ming Chuang 4,205 0 0 0
Manager Guo-Shiang Huang 1,752 0 0 0
Manager Chien-Lai Su 29 0 0 0
Manager Yung-Sheng Hu 4,323 0 0 0
Manager Chin-Hsiu Chen 8,743 0 0 0
Manager Chang-Hui Hsu 3,530 0 0 0
Manager Shun-Ho Chen 4,196 0 0 0
Manager Mei-Chen Chen 4,867 0 0 0
Manager Chiou-Hwa Su 1,143 0 0 0
Manager Wen-Jang Jou (4,637) 0 0 0
Manager Leh-Chin Kuo 3,385 0 0 0
Manager Der-Hsung Lin 4,140 0 0 0
Manager Cheng-Hung Wang 6,501 0 0 0
Manager Ya-Hua Su 6,269 0 0 0
Manager Chin-Chuan Su 11,285 0 0 0
Manager An-Yun Lin 8,210 0 0 0
Manager Li-Jung Lin 4,562 0 0 0
Manager Tzu-I Huang 4,280 0 0 0
Manager Wen-Tai Yang 4,181 0 0 0
Manager Ching-Wen Lee 2,743 0 0 0
Manager Kuang-Tsai Wang 4,131 0 0 0
Manager Jung-Ling Wang 4,150 0 0 0
Manager Hsueh-Hsia Chen 8,766 0 0 0
Manager Shih-Yuan Lin 4,818 0 0 0
Manager Shuang-Chen Su 4,146 0 0 0
Manager Ching-Yang Lee 4,197 0 0 0
Manager Shenn-Bao Jean 4,261 0 0 0
Manager Jen-Jung Fan 4,141 0 0 0
Manager Be-Yun Tong 6,522 0 0 0
Manager Yuan-Yuan Ying 7,433 0 0 0
Manager Sue-Jen Chen 36 0 0 0
Manager Feng-Ying Chen 4,235 0 0 0
Manager Chin-Fu Chiang 6,770 0 0 0
Manager Cheng-Hung Chang 4,022 0 0 0
Manager (Note 2) Mu-Xiang Wu - - 0 0
Manager (Note 2) Shu-Ting Chen - - 0 0
Manager (Note 2) Yun-Hui Zhang - - 0 0
Manager (Note 2) Dong-Han Lu - - 0 0
Manager (Note 2) Shui-Qiang Fang - - 0 0
Manager (Note 2) Meng-Xun Song - - 0 0
Manager (Note 2) Qing-Wen Li - - 0 0
Manager (Note 2) Jun-Da Lin - - 0 0
Manager (Note 2) Jing-Yi Lin - - 0 0
The Government
or Juristic Person
Shareholder Ministry of Finance 5,425,249 0 0 0
Representative by Director
(Note 1)
The Government
or Juristic Person
Shareholder Bank of Taiwan 42,357,354 0 0 0
Representative by Director
(Note 1)
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2018 As of Feb 28, 2019
Title Name Changes in Changes Changes in Changes
in pledged in pledged
shareholding shareholding
shareholding shareholding
The Government
or Juristic Person
Shareholder Land Bank of Taiwan 5,969,788 0 0 0
Representative by Director
(Note 1)
The Government
or Juristic Person
Shareholder TBB industry union 1,178,523 0 0 0
Representative by Director
(Note 1)
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Note 1: The shareholder holding 1% or more of the Bank's shares.

Note 2: The new manager approved by the 5th Board Meeting of the 15th Board of Directors on Jan 30, 2019.("-" means that the information does not need to be disclosed.)

(2) Information of shareholding transfer: Not applicable.

(3) Information for shareholding pledge: None.

8. Information Disclosing the Relationship among Top Ten Shareholders in the Relationship of Related Parties or Spouses, Blood Relatives within the Second Degree of Kinship

Information on the Relationship among Top Ten Shareholders

Feb. 28, 2019

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Names and the Relationship among the Top
Shareholding by
Shareholding under Ten Shareholders in the Relationship of
Name Shareholding Spouse & Minor Children others' names Related Parties or Spouses, Blood Relatives Note
within the Second Degree of Kinship
Shares % Shares % Shares % Name Relation
Bank of Taiwan Taiwan Financial Holding Co.,
(Representative: Ju-Cheng 1,101,291,214 17.22% 0 0 0 0 Ministry of Finance Ltd., a wholly-owned subsidary
Lu) of Ministry of Finance
Land Bank of Taiwan Land Bank of Taiwan, a wholly-
(Representative: Zhong-Yuan 155,214,491 2.43% 0 0 0 0 Ministry of Finance owned subsidary of Ministry of
Ling) Finance
Taiwan Financial Holding
Bank of Taiwan Co.,Ltd., a wholly-owned
Ministry of Finance subsidary of Ministry of Finance
(Representative: Jian-Rong 141,056,496 2.21% 0 0 0 0
Su) Land Bank of Land Bank of Taiwan, a wholly-
Taiwan owned subsidary of Ministry of
Finance
Vanguard Emerging Markets
Stock Index Fund A Series of
76,062,940 1.19% 00 0 0 0 None None
Vanguard International Equity
Index Funds
Kin Ming Investment Co., Ltd
(Representative: Zhao-Hua 69,455,812 1.09% 0 0 0 0 None None
Su)
JPMorgan Chase Bank N.A.
Taipei Branch in custody for
Vanguard Total International 67,026,528 1.05% 0 0 0 0 None None
Stock Index Fund a series of
Vanguard Star Funds
Chun-Jin Shi 66,325,865 1.04% 14,531,340 0.23% 0 0 None None
BES Engineering Corporation
(Representative: Hua-Yang 58,864,000 0.92% 0 0 0 0 None None
Shen)
China Man-Made Fiber
Corporation (Representative: 57,390,095 0.90% 0 0 0 0 None None
Gui-Xian Wang)
Morgan Stanley & Co. 53,364,503 0.83% 0 0 0 0 None None
International Plc
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Note: Shareholding amount represents the number of shares recorded on the last ex-dividend basis date.

62 62

Taiwan Business Bank Annual Report 2018

III

9. The joint venture directly or indirectly controlled and managed by Directors, President, Executive Vice Presidents and General Manager of each division or branch

Omnibus Shareholding Ratio

Dec. 31, 2018 Unit: Share; %

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The joint venture directly
or indirectly controlled
and managed by Directors,
Name of Joint Venture The Bank's Investment President, Executive Vice Omnibus Investment
(Note) Presidents and General
Manager of each division or
branch
Shares % Shares % Shares %
Taipei Forex Inc. 700,000 3.5318% 2,100,000 10.5954% 2,800,000 14.1272%
Financial Information Service 6,116,873 1.1718% 20,588,991 3.9443% 26,705,864 5.1161%
Co., Ltd.
Taiwan Stock Exchange Co. 6,588,724 0.9496% 90,269,366 13.0096% 96,858,090 13.9592%
Taiwan Futures Exchange Co. 3,340,910 1.0000% 10,189,778 3.0500% 13,530,688 4.0500%
Taiwan Asset Management 60,000,000 5.6754% 120,000,000 11.3507% 180,000,000 17.0261%
Corporation
Taiwan Financial Asset 5,000,000 2.9412% 15,000,000 8.8235% 20,000,000 11.7647%
Service Corporation
Sunny Asset Management 46,062 0.7678% 74,729 1.2457% 120,791 2.0135%
Corporation
Financial eSolution Co., Ltd. 905,475 4.1158% 2,156,769 9.8034% 3,062,244 13.9192%
Taiwan Depository & 307,306 0.0830% 264,835 0.0715% 572,141 0.1545%
Cleansing Corporation
Taiwan Mobile Payment Co. 600,000 1.0000% 2,400,000 4.0000% 3,000,000 5.0000%
Taiwan Power Company 1,451,523 0.0044% 918,981,385 2.7848% 920,432,908 2.7892%
Taiwan Sugar Corporation 16,831,537 0.2986% 24,307,963 0.4312% 41,139,500 0.7298%
Taiwan Incubator SME 3,417,440 4.8438% - - 3,417,440 4.8438%
Development Corporation
Sunsino Development 1,480,402 3.1166% - - 1,480,402 3.1166%
Associated Inc.
CDIB & Partners Investment 54,000,000 4.9505% - - 54,000,000 4.9505%
Holding Corp.
Taipei Financial Center Co. 11,760,000 0.8000% 11,760,000 0.8000%
Taiwan Urban Regeneration & 2,500,000 5.0000% 5,000,000 10.0000% 7,500,000 15.0000%
Financial Services Co., Ltd.
Chaofu Real Estate 150,000 3.0000% 150,000 3.0000%
Management Co., Ltd.
Asia Pacific Telecom Co., Ltd. 15,000,000 0.3490% 825,000 0.0192% 15,825,000 0.3682%
Taiwan High Speed Rail 44,500,000 0.7906% 24,365 0.0004% 44,524,365 0.7910%
Corporation
Taiwan Business Bank 500,000 100.000% - - 500,000 100.000%
Insurance Agency Co., Ltd.
Taiwan Business Bank 300,000 100.000% - - 300,000 100.000%
Property Insurance Agency
Co., Ltd.
TBB International Leasing 150,000,000 100.000% - - 150,000,000 100.000%
Co., Ltd.
TBB (Cambodia) Microfinance 20,000 100.000% 20,000 100.000%
Institution Plc
TBB Venture Capital Co., Ltd. 30,000,000 100.000% 30,000,000 100.000%
Taiwania Capital Buffalo II 1.6900% 1.6900%
Bioventures, LP
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Note: Long-term investment of the Bank.

IV Fund-Raising Status

65 68 74

1. Shares and Dividends

2. Issuance Status of Financial Bonds

3. Preferred Stocks, Global Depository Receipts, and Employee Stock Warrants, New Restricted Employee Shares, Any Merger and Acquisition Activities, and Acceptance of Transfer of the Shares of Another Financial Institution

4. Status of Implementation of Capital Allocation Plans

Taiwan Business Bank Annual Report 2018

Ⅳ

1. Shares and Dividends

(1) Capital Sources

Unit: Shares; NT$

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Authorized Capital Paid-in Capital Note
Year/ Issuing
Month Price Sources of
Shares Amount Shares Amount Others
Capital
Letter No.
Capital 10701121060
2018Sep. 10.00 8,000,000,000 80,000,000,000 6,393,880,193 63,938,801,930 Increased by Earnings issued by MOEA
registration effective
2,459,184,690
on Sep. 21, 2018.
Unit: Shares
Authorized Capital
Category of Shares Note
Outstanding Shares Un-issued Shares Total
Common Shares 6,393,880,193 1,606,119,807 8,000,000,000
Preferred Shares 0 0 0 Listed Shares
Total 6,393,880,193 1,606,119,807 8,000,000,000
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(2) Structure of Shareholders

Feb. 28, 2019

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Structure of Other Juristic Foreign
Government Financial Personal Institutions
Shareholders Person Total
Institutions Institutions Shareholder and Personal
Quantity Shareholder Shareholder
Number of Shareholders 3 8 324 146,401 690 147,426
Shareholding Amount 182,037,693 1,334,028,822 581,361,967 2,728,896,249 1,567,555,462 6,393,880,193
Shareholding Ratio (%) 2.85 20.86 9.09 42.68 24.52 100.00
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(3) Distribution of Shareholding

Par Value NT$10

Feb. 28, 2019

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Classification of Shareholding Number of Shareholders Shareholding Amount Shareholding Ratio (%)
1 to 999 41,681 11,812,984 0.18
1,000 to 5,000 50,453 131,184,951 2.05
5,001 to 10,000 18,712 150,079,077 2.35
10,001 to 15,000 9,810 130,297,403 2.04
15,001 to 20,000 4,874 92,373,009 1.44
20,001 to 30,000 7,035 185,698,236 2.9
30,001 to 40,000 2,713 99,675,681 1.56
40,001 to 50,000 2,517 121,910,993 1.91
50,001 to 100,000 4,610 347,915,575 5.44
100,001 to 200,000 2,745 398,176,357 6.23
200,001 to 400,000 1,197 350,399,471 5.48
400,001 to 600,000 371 190,085,979 2.97
600,001 to 800,000 190 137,626,602 2.15
800,001 to 1,000,000 96 90,105,181 1.41
1,000,001 to 99,999,999,999 422 3,956,538,694 61.89
Total 147,426 6,393,880,193 100.00
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(4) Major Shareholders

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Feb. 28, 2019
Shareholder's Name Shareholding Shareholding Ratio
Amount (%)
Bank of Taiwan 1,101,291,214 17.22%
Land Bank of Taiwan 155,214,491 2.43%
Ministry of Finance 141,056,496 2.21%
Vanguard Emerging Markets Stock Index Fund A Series of Vanguard International 76,062,940 1.19%
Equity Index Funds
Kin Ming Investment Co., Ltd 69,455,812 1.09%
JPMorgan Chase Bank N.A. Taipei Branch in custody for Vanguard Total 67,026,528 1.05%
International Stock Index Fund a series of Vanguard Star Funds
Chun Jin Shi 66,325,865 1.04%
BES Engineering Corporation 58,864,000 0.92%
China Man-Made Fiber Corporation 57,390,095 0.90%
Morgan Stanley & Co. International Plc 53,364,503 0.83%
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Note: Shareholding amount represents the number of shares recorded on the last ex-dividend basis date.

(5) Market Price Per Share, Net Value, EPS, Dividends, and Related Information for the Past Two Years (based on consolidated financial information)

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Year 2017 2018 As of Feb. 28,
Item 2019
Max 8.63 11.35 11.50
Market Price Per
Min 8.10 8.30 10.25
Share (NT$)
Average 8.34 9.72 10.95
Before Distribution 12.33 13.27 -
Net Value Per
Share
After Distribution - - -
Weighted Average Number of Shares (before 6,147,962,000 6,393,881,000 6,393,881,000
adjustment) shares shares shares
Earnings Per Weighted Average Number of Shares after adjustment) 6,393,881,000 shares - -
Share
Earnings Per Share (before adjustment) 0.82 1.19 -
(NT$)
Earnings Per Share (after adjustment) (NT$) 0.79 - -
Cash Dividends 0.268 (Note 3) -
Stock Dividends from Surplus 0.40 (Note 3) -
Dividends Per Stock
Share (NT$) Dividends Capital Surplus Distribution - - -
Accumulated Undistributed Dividend - - -
Price/Earnings (P/E) Ratio 10.17 8.17 -
Return on
Investment Price/Dividend Ratio (Note 1) 31.12 - -
Analysis
Cash Dividend Yield (Note 2) 3.21 - -
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Note: 1. Price/Dividend Ratio = Market Price Per Share/Cash Dividends Per Share.

Cash Dividend Yield = Cash Dividend/Average Price of the Month * 100%.
To be determined in accordance with the resolutions of shareholders' meeting.

Taiwan Business Bank Annual Report 2018

Ⅳ

(6) Dividend Policy and Distributions

A. Dividend policy prescribed in the Articles of Association of the Bank: Please refer to “Earnings Distribution and Dividend Policy” in the “Notes to the Financial Statements” of “VI. Financial Status”.
B. Dividend distribution to be proposed in the upcoming shareholders' meeting: A cash dividend of NT$0.30 per share and a stock dividend of NT$0.50 per share are proposed to be distributed from the capital surplus of 2018 of the Bank.

(7) Impacts of the Stock Dividends to be Proposed in the Upcoming Shareholders' Meeting

to Operating Performance and Earnings Per Share

According to the requirements under Article 6 of Regulations Governing the Publication of Financial Forecasts of Public Companies issued by the FSC, the Bank can not provide a complete financial information of 2019 for the reason that relevant financial forecast was not performed.

(8) Employees and Directors' Compensation

A. Percentage or scope of employees and directors' compensation set out in the Articles of Association of the Bank: Please refer to “Employees and Directors' Compensation” in the “Notes to the Financial Statements” of “VI. Financial Status”.
B. If the amounts of estimated employees and directors' remuneration differ from the actual distribution amounts subsequently resolved by the shareholders' meeting, the differences will be recorded as a change in accounting estimate in the same year as the shareholders' resolution.
C. Status of compensation distribution as approved by the Board of Directors
a. The Bank has proposed a total of NT$583,736 thousand of employees' remuneration and NT$58,374 thousand of directors' remuneration to be distributed for 2018.
b. The amount of any employee compensation distributed in stocks as a percentage of the sum of the current after-tax net income and total employee compensation: The Bank has not distributed any employee compensation in stocks during 2018.
D. Actual allocation of employees and directors' compensation for the previous year: According to the resolution of the shareholders' meeting on Jun. 29, 2018, profit sharing bonus to employees and compensation to directors were NT$272,350 thousand and NT$36,582 thousand, respectively, equivalent to the estimates set out in the financial statement of 2017.

(9) Share Redemption by the Bank in 2018 and as of the End of February 2019: None.

2. Issuance Status of Financial Bonds

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Tier of Financial Bonds Tranche 99-1 (A) non-cumulative Tranche 99-1 (B) non-cumulative Tranche 102-1 long-term
perpetual subordinated bonds perpetual subordinated bonds subordinated bonds
(Note 1)
(Note 6) (Note 6) (Note 6)
Approval Date and Approval Aug. 4, 2010 Aug. 4, 2010 Jan. 28, 2013
Document Number of the Central Letter of Jin-Guan-Yin-Guo-Zi No. Letter of Jin-Guan-Yin-Guo-Zi No. Letter of Jin-Guan-Yin-Guo-Zi No.
Competent Authority 09900289540 09900289540 10200016490
Date of Issuance Sep. 23, 2010 Sep. 23, 2010 Mar. 25, 2013
Nominal Value NT$10 million NT$10 million NT$10 million
Place of Issuance and Trading Taiwan Taiwan Taiwan
(Note 2)
Currency New Taiwan Dollar New Taiwan Dollar New Taiwan Dollar
Issue Price Issued at full face value Issued at full face value Issued at full face value
Total Amount NT$3.2 billion NT$0.8 billion NT$5 billion
The first 10 years' coupon rates The first 10 years' coupon rates Annual rate fixed at 1.68%
after issuance: At the floating after issuance: at the fixed rate of
interest rate on a one-year time 3.05% per annum; from the 11th
general deposit, as posted by the year, at the fixed rate of 4.05% per
Chunghwa Post Co., Ltd., plus annum.
Coupon Rates 1.34 percentage points; starting
from the 11th year, at the floating
interest rate on a one-year time
general deposit, as posted by the
Chunghwa Post Co., Ltd., plus 2.34
percentage points
Term No maturity date No maturity date 7-year term
Maturity date: March 25, 2020
Subordinate to the holders of the Subordinate to the holders of the Superior to stockholders' rights in
Bank's Tier II subordinated bonds Bank's Tier II subordinated bonds asset securitization and subordinate
Priority of Distribution
and other ordinary creditors and other ordinary creditors to all depositors and other ordinary
creditors
Guarantor None None None
Trustee None None None
Underwriting Agency None None None
Verification Lawyer None None None
Verification Accountant KPMG KPMG KPMG
(Note 3) Tan-Tan Chung, CPA Tan-Tan Chung, CPA Tan-Tan Chung, CPA
Verification Financial Institution None None None
10 years (including) after the bond 10 years (including) after the bond
is issued, the Bank may redeem is issued, the Bank may redeem
the bond, upon the approval of the the bond, upon the approval of the Lump sum payment at maturity
Payment Method
competent authority, in full at its competent authority, in full at its (bullet loan)
face value with the accrued interest face value with the accrued interest
paid. paid.
Outstanding Balances NT$3.2 billion NT$0.8 billion NT$5 billion
Paid-in Capital of the Preceding
NT$38.735 billion NT$38.735 billion NT$48.982 billion
Year
Net Worth of Paid-in Capital After
NT$41.727 billion NT$41.727 billion NT$55.038 billion
Final Report for the Preceding Year
Payment Status Normal Normal Normal
10 years (including) after the bond 10 years (including) after the bond None
is issued, the Bank may redeem is issued, the Bank may redeem
Redemption or Early the bond, upon the approval of the the bond, upon the approval of the
Settlement Term competent authority, in full at its competent authority, in full at its
face value with the accrued interest face value with the accrued interest
paid. paid.
Conversion and Exchange Terms None None None
Restriction Term (Note 4) Subordinate bonds Subordinate bonds Subordinate bonds
Net Worth of Paid-in Capital After 105.69 105.69 88.85
Final Report for the Preceding Year
Application of Funds Medium- to long-term loans Medium- to long-term loans Medium- to long-term loans
Eligible Equity Capital Tier I Capital Tier I Capital Tier II Capital
Credit Rating Agencies, Evaluation Jan. 25, 2017 Jan. 25, 2017 Jan. 25, 2017
Date and Rating Score (Note 5) Taiwan ratings: twA- Taiwan ratings: twA- Taiwan ratings: twA-
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Taiwan Business Bank Annual Report 2018

Ⅳ

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Tranche 104-1 non-cumulative
Tier of Financial Bonds Tranche 102-2 (A) long-term Tranche 102-2 (B) long-term
perpetual subordinated bonds
(Note 1) subordinated bonds (Note 6) subordinated bonds (Note 6)
(Note 6)
Approval Date and Approval Oct. 2, 2013 Oct. 2, 2013 Apr. 8, 2015
Document Number of the Central Letter of Jin-Guan-Yin-Guo-Zi No. Letter of Jin-Guan-Yin-Guo-Zi No. Letter of Jin-Guan-Yin-Guo-Zi No.
Competent Authority 10200273730 10200273730 10400065480
Date of Issuance Nov. 25, 2013 Nov. 25, 2013 Jun. 18, 2015
Nominal Value NT$10 million NT$10 million NT$10 million
Place of Issuance and Trading Taiwan Taiwan Taiwan
(Note 2)
Currency New Taiwan Dollar New Taiwan Dollar New Taiwan Dollar
Issue Price Issued at full face value Issued at full face value Issued at full face value
Total Amount NT$3.1 billion NT$2.9 billion NT$5 billion
1. The annual rate is calculated Annual rate fixed at 1.92% Annual rate fixed at 3.9%
in simple interest based on the
Index Rate plus 0.52%. The
Index Rate is the average of
the fixing rate of the 90-day
NTD commercial papers in the
secondary market shown on
p.6165 of Reuters in formation
screen at 11:00 am (Taipei time)
two business days before the
Coupon Rates interest accural date.
2. Since January 1, 2015, the
Index Rate has been changed
to the 3-month “Taipei Interbank
Offered Rate (TAIBOR)”
published two business days
before the interest accrual
date on the website of Bankers
Association of the Republic of
China .
7-year term 7-year term
Maturity No maturity date
Maturity date: November 25, 2020 Maturity date: November 25, 2020
Superior to stockholders' rights in Superior to stockholders' rights in Subordinate to the holders of the
asset securitization and subordinate asset securitization and subordinate Bank's Tier II subordinated bonds
Priority of Distribution
to all depositors and other ordinary to all depositors and other ordinary and other ordinary creditors
creditors creditors
Guarantor None None None
Trustee None None None
Underwriting Agency None None None
Verification Lawyer None None None
Verification Accountant KPMG KPMG KPMG
(Note 3) Tan-Tan Chung, CPA Tan-Tan Chung, CPA Feng-Hui Lee, CPA
Verification Financial Institution None None None
5 years (including) after the bond
is issued, the Bank may redeem
Lump sum payment at maturity Lump sum payment at maturity the bond, upon the approval of the
Payment Method
(bullet loan) (bullet loan) competent authority, in full at its
face value with the accrued interest
paid.
Outstanding Balances NT$3.1 billion NT$2.9 billion NT$5 billion
Paid-in Capital of the Preceding
NT$48.982 billion NT$48.982 billion NT$52.979 billion
Year
Net Worth of Paid-in Capital After
NT$55.038 billion NT$55.038 billion NT$62.738 billion
Final Report for the Preceding Year
Payment Status Normal Normal Normal
None None 5 years (including) after the bond
is issued, the Bank may redeem
Redemption or Early the bond, upon the approval of the
Settlement Term competent authority, in full at its
face value with the accrued interest
paid.
Conversion and Exchange Terms None None None
Restriction Term (Note 4) Subordinate bonds Subordinate bonds Subordinate bonds
Net Worth of Paid-in Capital After 93.48 93.48 66.31
Final Report for the Preceding Year
Application of Funds Medium- to long-term loans Medium- to long-term loans Medium- to long-term loans
Eligible Equity Capital Tier II Capital Tier II Capital Tier I Capital
Credit Rating Agencies, Evaluation Jan. 25, 2017 Jan. 25, 2017
Date and Rating Score (Note 5) Taiwan ratings: twA- Taiwan ratings: twA-
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Tranche 105-1 non-cumulative
Tier of Financial Bonds Tranche 104-2 (A) long-term Tranche 104-2 (B) long-term
perpetual subordinated bonds
(Note 1) subordinated bonds (Note 6) subordinated bonds (Note 6)
(Note 6)
Approval Date and Approval Apr. 8, 2015 Apr. 8, 2015 Jun. 24, 2016
Document Number of the Central Letter of Jin-Guan-Yin-Guo-Zi No. Letter of Jin-Guan-Yin-Guo-Zi No. Letter of Jin-Guan-Yin-Guo-Zi No.
Competent Authority 10400065480 10400065480 10500148070
Date of Issuance Aug. 31, 2015 Aug. 31, 2015 Sep. 20, 2016
Nominal Value NT$10 million NT$10 million NT$10 million
Place of Issuance and Trading Taiwan Taiwan Taiwan
(Note 2)
Currency New Taiwan Dollar New Taiwan Dollar New Taiwan Dollar
Issue Price Issued at full face value Issued at full face value Issued at full face value
Total Amount NT$4.7 billion NT$0.3 billion NT$8 billion
Coupon Rates Annual rate fixed at 2.05% Annual rate fixed at 2.10% Annual rate fixed at 3.20%
Term 8-year term 10-year term No maturity date
Maturity date: August 31, 2023 Maturity date: August 31, 2025
Superior to stockholders' rights in Superior to stockholders' rights in Subordinate to the holders of the
asset securitization and subordinate asset securitization and subordinate Bank's Tier II subordinated bonds
Priority of Distribution
to all depositors and other ordinary to all depositors and other ordinary and other ordinary creditors
creditors creditors
Guarantor None None None
Trustee None None None
Underwriting Agency None None None
Verification Lawyer None None None
Verification Accountant KPMG KPMG KPMG
(Note 3) Feng-Hui Lee, CPA Feng-Hui Lee, CPA Tan-Tan Chung, CPA
Verification Financial Institution None None None
5 years and 3 months (including)
after the bond is issued, the Bank
Lump sum payment at maturity Lump sum payment at maturity may redeem the bond, upon the
Payment Method
(bullet loan) (bullet loan) approval of the competent authority,
in full at its face value with the
accrued interest paid.
Outstanding Balances NT$4.7 billion NT$0.3 billion NT$8 billion
Paid-in Capital of the Preceding
NT$52.979 billion NT$52.979 billion NT$56.846 billion
Year
Net Worth of Paid-in Capital After
NT$62.738 billion NT$62.738 billion NT$67.659 billion
Final Report for the Preceding Year
Payment Status Normal Normal Normal
5 years and 3 months (including)
after the bond is issued, the Bank
Redemption or Early None None may redeem the bond, upon the
Settlement Term approval of the competent authority,
in full at its face value with the
accrued interest paid..
Conversion and Exchange Terms None None None
Restriction Term (Note 4) Subordinate bonds Subordinate bonds Subordinate bonds
Net Worth of Paid-in Capital After 72.68 72.68 71.02
Final Report for the Preceding Year
Application of Funds Medium- to long-term loans Medium- to long-term loans Medium- to long-term loans
Eligible Equity Capital Tier II Capital Tier II Capital Tier I Capital
Credit Rating Agencies, Evaluation
Date and Rating Score (Note 5)
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Taiwan Business Bank Annual Report 2018

Ⅳ

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Tranche 105-2
Tier of Financial Bonds Tranche 106-1 (A) long-term Tranche 106-1 (B) long-term
long-term subordinated bonds
(Note 1) subordinated bonds (Note 6) subordinated bonds (Note 6)
(Note 6)
Approval Date and Approval Jun. 24, 2016 Jun. 24, 2016 Jun. 24, 2016
Document Number of the Central Letter of Jin-Guan-Yin-Guo-Zi No. Letter of Jin-Guan-Yin-Guo-Zi No. Letter of Jin-Guan-Yin-Guo-Zi No.
Competent Authority 10500148070 10500148070 10500148070
Date of Issuance Dec. 20, 2016 Mar. 28, 2017 Mar. 28, 2017
Nominal Value NT$10 million NT$10 million NT$10 million
Place of Issuance and Trading Taiwan Taiwan Taiwan
(Note 2)
Currency New Taiwan Dollar New Taiwan Dollar New Taiwan Dollar
Issue Price Issued at full face value Issued at full face value Issued at full face value
Total Amount NT$2.7 billion NT$0.39 billion NT$0.25 billion
Coupon Rates Annual rate fixed at 1.40% Annual rate fixed at 1.50% Annual rate fixed at 1.60%
Term 7-year term 7-year term 8-year term
Maturity date: December 20, 2023 Maturity date: March 28, 2024 Maturity date: March 28, 2025
Superior to stockholders' rights in Superior to stockholders' rights in Superior to stockholders' rights in
asset securitization and subordinate asset securitization and subordinate asset securitization and subordinate
Priority of Distribution
to all depositors and other ordinary to all depositors and other ordinary to all depositors and other ordinary
creditors creditors creditors
Guarantor None None None
Trustee None None None
Underwriting Agency None None None
Verification Lawyer None None None
Verification Accountant KPMG KPMG KPMG
(Note 3) Tan-Tan Chung, CPA Tan-Tan Chung, CPA Tan-Tan Chung, CPA
Verification Financial Institution None None None
Lump sum payment at maturity Lump sum payment at maturity Lump sum payment at maturity
Payment Method
(bullet loan) (bullet loan) (bullet loan)
Outstanding Balances NT$2.7 billion NT$0.39 billion NT$0.25 billion
Paid-in Capital of the Preceding
NT$56.846 billion NT$59.689 billion NT$59.689 billion
Year
Net Worth of Paid-in Capital After
NT$67.659 billion NT$70.87 billion NT$70.87 billion
Final Report for the Preceding Year
Payment Status Normal Normal Normal
Redemption or Early None None None
Settlement Term
Conversion and Exchange Terms None None None
Restriction Term (Note 4) Subordinate bonds Subordinate bonds Subordinate bonds
Net Worth of Paid-in Capital After 71.02 64.48 64.48
Final Report for the Preceding Year
Application of Funds Medium- to long-term loans Medium- to long-term loans Medium- to long-term loans
Eligible Equity Capital Tier II Capital Tier II Capital Tier II Capital
Credit Rating Agencies, Evaluation
Date and Rating Score (Note 5)
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Tier of Financial Bonds Tranche 106-1 (C) long-term Tranche 106-2 long-term Tranche 106-3 unsecured US
(Note 1) subordinated bonds (Note 6) subordinated bonds (Note 6) dollar bonds (Note 6)
Approval Date and Approval Jun. 24,2016 Jun. 24,2016 Apr. 28, 2017
Document Number of the Central Letter of Jin-Guan-Yin-Guo-Zi No. Letter of Jin-Guan-Yin-Guo-Zi No. Letter of Jin-Guan-Yin-Guo-Zi No.
Competent Authority 10500148070 10500148070 10600090390
Date of Issuance Mar. 28, 2017 May 23, 2017 Oct. 27, 2017
Nominal Value NT$10 million NT$10 million US$1 million
Place of Issuance and Trading Taiwan Taiwan Taiwan
(Note 2)
Currency New Taiwan Dollar New Taiwan Dollar US dollar
Issue Price Issued at full face value Issued at full face value Issued at full face value
Total Amount NT$3.36 billion NT$1.3 billion US$0.12 billion
Annual rate fixed at 1.850% Annual rate fixed at 1.850% Issued as zero coupon bond, with
Coupon Rates an internal rate of return of 4.10%
Term 10-year term 10-year term 30-year term
Maturity date: March 28, 2027 Maturity date: May 23, 2027 Maturity date: October 27, 2047
Superior to stockholders' rights in Superior to stockholders' rights in The distribution priority is equivalent
asset securitization and subordinate asset securitization and subordinate to other unsecured creditors of the
Priority of Distribution to all depositors and other ordinary to all depositors and other ordinary Bank
creditors creditors
Guarantor None None None
Trustee None None None
Underwriting Agency None None None
Verification Lawyer None None None
Verification Accountant KPMG KPMG KPMG
(Note 3) Tan-Tan Chung, CPA Tan-Tan Chung, CPA Tan-Tan Chung, CPA
Verification Financial Institution None None None
Except for the redemption via the
Lump sum payment at maturity Lump sum payment at maturity “issuer's right”, the bond is subject
Payment Method
(bullet loan) (bullet loan) to lump sum repayment at maturity
(bullet loan).
Outstanding Balances NT$3.36 billion NT$1.3 billion US$0.12 billion
Paid-in Capital of the Preceding
NT$59.689 billion NT$59.689 billion NT$59.689 billion
Year
Net Worth of Paid-in Capital After
NT$70.87 billion NT$70.87 billion NT$70.87 billion
Final Report for the Preceding Year
Payment Status Normal Normal Normal
None None Issuer's redemption right: 10 years
after the bond is issued, the Bank
may redeem the bond in full, on
Redemption or Early
Settlement Term each effective day of redemption
and at the par value prices per
share as set out in the bonds
redemption table.
Conversion and Exchange Terms None None None
Restriction Term (Note 4) Subordinate bonds Subordinate bonds
Net Worth of Paid-in Capital After 64.48 66.32 62.96
Final Report for the Preceding Year
Application of Funds Medium- to long-term loans Medium- to long-term loans Medium- to long-term loans
Eligible Equity Capital Tier II Capital Tier II Capital No
Credit Rating Agencies, Evaluation
Date and Rating Score (Note 5)
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Taiwan Business Bank Annual Report 2018

Ⅳ

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Tier of Financial Bonds Tranche 107-1 Tranche 107-2 long-term Tranche 107-3 unsecured US
(Note 1) unsecured senior bonds (Note 6) subordinated bonds (Note 6) dollar bonds (Note 6)
Approval Date and Approval Nov. 15, 2017 Jun. 6,2018 Apr. 28, 2017
Document Number of the Central Letter of Jin-Guan-Yin-Guo-Zi No. Letter of Jin-Guan-Yin-Guo-Zi No. Letter of Jin-Guan-Yin-Guo-Zi No.
Competent Authority 10600265650 10702114820 10600090390
Date of Issuance Jan. 5, 2018 Aug. 20, 2018 Sep. 27, 2018
Nominal Value NT$10 million NT$10 million US$1 million
Place of Issuance and Trading Taiwan Taiwan Taiwan
(Note 2)
Currency New Taiwan Dollar New Taiwan Dollar US dollar
Issue Price Issued at full face value Issued at full face value Issued at full face value
Total Amount NT$1 billion NT$5.45 billion US$0.18 billion
Annual rate fixed at 0.70% Annual rate fixed at 1.450% Issued as zero coupon bond, with
Coupon Rates an internal rate of return of 4.70%
Term 3-year term 10-year term 30-year term
Maturity date: January 5, 2021 Maturity date: August 20, 2028 Maturity date: September 27, 2048
Equivalent to other unsecured Superior to stockholders' rights in Equivalent to other unsecured
creditors of the Bank asset securitization and subordinate creditors of the Bank
Priority of Distribution
to all depositors and other ordinary
creditors
Guarantor None None None
Trustee None None None
Underwriting Agency None None None
Verification Lawyer None None None
Verification Accountant KPMG KPMG KPMG
(Note 3) Tan-Tan Chung, CPA Tan-Tan Chung, CPA Tan-Tan Chung, CPA
Verification Financial Institution None None None
Except for the redemption via the
Lump sum payment at maturity Lump sum payment at maturity “issuer's right”, the bond is subject
Payment Method
(bullet loan) (bullet loan) to lump sum repayment at maturity
(bullet loan).
Outstanding Balances NT$1 billion NT$5.45 billion US$0.18 billion
Paid-in Capital of the Preceding
NT$61.48 billion NT$61.48 billion NT$61.48 billion
Year
Net Worth of Paid-in Capital After
NT$75.818 billion NT$75.818 billion NT$75.818 billion
Final Report for the Preceding Year
Payment Status Normal Normal Normal
None None Issuer's redemption right: 5 years
after the bond is issued, the Bank
may redeem the bond in full, on
Redemption or Early
Settlement Term each effective day of redemption
and at the par value prices per
share as set out in the bonds
redemption table.
Conversion and Exchange Terms None None None
Restriction Term (Note 4) Subordinate bonds
Net Worth of Paid-in Capital After 60.19 67.37 74.66
Final Report for the Preceding Year
Application of Funds Medium- to long-term loans Medium- to long-term loans Medium- to long-term loans
Eligible Equity Capital No Tier II Capital No
Credit Rating Agencies, Evaluation
Date and Rating Score (Note 5)
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4. Status of Implementation of Capital Allocation Plans

(1) Plan Details

A. To improve the Bank's capital adequacy and risk-bearing capacity in response to the capital requirement of business development, the issuance of NT$5.45 billions of long-term subordinated bonds was completed on August 20, 2018.
B. In order to expand the number of overseas branches, increase the investment level of foreign currency bonds, and effectively reduce risks in capital liquidity, the issuance of $0.18 billion of unsecured US dollar bonds was completed on September 27, 2018.
C. In response to the government's “5+2” industrial policy agenda and help the fund-raising in the green energy industry with the aim of fulfilling CSR, the Bank completed the issuance of senior unsecured green bonds in the amount of NT$1 billion on January 5, 2018.

(2) Status of Implementation

Analysis of the changes of major financial ratios, capital adequacy ratios, and after-tax earnings per share of the Bank:

Unit: NT$1,000 ; %

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Year
2018 2017 Increase/Decrease
Items
Financial Ratios
After-tax Return on Assets (ROA) 0.48% 0.33% 0.15%
After-tax Return on Shareholders' Equity (ROE) 9.51% 6.87% 2.64%
Capital Adequacy Ratio 12.70% 12.27% 0.43%
Net Profit After Tax 7,640,542 5,039,924 2,600,618
Earnings Per Share After Tax 1.19 0.79 0.40
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Note:

Earnings per share is calculated according to the weighted average number of shares of the current fiscal year. The effects of retrospective adjustments apply to basic earnings per share for 2017.
Net profit after tax for 2018 totaled NT$7.641 billion, increased by NT$2.601 billion from 2017.

Taiwan Business Bank Annual Report 2018

V Operation Summary

76 90 92 92 92 93 94 95

1. Business Activities

2. Employees

3. Corporate responsibilities and moral conducts

4. The number of non-managerial employees and the annual average employee benefit expenses

5. Information Equipment

6. Labor-Management Relations

7. Important contracts

8. Relevant information on securitization products

1. Business Activities

(1) Principal Activities for Different Areas of Business

A. Corporate Banking
a. Corporate financing loan
Engage in different corporate loans, project loans, syndication, bills discounting, domestic letter of credit issuing, guarantee provision, as well as accounts receivable financing and factoring.
b. Foreign exchange
Engage in import, export, foreign-currency deposits, foreign exchange, foreign-currency loans, forfaiting of time credit without recourse, and overseas financing.
B. Personal Banking
a. Personal loans

Engage in personal mortgage and consumer financiing business, etc.

b. Credit card
Engage in credit card issuance and acquiring businesses.
c. Wealth management
Select wealth management commodities with proven investment performance in line with the market trend, continue to focus on our wealth management customers and develop potential customers to expand the breadth and depth of relationship with customers.
d. Trusts
1) Monetary trust: Fiduciary investments in domestic and overseas marketable securities, advance trust, real estate transaction trust, civil servants estate trust, government projects subsidy trust, caring trust, insurance trust, third-party payment trust, and other monetary trusts.
2) Custodian business: Entrusted for keeping domestic securities investment trust fund, entrusted for keeping investment-linked products under investment discretionary account operation concerning investment trust by insurance companies, and entrusted for keeping operation bond and foreign investment safe-keeping.
3) Others: Real estate trust, superficies trust, marketable securities trust, and marketable securities certification services.
e. Securities
Engage in marketable securities transactions, margin trading and short selling, as well as futures introducing broker services.

C. Finance Logistics

Engage in the capital movement for New Taiwan Dollars and foreign currencies, foreign exchange transaction, marketable securities transactions, long-term equity investments, financial products marketing, and derivatives business.

D. Deposits

Engage in check deposits, passbook deposit, certificate deposit, tax collection, national treasury agent, collections, and remittance.
E. E-Banking
Engage in e-banking services such as personal intenet banking, corporate intenet banking, global eBanking, mobile banking, telephone banking, eATM, online cash register, national payment, parking fee collection, virtual accounts, digital deposit account, cross-border e-Pay, Alipay, deposit account acquisition with QR Code, services such as ACH (eACH, eDDA), and cross-border online shopping (cross-border outward remittance).

(2) Business Overview for the Past Two Years

A. Corporate Banking

Taiwan Business Bank Annual Report 2018

a. Corporate financing loan

Unit: NT$ million

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Year 2018 2017 Increase
Items Amount Percentage % Amount Percentage % (Decrease) %
SMEs loan balances 471,227 68.88 437,181 60.34 7.79
Large enterprises loan 130,192 19.03 114,595 15.81 13.61
balances
Government and
public enterprise loan 82,739 12.09 172,789 23.85 -52.12
balances
Corporate banking
New Taiwan Dollar loan 684,158 85.34 724,565 85.73 -5.58
balances
Foreign currency loan 117,562 14.66 120,611 14.27 -2.53
balances
Total 801,720 100.00 845,176 100.00 5.14
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b. Foreign exchange

Unit: NT$ million

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Year 2018 2017 Increase
Items Amount Percentage % Amount Percentage % (Decrease) %
Foreign currency 89,239 41.61 103,839 48.46 -14.06
demand deposit
Foreign currency time 125,239 58.39 110,453 51.54 13.39
deposit
Total 214,478 100.00 214,292 100.00 0.09
Unit: US$ million
Year Increase
2018 2017
Items (Decrease) %
Volume of foreign exchange business 69,688 70,845 -1.63
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Note: The volume of foreign exchange business is the sum of DBU and OBU.

B. Personal banking

a. Personal loans

Unit: NT$ million

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Year 2018 2017 Increase
Items Amount Percentage % Amount Percentage % (Decrease) %
Consumer loan
7,920 2.81 10,162 3.72 -22.06
balances
Mortgage balances 191,707 68.13 184,592 67.57 3.85
Other personal loan 81,779 29.06 78,423 28.71 4.28
balances
Total 281,406 100.00 273,177 100.00 3.01
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b. Wealth management

Unit: NT$ million

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Year 2018 2017 Increase
Items Amount Percentage % Amount Percentage % (Decrease) %
Service fee income for
440.66 28.11 504.35 30.93 -12.63
trust funds
Service fee for life
insurance collection 1,089.13 69.47 1,089.04 66.79 0.01
(Note 1, Note 2)
Service fee for property
insurance collection 34.17 2.18 33.75 2.07 1.24
(Note 2)
Gold passbook income 3.78 0.24 3.33 0.20 13.51
Total 1,567.74 100.00 1,630.47 100.00 -3.85
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Note 1: Mortgage life insurance and service fee income for credit card marketing/telemarketing of insurance are not included in the service fee income for life insurance

Note 2: The splitting rate regarding life insurance and property insurance between the Bank and Taiwan Business Bank Insurance Agency Co., Ltd. for 2018 and 2017 was 7:3.

c. Trusts

Unit: NT$ million

Year Items	2018	2017	Increase (Decrease) %
Fiduciary investments in domestic and overseas marketable securities balances	55,521	55,924	-0.72
Custodian bank balances (Note)	88,233	71,144	24.02
Other trusts balances	17,894	16,976	5.41

Note: The “Custodian bank balances” includes balances of securities investment trust fund held in trust and discretionary investment assets held in trust.

d. Credit card

Unit: NT$ million/card

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Year Increase
2018 2017
Items (Decrease) %
Card transaction volume 12,207 11,456 6.55
Number of issued cards 326,737 324,952 0.55
e. Securities
Unit: NT$ million/lot
Year Increase
2018 2017
Items (Decrease) %
Securities broker transacted amount 291,045 255,495 13.91
Average securities financing balances 2,344 1,924 21.83
Lot amount for futures (lot) 234,278 235,655 -0.58
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C. Finance Logistics

a. Foreign currency and foreign capital transaction

Unit: US$ million

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Year 2018 2017 Increase
Items Amount Percentage % Amount Percentage % (Decrease) %
Forwards 432 0.36 884 0.64 -51.16%
SWAP 24,434 20.32 24,222 17.44 0.88%
Non-deliverable forwards 0 0 15 0.01 -100.00%
Options 249 0.21 735 0.53 -66.12%
Inter-bank borrowings and 95,125 79.11 96,273 69.30 -1.19%
inter-bank loans
Total 120,240 100.00 122,129 100.00 -1.55%
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Note: The volume of foreign exchange transaction is the sum of the transaction volume of our head office and its overseas branches.

b. Stock fund investment

Unit: NT$ million

Year Items	2018	2018	2017	2017	Increase (Decrease) %
	Amount	Percentage %	Amount	Percentage %
Shares	2,158	99.04	1,478	99.33	46.01%
Funds	21	0.96	10	0.67	110.00%
Total	2,179	100.00	1,488	100.00	46.43%

Note: Stated at the initial acquisition costs.

c. Bonds and notes

Unit: NT$ million

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Year At the end of 2018 At the end of 2017
Increase
Items Amount Percentage % Amount Percentage % (Decrease) %
Short-term notes 169,731 51.16 124,830 46.68 35.96
Certificates of deposit 165,150 124,330
acquisition
Commercial paper acquisition 4,581 500
Acceptances acquisition 0
Bonds 161,997 48.84 142,565 53.32 13.63
Government debts 73,254 73,324
Corporate bonds 42,720 36,405
Financial bonds 44,711 32,836
Beneficiary securities and 1,312 0 0.00
asset-backed securities
Total 331,728 100.00 265,596 100.00 24.89
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Note: Stated at the initial acquisition costs.

Taiwan Business Bank Annual Report 2018

d. Reinvestment: Please refer to "Financial Assets Carried at Costs" in the "Notes to the Financial Statements" under "VI. Financial Status".
D. New Taiwan Dollar Deposits business

Unit: NT$ million

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Year At the end of 2018 At the end of 2017 Increase
Items Amount Percentage % Amount Percentage % (Decrease) %
Demand Deposits 605,798 52.56 609,605 52.62 -0.62
Time Deposits 546,914 47.44 548,941 47.38 -0.37
Total 1,152,712 100 1,158,546 100.00 -0.50
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E. E-Banking

Unit: Customer/Transaction

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Year
Items At the end of 2018 At the end of 2017 Increase (Decrease) %
Number of internet banking 10.44%
1,388,314 Customers 1,257,046 Customers
customers
Number of mobile banking 5.15%
107,087 Customers 101,835 Customers
customers
Number of e-banking transactions 9,646,150 Transactions 8,710,820 Transactions 10.73%
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(3) Operating Plan for 2019

A. Corporate Banking
a. Corporate financing loan
- 1) Focus on the key business promotion for SMEs.
- 2) Continue cooperating with the government to support the policy for key innovative industry.
- 3) Established "Innovative Financing Project Office" to support the development of the innovative industry.
- 4) Expand the loan scales and market share for industrial zones.
- 5) Provide counsel for the development of young entrepreneurs and the micro-scale enterprises to fulfill its corporate social responsibilities.
- 6) Actively organize the syndicated loans for SMEs.
- 7) Strengthen the credit guarantee funds transferring to reduce the risk-adjusted assets of the Bank.
b. Foreign exchange
- 1) Strengthen the expansion of our foreign exchange business.
  - i. Adopt incentive measures or projects in due course; actively expand the size of our foreign exchange deposits.
  - ii. Help importers/exporters in utilizing derivatives to promote the growth of foreign exchange business.
  - iii. Improve the interactions with regional operation centers to collectively provide assistance to the development of foreign exchange business for branches in the jurisdiction.
  - iv. Enhance training to improve professional competencies for foreign exchange, minimize operating risks, and increase the service quality of foreign exchange business.
- 2) Considering the size of the Bank, our overseas branches take risks and revenue into account to operate in a prudent manner and remain cautious regarding the compliance with local regulatory measures. Also, due to the differences in regional characters, legal and supervision strength, our overseas branches may expand their businesses according to the business license held by the branch, policy of our head office, as well as factors of local political and economic situations, and industrial changes.
B. Personal Banking

a. Personal loans

1) Adjust the mortgage pricing strategy in response to market changes to stabilize the growth momentum of personal financing loans.
2) Step up efforts in expanding batch-processing mortgage sources to improve the volume and performance of mortgage.
3) Improve value-added for the mortgage, increase the coverage and penetration of our mortgage and life insurance business, as well as the collection of personal loan system operating charges, so as to improve the income of the Bank.

4) Expand the market size of personal wealth management and consumer loan for the Bank, focus on wealth management loans and micro-credit loans with higher returns.
5) Expand the development of employee group loan; focus on corporate customers having proven track records with the Bank and visit proper target customer groups to improve our personal financing business.
6) Focus on employees from corporate customers using our payroll transfer services to increase the revenue of personal financing for the Bank.
b. Wealth management
1) Respond to government policies and fulfill its corporate social responsibilities; provide "micro-injury insurance" and "micro-whole life insurance" to supplement the shortfall of social insurance or social assistance system.
2) In response to the demand for the middle-aged and senior group and nursing and long-term care demand arising from the increase of the elder population, the Bank continues to introduce various types of wealth management and insurance products with focuses on "annuity," "medicine," and "long-term care" to help customers build high quality and carefree senior lives with stable economic sources.
3) Invest in premium wealth management customers and take the initiative to develop; provide assets allocation plan according to the requirements and the investment nature of customers; fully exert the marketing capacities of employees to improve our service fee income.
4) Establish a ranking system for professional competencies, provide training and management for wealth management personnel, enhance their marketing techniques, utilize the wealth management database effectively, and take the initiative to seek interacting opportunities with customers to increase sales performance and create the win-win situation.
5) Actively promote cross-departmental resources integration to create synergy effects that deliver satisfactory conditions for all parties involved.
6) Improve performance management, establish dynamic assessment objectives for branches, motivate our fellow employees to scale new heights and strive for honor, so as to achieve the full year budget target.
c. Trusts
1) Expand the asset scale in our custody through cross-industry cooperation. We continue to cooperate with insurance companies to safe keep the target maturity funds related to investment-linked products, so as to provide healthy investment instruments with low volatility to our customers and improve the asset scale and revenue in our custody.
2) Continue introducing offshore debenture products with marketability and satisfy the demand from high-asset customers to increase the market competitiveness of the Bank.
3) Combine governmental and private resources to build nursing homes by way of urban regeneration; accelerate the senior industry development and provide nursing and retirement integration services to the elders.
4) Comply with the government policy and participate in the Property Trust for the Senior and the Disabilities evaluation and continue to implement trust activities in order to fulfill the corporate social responsibility of the Bank.
5) Provide trust services for real estate and capital according to the urban regeneration and hazardous construction facility for city amenities and living environment improvement.
6) Help senior owners for smooth transitions of business and wealth to their successors, ensure the sustainable transitions of family businesses, provide care for the descendants, and satisfy the need for transmission through successive generations for family businesses; through which, extending the relationship between the Bank and the owner in the first generation to the next generation.
7) Promote employee benefits saving/shareholding trust for the employee cohesiveness of the corporate, improve the stability of life for employees after retirement, foster harmonious labor relations, maintain company equity, delivering healthy development for the corporate and increased business volume between corporate customers and the Bank.
8) Plan and maintain the public welfare and benefit trust to care for the community, improve the living and caring standards for seniors and the underprivileged groups.
d. Credit card
1) Continue the promotion for the Silver Love Credit Card, in which the Bank exclusively allocated 3‰ of the general card consumption to help seniors to dine and learn together.

Taiwan Business Bank Annual Report 2018

  - 2) Adapt to the payment trend and promote its mobile payment business.

  - 3) Implement the government's policy of e-payment to improve the performance of e-payment. The Bank will keep up the effort to advertise and encourage our customers to pay their consumptions and governmental fees with credit cards.

  - 4) To prevent the waste on creating cards and maintain costs, the Bank keeps track of card usage of our customers to improve the effective rate of credit cards.

  - 5) Participate in cross-industry strategic alliances to seek cross-industry alliances with moderate size and similar philosophy to launch credit cards, keep on developing stores with discount deals or using payment by installment services, and organize marketing events with stores from time to time, such as free gifts with credit card purchases achieving a prescribed amount to increase credit card issuance and trade volume.

  - 6) Carry out on-going promotion for the acquiring business to build closer relationships with stores, and in turns realize cross-selling for other financial products of the Bank and maintaining customer relationships.

e. Securities
- 1) Improve cross-selling business, actively promote securities business, and maintain the Branches Employee Securities Referral Administrative Reward Measures.
- 2) Vigorously cooperate with branches to jointly visit the target customer groups, fully exerting the integral marketing function of the Bank and improve the overall contribution of customers.
- 3) Our training for security personnel focuses on programs related to legal compliance, anti-money laundering, and risks control, enhancing our employees' professional know-how for securities and futures investment.
- 4) In order to comply with the Continuous Trading system to be duly implemented by Taiwan Stock Exchange in March 2020, the Bank intends to carry out securities mainframe and hardware upgrades and application system repair procedures.
- 5) To better meet the investment demand from our customers, the Bank intends to establish an "e-instant accounting" system in 2019 that allows customers to have instant access to information on their personal account online to boost the customer satisfaction.
C. Finance Logistics
(1) Enhance capital management and operating efficiency to maintain liquidity and improve capital utilization income.
(2) Actively carry out foreign exchange operations to increase exchange gains.
(3) Closely monitor domestic and overseas governmental and economic conditions to get hold of the overall market investment trend. Select premium stock in different industries in due course to balance the investment allocation and increase our investment income.
(4) Improve the planning and management for our reinvestment business to increase the reinvestment income of the Bank.
(5) Cautiously select premium investment targets with growth potentials and financial health to expand our investment portfolio, boosting foreign currency securities income.
(6) Implement KYC system and assessment for product adequacy; closely monitor customers' credit limits and carry out risks control.

D. Deposits

(1) Focus on exploring general corporate and personal demand deposits opportunities and comply with incentive supervision and evaluations, improve the deposits promotion momentum of branches, and expand the size of primary deposit customers.
(2) Advance our deposits services and reinforce our assistance to branches in terms of business expansion.
(3) Acquire stable deposit capital in due course according to the requirements of business development and strictly control deposit costs.
E. E-Banking
a. Introducing FinTech and digital equipment into branches
- 1) Value customer experiences: Customers may complete financial product transaction by using automatic equipment and simplify teller operations to cut down the waiting time, providing new service experiences for customers.

  - 2) Improve digital functions of branches: Improve system functions of branches with the integration of digital technology and business procedures to increase operating efficiency and accuracy.

b. Optimize virtual channels
- 1) Optimize internet banking functions: Rebuild the new generation internet banking, upgrade application systems of personal internet banking, eATM and mobile banking, and plan for establishing the revisions of online corporate banking and mobile banking to fully optimize the internet banking channels of the Bank.
- 2) Hi Bank optimization and upgrade: Plan for financial products with better diversity profile for Hi Bank platform and provide a financial department store meeting customers' requirements.
- 3) Robot advisor: Launched AI Wealth Management to help customers with investment and wealth management; its feature of low service charges delivers the goal of financial inclusion.
c. Emerging payment and cross-industry alliances
- 1) Continue expanding the scope of service for Taiwan Pay: Spare no efforts in involving authorized stores, tax payment, and collection institutions.
- 2) Cooperate with other payment companies: Allow deposits customers of the Bank to bind with the account of the cooperating mobile payment companies for top up, debit payment for consumption, rendering a convenient payment method.
- 3) Improve ACH gateway service platform: Carry out an overall upgrade for service performance of ACH collection and payment platform through eACH and eDDA online authorization, collection and payment function.
- 4) Establish multiple acquiring systems: Provide basic facilities for authorized stores managing and control, accounting procedures, and order treatment, reserve the expansion of multiple payment methods of authorized stored for the convenience of the Bank to develop other emerging payment operations in the future.
d. Explore digital marketing channels to create new opportunities: Use the existing Facebook page of the Bank as the exclusive platform to present marketing event advertisement with lively and brightly themed; interact with the young generation to build a new, young image for our company that has one hundred years of history.
F. Risks Management
a. To enhance the system for monitoring anomalies and deviation from the market price during financial products transaction, the Bank established the "Taiwan Business Bank Financial Products Transaction Deviation from Market Price Monitoring Procedures."
b. For valid assessment regarding the credit risks for building financing project loans and improvement on the risks measurement capacities for building financing, the Bank established the internal credit rating model for civil work financing and loans.
c. Implement "Channeling Costs of Risk Capital into Earnings of Domestic Branches Evaluation" system to guide branches adjusting the loan structure to reduce risk-adjusted assets and improve the capital adequacy rate.
d. Pursue enhancing linking function among the top three managing tools for operating risks, allowing management tools to support and link to one another, perform cross-over analysis and verification, to improve the Bank's capacity for active and advance control on operating risks.
G. Legal compliance and anti-money laundering
a. Reinforce the control measures for anti-money laundering and combatting the financing of terrorism according to the results and recommendations from the APG on-site evaluation.
b. Strengthen the supervision for the first line of defense and sampling test for our branches
c. Establish the managing system of legal compliance, anti-money laundering, and combatting the financing of terrorism for overseas branches
d. Organize training on an on-going basis

(4) Market Analysis

A. Geographic Scope of Operations
Apart from being a specialized bank for SMEs, the Bank also provides diversified services in personal financing, wealth management, and professional financing field. With our branches spreading across the

Taiwan Business Bank Annual Report 2018

nation, we have 125 branches in Taiwan and 1 Offshore Banking Unit, 8 overseas branches in Hong Kong, Los Angeles, Sydney, Shanghai, Brisbane, Wuhan, New York, and Tokyo as well as one representative office in Yangon, Myanmar.

B. Market supply and demand and market growth in the future
In 2018, the global economy was expected to show a positive trend. In Taiwan, the Financial Supervisory Commission(FSC) continued to amend the regulations to facilitate the expansion of domestic and overseas business and increase the competitiveness of banks in Taiwan. Furthermore, with the rapid growth of FinTech development, domestic and overseas loans and wealth management business is expected to show a growing trend. However, the R&D of FinTech resulted in the increasing costs for banks. Driven by the increase in investment net profit, the overall earnings for the banking industry in 2018 are expected to record an upward trend as compared to that of 2017.

Regarding the future development of our business, under the pressure of disposing of capital and the circumstances that the performance of overseas interest rate differential remains higher than the domestic performance, overseas loans become the primary target for the loan business of domestic banks in 2019. Participating in overseas syndication projects and providing cross-border financing services remain as the major two loan sources. However, the overseas market operation of domestic banks is still facing tremendous fluctuations in the financial market resulting from the trade war between the U.S. and PRC, which is likely to lead to exposure upsurge for overseas loans and investment, in turns reducing the substantial profits. Corporate loans and mortgage are the primary businesses of the domestic loan market. Among which, except for general financing regarding corporate financing, to expand to new customers group and boost the growth of loans, domestic banks expect to continue its focuses on "5+2" creative industries and strengthen the credit insurance cooperation with SMEs in 2019. Regarding the mortgage market, it is expected that domestic banks will continue providing lower interests rate for the sub-loan group at the maturity of their grace period and those with a higher interest rate in 2019. The mortgage business of domestic banks in 2019 expects to record a slight growth. Regarding wealth management, the lower interest rate differential makes wealth management more important, which not only dispose of capital but also increase the customer adhesion and service charges income. Benefitted from the continual establishment of Big Data, the Bank managed to continually enhance the product precision for the wealth management demand of our customers. Therefore, leveraging the contribution from both sides of demand and supply in wealth and management market, the business is expected to record continuing growth in 2019.

Regarding the industrial competitiveness, in order to improve the competitiveness for the banks in Taiwan, increase overseas operating strength, and settle the issue of having more than enough branches for the banking industry in Taiwan, the government has been actively searching for the improving methods. The FSC issued the "private-bank-mergers" solution in 2018, and the deregulation of standards related to "hostile takeover" was released in August. It is expected that the development of policies will gradually unfold in 2019. However, the management team of the merged banks generally find it hard to accept such mergers; it is expected that successful mergers will remain tough.

Overall, due to the continual amendment of regulations by the FSC and the rapid development of FinTech, plus the companies actively seeking the breaking point for entering new markets, the competitiveness for the banking industry for domestic and overseas businesses as well as the overseas layout were improved. Also, with companies continually adjusting their loan and business structural ratio to improve their profit margin, it is expected that, even with the constant interference to the global economy from the trade war initiated by the U.S., the banking industry may still improve their overall margin in 2019 as compared to 2018.

C. Positive and negative factors affecting competitive niches and long-term development, as well as response strategies
Regarding the fast-changing global financing and economic state, the Bank may encounter the following circumstances:

a. Favorable factors

1) Even though central banks across the globe have been slowly tightening the money supply; however, except for the U.S., the overall interest rate remains low, where the outlook for inflation remains mild with no sign of stagflation; there have been no systematic risks.
2) The Bank possesses profound local operation basis and extensive groups of customers having longterm relationships with the Bank.

3) Leverage on the competitive advantage of "Financing + Counselling," the Bank has been focusing on the SMEs loan business in the long run, assuming an essential part in the market share of SMEs loans with the benefit of scale profit.
b. Unfavorable Factors
1) The trade war between the U.S. and the PRC led to increasing international economic exposures, which may endanger corporates with their primary manufacturing base or consumer markets in Mainland China, adding uncertainties to the economic growth of Taiwan.
2) Increasing competition among our business for high homogeneity in products and services provided.
c. Countermeasures
1) Conservative and stable strategies are intended to be taken for our investment operating to obtain stable returns.
2) Consider factors of risks and returns to make effective adjustments on assets allocation for the increase of overall income.
3) Focus on the development with SMEs and continue to strengthen our specialized field of SMEs with considerations equally given to financing and counseling, fully exerting our function as a specialized bank for SMEs.
4) Integrate marketing resources, focus on product promotion, realize cross-selling, and increased business volume with targeting customers to improve the overall contributions of customers.
5) Leverage on the channel advantages and cooperate with the flexible marketing management to help promote the operating performance and improve services for customers.
6) Establish market segregations and carry out grouped and graded management according to assets of customers; focus on targeted wealth management customers and provide customized integral planning for finance and asset for such customers.
7) Introduce diversified products, fixate on the cooperative relationship regarding investment credit, and expand the investment choices to satisfy customers' need, enhance competitiveness, and improve service fee income.

(5) Financial Product Research and Business Development Summary

A. Primary Financial Products and Size of Newly Added Business Department, and Profit or Loss for the Past Two Years
a. Major financial products of the Bank for the past two years
1) Providing "Wonderful Industrial Zone Concessional Loan," and the loan balances were NT$97.07 billion at the end of February 2019.
2) Providing the " Preferential Loans for Key Innovative Industries," and the loan balances were NT$88.31 billion at the end of February 2019.
3) Providing the "Green Energy Sustainable Project Loan," and the loan balances were NT$0.413 billion at the end of February 2019.
4) Providing the "2018 Happy Homeland" mortgage project, and the loan balances were NT$4.821 billion at the end of February 2019.
5) Providing the retirement housing "Joyful Retirement" project, and the loan balances were NT$0.721 billion at the end of February 2019.
6) Providing the "Eternal Peace and Good Health" house guaranteed loan, and the loan balances were NT$8.381 billion at the end of February 2019.
7) Providing the "Heart of Gold" civil and teaching personnel credit loan, and the loan balances were NT$0.902 billion at the end of February 2019.
8) Providing the "Corporate Elite Loan" mortgage project, and the loan balances were NT$11.79 billion at the end of February 2019.
9) Providing the "New Immigrants Mortgage" project, and the loan balances were NT$10.389 million at the end of February 2019.
10) Issuance of the Silver Love Credit Card in June 2018, and the Bank exclusively allocated 3‰ of the general card consumption to help seniors to dine and learn together. At the end of February 2019, the accumulated volume of circulation was 17,509 cards, the accumulated general card consumption was NT$1,337,728,000, and the accumulated non-profit fund was NT$4,007,000.
11) The deposit balances for the "Excellent Rate Large Amount Demand Deposits" project at the end of 2018 were NT$20 billion; the deposit balances for the "Preferential Gold Demand Deposits" project at the end of 2018 were NT$15 billion.

Taiwan Business Bank Annual Report 2018

b. Newly added business departments of the Bank for the past two years
- 1) The New York Branch commenced operating on February 27, 2017, providing services of loans, etc.; the loan balance at the end of February 2019 was approximately NT$4.966 billion.
- 2) The Tokyo Branch commenced operating on November 9, 2017, engaging businesses of deposits, loans, and foreign exchange; the loan balance at the end of February 2019 was approximately NT$3.47 billion.
B. R&D expenses and results, and the future R&D plan
a. R&D expenses for the past two years

2) The Tokyo Branch commenced operating on November 9, 2017, engaging businesses of deposits, loans, and foreign exchange; the loan balance at the end of February 2019 was approximately NT$3.47 billion. D expenses and results, and the future R&D plan R&D expenses for the past two years	2) The Tokyo Branch commenced operating on November 9, 2017, engaging businesses of deposits, loans, and foreign exchange; the loan balance at the end of February 2019 was approximately NT$3.47 billion. D expenses and results, and the future R&D plan R&D expenses for the past two years	2) The Tokyo Branch commenced operating on November 9, 2017, engaging businesses of deposits, loans, and foreign exchange; the loan balance at the end of February 2019 was approximately NT$3.47 billion. D expenses and results, and the future R&D plan R&D expenses for the past two years
Unit: NT$ thousand
Year	2018	2017
Amount	27,990	22,836

b. R&D results for the past two years
1) Provide industrial information on a regular basis
- To improve the professional knowledge and expertise of industries for our employees, industrial analysis reports were written by the Bank on a regular basis; 96 industrial dynamics reports, 12 profile analysis on domestic and overseas economics and finance, 8 monthly statement for industrial trend, 4 quarterly reports for prospects of domestic industries, and 54 project reports were completed during 2018.
- 96 industrial dynamics reports, 12 profile analysis on domestic and overseas economics and finance, 8 monthly statement for industrial trend, 4 quarterly reports for prospects of domestic industries, and 6 project reports are expected to be completed during 2019.
2) Analysis, reports, and research on particular and major industries
- i. Given the stringent environmental protection control in the PRC, the legalization of environmental protection policies has been carried out. Revisions and supplements on relevant environmental laws and regulations have been promulgated successively, and environmental protection as priority has become a regular system instead of a short-lived political slogan. Furthermore, the target for such systems is not merely restricted to Taiwanese firms, but also different industries. Therefore, the Bank wrote the "Impacts on the Taiwanese Firms as well as the Risks and Business Opportunities to the Bank Resulting from the Pollution Control Order in the PRC" to analyze the impacts and risks the Taiwanese firms and the Bank may be exposed to, respectively. We expected to find new business opportunities as references to our head office for decisions on adjusting the industrial credit loans.
- ii. Due to the trade war between the U.S. and the PRC and the slowdown of the semiconductor market, the Bank wrote the "Operating Challenges for Semiconductor Channel Firms in 2019" accordingly, to point out that commodities sold by semiconductor channel firms are in the nature of complex specifications and broad selections of items. Also, the majority of such companies are facing operating challenges such as the short life cycle and low margin of products. Besides, due to the extensive scope of the sales market, exchange rate risk is also the business risk that is generally faced by such companies. It is expected that such information would benefit and allow all employees of the Bank to understand the industrial trend.
- iii. Organized and coordinated the syndicated loans projects in line with the Bank, continuingly completed the thematic reports of "Zinc Related Industries in Taiwan," Food Industry," "Processing and Preserving of Aquatic Products and Related Products" as references to the Bank for decisions on adjusting the industrial credit loans.
3) In February and November 2017, the core information systems implementation for the New York Branch and the Tokyo Branch were completed. Personnel was successively assigned to the branches for training provision, so as to help the system setup and day-to-day maintenance and operating tasks for the commencement of the branches.
4) Pre-arranged outward foreign-currency remittance function: Teller operations have been simplified, the operating time for hand-written customer application forms has been eliminated, and the function has been opened up for customers at smart branches since Mar. 6, 2017.
5) To meet the capital requirements for the domestic and overseas channel layout and improve the risks assumption, the Bank completed the issuance of long-term subordinated bonds in the amount of NT$5.3 billion on March 28 and May 23, 2017.

6) The building of the core system and SWIFT system at the Hong Kong Branch was pulled back to Taiwan and was completed in May 2017, which integrates and shares information systems, allowing an effective reduction on the equipment management and operating costs for overseas branches.
7) The establishment of the two-factor biometric system and improvement on information security control system were completed in June 2017 to set a foundation for information security control, reinforcing the e-banking of the Bank regarding customer verification.
8) The trusts assets management system was introduced on June 27, 2017 to improve our service quality.
9) Digital deposit account (Type 1): opened up for customers to use on July 28, 2017 to enhance digital services and function.
10) Cross-border online shopping (cross-border outward remittance): Inaugurated on August 1, 2017, allowing clients to pay for Taobao and Tmall online purchases with Taiwan Business Bank's ATM cards.
11) The maintenance contract for the "Financial Transaction Management System (KONDOR system) Software and Hardware and Project Service Program" was signed on August 2, 2017, to improve our operating efficiency.
12) In response to the digital financing developing trend, the Bank aims at creating comprehensive electronic services for securities. In September 2017, we added online services of "online signing services for risk disclosure statement of securities transactions," "emerging stocks online ordering system," and "webpage update," providing instant and convenient operating functions to customers.
13) Establishment of protection software for mobile banking and mobile corporate banking were completed in March and September 2017, respectively, to reinforce the security for customer transactions.
14) The "QR Code Mobile Payment" function was completed in September 2017, together with the security control system "Taiwan Business Bank Security", customers may use the interbank QRCode platform of financial companies to carry out the debit payments for consumptions. Functions of shopping by transfer, transfer payment, and P2P transfer were introduced subsequently to target the business opportunities from mobile payment services.
15) To develop the mobile payment and authorized stores acquiring services of Taiwan Pay in the mobile banking app of the Bank, we provide services for customers to make payment for consumption, payment (tax), shop by using our mobile banking and help the business unit to introduce the Taiwan Pay collection services:
i. Since September 15, 2017, customers may use the QR Code scanning function in the mobile banking app to perform the payment for consumption.
ii. QR Code - deposit account acquiring services were inaugurated on Sep. 15, 2017, made available to be applied by individuals or non-individual with operating business and collection requirements, so as to enhance the market competitiveness of the Bank regarding acquiring services for authorized stores.
iii. Since December 12, 2017, customers are allowed to used the mobile banking app of the Bank to pay the credit card bills of the Bank or other banks and use the shopping by transfer service.
iv. On December 28, 2017, the "Taiwan Pay" QR Code collection service was introduced into the tuition and miscellaneous bills for schools.
16) New "Wealth Management System" was launched on October 2, 2017, to improve our service quality.
17) To strengthen the operating scale of "TBB (Cambodia) Microfinance Institution Plc," our subsidiary in Cambodia, the central bank of Cambodia approved the establishment of the Chamkar Mon Branch on August 30, 2017; the branch opened for operation on October 2, 2017.
18) Inductive debit card: The inductive debit card was launched on October 16, 2017. The Bank added the contactless payment for consumption to the existing ATM card of the Bank and redesigned the model of new cards. Customers may perform contactless consumption with their ATM cards at authorized stores.
19) In order to expand the number of overseas branches and increase the investment level of foreign currency bonds, and effectively reduce risks in capital liquidity, the Bank issued unsecured US dollar bonds in the amount of US$0.12 billion on October 27, 2018.
20) To comply with the information security requirements and improve the functions of software and hardware, the Bank inaugurated the procurement project for the establishment of short-term bills clearing-settlement mechanism and the system function adjustment in October 2017.

Taiwan Business Bank Annual Report 2018

21) After the addition of online transactions for customers on November 2, 2017, "notice of internet banking transactions" will be dispatched to customers through e-mail.
22) Added the "TBB Cardless Withdrawal" function for the ATMs of the Bank: From November 28, 2017, customers may use the TBB Security on their mobile devices to apply for this service and set up the withdrawal password that allows them to set the withdrawal amount with their mobile device and present at the automated service equipment of the Bank for fetching such cash.
23) From December 1, 2017, the handling, through the Taiwan Clearing House, of electronic Direct Debit Authorization (eDDA) and enhanced Automated Clearing House (eACH) functions of the Automated Clearing House (ACH) has been added.
24) From December 18, 2017, Negotiable Certificates of Deposit in foreign currency (Foreign Currency NCD) was made available to general investors, which provides the Bank a new source for gaining foreign currency capital and expands the size of foreign exchange deposits of the Bank.
25) The planning for "Financial Transaction Management System (KONDOR) and Thomson Reuters Server" procurement project was completed on December 29, 2017; the official application of such systems will significantly improve the operating efficiency of the information system.
26) In order to comply with the digital financing 3.0 policy and provide customers with convenient services, the Bank newly added "personal loan service" to the mobile banking app of the Bank. The service connects to the internet banking of the Bank to fulfill customers' requirements of fast services without presenting at the counter.
27) The issuance of senior unsecured green bonds in the amount of NT$1 billion was completed on January 5, 2018.
28) The accessible eATM received the certification of Web Content Accessibility Guidelines 2.0 Conformance Level AAA on January 31, 2018.
29) Overseas bonds investments commenced from March 1, 2018; relevant operating manuals, booklet, forms were added, and the standard operating procedures were established to improve the investment and wealth management services provided to customers, satisfying the wealth management requirements from customers and reducing operating risks.
30) Taiwan Pay links to the "Paytax" online tax payment platform by the Ministry of Finance: From March 31, 2018, functions for auditing fixed categories of taxes such as payment for Individual Income Tax, Vehicle License Tax, House Tax, and Land Value Tax were opened up for Taiwan Pay.
31) Pre-arranged foreign cash function: Teller operations have been simplified, the operating time for hand-written customer application forms has been eliminated, and the pre-arranged foreign cash function has been opened up for customers at their mobile devices, personal PC, or the SmartTable at smart branches since March 22, 2018.
32) Taiwan Pay added barcode and QR code scanned for purchase function: In response to multipayment scenarios, the function in Taiwan Pay was inaugurated for stores to scan the barcode and QR code of the consumers with the code scanner to complete the debit payments for such purchases.
33) The accessible internet banking received the certification of Web Content Accessibility Guidelines 2.0 Conformance Level AA on May 7, 2018.
34) TBB Security system was added to the non-predesignated transfer with mobile banking: To expand the service scope of mobile banking, the execution of "non-predesignated transfer" function through TBB security with mobile banking was inaugurated on May 15, 2018.
35) The accessible official website received the certification of Web Content Accessibility Guidelines 2.0 Conformance Level AA on May 29, 2018.
36) “The application platform for the disabilities to apply for ATM inter-bank transaction fee reduction online” was added on July 1, 2018.
37) Fast login function added to mobile banking: To simplify the login service experiences for users of mobile banking, "mobile banking fast login function" was inaugurated on July 3, 2018, providing the login function for customers to log in through biometrics (i.e., fingerprint, facial recognition) or pattern recognition.
38) The Bank was invited to the ceremony of "Property Trust for the Senior and the Disabilities Evaluation" held by the FSC on July 12, 2018. The nursing trust business of the Bank recorded outstanding performance in 2017 and received an award from the FSC as recognition.
39) The bank established the risk hierarchy for the overseas bonds to implement the commodity risk hierarchy and the principle of customer adaptation on July 25, 2018.

40) The mainframe report was transferred to an open system; phase one data source collection was completed in July 2018, and the relevant report was prepared.
41) Taiwan Pay fast transaction and small amount transaction was added to mobile banking: To simplify the transaction procedures for Taiwan Pay mobile payment, Taiwan Pay fast transaction and small amount transaction was inaugurated on August 9, 2018. When using Taiwan Pay for consumption debiting, shopping by transfer, payment, tax payment, and personal transfer, customers may use biometrics verification and pattern recognition to confirm the transaction and complete the Taiwan Pay transaction, facilitating the mobile payment procedures.
42) The Bank issued the long-term subordinated financial bonds in the amount of NT$5.45 billion on August 20, 2018.
43) The Bank amended the operating regulations for monitoring procedure of anti-money laundering and combatting the financing of terrorism for suspected events on September 6, 2018.
44) The Bank completed the issuance of unsecured US dollar financial bonds in the amount of $0.18 billion on September 27, 2018.
45) In response to the upgrade requirements for our operating system, the Bank carried out the upgrade for short-term bills clearing-settlement banking mechanism in September 2018.
46) The individual segment operations for three districts in Northern Taiwan were completed in September 2018 to improve its network structure and improve the operating efficiency.
47) The new mainframe hard drive operating system information transfer was completed on October 20, 2018, to accelerate the data access speed.
48) The local and remote backup mechanism for the new mainframe hard drive was completed on October 27, 2018.
49) In response to the policy direction of the government and to help domestic industries to obtain the required funds for development, the Bank reinvested in its wholly-owned TBB Venture Capital Co., Ltd., with an investment amount of NT$2 billion, which was officially opened on October 23, 2018.
50) Upgrade of the programming language PL/I of the central mainframe to Enterprise PL/I V4.4, the highest compatible version currently available, was completed on November 17, 2018, to smoothly connect to the subsequent mainframe upgrade and system maintenance and operation.
51) On November 17, 2018, the Bank added the function for the end system to print "Non-discretionary Money Trusts Acquisition/Conversion Application" and "Non-discretionary Money Trusts Investing on Overseas Bonds Acquisition/Redemption Application" with specific transaction time automatically.
52) Financial blockchain confirmation services: Trail run for "Financial Blockchain Confirmation Services" has completed the confirmation operation on November 29, 2018.
53) Established the data warehouse module and collect the internal and external data for the industry for rapid data processing. The establishment of the data module was completed in December 2018 and had been providing to branches for use successively.
54) Free-of-form function: To provide convenient services to customers, free-of-form service regarding depositing, withdrawal, and transfer for over-the-counter services have been inaugurated since December 24, 2018.
55) Reset the personal internet banking username, password online: To improve the convenience for customers, the Bank provided customers to reset the personal internet banking username, login, transaction password online from December 24, 2018.
56) The Bank entered into a Global Master Repurchase Agreement with BANK SINOPAC COMPANY LIMITED on December 26, 2018.
57) Carried out upgrades for the personal internet banking, eATM, and mobile banking application system, as well as software and hardware equipment by stage. Introducing micro-service system for the financial module; phase one multi-language webpage was launched on December 28, 2018.
58) Personal internet banking revision establishment: To provide customers with diversified services, the Bank opened up the multi-language services of the new generation internet banking for customers. English and Simplified Chinese versions became available for customers. The Bank also redesigned the webpage version of the internet banking to that presented with brighter color, allowing customers to distinguish the login screen and provide them with brand new experiences.
59) The Bank amended the review requirements with approval level to be increased for non-discretionary money trusts in domestic and overseas securities account openings when customers involve higher risk factors of money-laundering and terrorism financing on December 28, 2018.
60) Carrying out the speed raising for VPN; the bandwidth was increased to 20Mbps/60Mbps (uploading/

Taiwan Business Bank Annual Report 2018

downloading). Divert the administration and business network connection yet carry out the backup procedures for one another for the branches, and allocate the bandwidth more efficiently. As of December 2018, head-end routing operations were completed for 24 branches, our head office, and domestic operation centers.

61) Financing patent: To develop FinTech, the Bank had applied for 39 patents to Intellectual Property Office, MOEA by the end of December 2018. 26 of such applications were approved (including 16 utility model patent and 10 inventions patent).
c. Future Research and Development (R&D) Plans and the R&D expenses expected to be invested
1) R&D budget for 2019 is NT$50,426,000.
2) Alipay from financial companies combines with Taiwan Pay: Providing access for customers to use mobile banking function of scanning payment for online consumption regarding offshore shopping websites such as Taobao or Tmall. The system would deduct the amount from the ATM card account of the customer when the QR Code was scanned for paying the consumption; the system is expected to be launched in January 2019.
3) Taiwan Pay Red Envelope Issuing and Lottery: In response to the upcoming Chinese New Year, the Bank provides the red envelope issuing function for Taiwan Pay mobile payment. The customers may select the red envelope style from mobile payment (Taiwan Pay) and scan the QR Code of the receiver to transfer and pass out the red envelope. Customers may also send the red envelop and greetings to the receivers through messaging apps. The function is expected to be launched by the end of January 2019.
4) It is expected that the old hard drives transfer for the terminal system of branches would be completed in March 2019.
5) Mobile payment scanning for withdrawal: Customers may use the mobile banking of the Bank to select the account for withdrawing from and complete the cash withdrawal after the interactive QR Code scanning by the ATM. The function is expected to be launched by the end of March 2019.
6) It is expected that the upgrade for central single mainframe will be completed in April 2019 and the Parallel Sysplex shall be completed in May 2020.
7) HCE inductive withdrawal: Customers may use TBB cloud payment debit card (i.e., the Taiwan Pay mobile banking APP) to complete the cash withdrawal after selecting TBB cloud for payment and perform induction at the induction area. The function is expected to be launched by the end of June 2019.
8) Combine Taiwan Pay with credit cards: Customers are allowed to use mobile banking to set up credit cards that are commonly used for the scanning payment of Taiwan Pay. Upon purchasing, customers may scan the QR Code of the stores and use credit cards (scanning mode) to pay, or present the credit card payment QR Code for stores to can (scanned mode) for payment. The function is expected to be launched in June 2019.
9) It is expected that the simplified closing account procedures shall be completed in the second quarter of 2019.
10) It is expected that the rebuilding of terminal systems for branches will be commenced in the third quarter of 2019.
11) Improving the application system for personal internet banking, online corporate banking, eATM, and mobile banking. Updating hardware equipment and introducing the systematic structures for financial module micro-services. Re-design the website to simplify the procedures and step closer to the requirements of customers. The personal internet banking and eATM are expected to complete in July 2019 and October 2019, respectively.
12) Addition of two-factor authentication services for eDDA internet banking: To reinforce the collection business of the Bank and strengthen the existing eDDA and eACH business functions, the Bank added services and functions (i.e., internet banking verification and authorization) through electronic Direct Debit Authorization (eDDA) and enhanced Automated Clearing House (eACH) functions for a more convenient customer service is expected to complete in December 2019.
13) Digital billboard: To create a paperless digital financing environment for our branches, the Bank uses the billboard to display its product posters and propaganda regarding announcements from the competent authority or the Bank, which improves the branches' cleanness of environment and avoids omissions of information by branches through central control. It is expected to be completed in December 2019.

(6) Short- and Long-Term Business Development Plans

A. Short-term business development plan: Please refer to “(3) Operating Plan for 2019” in this chapter.
B. Long-term business development plan: Please refer to “3. Future Development Strategies” in "I. Letter to Shareholders."

2. Employees

(1) Employees Information

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Year 2017 2018 From this year to
Feb. 28, 2019
Number of employees 4957 5082 5134
Average age 44.82 44.62 44.30
Average year of service 18.39 17.83 17.42
Ph. D. 0.12 0.18 0.19
Master's degree 14.43 15.51 16.01
Percentage
Distribution
of Academic University/College 76.44 75.93 75.69
Qualifications - (%) High school 8.49 7.93 7.66
Below sigh school 0.52 0.45 0.45
Licenses for trusts 4228 4311 4286
Financial planner 1659 1686 1675
Senior Qualification Examination for
Professional and Technical Personnel 13 13 13
(Lawyers and Chartered Public Accountant)
Qualification Examination for Senior 1668 1699 1675
Securities Specialist
Qualification Examination for Securities 83 87 86
Investment Analyst
Qualification Examination for Futures 2014 2070 2064
Specialist
Grade above S2 for FLPT® 795 976 984
Internal auditor 12 12 12
Basic Proficiency Test on Bank Internal 3496 3580 3557
Controls
Name and number
Financial Risk Manager (FRM) 13 13 13
of employees who
hold professional licenses Certified Financial Planner (CFP) 11 14 14
Qualification Examination for Property and 14 13 13
Insurance Broker
Qualification Examination for Property 9 9 9
Insurance Agent
Qualification Examination for Personal 8 8 8
Insurance Broker
Qualification Examination for Personal 7 7 7
Insurance Agent
Qualification Examination for Investment- 3901 4004 3964
orientated Insurance Product Representative
Property Insurance Representative 3431 3610 3591
Personal Insurance Representative 4335 4433 4410
Test for the Sales of Non-investment-
oriented Life Insurance with Payment in 2835 2999 2972
Foreign Currency by Personal Insurance
Representative
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Taiwan Business Bank Annual Report 2018

(2) Studies and Training for Employees

A. Completed all training according to Enforcement Guidelines for Training for Employees of Taiwan Business Bank, Ltd. and the 2018 Employees Training Plan with a total of 367 sessions (including 306 sessions of business seminars, 23 sessions of business foundation, 4 sessions of managers, 25 sessions of weekend classes, 9 sessions of lectures/orientations) held, with an additional 31 sessions to the original planned 336 sessions. The execution rate throughout the year was 109.2%, the total number of people trained was 42,124, the employer training rate was approximately 8.29 times per person, and the annual employee training expenses were NT$122,997,000 in total.
B. In response to the Bank 4.0 digital financing environment, the Bank provides a series of courses in relation to digital marketing for its employees to gain a profound insight into FinTech and innovation, corresponding to the future transformation opportunities for banks.
C. To strengthen the competitiveness of the Bank and improve the professional knowledge, expertise, and function, the Bank organized business directing and management development training courses to boost the quality of our management and reduce the operating risks.
D. The competent authority from our head office will assign relevant personnel to participate in training courses organized by external professional training institutions, encouraging employees to absorb new knowledge and improve their professional competencies, so as to meet the requirements on professional competencies for the business development of the Bank, comprehensively promote the business development.

(3) Employee Code of Conduct and Ethics

The Bank attaches great importance to the employee code of conduct and ethics. All of our employees are provided with the working rules for them to clearly understand their own rights and code of conduct to be observed, including loyalty and dedication, legal compliance and faithfulness, honesty and integrity, professional commitment, confidentiality, and courtesy. Our employees also adhere to a high standard of moral and ethics.

(4) Protective Measures for the Safety of the Work Environment and Personal Safety of the Employees

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Items Description
Access control 1. Rigorous access control monitor system is available during daytime and night time.
2. The Bank has signed a contract with the security company regarding night time and weekends to protect
the safety of the branches.
3. Connect with the police and public security unit as a precaution.
Maintenance 1. According to the requirements under Regulations for Inspecting and Reporting Buildings Public Security,
and inspection the Bank shall engage professional companies to carry out the security inspection every two to four years.
of the 2. The Bank commissioned professional organizations to inspect the fire safety facilities every year as
equipment required by the Fire Services Act.
3. According to the Code of Practice for Occupational Health and Safety of the Bank, the maintenance
and inspection for motorcycles, air conditioners, vehicles, coin counters, kitchen, hole puncher, and bill
counter are carried out per day; the maintenance and inspection for air conditioners, first-aid kit, fire
service equipment, and elevators are carried out per month; the maintenance and inspection for vehicles
are carried out per month per season; the maintenance and inspection for high/low voltage electrical
equipment are carried out per six months; the maintenance and inspection for motorcycles, fire service
equipment, and elevators are carried out per year, and the maintenance and inspection for motorcycles are
carried out per three years.
Measures and 1. The Bank has disaster prevention, rescue notes, and occupational accident reporting procedures in place,
damage control including "Disaster Emergency Response Countermeasures Manual," "Management Guidelines for Major
for disaster Contingencies," "Procedure Guidelines for Security and Grouping of Branches," "Code of Practice for
prevention Occupational Health and Safety," "Regulations Governing Occupational Health and Safety," "Workplace
Self-Inspection Plan," and "Procedure Guidelines for Equipment Maintenance." Such procedures specify
the responsibilities and mission for personnel at each level before and after material events of natural
disasters and material emergencies of robberies. Anti-robbery drills are performed twice a year at our
branches.
2. Except for the organization of the Civil Defense Corps, our head office also engages the competent
authority regarding fire services to organize the fire service lectures.
3. To safeguard the security and health of our employees, the Occupational Safety Section subordinates to
the Human Resources Department is in place for the promotion of safety and health affairs.
Physical Health 1. Health check and health management: Regular health check is provided for employees, and medical
workers present at the branches will offer health guidelines and recommendations to employees who
receive abnormal results of the health check.
2. Hygiene of the working environment: Smoking is prohibited at all business premises. The Bank also carries
out regular office cleaning and sterilization and set 17th of each month as the cleaning day.
3. In order to help voluntary health management of our employees, the Bank organizes health seminar, CPR
training, and provides health-related programs on the digital learning website of the Bank for our fellow
colleagues to learn new knowledge from the internet and enrich their concepts of health.
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Items Description
Mental Health 1. Provide physical and mental relaxation for employees: To help care for the living quality of our employees
and relieve their stress from workplace and family, the Bank provides programs of pressure release, family
care, emotion control, and encouragement on its digital learning platform for our fellow colleagues to
access, adjusting mental health in due course.
2. Expressing opinions: The Bank has established a website exclusive for employees, providing opinion
discussion zone, proposal zone, operation forms, and manual download zone, legal articles, learning
zone, and training announcement zone for employees to express their opinions, emotions, and carry out
interactive learning.
3. Prevention of sexual harassment at the workplace: Establish report regulations and punitive terms.
Advice on Setting up the “Advice on hazardous analysis during operations environment of contractors” and “Q&A” in the
hazardous exclusive zone for the employees of the Bank according to the government regulations.
factors during
operations of
contractors
Insurance 1. The Bank provides labor insurance (including occupational injury and disease) and health insurance to its
and medical employees according to the law, and negotiate with insurance companies to provide casualty insurance,
allowances accident medical insurance, and cancer insurance to the Bank's employees and their families at a rate of
concession.
2. The Bank offers work-related casualty insurance for all our employees with coverage of NT$3 million. For
work-related disability or work-related deaths, the insurance claim will be used to support the employee or
its successors.
3. Provide disease subsidies to our clerks, their spouses, and descendants.
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3. Corporate responsibilities and moral conducts: Please refer to Ⅸ . Corporate

Social Responsibility Report.

4. The number of non-managerial employees and the annual average employee benefit expenses.

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Unit: Person; NT$; %
Year
2017 2018 Growth Rate
Items
Number of Non-managerial Employees 3,970 4,077 2.70%
The annual average employee benefit expenses for non-managerial 1,256,735 1,373,375 9.28%
employees
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Note: To facilitate the human resources renewal, the Bank increased the recruitment for young employees in 2018, while there were senior employees retired during the same period, and the number of employees increased by 107. In 2018, the achieving rate of the before-tax profit was 125.96%. It is estimated that the performance bonus and employees' compensation will record an increase as compared to that of 2017, resulting in a growth of 12.23% in annual employee benefit expenses for non-managerial employees.

5. Information Equipment

(1) Primary hardware: Central accounting mainframe, foreign exchange mainframe, fund mainframe, automatic tape library of the mainframe, virtual tape library of the mainframe, hard drive of the mainframe, laser printer of the mainframe, hard drive of the open system, tape library of the open system, virtual tape library of the open system, server of the open system, and network equipment.

(2) Primary information system: Deposits system, loans system, remittance system, foreign exchange system, credit card system, general ledger system, e-banking information system, teller terminal system, seal/signature verification system of the Bank, ATM system, ATM monitoring system, the central operating system for collection bill and outward remittance, statement management and inquiry system, CRM system, digital branches system, AML system, fund system, wealth management system, and overseas branches system.

Taiwan Business Bank Annual Report 2018

(3) Information operating project

A. Updating the central accounting mainframe to establish the Parallel SYSPLEX system with local backup step-by-step, so as to ensure the continuous operations of the system, providing undisrupted services.
B. Establishing a data center to collect internal and external data, process information in a short time, and strengthen the capacity for data integration and analysis. Combine mass data with in-depth learning for the usage of product design, risks analysis, and customer marketing, accelerating the business promotion and risks control.
C. Organizing the foreign currency system and the New Taiwan Dollar system integration for single entry, providing a unified operating interface of teller and integrated services for customers, and rebuild the terminal system at our branches with a user-friendly operating interface.
D. The Bank introduced the new multi-factor biometric system (such as the application of digital vein, fingerprint recognition, and face recognition) and proactively invest in the research and development of technology fields such as innovative payment and transaction security, so as to provide an integral recognition system for all devices, expanding the digital financial sphere of the Bank.
E. Improving the quality of information service and the knowledge and competence of professional staff, establishing a knowledge bank and a function map for professional staff, thus benefitting the inheritance and sharing of experiences.

(4) Emergency backup and security protection measures for information operations

A. Central mainframe backup
The operating center of the Bank locates in Linkou, and a remote backup center locates in Taipei; both centers adopt the warm backup model. During business hours, where disasters occurred in the central computer facilities, the backup computer facilities would restore the crucial system within 4 hours to maintain the fundamental services provided by the Bank. In addition, to enhance the familiarity of our employees toward the operating procedures and the completeness of the verification document, remote backup rehearsals are carried out twice a year.
B. Branches backup
Our branches are equipped with backup networks. Also, when accidents occur and the connection system is down, customers may present at the nearby branch with relevant documents for handling.
C. Computer virus and hacker invasion precaution for computer equipment of the Bank
a. Spam filtering and malicious email blocking system is in place; meanwhile, external email accounts are prohibited, and letters have been dispatched to all departments regarding internal control operations.
b. Building antivirus walls for Internet, dual-firewall system, and Intrusion Prevention System (IPS); monitor the access to DMZ zone (i.e., internet banking, the entry portal, and online financing system, etc.) and server zone (i.e., application server, and database server, etc.), as well as all external website connection made by our employees, to reinforce the cybersecurity protection.
c. Construction of the Web Application Firewall (WAF) and enhance the security for web application vulnerabilities and block webpage attacks on the application level (i.e., DoS, and SQL injection, etc.).
d. Carrying out information security vulnerability scanning and penetration scan regularly and set up internal vulnerability scanning system to scan PCs, newly launched business, and testing systems of the Bank to reinforce the security system.

6. Labor-Management Relations

(1) Welfare measure of the Company

A. The Bank has a library that has books in Chinese and foreign languages available for employees.
B. Employees may use their off-hours to participate in language studies and fitness programs and apply for subsidies according to the Bank's requirements.
C. The cafeteria at the headquarter provides delicious lunch at a decent price for employees.
D. Except for employees involving in the securities business, all the employees may enjoy blue chip rate for deposits and loans.
E. For employees reaching the age of retirement or at the age of 60 or above, the Bank will provide bonuses for the three important Chinese holidays to those who are willing to retire voluntarily.

F. The Bank provides insurance for all employees with coverage of NT$3 million regarding emergencies related to work; employees may apply for claims from insurance companies concerning work-related injury or illness or work-related death.
G. The Bank has established an "Employee Benefits Committee" that withholds the 0.5% of the employees' salaries as the benefit payment per month and allocate 0.15% of the revenue for the Employee Benefits Committee to organize and use in matters in relation to employee benefits, including education scholarships for children of employees, disease subsidies to our clerks, their spouses, and descendants, employees fertility subsidies, provision of one-year term group insurance, and benefit payment for the three important Chinese holidays for employees on duties.
H. The Bank commenced the Employee Stock Ownership Trust in the first quarter of 2019, creating a win-win situation for the Bank and its employees.

(2) Retirement system

The Bank shall set aside the pension (contribution rate of 6%) per month to deposit in the employees' individual pension accounts for employees eligible for the new labor pension plan. The Bank shall set aside employees' retirement allowance (contribution rate of 7.64% at the end of 2018) per month to deposit in financial institutions designated by the government for employees eligible for the old labor pension plan. As of the end of 2018, balances in the employees' retirement allowance account was over NT$4.9 billion. The Bank has established the Labor Retirement Allowance Supervision Committee to supervise the utilization and contribution of retirement reserve funds. Regarding the procedures and conditions for retirement application, the Bank complies with the "Direction for Employees' Retirement, Consolation Payment, and Discharge with Severance Payment of TBB" and the "Group Contract" signed between the Bank and the TBB Industry Union for employees' retirement.

(3) Labor-management Agreements and Protective Measures for Employee Rights and Interests

The Bank convenes labor-management conferences regularly according to " Regulations for Implementing Labor-Management Meeting" to negotiate employee rights and interests, and implements according to the resolutions at the conferences; the execution process remains well.

(4) Losses arising from labor disputes in the most recent year and up to the end of February 2019: None.

(5) Current or future potential losses arising from labor disputes: None.

7. Important contracts

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Restrictive
Nature of contract Parties Starting date of the contract Major contents terms
Join the Payment Service
Provider TSM (PSP TSM) and
From December 25, 2014, to outsource data processing
December 24, 2016 services to Taiwan Mobile
Taiwan Mobile Confidentiality
Outsourcing contract Payment Co., Ltd. (Automatic renewal for 2 years Payment Co., Ltd. including clause
upon expiry, and the same card creation (i.e., credit card,
applies thereafter) and debit card, etc.) for mobile
payment instruments and life
cycle management for cards.
From July 1, 2016 to June 3, Credit card related operations
2018 - Operations of form printing, Confidentiality
Outsourcing contract SYSTEX Corporation (Automatic extension for 1 filling and sealing, and clause
year upon expiry, and up to 2 posting.
times)
Credit card related operations
- Operations of international
From December 1, 2013, to
cards purchase and
December 31, 2014
Financial Information authorization, operations Confidentiality
Outsourcing contract Service Co., Ltd. (Automatic extension for 1 of card opening/card clause
year upon expiry, and same
suspension/reporting of loss,
rules apply subsequently)
cash advance, emergency
services.
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Taiwan Business Bank Annual Report 2018

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Restrictive
Nature of contract Parties Starting date of the contract Major contents terms
From October 1, 2012, to Credit card operations -
December 31, 2013 Collecting the credit card bill
Outsourcing contract Taiwan FamilyMart Co., Ltd. (Automatic extension for 1 payment from the cardholders. [Confidentiality ] clause
year upon expiry, and same
rules apply subsequently)
From November 7, 2007,
Hong Li Assets Outsourcing debt collection
Outsourcing contract Management onward (No expiration date and the Bank may terminate for credit card and consumer Confidentiality clause
Consultancy Co., Ltd. finance
the contract at any time)
Hong Kong Gold From November 7, 2007,
Outsourcing debt collection
Outsourcing contract Partners (Asia) Asset Management Co., Ltd. Taiwan Branch onward (No expiration date and the Bank may terminate the contract at any time) for credit card and consumer finance Confidentiality clause
Established on the date
Taiwan Security Co., of signing by the signing Cash transit operation -
Outsourcing contract Ltd. and LeeBao department for a term of one Temporary and pay-per-use (2 None
Security Co., Ltd. year (the contract has an firms)
automatic extension term)
Established on the date
Taiwan Security Co., of signing by the signing
Outsourcing contract Ltd. and LeeBao department for a term of one Cash transit operation - Charter by month (2 firms) None
Security Co., Ltd. year (the contract has an
automatic extension term)
Established on the date
of signing by the signing
department for a term of
Outsourcing contract Chung Hwa Express one year, the contract will Marketable securities, notes, None
Corp. and receipts transit operations
automatically extend for 1
year, and same rules apply
subsequently
Established on the date
An Feng Enterprise of signing by the signing
Outsourcing contract Co., Ltd. and Lian An Service Co., Ltd. department for a term of 1 year, and the contract has an ATM replenishing operations (2 firms) None
automatic extension term
Shin Kong Security Established on the date
Co., Ltd., Taiwan of signing by the signing
Outsourcing contract Secom Co., Ltd. and department for a term of 3 ATM video monitoring operations (3 firms) None
China Steel Security years, and the contract has an
Co., Ltd. automatic extension term
2018.7.24-2019.7.23 Matters of printing cash
Outsourcing contract Yuen Foong Paper Co., Ltd. (the contract has an automatic extension term for the renewal dividends check, data processing and folding for None
of 1 year) postage.
Logistics for data processing
2018.10.1-2019.9.30 - Notice operations for New
Outsourcing contract Yuen Foong Paper (the contract has an automatic Taiwan Dollar time deposits None
Co., Ltd.
extension term) automatic renewal upon
expiry.
Operations of form printing,
2017.3.1-2019.2.28 cutting and folding, filling and
Outsourcing contract SYSTEX Corporation (Automatic extension for half year upon expiry, and up to 2 sealing, and posting regarding domestic and overseas None
times) mutual fund investment report
operations.
2017.7.1-2019.6.30 Matters of printing, filling
and sealing, and posting
Outsourcing contract SYSTEX Corporation (Automatic extension for half of balances verification None
year upon expiry, and up to 2
statement regarding
times) transactions with customers.
2017.6.1-2019.5.31 Printing, filling and sealing,
Outsourcing contract SYSTEX Corporation (Automatic extension for half and posting of e-bank transfer None
year upon expiry, and up to 2 transaction statement.
times)
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8. Relevant information on securitization products: The Bank has not offered securitization products.

VI

Financial Status

97 101 106 107 108 111 213 216

223

1. Brief Consolidated Balance Sheets and Consolidated Statements of Comprehensive Income for the Past Five Years

3. Audit Committee's Audit Report on the 2018 Financial Statements

4. Representation Letter for 2018 Consolidated Financial Statements

5. Independent Auditors' Report for 2018 Consolidated Financial Statements

6. 2018 Consolidated Financial Statements and Notes

7. Independent Auditors' Report for 2018 Individual Financial Statements

8. 2018 Individual Financial Statements Audited and Certified by Accountants

Its Subsidiaries and the Related Impacts

Taiwan Business Bank Annual Report 2018

VII

Review, Analysis, and Risks of Financial Conditions and Performance

225 226 226 226

227

227 239 239

1. Financial position analysis

2. Financial performance analysis

4. Impact of major capital expenditure on the company's financial business in 2018

5. Reinvestment policy for 2018, the main reasons for the profits/losses generated thereby, the plan for improving profitability, and investment plans for the coming year

6. Risk management

7. Crisis management and response mechanism

224

Taiwan Business Bank Annual Report 2018

Ⅶ

1. Financial position analysis

Unit: NT$1,000; %

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Year Difference
Item 2018 2017 Amount %
Cash and cash equivalents, Due from the
133,016,947 152,634,715 (19,617,768 ) (12.85 )
Central Bank and call loans to banks
Financial assets at fair value through profit or 7,134,604 1,061,789 6,072,815 571.94
loss
Financial assets measured at fair value through
73,164,201 0 73,164,201
other comprehensive income
Investments in debt instruments at amortized
261,470,496 0 261,470,496
cost
Securities purchased under resell agreements 2,386,518 3,998,104 (1,611,586 ) (40.31 )
Receivables-net 45,652,981 23,951,301 21,701,680 90.61
Current income tax assets 64,880 129,455 (64,575 ) (49.88 )
Discounts and loans-net 1,074,627,748 1,111,559,969 (36,932,221 ) (3.32 )
Available-for-sale financial assets - net 0 66,233,836 (66,233,836 )
Held-to-maturity financial assets-net 0 202,967,083 (202,967,083 )
Other financial assets-net 17,971 2,159,191 (2,141,220 ) (99.17 )
Premises and equipment-net 14,309,738 14,226,866 82,872 0.58
Intangible assets-net 286,054 274,349 11,705 4.27
Deferred income tax assets 1,646,991 1,222,464 424,527 34.73
Other assets-net 5,261,326 3,674,849 1,586,477 43.17
Total assets 1,619,040,455 1,584,093,971 34,946,484 2.21
Deposits from the Central Bank and other banks 91,314,543 93,529,770 (2,215,227 ) (2.37 )
Due to the Central Bank and other banks 591,988 31,464 560,524 1,781.48
Financial liabilities at fair value through profit or 9,339,273 3,732,481 5,606,792 150.22
loss
Securities sold under repurchase agreements 1,657,706 1,105,596 552,110 49.94
Payables 58,674,131 36,630,052 22,044,079 60.18
Current income tax liabilities 1,017,575 62,495 955,080 1,528.25
Deposits and remittances 1,311,041,103 1,316,023,711 (4,982,608 ) (0.38 )
Financial debentures 47,450,000 41,000,000 6,450,000 15.73
Other financial liabilities 7,507,715 10,120,545 (2,612,830 ) (25.82 )
Provision for liabilities 3,565,727 3,515,351 50,376 1.43
Deferred income tax liabilities 880,738 881,318 (580 ) (0.07 )
Other Liabilities 1,146,937 1,643,515 (496,578 ) (30.21 )
Total liabilities 1,534,187,436 1,508,276,298 25,911,138 1.72
Equity attributable to owners of parent company 84,853,019 75,817,673 9,035,346 11.92
Common stock 63,938,802 61,479,617 2,459,185 4.00
Retained earnings 18,007,553 14,644,284 3,363,269 22.97
Other items in equity 2,906,664 (306,228 ) 3,212,892 (1,049.18 )
Total equity 84,853,019 75,817,673 9,035,346 11.92
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There have been no significant changes (a significant change refer to a change over 20% between the current period and the previous period, and the amount of such change amounted to NT$10 million) in assets, liabilities, and total shareholders' equity for the past two years.

225

2. Financial performance analysis

Consolidated operational performance analysis

Unit: NT$1,000; %

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Year 2018 2017 Amount increased Ratio of changes
Item (decreased) (%)
Net interest income 17,197,876 15,425,422 1,772,454 11.49
Non-interest net income 5,829,071 5,437,273 391,798 7.21
Bad debts expense, commitment
(794,134 ) (3,028,711 ) (2,234,577 ) (73.78 )
and guarantee liability provision
Operating expenses (13,034,396 ) (11,962,883 ) 1,071,513 8.96
Income before income tax 9,198,417 5,871,101 3,327,316 56.67
Income tax expense (gain) (1,557,875 ) (831,177 ) 726,698 87.43
Income after income tax 7,640,542 5,039,924 2,600,618 51.60
Net profit of this period 7,640,542 5,039,924 2,600,618 51.60
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Analysis on increase/decrease in ratio:

Net profit for 2018 increased by NT$2.601 billion; this was mainly due to the growth of deposits and loans, the increase in Net interest income, the increase in profit and loss of financial product investments and the reduction of allowances for bad debts.

(1) Analysis of liquidity for the past two years (based on the consolidated financial information)

Year Item	2018	2017	Increase (Decrease)
Cash fow ratio	31.91%	4.48%	27.43%
Cash fow adequacy ratio	3,177.03%	4,404.56%	(1,227.53% )
Cash fow satisfaction ratio	(83.60% )	(285.13% )	201.53%
Analysis of increase/decrease in ratios: The ratios of increase and decrease in the above table are primarily due to the net cash infows from operating activities in 2018 increased as compared to that of 2017.

(2) Analysis of cash liquidity for the coming year (based on the individual financial information)

Unit: NT$1,000

Initial cash balance ①	Expected net cash	Expected net cash	Expected sum	Remedial measures for cash inadequacy	Remedial measures for cash inadequacy
	fow resulting from the year's business activities②	fow throughout the year③	of cash surplus (inadequacy) ①+②+③	Investment planning	Financial planning
45,706,331	(5,745,468)	5,329,782	45,290,645	-	-

2018

(1) The use of major capital expenditures and source of capital

Unit: NT$1,000

Planning items	Actual or expected	Actual or expected	Total capital	Use of actual or expected capital	Use of actual or expected capital	Use of actual or expected capital	Use of actual or expected capital	Use of actual or expected capital
	source of capital	date of completion	required	2015	2016	2017	2018	2019
Purchase of machinery and equipment - computer equipment	Own funds	2019/12/31	2,228,706	260,525	292,771	373,781	640,157	661,472
Purchase of premise of the Banks' headquarter	Own funds	2019/12/31	501,799	0	0	98,799	0	403,000
Maintenance and renovation work for the premise of the headquarter	Own funds	2019/12/31	683,949	40,026	101,602	65,245	22,276	454,800

226

Taiwan Business Bank Annual Report 2018

Ⅶ

To improve the corporate image of the Bank, service quality, stabilize the operating branches, and expand our service network.

5. Reinvestment policy for 2018, the main reasons for the profits/losses generated thereby, the plan for improving profitability, and investment plans for the coming year

During 2018, the primary profiting sources for the reinvestment business are the cash dividends income and the operating performance returns from the reinvestment companies. In the future, shall there be appropriate investment targets or investments made according to factors of government policies, the Bank will carry out relevant procedures after due assessment.

6. Risk management

(1) Structure of the Bank's risk management organization and the policy

A. Structure of the risk management organization

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Board of Directors
Chairman
Risk Management Committee
President
ALM Committee
Executive Vice President
Loan Supervision Committee
Risk Management Center
NPL Management Committee
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a. Risk Management Committee

The Chairman shall assign the chairman of the Risk Management Committee, and the committee member includes the President, Executive Vice President who is not the legal compliance officer of the Bank's headquarters, and the General Managers of departments under the Bank's headquarter (excluding the General Manager of the Auditing Department). The Committee is established to provide a sound risks management system, strengthen the efficacy of risk management, and execute the risk management and monitoring for the Bank. In principle, a meeting shall be convened per month, and the chairman of the committee may convene an extraordinary meeting when necessary. Its duties are as follow:

1) Analyze significant local and foreign economic, financial, and industrial risks, and review on responding plans.
2) Risk exposures in the risk management report and review on resolutions.
3) The review shall be based on the rules and regulations, limitation, management indicator, and responding solutions for exceeding the limitation in relation to risk management approved by the Board of Directors (Managing Directors)
4) Supervise the capital adequacy management of the Bank.
5) Review or supervise relevant matters that shall be reported to the Risk Management Committee according to the requirements from the local and foreign competent authority.
6) Review or supervise other matters related to risk management.
Risk Management Department is a staff unit of the Committee, responsible for meeting agenda preparation, convening notice, meeting process, meeting minutes, and resolutions tracking and management, and it shall report the material resolutions from the Risk Management Committee and risk exposures to the Board of Directors (Managing Directors) regularly.

227

b. ALM Committee
The ALM Committee of the Bank is chaired by the President, and the committee member includes Executive Vice President, General Managers from departments in charge of deposits, loans, financial trading, funding allocation, and risk management. The Committee is responsible for the monitoring and management of interest rate risk in banking book (IRRBB) and funding liquidity risks. It convenes regular meetings to evaluate the analysis and measurement method for funding liquidity risks and IRRBB, review on the management policy for funding liquidity risks and IRRBB, relevant limitation, and management indicators, listen to exposure reports for interest risks and funding liquidity risks and adjust the debt-asset ratio period structure and the funding maturity structure of the Bank.
c. Loan Supervision Committee
The Loan Supervision Committee of the Bank is convened by the Executive Vice President. In principle, the Committee is convened once a week to review credit loans projects of large denomination loans, foreign currencies, and guarantees.
d. NPL Management Committee
The NPL Management Committee of the Bank is convened by the Executive Vice President. The convener may invite members to convene the meeting of the Committee according to the business requirement at any time to discuss the countermeasures for non-performing loans and overdue loans.
B. Risk management policy
Establish a risk management mechanism for risk identification, measurement, supervision, and control, construct an integrated risk management system, adopt risk management oriented operating model, and control the reasonability of risk and return according to the statuary funding ratio, to achieve the operating goal and improve the shareholders' equity. It covers credit risk, market risk, operating risk, IRRBB, and funding liquidity risk management, and funding adequacy management.

(2) Information on the Nature and Amount of All Types of Risk

A. Credit Risk Management System and Capital Charges

Credit Risk Management System

2018

Item Content
1. Credit Risk Management I. Credit risk strategies Strategies, Goals, (I) Establish proper credit risk control environment, including credit verification procedures, credit Policies and Procedures management, measurement, and supervision procedures, as well as credit risk control.
(II) Credit risks regarding counterparties (including counterparties, borrower, and debtor), such as default risk and delivery risk, are included in the scope of control.
(III) Periodically develop advanced credit risk measuring methods to measure credit risk, and gradually introduce such methods into our business procedures.
II. Credit risk management goals
Within the scope of acceptable credit risk to the Bank, maintain adequate capital to achieve a reasonable state between risk and returns.
III. Credit risk management policies
(I) Fully understand the credit status of borrowers or counterparties and the usage of borrowings and repayment sources of the borrowers.
(II) Prudently assess the credit risk condition of borrowers or counterparties and attach attention to the adequacy of the collateral and the guarantee to measure risks and interests.
(III) Establish a credit rating system regarding the credit status of the borrowers or consider the ratings of the customers from external credit rating institutions as the reference for accepting credit loan cases and setting interests rate.
IV. Credit risk management procedures
(I) Establish a comprehensive credit approval procedure, including mechanisms such as credit investigation, credit loans, post-loan management, and claims management, to manage credit risks in an appropriate manner.
(II) Regularly carry out control for the concentration of corporate risk regarding nations, financial industries, industries, or conglomerates.
(III) Regularly report to the senior management and the Risk Management Committee regarding the credit risk limitation utilization. Shall there be abnormal losses, establish the responding countermeasures immediately and report to the senior management to minimize the potential losses.

228

Taiwan Business Bank Annual Report 2018

Ⅶ

Item Content
1. Credit risk management I. Board of Directors: The Board of Directors is the highest decision-making level for credit risk organization and management, which supervises the effective operation for credit risk management. Credit risk framework management policies and standards are regularly reviewed by the Board of Directors meeting to ensure the efficacy of risk management and the optimized allocation of the resources.
II. Risk Management Committee: Responsible for the review of relevant information and issues about credit risk.
III. Loan Supervision Department: Responsible for credit loan management and credit loan review. IV. Credit Investigation Department: Responsible for the credit investigation business and its management and planning, industrial analysis.
V. Overdue Loan & Control Department: Responsible for matters in relation to post-loan management, nonperforming loans, non-accrual loans, and bad debt claims.
VI. Risk Management Department: Responsible for the measurement, evaluation, monitoring, management, disclosure, and reporting of credit risks.
1. Scope and features of I. Credit risk reporting the credit risk reporting Convene meetings of the Risk Management Committee every month, report to the senior management and measurement regarding the alert for counterparties, and the concentration control for the industry, group, country, and system financial industry, and discuss the relevant information concerning the credit risk exposures of the Bank. II. Credit risk measurement system (I) The Bank currently adopts the credit risk standard method to calculate the capital charges; the risk management system generates the statement for reporting to the competent authorities automatically by month, and report to the senior management and the Risk Management Committee.
(II) The Bank has established multiple limitation control mechanisms (including, country, financial industry, industry, group, counterparty of derivative) and monitored the above risk limitation on a daily basis. In the case of exceeding the alert value or above 90% of the limitation, the Bank will establish the relevant countermeasures.
(III) The Bank has established an internal credit rating system and verified the rating results regularly. Currently, the rating results are included as part of the review regulations and the Bank is planning to expand the applicable scope for such business gradually.
1. Credit Risk Avoidance I. Credit Risk Hedging or Mitigation Policies: or Mitigation Polices, (I) Reduce the credit risk for the Bank through credit deduction methods of transferring credit trust fund and Monitoring the guarantee, collecting collateral and asked for guarantors. Continued Effectiveness of Risk Avoidance and (II) Establish the management limitation for credit risk concentration, such as limitation for the country, Mitigation Tools financial industry, industry, group, individual corporate, to prevent over-centralized risks. II. Monitoring the Continued Effectiveness of Risk Hedging and Mitigation Tools: (I) Through post-loan management and review mechanism, understand the usage of collateral and carry out the interim management inspection for the credit trust fund guarantee, so as to continue monitoring the credit risk undertaken by the Bank.
(II) Regularly monitor the credit risk concentration limitation, exposures distribution, and asset quality changes of the Bank to correspond to the changes of the financial states, review the credit risk control measures in due time, and regularly report to the senior management and the Risk Management Committee.
1. Approach Adopted for Statutory Capital The standardized approach. Charges

Exposure After Risk Mitigation and Capital Charges via Credit Risk Standardized Approach

December 31, 2018 (Unit: NT$1,000)

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Types of Exposure Exposure After Risk Mitigation Capital Charge
Sovereign States 312,660,472 17,225
Non-central Government Public Sectors 88,536,147 2,016,863
Banks (including multilateral development banks) 123,206,179 4,077,557
Corporations (including securities and insurance companies) 619,191,362 43,012,005
Retail Claims 283,147,912 15,652,312
Residential Real Estate 158,809,122 5,719,375
Equity Investments 4,385,711 350,857
Other assets 83,944,019 2,108,722
Total 1,673,880,924 72,954,916
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Note 1: Please fill in according to the information as of the quarter before the date printing the annual report. Note 2: Capital Charges = Exposure After Risk Mitigation x Statutory Minimum Capital Adequacy Ratio.

229

B. Securitization Risk Management System, Exposure and Capital Charges

Securitization Risk Management System

2018

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Item Explanation
1. Securitization Management Strategies and Procedures I. Securitization Management Strategies
Currently, the Bank does not engage in business related to founding
banks, and it may only invest in securitized products with certain ratings
approved by Taiwan Rating, S&P, Moody's, and FITCH according to
the requirements under the "Directions for New Taiwan Dollar Capital
Utilization Management of TBB" and "Directions for Investments in
Foreign Currency Marketable Securities Management of TBB" approved
by the Board of Directors of the Bank.
II. Securitization Management Procedures
(I) Before investing in marketable securitized securities, such investment
shall be passed by the review team and shall be approved by the report
within the authorized limits of each level.
(II) Subsequent evaluation, limitation monitoring, and stop-loss mechanism
shall be controlled according to the relevant regulations.
2. Securitization Management Organization and Framework I. Board of Directors: Approve the authorized limitation for all levels.
II. Trading department: Engage in investment for securitized products
within the prescribed limitation according to the relevant regulations of
the Bank.
III. Risk Management Department: Perform the control according to
evaluation, limitation monitoring, and stop-loss mechanism of the
investment position according to the abovementioned regulations.
IV. Operating department: Carry out subsequent operations of settlement.
3. Scope and Features of Securitization Risk Reporting and The Risk Management Department shall be responsible for the calculation of
Measurement Systems the limitation of investment position and capital charges and shall report to
the President by month.
4. Securitization Risk Hedging or Mitigation Policies, and Invest in securitized products with certain ratings approved by Taiwan
Monitoring the Continued Effectiveness of Risk Avoidance Rating, S&P, Moody's, and FITCH.
and Mitigation Tools
5. Approach adopted for statutory capital charges Perform according to the Standard Law of Securitized Seal according to the
third part of "Calculation Method Description and Forms regarding the Equity
Capital and Risk Assets of the Bank."
6. Overall requirements for qualitative disclosure, including: Currently, the Bank does not engage in founding bank business.
(1) Purpose of securitization activities and types of
risk that the bank undertakes and retains in re-
securitization activities
(2) Other Risks Inherent in Securitized Assets (e.g.
Liquidity Risk)
(3) Roles Played by the Bank in Processes of
Securitization and Degrees of the Bank's Participation
in Each Process
(4) Monitoring Procedures for Changes in Credit and
Market Risks Involved in Securitization Risk Exposure
(5) Credit Risk Mitigation Management Policies Used by
the Bank to Mitigate Risks Retained by Securitization
and Re-securitization
7. Policies for Securitization Currently, the Bank does not engage in founding bank business.
8. The Names of External Credit Assessment Institutions Currently, the Bank does not engage in founding bank business.
(ECAI) Used in Securitization in Banking Books and the
Usage of Each Type of Securitization Risk Exposure
9. Significant Changes in Quantitative Information since the None
Last Reporting (e.g. Asset Movements between Banking
Books and Trading Books)
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230

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Securitization Risk Exposure and Capital Charge

December 31, 2018

(Unit: NT$1,000)

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Traditional Style Portfolio Style Total
Exposure Exposure
Asset Type Existing or Providing Providing Subtotal Capital Existing or Capital Exposure Capital Pre-
Purchased Liquidity Credit (1) Charge Purchased Charge (5)=(1)+(3) Charge securitization
Securitized Facility Enhancement (2) Securitized (4) (6)=(2)+(4) Capital
Product Product Charges
(3)
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		Asset Type	Traditional Style	Traditional Style	Traditional Style	Traditional Style	Traditional Style	Portfolio Style	Portfolio Style	Total	Total	Total
			Exposure				Capital Charge (2)	Exposure	Capital Charge (4)	Exposure (5)=(1)+(3)	Capital Charge (6)=(2)+(4)	Pre- securitization Capital Charges
			Existing or Purchased Securitized Product	Providing Liquidity Facility	Providing Credit Enhancement	Subtotal (1)		Existing or Purchased Securitized Product (3)

Non- founding Bank	Banking Book	Real Estate Mortgage Securities	1,323,102			1,323,102	21,170			1,323,102	21,170

	Trading Book

	Subtotal		1,323,102			1,323,102	21,170			1,323,102	21,170
Founding Banking	Banking Book

	Trading Book

	Subtotal
Total			1,323,102			1,323,102	21,170			1,323,102	21,170

Information on Securitized Product

Statement for investment in securitized products

December 31, 2018;

Unit: NT$ 1,000

Item (Note 1)	Accounting Category	Original Cost	Total Fair Value Proft/Loss	Carrying Amount
Collateralized mortgage obligations (CMO)	Investments in debt instruments measured at amortized costs - corporate bond	451,942.00	5,478.00	447,940.00
Collateralized mortgage obligations (CMO)	Investments in debt instruments measured at amortized costs - corporate bond	441,425.00	7,947.00	436,357.00
Collateralized mortgage obligations (CMO)	Investments in debt instruments measured at fair value through other comprehensive income - corporate bond	429,565.00	10,726.00	428,079.00

Note 1: The table includes domestic and overseas securitized products, and the items are accounted for according to the following accounting categories:

(1) Mortgage-backed securities (MBS): Including residential mortgage-backed securities (RMBS), commercial mortgagebacked securities (CMBS), collateralized mortgage obligations (CMO), and other mortgage-backed securities.

(2) Beneficiary Asset-backed securitization (ABS): Including collateralized loan obligations (CLO), collateralized bond obligations (CBO), credit card receivables securitization, auto loan securitization, consumption loan/cash card securitization, lease securitization, other securitizations.

(3) Asset-backed commercial papers (ABCP).
(4) Collateralized debt obligations (CDO).
(5) Mortgage securitization: Refer to real estate asset trust (collectively, "REAT").
(6) Bonds issued under structured investment vehicles (SIV).
(7) Other securitized products.

Note 2: The table includes beneficiary securities or asset-backed securities with banks as founding institutions.

231

(1) Disclosure of investments in securitized products with an original value over NT$300 million (excluding those held by the Bank in the capacity as the founding institution with a view to strengthened credit):

Unit: NT$ 1,000

Name of securities (Note 2)	Accounting Category	Currency	Issuer and Location	Date of Purchase	Maturity date	Coupon Rate (%)	Credit Ratings	Method of Interest Payment and Principal Repayment	Original Cost	Total Fair Value Proft/Loss	Carrying Amount	Content of Asset Pool
US3137FGJD84	Investments in debt instruments measured at amortized costs - corporate bond	USD	US	2018/10/17	2014/10/15	3.5	AAA	Announce the interests for the next period and the amount of principal repayment by month	451,942.00	5,478.00	447,940.00	California: 13.15%; Texas: 9.52%; Florida: 8.28%; Arizona:7.22%; Colorado: 5.97%; Other: 55.86%
US3137F4VQ28	Investments in debt instruments measured at amortized costs - corporate bond	USD	US	2018/10/17	2046/09/ 15	3.5	AAA	Announce the interests for the next period and the amount of principal repayment by month	441,425.00	7,947.00	436,357.00	California: 12.42%; Texas: 11.77%; Florida: 8.37%; Colorado: 5.52%; Arizona: 5.31%; Other: 56.61%.
US3136B3KS88	Investments in debt instruments measured at fair value through other comprehensive income - corporate bond	USD	US	2018/11/ 15	2048/11/ 25	4.0	AAA	Announce the interests for the next period and the amount of principal repayment by month	429,565.00	10,726.00	428,079.00	California: 72.3%; Washington: 6.7%; New Jersey: 4.2%; Colorado:3.2%; Other: 13.6%.

Note 1: The table includes domestic and overseas securitized products.

Note 2: Specify the full name separately for the same securitized products in different tranches.
Note 3: Please fill in the results of the latest credit rating.
Note 4: Attachment point refers to the ratio of the amount of the total issued tranches with an order of priority of payment later the tranches held by the Bank accounting for the total issued amount of such securitized products. For instance, where the Bank purchased the A tranche collateralized debt obligation (CDO), the tranches with an order of priority of payment later A tranche are BBB tranche and equity tranche, and the issue amount of BBB tranche and equity tranche account for 12% of the total issue amount of the CDO; therefore, the attachment point for A tranche shall be 12%.
Note 5: Asset pool refers to the asset portfolio that entrusted to the trustee or transferred to the special purpose company by the founding institution. Please fill in the asset category (senior or subordinated), breakdown, carrying amount denominated in the original currency, and the number of entries of the asset portfolio.
(2) Disclosure of Information on the Positions Held by the Bank in the Capacity as the Founding Bank with a View to Strengthened Credit:

Unit: NT$ 1,000

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Name of Accounting Currency Purchase Maturity date Coupon Rate Credit Rating Method of Interest Original Cost Total Fair Accumulated Carrying Attachment Content of
Security Category date Payment and Value Profit/ Impairment Amount Point Asset Pool
Principal Repayment Loss
Note: Please refer to Table 2 (1) above for the definition and description of the columns.
(3) Disclosure of Information of the Discredited or Liquidated Securitized Commodities Held by the Bank in the
Capacity as the Buyer Institution:
Unit: NT$ 1,000
Name of Security Currency Founding Institution Maturity Date Content of the Contract Contract Performance
(Note)
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(3) Disclosure of Information of the Discredited or Liquidated Securitized Commodities Held by the Bank in the Capacity as the Buyer Institution:

Note: Where the Bank has purchased assets according to contracts, please set out the reference market price of the acquired assets.

Disclosure of the Bank Serving as Guaranteeing Institution or Liquidity Provider for Securitized Products, and Amount:

Unit: NT$ 1,000

Name of Security	Currency	Founding Institution	Maturity Date	Coupon Rate	Credit Rating	Role (Note 1)	Amount (Note 2)	Attachment Point	Content of Asset Pool


Note 1: When serving as guaranteeing institution for securitized products, please fll in the column "Guaranteeing institution." When serving as a provider of liquidity fnancing, please fll in the column "Provider of the liquidity fnancing."

Note 2: When the Bank is serving as guaranteeing institution, please specify the guarantee amount; when the Bank is serving as a provider of liquidity financing, please specify the limitation.

Note 3: Please refer to Table 2. (1) above for the definition and description of the columns.

232

Taiwan Business Bank Annual Report 2018

Ⅶ

C. Operational risk management system and capital charges

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Operational risk management system
2018
Item Content
1. Operational I. The operational risk management strategies of the Bank aim to establish an appropriate operational management
Risk environment. Through the implementation of operating risk management structure approved by the Board of
Management Directors and the rigorous execution of such structure by the senior managers, the Bank ensures that all relevant
Strategies and operational risks have been monitored by using appropriate evaluation procedures.
Procedures II. To optimize the function of operational risk management, the Bank grasps the scope of operational risk through
managing procedures of risk identification, risk evaluation, risk measurement, risk monitoring and communication.
The Bank also adopts appropriate measures to ensure a duly management for the relevant operational risk,
efficiently allocate limited resources to the operational risk management tasks.
2. Operational I. Board of Directors:
Risk Approve the risk management policies for the Risk Management Committee to execute the relevant management
Management and monitoring matters.
Organization II. Risk Management Committee
and Responsible for the review on information and issues related to the operational risk of the Bank.
Framework III. Risk Management Department
(I) Execute the risk management policies approved by the Board of Directors.
(II) Establish the operational risk management system and risk management tools.
(III) Monitor, analyze, and report to the Bank regarding information on operational risk.
IV. Authority Department of Business
(I) Identify and analyze the potential operational risk of each business.
(II) Establish the standard operation procedures (SOP) as the basis for business execution
(III) Set up business regulations and operational procedures that cover the operational risk points and relevant
control measures.
(IV) Manage and report the operational risk of each business.
V. Auditing Department
Conduct regular audit regarding the risk management operations for the departments of the Bank.
VI. All departments of the Bank
(I) Daily operations shall comply with and execute the operational management requirements.
(II) Report the operational risk management information according to the requirements.
3. Scope and I. The Bank conducts its operational risk measurement primarily through three operational risk management tools:
Features of (I) Loss data collection (LDC) for operational risk-
Operational A. The LDC for operational risk of the Bank covers operational risk incidents arising from all business activities.
Risk Departments file such incidents through the “Operational Risk Management (ORM) System” and provide
Reporting and details regarding the registering items of the operational risk incidents.
Measurement B. Improve the cognition to risk for all employees of the Bank through the implementation of ORM System and
Systems relevant training and assist the incident occurring department in performing proper improvement plan and
tracking the management execution.
(II) Key risk indicators (KRI) for operational risk -
A. Adopt the view of the Bank's risk management, consider the data availability, indicator management
efficacy, and risk significance among the operational risk items concerned by the businesses to establish
the Bank's key risk indicators with effective management benefits.
B. Each risk indicator has an alert value that is based on the historical statistics or experiences of the Bank,
which is used as the basis for determining whether active management is required for the indicator. The
authorities of the Bank carry out risk control through monitoring the exposures of the indicators, so as to
prevent the occurrence of potential operating risk incidents for each department.
(III) Risk and control self-assessment (RCSA) for operational risk -
A. Regarding the RCSA system of the Bank, the authority department of business at the Bank's headquarter
prepares a self-assessment questionnaire in respect of risk and control of its business procedures and the
business execution departments and supervision departments shall conduct the self-assessment concerning
execution and management according to the risk and control assessment scale, and self-assess the risk
results to provide an responding plan, allowing the Bank to analyze the exposures of potential operational
risk.
B. When carrying out the self-assessment, departments of the Bank may assess the residual risk hierarchy
of operational risk items concerning the effect of the residual risk and the probability of the residual risk.
Departments shall also assess the effectiveness of the control with respect to the execution of control and
relevance.
C. The Bank compiles and analyzes the risk control self-assessment results of the departments and prepare
the risk control self-assessment chart. Regarding items with higher risks, the authority department shall
propose the action plan to respond accordingly.
II. The content of the Bank's operational risk management report includes the disclosure regarding the Bank's
operational risk information and exposure monitoring status. The report is prepared and reported by the Risk
Management Department on a regular basis with a scope covering operational risk incidents, operational risk
indicators, trend analysis, and department improvement and tracking opinion, as well as the measurement and
analysis regarding the operational risk incident occurring frequency and severity based on the risk matrix formed with
the top eight business types and the top seven incident types, as the reference of improvement for relevant operating
procedures.
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233

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Item Content
4. Operational I. The Bank has stipulation such as guidelines, procedures, and regulations to control and mitigate the operational
Risk Hedging risk of the Bank. In addition, business departments adopt reasonable responding measures according to the loss
or Risk probability and the amount arising from the operational risk, respectively, i.e., directly avoid processing, transfer
Mitigation partial or entire risk by way of transfer or charges, or process after an evaluation on profit and risk.
Policies, and II. Operational risk hedging or risk mitigation of the Bank is primarily processed through insurance or outsourcing, so
Monitoring as to transfer and mitigate the losses of operational risks arising from human, system, or operation negligence, or
the Continued external incidents.
Effectiveness III. To minimize human factors, natural disasters, and other significant emergencies affecting the reputation or
of Risk endangering the normal operation of the Bank and the financial order, the Bank has established operational
Hedging and processing procedures and relevant regulations for departments to comply with, so as to instantly minimize the
Mitigation damages and resume the normal operation in a short time.
Tools IV. Unscheduled reports regarding crisis management of the Bank are submitted to the Risk Management Committee
and senior managers to monitor the operational risks exposures and response capabilities of the Bank.
5. Approach
Adopted for
Statutory The standardized approach.
Capital
Charges
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Operational Risk Capital Charges December 31, 2018

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(Unit: New Taiwan Dollar)
Year Gross profit Capital Charge
2016 19,677,692
2017 20,722,679
2018 22,560,518
Total 62,960,889 2,957,737
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D. The Market Risk Management System and Capital Charges

The Market Risk Management System - Standard Law

2018

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Item Content
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Item	Content
1. Market Risk Management Strategies and Procedures	I. Management Strategies (I) Implement market risk management according to “TBB Market Risk Management Standards” and other relevant regulations to achieve the operating goals and maintain the healthy capital adequacy ratio. (II) Subject to the risk appetite approved by the Board of Directors (Managing Directors), the Bank adopts various risk control mechanisms to effectively utilize and manage its capital, ensuring that the market risk exposures are within the bearable scope and the Bank may still achieve its goal for earning. II. Management Procedures (I) Risk Identifcation According to the requirements under the “TBB Market Risk Management Standards,” a proper market risk evaluation shall be performed before promoting a fnancial product; documentation of such evaluation shall be preserved for further reference. Content for the evaluation includes identifcation of risk factors, cost-beneft analysis, market liquidity, risk countermeasure, the adequacy of the risk management system and the effect of exposure to market risk by the Bank. (II) Risk measurement 1. The risk management department shall draw up the market risk positions, sensitivity, value-at-risk and suspension limit, and report to the Directors (Managing Directors) for approvals of execution. 2. The risk measurement (or valuation) for the financial products of the Bank are carried out on the different information system, and the market data and model parameters used in the valuation were sampled regularly to check their reasonability. (III) Risk monitoring 1. Regularly prepare the valuation report of fnancial products and submit to the senior management for approval, and used as the basis for the execution of daily risk management. 2. There are requirements concerning limitation and stop-loss in place for all fnancial transactions; risk control mechanisms of stop-loss, suspension, and post-management will be carried out according to the requirements when the losses amount from the valuation exceeds the limitation. (IV) Risk Reporting Risk management department regularly reports the current conditions of market risk management to the Directors (Managing Directors) and senior management, allowing them to grasp the risk exposures and adjust the management measures in due time.

Item

Content

1. Market Risk
Management
Strategies and
Procedures

I.
Management Strategies
(I) Implement market risk management according to “TBB Market Risk Management Standards” and other
relevant regulations to achieve the operating goals and maintain the healthy capital adequacy ratio.
(II) Subject to the risk appetite approved by the Board of Directors (Managing Directors), the Bank adopts
various risk control mechanisms to effectively utilize and manage its capital, ensuring that the market risk
exposures are within the bearable scope and the Bank may still achieve its goal for earning.
II.
Management Procedures
(I) Risk Identifcation
According to the requirements under the “TBB Market Risk Management Standards,” a proper market
risk evaluation shall be performed before promoting a fnancial product; documentation of such evaluation
shall be preserved for further reference. Content for the evaluation includes identifcation of risk factors,
cost-beneft analysis, market liquidity, risk countermeasure, the adequacy of the risk management system
and the effect of exposure to market risk by the Bank.
(II) Risk measurement
1. The risk management department shall draw up the market risk positions, sensitivity, value-at-risk and
suspension limit, and report to the Directors (Managing Directors) for approvals of execution.
2. The risk measurement (or valuation) for the financial products of the Bank are carried out on the
different information system, and the market data and model parameters used in the valuation were
sampled regularly to check their reasonability.
(III) Risk monitoring
1. Regularly prepare the valuation report of fnancial products and submit to the senior management for
approval, and used as the basis for the execution of daily risk management.
2. There are requirements concerning limitation and stop-loss in place for all fnancial transactions; risk
control mechanisms of stop-loss, suspension, and post-management will be carried out according to
the requirements when the losses amount from the valuation exceeds the limitation.
(IV) Risk Reporting
Risk management department regularly reports the current conditions of market risk management to the
Directors (Managing Directors) and senior management, allowing them to grasp the risk exposures and
adjust the management measures in due time.

234

Taiwan Business Bank Annual Report 2018

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Item Content
2. Market Risk I. Board of Directors:
Management The highest market risk management and supervision unit, responsible for approving the market risk
Organization and management policies and all risk limitation.
Framework II. Risk Management Committee
Responsible for the review on issues and responding plans related to the market risk of the Bank.
III. Risk Management Department
(I) Establish market risk management operating procedures and relevant regulations.
(II) Plan and execute a market risk management business.
(III) Establish market risk management-related systems.
(IV) Report the market risk management execution of the Bank to senior management and Directors (Managing
Directors) on a regular basis.
3. Scope and Features I. Scope and features of the measurement system
of Market Risk (I) Evaluate and monitor market risk exposure on a daily basis, including the expected and non-expected
Reporting and losses caused by adverse changes in market price resulted from interest rate, equity, exchange rate and
Measurement commodities on and off the balance sheet.
Systems (II) Adopts the historical simulation method to calculate the value at risk (VaR) on the financial trading
management system on a daily basis and observe its changing trends to report at the Risk Management
Committee meeting per month.
(III) The VaR measurement scope includes all positions of foreign exchange risk and commodity risks, as well
as the trading books positions of interest rate and equity securities risk. There are VaR limitation control
mechanisms in place for interests rate, equity, foreign exchange, and overall position.
II. Connotations of Market Risk Report
(I) Regularly report to the Directors (Managing Directors) and Risk Management Committee regarding the
amount of asset portfolio exposures, providing references to senior management for decision-making.
(II) The market risk report of the Bank includes the valuation on the exchange rate, interest rate, equity
securities positions, and profit or loss, so as to monitor the profit or loss for the market risk positions.
(III) The risk management department reports the equity securities, governments bonds, foreign exchange
trading positions, and profit or loss valuation on a daily basis, so as to grasp the daily routine market risk
control at any time.
4. Market Risk The financial transactions of the Bank mostly involve simple financial products. Regarding complex financial
Hedging or products from the customer end, the Bank, in principle, will carry out back to back hedging and covering to avoid
Mitigation Policies, market risks effectively. In addition, when engaging in hedging transactions with different contractual terms, the
and Monitoring financial trading department shall specify matters of hedged items, hedging relationship, nature of the hedged
the Continued risks, and the mitigation effects of the valuation risks. Risk management departments shall regularly carry out
Effectiveness of measurements regarding the effects of executing risks mitigation.
Risk Hedging and
Mitigation Tools
Approach Adopted for
Statutory Capital The standardized measurement method.
Charges
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Market risk capital charges December 31, 2018

Market risk capital charges December 31, 2018	Market risk capital charges December 31, 2018
(Unit: NT$1000)
Category of Risk	Capital Charge
Interest Rate Risk	533,409
Equity Risk	10,558
Foreign Exchange Risk	403,558
Commodity Risk	0
Total	947,525

235

E. Liquidity risks include the maturity analysis regarding assets and liabilities as well as management methods for assets liquidity and the cash flow gap liquidity

Liquidity Risk Management System 2018

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Item Content
1. Liquidity Risk I. Liquidity risk management strategies
Management Strategies (I) Monitor the liquidity risk positions according to the liquidity risk management policies and limitation
and Procedures approved by the Board of Directors.
(II) Established the “TBB Directions for funding Liquidity Risk Management” and “TBB Management
Guidelines for funding Liquidity Risk Management” for the compliance of the Bank, so as to effectively
control the funding liquidity risks.
(III) Overseas branches shall establish regulations related to liquidity risk management according to the
business nature and the requirements of the competent local authority; such regulations shall be
executed after being approved by the President, and the Risk Management Department shall be
responsible for the monitoring.
II. Liquidity risk management procedures
(I) Discuss and formulate directions, management guidelines for liquidity risk management, and
contingency plan for funding liquidity risk and conduct a review on a yearly basis.
(II) Identify, measure, supervise, and control the funding liquidity risk and establish stable operating
procedures and structures.
(III) Report to the ALM committee regarding the measurement results for funding liquidity risk on a
monthly basis and report to the Board of Directors regarding funding liquidity risk and stress test
results.
2. Liquidity Risk I. Board of Directors: The highest liquidity risk management and supervision unit, responsible for approving
Management the directions for liquidity risk management and all risk limitation, and shall review on a yearly basis, so as
Organization and to ensure the effectiveness of the liquidity risk management.
Framework II. ALM Committee: The Bank established an ALM Committee subordinated to the President, responsible the
supervision for liquidity risk exposures and the approval of responding plan upon conditions exceeding
management indicators.
III. Treasury Department: Execute daily funding allocation operations to ensure sufficient fundings are in
place to satisfy all funding requirements.
IV. Risk Management Department: Responsible for the identification, measurement, monitoring, disclosure,
and reporting of liquidity risk.
3. Scope and Features of The Bank uses the ALM system to calculate the liquidity gap on a monthly basis, allocates items of funding
Liquidity Risk Reporting inflow and outflow to each time slot according to the remaining maturity date, calculates the funding gap,
and Measurement to measure the funding gap within each time slot. Also, it prepares the statement of term structures of the
Systems maturity date, to contain liquidity gap within the limitation, making sure that that the Bank will have sufficient
capacity to fulfill its obligation in due course.
4. Funding strategies of I. The ratio of wholesale NT$ time deposits accounts shall be accounted for less than 1% total time deposits
the Bank: Policy of of the Bank in principle.
mismatching funding II. The ratio of deposits balances per account for wholesale deposits accounts (sum of demand and time
sources and funding deposits) shall be accounted for less than 2% total NT$ deposits (excluding time deposits transferred from
tenor, and centralized post offices) of the Bank in principle.
or decentralized funding III. Regarding depositors exceeding the above ratio, the Risk Management Department shall report to the
strategies ALM Committee on a monthly basis.
IV. The ratio of total deposits balances (demand and time) of the top 10 customers of the Bank shall be
accounted for less than 30% total NT$ deposits (excluding time deposits transferred from post offices)
of the Bank in principle; however, where the ratio is over 24%, the authority department shall propose
countermeasure and report to the ALM Committee.
V. Prepare the “Wholesale Time Deposits Transaction List” and “Wholesale Deposits Transaction List”
5. Liquidity risk hedging or I. The Bank has “Contingency Plan for Funding Liquidity Risk” in place to respond to liquidity crisis such
mitigation policies, and as abnormal withdrawal of deposits, huge loss of funding, or material shortage of liquidity, to minimize
monitoring the continued liquidity risk and maintain the normal operation of the Bank.
effectiveness of risk II. Review the “TBB Directions for Funding Liquidity Risk Management,” “TBB Management Guidelines for
hedging and mitigation Funding Liquidity Risk Management,” and “Contingency Plan for Funding Liquidity Risk” to effectively
tools control the funding liquidity risk.
III. Where the funding liquidity risk limitation is exceeded or other significant events have occurred that
may lead to a funding liquidity crisis, the Risk Management Department shall immediately call for a
meeting with other related departments to formulate countermeasures, submit to the ALM Committee
for discussion and execute by the relevant business authority after receiving the approvals from the
President, and shall report to the Board of Directors (Managing Directors).
6. Description on how to I. Conduct stress tests on the crisis occurred to the individual banks, and the crisis occurred to the overall
conduct a stress test market on a quarterly basis.
II. Convene a meeting with related business departments to formulate the stress environments and the
target value for risk management; submit to the President for approval and conduct the stress test on a
yearly basis.
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Taiwan Business Bank Annual Report 2018

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Item Content
1. Summary for liquidity When significant events occurred to the Bank that may incur funding liquidity crisis, and convene the ALM contingency plans Committee meeting and establish a contingency workforce that is in charge of the following: I. Allocate sufficient cash for support. II. Deal with abnormal wholesale deposits and funding withdrawals. III. Issue statement to clarify the truth. IV. Maintain the operating orders.
V. Provide information related to crisis management, funding changes, and available balances of the Bank from time to time according to the requirements of external processing institutions to allow such institutions to grasp the actual circumstances of the Bank in a short time and provide assistance to the Bank in due course.
VI. Avoid conditions of over-utilization regarding deposits in the interbank accounts and proactively contact the correspondent bank to maintain the current limitations.
VII. By the end of such events, in order to repay the borrowings and strengthened the confidence of the depositors, the Bank's headquarter and branches shall assign material officers to visit designated key accounts on site.
- To accelerate the re-deposits of the deposits and fully eliminate the concerns from all parties, the Bank shall publish a declaration to describe the entire events and show gratitude to related departments for their support.

a. Structural Analysis of the Maturity of New Taiwan Dollars

December 31, 2018 (Unit: NT$1000)

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Amount for the Remaining Period Prior to the Maturity Date
Total
0-10 days 11-30 days 31-90 days 91-180 days 181 days-1 year Over one year
Primary inflow
1,386,992,267 142,043,052 117,357,985 158,442,815 154,433,257 103,970,117 710,745,041
upon maturity
Primary outflow 1,739,903,414 114,961,489 96,567,905 187,352,640 207,077,947 318,556,969 815,386,464
upon maturity
Gap -352,911,147 27,081,563 20,790,080 -28,909,825 -52,644,690 -214,586,852 -104,641,423
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Note: The table includes the NT$ amount of the entire Bank, including an estimated outflow of loan commitments NT$344,259,726,000.

b. Structural Analysis of the Maturity of US Dollars

		December 31, 2018 (Unit: US$ 1,000)	December 31, 2018 (Unit: US$ 1,000)	December 31, 2018 (Unit: US$ 1,000)	December 31, 2018 (Unit: US$ 1,000)	December 31, 2018 (Unit: US$ 1,000)
	Total	Amount for the Remaining Period Prior to the Maturity Date
		0-30 days	31-90 days	91-180 days	181 days-1 year	Over one year
Primary maturity Cash infow	10,656,284	4,816,832	1,872,015	527,466	400,721	3,039,250
Primary maturity Cash outfow	11,623,232	3,692,617	2,791,061	1,010,782	1,107,184	3,021,588
Gap	-966,948	1,124,215	-919,046	-483,316	-706,463	17,662

Note: The table includes the US$ amount of the entire Bank, including an estimated outflow of loan commitments NT$1,152,522,000.

(3) Impact of changes of important domestic and international policies and laws on the Bank's finance and business, and response measures: None.

response measures

In an environment threatened by cybersecurity, to increase the growth of digital (mobile) financial business and maintain the effective risk control, the Bank is intended to carry out the strengthening measures for cybersecurity governance from aspects of governance, management, and technology; descriptions are as below:

A. Incorporated cybersecurity management to the governance structure of the Bank: Established the information security responsible department, formulated cybersecurity management policies, and set up the Cyber Security Management Committee.
B. Three lines of defense mechanism for the division of work: Three lines of defense mechanism is adopted for the relevant operations of cybersecurity control. The first line of defense shall be the information communication system management and using department of the Bank, responsible for the execution and maintenance. The second line of defense shall be the Information Security Department, responsible for the overall planning. The third line of defense shall be the Auditing Department, responsible for the legal compliance and audit.

237

C. Promote cybersecurity management by adopting the view of "risk management": Make use of international cybersecurity risk management model to regularly evaluate the cybersecurity management mechanisms and the execution capacities; also, form a continual improving management cycle through constant optimization.
D. Establish applicable information security management system (ISMS): Carry out information communication system of the Bank and information assets check, risk valuation, and corresponding risk improvement, to comply with the international standards ISO 27001 ISMS Mechanism, and gradually introduce to all departments of the Bank for the application.
E. Improve the responding capacities and identification capacities for cybersecurity events: Establish and improve the reporting procedures and contingency plans for cybersecurity events, and carry out information security anti-hacker practices to enhance the responding and coordinating competencies for the employees of the Bank in the face of emergencies.
F. Set up intelligence analysis and alert system for cybersecurity threats: Make use of real-time cybersecurity sharing and analysis, such as F-ISAC, to provide the information required by the Bank regarding realtime and historical cybersecurity events, and assist the branches of the Bank to execute cybersecurity management activities.
G. Improve the cybersecurity cognitive promotion and training for all employees of the Bank, and improve the cybersecurity function competencies of the cybersecurity personnel, requiring them to obtain professional cybersecurity certificates.
(5) Impact of changes in the Bank's image on corporate risk management and response

measures

Where the external parties recognize the Bank for its excellent business performances, the Bank will generally grasp the timely opportunities of news and carry out relevant promotional activities, so as to improve the image of the Bank. Shall there be untrue rumors or negative media press that adversely affects the image of the Bank, the Bank will proactively verify the truth, provide instant verification or engage media to make a balance, protecting the reputation and image of the Bank.

and the countermeasures: None.
(7) The expected benefits and possible risks to expand the branches and the countermeasures

In 2018, the Bank had not expanded its branches and only carried out adjustment for its domestic branches.

(8) Risks derived from the concentration of operations, and countermeasures: None.
(9) The impact on the Company, and risk due to changes in managerial authority, and the countermeasures: None
(10) The effects of Directors or substantial shareholders holding more than 1% of shareholdings transferring or converting a large amount of equity on the Bank, as well as the risks, and countermeasures

The equity changes in Directors and the corporate shareholder represented by the Director are reported according to the Securities and Exchange Act, and kept tracked by the Bank at any time. Furthermore, the Bank carries out the promotions to shareholders holding more than 1% of the shareholders of the Bank required by Article 25 under the Banking Act within 10 days from the suspension of share transfer, reminding them to notify the shareholding changes to the Bank according to the Banking Act, to achieve the stable operations of the Bank.

(11) Litigious or non-litigious matters

The World Trade Center Branch of the Bank carried out the outward collection project under the letter of credits for its customer Chih Seen Industrial Co., Ltd. in 1996, and it is suspected that the importer L' International Compagnie de Commercialisation et D'Investissement in the Republic of Zaire (hereinafter, “I.C.C.I. Company”) incurred losses due to Chi Seng Industrial Co., Ltd. holding counterfeit notes and has not performed the exports. The I.C.C.I. Company filed a prosecution to the Brussels Commercial Court in November 1998 and requested the issuing bank of the certificate and the Bank to make a joint compensation amounting to US$7.83 million, plus interests, losses, and fees. On August 31, 2005, the Court pronounced the judgment that the

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Ⅶ

Bank shall make compensation of US$7.674 million plus interests to the I.C.C.I. Company. The Bank engaged a local attorney to file an appeal, and the Brussels Appellate Court had made its interlocutory judgment in February 2011, considering that both the Bank and I.C.C.I. Company had faults and made its judgment regarding the proportion of fault on November 16, 2011, sentencing that the Bank shall be responsible for 90% of the proportion of fault. The Bank lodged an appeal regarding the interlocutory judgment of the second instance on November 3, 2011; however, the Court of Final Appeal rejected the appeal from the Bank. Therefore, losing the lawsuit was confirmed. However, the Bank and I.C.C.I. Company was not able to reach a consensus on the exchange rate and calculation for the amount of compensation. In October 2016, I.C.C.I. Company filed an application to the Frankfurt Court to impound the deposits of the Bank at the correspondent bank. Subsequently, the Bank provided security deposits of €13.2 million to the Court to release the order. In July 2017, I.C.C.I. Company applied for the enforcement regarding abovementioned security deposits, and the Court transferred such security deposits to I.C.C.I. Company without any consultations. Therefore, the Bank filed a lawsuit of debtor disagreement. However, the Frankfurt Court rejected the lawsuit of the Bank in November 2018. The bank is now in the course of filing an appeal. Furthermore, as of December 31, 2018, the Bank had provided the compensation for losses of NT$183,923,000 and €8,000,000 for the case.

To strengthen the risk management for the loan business and avoid excessive centralized loans to industries, group corporations, and individual corporations, the Bank established the “Management Guidelines for Credit Risk Limitations Control” and “Procedures for Credit Risk Limitations and Control of Credit Loans” to regulate its risk limits for loans, and thus diversify the risk.

7. Crisis management and response mechanism

(1) The Bank has established the "[Guideline for Material Contingencies Handling Mechanisms] ." Shall there be bank runs for deposits, robberies, fraud, fire, flood, natural disaster, violence, or other significant matters, the department shall immediately notify the Business Development Department of the Bank with a call and describe the relevant circumstances according to the requirements under the Guideline to carry out the related reporting and contingency process. The Business Development Department shall notify the President immediately to adopt appropriate countermeasures, convene the contingency workforce meeting when necessary, and taking the initiatives to assign staff for assistance in branches to take required measures. Report the relevant data to the FSC, the Central Bank, Central Deposit Insurance Corporation, and the Ministry of Finance, and closely work with the responding measures of the competent authority. The spokesman of the Bank will take the initiative the release the press, directing the news report regarding the event toward the facts, instead of exaggerating, and affecting the reputation of the Bank.
(2) Respond to natural disaster factors according to the "TBB Management Guidelines for Branches Concerning Foreign Currency Transaction and Capital Operations during Natural Disasters." When the Bank's headquarter has called off work due to natural disaster while partial branches are still operating as usual, such guidelines provide a basis for branches that carry out foreign currency transactions and capital operations.
(3) Emergency backup and security protection measures for information equipment: Please refer to "Emergency backup and security protection measures for information operations" in Chapter V "Operation Summary."
(4) Responding to the probability of significant funding outflow, the Bank has established the "Directions for Contingencies Response" and "Funding Liquidity Risk Management," describing the contingency measures to be adopted when liquidity crisis occurred.
(5) The Bank has established the "Occupational Safety and Health Code," which sets out the relevant occupational safety and health standards, maintenance and inspection method for each equipment, and designates specialists to carry out safety and health inspection regularly to ensure related equipment to function normally, minimize accidents, and protect the personal safety of the employees. Upon disasters, a comprehensive security inspection shall be carried out according to the "Disaster Contingency Manual." Regarding damaged branch premises or significant operating equipment, the Bank will adopt the necessary reinforcement or repair to ensure operational safety. For equipment that cannot be reinforced or repaired in a short time, a temporary substitute plan is also provided to help the restoration of all businesses.

8. Other significant events: The Company has no designated hedging instrument for hedging accounting.

239

VIII

Special Notes

241 243 243 243 243

1. Information Regarding the Bank's Subsidiaries

2. Progress of Private Placement of Securities and Financial Bonds

3. The Bank's Subsidiaries' Shareholding or Disposal of the Bank's Shares

4. Additional Disclosure

5. Pursuant to Item 2, Paragraph 3, Article 36 of Security and Exchange Act, the Incidence Exerting Material Influence on Shareholders' Rights or Security Prices

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Taiwan Business Bank Annual Report 2018

VIII

1. Information Regarding the Bank's Subsidiaries

Taiwan Business Bank, Ltd.

==> picture [455 x 201] intentionally omitted <==

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

100% Ownership
Taiwan Taiwan Business TBB TBB TBB Venture
Business Bank Bank Property International (Cambodia) Capital Co.,
Insurance Insurance Leasing Co., Microfinance Ltd.
Agency Co., Agency Co., Ltd. Institution Plc
Ltd. Ltd.
100% Ownership
Taiwan Business Bank
International Leasing
Co., Ltd.
----- End of picture text -----

==> picture [456 x 218] intentionally omitted <==

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

Enterprise Name Established Date Address Paid-In Capital Major Business
Taiwan Business Bank 2F, No. 158, Songjiang Rd., Taipei City, Life insurance
2002.03.27 NT$ 5 million
Insurance Agency Co., Ltd. Taiwan, R.O.C. agency
Taiwan Business Bank
2F, No. 158, Songjiang Rd., Taipei City, Property insurance
Property Insurance Agency 2008.11.10 NT$ 3 million
Taiwan, R.O.C. agency
Co., Ltd.
TBB International Leasing 5F, No. 151, Sec. 4, Nanjing E. Rd.,
2013.04.03 NT$ 1.5 billion Financial lease
Co., Ltd. Songshan Dist., Taipei City, Taiwan, R.O.C.
Taiwan Business Bank Room 368, 302 Part, No.211, North Fute
International Leasing Co., 2014.06.16 Road, Free Trade Zone, Pudong District, CNY$ 170 million Financial lease
Ltd. Shanghai
2E/2F Street 315, Sangkat Boeung
TBB (Cambodia) SME and personal
Microfinance Institution Plc 2015.08.10 Kok 1, Khan Toul Kork, Phnom Penh, Cambodia. US$ 20 million finance business
TBB Venture Capital Co., 11F, No. 30, Ta Cheng St., Taipei City, Venture capital
2018.09.07 NT$ 300 million
Ltd. Taiwan, R.O.C. business
----- End of picture text -----

241

==> picture [456 x 386] intentionally omitted <==

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

Shareholding
Enterprise Name Title Name
Shares %
Chairman Chih-Chien Chang
Director Yi-Yun Wang
Taiwan Business Bank Insurance
Director Yu-Min Chang 500,000 100%
Agency Co., Ltd.
Supervisor Chang-Yi Chen
President Wen-Ling Wang
Chairman Chih-Chien Chang
Director Tsung-Chu Hsieh
Taiwan Business Bank Property
Director Chu-Jou Chen 300,000 100%
Insurance Agency Co., Ltd.
Supervisor Yin-Cheng Tseng
President Chi-Feng Cheng
Chairman Yi-Yun Wang
Director Tsung-Chu Hsieh
TBB International Leasing Co., Ltd. Director Hsiou-Chen Kang 150,000,000 100%
Supervisor Chih-Wei Chen
President Yin-Ta Chen
Chairman Yi-Yun Wang
Director Chang-Yi Chen
Taiwan Business Bank International
Director Chang-Yu Lin - 100%
Leasing Co., Ltd.
Supervisor Chih-Wei Chen
President Jaw-Jiun Lai
Chairman Chang-Yi Chen
TBB (Cambodia) Microfinance DirectorDirector Chang-Yu LinJung-Pin Huang 20,000 100%
Institution Plc
Independent Director Tien-Liang Hsu
President Ho-Wen Yang
Chairman Yi-Yun Wang
Director Chang-Yu Lin
Director Tsung-Chu Hsieh
Director Chih-Wei Chen
TBB Venture Capital Co., Ltd. 30,000,000 100%
Director Jung-Fang Kuo
Supervisor Tun-Kung Cheng
Supervisor Yu-Chuan Chou
President Shao-Huang Chen
----- End of picture text -----

Unit: NT$ Thousand

==> picture [456 x 180] intentionally omitted <==

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

Current
Enterprise Name Capital AssetTotal LiabilityTotal Net Value Operating Revenue Operating Revenue Profit and Loss (After-tax)EPS
(After-tax)
Taiwan Business Bank
Insurance Agency Co., 5,000 563,934 169,454 394,480 1,825,965 480,217 384,479 768.96
Ltd.
Taiwan Business Bank
Property Insurance 3,000 21,726 6,305 15,421 48,900 11,758 9,422 31.41
Agency Co., Ltd.
TBB International
Leasing Co., Ltd. 1,500,000 1,545,932 139,579 1,406,353 385,995 32,421 22,722 0.15
(Consolidated)
TBB (Cambodia)
Microfinance Institution 614,730 1,103,758 532,272 571,486 55,834 -30,482 -27,815 -0.45
Plc
TBB Venture Capital 300,000 297,560 799 296,761 0 -3,547 -3,239 -0.11
Co., Ltd.
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Taiwan Business Bank Annual Report 2018

VIII

The financial statements of the reinvestment companies with more than 50% of equity owned by the Bank have been incorporated into the consolidated statements. Please refer to the 2018 Consolidated Financial Statements and notes in VI "Financial Status . "

2. Progress of Private Placement of Securities and Financial Bonds: None.

3. The Bank's Subsidiaries' Shareholding or Disposal of the Bank's Shares: None.

4. Additional Disclosure: None.

5. Pursuant to Item 2, Paragraph 3, Article 36 of Security and Exchange Act, the Incidence Exerting Material Influence on Shareholders' Rights or Security Prices: None.

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IX

Corporate Social Responsibility Report

245 246 250

1. Environment

2. Social

3. Corporate Governance

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Taiwan Business Bank Annual Report 2018

The fulfillment of Corporate Social Responsibility (CSR) has always been one of the TBB's core operating principles. 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.

To reinforce the fulfillment of its Corporate Social Responsibility (CRS) and exhibit the importance that the TBB attaches to CSR, the TBB set up a Corporate Social Responsibility (CSR) Initiative Committee, which was subsequently promoted to the Corporate Social Responsibility Committee, responsible for the proposal and execution of CSR policies or systems, and report to the Board of Directors regarding the results of executing the CSR of the TBB.

The committee charter of the Corporate Social Responsibility Committee was promulgated on November 14, 2018. There are currently 5 members. Except for the Chairman and the President undertaking posts of committee chairman the mandatory member, respectively, the remaining 3 members are Independent Directors. There are Corporate Governance Subcommittee, Customer Rights Subcommittee, Sustainable Environment Subcommittee, Social Benefit Subcommittee, and Employee Care Subcommittee in place, and the first Subcommittee meeting for 2019 was convened on March 29, 2019 to discuss the implementation results of 2018. The Bank will take the core financing business as the starting point in carrying out CSR within its scope of businesses.

business as the starting point in carrying out CSR within its scope of businesses.	business as the starting point in carrying out CSR within its scope of businesses.	business as the starting point in carrying out CSR within its scope of businesses.	business as the starting point in carrying out CSR within its scope of businesses.	business as the starting point in carrying out CSR within its scope of businesses.	business as the starting point in carrying out CSR within its scope of businesses.
CSR Committee Committee Chairman: Chairman of the Board Executive Secretary ~~GM of B~~usiness Development Dept.
Corporate Governance Customer Rights Sust Envir			ainable onment Social Beneft Employee Care

Integrity management, maintenance of shareholder rights, equal treatment of shareholders, reinforcement of the structure and operation of the Board of Directors, enhancement of information transparency, risk management, organizational strategy Provision of detailed information on products and services, protection of customers' personal information security, provision of appeal channels, maintenance of customer relationships Environmentally sustainable development, green fnancial products, green procurement and supplier management, energy conservation and carbon reduction Attention to social issues, support for disadvantaged groups, involvement in community development, promotion of art activities and sports, molding of the corporate image Enhancement of staff welfare, strengthening of staff training, reinforcement of labor relations communication, creation of an outstanding work environment

The TBB's achievements in the field of corporate social responsibility in 2018, divided into Environmental, Social and Corporate Governance (ESG) categories, are described below:

1. Environment

(1) Extension of Environmentally Friendly Enterprise Project Loans

In its advancement toward such sustainable environment goals as lowering energy consumption and reducing pollution, in addition to the implementation of corporate environmental protection in the review of loan applications, the TBB will continuously promote project loans under the “Preferential Loans for the Procurement of Renewal Energy Equipment,” “Machinery and Equipment Upgrading Loans,” “Preferential Loans for Key Innovative Industries,” and "Project Loans for Green Energy Sustainability" programs. In October 2018, the Bank amended the “Project Loans for Green Energy Sustainability,” extending the target scope to natural persons, to promote green energy industries including wind power, solar power generation, the procurement of renewable energy, and energy conservation with the aims of establishing a low-carbon economy, achieving the goal of sustainable social development, and generating a win-win for economic development and environmental protection.

245

(2) Implementation of Carbon Reduction and Energy Conservation Policy to Stimulate Sustainable Environmental Development
A. The Bank implemented its “Energy Policy” and “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.
B. 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 the protection of the environment.
C. The Bank's headquarters carried out the renewal of a 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 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 2018 was 20,406,432 kilowatt-hours, resulting in approximately 11,305 metric tons of carbon dioxide emissions. Compared with the previous year, the Bank has reduced electricity consumption by 1.64% and carbon dioxide emissions by 380 metric tons in the past two years.
E. Completion of 10 business units, including Fuxing and Banqiao, as well as adjustment of the contracted electricity demand of the Information Technology Department's Linkou equipment room, resulting in a cost saving of about NT$900,000.
F. In order to control the electricity consumption to avoid a waste of energy, the Bank conducted the installation of digital power meters and informatization of electricity consumption management at the headquarters, Chongqing South Building, Lin Kou Branch, Sung Shan Branch, Jia Sin Branch, East Tainan Branch, Hu Wei Branch, Cheng Kung Branch, and Hua Lien Branch.

(3) Superior Performance Record in Implementing Environmental Protection

A. 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 seven years in a row.
B. The Bank's headquarters building has received ISO 50001 Energy Management System certification.

2. Social

A. Charity sponsorship in support of public benefit activities
a. To help with the media exposure of charity and public benefit groups, the TBB disclosed information on charitable donations on the Credit Card Section of its official website.
b. Sponsorship was provided to the Huashan Social Welfare Foundation in organizing the "Love to Seniors and Love to Reunion" event that prepares 100 portions of free Chinese New Year meals and year-end parties for the disadvantaged.
c. In the midnight on Feb. 6, 2018, an earthquake with the magnitude of 7.0 has struck Hualien City causing serious damages and injuries. The Bank has made charitable donations in the amount of NT$2,000,000 to help the disaster relief because the Bank understands and sympathizes with the trauma caused by the Hualien earthquake. The Bank adheres to the human sympathy and performs its corporate social responsibility to assist the Hualien region in post-earthquake reconstruction.
d. To encourage the public to exercise, the Bank provided sponsorship to the "Ministry of Finance 2018 Uniform Invoice Cup Taoyuan Road Running," which commenced on June 24, 2018 and attracted more than 500 people from 21 branches to participate. The public in the Taoyuan region were welcomed to participate in the event for free. Furthermore, the Bank also collected the uniform invoices at the road running event and gathered over 50,000 invoices to donate to various disadvantaged groups.
e. To fulfill the CSR and take care of the disadvantaged groups in rural areas, the Bank continued to sponsor the “2018 Food (Goods) Bank” organized by the Taiwan Futures Exchange. Since the commencement

246

Taiwan Business Bank Annual Report 2018

of the program, the Bank has helped more than 110,000 families and 410,000 persons. With funds being collected, bulk supplies were procured and donated to disadvantaged groups throughout Taiwan.

f. To help with sluggish sales of onions for farmers in Pingtung, the Bank purchased 1,500 bags of onions weighing a total of 22 tons from the Pingtung Country Hengchun Farmers' Association, and distributed onions to clients and colleagues as gifts.
g. Sponsorship is provided to the Anue in organizing the "2018 Care for and Look after Seniors" for its 19thanniversary celebration, which fulfills its CSR and corresponds to the theme of the Bank to support in public benefit activities.
h. Sponsorship is provided to Taipei Kuanyin-Line Psychological and Social Service Association in organizing charity concerts, the proceeds from the fund-raising were used in events such as "Community based Preventive Care for Active Ageing and Long-term Care." So far, the Association has cared for more than 300,000 persons.
i. Participated in the 2018 Financial Services Public Benefit Carnival (Taoyuan) organized by the Taiwan Financial Services Roundtable. The Bank has set up 2 booths and provided 400 souvenirs to promote financial knowledge and public welfare through game playing and interaction with the public.
j. Upholds to the humanitarian spirit and assists the healthy growth of the vulnerable children, the Bank continued to care for aboriginal schools, medium- and low-income households, grand-parenting children, and single-parent children living in the rural areas and sponsored the cost of nutritious breakfasts for Saijia Elementary School, Duona Elementary School, Nanfeng Elementary School and Shuanglong Elementary School in 2018 School Year. The number of persons sponsored by this program has reached more than 2,000.
k. Upholds to the humanitarian spirit and exerts the CSR, the Bank acted in line with the Ministry of Finance and made donations to the post-disaster reconstruction plan for 0823 Flood in Southern Taiwan, helping flood victims in recovering from Disaster and home reconstruction.
l. Sponsorship is provided to the Taiwan Fund for Children and Families Kinmen Branch in organizing the "Children Community Support Center (Support Branch) Building Plan." The plan is estimated to provide services to more than 400 children.
B. Participation in community development
a. The Bank has issued “Silver Love” credit cards and set aside 0.3% of the card consumption amount to sponsor Kaohsiung City Qishan District Sugar Refinery Community Development Association, Hualien County Hualien City Minsheng Community Development Association, Miaoli Sanyi Shuangtan Community Development Association, Chiayi County Budai Township Donggang Community Development Association, and Kinmen County Lieyu Township Shangchyi Village Qingqi Community Development Association to establish "Senior Learning Centers" for seniors to learn and dine together. The Bank assisted the communities in providing services such as health promotion for the elderly, social interaction, happy learning, happy dining and delays in disability by setting up senior caring spots to improve the standards of caring services at senior welfare agencies, providing local and appropriate caring services accessible to disadvantaged seniors, in hope to achieve the goal of "aging in local communities."
b. Sponsorship is provided to the New Taipei City Funciao Culture Association in organizing the "2018 Banqiao Wenchang Street School of Life" program, improving the public's understanding towards the historical sites and traditional culture in Banqiao area. 50 unique stalls were set up by local creators onsite to help promote culture, creativity, education and public welfare values and stimulate the public's cultural creativity.
c. Sponsorship was provided to the Pingtung County Government in organizing the "2019 Taiwan Lantern Festival in Pingtung" event, which attracted more than 10 million visitors, extensively promoting the Silver Love Credit Card issued by the Bank to call for more people participating in public welfare, to support the vulnerable senior groups.
d. The Bank participated in the Senior University lecture tour organized by the Trust Association and the New Taipei City Government to publicize the fact that senior citizens can carry out trust planning for their retirement, coordinate with the promotion of the government's major policy of long-term care for senior citizens and the handicapped, and fulfill its social responsibility. The response was enthusiastic.

(2) Support for Academic, Cultural, and Sports Activities

A. Support 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

247

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. The Bank provides summer vacation part-time job vacancies for disadvantaged youngsters, to help take care of youngsters from families with weaker economic income and provide part-time job opportunities to young students. The Bank launches industry-university cooperative research projects with public and private universities to jointly provide lectures for nurturing elites and talents, strategically provides intern opportunities to train students, and plan to provide employment opportunities for students with excellent performances.
c. The Bank works vigorously to carry out the Ministry of Science and Technology's “Industry-University Cooperative Research Project on Broadcasting Production and Promotion of Popular Science Products” trust to advance cooperation between college/university and academic institutions and domestic and overseas media in broadcasting production, promote high-quality popular-science products, thereby expanding university broadcasting of popular science knowledge and enhancing the scientific literacy of Taiwan's people.
d. The Bank provided sponsorship for the 15th Cross-strait Financial Markets Development Seminar Committee of the Tamkang University to organize "Current and Future Cross-strait Financial Innovation Technology and Financial Supervision Seminar." The organizer invited about 150 people to attend the seminar, and 50 of them were international and cross-strait industry and government experts who participated in practical discussions and published academic papers.
e. The Bank provided sponsorship for the establishment of Taiwan-Asia Exchange Foundation, assisting in the promotion of businesses in relation to the "New Southbound Policy," The 2nd Yushan Forum held by the Foundation was attended by 66 ambassadors and representatives from 24 countries. Through the sharing of opinions, it helps to facilitate the diverse social, economic, and academic exchanges between Taiwan and Asian countries.
f. The Bank provided sponsorship for the Taiwan Economic Association in organizing its 2018 Annual Ceremony Plan and Paper Presentation, providing a platform for economic scholars to present and their papers and discuss their opinions.
g. To promote relevant knowledge on financial policies and market development to the public, the Bank provided sponsorship for the Chilee University of Technology in organizing the "Finance CEO Seminar." Domestic financial industry elites were invited to serve as lecturers, with topics focusing on major fiscal taxes and financial market related issues, and the seminar was opened to the public for participation.
B. Enhancement of the vogue for art and literature, and promotion of sports activities
a. TBB sponsored the Su Tien-Chai Foundation Scholarship in holding 2 sessions of onstage play "Grandma I Love You - 10 Signs of Alzheime," attracting approximately 1,000 people to participate. Through the tour performance, it wishes to improve the public's care and understanding for Alzheimer, and in turns learn more about how to prevent and delay the occurrence of Alzheimer.
b. TBB sponsored the General Association of Chinese Culture in organizing "My Zine - Independent Publishing Project in Taiwan vs. Netherlands Exhibition and Seminar," attracting about 1,300 visitors and 70% of them were young people aged 20-40. Also, the media has made 15 news reports regarding this event, helping to promote international interactions and the global exposure of Taiwan's culture.
c. TBB sponsored the udnFunLife Co., Ltd. in holding the "Berlin Philharmonic String Quintet." The concert was performed by five of the world's top classical musicians and almost 90% of the tickets were sold, showing the popularity of the concert.
d. Purchased 5,000 tickets for 2018 Taichung World Flora Exposition and invited customers of the Bank to participate and support such international exhibitive activities.
e. TBB sponsored the General Association of Chinese Culture in organizing 2018 Art and Culture Tea Party at the Taipei Guest House, which invited about 1,000 art and culture workers of different fields from across Taiwan to join and improve the innovative mechanism of culture and innovation industry, benefitting the establishment of relevant cultural policies by the government.
f. Sponsorship was provided for local sports activities, including Keelung City's “27th New Park Cup Basketball Championship” lasting for 30 days.
g. TBB sponsored the General Association of Chinese Culture in organizing the "The Soul of the Craftsman" video project and the "Hip Hop Night at NPM" cross-field new media and fashion exhibition. The exhibition manifests the fresh cultural atmosphere of Taiwan through recordings of hundreds of workers and trades, as well as performances of fashion shows and projection mapping shows. The number of participants in the Hip Hop Night at NPM event was about 600, and the number of live broadcast audiences was about 250,000.

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Taiwan Business Bank Annual Report 2018

h. Provided sponsorship in the event "2018 Dadaocheng International Festival of Arts" to strengthen the soft power of Taiwan's culture.
i. Provided sponsorship to MNA The Management of New Arts in organizing the "Orchestra dell'Accademia Nazionale di Santa Cecilia." The orchestra has a history of more than a century, and the romantic and enthusiastic music is recognized as the "Italian Rose", which was performed by contemporary conductor Pappano.
j. Provided sponsorship to the Taiwan Junior Chamber in organizing the Night of Taiwan event for "2018 Asia Pacific Conference in Kagoshima, Japan" to promote the current economic and cultural development in Taiwan, and introduce the tourism industry in Taiwan.
k. To nurture the innovative development of the fashion industry and improve the international profile of the fashion industry in Taiwan, the Ministry of Culture and the Ministry of Economic Affairs jointly promote the cooperation among the fashion industry, video/audio industry and art industry, etc. The first Taipei Fashion Week were held by C&A MEDIA and the sponsorship was provided by the Bank to jointly create a fashion design display platform.
l. The Bank has been dedicated to improving the overall cultural and art vibes in the society as well as the quality of education culture that it cooperated with the National Palace Museum to issue Friend of Palace Card. The Bank allocates 2‰ of the card consumption from such card to donate to the National Palace Museum as the promotional fund for culture, arts, and education, improving the public's living quality and culture and fulfilling its CSR.
m. Provided sponsorship in the art and culture event "8th Cross-Strait Quyi Festival," fulfilling the CSR and promote the charitable image of the Bank.
n. Provided sponsorship in the charitable event "X'mas Run" organized by the "Advanced Developers Association," so as to improve the charitable image of the Bank.

(3) Employee Care

Employees are the assets of a corporation. The Bank has spared no efforts in taking 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.

A. Enhancement of Employees' Professional Knowledge
To strengthen the competitiveness of employees and enhance their professional knowledge, the Bank inaugurated training programs for different areas of business in accordance with its annual staff training plan, and also offered holiday courses in such subjects as digital finance and wealth management on a regular basis.
B. Creation of an excellent workplace
a. In compliance with the Act of Gender Equality in Employment, the Bank has established regulations for sexual harassment measures, complaints, and punishments so that employees will have a work environment free of sexual harassment.
b. To enhance the safety of the Bank's working environment, whenever a construction incident occurs, the contractor is issued a “contractor working environment and hazard factors notice” in order to reduce occupational accidents; in addition, the Bank holds “general worker safety and health training” to enhance employees' concept of safety and health.
c. The Bank provides its employees with a safe and healthy workplace, equipped with central air conditioning systems, abundant lighting, comfortable and appropriate working space, and emergency evacuation routes and exits. Elevators are maintained on a regular basis, firefighting equipment is available, and regular fire drills are held. Workplaces are disinfected and cleaned regularly, and door access safety controls are in place.
C. 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 the Collective Agreement, thereby maintaining harmonious labor-management relations.

249

3. Corporate Governance

A. Deep cultivation of the core SME business
a. Cooperated with Magazine of Business Today for the "2018 Business Today Young Entrepreneurship Forum" event to promote the financing and counseling services of the Bank.
b. Organized two sessions of Credit Guarantee Lectures in accordance with the policy of Small & Medium Enterprise Credit Guarantee Fund of Taiwan to provide financing counsel services.
c. Co-organized the "2018 New Southbound Forum" with the Economy Daily News to assist customers in grasping the New Southbound business opportunities.
d. Co-organized the "Care and Services for SME and Reinforce Financial Competitiveness" seminar in 2018 with the Taiwan Small & Medium Enterprise Counseling Foundation according to the policy of Small and Medium Enterprise Administration, Ministry of Economic Affairs. Through which, the Bank fulfilled the policy of the government in relation to the proactively counseling for SMEs, strengthening the financial management of the SMEs for them to successfully obtain the facilities required and enhance their competitive advantages.
e. Co-organized the "New Southbound National Investment Seminar" with the Agricultural Bank of Taiwan, and invited the World Taiwanese Chambers of Commerce and over 150 Taiwanese businessmen from across 32 countries to participate, exhibiting the determination of the Bank for contributing to the promotion of the New Southbound policies along with the top three credit guarantees funds, and the efficacy of leading customers to explore new business opportunities.
f. Aligning with the policy of Small and Medium Enterprise Administration under the Ministry of Economic Affairs, to assist in the healthy financial development of the SMEs, the Bank engaged the National Innovation and Entrepreneurship Association to organize 4 sessions of "2018 Plans for Facilitating the Healthy Financial Development of SMEs - Sharing New Knowledge of Finance and Accounting for SMEs/ Risk Management," providing banking facility techniques and project loans.
B. Loan policy
The Bank follows the spirit of the “Equator Principles” in its loan policy.
In its extension of loans, the Bank fulfills its corporate social responsibility by taking the client's honesty management, corporate governance, environmental protection, social responsibility, food safety, and labor safety into consideration in its loan evaluation and decision making, thereby exerting its influence on corporate social responsibility.
C. 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. 24, 2018, the Bank's apportioned contribution to the SME Credit Guarantee Fund for 2019 amounted to NT$304,986,903.

(2) Implementation of consumer protection and reinforcement of customer care

A. Reinforcement of consumer protection
a. The Bank protects consumer rights through its Consumer Protection Policy and Consumer Protection Operating Procedures, which clearly state the measures to be implemented and designate an exclusive unit to review the effectiveness of the consumer protection mechanism. The Board of Directors Audit Committee is responsible for checking on the status of implementation.
b. In line with the implementation of the Consumer Debt Clearance Act, the Bank has set up a single window for taking applications and providing consultation on preliminary negotiations; thereby helping to lighten the debt burden on debtors. To date, this facility has helped 4,887 people to start new lives.
c. To carry through with consumer protection and comply with the rules of the competent authority, the Bank extends medium- and long-term loans secured by houses as well as loans that are secured by other real estate and whose purpose is the purchase of homes. The Bank strengthened its verbal explanation of “Special Reminders for Home Loans” to help borrowers understand the risk posed by interest-rate changes.
d. The Bank has established an “Operating Procedure for the Handling of Credit Card Disputes” and has set up a toll-free hotline, allowing the Credit Card Department to receive and handle customer complaints immediately.
e. In line with the "Psuedo Card Transaction Liability Shift Mechanism" announced by the International Credit Card Organizations, all ATMs of the Bank (425 in total, including 1 foreign currency ATM) have completed the ATM-EMV operations.
f. The whitelisting system was added to all ATMs of the Bank (425 in total, including 1 foreign currency ATM) on November 29, 2018, and the protection function has been activated to prevent the attack from illegal programs.

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Taiwan Business Bank Annual Report 2018

B. Implementation of customer service and care
a. To bring financial services closer to the disabled and gradually build up an obstacle-free environment for financial transactions, the TBB boosted the ratio of its accessible ATMs to 97% by the end of December 2018.
b. To facilitate the application for exemption or reduction of fees on interbank ATM withdrawals by the disabled, the Bank has added the online application since Jul. 1, 2018.
c. To take care of young people and disadvantaged groups, the Bank carried out the Ministry of Finance's “Preferential Housing Loan Program for Successful Family Foundation of Youth” and the Construction and Planning Agency, Ministry of the Interior's “Housing Subsidy and Home Improvement Loans.” By the end of December 2018, a total of 24,528 and 1,206 of these loans, respectively, had been extended, with the accumulated value amounting to a respective NT$98.329 billion and NT$2.358 billion.
d. Increase the interactions and interchanges between the Bank and the wealth management customers, three "Duo of Abundant Profits and Security" large-scale customer seminars were held separately in the Northern, Central, and Southern Taiwan, assisting customers to accomplish the assets accumulation and security through setting their financial targets.
e. Held five divisional "Good Friends - Heart to Heart" small scale high-assets customer seminars to develop deep relationships with customers.
f. Held the "New Highlight for China Investment in the PRC - One Click to Learn Healthcare" customer seminar, allowing customers to attend to both their assets allocation and physical health.
C. Creating financial products that conform to social trends and customer needs
a. The Bank follows the principles of care and sharing, and provides clients with professional and customized financial and asset planning services that help them realize their desire to “create, conserve, and pass on wealth.” This assists customers in building a high-quality life of economic stability and carefree leisure.
b. In response to Taiwan's aging 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.
c. Issued the "Silver Love Credit Card." The Bank exclusively allocated 3‰ of the general card consumption from the Silver Love Credit Card to help seniors to dine and learn together.
d. In coordination with the “Loans for Youth Overseas Experience” program of the Youth Development Administration, Ministry of Education, the TBB exclusively 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 December 2018, the Bank had provided NT$527 million in these loans to 4,478 persons, helping numerous young students to pursue their dreams overseas, and thereby received a certificate of appreciation and the trophy from the Youth Development Administration, Ministry of Education as a recognition of the Bank's efforts.
e. To help increase birth rates, the TBB continues to extend childbirth consumer loans, lightening the burden on family finances by providing the capital needed to pay for bearing children. By the end of December 2018, 1,336 of these loans for a total of NT$504 million had been extended.
f. To help seniors to invigorate their assets and stabilize their livings, the Bank continued to promote the "Joyful Retirement" project. By the end of December 2018, a total of 164 of these loans had been extended, with the contract amount and the appropriation amount accumulated to NT$1,081 million and NT$774 million, respectively.

(3) Upgrading of information transparency, and reinforcement of communication with shareholders and investors

The TBB is engaged in a long-term effort to upgrade its corporate governance, pursue even better operating performance, and constantly enhance asset quality and competitiveness so as to reinforce its operating structure and create greater value for its shareholders. In addition, the Bank works vigorously to reinforce channels of communication with its domestic and overseas shareholders and investors. The concrete methods used to do this are as follows:

A. Holding of a shareholders' regular meeting every six months.
B. Holding of a road show in the first and second halves of each year to provide a complete statement of the Bank's operating situation.
C. The Bank has established a special window and mailbox for immediate response to queries raised by shareholders and investors.
D. The Bank posts monthly revenue and financial status information on its official website, and Chinese and English versions of major company news items and the status of corporate social responsibility are posted there as well. This helps domestic and overseas investors understand the status of the Bank's operations.

251

X

Directory of Head Office and Branch Units

252

Taiwan Business Bank Annual Report 2018

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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 MBBTTWTP010
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
Chi Lin Branch 46, Sec. 2, Minquan E. Rd., Zhongshan Dist., Taipei (02)25417171 MBBTTWTP001
City, Taiwan, R.O.C.
Chung Ho Branch 634-10, Jingping Rd., Zhonghe Dist, New Taipei (02)22427171 MBBTTWTP002
City, Taiwan, R.O.C.
Po Ai Branch 419, Mingcheng 2nd Rd., Zuoying Dist., Kaohsiung (07)5567171
City, Taiwan, R.O.C.
North Taoyuan Branch 985 Chunri Rd., Taoyuan Dist., Taoyuan City, (03)3567171 MBBTTWTP004
Taiwan, R.O.C.
Nan Ken Branch 381 Zhongzheng Rd., Luzhu Dist., Taoyuan City, (03)3227171 MBBTTWTP005
Taiwan, R.O.C.
Si Tuen Branch 839/847 Sec. 4, Taiwan Blvd., Xitun Dist., Taichung (04)23587171 MBBTTWTP006
City , Taiwan R.O.C.
Chung Min Branch 301 Zhongming S. Rd., West Dist., Taichung City, (04)23057171 MBBTTWTP007
Taiwan, R.O.C.
Kinmen Branch 116, Minquan Rd., Jincheng Township, Kinmen (082) 316871 MBBTTWTP009
County, Taiwan, R.O.C.
Ta Ya Branch 161 Daya Rd., Daya Dist., Taichung City, Taiwan, R.O.C (04)25687171 MBBTTWTP011
Jen Ta Branch 183 Fengnan Rd., Nanzi Dist., Kaohsiung City, (07)3537171 MBBTTWTP012
Taiwan, R.O.C.
Jen Ai Branch 357, Sec. 4, Ren'ai Rd., Da'an Dist., Taipei City, (02)27217171 MBBTTWTP020
Taiwan, R.O.C.
Sung Shan Branch 147, Sec. 4, Nanjing E. Rd., Songshan Dist., Taipei (02)27167171 MBBTTWTP021
City, Taiwan, R.O.C.
Chien Cheng Branch (Banking Broker) 76 Nanjing W. Rd., Datong Dist., Taipei City, Taiwan, R.O.C. (02)25507171 MBBTTWTP022
Shih Lin Branch 601 Zhongzheng Rd., Shilin Dist., Taipei City, (02)28117171 MBBTTWTP023
Taiwan, R.O.C
Yung Ho Branch 168 Zhulin Rd., Yonghe Dist., New Taipei City, (02)29277171 MBBTTWTP024
Taiwan, R.O.C.
Hsin Tien Branch 192, Sec. 2, Zhongxing Rd., Xindian Dist., New (02)29117171 MBBTTWTP025
Taipei City, Taiwan, R.O.C.
Hsin Chuang Branch 16, Sec. 1, Zhonghua Rd., Xinzhuang Dist., New (02)29907171 MBBTTWTP026
Taipei City, Taiwan, R.O.C.
Hwa Cheng Branch 25, Touqian Rd., Xinzhuang Dist., New Taipei City, (02)29977171 MBBTTWTP027
Taiwan, R.O.C.
Sung Kiang Branch 158 Songjiang Rd., Zhongshan Dist., Taipei City, (02)25377171 MBBTTWTP040
Taiwan, R.O.C.
Taipei Branch 72, Sec. 1, Chongqing S. Rd., Zhongzheng Dist., (02)23717171 MBBTTWTP050
(Banking Broker) Taipei City, Taiwan, R.O.C.
Wan Hua Branch 103, Kangding Rd., Wanhua Dist., Taipei City, (02)23387171 MBBTTWTP060
Taiwan, R.O.C.
South Taipei Branch 93, Sec. 2, Roosevelt Rd., Da'an Dist., Taipei City, (02)23697171 MBBTTWTP061
Taiwan, R.O.C.
Fu Hsin Branch 390, Sec. 1, Fuxing S. Rd., Da'an Dist., Taipei City, (02)27057171 MBBTTWTP070
Taiwan, R.O.C.
Chung Shan Branch 17 Changchun Rd., Zhongshan Dist., Taipei City, (02)25517171 MBBTTWTP080
Taiwan, R.O.C.
Chien Kuo Branch 4, Sec. 3, Minquan E. Rd., Zhongshan Dist., Taipei (02)25097171 MBBTTWTP081
CIty, Taiwan, R.O.C.
Nai Hu Branch 15, Alley 360, Sec. 1, Naihu Rd., Naihu Dist., Taipei (02)27997171 MBBTTWTP082
City, Taiwan, R.O.C.
Nan King East Road Branch 311, Sec. 3, Nanjing E. Rd., Songshan Dist., Taipei City, Taiwan, R.O.C. (02)27127171 MBBTTWTP090
Chung Hsiao Branch 267, Sec. 3, Chung Hsiao E. Rd., Taipei City, (02)27727171 MBBTTWTP100
Taiwan, R.O.C.
World Trade Center Branch 547 Guangfu S. Rd., Xinyi Dist., Taipei City, Taiwan, R.O.C. (02)23457171 MBBTTWTP102
Yung Trin Branch 552, Sec. 5, Chung Hsiao E. Rd., Taipei City, (02)23467171 MBBTTWTP103
Taiwan, R.O.C.
Nan Kang Branch 19-2 Sanchong Rd., Nangang Dist., Taipei City, (02)26553771 MBBTTWTP105
Taiwan, R.O.C.
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TBB'S OFFICES ADDRESS TEL NO. SWIFT ADDRESS
Sung Nan Branch 161, Sec. 1, Keelung Rd., Xinyi Dist., Taipei City, (02)27647171 MBBTTWTP110
Taiwan, R.O.C.
Dong Hu Branch 152, Sec. 6, Minquan E. Rd., Naihu Dist., Taipei (02)87929771 MBBTTWTP111
City, Taiwan, R.O.C.
Ta An Branch 92, Sec. 2, Dunhua S. Rd. Da'an Dist., Taipei City, (02)27007171 MBBTTWTP120
Taiwan, R.O.C.
Shuang Ho Branch 356 Zhonghe Rd., Zhonghe Dist., New Taipei City, (02)22327171 MBBTTWTP121
Taiwan, R.O.C.
Jim Ho Branch 403, Sec. 2, Zhongshan Rd., Zhonghe Dist., New (02)22287171 MBBTTWTP122
Taipei City, Taiwan, R.O.C.
Wu Ku Branch 95 Wugong Rd., Wu Ku Industrial Zone, Xinzhuang (02)22987171 MBBTTWTP130
Dist., New Taipei City, Taiwan, R.O.C.
Lin Kou Branch 1F-2, 188 Zhongshan Rd., Linkou Dist., New Taipei (02)26037171 MBBTTWTP131
City, R.O.C.
Pan Chiao Branch 2-1 Mingde St., Banqiao Dist., New Taipei City, (02)29687171 MBBTTWTP140
Taiwan, R.O.C.
Shu Lin Branch 217, Sec. 1, Zhongshan Rd., Shulin Dist., New (02)26757171 MBBTTWTP141
Taipei City, Taiwan, R.O.C.
Tu Cheng Branch 126, Sec. 2, Zhongyang Rd., Tucheng Dist., New (02)22737171 MBBTTWTP142
Taipei City, Taiwan, R.O.C.
Hwei Long Branch 933 Zhongzheng Rd., Xinzhuang Dist., New Taipei (02)82097171 MBBTTWTP143
City, Taiwan, R.O.C.
Xi Zhi Branch 75, Sec. 1, Xintai 5th Rd., Xizhi Dist., New Taipei (02)26987171 MBBTTWTP144
City, R.O.C.
San Xia Branch 31, Daxue Rd., Sanxia Dist., New Taipei City, R.O.C. (02)26739871 MBBTTWTP148
9 Ai 3rd Rd., Ren'ai Dist., Keelung City, Taiwan,
Kee Lung Branch R.O.C. (02)24237171
Pu Chya Branch 62-1, Sec. 2, Zhongshan Rd., Banqiao Dist., New (02)29547171 MBBTTWTP151
(Banking Broker) Taipei City, Taiwan, R.O.C.
North San Chung Branch 137, Sec. 4, Sanhe Rd., Sanchong Dist., New Taipei City, Taiwan, R.O.C. (02)22867171 MBBTTWTP152
South San Chung Branch 232, Sec. 1, Ziqiang Rd., Sanchong Dist., New Taipei City, Taiwan, R.O.C. (02)29827171 MBBTTWTP153
Lu Chow Branch 42 Yongle St., Luzhou Dist., New Taipei City, (02)28477171 MBBTTWTP154
Taiwan, R.O.C.
I Lan Branch 305 Sec. 2,Zhongshan Rd., Yilan City, Yilan County, (03)9367171 MBBTTWTP160
Taiwan, R.O.C.
15 Zhongzheng N. Rd., Luodong Township, Yilan
Lo Tung Branch (03)9567171
County, Taiwan, R.O.C.
Su Aw Branch 96-1,Sec. 1, Zhongshan Rd., Su' ao Township, Yilan (03)9965051
County, Taiwan, R.O.C.
Yang Mei Branch 146 Dacheng Rd., Yangmei Dist., Taoyuan City, (03)4786111 MBBTTWTP290
Taiwan, R.O.C.
Hu Kou Branch 76, Sec. 1, Zhongcheng Rd., Hukou Township, (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.
Ta Yuan Branch 80 Zhongshan S. Rd., Dayuan Township, Taoyuan (03)3857171 MBBTTWTP301
City, Taiwan, R.O.C.
Ta Shi Branch 80 Fuxing Rd., Daxi Dist., Taoyuan County, Taiwan, R.O.C. (03)3887171 MBBTTWTP302
Chung Li Branch 157 Zhongshan Rd., Zhongli Dist Taoyuan City, (03)4277171 MBBTTWTP310
Taiwan, R.O.C.
Nei Li Branch 153 Zhongxiao Rd., Zhongli Dist., Taoyuan City, (03)4557171 MBBTTWTP311
Taiwan, R.O.C.
Hsin Ming Branch 282 Minzu Rd., Zhongli Dist., Taoyuan City, Taiwan, R.O.C. (03)4027171 MBBTTWTP312
East Taoyuan Branch 1223, Sec. 2, Wanshou Rd., Guishan Dist., Taoyuan (03)3297171 MBBTTWTP313
City, Taiwan, R.O.C.
Hsin Wu Branch 257 Zhongshan Rd., Xinwu Dist., Taoyuan CIty, (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 Based Industrial Park Branch NO.198, Guanxin Rd., Hsinchu City 300, Taiwan, R.O.C. (03)5637171 MBBTTWTP322
Pa Te Branch 789, Sec. 1, Jieshou Rd., Bade Dist., Taoyuan City, (03)3767171 MBBTTWTP330
Taiwan, R.O.C.
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Taiwan Business Bank Annual Report 2018

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TBB'S OFFICES ADDRESS TEL NO. SWIFT ADDRESS
Luong Tan Branch 64 Longyuan Rd., Longtan Dist., Taoyuan City, (03)4807171 MBBTTWTP332
Taiwan, R.O.C.
Chu Tung Branch 6 Donglin Rd., Zhudong Township, Hsinchu County, (03)5947171 MBBTTWTP340
Taiwan, R.O.C.
Chu Nan Branch 29 Bo'ai St., Zhunan Township, Miaoli County (037)467171 MBBTTWTP350
Taiwan, R.O.C.
Tou Fen Branch 90 Xinyi Rd., Toufen Township, Miaoli County, (037)687171 MBBTTWTP351
Taiwan, 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 City, (04)22707171 MBBTTWTP470
(Banking Broker) Taiwan, R.O.C.
Ta Chia Branch 14 Zhenzheng Rd., Dajia Dist., Taichung City, (04)26867171 MBBTTWTP480
Taiwan, R.O.C.
Sha Lu Branch 1023 Sec. 7, Taiwan Blvd., Shalu Dist., Taichung (04)26657171 MBBTTWTP482
City , Taiwan R.O.C.
Wu Jih Branch 616 Zhonghua Rd., Wuri Dist., Taichung City, (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.
Min Chen Branch 84 Minquan Rd., Central Dist., Taichung City, (04)22267171 MBBTTWTP491
Taiwan, R.O.C.
Hsing Chung Branch 136 Taizhong Rd., South Dist., Taichung City, (04)22877171 MBBTTWTP500
Taiwan, R.O.C.
Pei Tuen Branch 53 Jinhua N. Rd., Beitun Dist., Taichung City, (04)22307171 MBBTTWTP501
Taiwan, R.O.C.
Nan Tou Branch 139 Fuxing Rd., Nantou City, Nantou County, (049)2237171 MBBTTWTP510
Taiwan, R.O.C.
Tsao Tuen Branch 604 Zhongzheng Rd., Caotun Township, Nantou (049)2357171 MBBTTWTP511
County, Taiwan, R.O.C.
Pu Li Branch 434 Zhongzheng Rd., Puli Township, Nantou (049)2997171
County, Taiwan, R.O.C.
Tan Tze Branch 135, Sec. 2, Zhongshan Rd., Tanzi Dist., Taichung (04)25317171 MBBTTWTP521
City, Taiwan, R.O.C.
Chu Shan Branch 919, Sec. 3, Jishan Rd., Zhushan Township, Nantou (049)2637171 MBBTTWTP530
County, Taiwan, R.O.C.
Chang Hwa Branch 61 Guangfu Rd., Changhua City, Changhua County, (04)7257171 MBBTTWTP540
Taiwan, R.O.C.
Ho Mei Branch 8 He'an St., Hemei Township, Changhua County, (04)7558131 MBBTTWTP541
Taiwan, R.O.C.
Yuan Lin Branch 16 Minquan St., Yuanlin Township, Changhua (04)8377171 MBBTTWTP550
County, Taiwan, R.O.C.
Pei Tou Branch 62 Gongqian St., Beidou Township, Changhua (04)8877171 MBBTTWTP560
County, Taiwan, R.O.C.
Erh Lin Branch 2 Zhongzheng Rd., Erlin Township, Changhua (04)8957171 MBBTTWTP561
County, Taiwan, R.O.C.
Tou Liu Branch 109 Datong Rd., Douliu City, Yunlin County, Taiwan, R.O.C. (05)5347171 MBBTTWTP660
65 Wenhua Rd., Beigang Township, Yunlin County,
Pei Kang Branch (05)7827171
Taiwan, R.O.C.
Hu Wei Branch 45 Heping Rd., Huwei Township, Yunlin County, (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, Chiayi (05)2207171 MBBTTWTP681
(Banking Broker) County, Taiwan, R.O.C.
Chia Hsin Branch 766 Hsinming Rd., West Dist., Chiayi City, Taiwan, R.O.C. (05)286-7171 MBBTTWTP686
Hsin Ying Branch 216 Zhongshan Rd., Xinying Dist., Tainan City, (06)6357171 MBBTTWTP690
Taiwan, R.O.C.
Kai Yuan Branch 12 Zhonghua Rd., Yongkang Dist., Tainan City, (06)3117171 MBBTTWTP691
Taiwan, R.O.C.
Yun Kang Branch 79 Zhongzheng S. Rd., Yongkang Dist., Tainan City, (06)2517171 MBBTTWTP700
Taiwan, R.O.C.
Shiue Chia Branch 87 Zhongshan Rd., Xuejia Dist., Tainan City, Taiwan, R.O.C. (06)7837171 MBBTTWTP701
Shan Hwa Branch 352 Zhongshan Rd., Shanhua Dist., Tainan City, (06)5816111 MBBTTWTP702
Taiwan, R.O.C.
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TBB'S OFFICES ADDRESS TEL NO. SWIFT ADDRESS
Yung Ta Branch 1532, Sec. 2, Yongda Rd., Yongkang Dist., Tainan (06)2337171 MBBTTWTP703
City, Taiwan, R.O.C.
Tainan Branch
185 Zhongzheng Rd., Tainan City, Taiwan, R.O.C. (06)2247171 MBBTTWTP710
(Banking Broker)
Jen Te Branch 339 Zhongshan Rd., Rende Dist., Tainan City, (06)2797171 MBBTTWTP711
Taiwan, R.O.C.
Cheng Kung Branch 25 Gongyuan Rd., West Central Dist., Tainan City, (06)2217171 MBBTTWTP720
Taiwan, R.O.C.
East Tainan Branch 75, Sec. 2, Zhonghua E. Rd., East Dist., Tainan (06)2687171 MBBTTWTP721
City, R.O.C.
An Ping Branch 67, Sec. 1, Zhonghua W. Rd., East Dist., Tainan (06)2657171 MBBTTWTP730
City, R.O.C
Hua Lien Branch 247 Zhongshan Rd., Hualien City, Hualien County, (03)8357171 MBBTTWTP760
Taiwan, R.O.C.
335, Sec. 1, Zhonghua Rd., Taitung City, Taitung
Taitung Branch (089)327171
County, Taiwan, R.O.C.
East Kaohsiung Branch 249 Zhongzheng 1st Rd., Lingya Dist., Kaohsiung (07)7167171 MBBTTWTP820
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 Branch 28, Sec. 3, Jianguo Rd., Fengshan Dist., Kaohsiung (07)7767171 MBBTTWTP840
City, Taiwan, R.O.C.
Ling Ya Branch 31 Qingnian 1st Rd., Lingya Dist., Kaohsiung City, (07)5377171 MBBTTWTP841
Taiwan, R.O.C.
Kaohsiung Branch 79 Wufu 3rd Rd., Qianjin Dist., Kaohsiung City, (07)2717171 MBBTTWTP850
Taiwan, R.O.C.
North Kaohsiung Branch 90, Fuxing 1st Rd., Xinxing Dist., Kaohsiung City, (07)2387171 MBBTTWTP851
(Banking Broker) Taiwan, R.O.C.
116 Dachang 2nd Rd., Sanmin Dist., Kaohsiung
Ta Chang Branch (07)3827171
City, Taiwan, R.O.C.
Chien Chen Branch 378-3 Minquan 2nd Rd., Qianzhen Dist., Kaohsiung (07)5355171 MBBTTWTP853
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.
Ta Fa Branch No.5-3, Guanghua Rd., Daliao Dist., Kaohsiung City (07)7887171 MBBTTWTP881
831, Taiwan, R.O.C.
Ping Tung Branch 7 Hankou St., Pingtung City, Pingtung County,
(08)7327171
(Banking Broker) Taiwan, R.O.C.
Xiao Gang Branch 718 Hongping Rd., Xiaogang Dist., Kaohsiung City, (07)8016171 MBBTTWTP891
Taiwan, R.O.C.
Chiao Chou Branch 100 Xinsheng Rd., Chaozhou Township, Pingtung (08)7807171
County, Taiwan, R.O.C.
Offshore Banking Branch 3F, 30 Ta Cheng St., Taipei, Taiwan, R.O.C. (02)25597171 MBBTTWTP893
Los Angeles Branch 633 West 5th St., Suite 2280, Los Angeles, CA 1-213-8921260 MBBTUS6L
90071, U.S.A.
Hong Kong Branch Suite 2705-9, 27F, Tower 6, The Gateway, Harbour 852-29710111 MBBTHKHH
City, Kowloon, Hong Kong
Sydney Branch Suite 3, Level 24, 363 George Street, Sydney, NSW 61-2-92623356 MBBTAU2S
2000, Australia
Room 3806, 38F, Longemont Yes Tower, 399
Shanghai Branch Kaixuan Road, Changning District, Shanghai 86-21-62627171 MBBTCNSH
200051, China
Brisbane Branch Suite 903, Level 9, 239 George Street, Brisbane, 61-7-33173000 MBBTAU2SBRI
QLD 4000, Australia
Wuhan Branch 17F, Building 2, 108 Zhongbei Road, Wuchang 86-27-59817171 MBBTCNSHWUH
District, Wuhan, Hubei Province 430077, China
New York Branch 32 Old Slip, 5F, New York, NY 10005, U.S.A. 1-646-213-3258 MBBTUS33
Tokyo Branch 707 Room, 7F, Tekko Building, 1-8-2 Marunouchi, 81-3-5220-3918 MBBTJPJT
Chiyoda-ku, Tokyo 100-0005, Japan
422 Strand Road (Corner of Botahtaung Pagoda
Yangon Representative Office Road), #04-08, Botahtaung Township, Yangon, Republic of the Union of Myanmar 95-1-202101
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256

Taiwan Business Bank Annual Report 2018

Taiwan Business Bank, Ltd.

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Chairman

Ⅵ

1. Brief Consolidated Balance Sheets and Consolidated Statements of Comprehensive Income for the Past Five Years

(1) Brief Consolidated Balance Sheets and Brief Consolidated Statements of Comprehensive Income

Brief Consolidated Balance Sheets

Unit: NT$1,000

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2018 2017 2016 2015 2014
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Cash and cash equivalents, Due from the Central Bank and call loans to banks		133,016,947	152,634,715	140,184,210	159,946,581	126,086,689
Financial assets at fair value through proft or loss		7,134,604	1,061,789	1,443,693	2,082,611	2,610,707
Financial assets measured at fair value through other comprehensive income		73,164,201	0	0	0	0
Investment in debt instruments at amortized cost		261,470,496	0	0	0	0
Securitiespurchased under resell agreements		2,386,518	3,998,104	619,201	26,784,515	5,527,837
Receivables－net		45,652,981	23,951,301	24,000,980	24,697,758	21,821,960
Current Income tax assets		64,880	129,455	116,062	293,454	235,755
Discounts and loans－net		1,074,627,748	1,111,559,969	1,045,014,647	1,007,398,302	1,001,234,570
Available-for-sale fnancial assets－net		0	66,233,836	73,330,688	25,668,785	16,043,539
Held-to-maturityfnancial assets－net		0	202,967,083	192,523,259	206,277,479	194,541,571
Other fnancial assets－net		17,971	2,159,191	2,132,723	2,086,966	3,268,115
Premises and equipment－net		14,309,738	14,226,866	14,120,706	14,105,378	14,101,430
Intangible assets－net		286,054	274,349	183,061	131,292	150,029
Deferred income tax assets－net		1,646,991	1,222,464	1,240,678	1,437,671	2,125,784
Other assets－net		5,261,326	3,674,849	3,819,074	4,980,803	4,642,581
Total assets		1,619,040,455	1,584,093,971	1,498,728,982	1,475,891,595	1,392,390,567
Deposits from the Central Bank and other banks		91,314,543	93,529,770	75,817,857	77,857,537	80,595,072
Due to the Central Bank and other banks		591,988	31,464	0	0	0
Financial liabilities at fair value through proft or loss		9,339,273	3,732,481	214,259	219,999	303,213
Securities sold under repurchase agreements		1,657,706	1,105,596	2,758,905	4,163,147	3,895,308
Payables		58,674,131	36,630,052	35,412,594	30,924,431	30,556,802
Current income tax liabilities		1,017,575	62,495	310,077	0	0
Deposits and remittances		1,311,041,103	1,316,023,711	1,253,804,477	1,232,320,685	1,152,156,998
Financial debentures		47,450,000	41,000,000	42,750,000	45,600,000	41,800,000
Other fnancial liabilities		7,507,715	10,120,545	10,819,145	12,197,117	15,739,260
Provision for liabilities		3,565,727	3,515,351	3,606,753	3,321,737	3,018,791
Deferred income tax liabilities		880,738	881,318	884,569	920,890	898,420
Other liabilities		1,146,937	1,643,515	1,480,006	706,923	688,786
Total liabilities (Note 2)	Pre-distributed	1,534,187,436	1,508,276,298	1,427,858,642	1,408,232,466	1,329,652,650
	Post-distributed	Note 3	1,508,276,298	1,427,858,642	1,408,232,466	1,329,652,650
Equity parent company		84,853,019	75,817,673	70,870,340	67,659,129	62,737,917
Common stock (Note 2)	Pre-distributed	63,938,802	61,479,617	59,688,949	56,846,618	52,979,141
	Post-distributed	Note 3	63,938,802	61,479,617	59,688,949	56,846,618
Retained earnings (Note 2)	Pre-distributed	18,007,553	14,644,284	12,210,873	10,685,563	9,694,559
	Post-distributed	Note 3	10,537,445	9,811,377	7,274,766	5,827,082
Other items in	equity	2,906,664	(306,228)	(1,029,482)	126,948	64,217
Total equity (Note2)	Pre-distributed	84,853,019	75,817,673	70,870,340	67,659,129	62,737,917
	Post-distributed	Note 3	74,170,019	70,261,512	67,090,663	62,737,917

Note 2: Regarding the above information on pre-distribution and post-distribution, the pre-distribution amount was based on the amount certified by the CPA, while the post-distribution amount was based on the appropriation and distribution of surplus passed on the resolution of the shareholder's meeting in the following year.

Note 3: Distribution of earnings for 2018 has not yet been approved by the shareholders' meeting.

Brief Individual Balance Sheets

Unit: NT$1,000

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2018 2017 2016 2015 2014
Cash and cash equivalents, Due from 132,686,605 152,408,883 139,847,761 159,308,692 125,326,200
the Central Bank and call loans to
banks
Financial assets at fair value through 6,934,604 1,061,789 1,443,693 2,082,611 2,610,707
profit or loss
Financial assets measured at fair 73,164,201 0 0 0 0
value through other comprehensive
income
Investment in debt instruments at 261,470,496 0 0 0 0
amortized cost
Securities purchased under resell 2,386,518 3,998,104 619,201 26,784,515 5,527,837
agreements
Receivables － net 43,698,543 22,353,991 22,842,758 23,742,638 21,194,833
Current Income tax assets 64,842 129,435 114,583 291,981 235,755
Discounts and loans － net 1,074,627,748 1,111,559,969 1,045,014,647 1,007,398,302 1,001,234,570
Available-for-sale financial assets － 0 66,233,836 73,330,688 25,668,785 16,043,539
net
Held-to-maturity financial assets － net 0 202,967,083 192,523,259 206,277,479 194,541,571
Investment measured by equity 2,684,501 2,345,937 1,852,246 1,880,519 1,577,561
method - net
Other financial assets － net 17,971 2,159,191 2,132,723 2,086,966 3,268,115
Premises and equipment － net 14,298,525 14,216,773 14,112,644 14,098,277 14,097,127
Intangible assets － net 284,944 273,608 181,992 130,222 148,787
Deferred income tax assets － net 1,623,371 1,203,779 1,224,623 1,431,393 2,119,250
Other assets － net 5,222,172 3,639,872 3,796,738 4,959,477 4,601,060
Total assets 1,619,165,041 1,584,552,250 1,499,037,556 1,476,141,857 1,392,526,912
Deposits from the Central Bank and 91,314,543 93,529,770 75,817,857 77,857,537 80,595,072
other banks
Financial liabilities at fair value 9,339,273 3,732,481 214,259 219,999 303,213
through profit or loss
Securities sold under repurchase 1,657,706 1,105,596 2,758,905 4,163,147 3,895,308
agreements
Payables 58,620,227 36,591,457 35,360,208 30,860,359 30,517,274
Current income tax liabilities 952,293 0 288,846 0 0
Deposits and remittances 1,311,937,545 1,316,671,351 1,254,224,230 1,232,662,457 1,152,367,231
Financial debentures 47,450,000 41,000,000 42,750,000 45,600,000 41,800,000
Other financial liabilities 7,507,715 10,120,545 10,819,145 12,197,117 15,739,260
Provision for liabilities 3,565,727 3,515,351 3,606,753 3,321,737 3,018,791
Deferred income tax liabilities 880,738 881,318 884,569 919,119 893,575
Other liabilities 1,086,255 1,586,708 1,442,444 681,256 659,271
Total liabilities Pre-distributed 1, 534,312,022 1,508,734,577 1,428,167,216 1,408,482,728 1,329,788,995
(Note 2) Post-distributed Note 3 1,508,734,577 1,428,167,216 1,408,482,728 1,329,788,995
Common Pre-distributed 63,938,802 61,479,617 59,688,949 56,846,618 52,979,141
stock (Note 2) Post-distributed Note 3 63,938,802 61,479,617 59,688,949 56,846,618
Retained Pre-distributed 18,007,553 14,644,284 12,210,873 10,685,563 9,694,559
earnings Post-distributed Note 3 10,537,445 9,811,377 7,274,766 5,827,082
(Note 2)
Other items in equity 2,906,664 (306,228 ) (1,029,482 ) 126,948 64,217
Total equity Pre-distributed 84,853,019 75,817,673 70,870,340 67,659,129 62,737,917
(Note 2) Post-distributed Note 3 74,170,019 70,261,512 67,090,663 62,737,917
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by the CPA. Note 2: Regarding the above information on pre-distribution and post-distribution, the pre-distribution amount was based on the amount certified by the CPA, while the post-distribution amount was based on the appropriation and distribution of surplus passed on the resolution of the shareholder's meeting in the following year.

Note 3: Distribution of earnings for 2018 has not yet been approved by the shareholders' meeting.

Taiwan Business Bank Annual Report 2018

Ⅵ

Brief Consolidated Statements of Comprehensive Income

Unit: NT$1,000

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2018 2017 2016 2015 2014
Interest revenue 28,287,358 24,782,215 24,191,265 25,853,374 25,259,678
Less:Total interest expenses (11,089,482 ) (9,356,793 ) (9,195,062 ) (10,384,359 ) (10,469,421 )
Net interest income 17,197,876 15,425,422 14,996,203 15,469,015 14,790,257
Non-interest income 5,829,071 5,437,273 5,660,831 4,692,869 4,204,068
Net revenue 23,026,947 20,862,695 20,657,034 20,161,884 18,994,325
Bad debt expenses, commitment
(794,134 ) (3,028,711 ) (2,504,194 ) (2,409,189 ) (2,538,587 )
and guarantee liability provision
Operating expenses (13,034,396 ) (11,962,883 ) (11,793,424 ) (11,556,531 ) (10,970,022 )
Income from continuing operations
9,198,417 5,871,101 6,359,416 6,196,164 5,485,716
before income tax
Less: Income tax expenses (1,557,875 ) (831,177 ) (1,163,717 ) (1,083,128 ) (170,579 )
Income from continuing operations
7,640,542 5,039,924 5,195,699 5,113,036 5,315,137
after income tax
Net income 7,640,542 5,039,924 5,195,699 5,113,036 5,315,137
Other comprehensive income (net of
583,288 516,236 (1,416,022 ) (191,824 ) 169,212
tax)
Total comprehensive income 8,223,830 5,556,160 3,779,677 4,921,212 5,484,349
Net income parent company 7,640,542 5,039,924 5,195,699 5,113,036 5,315,137
Total Other comprehensive income
8,223,830 5,556,160 3,779,677 4,921,212 5,484,349
parent company
Earnings per share (Note2) 1.19 0.79 0.85 0.86 0.93
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Note 2: Earnings per share is calculated based on the weighted average number of shares of the current year. The basic earning per share for 2017, 2016, 2015, and 2014 have been adjusted based on the applicable retrospective effect.

Brief Individual Statements of Comprehensive Income

Unit: NT$1,000

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2018 2017 2016 2015 2014
Interest revenue 28,156,855 24,677,007 24,127,714 25,786,136 25,225,704
Less:Total interest expenses (11,082,469 ) (9,357,801 ) (9,195,987 ) (10,385,512 ) (10,474,182 )
Net interest income 17,074,386 15,319,206 14,931,727 15,400,624 14,751,522
Non-interest income 5,572,596 5,264,047 5,477,003 4,485,842 4,059,008
Net revenue 22,646,982 20,583,253 20,408,730 19,886,466 18,810,530
Bad debt expenses, commitment
(745,770 ) (3,009,551 ) (2,463,643 ) (2,327,004 ) (2,501,587 )
and guarantee liability provision
Operating expenses (12,814,383 ) (11,785,693 ) (11,621,647 ) (11,390,118 ) (10,831,383 )
Income from continuing operations
9,086,829 5,788,009 6,323,440 6,169,344 5,477,560
before income tax
Less: Income tax expenses (1,446,287 ) (748,085 ) (1,127,741 ) (1,056,308 ) (162,423 )
Income from continuing operations
7,640,542 5,039,924 5,195,699 5,113,036 5,315,137
after income tax
Net income 7,640,542 5,039,924 5,195,699 5,113,036 5,315,137
Other comprehensive income (net
583,288 516,236 (1,416,022 ) (191,824 ) 169,212
of tax)
Total comprehensive income 8,223,830 5,556,160 3,779,677 4,921,212 5,484,349
Earnings per share (Note 2) 1.19 0.79 0.85 0.86 0.93
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(2) CPA-Auditor and Independent Auditors' Opinions of the Consolidated Financial Report:

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Financial Year Independent Auditors' Opinions CPA-Auditor
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Financial Year	Independent Auditors' Opinions	CPA-Auditor

2014	Unqualifed opinion	LEE, FENG HUI、CHEN, FU WEI
2015	Unqualifed opinion	LEE, FENG HUI、CHEN, FU WEI
2016	Unqualifed opinion	CHUNG, TAN TAN、LEE, FENG HUI
2017	Unqualifed opinion	CHUNG, TAN TAN、LEE, FENG HUI
2018	Unqualifed opinion	CHUNG, TAN TAN、LEE, FENG HUI

100

Taiwan Business Bank Annual Report 2018

Ⅵ

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2018 2017 2016 2015 2014
Loan-to-deposit ratio (%) 79.41 81.67 81.63 79.91 84.64
(Note 2)
NPL ratio (%) (Note 2) 0.30 0.33 0.43 0.48 0.46
Interest expense to annual average 0.67 0.60 0.61 0.75 0.78
Operation deposits balances ratio (%)
performance Interest income to annual average credit 2.00 1.89 1.93 2.10 2.15
loan balances ratio (%)
Total assets turnover rate (%) 1.44 1.35 1.39 1.41 1.40
Average gain for employee (NT$'000) 4,385 4,092 4,160 4,038 3,925
Average profit for employee (NT$'000) 1,455 989 1,046 1,024 1,098
Return on Tier 1 capital (%) 10.22 6.86 8.14 9.11 8.99
Return on asset (%) 0.48 0.33 0.35 0.36 0.39
Profitability Return on equity (%) 9.51 6.87 7.50 7.84 8.86
Net profit margin (%) 33.18 24.16 25.15 25.36 27.98
Earnings per share (NT$) 1.19 0.79 0.85 0.86 0.93
Debts to total assets ratio (%) 94.76 95.21 95.27 95.42 95.49
Financial
structure Real estate and equipment to equity ratio 16.86 18.76 19.92 20.85 22.48
(%)
Asset growth ratio (%) 2.21 5.70 1.55 6.00 4.98
Growth rate
Profit growth ratio (%) 56.67 (7.68 ) 2.63 12.95 42.24
Cash flow ratio (%) 31.91 4.48 40.07 (3.40 ) 41.38
Cash flow Cash flow adequacy ratio (%) (Note 3) 3,177.03 4,404.56 5,587.48 4,967.08 6,789.05
Cash flow adequacy ratio (%) (83.60 ) (285.13 ) (128.24 ) 18.70 (792.81 )
Liquidity reserve ratio (%) 20.94 17.21 17.03 19.14 16.49
Related Party Secured Loan (NT$'000) 9,598,016 9,042,678 8,401,148 9,039,394 8,426,293
Ratio of Related Party Secured Loan to Total Loan (%) 0.88% 0.80% 0.78% 0.88% 0.82%
Market share of assets (%) 2.96 3.02 2.99 3.02 2.95
Operating Market share of net value (%) 2.20 2.07 2.03 2.09 2.07
scale Market share of deposits (%) 3.38 3.50 3.44 3.53 3.52
Market share of loans (%) 3.57 3.89 3.80 3.76 3.83
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In 2018, changes in cash flow related ratio had amounted to over 20%, which was primarily due to the net cash inflow from operating activities has increased as compared to that of 2017.

Represent the key performance indicators with industry particularity of the Bank.
(Cash flow adequacy ratio of 2018): Based on the net cash inflow from operating activities and capital expenditures prepared in accordance with IFRSs.

(Cash flow adequacy ratio of 2017): Based on the net cash inflow from operating activities and capital expenditures prepared in accordance with IFRSs.

(Cash flow adequacy ratio of 2016): Based on the net cash inflow from operating activities and capital expenditures prepared in accordance with IFRSs.

(Cash flow adequacy ratio of 2015): Based on the net cash inflow from operating activities and capital expenditures prepared in accordance with IFRSs for 2015, 2014, 2013, and 2012 while in accordance with financial accounting standards in Taiwan for 2011.

(Cash flow adequacy ratio of 2014): Based on the net cash inflow from operating activities and capital expenditures prepared in accordance with IFRSs for 2014, 2013, 2012 while in accordance with financial accounting standards in Taiwan for 2011 and 2010.

101

Operation performance
(1) Loan-to-deposit ratio = Total loans / total deposits
(2) NPL ratio = Total not performing loans / total loans
(3) Interest expense to annual average deposits balances ratio = Total interest expenditures related to deposits / annual average deposits balances
(4) Interest income to annual average credit loan balances ratio = Total interest income related to credit loan balances / annual average credit loan balances
(5) Total assets turnover rate = Net revenue / total average assets
(6) Average gain for employee = Net revenue / total number of employees
(5) Earnings per share = (Income attributable to owners of the parent company – dividends on preferred stock) / weighted average number of shares issued.
Financial structure
(1) Debt-asset ratio = Total liabilities / total assets
(2) Real estate and equipment to equity ratio = Net real estate and equipment / net equity
Growth rate
(1) Asset growth ratio = (Total assets of the current year - total assets of the previous year) / total assets of the previous year
year) / before-tax profit or loss of the previous year
paper payables + financial at fair value through profit or loss + notes issued under repurchase agreement and bond indebtedness + amount payable with maturity within one year)
expenditures + cash dividend) for the past five years.
(3) Cash flow adequacy ratio = Net cash flow from operating activities / net cash flow from investment activities
Liquidity reserve ratio = Current assets prescribed by the central bank / liabilities required liquid reserves
Operating scale
loans business
and loans business
and loans business
loans business

102

Taiwan Business Bank Annual Report 2018

Ⅵ

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2018 2017 2016 2015 2014
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		2018	2017	2016	2015	2014

Operation performance	Loan-to-deposit ratio (%) (Note 2)	79.36	88.99	81.60	79.89	84.62
	NPL ratio (%) (Note 2)	0.30	0.33	0.43	0.48	0.46
	Interest expense to average deposits balances ratio (%)	0.67	0.60	0.61	0.75	0.78
	Interest income to average credit loan balances ratio (%)	2.00	1.89	1.93	2.10	2.15
	Total assets turnover rate (%)	1.41	1.34	1.37	1.39	1.38
	Average revenue of employee (000')	4,365	4,078	4,139	4,009	3,904
	Average proft of employee (000")	1,473	998	1,054	1,031	1,103
Proftability	Return on Tier 1 capital (%)	10.10	6.76	8.09	9.07	8.98
	Return on asset (%)	0.48	0.33	0.35	0.36	0.39
	Return on equity (%)	9.51	6.87	7.50	7.84	8.86
	Net proft margin (%)	33.74	24.49	25.46	25.71	28.26
	Earnings per share (NT$)	1.19	0.79	0.85	0.86	0.93
Financial structure	Debts to total assets ratio (%)	94.76	95.22	95.27	95.42	95.49
	Real estate and equipment to equity ratio (%)	16.85	18.75	19.91	20.84	22.47
Growth rate	Asset growth ratio (%)	2.18	5.70	1.55	6.00	4.98
	Proft growth ratio (%)	56.99	(8.47 )	2.50	12.63	42.28
Cash fow	Cash fow ratio (%)	32.50	4.82	41.36	(5.05 )	41.64
	Cash fow adequacy ratio (%)	3,275.58	4,582.30	5,837.69	5,182.68	6,889.04
	Cash fow adequacy ratio (%)	(84.42 )	(269.70 )	(132.32 )	27.02	(680.45 )
Liquidity reserv	e ratio (%)	20.94	17.21	17.03	19.14	16.49
Related Party Secured Loan (NT$'000)		9,598,016	9,042,678	8,401,148	9,039,394	8,426,293
Ratio of Related Party Secured Loan to Total Loan (%)		0.88%	0.80%	0.78%	0.88%	0.82%
Operating scale	Market share of assets (%)	2.96	3.02	2.99	3.02	2.95
	Market share of net value (%)	2.20	2.07	2.03	2.09	2.07
	Market share of deposits (%)	3.38	3.5	3.44	3.53	3.52
	Market share of loans (%)	3.57	3.89	3.80	3.76	3.83

operating activities has increased as compared to that of 2017.
Represent the key performance indicators with industry particularity of the Bank.
(Cash flow adequacy ratio of 2018): Based on the net cash inflow from operating activities and capital expenditures prepared in accordance with IFRSs.

(Cash flow adequacy ratio of 2017): Based on the net cash inflow from operating activities and capital expenditures prepared in accordance with IFRSs.

(Cash flow adequacy ratio of 2016): Based on the net cash inflow from operating activities and capital expenditures prepared in accordance with IFRSs.

103

Operation performance
(1) Loan-to-deposit ratio = Total loans / total deposits
(2) NPL ratio = Total not performing loans / total loans
(3) Interest expense to annual average deposits balances ratio = Total interest expenditures related to deposits / annual average deposits balances
(4) Interest income to annual average credit loan balances ratio = Total interest income related to credit loan balances / annual average credit loan balances
(5) Total assets turnover rate = Net revenue / total average assets
(6) Average gain for employee = Net revenue / total number of employees
(5) Earnings per share = (Income attributable to owners of the parent company – dividends on preferred stock) / weighted average number of shares issued.
Financial structure
(1) Debt-asset ratio = Total liabilities / assets.
(2) Real estate and equipment to equity ratio = Net real estate and equipment / net equity
Growth rate
(1) Asset growth ratio = (Total assets of the current year - total assets of the previous year) / total assets of the previous year
year) / before-tax profit or loss of the previous year
paper payables + financial at fair value through profit or loss + notes issued under repurchase agreement and bond indebtedness + amount payable with maturity within one year)
expenditures + cash dividend) for the past five years.
(3) Cash flow adequacy ratio = Net cash flow from operating activities / net cash flow from investment activities
Liquidity reserve ratio = Current assets prescribed by the central bank / liabilities required liquid reserves
Operating scale
loans business
and loans business
and loans business
loans business

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(2) Capital adequacy ratio

Unit: NT$1,000

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Capital Adequacy Ratio for the most recent 5 years (Note 1)
2018 2017 2016 2015 2014
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			Capital Adequacy Ratio for the most recent 5 years (Note 1)	Capital Adequacy Ratio for the most recent 5 years (Note 1)	Capital Adequacy Ratio for the most recent 5 years (Note 1)	Capital Adequacy Ratio for the most recent 5 years (Note 1)	Capital Adequacy Ratio for the most recent 5 years (Note 1)
			2018	2017	2016	2015	2014

Regulatory Capital	Common Equity		78,947,036	73,448,764	68,922,354	65,662,491	60,731,181
	Additional Tier 1 Capital		13,386,998	14,140,802	14,664,225	7,057,157	2,532,896
	Tier 2 Capital		29,797,442	25,396,643	20,221,002	19,689,051	18,043,384
	Regulatory Capital		112,131,476	112,986,209	103,807,581	92,408,699	81,307,461
Total Risk- weighted Assets	Credit risk	Standardized Approach	912,764,211	871,996,666	818,988,412	770,946,612	726,103,364
		Internal ratings-based Approach
		Asset Securitization
	Operational risk	Basic indicator Approach					32,959,913
		Standardized Approach/Alternative Standardized Approach	36,971,711	35,136,391	34,024,618	32,741,848
		Advanced Measurement Approach
	Market risk	Standardized Approach	11,844,063	13,786,563	18,539,100	18,682,350	12,022,600
		Internal Models Approach
	Total risk-weighted assets		961,579,985	920,919,620	871,552,130	822,370,810	771,085,877
Capital Adequacy Ratio (Note 2)			12.70%	12.27%	11.91%	11.24%	10.54%
Ratio of Tier 1 capital to risk-weighted assets			9.60%	9.51%	9.59%	8.84%	8.20%
Ratio of common equity to risk-weighted assets			8.21%	7.98%	7.91%	7.98%	7.88%
Leverage Ratio (Note 3)			5.40%	5.26%	5.30%	4.69%	-
	Please explain the reasons for the change in the capital adequacy ratio in the last two years(Note 4)。

Represent the key performance indicators with industry particularity of the Bank.
Leverage ratio was disclosed since 2015.
Changes for the latest two periods (2018 and 2017) have not reached 20%; analysis of the reason is exempted.

Calculation formula of Capital Adequacy Ratio is as follow:

Regulatory capital = Common equity + Additional Tier 1 capital + Tier 2 capital.
Total risk-weighted assets = Credit risk-weighted assets + Capital requirements of (operational risk + market risk) × 12.5
Capital adequacy ratio = Regulatory capital / Total risk-weighted assets.
Ratio of Tier 1 capital to risk-weighted assets = (Common equity + Additional Tier 1 capital) / Total riskweighted assets.
Ratio of common equity to risk-weighted assets = Common equity / Total risk-weighted assets.
Leverage ratio = Net Tier 1 capital / Total exposures amount.
(3) Improvement measures for regulatory capital to risk-weighted assets ratio calculated according to Article 44 of the Banking Act is lower than the required ratio: No such cases.

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3. Audit Committee's Audit Report on the 2018 Financial Statements

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4. Representation Letter for 2018 Consolidated Financial Statements

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, 2018 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 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 Subsidiaries do not prepare a separate set of combined financial statements.

Company name: TAIWAN BUSINESS BANK, LTD. Chairman: Bor-Yi Huang Date: March 26, 2019

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5. Independent Auditors' Report for 2018 Consolidated Financial Statements

Independent Auditors' Report

To the Board of Directors of Taiwan Business Bank, Ltd.:

Opinion

which comprise the consolidated balance sheets as of December 31, 2018 and 2017, the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, 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 at December 31, 2018 and 2017, 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 ("IASs"), interpretations developed by the International Financial Reporting Interpretations Committee ("IFRIC") or the former Standing Interpretations Committee ("SIC") endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audit in accordance with the Regulations Governing Auditing and Attestation of Financial Statements of Financial Industry 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

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 (AO) "Financial Risk Information" for details of loans impairment, respectively.

The management of the Bank and its subsidiaries assess its loans to determine the impairment in accordance with IFRS 9. For the credit impaired cases which impairment has occurred since initial recognition, the measurement is based on expected future cash flow. The amount of expected credit loss (ECL) for non-credit impaired cases is evaluated by identifying whether the credit risk has significantly increased at the reporting date. If the credit risk of noncredit impaired cases has not significantly increased, the 12-month expected credit loss should be adopted, if the credit risk of non-credit impaired cases has significantly increased, the lifetime credit loss evaluation should be adopted. Except for the methods mentioned above, the management of the Bank and its subsidiaries should inspect whether the amount of impairment provision is in compliance with the minimum level required by the authority. Both the future cash flows of credit impaired cases and the main parameters which are used in calculated the non-credit cases, such as probability of default (PD), loss given default (LGD), forward-looking factors, and the judgments of whether the credit risk has significantly increased, all involved significant judgments and estimations. The movement of related parameters will have significant impact on the assessment of loans impairment. Therefore, the assessment on the impairment of loans has been identified as a key audit matters in our audit.

How the matter was addressed in our audit

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sampling tests to evaluate the use of the original effective interest rate, the appropriateness of the recoverable amount of expected future cash flows and value of collateral. For non-credit impaired assessment, we assessed the impairment model adopted by the management and reviewed the appropriated of the calculation of the impairment parameters and verified the completeness of the loans portfolio via sampling. Meanwhile, we assessed the impaired amounts recognized by the management were in compliance with the related regulations issued by authority.

Other Matters

December 31, 2018 and 2017, on which we have issued an unmodified 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, IFRC, SIC endorsed and issued into effect 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 (including the Audit Committee) are responsible for overseeing the Bank and its subsidiaries' financial reporting process.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

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

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:

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.
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.

109

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 determined 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

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

KPMG

Taipei, Taiwan (Republic of China) March 26, 2019

Notes 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 audit such consolidated financial statements are those generally accepted and applied in the Republic of China.

The independent 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 independent auditors' report and consolidated financial statements, the Chinese version shall prevail.

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6. 2018 Consolidated Financial Statements and Notes

(English Translation of Consolidated Financial Statements Originally Issued in Chinese)

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2018 and 2017

(expressed in thousands of New Taiwan dollars)

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December31,2018 December 31,2017
Assets
Amount % Amount %
11000 Cash and cash equivalents (Notes 6(A) and 7) $ 46,036,673 3 51,292,359 3
11500 Due from the Central Bank and call loans to 86,980,274 5 101,342,356 7
banks (Notes 6(B) and 7)
12000 Financial assets at fair value through profit or 7,134,604 - 1,061,789 -
loss (Note 6(C))
12100 Financial assets at fair value through other 73,164,201 5 - -
comprehensive income(Notes 6(G) and (Q))
12200 Investment in debt instruments at amortized 261,470,496 16 - -
cost(Note 6(I))
12500 Securities purchased under resell agreements 2,386,518 - 3,998,104 -
(Notes 6(D))
13000 Receivables － net (Note 6(E)) 45,652,981 3 23,951,301 2
13200 Current Income tax assets 64,880 - 129,455 -
13500 Discounts and loans － net (Notes 6(F) and 7) 1,074,627,748 67 1,111,559,969 70
14000 Available-for-sale financial assets － net (Notes - - 66,233,836 4
6(H) and (Q))
14500 Held-to-maturity financial assets － net (Note 6(J)) - - 202,967,083 13
15500 Other financial assets － net (Note 6(K)) 17,971 - 2,159,191 -
18500 Premises and equipment － net (Note 6(L)) 14,309,738 1 14,226,866 1
19000 Intangible assets － net 286,054 - 274,349 -
19300 Deferred income tax assets － net (Note 6(Y)) 1,646,991 - 1,222,464 -
19500 Other assets － net (Note 6(M)) 5,261,326 - 3,674,849 -
Total assets $ 1,619,040,455 100 1,584,093,971 100
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December31,2018 December 31,2017
Liabilities and equity
Amount % Amount %
Liabilities
21000 Deposits from the Central Bank and other banks $ 91,314,543 6 93,529,770 6
(Notes 6(N) and 7)
21500 Due to the Central Bank and other banks (Note 591,988 - 31,464 -
6(O))
22000 Financial liabilities at fair value through profit or 9,339,273 1 3,732,481 -
loss (Notes 6(P) and (T))
22500 Securities sold under repurchase agreements 1,657,706 - 1,105,596 -
(Note 6(Q))
23000 Payables (Note 6(R)) 58,674,131 4 36,630,052 2
23200 Current income tax liabilities 1,017,575 - 62,495 -
23500 Deposits and remittances (Notes 6(S) and 7) 1,311,041,103 81 1,316,023,711 83
24000 Financial debentures (Note 6(T)) 47,450,000 3 41,000,000 3
25500 Other financial liabilities (Note 6(U)) 7,507,715 - 10,120,545 1
25600 Provision for liabilities (Note 6(V)) 3,565,727 - 3,515,351 -
29300 Deferred income tax liabilities (Note 6(Y)) 880,738 - 881,318 -
29500 Other liabilities (Note 6(W)) 1,146,937 - 1,643,515 -
Total liabilities 1,534,187,436 95 1,508,276,298 95
Equity parent company
31101 Common stock (Note 6(X)) 63,938,802 4 61,479,617 4
Retained earnings:
32001 Legal reserve (Note 6(X)) 10,020,013 1 8,569,864 1
32003 Special reserve (Note 6(X)) 516,555 - 1,240,588 -
32005 Undistributed earnings (accumulated 7,470,985 - 4,833,832 -
deficit) (Note 6(X))
32500 Other items in equity 2,906,664 - ( 306,228 ) -
Total equity 84,853,019 5 75,817,673 5
Total liabilities and equity $ 1,619,040,455 100 1,584,093,971 100
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(English Translation of Consolidated Financial Statements Originally Issued in Chinese)

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2018 and 2017

(expressed in thousands of New Taiwan dollars, except earnings per share)

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107 年度 106 年度變動百
金額％金額％分比％
41000 Interest revenue(Notes 6(AC) and 7) $ 28,287,358 123 24,782,215 119 14
51000 Less:Total interest expenses(Notes 6(AC) and 7) (11,089,482 ) (48 ) (9,356,793 ) (45 ) 19
Net interest income 17,197,876 75 15,425,422 74 11
Non-interest income
49100 Service fee and commision income(Notes 6(AD) and 13) 3,659,850 16 3,690,537 18 (1 )
49200 Gains on financial assets or liabilities at fair value through profit 1,029,180 4 1,036,512 5 (1 )
or loss - net(Note 6(AE))
49300 Realized gain on available-for-sale financial assets(Note 6(AG)) - - 109,753 - (100 )
49310 Realized gain on financial assets measured at other 374,849 2 - - -
comprehensive income(Note 6(AF))
49450 Gains on disposal of financial assets measured at amortized cost 130 - - - -
49600 Foreign exchange gain 478,887 2 376,069 2 27
49700 (Impairment loss on asssts) reversal of impairment loss on (28,297 ) - - - -
aseets(Note 6(AH))
49800 Net other non-interest income (Note 6(AI)) 93,362 - (120,657 ) (1 ) 177
49805 Net profit on financial assets measured at cost - - 141,240 1 (100 )
49831 Securities brokering income-net 221,110 1 203,819 1 8
Net revenue 23,026,947 100 20,862,695 100 10
58200 Bad debt expenses, commitment and guarantee liability (794,134 ) (3 ) (3,028,711 ) (15 ) (74 )
provision(Note 6(AJ))
Operating expenses
58500 Employee benefits expenses(Notes 6(AK) and 12) (8,325,594 ) (36 ) (7,460,684 ) (36 ) 12
59000 Depreciation and amortization expense(Notes 6(AL) and 12) (472,783 ) (2 ) (417,760 ) (2 ) 13
59500 Other general and administrative expense(Note 6(AM)) (4,236,019 ) (19 ) (4,084,439 ) (19 ) 4
Total operating expenses (13,034,396 ) (57 ) (11,962,883 ) (57 ) 9
61001 Income from continuing operations before income tax 9,198,417 40 5,871,101 28 57
61003 Income tax expenses (Note 6(Y)) (1,557,875 ) (7 ) (831,177 ) (4 ) (87 )
Net income 7,640,542 33 5,039,924 24 52
65000 Other comprehensive income:
65200 Items that will not to be reclassified into profit or loss
65201 Remeasurements of defined benefit plans (174,907 ) - (249,419 ) (1 ) 30
65204 Revaluation gain from investments in equity instruments 226,956 1 - - -
measured at fair value through other comprehensive income
65220 Income tax related to items that will not to be reclassified into 71,895 - 42,401 - 70
profit or loss (Note 6(Y))
Total items that will not to be reclassified into profit or loss 123,944 1 (207,018 ) (1 ) 160
65300 Items that are or may be reclassified subsequently to profit or
loss
65301 Difference of foreign exchange in translating financial 330,032 1 (982,775 ) (5 ) 134
statements of foreign operating units
65302 Unrealized gains on available-for-sale financial assets-net - - 1,540,838 8 (100 )
65309 Revaluation gains on investment in debt instrument measured 156,183 1 - - -
at fair value through other comprehensive income
65310 (Impairment loss on) reversal of investments in debt 8,363 - - - -
instruments measured at fair value through other
comprehensive income
65320 Income tax related to items that are or may be reclassified to (35,234 ) - 165,191 1 (121 )
profit or loss (Note 6(Y))
Total items that are or may be reclassified subsequently to 459,344 2 723,254 4 (36 )
profit or loss
65000 Other comprehensive income 583,288 3 516,236 3 13
Total comprehensive income $ 8,223,830 36 5,556,160 27 48
Earnings per share (in NT dollar)(Note 6 (AA))
Basic earnings per share (in NT dollar) $ 1.19 0.79
Diluted earnings per share (in NT dollar) $ 1.18 0.78
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(English Translation of Consolidated Financial Statements Originally Issued in Chinese) TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2018 and 2017

(Expressed In thousands of New Taiwan dollars)

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Equity attributed to the parent company
Other item in equity
Retained earnings Difference
of foreign
exchange in Unrealized gains
translating from financial Unrealized
financial assets measured gains and
statements at fair value losses on
of foreign through other available for
Common Legal Special Undistributed operating comprehensive sale financial
stock reserve reserve earnings Total units income assets Total
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Balance─January 1, 2017 Net Income for the year ended December 31, 2017 Other comprehensive income (losses) for the year ended December 31, 2017 Total comprehensive income for the year ended December 31, 2017 Earnings appropriation and distribution Legal reserve appropriated Special reserve appropriated Common cash dividend Common stock dividend Balance─December 31, 2017 Effects of retrospective application of new standards Balance at January 1, 2018 after adjustments Net Income for the year ended December 31, 2018 Other comprehensive income (losses) for the year ended December 31, 2018 Total comprehensive income for the year ended December 31, 2018 Earnings appropriation and distribution Legal reserve appropriated Reversal of special reserve Common cash dividend Common stock dividend Disposal of investments in equity instruments designated at fair value through other comprehensive income Balance─December 31, 2018	$ 59,688,949 - - - - - - 1,790,668 61,479,617 - 61,479,617 - - - - - - 2,459,185 - $ 63,938,802	7,088,772 - - - 1,481,092 - - - 8,569,864 - 8,569,864 - - - 1,450,149 - - - - 10,020,013	185,128 - - - - 1,055,460 - - 1,240,588 - 1,240,588 - - - - (724,033) - - -	4,936,973 5,039,924 (207,018 ) 4,832,906 (1,481,092 ) (1,055,460 ) (608,827 ) (1,790,668 ) 4,833,832 (98,187 ) 4,735,645 7,640,542 (103,012 ) 7,537,530 (1,450,149 ) 724,033 (1,647,654 ) (2,459,185 ) 30,765 7,470,985	12,210,873 5,039,924 (207,018 ) 4,832,906 - - (608,827 ) (1,790,668 ) 14,644,284 (98,187 ) 14,546,097 7,640,542 (103,012 ) 7,537,530 - - (1,647,654 ) (2,459,185 ) 30,765 18,007,553	(19,637 ) - (815,703 ) (815,703 ) - - - - (835,340 ) - (835,340 ) - 294,218 294,218 - - - - - (541,122)	-	(1,009,845 )	70,870,340 5,039,924 516,236 5,556,160 - - (608,827 ) - 75,817,673 2,459,170 78,276,843 7,640,542 583,288 8,223,830 - - (1,647,654 ) - - 84,853,019
							- -	- 1,538,957
							-	1,538,957
							- - - -	- - - -
							- 3,086,469	529,112 (529,112 )
							3,086,469	-
							- 392,082	- -
							392,082	-
							- - - - (30,765)	- - - - -
			516,555				3,447,786	-

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(English Translation of Consolidated Financial Statements Originally Issued in Chinese)

TAIWAN BUSINESS BANK, LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2018 and 2017 (Expressed In thousands of New Taiwan dollars)

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For the years ended December 31,
2018 2017
Cash flows from operating activities:
Net income before tax $ 9,198,417 5,871,101
Adjustments:
Income and expenses items:
Depreciation expenses 373,990 337,771
Amortization expenses 98,793 79,989
Provision of bad debt expenses 708,787 3,019,425
Net loss on financial assets and liabilities at fair value through profit or loss 179,390 120,502
Interest expenses 11,089,482 9,356,793
Interest revenues (28,287,358 ) (24,782,215 )
Net change of provision for guarantee liabilities 58,710 9,286
Net change of other miscellaneous provision for liabilities 26,637 109,273
Losses on disposal and retirement of premises and equipment 1,155 1,972
Impairment loss on financial assets 28,297 -
Other - (276,880 )
Subtotal of income and expense items (15,722,117 ) (12,024,084 )
Change in Operating Assets and Liabilities:
Net Changes in Operating Assets:
Decrease (increase) in due from the Central Bank and call loans to banks 14,352,507 (10,723,869 )
(Increase) decrease in financial assets at fair value through profit or loss (6,012,905 ) 284,263
Decrease (increase) in securities purchased under resell agreements 1,611,586 (3,378,903 )
(Increase) decrease in receivables (21,399,195 ) 36,157
Decrease (increase) in discounts and loans 36,317,199 (69,501,470 )
Decrease (increase) in other financial assets 102,084 (59,822 )
Increase in other assets (719,250 ) (971,840 )
Net change in operating assets 24,252,026 (84,315,484 )
Net Change in Operating Liabilities:
(Decrease) increase in deposits from the Central Bank and other banks (2,215,227 ) 17,711,913
Increase in financial liabilities at fair value through profit or loss 5,367,493 3,495,360
-
Decrease in provisions for lawsuit (466,884 )
Increase (decrease) in securities sold under repurchase agreements 552,110 (1,653,309 )
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For the years ended December 31,
2018 2017
Increase in payables $ 21,184,352 $ 1,020,580
(Decrease) increase in deposits and remittances (4,982,608 ) 62,219,234
Decrease in other financial liabilities (2,603,441 ) (690,408 )
(Decrease) increase in provision for employee benefits (257,144 ) 39,039
Net Change in Operating Liabilities 17,045,535 81,675,525
Net Change in Operating Assets and Liabilities 41,297,561 (2,639,959 )
Sum of adjustments 25,575,444 (14,664,043 )
Cash provided by (used in) operating activities 34,773,861 (8,792,942 )
Interest collected 27,943,576 24,808,273
Interest paid (10,608,976 ) (9,159,915 )
Income tax paid (547,357 ) (800,310 )
Net Cash Flow Provided By Operating Activities 51,561,104 6,055,106
Cash Flows from Investing Activities:
-
Purchase of financial assets measured at fair value through other comprehensive (4,153,866 )
income
Purchase of investment in debt instruments at amortized cost (56,422,615 ) -
Disposal of available-for-sale financial assets - 8,635,810
-
Purchase of hold-to-maturity financial assets (10,443,824 )
Purchase of premises and equipment (451,166 ) (469,381 )
Disposal of premises and equipment 195 66
(Increase) decrease in guarantee deposits paid (537,185 ) 300,272
Purchase of intangible assets (110,361 ) (146,591 )
Net Cash Flows Used in Investing Activities (61,674,998 ) (2,123,648 )
Cash Flows from Financing Activities:
Increase in due to the Central Bank and other banks 560,524 31,464
Issuance of financial debentures 6,450,000 5,300,000
-
Redemption of financial debentures (7,050,000 )
Increase in guarantee deposits received 52,870 185,129
Decrease in lease payable (9,389 ) (8,192 )
Decrease in other liabilities (549,448 ) (21,620 )
Cash dividends (1,647,654 ) (608,827 )
Net Cash Provided by (Used in) Financing Activities 4,856,903 (2,172,046 )
Foreign exchange effect 1,305 (32,001 )
Net (decrease) increase in cash and cash equivalents (5,255,686 ) 1,727,411
Cash and cash equivalents, at the beginning of the period 51,292,359 49,564,948
Cash and cash equivalents, at the end of the period $ 46,036,673 51,292,359
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(English Translation of Consolidated Financial Statements Originally Issued in Chinese)

TAIWAN BUSINESS BANK, LTD.AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

(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 mediumsize 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, 2018, the Bank not only sets up the banking dept., international dept., securities dept. and trust dept. under head office but also has 124 domestic branches, 1 offshore banking unit, 8 overseas branches, 1 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) The impact of the International Financial Reporting Standards ("IFRSs") endorsed by the Financial Supervisory Commission, R.O.C. ("FSC") which have already been adopted.

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2018.

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New, Revised or Amended Standards and Interpretations Effective date per IASB
Amendment to IFRS 2 "Clarifications of Classification and Measurement of Share-based
January 1, 2018
Payment Transactions"
Amendments to IFRS 4 "Applying IFRS 9 Financial Instruments with IFRS 4 Insurance
January 1, 2018
Contracts"
IFRS 9 "Financial Instruments" January 1, 2018
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New, Revised or Amended Standards and Interpretations Effective date per IASB
IFRS 15 "Revenue from Contracts with Customers" January 1, 2018
Amendment to IAS 7 "Statement of Cash Flows -Disclosure Initiative" January 1, 2017
Amendment to IAS 12 "Income Taxes- Recognition of Deferred Tax Assets for Unrealized
January 1, 2017
Losses"
Amendments to IAS 40 "Transfers of Investment Property" January 1, 2018
Annual Improvements to IFRS Standards 2014–2016 Cycle:
Amendments to IFRS 12 January 1, 2017
Amendments to IFRS 1 and Amendments to IAS 28 January 1, 2018
IFRIC 22 "Foreign Currency Transactions and Advance Consideration" January 1, 2018
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Except for the following items, the Taiwan Business Bank, Ltd. believes that the adoption of the above IFRSs would not have any material impact on its consolidated financial statements. The extent and impact of signification changes are as follows:

(i) IFRS 9 "Financial Instruments"
IFRS 9 replaces IAS 39 "Financial Instruments: Recognition and Measurement" which contains classification and measurement of financial instruments, impairment and hedge accounting.
As a result of the adoption of IFRS 9, The Bank and its subsidiaries adopted the consequential amendments to IAS 1 "Presentation of Financial Statements", which requires the impairment of debt investments at fair value through other comprehensive income and debt instruments measured at amortized cost to be recognized in impairment of assets, the impairment of loan commitment recognized in bad debt expenses and guarantee liability provisions. In addition, The Bank and its subsidiaries adopted the amendments to IFRS 7 "Financial Instruments: Disclosures", disclosure the information in 2018, but generally it has not been applied to the comparative information.

follows:

cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. The standard eliminates the existing IAS 39 categories of held to maturity, available for sale financial assets, financial assets carried at cost and debt instrument with no active market. Under IFRS 9, derivatives embedded in contracts where the host is a financial assets in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification. For an explanation of how the Bank and its subsidiaries classifies and measures financial assets and accounts for related gains and losses under IFRS 9, please refer to Note 4(F).
policies on financial liabilities.
IFRS 9 replaces the 'incurred loss' model in IAS 39 with a forward-looking 'expected credit loss' (ECL) model. The new impairment model will apply to financial assets measured at amortized cost or FVOCI, except for investments in equity instruments, lease receivables, contract assets and the financial guarantee contracts. Under IFRS 9, the credit loss are recognized earlier than they are under IAS 39. Please refer to Note 4 (F).
3) Transition

The adoption of IFRS 9 has been applied retrospectively, except as described below:

Differences in the carrying amounts of financial assets resulting from the adoption of IFRS 9

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are recognized in retained earnings and other equities as on 1 January 2018. Accordingly, the information presented for 2017 does not generally reflect the requirements on IFRS 9 and therefore is not comparable to the information presented for 2018 under IFRS 9.

The following assessments have been made on the basis of the facts and circumstances that exist at the date of initial application.
The designation and revocation of previous designations of certain financial assets and
The designation of certain investments in equity instruments not held for trading as at FVOCI.
If the debt securities had low credit risk at the date of initial application of IFRS 9, The Bank and its subsidiaries may assume that the credit risk on its assets has not increased significantly since its initial recognition.

The following table shows the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Bank and its subsidiaries' financial assets as of January 1, 2018.

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IAS 39 IFRS 9
Measurement categories Carrying Amount Measurement categories Carrying Amount
Financial Assets
Cash and cash equivalents Amortized costs $ 51,292,359 Amortized costs 51,292,359
Due from the Central Bank Amortized costs 101,342,356 Amortized costs 101,342,356
and call loans to banks
Financial assets at fair Fair value through profit or 1,061,789 Fair value through profit or 1,061,789
value through profit or loss loss loss
Securities purchased Amortized costs 3,998,104 Amortized costs 3,998,104
under resell
agreements
Receivables–net Amortized costs 23,951,301 Amortized costs 23,947,845
(Loans and Receivables) (Loans and Receivables)
Discounts and loans– net Amortized costs 1,111,559,969 Amortized costs 1,111,614,910
(Loans and Receivables) (Loans and Receivables)
Available-for-sale financial Fair value through other $63,608,278 Fair value through other 58,426,093
assets － net comprehensive income comprehensive income
(Debt instrument)
Amortized costs 5,251,768
Fair value through other 2,625,558 Fair value through other 2,625,558
comprehensive income comprehensive income
(Equity instruments)
Held-to-maturity financial Amortized costs 202,967,083 Fair value through other 3,158,835
assets － net comprehensive income
Amortized costs 199,816,594
Other financial assets Amortized costs 2,035,121 Fair value through other 4,416,710
－ net (Measured at cost) comprehensive income
Other assets － net Amortized costs 321,496 Amortized costs 321,496
(Guarantee deposits paid)
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Note1: The corporate debt securities categorized as available-for-sale under IAS 39 are held by The Bank and its subsidiaries' s treasury unit in a separate portfolio to provide interest income; however they may be sold to meet liquidity requirements arising in the normal course of business. The Bank and its subsidiaries considers that these securities are held within a business model whose objective is achieved both by collecting contractual cash flows and by selling securities. The corporate debt securities and the contractual terms of these financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. These assets have therefore been classified as financial assets at FVOCI under IFRS 9. An allowance for impairment of $24,495 (effects of tax for $213) was recognized in opening retained earnings and other equity on transition to IFRS 9 on January 1, 2018.

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subsidiaries evaluated that in the past these securities were held within a business model whose objective is achieved by collecting the contractual cash flows, and they will be possessed in the same purpose. Therefore, The Bank and its subsidiaries has classified the assets to debt investments measured at amortized costs. An increase of $1,559 in allowance for impairment and a decrease of $71,142 in valuation losses were recognized in retained earnings and other equity on January 1, 2018 respectively upon transition to IFRS 9.
Note3: These equity securities represent investments that The Bank and its subsidiaries intends to hold for the long term for strategic purposes. As permitted by IFRS 9, The Bank and its subsidiaries has designated these investments at the date of initial application as measured at FVOCI.
measured at fair value through other comprehensive income under IFRS 9. The Bank and its subsidiaries assesses that these securities are held within a business model whose objective is achieved by both collecting the contractual cash flows and by selling securities, and for which the contractual cash flows are fully be paid for the principal and interests incurred. An increase of $909 in allowance for impairment and $80,344 in valuation gains were recognized under retained earnings and other equity on January 1, 2018 respectively upon transition to IFRS 9.
The Bank and its subsidiaries assesses that these securities are held within a business model whose objective is achieved by collecting the contractual cash flows, and for which the contractual cash flows are fully be paid for the principal and interests incurred. An increase of $71,089 (effects of income tax for $144) in the allowance for impairment was recognized in opening retained earnings on January 1, 2018 upon transition to IFRS 9.
Note6: These equity securities represent investment that The Bank and its subsidiaries intends to hold for the long term for strategic purposes. As permitted by IFRS 9, The Bank and its subsidiaries has designated these investments at the date of initial application as measured at FVOCI. An increase of $2,381,589 in the valuation gains was recognized in other equity on January 1, 2018 upon transition to IFRS 9.
with "expected credit loss" model under IFRS 9. Therefore, an increase of $494 (effects of income tax for $2) in the allowance for impairment was recognized in retained earnings on January 1, 2018 upon transition to IFRS 9.

TAIWAN BUSINESS BANK, LTD AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

Financial assets under IAS 39 have transferred to IFRS 9, the following table reconciles the carrying amounts of financial assets on January 1, 2018

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December 31, January 1, 2018 January 1, 2018 January 1, 2018
2017 IAS39 IFRS 9 Carrying Retained earnings Other equity
Carrying amount Reclassifications Remeasurements amount impacts impacts Note
Measured at fair value through profit or loss
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Measured at fair value through proft or loss	December 31, 2017 IAS39 Carrying amount	Reclassifcations	Remeasurements	January 1, 2018 IFRS 9 Carrying amount	January 1, 2018 Retained earnings impacts	January 1, 2018 Other equity impacts
From measured at fair value through proft or loss (IAS39) Measured at fair value through other comprehensive income Additions－debt instruments: From available for sale (IAS39) From amortized cost (IAS39) Additions－equity instruments: From available for sale (IAS39) From measured at cost (IAS39) Deduction－debt and equity instruments: From available for sale (IAS39) to amortized cost (IFRS9) Total changes in fair value through other comprehensive income Amortized cost Additions: From held-to-maturity (IAS 39) From other fnancial assets-measured at cost (IAS 39) From available for sale (IAS 39) Deduction: To measured at fair value through other comprehensive income (IFRS 9) Total changes of amortized cost assets The balance of fnancial assets, the total balance of reclassifcation and remeasurement on January1, 2018	$ 1,061,789	- - 3,079,400 - 2,035,121 (5,253,327 ) (138,806 ) - - 5,253,327 (5,114,521 ) 138,806 -	- - 79,435 - 2,381,589 71,142 2,532,166 (71,089 ) - (1,559 ) - (72,648) 2,459,518	1,061,789	-	-
	63,608,278 - 2,625,558 - -				(24,495 ) (909 ) - - -	24,495 80,344 - 2,381,589 71,142
	66,233,836			68,627,196	(25,404)	2,557,570
	202,967,083 2,035,121 - -				(71,089 ) - (1,559 ) -	- - - -
	205,002,204			205,068,362	(72,648)	-
	$ 272,297,829			274,757,347	(98,052)	2,557,570

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the following table shows their fair value as of December 31, 2018 and the fair value gain or loss that would have been recognized if these financial assets had not been reclassified as part of the transition to IFRS 9.

	For the year ended December 31, 2018
Reclassify available-for-sale fnancial assets as investment in debt investment at amortized cost Fair value as of December 31, 2018 Other comprehensive income that should have been recognized if the financial assets had not been reclassifed	5,267,055 98,448

The following table reconciles the allowance for impairments based on "incurred loss model" under IAS 39 to the allowance for impairment based on "expected loss model" (ECL) under IFRS 9 on 1 January, 2018.

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The balance of
allowance of
impairment loss
under IAS39 and The balance of
the amount of allowance of
provision under impairment loss
IAS37 Reclassifications Remeasurements under IFRS9
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	The balance of allowance of impairment loss under IAS39 and the amount of provision under IAS37	The balance of allowance of impairment loss under IAS39 and the amount of provision under IAS37	Reclassifcations	Reclassifcations	Remeasurements	Remeasurements	The balance of allowance of impairment loss under IFRS9
Loans and receivables (IAS39) / Financial assets measured at amortized cost (IFRS9) Due from Central Bank and call loans to banks Receivables Discounts and loans Other fnancial assets-Non-accrual loans transferred from non-loan fnancial assets Other fnancial assets-Exchange bills negotiated Additional provision of impairment loss in accordance with "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/ Non-accrual Loans" Subtotal Available-for-sale fnancial assets (IAS39) /Financial assets measured at fair value through other comprehensive income (IFRS9) Available-for-sale fnancial assets Available-for-sale fnancial assets (IAS39) / Financial assets measured at amortized cost (IFRS9) Available-for-sale fnancial assets Held-to-maturity (IAS39)/ Financial assets measured at fair value through other comprehensive income (IFRS9) Held-to-maturity fnancial assets Held-to-maturity (IAS39)/ Financial assets measured at amortized cost (IFRS9) Held-to-maturity fnancial assets Financing commitment and guarantee reserve Loans (Financing commitment) Credit cards (Financing commitment) Guarantee receivables / Letter of credit receivables Additional provision of impairment loss in accordance with"Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/ Non-accrual Loans" Subtotal Total		$ 3,562 95,043 5,892,515 47,133 1 6,315,492 12,353,746 - - - - - - - 156,523 156,523 $ 12,510,269		- - - - - - - - - - - - - - - - -		- (27,619 ) (259,138 ) 8,535 (1 ) 231,452 (46,771) 24,495 1,559 909 71,089 45,029 2,236 70,820 (70,820 ) 47,265 98,546	3,562 67,424 5,633,377 55,668 - 6,546,944 12,306,975 24,495 1,559 909 71,089 45,029 2,236 70,820 85,703 203,788 12,608,815

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(b) The impact of IFRS endorsed by FSC but not yet effective

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019 in accordance with Ruling No. 1070324857 issued by the FSC on July 17, 2018:

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Effective date per
New, Revised or Amended Standards and Interpretations IASB
IFRS 16 "Leases" January 1, 2019
IFRIC 23 "Uncertainty over Income Tax Treatments" January 1, 2019
Amendments to IFRS 9 "Prepayment features with negative compensation" January 1, 2019
Amendments to IAS 19 "Plan Amendment, Curtailment or Settlement" January 1, 2019
Amendments to IAS 28 "Long-term interests in associates and joint ventures" January 1, 2019
Annual Improvements to IFRS Standards 2015–2017 Cycle January 1, 2019
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Except for the following items, the The Bank and its subsidiaries believes that the adoption of the above IFRSs would not have any material impact on its consolidated financial statements. The extent and impact of significant changes are as follows:

(i) IFRS 16"Leases"

IFRS 16 replaces the existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

IFRS 16 introduces a single and an on-balance sheet lease accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. In addition, the nature of expenses related to those leases will now be changed since IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. There are recognition exemptions for short-term leases and leases of low-value items. The lessor accounting remains similar to the current standard – i.e. the lessors will continue to classify leases as finance or operating leases.

1) Determining whether an arrangement contains a lease

On transition to IFRS 16, The Bank and its subsidiaries can choose to apply either of the following:

a practical expedient that does not need any reassessment whether a contract is, or contains, a lease.
a lease upon transition. This means that it will apply IFRS 16 to all contracts entered into before January 1, 2019 and identified as leases in accordance with IAS 17 and IFRIC 4.
2) Transition

As a lessee, The Bank and its subsidiaries can apply the standard using either of the following:

retrospective approach; or

The lessee applies the election consistently to all of its leases.

retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognized as an adjustment to the opening balance at January 1, 2019, with no restatement of comparative information.

When applying the modified retrospective approach to leases previously classified as operating leases under IAS 17, the lessee can elect, on a lease-by-lease basis, whether to apply a number of practical expedients on transition. The Bank and its subsidiaries chooses to elect the following practical expedients:

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Apply a single discount rate to a portfolio of leases with similar characteristics.
Apply the exemption not to recognize the right-of-use assets and liabilities to leases with lease term that ends within 12 months of the date of initial application.
Exclude the initial direct costs from measuring the right-of-use assets at the date of initial application.
Use hindsight when determining the lease term if the contract contains options to extend or terminate the lease.
3) So far, the most significant impact identified is that The Bank and its subsidiaries will have to recognize the new assets and liabilities for the operating leases of its offices. The Bank and its subsidiaries estimated that the right-of-use assets and the lease liabilities to increase by 911,838 thousand and 891,321 thousand respectively, as well as the prepaid rents to decrease by 20,517 thousand on January 1, 2019. No significant impact is expected for the finance leases. Besides, The Bank and its subsidiaries does not expect the adoption of IFRS 16 to have any impact on its ability to comply with the revised maximum leverage threshold loan covenant.

(c) The impact of IFRS issued by IASB but not yet endorsed by the FSC

As of the date, the following IFRSs that have been issued by the IASB, but have yet to be endorsed by the FSC:

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New, Revised or Amended Standards and Interpretations Effective date per IASB
Amendments to IFRS 3 "Definition of a Business" January 1, 2020
Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets Between an Investor Effective date to be determined
and Its Associate or Joint Venture" by IASB
IFRS 17 "Insurance Contracts" January 1, 2021
Amendments to IAS 1 and IAS 8 "Definition of Material" January 1, 2020
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The Bank and its subsidiaries assessed that the above IFRSs may not be relevant.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following accounting policies were applied consistently throughout the periods presented in the consolidated

(A) Statement of compliance

the Preparation of Financial Reports by Public Banks (hereinafter referred to as the Regulation) and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed and issued into effect 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:

(2) Financial instrument measured at fair value through other comprehensive income;
(3) Available-for-sale financial assets are measured at fair value (applicable before the year ended December 31, 2017 ) ; and
defined benefit obligation and the effect of the asset ceiling in Note 4(M).

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

(c) Functional and presentation currency

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 noncontrolling 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.

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Shareholding (Holding %)
Established Main business December December
location scope 31, 2018 31, 2017
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
TBB International Leasing Co., Ltd. Taiwan Leasing business 100 100
Taiwan Business Bank International China Leasing business 100 100
Leasing Co., Ltd.
TBB (Cambodia) Microfinance Cambodia Financial company 100 100
Institution Plc
TBB Venture Capital Co., Ltd. Taiwan Investing business 100 -
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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 at 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 period adjusted for the effective interest and payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the period.

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.

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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 equity instruments measured at fair value through other comprehensive income (Be identified as available-for-sale before the year ended December 31, 2017) 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 Bank and its subsidiaries' functional currency(not the currency under highly inflation economy) by the following procedures:

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.

(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

according to the international financial reporting standards approved and issued by the FSC. They are recognized on the consolidated balance sheet and are measured by the classification of the assets.

The routine transactions of financial assets are based on the trade-date accounting. The Bank and its subsidiaries shall reclassify all affected financial assets only when it changes its business model for managing

(a) Financial assets (applicable from January 1, 2018)
(1) Investment in debt instruments measured at amortized cost
- designated as at FVTPL:
- it is held within a business model whose objective is to hold assets to collect contractual cash
- and interest on the principal amount outstanding.

attributable transaction costs. These assets are subsequently measured at initial recognition amount plus/minus accumulated amortization which is calculated using the effective interest method and the loss allowance measured at amortized cost. Interest income, foreign exchange gains and losses, and impairment loss, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

(2) Financial assets at fair value through other comprehensive income (FVOCI)
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVPTL.
it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.

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and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Bank and its subsidiaries may irrevocably elect to present subsequent changes in the investment's fair value in other comprehensive income. This election is made on an investment-by-investment basis.

transaction costs. These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses, and impairment losses, derived from debt investments are recognized as income in profit or loss, whereas dividends derived from equity investments are recognized as income in profit or loss, unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses of financial assets measured at FVOCI are recognized in OCI. On derecognition, gains and losses accumulated in OCI of debt investments are reclassified to profit or loss. However, gains and losses accumulated in OCI of equity investments are reclassified to retain earnings instead of profit or loss.

Dividend income derived from equity investments is recognized on the date that the Bank and its subsidiaries' right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date.

FVTPL, including derivate financial assets. On initial recognition, the Bank and its subsidiaries may irrevocably designate a financial asset, which otherwise meets the requirements to be measured at amortized cost or at FVOCI, as at FVPTL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes that are measured at fair value, which take into account any dividend and interest income, are recognized in profit or loss.

(4) 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:
Payment of principal or interest is very likely not to be redeemed as per contracts.
Non-performing loans are categorized as overdue loans in six months after the settlement period ends.

The Bank and its subsidiaries recognize loss allowances for expected credit losses on financial assets measured at amortized cost, debt investments measured at FVOCI and loan commitments and financial guarantee contracts. Equity instrument investment does not need to recognize expected credit losses.

The Bank and its subsidiaries measures loss allowances at an amount equal to lifetime expected credit loss (ECL), except for the following which are measured as 12-month ECL:

debt securities that are determined to have low credit risk at the reporting date; and
other debt securities, receivables, loan commitments and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

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Lifetime ECLs are the ECLs that result from all possible default events over the expected life of

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 month after the reporting date( or a shorter period if the expected life of the instruments is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Bank and its subsidiaries is exposed to credit risk.

recognition and when estimating ECL, the Bank and its subsidiaries considers reasonable and supportable information that is relevant and available( without undue cost or effort). This includes both quantitative and qualitative information and analysis, based on the Bank and its subsidiaries' historical experience, informed credit assessment and including forward-looking information.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls. The difference between the cash flows due to the Bank and its subsidiaries expect to receive. ECLs are discounted at the effective interest rate of the financial asset.

amortized cost, debt securities at FVOCI, loan commitments and contracts of financial guarantee are credit-impaired. A financial asset is "credit-impaired" when one or move events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial assets is credit-impaired includes the following observable data:

a breach of contract such as a default or being past due;
the restructuring of a loan or advance by the borrowers on terms that the borrowers would not consider otherwise;
have occurred.

amount of the assets. For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognized in other comprehensive income.

In addition to estimate the allowance for bad debts and guarantee liability provisions as above, according to "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans ", and considering the situation of their finance and the default of principal and interest payment, the credit assets are classified as below:

2% of the second class credit assets.
10% of the third class credit assets.
50% of the fourth class credit assets.

The allowance for bad debts and guarantee liability provisions were 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.

Unrecoverable overdue loans and bad debts of the Bank and its subsidiaries, 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

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(b) Financial liabilities (applicable from January 1, 2018)
- Financial liabilities held for trading
- or repurchasing it in the near term; on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit- taking. A derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument, is classified as instrument held for trading as well.
- Financial liabilities falling under this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent changes are measured at fair value and recognized in profit or loss. While for financial liabilities designated at fair value through profit or loss, the changes in fair value generated from credit risk should be recognized under other comprehensive income, except for avoiding accounting mismatch that should be recognized in profit or loss.
The Bank and its subsidiaries only reclassified all affected financial assets in accordance with the regulations when changing the business model of managing financial assets. These changes are expected to be extremely infrequent. In addition, the Bank and its subsidiaries must not reclassify any financial assets and liabilities of equity instruments.
the reclassification shall be postponed from the reclassification date, and any previously recognized gains, losses (including impairment losses or reversal of impairment loss) or interest shall not be restated.
(d) Financial assets and liabilities ( applicable before the years ended December 31, 2017)
- trading 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:
- A. A hybrid instrument contains one or more embedded derivatives;
- would otherwise arise; and
- C. 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,

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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.
(4) 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.
(5) 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.
(6) Loans and advances
Loans and advances are recorded as initial fair value (including direct transaction cost), and the subsequent measurement recognizes interest income via effective interest rate method (if there is not much difference then it can adopt straight line method) and is booked as per amortized cost deducted by impairment loss.
Interest accrual on loans and advances is suspended if either of the following occurs:
A. Payment of principal or interest is very likely not to be redeemed as per contracts.
B. Non-performing loans are categorized as overdue loans in six months after the settlement period ends.
(7) 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 NonPerforming and Non- Accrual Loans," and the "Regulations Governing Institutions Engaging in Credit Card Business".
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.

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

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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:

B. There are already default circumstances occur to the issuer or debtor, for example: default or overdue payment of interest or principal.
C. The creditor give in to the debtor due to commercial or legal concern.
F. The payment status of the debtor worsens.
G. 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% of the second class credit assets.
10% of the third class credit assets.
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 and its subsidiaries provide reserve for guarantee liabilities for off-balance- sheet noncredit 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.

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. This is also applicable when the Bank and its subsidiaries conduct securitization transactions and still retain some of the risks.

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(f) 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.

(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 (c) Lease asset 5 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.

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(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 financing (capital) lease. If a lease contract does not transfers almost all the risk and reward comes with the 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 Bank and its subsidiaries 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

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compulsory obligation, contracts or voluntary will to public or private managed pension funds. If certain pension fund fail to pay the employees the benefit which they deserve for the service they provided, the 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 is performed annually by a qualified actuary using the projected unit credit method. When 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 and its subsidiaries. An economic benefit is available to the Bank and its subsidiaries if it is realizable during the life of the plan, or on settlement of the plan liabilities.

relating to past service by employees, is recognized immediately in profit or loss.

(1) Actuarial gains and losses;

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

Gains or losses on the curtailment or settlement of a defined benefit plan are recognized when the curtailment or settlement occurs. The gain or loss on curtailment arises from any changes in the fair value of plan assets, any changes in the present value of the defined benefit obligation, and any related actuarial gains or losses and past service cost which had not previously been recognized.

The Bank provides deposits with favorable rate to employees, which include current employee fix amount 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

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.

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

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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. All current and deferred taxes shall be recognized in profit or loss except for the items related to business combinations or recognized directly in equity or other comprehensive income.

Current income tax includes tax payable or tax refundable on taxable income (loss) for the year calculated using the statutory tax rate on the reporting date or the actual legislative tax rate, as well as tax adjustments related to 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 and liabilities may be offset against each other if the following criteria are met:

(a) The entity has the legal right to settle tax assets and liabilities on a net basis; and
(1) Levied by the same taxing authority; or
(2) Levied by different taxing authorities, but where each such authority intends to settle tax assets and liabilities (where such amounts are significant) on a net basis every year of the period of expected asset realization or debt liquidation, or where the timing of asset realization and debt liquidation is matched.

A deferred tax asset is recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. Such unused tax losses, unused tax credits, and deductible temporary differences are also revaluated every year on the financial reporting date, and adjusted based on the probability that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized.

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

(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) Earnings per share (EPS)

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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.

(Q) 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.

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 impairment of loans of the Bank and its subsidiaries was evaluated by identifying the credit risk of those financial assets have significantly increased or not at the reporting date if the credit risk has not significant incurred, the 12-month expected credit loss should be adopted to evaluate, or the lifetime credit loss evaluation should be adopted.

To evaluate the expected credit losses for 12-month and lifetime, the Bank and its subsidiaries considers the unfavorable changes of payment status or the economic conditions of the countries or areas related to the default loans. When analyzing expected cash flows, the estimates by the management are based on the pass losses experience from assets with similar credit risk characteristics. In order to reduce losses from the difference between estimated and actual amount, the Bank and its subsidiaries has considered historical experience, current economic conditions and forward-looking information at the reporting date to determine the assumptions to be used in calculating the impairments and the select inputs.

(B) Retirement benefit

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

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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.

6. EXPLANATION OF SIGNIFICANT ACCOUNTS

(A) Cash and cash equivalents

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December 31, 2018 December 31, 2017
Petty cash and revolving fund $ 9,463,764 9,129,276
Foreign currencies on hand 1,001,582 944,558
Checks for clearing 12,965,443 13,350,478
Due from other banks 22,605,884 27,868,047
Total $ 46,036,673 51,292,359
----- End of picture text -----

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

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December 31, 2018 December 31, 2017
Due from the Central Bank $ 50,348,172 56,328,785
Deposits transferred to the Central Bank 74,869 76,720
Call loans to banks 36,557,233 44,936,851
Trust fund indemnity reserve deposited 80,000 70,000
Securities serving as trust fund indemnity reserve deposited (80,000 ) (70,000 )
Total $ 86,980,274 101,342,356
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As of December 31, 2018 and 2017, in accordance with the Banking Law and the Central Bank Law, the required reserve deposited by the Bank and its subsidiaries with the Central Bank amounted to $50,137,774, and $56,131,096, of which $34,763,628, and $34,812,779 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, 2018 and 2017, the required reserve with the Central Bank amounted to $210,398 and $197,689 respectively, and its use was unrestricted.

As of December 31, 2018 and 2017, 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 and its subsidiaries 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, 2018 and 2017, the Bank deposited marketable securities of $80,000, and $70,000 as trust fund reserves.

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

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December 31, 2018 December 31, 2017
Financial assets designated at fair value through profit or loss:
Linked deposits $ 1,506,135 -
Overseas bonds 403,572 237,652
Financial assets at fair value through profit or loss, mandatorily
measured at fair value:
Derivative instruments not used for hedging:
Foreign exchange forward contracts 5,687
Currency swap contracts 287,665
Foreign currency options-call 3,886
Stock index futures 30,452
Non-derivative financial assets
Commercial paper 4,581,217
Listed and OTC stocks 48,910
Beneficiary certificates 67,080
Financial debentures 200,000
Financial assets held for trading:
Derivative instruments not used for hedging:
Foreign exchange forward contracts 63,784
Currency swap contracts 241,588
Foreign currency options-call 8,621
Structured product options-call 81
Stock index futures 454
Non-derivative financial assets
Commercial paper 499,459
Beneficiary certificates 10,150
Total $ 7,134,604 1,061,789
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operating, financing and investing activities. The Bank and its subsidiaries held derivative financial instruments which did not apply to hedge accounting are as follows (financial assets reported as financial assets at fair value through profit or loss, mandatorily measured at fair value on December 31, 2018 and as financial assets held for trading on December 31, 2017) :

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December 31, 2018
Amount of contracts
Currency Matured duration
(in thousands)
Foreign exchange forward contracts $ 1,000 EUR 2019/1/24~2019/1/24
Foreign exchange forward contracts 672,346 JPY 2019/1/4~2019/4/22
Foreign exchange forward contracts 875,469 TWD 2019/1/4~2019/9/12
Foreign exchange forward contracts 27,352 USD 2019/1/31~2019/3/29
Foreign exchange forward contracts 5,252 CNY 2019/1/21~2019/3/15
Currency swap contracts 800 AUD 2019/1/2
Currency swap contracts 22,012 CAD 2019/1/25~2019/3/22
Currency swap contracts 2,565,277 CNY 2019/1/9~2019/11/1
Currency swap contracts 90,000 EUR 2018/12/31~2019/10/11
Currency swap contracts 18,200 GBP 2019/1/3~2019/2/25
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December 31, 2018
Amount of contracts
Currency Matured duration
(in thousands)
Currency swap contracts $ 40,000 HKD 2019/1/23
Currency swap contracts 4,251,853 JPY 2019/1/7~2019/6/14
Currency swap contracts 30,000 NZD 2019/1/18~2019/2/19
Currency swap contracts 1,000 CHF 2019/2/15
Currency swap contracts 12,537,712 TWD 2019/1/2~2019/10/9
Currency swap contracts 3,258,522 USD 2019/1/2~2019/12/31
Currency swap contracts 2,137,013 ZAR 2018/12/31~2019/3/5
Option contracts-call 8,000 AUD 2019/1/29~2019/3/25
Option contracts-call 6,800 EUR 2019/1/4~2019/3/20
Option contracts-call 21,300 USD 2019/1/11~2019/9/27
Option contracts-put 8,000 AUD 2019/1/29~2019/3/25
Option contracts-put 6,800 EUR 2019/1/4~2019/3/20
Option contracts-put 21,300 USD 2019/1/11~2019/9/27
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December 31, 2017
Amount of contracts
Currency Matured duration
(in thousands)
Foreign exchange forward contracts $6,656 JPY 2018/4/3~2018/6/5
Foreign exchange forward contracts 1,742,481 TWD 2018/4/20~2018/8/17
Currency swap contracts 10,760 AUD 2018/1/2~2018/1/22
Currency swap contracts 27,285 CAD 2018/1/22~2018/3/16
Currency swap contracts 1,430,000 CNY 2018/1/4~2018/2/27
Currency swap contracts 139,000 EUR 2018/1/26~2018/12/31
Currency swap contracts 1,000 GBP 2018/2/27
Currency swap contracts 151,000 HKD 2018/1/3~2018/2/13
Currency swap contracts 13,222,385 JPY 2018/1/18~2018/5/8
Currency swap contracts 33,250 NZD 2018/1/4~2018/2/12
Currency swap contracts 5,000 SGD 2018/1/5
Currency swap contracts 14,893,793 TWD 2018/1/2~2018/12/28
Currency swap contracts 2,557,353 USD 2018/1/2~2018/5/2
Currency swap contracts 1,963,112 ZAR 2018/1/2~2018/2/26
Option contracts-call 2,000 AUD 2018/1/29
Option contracts-call 45,000 USD 2018/1/11~2018/11/1
Option contracts-put 2,000 AUD 2018/1/29
Option contracts-put 45,000 USD 2018/1/2~2018/12/31
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(D) Securities purchased under resell agreements

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December 31, 2018 December 31, 2017
Securities under resell agreements $ 2,386,518 3,998,104
Face amount 2,388,800 4,000,000
Resell period 2019.1.2~2019.1.3 2018.1.3~2018.1.12
Range of resell interest rate 0.62%~0.63% 0.38%~0.42%
Resell price $ 2,386,828 3,998,530
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(E) Receivables–net

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December 31, 2018 December 31, 2017
Interest receivable $ 3,300,752 2,953,720
Acceptances receivable 1,411,879 1,694,044
Accrued incomes 73,545 86,075
Accounts receivable 950,935 577,647
Accounts receivable factoring without recourse 566,451 512,299
Spot exchange receivable-foreign currencies 36,539,337 15,317,678
Refinancing guaranty deposits 13,025 -
Guaranteed proceeds receivable from refinancing 10,968 -
Receivable from credit card 1,300,607 1,261,322
Receivable from security brokerage 43,252 90,981
Settlement fund 337,174 61,723
Installment receivables and leases 1,051,763 1,186,271
Receivable from fail derivative instrument contracts - 9,119
Notes receivables - 802
Other receivables 189,023 307,380
Sub-total 45,788,711 24,059,061
Less: Allowance for bad debts (135,730 ) (107,760 )
Net $ 45,652,981 23,951,301
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December 31, 2018 and 2017 were $77,039,223 and $77,229,642, respectively.

The change in allowance for bad debts was as follows:

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For the years ended December 31,
2018 2017
Beginning balance (according to IAS39) $ 107,760 112,735
Adjustment of initial application of IFRS9 3,456 -
Beginning balance (according to IFRS 9) 111,216 112,735
Provision 40,120 20,243
Write-off (16,607 ) (24,328 )
Write-off recovered 31 -
Foreign exchange 970 (890 )
Ending balance $ 135,730 107,760
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(F) Discounts and loans–net

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December 31, 2018 December 31, 2017
Import/export bills negotiated $ 502,839 251,330
Bills and notes discounted 1,709,185 1,831,622
Overdrafts 36,758 8,401
Secured overdrafts 2,877,536 1,433,386
Short-term loans 172,635,763 266,520,172
Short-term secured loans 196,148,277 183,379,076
Margin loans receivable 1,845,664 2,341,425
Medium-term loans 135,528,776 118,666,041
Medium-term secured loans 151,382,900 151,462,973
Long-term loans 15,495,441 14,229,721
Long-term secured loans 407,310,715 380,822,519
Overdue loans 2,449,090 3,029,112
Sub-total 1,087,922,944 1,123,975,778
Less: Adjustment of discount and premium (261,045 ) (257,796 )
Less: Allowance for bad debts (13,034,151 ) (12,158,013 )
Net $ 1,074,627,748 1,111,559,969
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139

The change in allowance for bad debts is as follows:

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For the years ended December 31,
2018 2017
Beginning balance (according to IAS39) $ 12,158,013 12,549,963
Adjustment of initial application of IFRS9 (54,941 ) -
Beginning balance (according to IFRS 9) 12,103,072 12,549,963
Provision 704,605 3,549,074
Transfer out (44,688 ) (584,242 )
Write-off (2,626,396 ) (3,906,067 )
Write-off recovered 2,890,761 589,858
Foreign exchange 6,797 (40,573 )
Ending balance $ 13,034,151 12,158,013
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(G) Financial asset at fair value through other comprehensive income

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December 31, 2018
Debt instruments measured at fair value through other comprehensive income:
Government bonds $ 31,926,679
Corporate bonds 21,716,510
Overseas bonds 11,764,869
Subtotal 65,408,058
Equity instruments measured at fair value through other comprehensive income:
Listed and OTC stocks 3,500,614
Unlisted and non-OTC stocks 4,212,027
Real estate investment trusts 43,502
Subtotal 7,756,143
Total $ 73,164,201
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Investment in debt instruments measured at fair value through other comprehensive income The Bank and its subsidiaries assessed that the above bond investments were held within a business model whose objective was achieved by both collecting contractual cash flows and selling financial assets. The bond investments have been classified as the financial asset measured at fair value through other comprehensive income since January 1, 2018. Some of the investment in debt instruments measured at fair value through other comprehensive income are used as repurching condition. Please refer to Note 6 (Q) for more details.
Investment in equity instruments measured at fair value through other comprehensive income On January 1, 2018, the Bank and its subsidiaries designated the investments shown above as equity securities as at fair value through other comprehensive income because these equity securities represent those investment intending to hold for long-term for strategic purpose. These investments were classified as available-for-sale financial assets on December 31, 2017. The unlisted and non-OTC securities have been classified as financial assets measured at fair value through other comprehensive income since January 1, 2018 and were recognized as other financial assets carried at cost on December 31, 2017.
The Bank and its subsidiaries designated the investments shown above as equity instruments as at fair value through other comprehensive income, therefore, The Bank and its subsidiaries were recognized $276,340 and $16,587 as dividend revenue for the year ended December 31, 2018 of equity instruments and disposal equity instruments.

The Bank and its subsidiaries sell the investments which were designated as at fair value through other comprehensive income due to assets allocation. The fair value of disposed is $368,739 and gains on disposal is $30,765 for the year ended December 31, 2018. Thus, accumulated gains on disposal were transferred from other equity to retained earnings.

140

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Please refer to Note 6(AO) for the credit risk (including the impairment in debt instruments) and market risk information.
other comprehensive income as of December 31, 2018. The changes in allowance for credit losses

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For the year ended
December 31, 2018
Beginning balance $ -
Adjustments of initial application of IFRS 9 25,404
Beginning balance (according to IFRS 9) 25,404
Provision 8,363
Foreign exchange (2 )
Ending balance $ 33,765
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(H) Available-for-sale financial assets–net

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December 31, 2017
Government bonds $ 37,660,906
Corporate bonds 18,500,141
Overseas bonds 7,447,231
Listed and OTC stocks 2,625,558
Total $ 66,233,836
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Please refer to Note 6(Q) for the information with regard to repurchase conditions for available-for-sale

(I) Investment in debt instruments at amortized cost

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December 31, 2018
Certificates of deposit with the Central Bank $ 165,150,000
Government bonds 34,922,034
Corporate bonds 19,229,940
Overseas bonds 41,889,974
Negotiable certificates of deposit 371,676
Subtotal 261,563,624
Less:Accumulated impairment (93,128 )
Total $ 261,470,496
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The Bank and its subsidiaries assessed that these financial assets were held to maturity to collect the contractual cash flows, which consisted solely of payments of principal and interest on principal amount outstanding. Therefore, these investments were classified as financial assets measured at amortized cost on January 1, 2018.

Please refer to Note 6(AO) for credit risk.
The pledged assets provided by the above investment in debt instruments at amortized cost were shown follows:

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December 31, 2018
Reserve for provisional seizure by the court, international card payment reserve, trust $ 869,100
claim reserve and operating guaranty funds
Overseas branches required reserve of overdraft guarantee 64,544
Daylight overdraft guarantee (Certificates of deposit with the Central Bank ) 2,000,000
Guarantee for borrowing US dollars 23,000,000
Guarantee for borrowing JPY dollars 200,000
Total $ 26,133,644
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141

The Bank and its subsidiaries assessed the impairment of investment in debt instruments at amortized cost as December 31, 2018. The changes in allowance for credit losses attribute to these financial assets were as follows:

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For the year ended
December 31, 2018
Beginning balance $ -
Adjustments of initial application of IFRS 9 72,648
Beginning balance (according to IFRS 9) 72,648
Provision 19,934
Foreign exchange 546
Ending balance $ 93,128
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Disposal gain(loss) on disposal investment in assets at amortized cost:

	For theyear ended December 31, 2018	For theyear ended December 31, 2018	For theyear ended December 31, 2018	For theyear ended December 31, 2018
	The carrying amount at the date of derecognition		Gain (Loss) on disposal
Overseas bonds		$ 86,063		130

The Bank and its subsidiaries derecognized investment in financial assets measured at amortized cost due to the increase of credit risk and the prepayment of the investment in debt instruments at amortized cost.

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

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December 31, 2017
Certificates of deposit with the Central Bank $ 124,330,000
Government bonds 32,958,891
Corporate bonds 16,215,509
Overseas bonds 29,400,355
Negotiable certificates of deposit 62,328
Total $ 202,967,083
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seizure by the court, international card payment reserve, trust claim reserve and operating guaranty funds amounted to $715,700. As of December 31, 2017, the overseas branches have provided $62,328, 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, 2017. The amount of the guarantee could be modified anytime and the remaining amount could be served as liquid reserves.

As of December 31, 2017, 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 to the Central Bank. When certain conditions are satisfied, the Bank

As of December 31, 2017, the Bank provided Central bank certificates of deposit with face value of $17,000,000 to serve as a guarantee for borrowing US dollars from Central bank.

(K) Other financial assets–net

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December 31, 2018 December 31, 2017
Non-accrual loans transferred from non-loan financial assets $ 105,200 208,339
Less: Allowance for bad debts (87,249 ) (84,410 )
Non-accrual loans transferred from non-loan financial assets － net 17,951 123,929
Exchange bills negotiated 20 142
-
Less: Allowance for bad debts exchange bills negotiated (1 )
Exchange bills negotiated － net 20 141
Financial assets carried at cost - 2,035,121
Total $ 17,971 2,159,191
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(a) Financial assets carried at cost were as follows:

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December 31, 2017
Investee Amount %
Taiwan Power Company $ 11,427 -
Taiwan Sugar Corporation 58,294 0.30
Sunysino Development Associated Inc. 17,440 3.12
Taiwan Incubator SME Development Corporation 29,000 4.84
Taipei Forex Inc. 7,000 3.53
Financial Information Service Co., Ltd. 45,500 1.14
CDIB & Partners Investment Holding Corp. 500,000 4.95
Taiwan Stock Exchange Corp. 198,012 0.95
Taiwan Futures Exchange Co., Ltd. 20,000 1.00
Taiwan Asset Management Corp 750,000 5.68
Taiwan Finance Asset Service Corp 50,000 2.94
Financial eSolution Co., Ltd. 9,245 4.12
Taiwan Depository and Clearing Corp. 4,639 0.08
Sunny Asset Management Corporation 460 0.77
Taiwan Mobile Payment Co. 6,000 1.00
Taipei Financial Center Corp. 328,104 0.80
Total 2,035,121
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(b) The change in allowance for bad debts was as follows:

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For the years ended December 31,
2018 2017
Beginning balance (according to IAS39) $ 84,411 60,202
Adjustments of initial application of IFRS 9 4,714 -
Beginning balance (according to IFRS 9) 89,125 60,202
Reversal (45,387 ) (550,888 )
Transfer in 44,688 584,242
Write-off (26,368 ) (34,107 )
Written-off recovered 25,191 24,962
Ending balance $ 87,249 84,411
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(L) Premises and equipment–net

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Revaluation Accumulated Accumulated
December 31, 2018 Cost Total
appreciation depreciation impairment
Land $ 6,737,960 2,986,161 - 14,031 9,710,090
Buildings 7,824,415 31,184 4,027,738 14,754 3,813,107
Machinery 2,094,860 - 1,739,374 - 355,486
Transportation equipment 277,877 - 242,753 - 35,124
Miscellaneous equipment 579,568 - 492,179 - 87,389
Leasehold improvement 138,783 - 55,180 - 83,603
Construction in progress 31,065 - - - 31,065
Prepayment for equipment 171,807 - - - 171,807
Leased assets 75,518 - 53,451 - 22,067
Total $ 17,931,853 3,017,345 6,610,675 28,785 14,309,738
Revaluation Accumulated Accumulated
December 31, 2017 Cost Total
appreciation depreciation impairment
Land $ 6,678,952 2,986,161 - 14,031 9,651,082
Buildings 7,699,394 31,184 3,849,763 14,754 3,866,061
Machinery 2,072,355 - 1,760,891 - 311,464
Transportation equipment 280,450 - 243,860 - 36,590
Miscellaneous equipment 590,195 - 504,628 - 85,567
Leasehold improvement 104,639 - 33,406 - 71,233
Construction in progress 17,726 - - - 17,726
Prepayment for equipment 56,593 - - - 56,593
Prepayment for real estate 98,799 - - - 98,799
Leased assets 74,596 - 42,845 - 31,751
Total $ 17,673,699 3,017,345 6,435,393 28,785 14,226,866
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143

Change of cost

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Foreign December
January 1, 2018 Increase Decrease Exchange 31,2018
Land $ 9,665,113 59,008 - - 9,724,121
Buildings 7,730,578 125,021 - - 7,855,599
Machinery 2,072,355 167,919 149,244 3,830 2,094,860
Transportation equipment 280,450 10,254 14,815 1,988 277,877
Miscellaneous equipment 590,195 23,703 35,589 1,259 579,568
Leasehold improvement 104,639 33,845 5,720 6,019 138,783
Construction in progress 17,726 70,300 56,961 - 31,065
Prepayment for equipment 56,593 132,835 17,776 155 171,807
Prepayment for real estate 98,799 - 98,799 - -
Leased assets 74,596 1,540 624 6 75,518
Total $ 20,691,044 624,425 379,528 13,257 20,949,198
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Foreign December
January 1, 2017 Increase Decrease Exchange 31,2017
Land $ 9,665,113 - - - 9,665,113
Buildings 7,518,038 212,540 - - 7,730,578
Machinery 1,966,592 184,111 82,939 4,591 2,072,355
Transportation equipment 286,164 8,192 14,213 307 280,450
Miscellaneous equipment 580,418 35,885 25,304 (804 ) 590,195
Leasehold improvement 69,916 41,142 3,799 (2,620 ) 104,639
Construction in progress 153,162 32,147 167,583 - 17,726
Prepayment for equipment 62,933 26,271 31,107 (1,504 ) 56,593
Prepayment for real estate - 98,799 - - 98,799
Leased assets 72,495 2,101 - - 74,596
Total $ 20,374,831 641,188 324,945 (30 ) 20,691,044
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Change of depreciation

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Foreign December 31,
January 1, 2018 Increase Decrease Exchange 2018
Buildings $ 3,849,763 177,975 - - 4,027,738
Machinery 1,760,891 126,024 148,553 1,012 1,739,374
Transportation equipment 243,860 13,461 14,563 (5 ) 242,753
Miscellaneous equipment 504,628 22,639 35,282 194 492,179
Leasehold improvement 33,406 23,289 5,620 4,105 55,180
Leased assets 42,845 11,226 624 4 53,451
Total $ 6,435,393 374,614 204,642 5,310 6,610,675
Foreign December 31,
January 1, 2017 Increase Decrease Exchange 2017
Buildings $ 3,682,819 166,944 - - 3,849,763
Machinery 1,733,509 110,338 79,299 (3,657 ) 1,760,891
Transportation equipment 244,838 13,334 14,146 (166 ) 243,860
Miscellaneous equipment 509,879 20,832 25,204 (879 ) 504,628
Leasehold improvement 22,725 14,987 3,799 (507 ) 33,406
Leased assets 31,570 11,336 - (61 ) 42,845
Total $ 6,225,340 337,771 122,448 (5,270 ) 6,435,393
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144

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Accumulated impairment

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

January 1, 2018 Increase Decrease Foreign Exchange December 31,2018
Land $ 14,031 - - - 14,031
Buildings 14,754 - - - 14,754
Total $ 28,785 - - - 28,785
January 1, 2017 Increase Decrease Foreign Exchange December 31,2017
Land $ 14,031 - - - 14,031
Buildings 14,754 - - - 14,754
Total $ 28,785 - - - 28,785
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per the regulation of GAAP of R.O.C as the original cost on the transition date.

As of December 31, 2018 and 2017, 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).

As of December 31, 2018 and 2017, 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.

(M) Other assets-net

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December 31, 2018 December 31, 2017
Office supplies $ 28,261 27,997
Prepayments 4,261,033 3,269,987
Operating guaranty deposits and settlement fund 31,011 30,608
Guarantee deposits paid 858,681 321,496
Deferred assets 16 40
Temporary payments and suspense accounts 80,253 -
Proceeds of settlement and credit transaction 2,071 24,721
Total $ 5,261,326 3,674,849
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(N) Deposits from the Central Bank and other banks

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December 31, 2018 December 31, 2017
Deposits from the Central Bank $ 251,673 304,431
Call loans from the Central Bank 15,367,500 16,234,960
Deposits from banks 64,602 100,305
Call loans from banks 18,991,607 18,439,863
Overdrafts on banks 812,952 1,680,993
Deposits transferred from Chunghwa Post Co., Ltd. 55,826,209 56,769,218
Total $ 91,314,543 93,529,770
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(O) Due to the Central Bank and other banks

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December 31, 2018 December 31, 2017
Due to banks $ 591,988 31,464
Due to banks:
Chang Hwa Commercial Bank, Ltd. (SH)
December 31, 2018 December 31, 2017
Interbanks borrowing (CNY) $ 14,750 6,917
Interest rate 5.2250% 4.99%
Maturity date June 22, 2020 August 30,2020
~February 13, 2021
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145

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First Bank (Ximen)
December 31, 2018 December 31, 2017
Interbanks borrowing (CNY) $ 800 -
Interest rate 5.4625%
Maturity date May 18, 2020
Taichung Commercial Bank Co., Ltd. (OBU)
December 31, 2018 December 31, 2017
Interbanks borrowing (USD) $ 15,000 -
Interest rate 4.5815%~ 4.6290%
Maturity date May 28, 2021
First Bank (OBU)
December 31, 2018 December 31, 2017
Interbanks borrowing (USD) $ 1,000 -
Interest rate 4.6953%
Maturity date December 4, 2019
Sunny Bank (OBU)
December 31, 2018 December 31, 2017
Interbanks borrowing (USD) $ 1,000 -
Interest rate 4.0056%
Maturity date January 25, 2019
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(P) Financial liabilities at fair value through profit or loss

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December 31, 2018 December 31, 2017
Financial liabilities designated at fair value through profit or loss:
Financial debentures $ 9,162,841 3,565,337
Financial liabilities held for trading:
Derivative instruments not used for hedging
Foreign exchange forward contracts 11,546 8,420
Currency swap contracts 161,000 150,009
Foreign currency option-put 3,886 8,633
Structured product option-put - 82
Total $ 9,339,273 3,732,481
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Please refer to 6(C) for the nominal amount of unsettled financial derivatives instrument contracts of December 31, 2018 and 2017.

(Q) Securities sold under repurchase agreements

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December 31, 2018
Selling Price (Recognized in Designated
securities sold under repurchase repurchase Designated
Assets Par value agreements) amount repurchase date
Financial assets at fair $ 1,628,596 1,657,706 1,660,551 Prior to June 14, 2019
value through other
comprehensive income
December 31, 2017
Selling Price (Recognized in Designated
securities sold under repurchase repurchase Designated
Assets Par value agreements) amount repurchase date
A v a i l a b l e - f o r - s a l e $ 1,001,200 1,105,596 1,106,770 Prior to June 27, 2018
financial assets
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146

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(R) Payables

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December 31, 2018 December 31, 2017
Interest payable $ 2,183,207 1,702,701
Accounts payable 12,976,337 13,363,952
Acceptances 1,476,163 1,724,173
Accrued expenses 3,223,896 2,522,471
Collection payable 612,741 590,876
Deposits received from securities borrowers 103,529 95,470
Guaranteed price deposits received from securities borrowers 111,936 111,668
Accounts payable factoring 177,759 153,704
Spot exchange payable － foreign currencies 36,521,898 15,315,863
Other payables 896,129 864,379
Trusted security payable 377,826 147,945
Other 12,710 36,850
Total $ 58,674,131 36,630,052
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(S) Deposits and remittances

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December 31, 2018 December 31, 2017
Savings deposits $ 617,461,408 607,119,560
Time deposits 341,309,350 329,695,922
Demand deposits 323,439,370 350,247,717
Checking account deposits 28,257,596 28,358,099
Remittances 573,379 602,413
Total $ 1,311,041,103 1,316,023,711
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(T) Financial debentures

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Terms of Transactions Bond Issued
Amount
Bonds Maturity
Issue date Interest Rate & repayment Type December December
date
31, 2018 31, 2017
2010-1P A 09/23/2010 None The debentures bear annual interest rate which is the Perpetual $ 3,200,000 3,200,000
Chunghwa post's board average interest rate for 1-year non-
time deposit plus 1.34% for the ten years after the issue accumulated
date. The interest rate will be the Chunghwa post's subordinated
board interest rate for 1-year time deposit plus 2.34% financial
from the eleventh year. The debentures is redeemable debentures
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 of 3.05% for the 〞 800,000 800,000
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 rate of 1.68%. Unsecured 5,000,000 5,000,000
Simple interest is accrued and paid annually. The subordinated
principal will be repaid in full at maturity. long-term
financial
debentures
2013-2A 11/25/2013 11/25/2020 (A) The debentures bear annual interest rate, which 〞 3,100,000 3,100,000
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.
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147

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Terms of Transactions Bond Issued
Amount
Bonds Maturity
Issue date Interest Rate & repayment Type December December
date
31, 2018 31, 2017
(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 rate of 1.92%. 〞 $ 2,900,000 $ 2,900,000
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 rate of 3.9%. Perpetual 5,000,000 5,000,000
Simple interest is accrued and paid annually. The non-
debentures is redeemable per face value plus accrued accumulated
interest at interest payment date after five years from subordinated
the issued date under the consent of the competent financial
authority. debentures
2015-2A 08/31/2015 08/31/2023 The debenture bear an annual interest rate of 2.05%. Unsecured 4,700,000 4,700,000
Simple interest is accrued and paid annually. The subordinated
principal will be repaid in full at maturity. long-term
financial
debentures
2015-2B 08/31/2015 08/31/2025 The debenture bear an annual interest rate of 2.10%. 〞 300,000 300,000
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 rate of 3.2%. Perpetual 8,000,000 8,000,000
Simple interest is accrued and paid annually. The non-
debentures is redeemable per face value plus accrued accumulated
interest at interest payment date after five years and subordinated
three months from the issued date under the consent of financial
the competent authority debentures
2016-2 12/20/2016 12/20/2023 The debenture bear an annual interest rate of 1.40%. Unsecured 2,700,000 2,700,000
Simple interest is accrued and paid annually. The subordinated
principal will be repaid in full at maturity. long-term
financial
debentures
2017-1A 03/28/2017 03/28/2024 The debentures bear an annual interest rate of 1.50%. 〞 390,000 390,000
Simple interest is accrued and paid annually. The
principal will be repaid in full at maturity.
2017-1B 03/28/2017 03/28/2025 The debentures bear an annual interest rate of 1.60%. 〞 250,000 250,000
Simple interest is accrued and paid annually. The
principal will be repaid in full at maturity.
2017-1C 03/28/2017 03/28/2027 The debentures bear an annual interest rate of 1.85%. 〞 3,360,000 3,360,000
Simple interest is accrued and paid annually. The
principal will be repaid in full at maturity.
2017-2 05/23/2017 05/23/2027 The debentures bear an annual interest rate of 1.85%. 〞 1,300,000 1,300,000
Simple interest is accrued and paid annually. The
principal will be repaid in full at maturity.
2018-1 01/05/2018 01/05/2021 The debentures bear an annual interest rate of 0.7%. 〞 1,000,000 -
Simple interest is accrued and paid annually. The
principal will be repaid in full at maturity.
2018-2 08/20/2018 08/20/2028 The debentures bear an annual interest rate of 1.45%. 〞
Simple interest is accrued and paid annually. The
principal will be repaid in full at maturity. 5,450,000 -
$ 47,450,000 41,000,000
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The Bank issued $120,000 thousands and $180,000 thousands dollar-denominated debentures with call option that can be executed on strike price after five years from the issued date. Without executing call options during the periods of debentures, the principal will be repaid in full at maturity. In order to avoid interest risk, the Bank buys interest rate swap contracts that are classified as financial assets at fair value through profit or loss. To eliminate the measurement or recognition inconsistency between IRSs and debentures, the Bank classified the debentures into financial liabilities at fair value through profit or loss. The debentures are as follows:

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Terms of Transactions Bond Issued
Amount
Bonds Maturity
Issue date date Interest Rate & repayment Type December December
31, 2018 31, 2017
2017-3 10/27/2017 10/27/2047 The zero-coupon debentures with call options can be Unsecured $ 3,688,200 3,561,600
executed on strike dollar-
price after five years from the issued date. Without denominated
executing call options during the periods of debentures, senior
the principal will be repaid in full at maturity. financial
debentures
2018-3 09/27/2018 09/27/2048 The zero-coupon debentures with call options can be 〞 5,532,300 -
executed on strike
price after five years from the issued date. Without
executing call options during the periods of debentures,
the principal will be repaid in full at maturity.
Valuation
adjustment (57,659 ) 3,737
$ 9,162,841 3,565,337
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(U) Other financial liabilities

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

December 31, 2018 December 31, 2017
Appropriated loans funds $ 7,486,694 10,090,135
Lease payable 21,021 30,410
Total $ 7,507,715 10,120,545
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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.

(V) Provision for liabilities

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December 31, 2018 December 31, 2017
Provision for guarantee liabilities $ 215,383 156,523
Provision for financing commitment 73,753 -
Provision for employee benefit 3,276,591 3,358,828
Total $ 3,565,727 3,515,351
Change of provision
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----- Start of picture text -----

January 1, IFRS 9 Foreign December 31,
2018 Adjustment Increase Decrease Use exchange 2018
Provision for guarantee $ 156,523 - 58,710 - - 150 215,383
liabilities
Provision for financing - 47,265 26,637 - - (149 ) 73,753
commitment
Provision for employee
benefit 3,358,828 - 444,090 453,021 73,306 - 3,276,591
Total $ 3,515,351 47,265 529,437 453,021 73,306 1 3,565,727
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149

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

January 1, Foreign December 31,
2017 Increase Decrease Use exchange 2017
Provision for guarantee liabilities $ 147,491 9,286 - - (254 ) 156,523
Provision for lawsuit 346,491 109,273 - 466,884 11,120 -
Provision for employee benefit 3,112,771 504,152 208,775 49,320 - 3,358,828
Total $ 3,606,753 622,711 208,775 516,204 10,866 3,515,351
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(W) Other liabilities

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December 31, 2018 December 31, 2017
Advance interest receipts $ 10,717 10,284
Unearned revenue 154,589 109,386
Other advances receipts 152,649 101,006
Guarantee deposits received 821,386 768,517
Temporary receipts and suspense accounts - 648,221
Other 7,596 6,101
Total $ 1,146,937 1,643,515
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(X) Equity

(a) Common stock

As of December 31, 2018 and 2017, the Bank's authorized capital were $80,000,000 and the paid-in capital for common shares of the Bank were $63,938,802 and $61,479,617, the face value of each share is NTD $10. The outstanding shares were 6,393,881 and 6,147,962 thousand shares, respectively.

Pursuant to the resolution approved by the stockholders' meeting of the Bank on June 29, 2018, the Bank increased its capital from the unappropriated retained earnings by $2,459,185 and issued 245,919 thousand shares. The capital increase has been approved by Financial Supervisory Commission and came into effect on August 10, 2018. The base date of the capital increase is set on September 12, 2018. The Bank has completed the registration of change in paid-in capital on September 21, 2018.

Pursuant to the resolution approved by the stockholders' meeting of the Bank on June 16, 2017, the Bank increased its capital from the unappropriated retained earnings by $1,790,668 and issued 179,067 thousand shares. The capital increase has been approved by the Financial Supervisory Commission and came into effect on July 7, 2017. The base date of the capital increase is set on August 7, 2017. The Bank has completed the registration of change in paid-in capital on August 23, 2017.

(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 unappropriated 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

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Taiwan Business Bank Annual Report 2018

Ⅵ

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.

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 2017 and 2016 in the shareholder's meeting

on June 29, 2018 and June 16, 2017, respectively. The dividends distributed were as follows:

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For the years ended December 31,
2017 2016
Distribution rate Distribution rate
(NT dollar) Amount (NT dollar) Amount
Dividends to common share
holders
Share $ 0.40 2,459,185 0.30 1,790,668
Cash 0.268 1,647,654 0.102 608,827
Total 4,106,839 2,399,495
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(d) Other equity items

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

Unrealized gains exchange
from financial assets Unrealized gains differences on
measured at fair and losses on translation of
value through other available-for-sale foreign financial
comprehensive income financial assets statements Total
January 1, 2018 $ - 529,112 (835,340 ) (306,228 )
Effects of retrospective application
of new standards 3,086,469 (529,112 ) - 2,557,357
Balance at January 1, 2018 after
adjustments 3,086,469 - (835,340 ) 2,251,129
Debt instruments measured at fair
value through other
comprehensive income
-Valuation adjustment 490,591 - - 490,591
-Realized amount (98,509 ) - - (98,509 )
Foreign currency translation
difference － Exchange
difference - - 294,218 294,218
Disposal of investments in
equity instruments measured
at fair value through other
comprehensive income (30,765 ) - - (30,765 )
December 31, 2018 $ 3,447,786 - (541,122 ) 2,906,664
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151

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(Y) Income taxes

of China (Taiwan) on February 7, 2018, an increase in the corporate income tax rate from 17% to 20% is applicable upon filing the corporate income tax return commencing year 2018.

(a) The income tax expenses were as follows:

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For the years ended December 31,
2018 2017
Current tax expense
Current period $ 1,910,481 800,257
Adjustment for prior periods 35,751 (191,611 )
Additional surtax on undistributed retained earnings - 5
1,946,232 608,651
Deferred tax expense
Origination and reversal of temporary different (388,357 ) 222,526
Income tax expenses $ 1,557,875 831,177
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For the years ended December 31,
2018 2017
Items that will not reclassified subsequently to profit or loss:
Remeasurements of defined benefit plans $ 71,895 42,401
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	For the years ended December 31,	For the years ended December 31,
	2018	2017
Items that may be reclassifed subsequently to proft or loss: Foreign exchange difference in translating fnancial statements of foreign operations Unrealized gains (losses) on valuation of available-for-sale fnancial assets Unrealized gains on valuation of fnancial assets measured at fair value through other comprehensive income		167,072 (1,881 ) - 165,191
	$ (35,814 )
	-
	580
	$ (35,234)

The reconciliation between the income tax expense (income) and net income before tax of the Bank and its subsidiaries for 2018 and 2017 is as follows:

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For the years ended December 31,
2018 2017
Income tax computed on net income before tax $ 1,848,646 1,002,844
Cessation tax of gains derived from the securities transactions (5,131 ) (3,818 )
Net income from offshore banking unit (212,852 ) (193,088 )
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152

Taiwan Business Bank Annual Report 2018

Ⅵ

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

For the years ended December 31,
2018 2017
Recognized (gain) loss from financial assets and liabilities (14,420 ) 7,032
measured at fair value through profit or loss
Cash Dividend (56,743 ) (38,311 )
Non-deductible expense 524 257
-
Adjustment in tax rate (148,021 )
Overseas branch income tax expenses 106,570 247,867
Additional surtax on undistributed retained earnings - 5
Underestimate (overestimate) prior income tax expense 35,751 (191,611 )
Income tax loss from unrecognized deferred tax assets 3,551 -
Income tax expense $ 1,557,875 831,177
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				For the years ended December 31, 2018	For the years ended December 31, 2018	For the years ended December 31, 2018	For the years ended December 31, 2018	For the years ended December 31, 2018	For the years ended December 31, 2018
		Beginning balance		Recognized in profit 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 Reserve for employee beneft liabilities Land value increment tax Exchange differences from the translation of fnancial statements of foreign operations Unrealized (gain) loss on valuation of fnancial assets measured at fair value through other comprehensive income 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
		$ 383,793		346,506		-		(70 )		730,229
		40,593		12,823		-		146		53,562
		414,235		29,084		-		-		443,319
		(879,056 )		-		-		-		(879,056 )
		171,093		-		(35,814 )		-		135,279
		(2,262 )		-		580		-		(1,682 )
		209,181		-		71,895		-		281,076
		245		(7 )		-		13		251
		337,822		388,406		36,661		89		762,978
		3,324		(49 )		-		-		3,275
		$ 341,146		388,357		36,661		89		766,253

		$ 1,222,464								1,646,991
		$ 881,318								880,738
	For the years ended December 31, 2017
	Beginning balance		Recognized in profit 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
	$ 546,478		(162,657 )		-		(28 )		383,793
	40,593		-		-		-		40,593
	75,446		(75,446 )		-		-		-
	402,079		12,156						414,235
	(879,056 )		-		-		-		(879,056 )

			For the years ended December 31, 2017	For the years ended December 31, 2017	For the years ended December 31, 2017
		Beginning balance	Recognized in profit or loss	Recognized in other comprehensive income	Others	Ending balance
Temporary difference
Deferred tax assets resulted from	$	546,478	(162,657 )	-	(28 )	383,793
allowance for bad debts exceeding the
limit regulated in Tax Law
Loss on assets impairment		40,593	-	-	-	40,593
Indemnity reserve		75,446	(75,446 )	-	-	-
Reserve for employee beneft liabilities		402,079	12,156			414,235
Land value increment tax		(879,056 )	-	-	-	(879,056 )

153

		For the years ended December 31, 2017	For the years ended December 31, 2017	For the years ended December 31, 2017
	Beginning balance	Recognized in profit or loss	Recognized in other comprehensive income	Others	Ending balance
Exchange differences from the translation of fnancial statements of foreign operations 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	4,021	-	167,072	-	171,093
	(381 )	-	(1,881 )	-	(2,262 )
	166,780	-	42,401	-	209,181
	149	97	-	(1 )	245
	356,109	(225,850 )	207,592	(29 )	337,822
	-	3,324	-	-	3,324
	$ 356,109	(222,526)	207,592	(29)	341,146

	$ 1,240,678				1,222,464
	$ 884,569				881,318

(d) The income tax returns of the subsidiaries Taiwan Business Bank International Leasing Co., Ltd. have been approved until 2016 by the Tax authority. Taiwan Business Bank Insurance Agency Co., Ltd. and Taiwan Business Bank Property Insurance Agency Co., Ltd. have been approved until 2017 by the Tax authority.

(Z) Provision for employee benefit

As of December 31, 2018 and 2017, the balance of provision for employee benefit of the Bank and its subsidiaries were as follows:

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

December 31, 2018 December 31, 2017
Defined benefit plan $ 2,406,353 2,535,720
Employee deposit with favorable rate 870,238 823,108
$ 3,276,591 3,358,828
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benefit plan assets of the Bank and its subsidiaries as follows:

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

December 31, 2018 December 31, 2017
Present value of defined benefit obligation $ 7,385,323 7,260,197
Less: Fair value of defined benefit plan assets (4,978,970 ) (4,724,477 )
$ 2,406,353 2,535,720
----- End of picture text -----

Bank of Taiwan that 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 Bank and its subsidiaries 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.

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Taiwan Business Bank Annual Report 2018

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The Bank of Taiwan labour pension reserve account balance for the Bank and its subsidiaries amounted to $4,978,970 and $4,724,477 on December 31, 2018 and 2017. For information on the utilization 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.

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For the years ended December 31,
2018 2017
Defined benefit obligation on January 1 $ 7,260,197 7,241,938
Current service and interest cost 268,958 289,790
Remeasurements of the net defined benefit liability
－ Actuarial gain and loss on experience adjustment 261,683 111,821
－ Actuarial gain and loss on financial assumptions 61,966 126,516
changed
Benefits paid by the plan (467,481 ) (509,868 )
Defined benefit obligation on December 31 $ 7,385,323 7,260,197
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----- Start of picture text -----

For the years ended December 31,
2018 2017
Fair value of plan assets on January 1 $ 4,724,477 4,928,465
Interest income 46,905 58,868
Remeasurements of the net defined benefit liability
－ plan assets revenue (excluded of current interest) 148,742 (11,082 )
Contributions made 526,327 258,094
Benefits paid by the plan (467,481 ) (509,868 )
Fair value of plan assets on December 31 $ 4,978,970 4,724,477
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----- Start of picture text -----

For the years ended December 31,
2018 2017
Current service costs $ 198,096 204,840
Net interest on the net defined benefit liability 23,957 26,082
$ 222,053 230,922
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income for the years ended December 31, 2018 and 2017 were as follows:

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

For the years ended December 31,
2018 2017
Amount on January 1 $ 1,230,475 981,056
Recognized during the period 174,907 249,419
Amount on December 31 $ 1,405,382 1,230,475
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(6) Actuarial assumptions

the reporting date as follow :

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

December 31, 2018 December 31, 2017
Discount rate of defined benefit plan 0.90% 1.00%
Future salary increase rate 1.50% 1.50%
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155

period after the reporting dates is $265,000.

(7) Sensitivity analysis

The effects of changes in major actuarial assumptions adopted in defined benefit obligation on December 31, 2018 and 2017 were as follows :

	Infuence of defned beneft plan obligation	Infuence of defned beneft plan obligation
	Increase0.25%	Decrease0.25%
December 31, 2018 Discount rate(Change 0.25%) Future salary increase rate(Change 0.25%)	(2.08)% 2.06 %	2.15 % (2.01)%
	Infuence of defned beneft plan obligation
	Increase0.25%	Decrease0.25%
December 31, 2017 Discount rate(Change 0.25%) Future salary increase rate(Change 0.25%)	(2.17)% 2.16 %	2.25 % (2.10)%

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 .Sensitivity analysis and the net defined benefit liability on the balance sheet date are determined by consistent method.

The methods and assumptions used in the preparation of the sensitivity analysis are consistent with those for the prior period.

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 $115,178 and $99,714 for the years ended December 31, 2018 and 2017, respectively.

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

December 31, 2018 December 31, 2017
Present value of defined benefit obligation $ 870,238 823,108
- -
Less: Fair value of defined benefit plan assets
Net defined benefit liability $ 870,238 823,108
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The Bank and its subsidiaries conducted the obligation of time deposit with favorable rate for retired and current employees based on the internal regulation "Saving Deposits for Employees".

years ended December 31, 2018 and 2017 were as follows:

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

For the years ended December 31,
2018 2017
Defined benefit obligation on January 1 $ 823,108 799,298
Interest cost 31,128 30,214
Remeasurements of the net defined benefit liability
-current actuarial gains and losses 199,223 172,756
Benefits paid by the plan (183,221 ) (179,160 )
Defined benefit obligation on December 31 $ 870,238 823,108
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Taiwan Business Bank Annual Report 2018

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ended December 31, 2018 and 2017 were as follows:

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

For the years ended December 31,
2018 2017
Fair value of plan assets on January 1 $ - -
Contributions made 183,221 179,160
Benefits paid by the plan (183,221 ) (179,160 )
Fair value of plan assets on December 31 $ - -
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		For the years ended December 31,	For the years ended December 31,	For the years ended December 31,
		2018		2017
Net interest on the net defned beneft liability		$ 230,351		202,970

(4) Actuarial assumption

the reporting date as follow :

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

December 31, 2018 December 31, 2017
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 balanc 1.00% 1.00%
Possibility that employee deposit with favorable rate be modified 50.00% 50.00%
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(AA) Earnings per share

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

For the years ended December 31,
2018 2017
Net income $ 7,640,542 5,039,924
Weighted average number of common stock shares outstanding (in 6,393,881 6,393,881
thousands) (Note 1)
Basic earnings per shares (in dollars) $ 1.19 0.79
Dilutive potential common shares (in thousands) (Note 1,2) 56,400 33,759
Weighted average number of shares outstanding for diluted EPS (in 6,450,281 6,427,640
thousands) (Note 1)
Diluted earnings per shares (in dollars) $ 1.18 0.78
----- End of picture text -----

Note 1: The basic earnings per share for the year ended December 31, 2017 has applied retrospective adjustments. Note 2: The shares were calculated based on the stock price on the balance sheet date.

(AB) 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, 2018 and 2017, the estimated employee remuneration were $583,736 and $272,350, and the estimated directors' remuneration were $58,374 and $36,582, 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. If the board' s meeting decides to release stock dividends as employee' s bonuses, the total number of employee bonus stocks to be issued shall be determined by the common stock closing price of the day before the meeting date.

157

(AC) Net interest income

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For the years ended December 31,
2018 2017
Interest revenue:
Loan $ 7,129,577 5,985,793
Secured loans 14,787,842 14,004,060
Bills negotiated 8,407 6,802
Bank overdraft 19,681 21,689
Discount 53,987 31,767
Time deposit from Central Bank 840,039 741,016
Due from the Central Bank 146,512 145,192
Call loans to banks 1,189,729 804,894
Bond 2,389,890 1,969,780
International credit card 56,566 58,017
Overdue loans 462,029 138,230
Bills 92,561 61,499
Due from other Banks 807,423 574,765
Other 303,115 238,711
Subtotal 28,287,358 24,782,215
Interest expense:
Deposits 9,310,001 7,807,526
Deposits from banks 32 35
Call loans from banks 752,941 514,224
Fund 2,817 6,843
Financial debentures 1,000,882 1,019,985
Bond sold under repurchase agreement 8,373 4,481
Imputed deposit interest and rent interest 13 13
Other 14,423 3,686
Subtotal 11,089,482 9,356,793
Total $ 17,197,876 15,425,422
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(AD) Service fee and commission income

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For the years ended December 31,
2018 2017
Service charge income:
Remittance service fee $ 92,242 98,636
Import bills negotiated service fee 62,266 62,985
Export bills negotiated service fee 20,612 20,589
Letter of credit service fee 11,608 14,822
Certification service fee 3,043 3,361
Acceptance service fee 3,008 2,137
Trust service fee 466,666 532,922
Guarantee service fee 159,768 158,355
Agency service fee 94,217 102,565
Interbank service fee 64,964 65,351
Card service fee 138,025 135,697
Commission revenue of insurance premium 1,875,002 1,787,996
Custodian service fee 165,568 143,679
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For the years ended December 31,
2018 2017
Foreign currency service fee $ 102,854 102,554
Commission of futures 7,423 5,989
Loan service fee 579,224 631,633
Miscellaneous fees 149,123 135,193
Subtotal 3,995,613 4,004,464
Service fee expense:
Foreign currency service fee 34,447 30,619
Interbank service fee 132,635 129,654
Trust service fee 2,012 3,248
Agency service fee 2,446 2,860
IC card service fee 69,856 67,593
Check clearing service fee 10,212 10,733
Remittance service fee 4,661 3,938
Custodian service fee 47,478 37,062
Call loans service fee 3,302 2,922
Miscellaneous fees 28,714 25,298
Subtotal 335,763 313,927
Total $ 3,659,850 3,690,537
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(AE) 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,
2018 2017
Valuation profit and loss:
Corporate bonds $ 3,789 216
Financial debentures 44,053 (30,258 )
Stock of listed company (1,353 ) 850
Beneficiary certificates (3,970 ) 150
Commercial paper 335 (54 )
Option contracts (632 ) (4,309 )
Foreign exchange forward contracts (62,276 ) (15,834 )
-
Linked deposits (194,422 )
Currency swap contracts 35,086 (71,263 )
Subtotal (179,390 ) (120,502 )
Disposition profit and loss:
Government bond 240 -
Stock of listed company (36,698 ) 3,057
Beneficiary certificates (40,638 ) 50,287
Option contracts 5,147 17,136
Interest swap contracts 44,394 2,008
Foreign exchange forward contracts (41,276 ) 169,121
Currency swap contracts 1,245,294 913,315
Non-delivery forward contracts - (1,932 )
Subtotal 1,176,463 1,152,992
Dividend revenue 7,377 534
Interest income 24,730 3,488
Total $ 1,029,180 1,036,512
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(AF) Realized gains on financial assets measured at fair value through other comprehensive income

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For the year ended
December 31, 2018
Gains on disposal of government bond $ 96,020
Gains on disposition of corporate bonds 2,224
Gains on disposal of Financial debentures 265
Dividend revenue 276,340
Total $ 374,849
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(AG) Realized (losses) gains on available-for-sale financial assets

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For the year ended
December 31, 2017
Losses on disposal of government bond $ (7,703 )
Gains on disposition of corporate bonds 24
Losses from disposition of financial debentures (1,700 )
Gains from disposal of beneficiary certificates 30,035
Gains from disposition of stock on listed company 5,512
Dividend revenue 83,585
Total $ 109,753
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(AH) (Impairment loss on assets) reversal of impairment loss on assets

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For the year ended
December 31, 2018
Debt instrument measured at fair value through other comprehensive income $ (8,363 )
Debt instrument at amortized cost (19,934 )
Total $ (28,297 )
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(AI) Net other non-interest income

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For the years ended December 31,
2018 2017
Rental revenue of operating assets $ 9,424 9,531
Rental expense of operating assets (1,836 ) (1,856 )
Loss on disposal and retirement of premises and equipment (1,155 ) (1,972 )
Loss of account error (137 ) (133 )
Gold deposit book 3,392 2,873
Other operating expense (40,288 ) (153,476 )
Other miscellaneous income 123,962 24,376
Total $ 93,362 (120,657 )
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(AJ) Bad debt expenses and guarantee liability provisions

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For the years ended December 31,
2018 2017
Discounts, loans and overdue loans $ 704,605 3,549,074
Call loans to banks 9,449 996
Receivables and other financial assets (5,267 ) (530,645 )
Subtotal 708,787 3,019,425
Provision for guarantee liabilities 58,710 9,286
Provision for financing commitment 26,637 -
Total $ 794,134 3,028,711
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(AK) Employee benefit expenses

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For the years ended December 31,
2018 2017
Salary expense $ 6,343,853 5,902,631
Labor and health insurance 446,028 424,366
Pension expense 337,231 330,636
Other employee benefit 1,198,482 803,051
Total $ 8,325,594 7,460,684
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(AL) Depreciation and amortization expenses

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For the years ended December 31,
2018 2017
Property and equipment depreciation $ 373,990 337,771
Amortization
Computer software 98,773 79,916
Other deferred charges 20 73
Total $ 472,783 417,760
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(AM) Other general and administrative management expenses

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For the years ended December 31,
2018 2017
Compensation loss $ 704 1,329
Water and electricity fee 93,096 92,342
Postage and telecommunication 175,140 161,774
Transportation fee 45,301 50,663
Printing and advertisement fee 239,439 236,176
Maintenance fee 47,399 41,816
Insurance fee 372,588 333,474
Professional service fee 329,717 246,983
Materials and supplies 75,670 138,417
Rental expenses 724,328 743,626
Duties and levies 1,374,585 1,287,841
Membership, donation and partaking 525,814 530,740
Storage, packing and processing 60,357 49,599
Cash transit 94,094 99,296
Other 77,787 70,363
Total $ 4,236,019 4,084,439
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(AN) 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 the most reliable evidence of fair value. If financial instruments are without active market, the Bank and its subsidiaries 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.

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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 processed by the Bank and its subsidiaries 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 and its subsidiaries issued are belong to second tier.

C. Third tier and the subsidiaries
- The input are unobservable for the asset or liability in market or counterparty prices. 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 input parameter used to measure the fair value of this tier is not based on data that can be obtained in the market but using a combination of complex market prices to estimate their values. The assets have been categorized as a third tier 3, due to their fair market value cannot be directly calculated. The equity instruments with no active market which the Bank and its subsidiaries 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, 2018
Assets and Liabilities Total 1st Tier 2nd Tier 3nd Tier
Instruments measured at fair value on a
recurring basis
Non-derivative financial assets and
liabilities:
Financial assets at fair value through
profit or loss
Financial assets at fair value through
profit or loss,mandatorily (measured
at fair value)
Security Investment $ 48,910 48,910 - -
Financial debentures 200,000 - - 200,000
Other 4,648,297 17,080 4,581,217 50,000
Financial assets designated at fair 1,909,707 - 1,909,707 -
value through profit or loss
Financial assets measured at fair value
through other comprehensive income
Security Investment 7,712,641 3,500,614 - 4,212,027
Bond Investment 65,408,058 53,643,189 11,764,869 -
Other 43,502 43,502 - -
Financial liabilities at fair value through
profit or loss
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December 31, 2018
Assets and Liabilities Total 1st Tier 2nd Tier 3nd Tier
Financial liabilities designated at fair $ 9,162,841 - 9,162,841 -
value through profit or loss
Derivative financial assets and liabilities
Assets:
Financial assets at fair value through $ 327,690 - 327,690 -
profit or loss
Liabilities:
Financial liabilities at fair value through 176,432 - 176,432 -
profit or loss
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December 31, 2017
Assets and Liabilities Total 1st Tier 2nd Tier 3nd Tier
Instruments measured at fair value
on a recurring basis
Non-derivative financial assets and
liabilities:
Financial assets at fair value through
profit or loss
Financial assets held for trading
Other $ 509,609 10,150 499,459 -
Financial assets designated at fair 237,652 - 237,652 -
value through profit or loss
Available-for sale financial assets
Security Investment 2,625,558 2,625,558 - -
Bond Investment 63,608,278 56,161,047 7,447,231 -
Financial liabilities at fair value through
profit or loss
Financial liabilities designed at fair value 3,565,337 - 3,565,337 -
through profit or loss on initial
recognition
Derivative financial assets and liabilities
Assets:
Financial assets at fair value through $ 314,528 454 314,074 -
profit or loss
Liabilities:
Financial liabilities at fair value through 167,144 - 167,144 -
profit or 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

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The financial asset's fair value is estimated on the basis of the result of a valuation technique, the Bank and its subsidiaries adopted that refers to quoted prices provided by financial institutions. Ask (bid) is used to evaluate the selling (buying) position by the Bank and its subsidiaries 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.

and its subsidiaries, assuming that the contract will be terminated on the balance sheet date. The Bank and its subsidiaries 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 and its subsidiaries adopts the price data from Reuters and Bloomberg to calculate the fair value of the holding position. The aforesaid price data is based upon the middle price and used

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

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 and its subsidiaries' 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 counterparty or the default, and the Bank and its subsidiaries may not be received or paid full market value of trading possibilities.

The Bank and its subsidiaries 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 and its subsidiaries 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.

There were no transfers between second tier and first tier for the years ended December 31, 2018 and 2017.

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For the years ended December 31, 2018
Valuation profit and loss Increase Decrease
Recognized in
other Sale
Beginning Recognized in comprehensive Purchase or Transfer in of Disposition or Transfer out of Ending
Name balance profit or loss income issue third tier Settlement third tier balance
Financial assets at fair value $ - - - 250,000 - - - 250,000
through profit or loss
Equity instruments measured 4,416,710 - (65,522 ) 38,139 - 177,300 - 4,212,027
at fair value through other
comprehensive income(Note)
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Note: The equity instruments amounted to $4,416,710 previously classified as other financial assets earned at cost were switched from IAS39 to IFRS 9.

Current gain (loss) and other comprehensive income of holding assets are as follow:

	For the year ended December 31, 2018
Realized on other comprehensive income (reported as unrealized gain (loss) from investments instruments measured at fair value through other comprehensive income)	(62,522)

tier)

	December 31, 2018	December 31, 2018	December 31, 2018	December 31, 2018
	fair value	valuation methods	signifcant unobservable inputs	inter-relationship between signifcant unobservable inputs and fair value measurement
Financial asset at fair value through other comprehensive income
Stock of non- listed company	$ 4,212,027	market approach assets approach	liquidity discount	The higher market liquidity discount, the lower fair value.
		income approach	sustainable growth rate and cost of equity	The higher sustainable growth rate, the higher fair value. The higher growth rate of cost of equity, the lower fair value.

H. Sensitivity analysis of reasonably possible alternative assumptions for fair value measurement in third tier.
Valuation techniques used by the Bank and its subsidiaries for fair value measurements of financial instruments are appropriate. However, the use of different valuation models or inputs could lead to different outcomes of fair value measurements. The following are the impact on the other comprehensive profit and loss if using different assumptions:
a. Asset approach/ Market approach

are mainly based on the market approach or the asset approach. If the liquidity discount changes by 5% upwards or downwards, the impact on the other comprehensive profit and loss is as follows:

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the effects of changes in fair value to
other comprehensive income
Favorable changes(-5%) Unfavorable changes(5%)
December 31, 2018
Financial assets at fair value through other comprehensive
income
Unlisted and non-OTC stocks $ 240,675 (240,675)
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b. Income approach

its subsidiaries. The evaluation parameters are divided into sustainable growth rate and cost

165

of equity capital. The effects of the two evaluation parameters on the other comprehensive profit and loss are as follows:

1) sustainable growth rate

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the effects of changes in fair value to
other comprehensive income
Favorable changes(0.3%) Unfavorable changes(-0.3%)
December 31, 2018
Financial assets at fair value through other comprehensive
income
Unlisted and non-OTC stocks $ 8,464 (7,720)
2) cost of equity
the effects of changes in fair value to
other comprehensive income
Favorable changes(-3%) Unfavorable changes(3%)
December 31, 2018
Financial assets at fair value through other comprehensive
income
Unlisted and non-OTC stocks $ 196,452 (64,402)
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The favorable and unfavorable effects represent the changes in fair value, and fair value

is based on a variety of unobservable inputs calculated using a valuation technique. The analysis above only reflects the effects of changes in a single input, and it does not include the interrelationships with another input.

(4) Not based on fair value measurement

A. Fair value information

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

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December 31, 2018
Book value Fair value
Investment in debt instruments at amortized cost $ 261,470,496 261,756,260
December 31, 2017
Book value Fair value
Held-to-maturity financial assets － net $ 202,967,083 203,113,313
B. The fair value hierarchy of information
December 31, 2018
Assets and Liabilities Total 1st Tier 2nd Tier 3rd Tier
Investment in debt instruments at $ 261,756,260 54,658,948 207,097,312 -
amortized
December 31, 2017
Assets and Liabilities Total 1st Tier 2nd Tier 3rd Tier
Held-to-maturity financial assets-net $ 203,113,313 49,314,727 153,798,586 -
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C. Valuation techniques

Methods and assumptions used by the Bank and its subsidiaries for evaluation of financial instruments not measured by fair value were as follows:
a. Cash and cash equivalents, due from Central Bank and call loans to banks, securities

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purchased under resell agreements, receivables, non-accrual loans transferred from nonloan 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.
c. Investment in debt instruments at amortized cost (applicable from January 1, 2018) and hold-to-maturity financial assets (applicable before the year ended December 31, 2017): the quoted price is regarded as its fair value. If there is no quoted price in an active market for the financial asset, its fair value is estimated on the basis of the result of a valuation technique.
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.
f. Other financial assets– debt investment without active market (applicable before the year ended December 31, 2017): If there is some dealing price, 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 (applicable before the year ended December 31, 2017): 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.

(AO) Financial Risk Information

(a) General description

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

167

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 specified 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, 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

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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
- 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.

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 nonperforming credit and overdue loans collection.

169

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.

At each reporting date, the Bank and its subsidiaries shall assess the change in the risk of a default occurring over the expected life of the various credit assets and financial assets to determine whether the credit risk has increased significantly since initial recognition. To make that assessment, the Bank and its subsidiaries consider reasonable and supportable information ( including forward-looking information) that is indicative of significant increases in credit risk since initial recognition. The main considerations include:
A. credit assets
- a. The borrowers failed to pay the principal and interest overdue for more than 30 days, less than 90 days;
- b. When the Bank and its subsidiaries conducts review or follow-up review of the relevant management procedures after loan, it knows that the financial report of the borrowers have been issued by the accountant and it has issued opinions of the significant doubt on the ability to continue as a going concern;
- c. The deposits and assets of borrowers are compulsorily executed, besides, the deposits are compulsorily executed because of tax arrears. However, the borrowers that have enough deposit to bear the cost that assessed by the Bank and its subsidiaries are except;
- d. The Bank knows (if it has received the notice from court) that the collaterals are compulsory executed by other bank;
- f. The letter of credit insurance fund notice due to the related company's overdue debt in other bank, the creditor to stop the delivery;
- g. Because the borrowers have been involved in litigation and unfavorable judgments, their ability of credit performance is affected;

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  - aware by others.

B. Debt instrument investments
- a. The latest credit rating on the report date was non-investment grade and fell more than two levels than the original rating, or;
- b. Investment target evaluation loss is up to 30% of investment cost.

the risk of default for any credit asset during the expected duration of existence or a low credit risk. The amount of expected credit losses was not taken as the change of credit risk, if the credit risk of the credit asset was low on the report date, It also assumes that the credit risk of the credit asset has not increased significantly since the initial recognition. The credit assets with low credit risk refer to the low default risk and the borrower's ability to perform its contractual cash flow obligations in the near term. No significant increase in risk relates to the borrower. The absence of economic, operational, and adverse changes in financial conditions and other bad debt conditions did not affect their ability to fulfill their contractual cash flow obligations. Financial assets on investment-grade or not on investment-grade but the ratings are not significantly reduced are also considered to be low-risk areas.

estimated future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired not only the borrower defaults the loan more than 90 days , it also includes observable data as follows:

A. Credit assets
b. A breach of contract, such as a default or past due event ;
c. The lender(s) of the borrower, for economic or contractual reasons relating to the borrower' s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;
d. It is becoming probable that the borrower will enter bankruptcy or other financial reorganization;
f. The purchase or origination of a financial asset at a considerable amount of discount that reflects the incurred credit losses;
B. Debt instrument investments
c. The purchase or origination of a financial asset at a considerable amount of discount that
d. Counterparty defaulting on agreement of other financial instruments (e.g. transactions settlement failure, a bank decide to execute early termination of transactions, or loans originated from derivatives settlement failure).

(6) Write-off policy

The integral part or the portion of the credit assets that needs to be written-off should first be approved during the board of directors' meeting; particularly, the portion that is deemed uncollectible.

171

A. The borrowers fail to recover all or part of the debt due to dissolution, escape, settlement, bankruptcy or other reasons.
B. After the collateral and the assets of the principal and subordinate debtors have been priced low or deducted from the first-order mortgage, they cannot be repaid, the execution costs are close or may exceed the Bank' s reimbursable amount, and the implementation is not beneficial.
C. The collateral and the property of the principal and subordinate debtors were auctioned off at no cost and were not bought by anyone, and there was no one have substantial benefits.
D. Overdue loan and non-accrual loan have exceeded the liquidation period for two years.
- The bank and its subsidiaries, whose written-off claims may still have ongoing recourse and continue to follow laws and regulations to pursue the proceedings.

The Bank and its subsidiaries may revise the contractual cash flow of the credit asset due to the borrower's financial difficulties in negotiating, increasing the recovery rate of the borrowers that have problems, or maintaining the customer relationship. The modification of the contractual terms of the credit asset may include extending the contract period, modifying the payment time of interest, and modifying agreement rate and so on. If the contractual cash flow modification of the credit asset is due to the financial difficulty of the borrower, it is deemed as a impairment of the financial asset. If the contractual cash flow modification is not due to the financial difficulties of the borrower, the existing or projected unfavorable changes in the operating, financial or economic conditions under the borrower's performance or the borrower's ability to make the borrower's ability to perform its debt obligations vary significantly. The cause of anomalies or other bad debts is supplemented by an assessment of whether the credit risk of financial assets has increased significantly.

(8) Measuring the expected credit losses
A. Adoption of methods and assumptions

experience, internal historical data or the information from external credit rating agency is used to estimate the Probability of default (PD), Loss given default (LGD) , Exposure at default (EAD) and other credit risk components.

In order to assess the expected credit losses of credit assets, the Bank and its subsidiaries are divided into the following combinations depending on the credit risk characteristics such as the

identity of borrowers, products, and type of collateral:

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Government and public institution
Financial institution( including banks, ticket companies, securities finance companies)
The guarantee of the credit guarantee mechanism
Large Enterprise Secured
Corporate banking
Non-secured
The guarantee of the credit guarantee mechanism
Medium and small
Secured
enterprises
Non-secured
Mortgage
Microcredit
Private banking
Other-Secured
Other-Non-secured
The guarantee of the credit guarantee mechanism
Entrepreneurship Secured
Non-secured
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credit asset has low credit risk at the reporting date, the Bank and its subsidiaries shall measure the allowance for impairment using the 12- month expected credit losses; if the credit risk on a financial instrument has increased significantly or credit-impaired since initial recognition, the Bank and its subsidiaries shall measure the allowance for impairment using the lifetime expected credit losses.

In order to measure expected credit losses, the Bank and its subsidiaries considers the default probability (Probability of default, "PD") of borrowers, and loss given default rate ("LGD") multiplying the exposure at default ("EAD"), taking into account the time value of money as well evaluate 12- month and lifetime loss.

Default probability is the default probability of the borrower (default and credit impairment of financial assets), and the loss given default rate is the rate of loss caused by default by the borrower. The default probability and default loss rate used in the impairment assessment of the credit business are based on internal historical information of each group, and adjusted based on current observable information and forward-looking general economic information.

The Bank and its subsidiaries measures the EAD based on the book value of loans at reporting date. When estimating the 12-month and lifetime expected credit losses of the loan commitments and financial guarantee contracts, the definition of the credit risk increasing significantly and the credit-impaired assets are based on the rules mentioned above. Additionally, in order to determine the EAD used to calculate expected credit loss of off-balance sheet items, the Bank and its subsidiaries adopts the credit conversion factor(CCF) of standardized approach in credit risk which is legislated in the regulation of Proprietary Capital and Risk Capital of Banks.

B. Consideration of forward-looking information

The Bank and its subsidiaries obtains forward-looking information which it takes into consideration when determining whether the credit risk of financial instruments has increased significantly since initial recognition and assessing the expected credit losses. The Bank and its subsidiaries identified the relevant macroeconomic factors for credit risk of each portfolio by analyzing the historically data. These macroeconomic factors include Taiwan GDP (not seasonally adjusted), Taiwan's actual industrial production index, Taiwan's annual growth rate of retail sales, Taiwan's real sales price index, unemployment rate (seasonally adjusted), Cathay National Real Estate Index (national), Taiwan's real consumer price index (Not seasonally adjusted) and Taiwan's annual growth in retail sales or other factors. The various economic factors and their impacts on Probability of Default ("PD") are different depending on the type of financial instruments.

In order to determine the credit risk of investment in debt instruments at amortized cost and at fair value through other comprehensive income has increased significantly, the Bank and its subsidiaries uses the changes of external ratings published by international credit rating agencies as the quantitative indicators, while the assessment of expected credit losses are calculated by using the external ratings, as well as PD and Loss Given Default("LGD"), published by Moody' s. Since the international credit rating agencies have already considered the forward-looking information while evaluating the credit ratings, which the Bank and its subsidiaries considered to be appropriate after its assessment, the credit ratings will be included in the Bank and its subsidiaries' assessment of related expected credit losses.

(9) 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

173

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.(e.g., Small & Medium Enterprise Credit Guarantee Fund, Agricultural Credit Guarantee Fund, Overseas Credit Guarantee Fund)

and the collateral for mitigating potential losses are as follows:

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Exposure
Carrying Allowance (measured at Value of
December 31, 2018 amount impairment amortized cost) collateral
Impairment financial assets:
Receivables
Interest receivable 65,815 41,204 24,611 -
Discounts and loans 16,553,430 4,659,004 11,894,426 15,595,114
Non-accrual loans transferred from non-loan 105,200 54,231 50,969 -
financial assets
Total impairment financial assets $ 16,724,445 4,754,439 11,970,006 15,595,114
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Note: The value of collateral is the real estate appraisal information and credit guarantee agency guarantee amount levied by the Bank and its subsidiaries' credit assets.

(11) Credit risk concentration

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:

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A. By industry

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

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December 31, 2018 December 31, 2017
Industry Amount % Amount %
Private business $ 680,785,977 62.58% 632,336,673 56.26%
Public business 39,994,081 3.67% 18,230,026 1.62%
Government institution 42,745,443 3.93% 154,558,889 13.75%
Nonprofit organization 3,235,117 0.30% 3,404,583 0.30%
Individual 288,709,795 26.54% 281,987,758 25.09%
Foreign financial institution 12,772,131 1.17% 12,030,852 1.07%
Foreign non-financial institution 19,680,400 1.81% 21,426,997 1.91%
Total $ 1,087,922,944 100.00% 1,123,975,778 100.00%
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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, 2018 December 31, 2017
Area Amount % Amount %
Domestic $ 1,055,470,413 97.02% 1,090,517,929 97.02%
Foreign 32,452,531 2.98% 33,457,849 2.98%
Total $ 1,087,922,944 100.00% 1,123,975,778 100.00%
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C. By collateral

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

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December 31, 2018 December 31, 2017
Collateral Amount % Amount %
Unsecured $ 248,476,152 22.84% 336,350,132 29.92%
Stock 9,232,197 0.85% 8,941,574 0.80%
Bond 19,051,511 1.75% 15,024,111 1.34%
Real estate 672,375,170 61.80% 626,803,813 55.77%
Chattel 12,702,253 1.17% 12,456,604 1.11%
Notes receivable 3,100,812 0.28% 3,834,168 0.34%
Guarantee 113,770,575 10.46% 110,879,350 9.86%
Other 9,214,274 0.85% 9,686,026 0.86%
Total $ 1,087,922,944 100.00% 1,123,975,778 100.00%
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Note: Secured credit are categorized in its respective item per the type of the collaterals. Non-secured credit (no collateral provided) 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.

(12) Maximum credit risk exposure
A. The maximum credit exposure of the assets in the consolidated financial statement is

approximately 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, 2018 December 31, 2017
Loan commitment signed and irrevocable $ 104,313,061 100,285,316
Irrevocable credit card loan commitment 29,329,058 29,541,077
Signed but not used L/C credit amount 8,830,536 10,243,024
Various guarantee proceeds 18,362,275 15,067,259
Total $ 160,834,930 155,136,676
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The Management of the Bank and its subsidiaries evaluated the credit risk exposure and believed that it is able to continuously control and minimize the off-balance-sheet credit risk exposure due to its strict appraisal process and regular subsequent examination.

175

a. Credit quality analysis of discounts and loans, receivables, guarantee and commitments

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Lifetime ECL －
12-month ECL Lifetime ECL － not impaired impaired
December 31, 2018 Excellent Good Medium Acceptable Under standard No rating Subtotal Excellent Good Medium Acceptable Under standard No rating Subtotal High risk Allowance Total
impairment
Receivable
Credit card $ 546,365 130,485 268,846 39,017 8,732 298,288 1,291,733 1,972 613 3,183 1,026 2,080 - 8,874 - 3,439 1,297,168
Acceptances receivable 536,265 431,071 248,116 67,306 - 122,030 1,404,788 - 513 6,578 - - - 7,091 - 14,214 1,397,665
Accounts receivable factoring - - - - - 566,451 566,451 - - - - - - - - 5,665 560,786
Other receivables 293,606 1,522,169 311,620 53,250 9,029 2,825,043 5,014,717 351 491 1,727 1,515 2,404 33,998 40,486 65,815 112,412 5,008,606
Discounts and loans
Private banking 109,714,063 102,082,939 70,464,120 4,278,416 1,585,150 2,614,256 290,738,944 85,992 110,913 308,885 162,536 229,961 6,195 904,482 3,305,807 3,400,597 291,548,636
Corporate banking 173,049,850 271,957,972 191,589,607 49,334,606 4,071,360 88,236,547 778,239,942 13,919 37,688 172,299 336,415 925,825 - 1,486,146 13,247,623 9,633,554 783,340,157
Other financial assets
Exchange bills - - - - - 20 20 - - - - - - - - - 20
Non-accrual loans transferred - - - - - - - - - - - - - - 105,200 87,249 17,951
from non- loan financial
assets
Total $ 284,140,149 376,124,636 262,882,309 53,772,595 5,674,271 94,662,635 1,077,256,595 102,234 150,218 492,672 501,492 1,160,270 40,193 2,447,079 16,724,445 13,257,130 1,083,170,989
Guarantee and commitments $ 24,354,317 10,928,309 10,963,731 1,610,303 365,707 112,194,037 160,416,404 44,469 18,621 88,434 23,137 47,438 - 222,099 196,427 289,136 160,545,794
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b. Debt instrument

	12-month ECL	12-month ECL	12-month ECL	12-month ECL	12-month ECL	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－not impaired	Lifetime ECL－ impaired	Lifetime ECL－ impaired
December 31, 2018	Investment	Sub investment	High risk	No rating	Subtotal	Investment	Sub investment	High risk	No rating		Subtotal	High risk		Total	Accumulated impairment (Note)
Fair value through other comprehensive proft or loss- bonds Overseas bonds NT bonds Debts investment of measured at amortized cost Overseas bonds NT bonds Certifcates of deposit with the Central Bank Negotiable certifcates of deposit Total															1,910 31,855 18,115 26,126 48,771 116 126,893
	$ 11,764,869	-	-	-	11,764,869	-	-	-	-		-	-		11,764,869
	53,643,189	-	-	-	53,643,189	-	-	-	-		-	-		53,643,189

	41,889,974	-	-	-	41,889,974	-	-	-	-		-	-		41,889,974
	54,151,974	-	-	-	54,151,974	-	-	-	-		-	-		54,151,974
	165,150,000	-	-	-	165,150,000	-	-	-	-		-	-		165,150,000
	371,676	-	-	-	371,676	-	-	-	-		-	-		371,676
	$ 326,971,682	-	-	-	326,971,682	-	-	-	-		-	-		326,971,682
	Note: The cumulative impairment of the bond which measured at fair value through other comprehensive proft or loss is recognized as other equity. C. The Maximum credit risk exposure for financial instruments are not subject to Impairment regulations are as follows: December 31, 2018 Maximum credit risk exposure Collateral Enhancement of other credit Financial assets at fair value through profit or loss －Linked deposits $ 1,506,135 - - －Debt investments 403,572 - - －Commercial papers 4,581,217 - - －Listed and OTC stocks 48,910 - - －Benefciary certifcates 67,080 - - －Derivative instrument 327,690 176,599 627,412
							Maximum credit risk exposure			Collateral			Enhancement of other credit
							$ 1,506,135 403,572 4,581,217 48,910 67,080 327,690			- - - - - 176,599			- - - - - 627,412

Note: The cumulative impairment of the bond which measured at fair value through other comprehensive profit or loss is recognized as other equity.

C. The Maximum credit risk exposure for financial instruments are not subject to Impairment

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(13) Changes in the expected credit losses of the Bank and its subsidiaries

A. Receivables

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For the year ended December 31, 2018
Impairment difference of
"Regulations Governing
the Procedures for
Banking Institutions to
Evaluate Assets and Deal
Lifetime ECL － Lifetime ECL － with Non- Performing and
12-month ECL not impaired impaired Impaired (IFRS9) Non- Accrual Loans " Total
Beginning balance $ 37,773 3,565 26,086 67,424 43,792 111,216
Changes in financial instruments that
have been identified at the beginning
of the period ：
－ Transfer to 12-months ECL 139 (114 ) (25 ) - -
－ Transfer to lifetime ECL (1,958 ) 2,010 (52 ) - -
－ Transfer to to the credit- impaired
financial assets (233 ) (43 ) 116 (160 ) (160 )
－
The financial assets that have been
derecognized (8,859 ) (27 ) (11,328 ) (20,214 ) (20,214 )
New financial assets originated or
purchased 19,921 127 6,304 26,352 26,352
Write-off - - (16,607 ) (16,607 ) (16,607 )
Other changes (8,319 ) 7,290 36,710 35,681 35,681
Impairment difference of "Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and
Deal with Non-Performing and Non-
Accrual Loans " - - - - (538 ) (538 )
Ending balance $ 38,464 12,808 41,204 92,476 43,254 135,730
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B. Discounts and loans

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For the year ended December 31, 2018
Impairment difference of
"Regulations Governing
the Procedures for
Banking Institutions to
Evaluate Assets and Deal
Lifetime ECL － Lifetime ECL － with Non- Performing and
12-month ECL not impaired impaired Impaired (IFRS9) Non- Accrual Loans " Total
Beginning balance $ 2,277,834 32,442 3,323,101 5,633,377 6,469,695 12,103,072
Changes in financial instruments that
have been identified at the beginning
of the period ：
－ Transfer to 12-months ECL 12,113 (2,007 ) (10,106 ) - -
－ Transfer to lifetime ECL (2,330 ) 12,155 (9,825 ) - -
－ Transfer to to the credit- impaired
financial assets (15,454 ) (12,239 ) 27,693 - -
－
The financial assets that have been
derecognized (1,319,687 ) (6,169 ) (556,996 ) (1,882,852 ) (1,882,852 )
New financial assets originated or
purchased 1,398,612 4,163 1,222,628 2,625,403 2,625,403
Write-off - - (2,596,896 ) (2,596,896 ) (2,596,896 )
Other changes 423,289 38,071 3,259,405 3,720,765 3,720,765
Impairment difference of "Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and
Deal with Non-Performing and Non-
Accrual Loans " - - - - (935,341 ) (935,341 )
Ending balance $ 2,774,377 66,416 4,659,004 7,499,797 5,534,354 13,034,151
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177

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For the year ended December 31, 2018
Impairment difference of
"Regulations Governing
the Procedures for
Banking Institutions to
Evaluate Assets and Deal
Lifetime ECL － Lifetime ECL － with Non- Performing and
12-month ECL not impaired impaired Impaired (IFRS9) Non- Accrual Loans " Total
Beginning balance $ - - 55,668 55,668 33,457 89,125
Changes in financial instruments that
have been identified at the beginning
of the period ：
－ Transfer to to the credit- impaired
financial assets - - 160 160 160
－
The financial assets that have been
- -
derecognized (13 ) (13 ) (13 )
New financial assets originated or
purchased - - 37,683 37,683 37,683
Write-off - - (39,267 ) (39,267 ) (39,267 )
Impairment difference of "Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and
Deal with Non-Performing and Non-
Accrual Loans " - - - - (439 ) (439 )
Ending balance $ - - 54,231 54,231 33,018 87,249
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D. Guarantee and commitments

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For the year ended December 31, 2018
Impairment difference of
"Regulations Governing
the Procedures for
Banking Institutions to
Evaluate Assets and Deal
Lifetime ECL － Lifetime ECL － with Non- Performing and
12-month ECL not impaired impaired Impaired (IFRS9) Non- Accrual Loans " Total
Beginning balance $ 80,439 105 37,541 118,085 85,703 203,788
Changes in financial instruments that
have been identified at the beginning
of the period ：
－ Transfer to 12-months ECL 36 (36 ) - - -
－ Transfer to lifetime ECL (304 ) 304 - - -
－ Transfer to to the credit- impaired
financial assets (20 ) (3 ) 23 - -
－
The financial assets that have been
derecognized (25,702 ) (39 ) (283 ) (26,024 ) (26,024 )
New financial assets originated or
purchased 46,732 77 712 47,521 47,521
Other changes 4,960 10 (9,470 ) (4,500 ) (4,500 )
Impairment difference of "Regulations
Governing the Procedures for Banking
Institutions to Evaluate Assets and
Deal with Non-Performing and Non-
Accrual Loans " - - - - 68,351 68,351
Ending balance $ 106,141 418 28,523 135,082 154,054 289,136
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E. Debts investment

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For the year ended December 31, 2018
Lifetime ECL － not Lifetime ECL －
12-month ECL impaired impaired Total
Beginning balance $ 98,052 - - 98,052
Added 84,844 - - 84,844
- -
Derecognition (51,475 ) (51,475 )
Other changes (4,528 ) - - (4,528 )
Ending balance $ 126,893 - - 126,893
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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

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Not overdue and not impair ent amount Loss pro vided (D)
Without
Overdue but Impaired With objective objective Net Amount
Under Subtotal not impaired amount Total evidence of evidence of (A)+(B)+
December 31, 2017 Excellent Good Medium Acceptable standard No rating (A) (B) (C) (A)+(B)+ (C) impairment impairment (C)-(D)
Receivable
-Credit card $ 360,165 257,699 224,566 107,764 7,744 290,598 1,248,536 12,786 - 1,261,322 - 2,906 1,258,416
-Other 647,362 1,944,782 251,796 1,941 - 4,325,435 7,171,316 - 69,966 7,241,282 40,223 64,631 7,136,428
Discounts and loans 242,043,773 348,959,420 260,885,564 60,456,908 12,037,651 180,421,547 1,104,804,863 5,254,606 13,916,309 1,123,975,778 3,014,849 9,143,164 1,111,817,765
Other financial assets - 135 - - - - 135 7 208,339 208,481 84,410 1 124,070
Total $ 243,051,300 351,162,036 261,361,926 60,566,613 12,045,395 185,037,580 1,113,224,850 5,267,399 14,194,614 1,132,686,863 3,139,482 9,210,702 1,120,336,679
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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.

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

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December 31, 2017 Excellent Good Medium Acceptable Under standard No rating Total
Private banking
Secured $ 82,168,276 99,519,055 72,240,137 7,749,168 3,910,144 949,765 266,536,545
Non-secured 1,596,472 3,561,134 5,770,439 717,977 259,144 33,840 11,939,006
Corporate banking
Government and public institution - 8,500,026 - 9,730,000 - 154,546,400 172,776,426
Financial institution 445,200 9,783,651 2,925,696 1,056,286 - - 14,210,833
Margin loans receivable - - - - - 2,341,425 2,341,425
Large Enterprise- credit and 56,423 127,688 61,838 50,808 1,465 - 298,222
guarantee fund
Large Enterprise-secured 53,936,174 12,548,765 8,863,437 781,039 1,124,643 13,400 77,267,458
Large Enterprise-unsecured 28,442,656 40,900,796 17,435,848 3,561,199 - 2,648,212 92,988,711
Medium and small enterprises- 8,107,965 31,059,909 39,542,324 3,893,304 701,471 125,077 83,430,050
credit and guarantee fund
Medium and small enterprises- 54,334,619 120,145,035 90,604,804 27,324,111 4,943,616 6,323,051 303,675,236
secured
Medium and small enterprises- 12,955,988 22,813,361 23,441,041 5,593,016 1,097,168 13,440,377 79,340,951
unsecured
Total $ 242,043,773 348,959,420 260,885,564 60,456,908 12,037,651 180,421,547 1,104,804,863
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179

C. Credit quality analysis of security investments

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Not overdue and impaired position Overdue but Impairment Total Loss Net amount
Sub not impaired (A)+(B)+
December 31, 2017 Investment investment High risk No rating Subtotal (A) position (B) position (C) (A)+(B)+(C) provided (D) (C)- (D)
Financial assets at fair value through profit or loss
-Overseas bonds $ 148,483 - - 89,169 237,652 - - 237,652 - 237,652
Available-for-sale financial assets-net
-Overseas bonds 7,447,231 - - - 7,447,231 - - 7,447,231 - 7,447,231
-'NT bonds 56,161,047 - - - 56,161,047 - - 56,161,047 - 56,161,047
Hold-to-maturity financial assets-net
-Overseas bonds 29,462,683 - - - 29,462,683 - - 29,462,683 - 29,462,683
-'NT bonds 49,174,400 - - - 49,174,400 - - 49,174,400 - 49,174,400
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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. N ¬ o 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, 2017
within 1 month 1~3 months over 3 months Total
Account receivables
-Credit card $ 4,709 8,009 68 12,786
Discounts and loans
Private banking
-Secured 1,628,880 755,624 - 2,384,504
-Unsecured 77,463 12,041 - 89,504
Corporate banking
-Large enterprise-unsecured 231,579 - - 231,579
-Medium and small enterprises- credit 431,435 109,536 - 540,971
and guarantee fund
-Medium and small enterprises- 1,637,361 41,399 - 1,678,760
secured
-Medium and small enterprises- 329,288 - - 329,288
unsecured
Other financial assets - Exchange bills 7 - - 7
negotiated
Total $ 4,340,722 926,609 68 5,267,399
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A. Discounts and loans

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December 31, 2017
Item Discounts and loans Allowance for bad debts
With objective evidence of impairment
Individual assessment $ 9,175,584 1,526,757
Collective assessment
Government and public institution 12,489 12,489
Large enterprise- credit and guarantee fund 677 677
Medium and small enterprises-credit and guarantee fund 2,110,157 566,066
Medium and small enterprises-secured 445,903 379,086
Medium and small enterprises-unsecured 67,484 35,018
Private banking-secured 1,914,114 393,744
Private banking-unsecured 188,400 100,003
Preliminary negotiation projects 1,501 1,009
Subtotal 13,916,309 3,014,849
Without objective evidence of impairment
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December 31, 2017
Item Discounts and loans Allowance for bad debts
Collective assessment
Government and public institution $ 172,776,426 164,688
Financial institution 14,210,833 13,546
Margin loans receivables 2,341,425 2,232
Large enterprise- credit and guarantee fund 298,222 17,226
Large enterprise secured 77,267,458 595,852
Large enterprise-unsecured 93,220,290 1,800,673
Medium and small enterprises-credit guarantee fund 83,971,021 1,435,548
Medium and small enterprises-secured 305,353,996 3,434,854
Medium and small enterprises-unsecured 79,670,239 1,014,982
Private banking-secured 268,921,049 600,879
Private banking-unsecured 12,028,510 62,684
Subtotal 1,110,059,469 9,143,164
Total $ 1,123,975,778 12,158,013
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B. Receivables

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December 31, 2017
Item Receivables Allowance for bad debts
With objective evidence of impairment
Individual assessment $ 45,871 30,834
Collective assessment 24,095 9,389
Subtotal 69,966 40,223
Without objective
Collective assessment
Credit card proceeds receivable 1,261,322 2,906
Accounts receivable 577,647 15,589
Installment accounts receivable and rents receivable 1,184,612 17,318
Other receivables 248,192 1,745
Acceptances receivable 1,694,044 16,940
Accounts receivable factoring 512,299 5,123
Notes receivable 802 -
Interest receivable 2,953,720 7,916
Subtotal 8,432,638 67,537
Total $ 8,502,604 107,760
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December 31, 2017
Item Other financial assets Allowance for bad debts
With objective evidence of impairment
Individual assessment $ 147,423 1,250
Collective assessment
Guarantee, acceptance and other advances 12,081 63,670
Credit card 48,835 19,490
Subtotal 208,339 84,410
Without objective evidence of impairment
Collective assessment
Exchange bills negotiated 142 1
Total $ 208,481 84,411
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(17) 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 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

181

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

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

A. Loan quality:

Unit ： In Thousands of New Taiwan Dollars, %

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Month/Year December 31, 2018
Non-performing Non-performing Allowance for
Items loans Total loans loan ratio credit losses Coverage ratio
Corporate Secured 1,535,013 489,854,376 0.31% 5,777,173 376.36%
finance Unsecured 507,030 312,809,178 0.16% 3,856,381 760.58%
Residence mortgages(Note 4) 533,982 148,166,073 0.36% 1,762,103 329.99%
Cash cards - 30 -% - -%
Consumer
finance Microcredit(Note 5) 14,358 835,206 1.72% 17,130 119.31%
Others Secured 686,075 126,434,434 0.54% 1,496,212 218.08%
(Note 6) Unsecured 31,053 9,823,647 0.32% 125,152 403.03%
total loan business 3,307,511 1,087,922,944 0.30% 13,034,151 394.08%
Allowance for Ratio of allowance
Overdue loans Total receivables Overdue ratio doubtful accounts to overdue loans
Credit cards business 1,701 1,342,892 0.13% 27,773 1,632.75%
Account receivable factoring-without recourse - 566,451 -% 5,665 -%
(Note 7)
Month/Year December 31, 2017
Non-performing Non-performing Allowance for
Items loans Total loans loan ratio credit losses Coverage ratio
Corporate Secured 2,210,090 459,502,261 0.48% 4,883,523 220.96%
finance Unsecured 502,548 386,586,608 0.13% 4,280,256 851.71%
Residence mortgages(Note 4) 559,849 144,878,539 0.39% 1,543,058 275.62%
Cash cards - 83 -% - -%
Consumer
finance Microcredit(Note 5) 15,497 921,674 1.68% 18,114 116.89%
Others Secured 369,239 121,235,830 0.30% 1,278,420 346.23%
(Note 6) Unsecured 54,400 10,850,783 0.50% 154,642 284.27%
total loan business 3,711,623 1,123,975,778 0.33% 12,158,013 327.57%
Allowance for Ratio of allowance
Overdue loans Total receivables Overdue ratio doubtful accounts to overdue loans
Credit cards business 1,778 1,310,157 0.14% 22,396 1,259.62%
Account receivable factoring-without recourse - 512,299 -% 5,123 -%
(Note 7)
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Note 1 Non-performing loans represent the amount of overdue loans as reported in accordance with the "Regulations on the Procedures for Banking Institutions to Evaluate Assets and Deal with Past Due/Non- performing Loans". The credit card overdue loans represent the amount of overdue loans as reported in accordance with Jin-Kuan-Yin-(4)-Zi No. 0944000378, dated July 6, 2005.
Note 2 Non-performing loan ratio = Non-performing loans ÷ total loans; Credit card delinquency ratio = Overdue receivables ÷ balance of receivables
Note 3 Coverage ratio for loans = allowance for credit losses ÷ non- performing loans; Coverage ratio for credit card business = allowance for credit losses ÷ overdue receivables.
Note 4 For residential mortgage loans, a borrower provides his/her (or spouse' s or minor child' s) house as collateral in full and pledges it to the financial institution for the purpose of obtaining funds to purchase property and to construct or repair a house.
credit cards or cash cards.
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

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not to compensate the loss.

B. Overdue loans and receivables exempted from reporting

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December 31, 2018 December 31, 2017
Loans may be exempted Receivables may be Loans may be exempted Receivables may be
from reporting as a exempted from reporting as from reporting as a exempted from reporting as
non-performing loan overdue receivables non-performing loan overdue receivables
Pursuant to a contract under $ 1,305 4,139 2,016 5,636
a debt negotiation plan
Pursuant to a contract under 76,801 36,408 83,319 41,422
a debt liquidation plan and a
debt relief plan
Total $ 78,106 40,547 85,335 47,058
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Note 1: 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 2: In accordance with Jin-Kuan-Yin-(1)-Zi No. 09700318940, dated September 15, 2008, a bank is required to make supplemental disclosure of credit information once debtors apply for pre-negotiation, relief and liquidation under the "Consumer Debt Clearance Act."

C. Concentration of credit extensions

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Unit ： In Thousands of New Taiwan Dollars, %
December 31, 2018
Ranking Group enterprise Credit amount Credit amount to equity ratio (%)
1 A company. (Railway transportation) 26,900,374 31.70%
2 B group. (Steel rolling and extruding ) 8,830,249 10.41%
3 C group. (Real estate for sale and rental with own or leased property) 8,327,022 9.81%
4 D group. (Computer manufacturing) 6,796,732 8.01%
5 E group. (Real estate development) 6,645,072 7.83%
6 F group. (Other holding companies) 5,918,472 6.97%
7 G group. (Chemical raw materials manufacturing) 5,379,013 6.34%
8 H group. (Real estate development)) 4,311,031 5.08%
9 I group. (Real estate for sale and rental with own or leased property) 4,173,592 4.92%
10 J group. (Steel smelting) 4,153,903 4.90%
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December 31, 2017
Ranking Group enterprise Credit amount Credit amount to equity ratio (%)
1 A company. (Railway transportation) 27,877,573 36.77%
2 B group. (Steel rolling and extruding) 8,677,737 11.45%
3 C group. (Real estate for sale and rental with own or leased property) 7,457,330 9.84%
4 E group. (Real estate development) 6,659,072 8.78%
5 K group. (Integrated circuits manufacturing) 6,000,000 7.91%
6 G group. (Chemical raw materials manufacturing) 5,750,724 7.58%
7 D group. (Computer manufacturing) 4,990,052 6.58%
8 J group. (Steel smelting) 4,989,104 6.58%
9 F group. (Other holding companies) 4,349,153 5.74%
10 I group. (Real estate for sale and rental with own or leased property) 3,904,010 5.15%
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Note 1 The top ten enterprise groups other than government or stated-owned enterprises are ranked according to their total outstanding credit amount. If the borrowers belong to an enterprise group, the aggregate credit balance of the enterprise should be calculated and disclosed as a code number for each such borrower together with an indication of the borrowers' line of business. In addition, if the borrowers are enterprise groups, the enterprise group' s industry sector with the maximum exposure to credit risk in its main industry sector should be disclosed, along with the "class" of the industry, in compliance with the Standard Industrial Classification System of the R.O.C. posted by the Directorate-General of Budget, Accounting and Statistics, Executive Yuan, R.O.C.

Rules for Review of Securities Listings".

Note 3 Consists of loans (foreign currency imports financing, foreign currency export financing, notes discounted, customer overdrafts, short-term unsecured loans, short-term secured loans, receivables from securities lending, medium-term unsecured loans, medium-term secured loans, long-term unsecured loans long-term secured loans, non-performing loans), foreign currency long positions, accounts receivable factoring- without recourse, bankers' acceptance receivable, guarantees receivable.

The Foreign bank should be calculated in the net value of Taiwan branch.

183

(a) Liquidity risk
- 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

  - cope with various demands for capital.

  - 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
- 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.
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

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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, financial assets at fair value through other comprehensive income (available-for-sale financial assets are applicable before the year ended December 31, 2017), Investment in debt instruments at amortized cost( held-to-maturity financial assets are applicable before the year ended December 31, 2017)

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, 2018
0-30 days 31-90 days 91 days-1 year 1-5 years Over 5 years Total
Major matured cash outflow $ 830,674,488 181,906,588 357,705,431 76,020,934 24,580,641 1,470,888,082
Deposits from the Central Bank 316,275 - - - - 316,275
and banks
Overdrafts on banks 812,952 - - - - 812,952
Call loans from the Central Bank 22,460,469 11,591,288 307,350 - - 34,359,107
and banks
Due to the central bank and other 30,735 - 30,735 530,518 - 591,988
banks
Financial liabilities designated at fair value through profit or loss - - - - 9,162,841 9,162,841
Securities sold under repurchase 369,337 626,644 661,725 - - 1,657,706
agreement
Interest payable 325,088 638,988 1,155,732 63,348 51 2,183,207
Deposits transferred from 7,500,000 15,108,258 33,217,951 - - 55,826,209
Chunghwa Post Co., Ltd.
Demand deposits 694,579,076 - - - - 694,579,076
Time deposits 103,697,597 153,933,750 322,112,518 36,124,148 20,635 615,888,648
Remittance 573,379 - - - - 573,379
Financial debentures - - - 36,400,000 11,050,000 47,450,000
Appropriated loan fund 9,580 7,660 219,420 2,902,920 4,347,114 7,486,694
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	December 31, 2017	December 31, 2017	December 31, 2017	December 31, 2017	December 31, 2017	December 31, 2017
	0-30 days	31-90 days	91 days-1 year	1-5 years	Over 5 years	Total
Major matured cash outfow Deposits from the Central Bank and banks Overdrafts on banks Call loans from the Central Bank and banks Due to the central bank and other banks Financial liabilities at fair value through proft or loss Securities sold under repurchase agreement Interest payable Deposits transferred from Chunghwa Post Co., Ltd. Demand deposits Time deposits Remittance Financial debentures Appropriated loan fund	$ 842,064,235	172,333,314	362,842,204	67,423,723	22,385,238	1,467,048,714
	404,736	-	-	-	-	404,736
	1,680,993	-	-	-	-	1,680,993
	24,404,249	8,488,697	1,781,877	-	-	34,674,823
	-	-	-	31,464	-	31,464
	-	-	-	-	3,565,337	3,565,337
	211,737	236,468	657,391	-	-	1,105,596
	345,792	389,195	902,517	65,169	28	1,702,701
	7,647,014	20,136,389	28,985,815	-	-	56,769,218
	712,974,517	-	-	-	-	712,974,517
	93,787,034	143,079,895	330,132,774	35,437,090	9,988	602,446,781
	602,413	-	-	-	-	602,413
	-	-	-	28,000,000	13,000,000	41,000,000
	5,750	2,670	381,830	3,890,000	5,809,885	10,090,135

185

  - The derivative instruments of the Bank and its subsidiaries whose possession 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

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December 31, 2017
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 $ - - 1,240 1,140 - 2,380
instrument
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The derivative instruments of the Bank' s possession settled by gross amount include the following:
amount, foreign exchange forward contracts and currency swap contracts.

whose possession 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, 2018 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 $ 26,416,112 36,190,587 2,891,375 3,868,099 - 69,366,173
Cash inflow 26,087,200 36,209,231 2,865,909 3,781,737 - 68,944,077
Total cash outflow 26,416,112 36,190,587 2,891,375 3,868,099 - 69,366,173
Total cash inflow 26,087,200 36,209,231 2,865,909 3,781,737 - 68,944,077
Net cash flow $ 328,912 (18,644 ) 25,466 86,362 - 422,096
December 31, 2017 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 $ 59,440,726 20,530,843 5,330,127 4,499,139 - 89,800,835
Cash inflow 58,097,696 20,442,073 5,346,372 4,451,488 - 88,337,629
Total cash outflow 59,440,726 20,530,843 5,330,127 4,499,139 - 89,800,835
Total cash inflow 58,097,696 20,442,073 5,346,372 4,451,488 - 88,337,629
Net cash flow $ 1,343,030 88,770 (16,245 ) 47,651 - 1,463,206
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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, 2018 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total
Issued and irrevocable loan $ 156,603 5,403,482 40,354,160 11,521,819 46,876,997 104,313,061
commitment
Irrevocable credit card loan 3,491 8,674 15,695 59,713 29,241,485 29,329,058
commitment
Issued but not yet executed 3,100,804 4,493,508 754,936 431,297 49,991 8,830,536
letter of credit
Miscellaneous guarantee 18,362,275 - - - - 18,362,275
Total $ 21,623,173 9,905,664 41,124,791 12,012,829 76,168,473 160,834,930
December 31, 2017 0-30 days 31-90 days 91-180 days 181 days to 1 year Over 1 year Total
Issued and irrevocable loan $ 224,055 1,095,821 1,132,840 32,673,322 65,159,278 100,285,316
commitment
Irrevocable credit card loan 3,098 234,098 203,981 52,460 29,047,440 29,541,077
commitment
Issued but not yet executed 3,662,841 5,462,286 698,346 141,046 278,505 10,243,024
letter of credit
Miscellaneous guarantee 15,067,259 - - - - 15,067,259
Total $ 18,957,253 6,792,205 2,035,167 32,866,828 94,485,223 155,136,676
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(6) Maturity analysis of lease contract commitments

The Bank and its subsidiaries only has operating lease contract, operating lease commitment refers to, when the Bank and its subsidiaries 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 and its subsidiaries operating lease contract commitments:

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December 31, 2018 Below 1 year 1-5 years Over 5 years Total
Operating lease expense (lessee) $ 328,756 476,264 65,366 870,386
Operating lease income (lessor) 1,666 2,338 - 4,004
December 31, 2017 Below 1 year 1-5 years Over 5 years Total
Operating lease expense (lessee) $ 375,509 758,419 101,108 1,235,036
Operating lease income (lessor) 1,025 1,389 - 2,414
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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, 2018 Below 1 year 1-5 years Over 5 years Total
Machinery and equipment $ 2,000,216 - - 2,000,216
Communication and transportation equipment 16 - - 16
Lease property 10,111 10,910 - 21,021
Miscellaneous equipment 24 - - 24
Total $ 2,010,367 10,910 - 2,021,277
December 31, 2017 Below 1 year 1-5 years Over 5 years Total
Machinery and equipment $ 714,899 - - 714,899
Communication and transportation equipment 460 - - 460
Lease property 10,068 20,342 - 30,410
Miscellaneous equipment 75 - - 75
Total $ 725,502 20,342 - 745,844
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187

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

A. Maturity analysis in New Taiwan dollars

Unit : In Thousands of New Taiwan Dollars

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December 31, 2018
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 $ 1,386,992,267 142,043,052 117,357,985 158,442,815 154,433,257 103,970,117 710,745,041
capital inflow
Major maturity 1,739,903,414 114,961,489 96,567,905 187,352,640 207,077,947 318,556,969 815,386,464
capital outflow
Gap (352,911,147 ) 27,081,563 20,790,080 (28,909,825 ) (52,644,690 ) (214,586,852 ) (104,641,423 )
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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 $344,259,726.

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December 31, 2017
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 $ 1,364,209,249 125,241,132 130,619,593 128,736,427 176,150,942 169,428,890 634,032,265
capital inflow
Major maturity 1,721,231,342 81,314,262 102,439,479 181,974,118 215,654,621 308,463,480 831,385,382
capital outflow
Gap (357,022,093 ) 43,926,870 28,180,114 (53,237,691 ) (39,503,679 ) (139,034,590 ) (197,353,117 )
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B. Maturity analysis in U.S. dollars

Unit : In Thousands of US Dollars

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December 31, 2018
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 $ 10,656,284 4,816,832 1,872,015 527,466 400,721 3,039,250
capital inflow
Major maturity 11,623,232 3,692,617 2,791,061 1,010,782 1,107,184 3,021,588
capital outflow
Gap (966,948 ) 1,124,215 (919,046 ) (483,316 ) (706,463 ) 17,662
Note: Including commitment of credit agreement and estimates to outflow US$1,152,522.
December 31, 2017
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 $ 10,164,920 5,444,707 1,902,732 467,530 365,842 1,984,109
capital inflow
Major maturity 11,212,632 3,524,706 2,276,744 938,951 996,588 3,475,643
capital outflow
Gap (1,047,712 ) 1,920,001 (374,012 ) (471,421 ) (630,746 ) (1,491,534 )
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(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.

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(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.
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.

189

b. Applicable scope
and involve in foreign currencies.
c. Purpose for foreign exchange risk management
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.
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 influence 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.

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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

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). The demand will be executed after approved by the board of directors.
- 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. And the investment gains or losses shall report to the board of directors (executive directors) regularly for future reference.

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

191

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

c. Purpose of interest rate risk management
- 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 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.
- 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.

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(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 interestrate-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:

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.

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(7) Foreign exchange risk disclosure and sensitivity analysis

A. Foreign exchange risk exposure

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Significant net positions of foreign currencies (Market risk)
December 31, 2018
Currency Foreign currency amount NT$ amount
USD $ 470,443 14,459,066
JPY 2,965,336 822,584
CNY 135,296 604,638
AUD 16,208 350,984
EUR 3,495 122,954
Significant net positions of foreign currencies (Market risk)
December 31, 2017
Currency Foreign currency amount NT$ amount
USD $ 353,797 10,500,695
EUR 55,756 1,976,550
JPY 2,063,416 543,297
AUD 23,110 534,650
CNY 28,235 128,441
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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, 2018
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 $ 10,400,702 30.7350 319,665,576 9,815,937 30.7350 301,692,824
AUD 4,113,296 21.6550 89,073,425 4,061,406 21.6550 87,949,747
CNY 8,922,386 4.4690 39,874,143 8,717,386 4.4690 38,957,998
HKD 5,947,321 3.9230 23,331,340 5,666,020 3.9230 22,227,796
JPY 41,701,989 0.2774 11,568,132 40,269,290 0.2774 11,170,701
EUR 303,587 35.1800 10,680,191 303,677 35.1800 10,683,357
ZAR 4,782,950 2.1200 10,139,854 4,784,213 2.1200 10,142,532
GBP 40,606 38.9000 1,579,573 40,654 38.9000 1,581,441
NZD 61,409 20.6300 1,266,868 62,555 20.6300 1,290,510
CAD 45,171 22.5800 1,019,961 45,227 22.5800 1,021,226
CHF 6,529 31.1650 203,476 6,595 31.1650 205,533
SGD 5,427 22.4400 121,782 5,492 22.4400 123,240
Other (Note) - - 84,570 - - 91,209
Non-monetary Financial assets Non-monetary Financial liabilities
USD 556 30.7350 17,089 - - -
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Note: Consolidated disclosure is applied for other currencies not over $100,000.

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December 31, 2017
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 $ 9,787,378 29.6800 290,489,374 9,398,630 29.6800 278,951,337
AUD 3,851,446 23.1350 89,103,203 3,816,093 23.1350 88,285,312
CNY 7,131,376 4.5490 32,440,628 6,953,085 4.5490 31,629,584
HKD 6,306,122 3.7960 23,938,039 6,120,017 3.7960 23,231,585
JPY 41,354,855 0.2633 10,888,733 39,592,813 0.2633 10,424,788
EUR 520,113 35.4500 18,438,006 519,947 35.4500 18,432,121
ZAR 4,233,471 2.3900 10,117,996 4,232,608 2.3900 10,115,933
GBP 22,824 39.9300 911,362 22,836 39.9300 911,841
NZD 66,983 21.0700 1,411,332 66,913 21.0700 1,409,857
CAD 57,552 23.6300 1,359,954 57,570 23.6300 1,360,379
SGD 10,317 22.2000 229,037 10,396 22.2000 230,791
Other (Note) - - 137,744 - - 146,609
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Note: Consolidated disclosure is applied for other currencies not over $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, 2018
Depreciate by 1% Appreciate by 1%
Currency Income Equity Income Equity
USD $ 23,357 (53,055 ) (23,357 ) 53,055
AUD 7,318 (15,365 ) (7,318 ) 15,365
HKD 3,050 (14,263 ) (3,050 ) 14,263
JPY 5,690 (4,431 ) (5,690 ) 4,431
GBP 100 - (100 ) -
SGD 14 - (14 ) -
ZAR 24 - (24 ) -
SEK 22 - (22 ) -
CHF 21 - (21 ) -
CAD 40 - (40 ) -
THB 44 - (44 ) -
EUR (153 ) - 153 -
NZD 229 - (229 ) -
CNY (1,334 ) - 1,334 -
Total $ 38,422 (87,114 ) (38,422 ) 87,114
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195

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December 31, 2017
Depreciate by 1% Appreciate by 1%
Currency Income Equity Income Equity
USD $ 74,477 (47,576 ) (74,477 ) 47,576
AUD 8,052 (12,677 ) (8,052 ) 12,677
HKD 2,898 (10,011 ) (2,898 ) 10,011
JPY 5,286 (4,984 ) (5,286 ) 4,984
GBP 8 - (8 ) -
SGD 18 - (18 ) -
ZAR (24 ) - 24 -
SEK 4 - (4 ) -
CHF 57 - (57 ) -
CAD 66 - (66 ) -
THB 28 - (28 ) -
EUR (140 ) - 140 -
NZD (31 ) - 31 -
CNY (23,943 ) - 23,943 -
Total $ 66,756 (75,248 ) (66,756 ) 75,248
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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, 2018
Currency Interest rate increases by 1 bp Interest rate decreases by 1 bp
Income Equity Income Equity
Trading book
TWD $ - (4,175 ) - 4,175
Banking book
TWD - (50,411 ) - 50,411
USD 34 (12,593 ) (34 ) 12,593
AUD - (682 ) - 682
HKD - (20 ) - 20
CNY - (495 ) - 495
ZAR - (191 ) - 191
Total $ 34 (68,567 ) (34 ) 68,567
December 31, 2017
Currency Interest rate increases by 1 bp Interest rate decreases by 1 bp
Income Equity Income Equity
Trading book
TWD $ 32 (9,936 ) (32 ) 9,936
Banking book
TWD - (56,530 ) - 56,530
USD 47 (4,058 ) (47 ) 4,058
AUD - (192 ) - 192
ZAR - (16 ) - 16
HKD - (95 ) - 95
CNY - (277 ) - 277
Total $ 79 (71,104 ) (79 ) 71,104
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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, 2018
Effect on NII in 1 year Effect on EVE in 1 year
Scenario TWD USD TWD USD
Interest rate increases by 100 bp 2,721,539 (17,175 ) (1,309,829 ) (30,545 )
Interest rate decreases by 100 bp (5,609,550 ) 6,550 1,726,999 34,423
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Scenario	December 31, 2017	December 31, 2017	December 31, 2017	December 31, 2017
	Effect on NII in 1 year		Effect on EVE in 1 year
	TWD	USD	TWD	USD
Interest rate increases by 100 bp Interest rate decreases by 100 bp	3,165,803 (5,986,102 )	(16,652 ) (2,208 )	(1,292,836 ) 2,104,453	(11,892 ) 12,402

(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, 2018
Change
Currency Income Equity
Equity security price increases by 1 % TWD 489 -
USD 6 -
Equity security price decreases by 1 % TWD (489 ) -
USD (6 ) -
December 31, 2017
Change
Currency Income Equity
Equity security price increases by 1 % TWD 102 14,301
Equity security price decreases by 1 % TWD (102 ) (14,301 )
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B. Value at Risk of equity security

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For the year ended December 31, 2018
Value at Risk
Average Maximum Minimum
Equity security risk 13,763 5,130 25
For the year ended December 31, 2017
Value at Risk
Average Maximum Minimum
Equity security risk 58,287 80,781 40,227
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(10) Disclosures required by "Regulations Governing the Preparation of Financial Reports by Public 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, 2018
Item 1~90 days 91~180 days 181days~1year over 1 year total
Interest rate-sensitive assets $ 1,094,648,453 7,655,531 23,923,254 157,779,086 1,284,006,324
Interest rate-sensitive liabilities 980,971,467 64,335,404 89,739,637 47,342,431 1,182,388,939
Interest rate sensitivity gap 113,676,986 (56,679,873 ) (65,816,383 ) 110,436,655 101,617,385
Net amount 84,853,019
Ratio of interest rate-sensitive assets to debt (%) 108.59
Ratio of interest rate-sensitive gap to net worth (%) 119.76
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197

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December 31, 2017
Item 1~90 days 91~180 days 181days~1year over 1 year total
Interest rate-sensitive assets $ 1,123,566,515 13,243,882 11,024,511 121,866,618 1,269,701,526
Interest rate-sensitive liabilities 976,655,486 79,970,590 86,725,704 41,204,677 1,184,556,457
Interest rate sensitivity gap 146,911,029 (66,726,708 ) (75,701,193 ) 80,661,941 85,145,069
Net amount 75,817,673
Ratio of interest rate-sensitive assets to debt (%) 107.19
Ratio of interest rate-sensitive gap to net worth (%) 112.30
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Note 1 The banking component refers to the Bank's amount of N.T.dollars and does not include contingent assets or liabilities.

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 ratesensitive liabilities (New Taiwan 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, 2018
Item 1~90 days 91~180 days 181days~1year over 1 year total
Interest rate-sensitive assets $ 3,871,699 444,219 174,371 724,152 5,214,441
Interest rate-sensitive liabilities 5,091,691 569,099 421,251 - 6,082,041
Interest rate sensitivity gap (1,219,992 ) (124,880 ) (246,880 ) 724,152 (867,600 )
Net amount 2,760,795
Ratio of interest rate-sensitive assets to debt (%) 85.74
Ratio of interest rate-sensitive gap to net worth (%) (31.43 )
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December 31, 2017	December 31, 2017	December 31, 2017	December 31, 2017	December 31, 2017	December 31, 2017
Item	1~90 days	91~180 days	181days~1year	over 1 year	total
Interest rate-sensitive assets $ 4,469,367 Interest rate-sensitive liabilities 5,495,210 Interest rate sensitivity gap (1,025,843 ) Net amount Ratio of interest rate-sensitive assets to debt (%) Ratio of interest rate-sensitive gap to net worth (%)	$ 4,469,367	374,144	88,227	410,338	5,342,076
	5,495,210	456,356	318,865	300	6,270,731
	(1,025,843 )	(82,212 )	(230,638 )	410,038	(928,655 )
					2,554,504
					85.19
					(36.35 )

Note 1 The banking component refers to the Bank's amount of U.S.dollars and does not include contingent assets or liabilities.

Note 2 Interest rate-sensitive assets and interest rate-sensitive liabilities refer to the interest yielding assets and interest paying liabilities 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 ratesensitive liabilities (U.S. dollars interest- rate-sensitive assets and U.S. dollars interest-ratesensitive liabilities).

The transactions, relating to transferred financial assets not qualifying for full derecognition, the Bank and its subsidiaries 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 and its subsidiaries' obligation to repurchase the transferred assets for a fixed price at a future date is recognized under liability, for these transactions, the Bank and its subsidiaries can not use,

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interest rate risk and credit risk, the said transferred assets are not fully derecognized.

derecognized.

The Bank and its subsidiaries have 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, 2018
Financial assets that are offset, have an exercisable master netting arrangement or similar agreement
Gross amounts Net amount of Amounts not set off in the balance
of financial financial assets sheet(d)
Item Gross amounts liabilities offset presented in the Financial
of recognized in the balance balance sheet instruments Cash collateral Net amount
financial assets(a) sheet(b) (c)=(a)-(b) (Note) received (e)=(c)-(d)
Derivative financial
instruments $ 121,120 - 121,120 627,412 176,599 (682,891)
December 31, 2018
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 of financial balance sheet(d)
Gross amounts of financial assets liabilities
Item
recognized offset in presented in the Financial
financial the balance balance sheet instruments Cash collateral Net amount
liabilities(a) sheet(b) (c)=(a)-(b) (Note) pledged (e)=(c)-(d)
Derivative financial
instruments $ 95,769 - 95,769 - 608,768 (512,999)
December 31, 2017
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
of financial financial assets sheet(d)
Item Gross amounts liabilities offset presented in the Financial
of recognized in the balance balance sheet instruments Cash collateral Net amount
financial assets(a) sheet(b) (c)=(a)-(b) (Note) received (e)=(c)-(d)
Derivative financial
instruments $ 109,740 - 109,740 - 169,736 (59,996)
December 31, 2017
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 of financial balance sheet(d)
Gross amounts of financial assets liabilities
Item
recognized offset in presented in the Financial
financial the balance balance sheet instruments Cash collateral Net amount
liabilities(a) sheet(b) (c)=(a)-(b) (Note) pledged (e)=(c)-(d)
Derivative financial
instruments $ 63,552 - 63,552 - 76,266 (12,714)
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(AP) 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 finacial assets measured at fair value through other comprehensive income (unrealized gain on available-for-sale financial assets are applicable before the year ended December 31, 2017), 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.
- 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 financial assets measured at fair value through other comprehensive income (unrealized gain on available-for-sale financial assets are applicable before the year ended December 31, 2017), and 50% of the investment on financial related business which is classified in banking book.

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Item December 31, 2018 December 31, 2017
Common stock equity 78,947,036 73,448,764
Other tier 1 capital 13,386,998 14,140,802
Eligible capital
Tier 2 captial 29,797,442 25,396,643
Eligible Capital 122,131,476 112,986,209
Standardized approach 912,764,211 871,996,666
Credit risk Internal ratings-based approach - -
Securitization - -
- -
Basic indicator approach
Risk-weighted Standardized approach/selective 36,971,711 35,136,391
Operational risk
assets standardized approach
- -
Advanced measurement approach
Standardized approach 11,844,063 13,786,563
Market risk
- -
Internal model approach
Total risk-weighted assets 961,579,985 920,919,620
Capital adequacy ratio 12.70% 12.27%
Common stock equity/ Risk-weighted assets ratio 8.21% 7.98%
Tier 1 capital / Risk-weighted assets ratio 9.60% 9.51%
Leverage ratio 5.40% 5.26%
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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".
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)/ Riskweighted assets
Note 6. Leverage ratio = Net Tier 1 capital / Total risk exposure.
quarter.

(AQ) Structured entities that not included in consolidated financial reports

(a) The table below presents the types of structured entities that the Bank and its subsidiaries do not include

The types of structured entities	Nature andpurpose	Interests held by the Bank and its subsidiaries
Private fund	Investing in funds that cannot be freely traded on the open market	Investing in units or limited partnership interests issued bythese funds.
Asset backed securities	Investing in commercial real estate investment trusts	Investing in asset-backed securities issued by entities

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December 31, 2018 December 31, 2017
Private fund $ 50,000 -
Asset backed securities 43,502 -
Total $ 93,502 -
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(c) The carrying amounts of interests held by the Bank and its subsidiaries in these structured entities were
as follows:

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Assets held by the Bank and its subsidiaries December 31, 2018 December 31, 2017
Financial assets at fair value through profit or loss $ 50,000 -
Financial assets at fair value through other comprehensive 43,502 -
income
total $ 93,502 -
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The maximum amount of risk exposure the Bank and its subsidiaries endure to a loss incurred from structured entity equities that are not included in consolidated financial reports is the carrying amount of interests held by the Bank and its subsidiaries.

structured entity equities that are not included in consolidated financial reports.

7. RELATED PARTY TRANSACTIONS

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

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

Name of related party Relationship with the Bank and its subsidiaries
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Name of related party	Relationship with the Bank and its subsidiaries

Bank of Taiwan	Corporate director of the Bank
Ministry of Finance, R.O.C	Corporate director of the Bank
Land Bank of Taiwan	Corporate director of the Bank
Other	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, 2018
Amount %
Bank of Taiwan $ 129,756 0.57
Land Bank of Taiwan 6,036 0.03
Total $ 135,792 0.60
December 31, 2017
Amount %
Bank of Taiwan $ 141,044 0.51
Land Bank of Taiwan 1,250 -
Total $ 142,294 0.51
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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, 2018
Amount %
Land Bank of Taiwan $ 732 1.13
December 31, 2017
Amount %
Land Bank of Taiwan $ 1,496 1.49
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Interest rates are the same as those with regular clients.

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(c) Call loans to banks

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For the years ended
December 31, 2018 Maximum balance December 31, 2018 Interest income Annual interest rate
Bank of Taiwan $ 11,800,740 153,675 8,507 0.17%~3%
Land Bank of Taiwan 4,948,798 - 6,037 1.45%~2.77%
Total $ 16,749,538 153,675 14,544
For the years ended
December 31, 2017 Maximum balance December 31, 2017 Interest income Annual interest rate
Bank of Taiwan $ 8,620,470 - 2,360 0.17%~3.40%
Land Bank of Taiwan 2,884,226 1,929,200 3,789 0.80%~2.62%
Total $ 11,504,696 1,929,200 6,149
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Interest rates are the same as those with regular clients

(d) Call loans from banks

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For the years ended
December 31, 2018 Maximum balance December 31, 2018 Interest Expense Annual interest rate
Bank of Taiwan $ 5,210,241 - 2,978 0.05%~3.3%
Land Bank of Taiwan 10,067,317 - 19,615 0.18%~3.9%
Total $ 15,277,558 - 22,593
For the years ended
December 31, 2017 Maximum balance December 31, 2017 Interest Expense Annual interest rate
Bank of Taiwan $ 9,228,701 - 5,177 0.32%~4.5%
Land Bank of Taiwan 13,580,150 1,484,000 18,690 0.03%~12%
Total $ 22,808,851 1,484,000 23,867
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Interest rates are the same as those with regular clients.

(e) Deposits

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December 31, 2018
Amount %
Others $ 1,149,229 0.09
December 31, 2017
Amount %
Others $ 1,660,259 0.13
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Interest rates are the same as those with regular clients.

(f) Credit

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December 31, 2018
Number of Performing situations Difference from
clients or transaction terms
name of Maximum Ending Performing Non-performing of non-related
Category related party balance balance loan Loans Collaterals parties
Employee consumer 151 808,222 384,533 384,533 - none/real none
loans estate
Self-use residence 123 1,141,682 461,328 461,328 - real estate none
collateral loans
Others Si ○ ○ 726 726 726 - real estate none
Du ○ ○ 7,792 7,705 7,705 - real estate none
Wu ○ ○ 7,179 7,179 7,179 - real estate none
Cho ○ ○ 1,246 1,246 1,246 - real estate none
Chang ○ ○ 1,168 1,142 1,142 - real estate none
Chuang ○ ○ 1,565 1,565 1,565 - real estate none
Huang ○ ○ 5,699 5,699 5,699 - real estate none
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203

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December 31, 2017
Number of Performing situations Difference from
clients or transaction terms
name of Maximum Ending Performing Non-performing of non-related
Category related party balance balance loan Loans Collaterals parties
Employee consumer 129 344,249 320,358 320,358 - none/real none
loans estate
Self-use residence 118 473,764 394,610 394,610 - real estate none
collateral loans
Others Si ○ ○ 294 294 294 - real estate none
Du ○ ○ 7,345 7,345 7,345 - real estate none
Chiang ○ ○ 2,397 1,751 1,751 - real estate none
Liu ○ ○ 1,562 1,326 1,326 - real estate none
Cho ○ ○ 899 768 768 - real estate none
Chang ○ ○ 944 944 944 - real estate none
Lu ○ ○ 1,304 1,207 1,207 - real estate none
Huang ○ ○ 4,472 4,472 4,472 - real estate none
Simpro ○ ○ 1,883 967 967 - non-physical none
collaterals
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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,
2018 2017
Salary and other short-term employee benefit $ 142,217 114,312
Retirement Benefit 1,826 1,760
Total $ 144,043 116,072
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8. PLEDGED ASSETS : Please refer to notes 6(I) and (J) for more details.

9. COMMITMENTS AND CONTINGENCIES

(A) Significant commitments and contingencies were as follows:

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December 31, 2018 December 31, 2017
Marketable securities held for custody $ 14,045,346 13,357,412
Bills collected for others 47,768,037 51,172,708
Bills lent for others 28,686,169 27,951,849
Guarantees and letters of credit 27,192,811 25,310,283
Collaterals received 426 426
Trust liabilities 152,551,326 135,476,558
Travelers' check in custody for sale 59,725 66,423
Items held for custody 4,433,125 4,103,319
Registered government bonds for sale 65,842,800 68,651,600
Registered short-term bills for sale 1,471,796 1,323,800
Guarantee notes payable 26,069,360 27,915,700
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(B) Unrecognized contractual commitments:

As of December 31, 2018 and 2017, major constructions in progress and purchases amounted to $1,095,465 and $559,663 respectively, of which $851,250 and $416,267 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, 2018 and 2017 is as follows:

Trust Balance Sheet

December 31, 2018 and 2017

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Trust Assets December 31, 2018 December 31, 2017
Cash in Bank $ 3,469,268 2,697,388
Stocks 169,514 177,799
Funds 54,862,191 55,582,025
Bonds 233,392 -
Real estate 14,044,203 13,850,725
Securities custody 79,136,066 62,576,450
Other assets 636,692 592,171
Total trust assets $ 152,551,326 135,476,558
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Trust Liabilities December 31, 2018 December 31, 2017
Payables $ 62 113
Securities held for custody 79,136,066 62,576,450
Trust capital 73,366,293 72,858,128
Reserves and accumulated loss (1,775,757 ) (1,933,370 )
Net income 1,824,662 1,975,237
Total trust liabilities $ 152,551,326 135,476,558
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Trust Property Accounts

December 31, 2018 and 2017

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Investment in December 31, 2018 December 31, 2017
Cash in bank $ 3,469,268 2,697,388
Stocks 169,514 177,799
Funds 54,862,191 55,582,025
Bonds 233,392 -
Real estate
Land 10,601,163 11,417,841
Buildings 49,612 51,154
Construction in progress 3,393,428 2,381,730
Securities in custody 79,136,066 62,576,450
Other assets 636,692 592,171
Total $ 152,551,326 135,476,558
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Note: As of December 31, 2018 and 2017, the amounts above included OBU transaction on "foreign currency designated trust funds investment in foreign negotiable securities business" amounting to $945,302 and $748,020, respectively.

205

Trust Income Statement

For the years ended December 31, 2018 and 2017

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For the years ended December 31,
Investment in
2018 2017
Trust Revenue
Interest income $ 6,164 4,759
Realized cpaital gain-fund - 21
Realized capital gain-stock 2,520 1,686
Cash dividend income of common stock 2,174,988 1,865,260
Gains on property transaction 945,568 1,155,050
Other revenue 220 202
Sub-total 3,129,460 3,026,978
Trust Expense
Administrative expenses 54,540 68,913
Postage and phone/fax expense 9 3
Duties 36 -
Realized capital loss-bonds 316 -
Losses on property transaction 1,249,737 982,719
Other expense 135 85
Sub-total 1,304,773 1,051,720
Net income before tax 1,824,687 1,975,258
Income tax expense (25 ) (21 )
Net income after tax $ 1,824,662 1,975,237
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(D) 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 Internationale Compagnie de Commercialisation et d' Investissement SPRL (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. In October 2016, I.C.C.I initiated a case with the Court of Frankfurt in Germany, applied for seizing the bank account in Germany, and the bank lodged guaranty money of EUR $13,200 thousands to the court to rescind the order for attachment. In July 2017, I.C.C.I applied for compulsory execution to the guaranty money, the court has transferred the guaranty money to I.C.C.I. The Bank filed the lawsuit objecting to the debt but the court of Frankfurt in Germany overruled the appeal in November 2018. The Bank is filing an appeal. As of December 31, 2018, the Bank has accrued the compensation of $183,923 and EUR$8,000 thousands.

(E) Among the private equity fund contracts signed by the Bank, the maximum amount of committed investment that has not been invested is

		December 31, 2018		December 31, 2017
New Taiwan Dollar		$ 50,000		-

not yet been delivered.

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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 2018 2017
Operating expense Operating expense
Employee benefit expenses
Salary expense $ 6,343,853 5,902,631
Labor and health insurance expenses 446,028 424,366
Pension expenses 337,231 330,636
Directors remuneration 68,049 46,091
Other employee benefit 1,130,433 756,960
Total employee benefit 8,325,594 7,460,684
Depreciation expenses 373,990 337,771
Amortization expenses 98,793 79,989
Total $ 8,798,377 7,878,444
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The employee numbers amounted to 5,251 and 5,098 people as of December 31, 2018 and 2017, respectively. The number of directors who are not employees amounted to 12 people.

2018 and 2017 were $1,576 and $1,458, respectively.

The average salary expense of the Bank and its subsidiaries for the years ended December 31, 2018 and 2017 were $1,211 and $1,161, respectively.

(B) Profitability

Unit: %

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Item December 31, 2018 December 31, 2017
Before income tax 0.57 0.38
The ratio of return on assets
After income tax 0.48 0.33
Before income tax 11.45 8.00
The ratio of return on equity
After income tax 9.51 6.87
Net income ratio 33.18 24.16
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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 period.

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.

(b) Acquisition of real estate amounting to over $300,000 or 10% of paid-in capital: None.

207

(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.

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Transaction status for the year ended December 31, 2018
Percentage
accounted for
No Trader Counterparty Relationship Account Amount Terms consolidated net
revenue or total
assets
0 TAIWAN BUSINESS Taiwan Business 1 Account 64,344 No difference with -%
BANK, LTD. Bank Insurance Receivables non-related parties
Agency Co., Ltd.
0 TAIWAN BUSINESS Taiwan Business 1 Deposits and 448,863 No difference with 0.03%
BANK, LTD. Bank Insurance remittances non-related parties
Agency Co., Ltd.
0 TAIWAN BUSINESS Taiwan Business 1 Service 1,208,460 No difference with 5.25%
BANK, LTD. Bank Insurance revenue non-related parties
Agency Co., Ltd.
0 TAIWAN BUSINESS Taiwan Business 1 Other net 2,203 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 4,137 No difference with -%
BANK, LTD. Bank Property Receivables non-related parties
Insurance Agency
Co., Ltd.
0 TAIWAN BUSINESS Taiwan Business 1 Deposits and 15,337 No difference with -%
BANK, LTD. Bank Property remittances non-related parties
Insurance Agency
Co., Ltd.
0 TAIWAN BUSINESS Taiwan Business 1 Service 34,101 No difference with 0.15%
BANK, LTD. Bank Property revenue non-related parties
Insurance Agency
Co., Ltd.
0 TAIWAN BUSINESS Taiwan Business 1 Other net 245 No difference with -%
BANK, LTD. Bank Property non-interest non-related parties
Insurance Agency income
Co., Ltd.
0 TAIWAN BUSINESS TBB International 1 Deposits and 153,548 No difference with 0.01%
BANK, LTD. Leasing Co., Ltd. remittances non-related parties
0 TAIWAN BUSINESS TBB International 1 Other net 691 No difference with -%
BANK, LTD. Leasing Co., Ltd. non-interest non-related parties
income
0 TAIWAN BUSINESS TBB Venture 1 Deposits and 195,962 No difference with 0.01%
BANK, LTD. Capital Co., Ltd. remittances non-related parties
0 TAIWAN BUSINESS TBB Venture 1 Other net 59 No difference with -%
BANK, LTD. Capital Co., Ltd. non-interest non-related parties
income
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Note: 1. The meaning of the number is as follows.

(1) Zero stands for the parent company
(2) Subsidiaries are coded from No 1 per respective companies.
There are three kinds of relationships with counterparty:
(1) Parent company to subsidiary
(2) Subsidiary to parent company
(3) Between subsidiaries

statements users: None.

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(B) Information of investees:

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

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

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The cross holding of the Bank and its related
Main parties
Shareholding Investment
Name of investee Location business Book value Number of Total Note
ratio gain (loss) Number
scope prefomat Number of Shareholding
of shares
shares shares ratio
Taiwan Business 2F, No.158, Agent of 100.00% 394,480 384,479 500 - 500 100.00% Already written-
Bank Insurance Songjiang Rd personal off when preparing
Agency Co., Ltd. Taipei City insurance the consolidated
financial
statements
Taiwan Business 2F, No.158, Agent of 100.00% 15,421 9,422 300 - 300 100.00% "
Bank Property Songjiang Rd property
Insurance Taipei City insurance
Agency Co., Ltd
TBB 5F., No.151, Leasing 100.00% 1,406,353 22,722 150,000 - 150,000 100.00% "
International Sec. 4, Nanjing business
Leasing Co., Ltd E. Rd.,Taipei City
TBB Cambodia SMEs and 100.00% 571,486 (28,932) 20 - 20 100.00%
(Cambodia) personal
Microfinance finance
Institution Plc business
TBB Venture 11F, No.30, Investing 100.00% 296,761 (3,239) 30,000 - 30,000 100.00% "
Capital Co., Ltd. Ta-Chang Street, business
Taipei, Taiwan,
R.O.C.
(b) Loans to others:
(Unit : In Thousands of New Taiwan Dollars)
The Guarantee Limited
Main neccessary amount Total limited
Loan Loan Main Related Maximum Ending Actual Range of Dealing Allowance for
NO. loan reason for for amount
from to Account party Amount balance amount intrest rate amount bad debts Name Value
nature short-term individual for loan
loans object
1 Taiwan Shanghal- Entrusted No 63,204 53,666 80,442 6.5%~6.8% 1 80,442 None 471 land, 853,579 351,588 1,406,353
Business Buynow loan building
Bank Electronic- 1~4F,
International Information underground
Leasing Co., Co., Ltd. parking lot
Ltd. B1~B2
2 TBB Chao Financial No 10,000 4,230 10,000 5.5%~7% 2 - To the 56 None - 351,588 1,406,353
International Yang- receivables lender
Leasing Co., International for buying
Ltd. Co., Ltd. goods
2 TBB Argosy seafoods Financial No 30,000 25,112 30,000 5.7%~7.3% 2 - To the 336 None - 351,588 1,406,353
International corporation receivables lender for
Leasing Co., buying
Ltd. goods
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Note1: The meaning of the number is as follows.

(1) Zero stands for issuer.

(2) Investee companies are coded from NO 1 per respective companies.

Note2: The quota / amount is still valid up to now.

Note3: The meaning of the loan nature is as follows.

(1) 1 stands for business dealing.

(2) 2 stands for the necessary for short-term loans.

Note4: Limited amount for individual object ： 25% net value of parent company.

Note5: Total limited amount for loan ： 100% net value of parent company.

209

(c) Endorsements and guarantee for others: None
(d) Acquisition of securities:

(Unit : In Thousands of New Taiwan Dollars)

				At the end of the period	At the end of the period	At the end of the period	At the end of the period	Note
Company acquired	Type and name of the security	Relationship with the security issuer	Account	Number of shares	Carrying amount	Share proportion (Note 2)	Market price (Note 1)
Taiwan Business Bank International 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	-	848,843	100.00%	848,843	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		Investment	Accumulated amount transferred	Investment transferred out or recovered	Investment transferred out or recovered	Accumulated amount transferred from Taiwan, end of the period	The current profit or loss of the investee	Shares directly or indirectly possessed by the Bank	Profit or loss recognized	Ending book value of investment	Investment profit transferred in
	business	Paid-in capital	method	from Taiwan, beginning of the period	Transferred out	Recovered
Taiwan Business Bank , Ltd. Shanghai branch	Banking business	3,910,537 (CNY800 million) (Operating capital)	(e)	3,910,537 (CNY800 million))	-	-	3,910,537 (CNY800 million)	-	Shanghai branch of the Bank, not an investee company	-	4,107,869	None
Taiwan Business Bank , Ltd. Wuhan branch	Banking business	3,942,815 (CNY800 million) (Operating capital)	(e)	3,942,815 (CNY800 million)	-	-	3,942,815 (CNY800 million)	-	Wuhan branch of the Bank, not an investee company	-	3,904,453	"
Taiwan Business Bank International Leasing Co., Ltd.	Leasing business	838,305 (CNY170 million) (Operating capital)	(d)	838,305 (CNY170 million)	-	-	838,305 (CNY170 million)	37,195	100%	37,195	848,843	"

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(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.

(d) Directly invest in a Chinese company.

(e) Other: establish a foreign branch.

(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, end of the period	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)	50,911,811

Note: The investment amount in China of the subsidiary TBB 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. Securities department, Trust department and Other segments don'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 major operating activities of securities department are securities brokerage, financing, ancillary business of futures trading and providing clients a platform for securities investment. The trust department mainly provides customers relevant financial services, including securities review and approval, custodian bank service, new type trust business and specific trust funds investing in domestic or foreign securities. Other segments include all the business of subsidiaries, which main operations are insurance agents, property insurance agents, leasing, financing, and venture capital . 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 year ended December Securities, Trust and Interdepartment
31, 2018 Bank Department others adjustment Total segment
Net interest income $ 16,855,464 339,556 2,856 17,197,876
Non-interest income 5,071,765 1,147,812 (390,506 ) 5,829,071
Net revenue 21,927,229 1,487,368 (387,650 ) 23,026,947
-
Bad debt expenses (750,799 ) (43,335 ) (794,134 )
Operating expense (12,467,785 ) (569,809 ) 3,198 (13,034,396 )
Net income before tax $ 8,708,645 874,224 (384,452 ) 9,198,417
Total assets $ 1,603,542,532 19,153,231 (3,655,308 ) 1,619,040,455
Total liabilities $ 1,521,320,594 13,837,649 (970,807 ) 1,534,187,436
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For the year ended December Securities, Trust and Inter-department
31, 2017 Bank Department others adjustment Total segment
Net interest income $ 15,082,655 342,767 - 15,425,422
Non-interest income 4,777,719 1,038,831 (379,277 ) 5,437,273
Net revenue 19,860,374 1,381,598 (379,277 ) 20,862,695
-
Bad debt expenses (3,003,316 ) (25,395 ) (3,028,711 )
Operating expense (11,455,997 ) (510,025 ) 3,139 (11,962,883 )
Net income before tax $ 5,401,061 846,178 (376,138 ) 5,871,101
Total assets $ 1,565,867,091 21,296,209 (3,069,329 ) 1,584,093,971
Total liabilities $ 1,492,676,963 16,322,727 (723,392 ) 1,508,276,298
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(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:

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

For the years ended December 31
Area 2018 2017
Taiwan $ 7,987,404 4,846,835
USA 236,337 143,868
Hong Kong 438,243 281,177
Australia 387,159 214,760
China 259,700 421,876
Cambodia (28,914 ) (9,233 )
Japan (81,512 ) (28,182 )
Total $ 9,198,417 5,871,101
----- End of picture text -----

Non-current assets:

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

Area December 31, 2018 December 31, 2017
Taiwan $ 19,639,128 17,978,580
USA 40,663 32,812
Hong Kong 27,678 27,236
Australia 15,952 9,630
China 40,328 38,658
Cambodia 38,793 38,436
Japan 54,576 50,712
Total $ 19,857,118 18,176,064
----- 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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7. Independent Auditors' Report for 2018 Individual Financial Statements

Independent Auditors' Report

To the Board of Directors of Taiwan Business Bank, Ltd.:

Opinion

the balance sheets as of December 31, 2018 and 2017, the statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

position of the Bank as of December 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Public Held Banks, and the Regulations Governing the Preparation of Financial Reports by Securities Firms.

Basis for Opinion

We conducted our audit in accordance with the Regulations Governing Auditing and Attestation of Financial Statements of Financial Industry 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 Financial Statements section of our report. We are independent of the Bank 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

audit of the financial statements of the current period. These matters were addressed in the context of our audit of the 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) (E) "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 (AP) "Financial Risk Information" for details of loans impairment, respectively.

The management of the Bank assess its loans to determine the impairment in accordance with IFRS 9. For the credit impaired cases which impairment has occurred since initial recognition, the measurement is based on expected future cash flow. The amount of expected credit loss (ECL) for non-credit impaired cases is evaluated by identifying whether the credit risk has significantly increased at the reporting date. If the credit risk of non-credit impaired cases has not significantly increased, the 12-month expected credit loss should be adopted, if the credit risk of non-credit impaired cases has significantly increased, the lifetime credit loss evaluation should be adopted. Except for the methods mentioned above, the management of the Bank should inspect whether the amount of impairment provision is in compliance with the minimum level required by the authority. Both the future cash flows of credit impaired cases and the main parameters which are used in calculated the non-credit cases, such as probability of default (PD), loss given default (LGD), forwardlooking factors, and the judgments of whether the credit risk has significantly increased, all involved

213

significant judgments and estimations. The movement of related parameters will have significant impact on the assessment of loans impairment. Therefore, the assessment on the impairment of loans has been identified as a key audit matters in our audit.

How the matter was addressed in our audit

Our principal audit procedures included: understanding the methodology used by the management to assess the impairment of loans, and performing the relevant control procedures. For the credit impaired assessment, we conducted sampling tests to evaluate the use of the original effective interest rate, the appropriateness of the recoverable amount of expected future cash flows and value of collateral. For non-credit impaired assessment, we assessed the impairment model adopted by the management and reviewed the appropriated of the calculation of the impairment parameters and verified the completeness of the loans portfolio via sampling. Meanwhile, we assessed the impaired amounts recognized by the management were in compliance with the related regulations issued by authority.

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

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Public Held Banks, and the Regulations Governing the Preparation of Financial Reports by Securities Firms, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Bank's 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 Bank or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including the Audit Committee) are responsible for overseeing the Bank' s financial reporting process.

Auditors' Responsibilities for the Audit of the 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 financial statements.

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 internal control.

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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's 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 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 to cease to continue as a going concern.
disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
in other entities accounted for using the equity method to express an opinion on this financial statements. We are responsible for the direction, sueprvision and performance of the audit. We remain solely responsible for our audit opinion.

From the matters communicated with those charged with governance, we detemined those matters that were of most significance in the audit of the 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 independent auditors' audit report are CHUNG, TAN TAN and LEE, FENG HUI.

KPMG

Taipei, Taiwan (Republic of China) March 26, 2019

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(English Translation of Financial Statements Originally Issued in Chinese)

TAIWAN BUSINESS BANK, LTD.

Balance Sheets

December 31, 2018 and 2017

(expressed in thousands of New Taiwan dollars)

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December 31, 2018 December 31, 2017
Assets Amount ％ Amount ％
11000 Cash and cash equivalents $ 45,706,331 3 51,066,527 4
11500 Due from the Central Bank and call loans to 86,980,274 5 101,342,356 6
banks
12000 Financial assets at fair value through profit or 6,934,604 - 1,061,789 -
loss
12100 Financial assets at fair value through other 73,164,201 5 - -
comprehensive income
12200 Investment in debt instruments at amortized cost 261,470,496 16 - -
12500 Securities purchased under resell agreements 2,386,518 - 3,998,104 -
13000 Receivables － net 43,698,543 3 22,353,991 2
13200 Current Income tax assets 64,842 - 129,435 -
13500 Discounts and loans － net 1,074,627,748 67 1,111,559,969 70
14000 Available-for-sale financial assets － net - - 66,233,836 4
14500 Held-to-maturity financial assets － net - - 202,967,083 13
15000 Investments measured by equity method － net 2,684,501 - 2,345,937 -
15500 Other financial assets － net 17,971 - 2,159,191 -
18500 Premises and equipment － net 14,298,525 1 14,216,773 1
19000 Intangible assets － net 284,944 - 273,608 -
19300 Deferred income tax assets － net 1,623,371 - 1,203,779 -
19500 Other assets － net 5,222,172 - 3,639,872 -
Total assets $ 1,619,165,041 100 1,584,552,250 100
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----- Start of picture text -----

December 31, 2018 December 31, 2017
Liabilities and equity
Amount ％ Amount ％
Liabilities ：
21000 Deposits from the Central Bank and other banks $ 91,314,543 6 93,529,770 6
22000 Financial liabilities at fair value through profit or 9,339,273 1 3,732,481 -
loss
22500 Securities sold under repurchase agreements 1,657,706 - 1,105,596 -
23000 Payables 58,620,227 4 36,591,457 2
23200 Current income tax liabilities 952,293 - - -
23500 Deposits and remittances 1,311,937,545 81 1,316,671,351 83
24000 Financial debentures 47,450,000 3 41,000,000 3
25500 Other financial liabilities 7,507,715 - 10,120,545 1
25600 Provision for liabilities 3,565,727 - 3,515,351 -
29300 Deferred income tax liabilities 880,738 - 881,318 -
29500 Other liabilities 1,086,255 - 1,586,708 -
Total liabilities 1,534,312,022 95 1,508,734,577 95
31101 Common stock 63,938,802 4 61,479,617 4
Retained earnings:
32001 Legal reserve 10,020,013 1 8,569,864 1
32003 Special reserve 516,555 - 1,240,588 -
32005 Undistributed earnings (accumulated deficit) 7,470,985 - 4,833,832 -
32500 Other items in equity 2,906,664 - (306,228 ) -
Total equity 84,853,019 5 75,817,673 5
Total liabilities and equity $ 1,619,165,041 100 1,584,552,250 100
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(English Translation of Financial Statements Originally Issued in Chinese)

TAIWAN BUSINESS BANK, LTD. Statements of Comprehensive Income

For the years ended December 31, 2018 and 2017

(expressed in thousands of New Taiwan dollars, except earnings per share)

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For the year ended December 31,
2018 2017 Percent
Change
Amount ％ Amount ％ %
41000 Interest revenue $ 28,156,855 124 24,677,007 120 14
51000 Less ： Total interest expenses (11,082,469 ) (49 ) (9,357,801 ) (45 ) 18
Net interest income 17,074,386 75 15,319,206 75 11
Non-interest income
49100 Service fee and commision income 3,012,942 13 3,139,092 15 (4 )
49200 Gains on financial assets or liabilities at fair value 1,029,180 5 1,036,512 5 (1 )
through profit or loss - net
49300 Realized gain on available-for-sale financial assets - - 109,753 - (100 )
49310 Realized gain on financial assets measured at other 374,849 2 - - -
comprehensive income
49450 Gain on disposal of financial assets measured at 130 - - - -
amortized cost
49600 Foreign exchange gain 478,887 2 376,072 2 27
49700 (Impairment loss on asssts) reversal of impairment loss (28,297 ) - - - -
on aseets
49750 Share of profit of associates and joint ventures accounted 384,452 2 376,138 2 2
for using equity method
49800 Net other non-interest income 99,343 - (118,579 ) (1 ) 184
49805 Net profit on financial assets measured at cost - - 141,240 1 (100 )
49831 Securities brokering income － net 221,110 1 203,819 1 8
Net revenue 22,646,982 100 20,583,253 100 10
58200 Bad debt expenses, commitment and guarantee liability (745,770 ) (3 ) (3,009,551 ) (15 ) (75 )
provision
Operating expenses
58500 Employee benefits expenses (8,176,618 ) (36 ) (7,351,794 ) (36 ) 11
59000 Depreciation and amortization expense (468,765 ) (2 ) (413,696 ) (2 ) 13
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----- Start of picture text -----

For the year ended December 31,
2018 2017 Percent
Change
Amount ％ Amount ％ %
59500 Other general and administrative expense (4,169,000 ) (19 ) (4,020,203 ) (19 ) 4
Total operating expenses (12,814,383 ) (57 ) (11,785,693 ) (57 ) 9
61001 Income from continuing operations before income tax 9,086,829 40 5,788,009 28 57
61003 Income tax expenses (1,446,287 ) (6 ) (748,085 ) (4 ) (93 )
Net income 7,640,542 34 5,039,924 24 52
65000 Other comprehensive income ：
65200 Items that will not to be reclassified into profit or loss
65201 Remeasurements of defined benefit plans (174,907 ) (1 ) (249,419 ) (1 ) 30
65204 Revaluation gain from investments in equity instruments 226,956 1 - - -
measured at fair value through other comprehensive
income
65220 Income tax related to items that will not to be 71,895 - 42,401 - 70
reclassified into profit or loss
Total items that will not to be reclassified into profit or 123,944 - (207,018 ) (1 ) 160
loss
65300 Items that are or may be reclassified subsequently to
profit or loss
65301 Difference of foreign exchange in translating financial 335,075 1 (980,585 ) (5 ) 134
statements of foreign operating units
65302 Unrealized gains on available-for-sale financial assets- - - 1,540,838 8 (100 )
net
65309 Revaluation gains on investment in debt instrument 156,183 1 - - -
measured at fair value through other comprehensive
income
65310 (Impairment loss on) reversal of investments in 8,363 - - - -
debt instruments measured at fair value through
other comprehensive income
65320 Income tax related to items that are or may be (40,277 ) - 163,001 1 (125 )
reclassified to profit or loss
Total items that are or may be reclassified 459,344 2 723,254 4 (36 )
subsequently to profit or loss
65000 Other comprehensive income 583,288 2 516,236 3 13
Total comprehensive income $ 8,223,830 36 5,556,160 27 48
Earnings per share (in NT dollar)
Basic earnings per share (in NT dollar) $ 1.19 0.79
Diluted earnings per share (in NT dollar) $ 1.18 0.78
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(English Translation of Financial Statements Originally Issued in Chinese)

TAIWAN BUSINESS BANK, LTD.

Statements of Change in Equity

For the years ended December 31, 2018 and 2017

(expressed in thousands of New Taiwan dollars)

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

Retained earnings Other item in equity
Unrealized gains
Difference of from financial
foreign exchange in assets measured
translating financial at fair value Unrealized gains
statements of through other and losses on
Undistributed foreign operating comprehensive available for sale
Common stock Legal reserve Special reserve earnings Total units income financial assets Total
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	Common stock	Retained earnings	Retained earnings	Retained earnings	Retained earnings	Other item in equity	Other item in equity	Other item in equity	Total
		Legal reserve	Special reserve	Undistributed earnings	Total	Difference of foreign exchange in translating fnancial statements of foreign operating units	Unrealized gains from fnancial assets measured at fair value through other comprehensive income	Unrealized gains and losses on available for sale fnancial assets
Balance─January 1, 2017 Net Income for the year ended December 31, 2017 Other comprehensive income (losses) for the year ended December 31, 2017 Total comprehensive income for the year ended December 31, 2017 Earnings appropriation and distribution Legal reserve appropriated Special reserve appropriated Common cash dividend Common stock dividend Balance─December 31, 2017 Effects of retrospective application of new standards Balance at January 1, 2018 after adjustments Net Income for the year ended December 31, 2018 Other comprehensive income (losses) for the year ended December 31, 2018 Total comprehensive income for the year ended December 31, 2018 Earnings appropriation and distribution Legal reserve appropriated Reversaled of special reserve Common cash dividend Common stock dividend Disposal of investments in equity instruments designated at fair value through other comprehensive income Balance─December 31, 2018	$ 59,688,949 - - - - - - 1,790,668 61,479,617 - 61,479,617 - - - - - - 2,459,185 - $ 63,938,802	7,088,772 - - - 1,481,092 - - - 8,569,864 - 8,569,864 - - - 1,450,149 - - - - 10,020,013	185,128 - - - - 1,055,460 - - 1,240,588 - 1,240,588 - - - - (724,033 ) - - - 516,555	4,936,973	12,210,873	(19,637)	- - - - - - - - - 3,086,469 3,086,469 - 392,082 392,082 - - - - (30,765)	(1,009,845)	70,870,340 5,039,924 516,236 5,556,160 - - (608,827 ) - 75,817,673 2,459,170 78,276,843 7,640,542 583,288 8,223,830 - - (1,647,654 ) - - 84,853,019
				5,039,924 (207,018)	5,039,924 (207,018)	- (815,703)		- 1,538,957 1,538,957 - - - - 529,112 (529,112)
				4,832,906	4,832,906	(815,703)
				(1,481,092 ) (1,055,460 ) (608,827 ) (1,790,668)	- - (608,827 ) (1,790,668)	- - - -
				4,833,832 (98,187)	14,644,284 (98,187)	(835,340 ) -
				4,735,645	14,546,097	(835,340)		- - - - - - - - - -
				7,640,542 (103,012)	7,640,542 (103,012)	- 294,218
				7,537,530	7,537,530	294,218
				(1,450,149 ) 724,033 (1,647,654 ) (2,459,185 ) 30,765	- - (1,647,654 ) (2,459,185 ) 30,765	- - - - -
				7,470,985	18,007,553	(541,122)	3,447,786

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(English Translation of Financial Statements Originally Issued in Chinese)

TAIWAN BUSINESS BANK, LTD.

Statements of Cash Flows

For the years ended December 31, 2018 and 2017

(expressed in thousands of New Taiwan dollars)

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

For the years ended December 31,
2018 2017
Cash flows from operating activities:
Net income before tax $ 9,086,829 5,788,009
Adjustments ：
Income and expenses items:
Depreciation expenses 370,604 334,299
Amortization expenses 98,161 79,397
Provision of bad debt expenses 660,423 3,000,265
Net loss on financial assets and liabilities at fair value through profit or 179,390 120,502
loss
Interest expenses 11,082,469 9,357,801
Interest revenues (28,156,855 ) (24,677,007 )
Dividend revenues 355,800 143,672
Net change of provision for guarantee liabilities 58,710 9,286
Net change of other miscellaneous provision for liabilities 26,637 109,273
Share of profit of associates and joint ventuers accounted for using (384,452 ) (376,138 )
equity method
Losses on disposal and retirement of premises and equipment 1,155 1,972
Impairment loss on financial assets 28,297 -
Other - (317,484 )
Subtotal of income and expense items (15,679,661 ) (12,214,162 )
Change in Operating Assets and Liabilities ：
Net Changes in Operating Assets ：
Decrease (increase) in due from the Central Bank and call loans to 14,352,507 (10,723,869 )
banks
(Increase) decrease in financial assets at fair value through profit or (5,812,905 ) 284,263
loss
Decrease (increase) in securities purchased under resell agreements 1,611,586 (3,378,903 )
(Increase) decrease in receivables (20,996,379 ) 487,561
Decrease (increase) in discounts and loans 36,317,199 (69,501,470 )
Decrease (increase) in other financial assets 102,084 (59,822 )
Increase in other assets (727,419 ) (926,327 )
Net change in operating assets 24,846,673 (83,818,567 )
Net Change in Operating Liabilities ：
(Decrease) increase in deposits from the Central Bank and other (2,215,227 ) 17,711,913
banks
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221

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For the years ended December 31,
2018 2017
Increase in financial liabilities at fair value through profit or loss 5,367,493 3,495,360
-
Decrease in provisions for lawsuit (466,884 )
Increase (decrease) in securities sold under repurchase agreements 552,110 (1,653,309 )
Increase in payables 21,240,603 1,034,371
(Decrease) increase in deposits and remittances (4,733,806 ) 62,447,121
Decrease in other financial liabilities (2,603,441 ) (690,408 )
(Decrease) increase in provision for employee benefits (257,144 ) 39,039
Net Change in Operating Liabilities 17,350,588 81,917,203
Net Change in Operating Assets and Liabilities 42,197,261 (1,901,364 )
Sum of adjustments 26,517,600 (14,115,526 )
Cash provided by (used in) operating activities 35,604,429 (8,327,517 )
Interest collected 27,816,690 24,709,329
Interest paid (10,601,963 ) (9,160,923 )
Income tax paid (510,148 ) (716,706 )
Net Cash Flow Provided By Operating Activities 52,309,008 6,504,183
Cash Flows from Investing Activities ：
-
Purchase of financial assets measured at fair value through other (4,153,866 )
comprehensive income
Purchase of investment in debt instruments at amortized cost (56,422,615 ) -
Disposal of available-for-sale financial assets - 8,635,810
-
Purchase of hold-to-maturity financial assets (10,443,824 )
Acquisition of investment under equity method (300,000 ) (308,600 )
Purchase of premises and equipment (446,775 ) (463,503 )
Disposal of premises and equipment 195 66
(Increase) decrease in guarantee deposits paid (529,738 ) 314,791
Purchase of intangible assets (109,329 ) (146,342 )
Net Cash Flows Used in Investing Activities (61,962,128 ) (2,411,602 )
Cash Flows from Financing Activities ：
Issuance of financial debentures 6,450,000 5,300,000
-
Redemption of financial debentures (7,050,000 )
Increase in guarantee deposits received 51,804 166,122
Decrease in lease payable (9,389 ) (8,192 )
Decrease in other liabilities (552,257 ) (21,858 )
Cash dividends (1,647,654 ) (608,827 )
Net Cash Provided by (Used in) Financing Activities 4,292,504 (2,222,755 )
Foreign exchange effect 420 (31,798 )
Net (decrease) increase in cash and cash equivalents (5,360,196 ) 1,838,028
Cash and cash equivalents, at the beginning of the period 51,066,527 49,228,499
Cash and cash equivalents, at the end of the period $ 45,706,331 51,066,527
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Taiwan Business Bank Annual Report 2018

Ⅵ

Taiwan Business Bank, Ltd.

Chairman: Bor-Yi Huang

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President: Chien-An Shih

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SVP&GM, Accounting Dept.: Yu-Chuan Chou

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9. Financial Difficulties Confronted by the Bank or Its Subsidiaries and the Related Impacts: None.

223

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www.tbb.com.tw

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AI assistant

TBB — Annual Report 2018

52201_rns_2019-07-29_7637a4fb-e590-4370-8497-b6ca3e6ced75.pdf

Taiwan Business Bank Head Office

Spokesperson

Deputy Spokesperson

Deputy Spokesperson

Stock Registration Agent

Rating Agency

The CPA-auditor of the Financial Report

04

Contents

I. Letter to Shareholders

15 18

II. Bank Profile

III. Corporate Governance Report

1. Organization

IV. Fund-Raising Status

V. Operation Summary

VI. Financial Status

VII. Review, Analysis, and Risks of Financial Conditions and Performance

IX. Corporate Social Responsibility Report

I

Letter to Shareholders

1. Operation Results in 2018

(1) The Domestic and Overseas Financial Environments

(2) Changes in the Bank's Organization

(3) Implementation of Business Plans and Operating Strategies

(4) Budget Implementation

(6) Research and Development

2. Business Plans for 2019

(1) Operating Directions and Policies

C. Customers

(2) Business Targets

3. Future Development Strategies

(1) External competitive environment

(2) Regulatory Environment

(3) Overall Operating Environment

5. Results of Latest Credit Rating

1. Establishment and History

2. Bank M&A, reinvestment in related enterprises, and reorganization in 2018 and to the end of February 2019

III Corporate Governance Report

1. Organization

(2) Operations of Major TBB Units

2. Directors and Major Managers

(1) Board of Directors

December 31, 2018

(2) Information of President, Executive Vice President, Vice President and Managers of

Departments and Branches

(3) Compensation for 2018

3. Operations of Corporate Governance

(1) Operation of Board of Directors

(2) Audit Committee activities

(3) Strategy Development Committee activities

(4) CSR Committee activities

(7) Operations of the Remuneration Committee

B. Responsibility of the Remuneration Committee

C. Operation of Remuneration Committee:

(8) Corporate Social Responsibility

(9) Implementation of Business Integrity

(10) Procedures for Handling Material Inside Information:

(11) Inquiry for Corporate Governance Principles and relevant rules: Please refer to About TBB > Corporate Governance > Rules of Corporate Governance (https://www.tbb.com. tw/web/guest/-429).

(12) Other important information contributes to understanding the operations of corporate governance: Please refer to About TBB > Corporate Governance and Investor Relations (https://www.tbb.com.tw/).

(13) Execution of the internal control system

Matters to be improved for the internal control system of Taiwan Business Bank and the improvement plan

Items to be improved and Countermeasures of Overall Information Security Implementation of Taiwan Business Bank

4. Accounting Expenses

(1) CPA professional charges grading table

5. Information on switching CPA: None

(1) Changes in Shareholding

(2) Information of shareholding transfer: Not applicable.

(3) Information for shareholding pledge: None.

8. Information Disclosing the Relationship among Top Ten Shareholders in the Relationship of Related Parties or Spouses, Blood Relatives within the Second Degree of Kinship

9. The joint venture directly or indirectly controlled and managed by Directors, President, Executive Vice Presidents and General Manager of each division or branch

IV Fund-Raising Status

1. Shares and Dividends

1. Shares and Dividends

(1) Capital Sources

(2) Structure of Shareholders

(3) Distribution of Shareholding

TBB Annual Report 2018