TBB — Annual Report 2022

Nov 11, 2022

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Stock Code:2834

TAIWAN BUSINESS BANK LTD.

Financial Statements

With Independent Auditors’ Report For the Years Ended December 31, 2022 and 2021

ADDRESS: NO. 30, Ta-Cheng Street, Taipei, Taiwan, R.O.C. TELEPHONE: 02-2559-7171

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

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Table of contents

Contents 1. Cover Page 2. Table of Contents 3. Independent Auditors’ Report 4. Balance Sheets 5. Statements of Comprehensive Income 6. Statements of Changes in Equity 7. Statements of Cash Flows 8. Notes to the Financial Statements (1) Company history (2) Approval date and procedures of the financial statements (3) New standards, amendments and interpretations adopted (4) Summary of significant accounting policies (5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty (6) Explanation of significant accounts (7) Related-party transactions (8) Pledged assets (9) Commitments and contingencies (10) Loss from major disasters (11) Subsequent Events (12) Others (13) Other disclosures (a) Information on significant transactions (b) Information on investees (c) Information on investments in Mainland China (d) Information of major shareholders (14) Segment information 9. Statement of significant accounts 10. Segment information of Security Division

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KPMG

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Independent Auditors’ Report

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

Opinion

We have audited the financial statements of Taiwan Business Bank Ltd. (“the Bank”), which comprise the balance sheets as of December 31, 2022 and 2021, 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.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Bank as of December 31, 2022 and 2021, 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 audits of the current period in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants, Jin-Kuan-Yin-Zi No.1082731571 and the auditing standards. 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 subsidiaries in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the 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.

KPMG, a Taiwan partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

3-1

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

How the matter was addressed in our audit:

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

1. Fair value assessment of financial investments

Please refer to Note 4 (e) “Financial Instruments” for related accounting policy, Note 5 (c) for accounting estimates, and Note 6 (ao) “Financial Instruments” for details of loans impairment, respectively.

Description of key audit matter:

The evaluation of several financial instruments of the Bank is measured using the valuation models, which involved the exercise of significant professional judgments and estimations. Therefore, the assessment on the financial instruments has been identified as a key audit matter in our audit.

How the matter was addressed in our audit:

Our principal audit procedures included: inspected the internal control procedures for fair value measurement performed by management, selected samples to evaluate whether the quoted prices in active markets for financial assets are appropriate, inspected the reasonableness of valuation techniques and to test the key parameters of financial assets without active market prices, wherein valuation models are used to ensure that the applied valuation techniques are in accordance with IFRS 13 ”Fair Value Measurement” and verified whether the presentation and disclosure of financial instruments are in accordance with the International Financial Reporting Standards

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.

3-2

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

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s 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 Standards on Auditing of 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.

As part of an audit in accordance with the Standards on Auditing of the Republic of China, we exercise professional judgment and professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. 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’s internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

4. 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.

5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient and appropriate audit evidence regarding the financial information of the investment in other entities accounted for using the equity method to express an opinion on this financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

3-3

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 determine 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’ report are LEE, FENG HUI and CHUNG, TAN TAN.

KPMG

Taipei, Taiwan (Republic of China) February 22, 2023

Notes to Readers

The accompanying financial statements are intended only to present the 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 financial statements are those generally accepted and applied in the Republic of China.

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

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(English Translation of Financial Statements and Report Originally Issued in Chinese) TAIWAN BUSINESS BANK LTD.

Balance Sheets

December 31, 2022 and 2021

(Expressed in Thousands of New Taiwan Dollars)

Assets 11000 Cash and cash equivalents (Notes 6(a) and 7) 11500 Due from the central bank and call loans to banks (Notes 6(b) and 7) 12000 Financial assets at fair value through profit or loss (Note 6(c)) 12100 Financial assets at fair value through other comprehensive income (Notes 6(g) and (q)) 12200 Investment in debt instruments at amortized cost (Note 6(h)) 12500 Securities purchased under resell agreements (Note 6(d)) 13000 Receivables (Note 6(e)) 13200 Current tax assets 13500 Discounts and loans, net (Notes 6(f) and 7) 15000 Investments measured by equity method (Note 6(i)) 15500 Other financial assets (Note 6(j)) 18500 Property and equipment, net (Note 6(k)) 18600 Right-of-use assets, net (Note 6(l)) 19000 Intangible assets, net 19300 Deferred tax assets (Note 6(z)) 19500 Other assets, net (Note 6(m)) Total assets	December 31, 2022 Amount % $ 48,879,847 2 148,557,154 7 32,536,757 2 159,970,603 8 236,774,247 11 797,893 - 6,469,268 - 348,724 - 1,400,112,365 68 3,497,456 - 10,315 - 14,118,286 1 1,189,528 - 756,703 - 1,752,566 - 15,763,696 1 $ 2,071,535,408 100	December 31, 2021 Amount % 39,189,153 2 158,109,903 8 39,658,224 2 157,498,525 8 279,035,906 14 7,831,274 - 5,609,809 - 347,649 - 1,302,388,363 65 3,117,027 - 28,942 - 14,529,762 1 1,145,071 - 553,784 - 1,923,597 - 10,011,973 - 2,020,978,962 100 Liabilities and Equity Liabilities 21000 Deposits from the Central Bank and banks (Notes 6(n) and 7) 21500 Due to the Central Bank and banks (Note 6(o)) 22000 Financial liabilities at fair value through profit or loss (Notes 6(p) and (t)) 22500 Notes and bonds issued under repurchase agreement (Note 6(q)) 23000 Payables (Note 6(r)) 23200 Current tax liabilities 23500 Deposits and remittances (Notes 6(s) and 7) 24000 Bank notes payable (Note 6(t)) 25500 Other financial liabilities (Note 6(u)) 25600 Provisions (Note 6(v)) 26000 Lease liabilities (Note 6(w)) 29300 Deferred tax liabilities (Note 6(z)) 29500 Other liabilities (Note 6(x)) Total liabilities Equity: 31101 Common stock (Note 6(y)) 31500 Capital surplus (Note 6(y)) Retained earnings: 32001 Legal reserve (Note 6(y)) 32003 Special reserve (Note 6(y)) 32005 Unappropriated retained earnings (Note 6(y)) 32500 Other equity interest (Note 6(y)) Total equity Total liabilities and equity	December 31, 2022		December 31, 2021
			Amount %		Amount %
			$ 194,966,177 9 - - 9,925,525 - 2,462,991 1 21,441,496 1 1,086,481 - 1,673,936,069 81 52,250,000 3 2,910,581 - 2,676,102 - 1,216,510 - 879,056 - 3,677,162 - 1,967,428,150 95 80,296,934 4 815,900 - 17,239,615 1 185,128 - 9,339,356 - (3,769,675) - 104,107,258 5 $ 2,071,535,408 100		102,540,315 5 49,713,800 3 8,436,037 - 2,060,693 - 22,727,994 1 59,567 - 1,669,039,989 83 52,250,000 3 4,365,294 - 3,420,210 - 1,145,072 - 886,290 - 2,673,729 - 1,919,318,990 95 77,431,952 4 815,900 - 15,693,140 1 185,128 - 5,227,632 - 2,306,220 - 101,659,972 5 2,020,978,962 100

See accompanying notes to financial statements.

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(English Translation of Financial Statements Originally Issued in Chinese) TAIWAN BUSINESS BANK LTD.

Statements of Comprehensive Income

For the three and years ended December 31, 2022 and 2021

(Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Common Share)

41000 Interest income (Notes 6(ad) and 7) 51000 Less:Interest expenses (Notes 6(ad) and 7) Net interest revenue Net revenue other than interest 49100 Net service fee revenue (losses) (Notes 6(ae) and 13) 49200 Gain on financial assets or liabilities measured at fair value through profit or loss (Note 6(af)) 49310 Realized gain on financial assets at fair value through other comprehensive income (Note 6(ag)) 49450 Gain arising from derecognition of financial assets measured at amortized cost (Note 6(h)) 49600 Foreign exchange gain 49700 (Impairment loss on assets) reversal of impairment loss on assets (Note 6(ah)) 49750 Share of profit of associates and joint ventures accounted for using equity method (Notes 6(h) and 6(ai)) 49800 Net other revenue other than interest income (loss) (Note 6(aj)) 49831 Net securities brokering revenue Net revenue 58200 Bad debts expense, commitment and guarantee liability provision (Note 6(ak)) Operating expenses 58500 Employee benefits expenses (Note 6(al)) 59000 Depreciation and amortization expenses (Note 6(am)) 59500 Other general and administrative expenses (Note 6(an)) Total operating expense 61001 Income from continuing operation before tax 61003 Less: Income tax expenses (Note 6(z)) Net income 65000 Other comprehensive income: 65200 Components of other comprehensive income that will not be reclassified to profit or loss 65201 Remeasurements of defined benefit plans (Note 6(aa)) 65204 Revaluation (losses) gains on investments in equity instruments measured at fair value through other comprehensive income 65207 Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss 65220 Less: Income tax related to components of other comprehensive income that will not be reclassified to profit or loss (Note 6(z)) Components of other comprehensive income that will not be reclassified to profit or loss 65300 Components of other comprehensive income that will be reclassified to profit or loss 65301 Exchange difference on translation 65308 Losses from investments in debt instruments measured at fair value through other comprehensive income 65307 Share of other comprehensive income of associates and joint ventures accounted for using equity method, components of other comprehensive income that will not be reclassified to profit or loss 65320 Less: Income tax related to components of other comprehensive income that will be reclassified to profit or loss (Note 6(z)) Components of other comprehensive income that will be reclassified to profit or loss 65000 Other comprehensive income Total comprehensive income Earnings per share (in NT dollar) (Note 6(ab)) Basic earnings per share (in NT dollar) Diluted earnings per share (in NT dollar)	For the years ende	d December 31, Percent 2021 Change Amount % % 24,037,857 100 38 (6,357,367) (26) 105 17,680,490 74 14 3,317,550 14 19 562,196 2 121 1,187,700 5 23 103,741 1 (98) 310,634 1 198 (33,260) - 135 99,659 - 221 168,888 1 (63) 561,639 2 (42) 23,959,237 100 18 (5,171,832) (22) (54) (8,350,140) (35) 5 (1,032,950) (4) 18 (3,628,017) (15) 9 (13,011,107) (54) 7 5,776,298 24 108 676,186 3 180 5,100,112 21 98 24,512 - 2,173 987,549 4 (337) 4,546 - (204) 4,902 - 2,173 1,011,705 4 (288) (416,460) (2) 460 (2,046,533) (9) (205) 2,674 - 336 (98,583) - (373) (2,361,736) (11) 112 (1,350,031) (7) (411) 3,750,081 14 (14) 0.64 0.63
	2022 Amount % $ 33,136,301 117 (13,046,962) (46) 20,089,339 71 3,934,425 14 1,244,071 4 1,462,569 5 1,981 - 925,170 3 11,689 - 320,283 1 63,071 - 326,877 2 28,379,475 100 (2,401,068) (8) (8,783,271) (31) (1,220,945) (4) (3,960,406) (14) (13,964,622) (49) 12,013,785 43 1,891,933 7 10,121,852 36 557,098 2 (2,342,393) (8) (4,729) - 111,419 - (1,901,443) (6) 1,497,223 5 (6,238,235) (22) 11,653 - 269,444 1 (4,998,803) (18) (6,900,246) (24) $ 3,221,606 12 $ 1.26 $ 1.26

See accompanying notes to financial statements.

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(English Translation of Financial Statements Originally Issued in Chinese) TAIWAN BUSINESS BANK LTD.

Statements of Changes in Equity

For the years ended December 31, 2022 and 2021

(Expressed in Thousands of New Taiwan Dollars)

Balance at January 1, 2021 Net income for the year ended December 31, 2021 Other comprehensive income for the year ended December 31, 2021 Total comprehensive income for the year ended December 31, 2021 Appropriation and distribution of retained earnings: Legal reserve appropriated Cash dividends of ordinary share Stock dividends of ordinary share Disposal of investment in equity instruments designated at fair value through other comprehensive income Balance at December 31, 2021 Net income for the year ended December 31, 2022 Other comprehensive income for the year ended December 31, 2022 Total comprehensive income for the year ended December 31, 2022 Appropriation and distribution of retained earnings: Legal reserve appropriated Cash dividends of ordinary share Stock dividends of ordinary share Disposal of investments in equity instruments designated at fair value through other comprehensive income Balance at December 31, 2022	Share capital	Share capital		Capital surplus				Retained	earnings	earnings				Other equity interest Unrealized gains Exchange differences on translation of foreign financial statements (losses) from financial assets measured at fair value through other comprehensive income	Other equity interest Unrealized gains Exchange differences on translation of foreign financial statements (losses) from financial assets measured at fair value through other comprehensive income	Other equity interest Unrealized gains Exchange differences on translation of foreign financial statements (losses) from financial assets measured at fair value through other comprehensive income	Total
	Common stock					Legal reserve		Special reserve		Unappropriated retained earnings		Total		Exchange differences on translation of foreign financial statements
	$ 74,885,834 - - - - - 2,546,118 - 77,431,952 - - - - - 2,864,982 - $ 80,296,934			815,900 - -		14,332,452 - -		185,128 - -		4,728,382 5,100,112 19,610		19,245,962 5,100,112 19,610		(1,476,771) - (330,494) (330,494) - - - - (1,807,265) - 1,209,432 1,209,432 - - - - (597,833)		5,187,824 - (1,039,147) (1,039,147) - - - (35,192) 4,113,485 - (8,555,357) (8,555,357) - - - 1,270,030 (3,171,842)	98,658,749 5,100,112 (1,350,031)
		-		-		-		-		5,119,722		5,119,722					3,750,081
		- - 2,546,118 -		- - - -		1,360,688 - - -		- - - -									- (748,858) - -
		77,431,952 - -		815,900 - -		15,693,140 - -		185,128 - -									101,659,972 10,121,852 (6,900,246)
		-		-		-		-									3,221,606
		- - 2,864,982 -		- - - -		1,546,475 - - -		- - - -									- (774,320) - -
		$ 80,296,934		815,900		17,239,615		185,128									104,107,258

See accompanying notes to financial statements.

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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, 2022 and 2021

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from operating activities: Net income before tax Adjustments: Income and expenses items: Depreciation expense Amortization expense Provision for bad debt expense Net loss on financial assets or liabilities at fair value through profit or loss Interest expenses Net gain arising from derecognition of financial assets measured at amortised cost Interest income Dividend income Net change in provisions for guarantee liabilities Net change in other provisions Share of profit of subsidiaries, associates and joint ventures accounted for using equity method Loss on disposal of property and equipment Impairment loss on financial assets (reversal of impairment loss) Other items Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Changes in operating assets: Decrease (increase) in due from the central bank and call loans to banks Decrease (increase) in financial assets at fair value through profit or loss Decrease (increase) in securities purchased under resell agreements Decrease in receivables Increase in discounts and loans Decrease (income) in other financial assets Increase in other assets Total changes in operating assets Changes in operating liabilities: Increase (decrease) in deposits from the central bank and banks Increase in financial liabilities at fair value through profit or loss Increase in notes and bonds issued under repurchase agreement Decrease in payable Increase in deposits and remittances Decrease in other financial liabilities Decrease in provisions for employee benefits Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow generated from operations Interest received Interest paid Income taxes paid Net Cash flows from operating activities Cash flows from investing activities: Acquisition of financial assets at fair value through other comprehensive income Acquisition of financial assets at amortised cost Proceeds from repayments of financial assets at amortised cost Acquisition of property and equipment Proceeds from disposal of property and equipment Increase in refundable deposits Decrease in refundable deposits Acquisition of intangible assets Net cash flows (used in) from investing activities Cash flows from financing activities: Increase in due to the central bank and banks Decrease in due to the central bank and banks Proceeds from issuing bank notes payable Repayments of bank notes payable Increase in guarantee deposits received Decrease in guarantee deposits received Payment of lease liabilities Increase in other liabilities Cash dividends paid Acquisition of ownership interests in subsidiaries Net cash flows (used in) from financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

For the years ended December 31, 2022 2021 $ 12,013,785 5,776,298 972,173 862,209 248,772 170,741 2,394,782 5,113,134 370,320 388,853 13,046,962 6,357,367 (1,981) (103,741) (33,136,301) (24,037,857) 7,161 - (21,496) 39,802 29,220 92,077 (320,283) (99,659) 944 852 (11,689) 33,260 (3,817) (1,369) (16,425,233) (11,184,331) 9,550,686 (44,028,431) 7,315,066 (25,338,360) 7,033,381 (1,784,087) 479,288 36,367,071 (100,231,972) (97,792,108) 25,244 (5,770) (2,091,463) (3,568,328) (77,919,770) (136,150,013) 92,425,862 (15,660,724) 925,569 91,891 402,298 4,702 (3,679,471) (25,322,034) 4,896,080 250,336,507 (1,454,713) (1,127,072) (196,272) (80,182) 93,319,353 208,243,088 15,399,583 72,093,075 (1,025,650) 60,908,744 10,988,135 66,685,042 31,841,928 23,790,232 (11,071,317) (6,241,095) (649,535) (506,777) 31,109,211 83,727,402 (11,055,765) (41,225,923) (188,506,846) (130,873,423) 230,783,092 79,933,076 (317,194) (532,051) 54 132 (2,223,467) - - 1,358,420 (288,032) (309,304) 28,391,842 (91,649,073) - 21,263,800 (49,713,800) - - 8,000,000 - (9,000,000) 2,081,139 - - (347,219) (413,133) (411,827) (1,077,706) (1,506,959) (774,320) (748,858) - (450,000) (49,897,820) 16,798,937 87,461 (8,065) 9,690,694 8,869,201 39,189,153 30,319,952 $ 48,879,847 39,189,153

2022 $ 12,013,785 972,173 248,772 2,394,782 370,320 13,046,962 (1,981) (33,136,301) 7,161 (21,496) 29,220 (320,283) 944 (11,689) (3,817) (16,425,233) 9,550,686 7,315,066 7,033,381 479,288 (100,231,972) 25,244 (2,091,463) (77,919,770) 92,425,862 925,569 402,298 (3,679,471) 4,896,080 (1,454,713) (196,272) 93,319,353 15,399,583 (1,025,650) 10,988,135 31,841,928 (11,071,317) (649,535) 31,109,211 (11,055,765) (188,506,846) 230,783,092 (317,194) 54 (2,223,467) - (288,032) 28,391,842 - (49,713,800) - - 2,081,139 - (413,133) (1,077,706) (774,320) - (49,897,820) 87,461 9,690,694 39,189,153 $ 48,879,847

See accompanying notes to financial statements.

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(English Translation of Financial Statements Originally Issued in Chinese) TAIWAN BUSINESS BANK LTD.

Notes to the Financial Statements

For the years ended December 31, 2022 and 2021

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

(1) Company history

TAIWAN BUSINESS BANK LTD. (the “Bank”) was formerly a general savings union known as “Taiwan Mutual Financing Bank” or “Tai-Shio Mutual Financing Bank” when it was established in 1915. After several mergers and acquisitions, it was renamed as Taiwan Business Bank, Ltd. in order to finance and provide banking assistance to small and medium-size businesses on July 1, 1976. The Bank’s major lines of business are the following:

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

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

• (c) International banking business; and

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

As of December 31, 2022, the Bank not only sets up the business 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 16 securities brokerage locations.

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

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

As of December 31, 2022 and 2021, the Bank has 5,530 and 5,436 employees, respectively.

(2) Approval date and procedures of the financial statements:

These financial statements were authorized for issuance by the board of directors on February 22, 2023.

(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 Bank has initially adopted the following new amendments, which do not have a significant impact on its financial statements, from January 1, 2022:

• －

• ●Amendments to IAS 16 “Property, Plant and Equipment Proceeds before Intended Use”

• －

• ●Amendments to IAS 37 “Onerous Contracts Cost of Fulfilling a Contract”

• ●Annual Improvements to IFRS Standards 2018–2020

(Continued)

9

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• ●Amendments to IFRS 3 “Reference to the Conceptual Framework”

• (b) The impact of IFRS issued by the FSC but not yet effective

The Bank assesses that the adoption of the following new amendments, effective for annual period beginning on January 1, 2023, would not have a significant impact on its financial statements:

• ●Amendments to IAS 1 “Disclosure of Accounting Policies”

• ●Amendments to IAS 8 “Definition of Accounting Estimates”

• ●Amendments to IAS 12 “ Deferred Tax related to Assets and Liabilities arising from a Single Transaction”

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

The Bank does not expect the following new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its financial statements:

• ●Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture”

• ●IFRS 17 “ Insurance Contracts” and amendments to IFRS 17 “ Insurance Contracts”

• ●Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”

• ●Amendments to IAS 1 “Non-current Liabilities with Covenants”

• ●Amendments to IFRS 17 “Initial Application of IFRS 17 and IFRS 9 – Comparative Information “

• ●IFRS16 “Requirements for Sale and Leaseback Transactions”

(4) Summary of significant accounting policies:

• (a) Statement of compliance

These financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Public Held Banks (hereinafter referred to as the Regulation) and the Regulations Goverming the Preparation of Financial Report by Securities Firms (hereinafter referred to as the Regulation).

• (b) Basis of preparation

• (i) Basis of measurement

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

• 1) Financial instruments measured at fair value through profit or loss are measured at fair value (including derivative instruments);

(Continued)

10

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• 2) Financial instrument measured at fair value through other comprehensive income; and

• 3) The net defined benefit liability (asset) is recognized as fair value of plan assets, less present value of defined benefit obligation and the effect of the asset ceiling in Note 4(m).

(ii) Consolidation of financial statement

The financial statements include the headquarter and all the domestic branches and foreign branches. The internal transactions within the headquarter, the domestic branches and the foreign branches are offset when preparing the financial statement.

(iii) Functional and presentation currency

The functional currency of the Bank is determined based on the primary economic environment in operating. The 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) Foreign currencies

• (i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies on the end of each subsequent reporting period (hereinafter referred to as the reporting date) are retranslated to the functional currency at the exchange rate of Bank of Taiwan at 10 AM. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of translation. Foreign currency differences arising on retranslation are recognized in profit or loss, except for the equity instruments measured at fair value through other comprehensive income which are recognized in other comprehensive income arising on the retranslation.

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the presentation currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into the presentation currency at the average exchange rate. Exchange differences are recognized in other comprehensive income.

(Continued)

11

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

When a foreign operation is disposed of such that control, significant influence, or joint control is lost, 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. When the Bank disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non controlling interests. When the the Bank disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, Exchange differences arising from such a monetary item that are considered to form part of the net investment in the foreign operation are recognized in other comprehensive income.

(d) Cash and cash equivalents

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.

(e) Financial instruments

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Bank becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

(i) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis or a settlement date basis.

On initial recognition, a financial asset is classified as measured at: amortized cost; fair value through other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Bank changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the next reporting period following the change in the business model.

1) Investment in debt instruments measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

(Continued)

12

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• ‧ it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

• ‧ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, 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 FVTPL.

• ‧ it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

• ‧ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Bank 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.

Debt investments at FVOCI are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

Equity investments at FVOCI are subsequently measured at fair value. Dividends 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 are recognized in other comprehensive income and are never reclassified to profit or loss.

Dividend income is recognized in profit or loss on the date on which the Bank’s right to receive payment is established.

• 3) Financial assets at fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivate financial assets. On initial recognition, the Bank may irrevocably designate a financial asset, which otherwise meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

(Continued)

13

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• 4) Discount and loans, net

Discount and loans 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 discount and loans are 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.

• 5) Impairment of financial assets

The Bank recognizes 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 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.

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

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months 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 is exposed to credit risk.

When determining whether the credit risk of financial asset has increased significantly since initial recognition and when estimating ECL, the Bank 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's historical experience, informed credit assessment and including forward-looking information.

(Continued)

14

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

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 expects to receive. ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the Bank assesses whether financial assets carried at 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 asset is credit-impaired includes the following observable data:

• ‧ significant financial difficulty of the borrower or issuer;

• ‧ 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;

• ‧ it is probable that the borrower will enter bankruptcy or other financial reorganization;

• ‧ the disappearance of an active market for a security because of financial difficulties; or

• ‧ to purchase or initiate financial assets at a substantial discount that reflects the credit losses that have occurred.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying 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 instead of reducing the carrying amount of the asset.

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:

• ‧ 1% of the first class credit assets deducted by the amount of credit assets from the government.

• ‧ 2% of the second class credit assets.

• ‧ 10% of the third class credit assets.

• ‧ 50% of the fourth class credit assets.

• ‧ 100% of the fifth class credit assets.

(Continued)

15

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

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

(ii) Financial liabilities

Financial liability measured at fair value through profit or loss, if one of the following conditions is met

• 1) Financial liabilities held for trading

A financial liability is held for trading if it is acquired or incurred principally for the purpose of selling 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.

• 2) Financial liabilities designated at fair value through profit or loss

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.

• (iii) Reclassification of financial instruments

The Bank 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 must not reclassify any financial assets and liabilities of equity instruments.

If the Bank reclassify financial assets in accordance with the aforesaid circumstances, 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.

(Continued)

16

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(iv) Derecognition of financial assets and liabilities

The Bank derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Bank neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Bank enters into transactions whereby it transfers assets recognized in its statement of balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

The Bank derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Bank also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

On derecognition of a financial liability, the difference between the carrying amount of a financial liability extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

• (v) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount presented in the statement of balance sheet when, and only when, the Bank currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

(vi) Interest rate benchmark reform

When the basis for determining the contractual cash flows of a financial asset or financial liability measured at amortized cost changes as a result of interest rate benchmark reform, the Bank updates the effective interest rate of the financial asset or financial liability to reflect the change that is required by the reform.

A change in the basis for determining the contractual cash flows is required by interest rate benchmark reform if the following conditions are met:

• the change is necessary as a direct consequence of the reform; and

• the new basis for determining the contractual cash flows is economically equivalent to the previous basis - i.e. the basis immediately before the change.

When changes were made to a financial asset or financial liability in addition to change to the basis for determining the contractual cash flows required by interest rate benchmark reform, the Bank first updates the effective interest rate of the financial asset or financial liability to reflect the changes that is required by interest rate benchmark reform. Thereafter, the Bank will applied the policies on accounting for modifications to the additional changes.

(Continued)

17

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(f) Impairment loss on non-financial assets

The Bank reviews the carrying amounts of its non-financial assets (other than contract assets and deferred tax assets) to determine whether there is any indication of impairment on the balance sheet date. If any such indication exists, then the asset’s recoverable amount is estimated.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units (CGUs).

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

(g) Property, plant and equipment

• (i) Recognition and measurement

Items of property and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

If significant parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property and equipment is recognized in profit or loss.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Bank.

• (iii) Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property and equipment.

Land is not depreciated.

(Continued)

18

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

The estimated useful lives of property and equipment for current and comparative periods are as follows:

1) Buildings 35~50 years 2) Equipment 3~8 years

The Bank 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 evaluates the impairment loss of assets.

(h) Investment in associates

The Bank uses the equity method to evaluate an investee that it controls in preparing thefinancial statements. Under the equity method, the profit or loss and other comprehensive income are the same as the allocated amount of those attributable to owners of parent in the financial statements, and owners' equity are the same as the equity attributable to owners of parent in the consolidated financial statements. Changes in the Bank's ownership interest in a subsidiary that do not result in a loss of control of a subsidiary are equity transactions with owners.

(i) Leases

At inception of a contract, the Bank assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

(i) As a leasee

The Bank recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Bank incremental borrowing rate. Generally, the Bank uses its incremental borrowing rate as the discount rate.

(Continued)

19

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Lease payments included in the measurement of the lease liability comprise the following:

• －

• fixed payments, including in substance fixed payments;

• － variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

• － amounts expected to be payable under a residual value guarantee; and

• －

• payments for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

• －

• there is a change in future lease payments arising from the change in an index or rate; or

• － there is a change in the Bank estimates of the amount expected to be payable under a residual value guarantee; or

• － there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or

• － there is a change of its assessment on whether it will exercise an extension or termination option; or

• －

• there are any lease modifications

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Bank accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognizes in profit or loss any gain or loss relating to the partial or full termination of the lease.

The Bank has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The Bank recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(ii) As a leasor

When the Bank acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Bank makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Bank considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

(Continued)

20

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(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) Collaterals

The difference between the amount of claims and the Bank received when creditors cannot meet obligations and the collaterals are auctioned off is recognized as bad debts expense. The amount that net realized value lower than book value is recognized as impairment loss. The selling price deducts the original book value of collateral assumed is recognized as gain or loss on sale of collateral assumed.

(l) Provisions

A provision is recognized if, as a result of a past event, the Bank 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.

(m) Employee benefits

• (i) Short term employee benefit

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

(ii) Retirement benefit

The pension provision of the Bank includes defined contribution plan and defined benefit plan. For the personnel of foreign offices, the Bank provides pension fund per the regulations of the local authorities.

Defined contribution plan refers to the plan that the Bank annually provides certain amount of money to funds to fulfill the obligation. The Bank provides pension based on compulsory obligation, contracts or voluntary will to public or private managed pension funds. If certain pension fund fails to pay the employees the benefit which they deserve for the service they provided, the Bank does not hold legal or constructive obligation to pay additional provision. The Bank recognizes the pension fund provided as current pension cost on accrual basis.

The Bank’s net obligation in respect of defined benefit pension plans is calculated separately for each 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.

(Continued)

21

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

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. An economic benefit is available to the Bank if it is realizable during the life of the plan, or on settlement of the plan liabilities.

If the benefits of a plan are improved, the pension cost incurred from the portion of the increase benefit relating to past service by employees, is recognized immediately in profit or loss.

The remeasurements of defined benefit liability (asset) include:

• 1) Actuarial gains and losses;

• 2) Return on plan assets, excluding net interest on the net defined benefit liability (asset); and

• 3) The effect of the asset ceiling, excluding net interest on the net defined benefit liability (asset).

The remeasurements of defined benefit liability (asset) are recognized as other comprehensive income 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 pension cost in the consolidated interim financial statements was calculated and disclosed on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior fiscal year, for the reporting period, the rate will be adjusted by material market volatility, material curtailment, reimbursement and settlement or other material one-time events.

• (iii) Deposits with favorable rate

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 benefit.

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

(Continued)

22

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

In accordance with the regulation of “Discussion of the employee benefit actuarial assumption related 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.

(iv) Termination benefits

Termination benefits are recognized as an obligation when the Bank is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. The Bank recognizes 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 taxes

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

Current taxes comprise the expected tax payables or receivables on the taxable profits(losses) for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

Deferred tax assets are 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 profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realized.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date, and reflect uncertainty related to income taxes, if any.

(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 receives cash, the revenue is recognized.

The revenue of handling fee is recognized when cash collected or when the process of the profit are mostly completed. In addition, for the individual loan which does not belong to labor service and the handling fee is over 1% of the principal, the interest rate shall be adjusted from the original agreed interest rate to the effective interest rate. For the individual loan which does not belong to the service and the handling fee is less than 1% of the principal, the recognition of the revenue should be deferred and be recognized as revenue during the loan period.

(Continued)

23

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(p) Earnings per share (EPS)

The Bank discloses the basic and diluted earnings per share attributable to ordinary shareholders of the bank. Basic earnings per share is calculated as the profit attributable to ordinary shareholders of the bank divided by the weighted average number of ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Bank divided by the weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as stock that issued for employee bonuses.

(q) Operating segments

Operating segment is the component of the Bank that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Bank). The segment's operating results are reviewed regularly by the Bank’s chief operating decision maker to make decisions pertaining to the allocation of resources to the segment and to assess the performance for which discrete financial information is available.

(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year is as follows. Those assumptions and estimation have been updated to reflect the impact of COVID-19 pandemic:

(a) Impairment losses on loans

The impairment of loans of the Bank were 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 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 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

The present value of the retirement benefit obligation is the actuarial result based on several assumptions. Any change of the assumptions may influence the carrying amount of the retirement benefit obligation.

(Continued)

24

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

The assumptions applied to determine net pension cost (revenue) include the discount rate. The Bank determines 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 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.

(c) Fair value of financial instruments

Financial instruments without active market or quoted market prices are measured using the valuation models or counterparty prices. When using the valuation model, all the inputs data are using the observable factors as much as possible and the inputs cannot be adjusted manually. In principle, the models used the factors can be long-term stably accessed in the market. In order to avoid the data source changed causing the gap of the financial report between the difference financial years, the models need to be adjusted and verified repeatedly to ensure the output can be measured the value of financial instruments properly.

(6) Explanation of significant accounts:

(a) Cash and cash equivalents

Cash and cash equivalents
Petty cash and revolving funds Foreign currencies on hand Checks for clearing Due from other banks Total	December 31, 2022 $ 14,042,490 988,995 11,029,785 22,818,577 $ 48,879,847	December 31, 2021
		10,892,224 813,650 12,197,958 15,285,321
		39,189,153

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

Due from the Central Bank Deposits transferred to Central Bank Call loans to banks Trust fund indemnity reserve deposited Securities serving as trust fund indemnity reserve deposited Total	December 31, 2022 $ 85,207,475 39,664 63,310,015 110,000 (110,000) $ 148,557,154	December 31, 2021 72,157,455 52,275 85,900,173 90,000 (90,000) 158,109,903

(Continued)

25

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

As of December 31, 2022 and 2021, in accordance with the Banking Law and the Central Bank Law, the required reserve deposited by the Bank with the Central Bank amounted to $84,763,295 and $71,836,985 of which $47,637,794 and $44,525,965 respectively, were restricted and such restriction may only be lifted when the required reserve is adjusted to a lower amount. The Bank cooperated with the Central Bank to undertake financing loans for small and medium enterprises that are affected by the severe and the special infectious pneumonia epidemic, as of December 31, 2022 and 2021 are guaranteed by the deposit reserve of the Central Bank as required, $0 and $39,000,000 respectively, please refer to 6(o) for the information of due to the Central Bank and banks.

As of December 31, 2022 and 2021, the Bank’s overseas branches, in compliance with the Central Bank’s reserve requirement set by local authorities, deposited $134,219 and $153,662 and in reserve, of which $52,137 and $64,758 were restricted.

Effective December 2000, in accordance with the amended “Regulations Governing the Audit and Adjustment of Deposit and Other Liability Reserves of Financial Institutions”, the Bank provides the required additional reserve on foreign currency deposits. As of December 31, 2022 and 2021, the required reserve with the Central Bank amounted to $309,961 and $166,808 respectively, and its use was unrestricted.

As of December 31, 2022 and 2021, deposits transferred to the Central Bank collected from the armed forces, prisons, and other treasury deposits were restricted.

Effective January 20, 2001, in accordance with the requirement of the Central Bank of China, the Bank complies with Clause 34 of the Trust Law to treat the discretionary trust of investments in overseas marketable securities as a default loss reserve. As of December 31, 2022 and 2021, the Bank deposited marketable securities of 110,000 and $90,000 as trust fund reserves.

• (c) Financial assets at fair value through profit or loss

Financial assets designated at fair value through profit or loss: Derivative instruments not used for hedging: Foreign exchange forward contracts Currency swap contracts Foreign currency options-buy Stock index futures Interest rate swap Non-derivative financial assets Commercial paper Listed stocks Beneficiary certificates Convertible corporate bonds Financial debentures Total	December 31, 2022 $ 27,271 1,088,827 17,813 26,860 5,896 30,907,810 115,114 347,166 - - $ 32,536,757	December 31, 2021
		18,120 495,831 3,714 28,745 6,226 37,015,444 68,106 1,665,898 79,230 276,910
		39,658,224

(Continued)

26

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Derivative financial instruments are used for hedging foreign exchange risk and interest rate risk arising from operating, financing and investing activities. The Bank held derivative financial instruments which did not apply to hedge accounting are as follows (reported as financial assets mandatorily measured at fair value through profit or loss and financial liabilities held for trading)

Currency swaps contract Interest rate swaps contract Option contract - buy Option contract - sell Forward foreign exchange contract	December 31, 2022 December 31, 2021 $ 260,470,257 153,249,108 12,665,622 11,916,735 1,229,230 682,393 1,229,230 682,393 2,786,130 3,835,462

• (d) Securities purchased under resell agreements

Securities under resell agreements Face amount Resell period Range of resell interest rate Resell price	December 31, 2022 $ 797,893 800,000 112.01.05 1.24% 798,576	December 31, 2021
		7,831,274
		7,834,600
		111.01.03~111.01.19
		0.33%~0.34%
		7,832,994

• (e) Receivables, net

Interest receivable Acceptances recievables Accrued income Accounts receivable Spot exchange receivable-foreign currencies Refinacing guaranty deposits Guaranteed proceeds receivable from refinacing Credit cards accounts receivable Receivable price of securities purchased for customers Settlement price Other receivables Sub-total Less: Allowance for bad debts Total	December 31, 2022 $ 4,091,548 791,284 140,805 376 9,096 1,505 1,158 1,098,733 179,159 - 225,605 6,539,269 (70,001) $ 6,469,268	December 31, 2021
		2,753,874 1,033,229 138,537 9,094 9,546 33 36 1,033,355 177,964 141,261 383,953
		5,680,882 (71,073
		5,609,809

(Continued)

27

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

The outstanding contract amount of financial assets that have been written off and still have recourse as of December 31, 2022 and 2021 were $85,446,014 and $85,326,562, respectively.

The change in allowance for bad debts was as follows:

Beginning balance Reversal Foreign exchange Ending balance (f) Discounts and loans, net Import/export bills negotiated Bills and notes discounted Overdrafts Secured overdrafts Short-term loans Short-term secured loans Margin loans receivable Medium-term loans Medium-term secured loans Long-term loans Long-term secured loans Overdue loans Sub-total Less: Adjustment of discount and premium Less: Allowance for bad debts Total

For the years ended December 31, 2022 2021 $ 71,073 84,162 (1,443) (12,953) 371 (136) $ 70,001 71,073 December 31, 2022 December 31, 2021 $ 111,492 185,267 631,574 753,253 30,781 35,359 934,845 3,082,281 175,758,201 158,526,680 222,836,626 224,893,139 2,672,159 3,245,824 182,824,935 158,957,105 293,811,922 283,220,193 36,127,193 30,248,716 500,599,070 453,214,205 2,154,653 1,862,326 1,418,493,451 1,318,224,348 (302,470) (259,168) (18,078,616) (15,576,817) $ 1,400,112,365 1,302,388,363

2022 $ 71,073 (1,443) 371 $ 70,001 December 31, 2022 $ 111,492 631,574 30,781 934,845 175,758,201 222,836,626 2,672,159 182,824,935 293,811,922 36,127,193 500,599,070 2,154,653 1,418,493,451 (302,470) (18,078,616) $ 1,400,112,365

(Continued)

28

TAIWAN BUSINESS BANK LTD.

Notes to the Financial Statements

The change in allowance for bad debts was as follows:

Beginning balance Provision Transfer out Write-off Write-off recovered Foreign exchange Ending balance	For the years ended December 31, 2022 2021 $ 15,576,817 14,326,157 2,419,063 5,153,489 (16,605) (15,073) (2,300,641) (5,081,394) 2,337,772 1,218,393 62,210 (24,755) $ 18,078,616 15,576,817
	2022 $ 15,576,817 2,419,063 (16,605) (2,300,641) 2,337,772 62,210 $ 18,078,616

(g) Financial asset at fair value through other comprehensive income

Investment in debt instruments measured at fair value through other comprehensive income： Government bonds Corporate bonds Financial debentures Sub-total Investment in equity instruments measured at fair value through other comprehensive income： Listed stocks Unlisted stocks Real Estate Investment Trust Sub-total Total	December 31, 2022 $ 48,754,854 60,445,796 32,639,581 141,840,231 12,676,936 5,307,654 145,782 18,130,372 $ 159,970,603	December 31, 2021
		46,011,743 57,107,224 32,875,263
		135,994,230
		16,414,356 4,940,042 149,897
		21,504,295
		157,498,525

(i) Investment in debt instruments measured at fair value through other comprehensive income

The Bank 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. Some of the investment in debt instruments measured at fair value through other comprehensive income are used as resell condition. Please refer to Note 6 (q) for more details.

(Continued)

29

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• (ii) Investment in equity instruments measured at fair value through other comprehensive income

The Bank designated the investments shown above as equity securities as at fair value through other comprehensive income because these equity securities represent those investments intending to hold for long-term for strategic purpose.

The Bank designated the investments shown above as equity instrument as at fair value through other comprehensive income; therefore, the Bank recognized $1,457,593 and $884,796, respectively as dividend revenue for the years ended December 31, 2022 and 2021. In which, the disposal equity instruments were recognized $688,220 and $44,127 as dividend revenue for the years ended December 31, 2022 and 2021.

The Bank sold the investments which were measured as at fair value through other comprehensive income due to assets allocation. The fair value of disposed investments are $11,601,994 and $801,669. And (losses) gains on disposal are $(1,270,030) and $35,192 for the years ended December 31, 2022 and 2021. Therefore, accumulated gains on disposal were transferred from other equity to retained earnings.

• (iii) Please refer to Note 6(ap) for the credit risk (including the impairment in debt instruments) and market risk information.

• (iv) The Bank assessed the impairment of financial assets measured at fair value through other comprehensive income as of December 31, 2022 and 2021. The changes in allowance for credit losses attribute to the financial assets were as follows:

Beginning balance Provision Foreign exchange Ending balance Investment in debt instruments at amortized cost Certificates of deposit with the Central Bank Government bonds Corporate bonds Financial debentures Negotiable certificates of deposit Sub-total Less:Accumulated impairment Total	For the years ended December 31, 2022 2021 $ 87,792 66,454 1,521 21,599 1,539 (261) $ 90,852 87,792 December 31, 2022 December 31, 2021 $ 195,595,000 231,395,000 24,370,304 24,673,670 7,481,434 8,689,856 9,337,858 14,306,782 64,523 58,076 236,849,119 279,123,384 (74,872) (87,478) $ 236,774,247 279,035,906
	2022 $ 87,792 1,521 1,539 $ 90,852 December 31, 2022 $ 195,595,000 24,370,304 7,481,434 9,337,858 64,523 236,849,119 (74,872) $ 236,774,247

• (h) Investment in debt instruments at amortized cost

(Continued)

30

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

The Bank assessed that these financial assets were held 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.

• (i) Please refer to Note 6(ap) for credit risk.

• (ii) The pledged assets provided by the above investment in debt instruments at amortized cost were shown follows:

Reserve for provisional seizure by the court, international card payment reserve, trust claim reserve and operating guaranty funds Central Bank financing guarantee Overseas branches required reserve of overdraft guarantee Daylight overdraft guarantee Guarantee for borrowing US dollars Guarantee for borrowing JPY dollars Sponsorship of Treasury Affairs Total	December 31, 2022 $ 854,500 - 64,523 2,000,000 29,000,000 200,000 20,000,000 $ 52,119,023	December 31, 2021 901,900 11,300,000 58,076 2,000,000 23,000,000 200,000 16,200,000 53,659,976

(iii) The Bank assessed the impairment of investment in debt instruments at amortized cost as of December 31, 2022 and 2021. The changes in allowance for credit losses attribute to these financial assets were as follows:

Beginning balance (Reversal) provision Foreign exchange Ending balance	For the years ended December 31,	For the years ended December 31,
	2022 $ 87,478 (13,210) 604 $ 74,872	2021
		75,964 11,661 (147
		87,478

• (iv) Disposal gain (loss) on disposal investment in assets at amortized cost：

Corporate bonds Financial debentures Total	For the year ended December 31, 2022	For the year ended December 31, 2022
	The carrying amount at the date of derecognition $ 81,364 305,979 $ 387,343	Gain (Loss) on disposal
		710 1,271
		1,981

(Continued)

31

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Government bonds Corporate bonds Financial debentures Total	For the year ended December 31, 2021	For the year ended December 31, 2021
	The carrying amount at the date of derecognition $ 791,559 248,776 549,111 $ 1,589,446	Gain (Loss) on disposal
		78,951 2,048 22,742
		103,741

For the years ended December 31, 2022 and 2021, the following reasons that caused the Bank dispose part of its financial assets measured at amortized cost for the mandatorily redemption of the bond issuers, and the purpose of fund management.

(i) Investments accounted for using equity method, net

Subsidiary	December 31, 2022 Amount % $ 1,516,406 100.00 624,591 100.00 1,258,512 100.00 97,947 100.00 $ 3,497,456	December 31, 2021	December 31, 2021
	Amount $ 1,516,406 624,591 1,258,512 97,947 $ 3,497,456	Amount 1,463,080 537,297 1,068,059 48,591 3,117,027	%
Investment measured by equity method TBB International Leasing Co., Ltd. －initial investment $400,000 thousand TBB (Cambodia) Microfinance Institution Plc. －initial investment USD $10,000 thousand TBB Venture Capital Co., Ltd. －initial investment $300,000 thousand TBB Consulting Co., Ltd. －initial investment $50,000 thousand Total			100.00 100.00 100.00 100.00

The Bank's share of profit of associates and joint ventures accounted for using equity method for the years ended December 31, 2022 and 2021 are $320,283 and $99,659 respectively.

On August 23, 2021, the Bank invested $50,000 and held 100% of the equity in TBB Consulting Co., Ltd. The establishment registration was completed on August 30, 2021.

On December 22, 2021, the subsidiary TBB Consulting Co., Ltd. invested $2,000 and expected to hold 20% of the equity in Manitok Management Consultants Co., Ltd. The establishment registration was completed on January 19, 2022.

The Bank has prepared consolidated financial statements for the years ended December 31, 2022 and 2021.

(Continued)

32

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(j) Other financial assets, net

Overdue receivable Less: Allowance for bad debts, overdue receivable Total	December 31, 2022 $ 58,786 (48,471) $ 10,315	December 31, 2021 80,334 (51,392) 28,942

The change in allowance for bad debts was as follows:

Beginning balance Reversal Transfer in Write-off Written-off recovered Ending balance	For the years ended December 31,	For the years ended December 31,
	2022 $ 51,392 (23,222) 16,605 (16,567) 20,263 $ 48,471	2021
		55,051 (24,464) 15,073 (15,308) 21,040
		51,392

(k) Property and equipment, net

December 31, 2022	Cost $ 6,743,535 8,116,339 2,692,413 272,058 653,883 194,023 20,225 130,457 $ 18,822,933 Cost $ 6,743,535 8,017,954 2,389,844 272,245 643,410 152,399 40,547 573,971 $ 18,833,905	Revaluation increment 2,986,161 31,184 - - - - - - 3,017,345 Revaluation increment 2,986,161 31,184 - - - - - - 3,017,345	Accumulated depreciation - 4,790,018 2,008,693 230,153 554,159 110,184 - - 7,693,207 Accumulated depreciation - 4,592,658 1,862,830 224,946 536,589 75,680 - - 7,292,703	Accumulated impairment 14,031 14,754 - - - - - - 28,785 Accumulated impairment 14,031 14,754 - - - - - - 28,785	Total 9,715,665 3,342,751 683,720 41,905 99,724 83,839 20,225 130,457 14,118,286 Total 9,715,665 3,441,726 527,014 47,299 106,821 76,719 40,547 573,971 14,529,762
Land Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Leasehold improvements Construction in progress Prepayment for equipment Total December 31, 2021
Land Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Leasehold improvements Construction in progress Prepayment for equipment Total

(Continued)

33

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Change of cost

Land Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Leasehold improvements Construction in progress Prepayment for equipment Total Land Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Leasehold improvements Construction in progress Prepayment for equipment Total	January 1, 2022 $ 9,729,696 8,049,138 2,389,844 272,245 643,410 152,399 40,547 573,971 $ 21,851,250 January 1, 2021 $ 9,729,696 7,961,424 2,270,278 275,177 605,359 158,863 12,246 514,215 $ 21,527,258	Increase - 98,385 448,629 7,577 22,072 42,280 32,248 49,995 701,186 Increase - 87,714 229,260 18,695 63,178 17,086 62,045 158,678 636,656	Decrease - - 153,867 8,543 14,859 2,572 52,570 493,808 726,219 Decrease - - 106,258 21,548 24,177 19,788 33,744 98,853 304,368	Foreign Exchange - - 7,807 779 3,260 1,916 - 299 14,061 Foreign Exchange - - (3,436) (79) (950) (3,762) - (69) (8,296)	December 31, 2022
					9,729,696 8,147,523 2,692,413 272,058 653,883 194,023 20,225 130,457
					21,840,278
					December 31, 2021 9,729,696 8,049,138 2,389,844 272,245 643,410 152,399 40,547 573,971
					21,851,250

Change of depreciation

Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Leasehold improvements Total Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Leasehold improvements Total	January 1, 2022 $ 4,592,658 1,862,830 224,946 536,589 75,680 $ 7,292,703 January 1, 2021 $ 4,404,411 1,769,070 232,756 518,100 62,114 $ 6,986,451	Increase 197,360 292,951 13,171 30,036 36,185 569,703 Increase 188,247 200,922 13,833 43,890 31,195 478,087	Decrease - 153,101 8,480 14,690 2,572 178,843 Decrease - 105,609 21,394 23,996 19,788 170,787	Foreign Exchange - 6,013 516 2,224 891 9,644 Foreign Exchange - (1,553) (249) (1,405) 2,159 (1,048)	December 31, 2022 4,790,018 2,008,693 230,153 554,159 110,184
					7,693,207
					December 31, 2021 4,592,658 1,862,830 224,946 536,589 75,680
					7,292,703

(Continued)

34

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Accumulated impairment

Land Buildings Total Land Buildings Total	January 1, 2022 $ 14,031 14,754 $ 28,785 January 1, 2021 $ 14,031 14,754 $ 28,785	Increase - - - Increase - - -	Decrease - - - Decrease - - -	Foreign Exchange - - - Foreign Exchange - - -	December 31, 2022 14,031 14,754
					28,785
					December 31, 2021 14,031 14,754
					28,785

When the Bank first adopted IFRSs, it elected to apply the revaluation amount calculated per the regulation of GAAP of R.O.C as the original cost on the transition date.

As of December 31, 2022 and 2021, 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, 2022 and 2021, land which was occupied all amounted to $5,496. Except for a portion of the land that had been negotiated with the occupant to collect the rent; the Bank intends to participate in land auction, urban renewal or by other appropriate means in due course.

(l) Right-of-use assets

The Bank leases many assets including buildings, machinery and transportation equipment. Information about leases on costs, depreciation and impairment for which the Bank as a lessee is presented below:

December 31, 2022	Cost $ 1,832,547 26,497 72,592 12,403 $ 1,944,039 Cost $ 1,780,314 27,842 71,244 10,337 $ 1,889,737	Accumulated depreciation 701,020 26,408 21,877 5,206 754,511 Accumulated depreciation 671,607 27,272 42,434 3,353 744,666	Accumulated impairment - - - - - Accumulated impairment - - - - -	Total 1,131,527 89 50,715 7,197
Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Total December 31, 2021
				1,189,528
				Total 1,108,707 570 28,810 6,984
Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Total
				1,145,071

(Continued)

35

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Change of cost

Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Total Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Total	January 1, 2022 $ 1,780,314 27,842 71,244 10,337 $ 1,889,737 January 1, 2021 $ 1,522,533 43,406 64,316 7,603 $ 1,637,858	Increase 584,148 - 50,368 2,996 637,512 Increase 535,271 3 19,503 4,960 559,737	Decrease 550,273 1,345 49,099 930 601,647 Decrease 271,377 15,567 12,566 2,226 301,736	Foreign Exchange 18,358 - 79 - 18,437 Foreign Exchange (6,113) - (9) - (6,122)	December 31, 2022 1,832,547 26,497 72,592 12,403
					1,944,039
					December 31, 2021 1,780,314 27,842 71,244 10,337
					1,889,737

Change of depreciation

Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Total Buildings Machinery and equipment Transportation equipment Miscellaneous equipment Total	January 1, 2022 $ 671,607 27,272 42,434 3,353 $ 744,666 January 1, 2021 $ 493,055 40,895 34,141 3,035 $ 571,126	Increase 379,296 481 21,372 2,666 403,815 Increase 374,946 1,944 20,122 2,416 399,428	Decrease 357,745 1,345 41,952 813 401,855 Decrease 195,749 15,567 11,829 2,098 225,243	Foreign Exchange 7,862 - 23 - 7,885 Foreign Exchange (645) - - - (645)	December 31, 2022 701,020 26,408 21,877 5,206
					754,511
					December 31, 2021 671,607 27,272 42,434 3,353
					744,666

(Continued)

36

TAIWAN BUSINESS BANK LTD.

Notes to the Financial Statements

(m) Other assets, net

Office supplies Prepayments Operating guarantee deposits and settlement fund Guarantee deposits paid Deferred assets Temporary payments and suspense accounts Proceeds of settlement and margin trading Other assets Total Deposits from the Central Bank and banks Deposits from the Central Bank Due from the Central Bank Deposits from banks Call loans from banks Overdrafts on banks Deposits transferred from Chunghwa Post Co., Ltd. Total	December 31, 2022 $ 29,019 8,167,434 31,753 2,607,864 128 4,690,927 60,139 176,432 $ 15,763,696 December 31, 2022 $ 232,262 14,133,500 705,261 31,549,533 1,084,076 147,261,545 $ 194,966,177	December 31, 2021
		28,953 8,154,098 31,450 384,397 175 - 1,307,041 105,859
		10,011,973
		December 31, 2021
		249,565 9,955,800 244,033 24,292,901 536,471 67,261,545
		102,540,315

(n) Deposits from the Central Bank and banks

(o) Due to the Central Bank and banks

Central Bank Unused credit lines			December 31, 2021
	Currency TWD	Interest Rate 0.1%	Maturity Date 2022.6.30	Original Amount NTD Amount 49,713,800 $ 49,713,800 $ 586,200

(Continued)

37

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(p) Financial liabilities at fair value through profit or loss

Financial liabilities designated at fair value through profit or loss： Financial debentures Financial liabilities held for trading： Derivative instruments not used for hedging Foreign exchange forward contracts Currency swap contracts Foreign currency option-sell Interest rate contract Total	December 31, 2022 $ 9,367,595 10,932 524,421 17,864 4,713 $ 9,925,525	December 31, 2021 8,293,730 4,404 126,198 3,714 7,991 8,436,037

Please refer to 6(t) for the information of financial liabilities designated at fair value through profit and loss.

Please refer to 6(c) for the nominal amount of unsettled financial derivatives instrument contracts of December 31, 2022 and 2021.

• (q) Notes and bonds issued under repurchase agreement

Assets	December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022
	Par value	Selling Price (Recognized in securities sold under repurchase agreements)	Designated repurchase amount	Designated repurchase date
Financial assets at fair value through other comprehensive income	$ 2,616,634	2,462,991	2,472,765	Prior to July 1, 2024
Assets	December 31, 2021
	Par value	Selling Price (Recognized in securities sold under repurchase agreements)	Designated repurchase amount	Designated repurchase date
Financial assets at fair value through other comprehensive income	$ 2,157,553	2,060,693	2,068,283	Prior to July 1, 2024

(Continued)

38

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(r) Payables

Accrued interest Accounts payable Acceptances Accrued expenses Collection payable Deposits received from securities borrowers Guaranteed price deposits received from securities borrowers Spot exchange payable, foreign currencies Other payables Prices payable of securities sold for customers Settlement payable Others Total Deposits and remittances Savings deposits Time deposits Demand deposits Checking account deposits Remittances Total	December 31, 2022 $ 4,428,933 11,042,559 802,824 3,237,203 673,102 116,196 108,289 13,625 834,692 137,155 40,444 6,474 $ 21,441,496 December 31, 2022 $ 737,659,280 437,048,016 465,508,480 33,292,182 428,111 $ 1,673,936,069	December 31, 2021
		2,469,585 12,819,538 1,039,557 2,814,117 775,553 115,541 149,272 9,204 2,209,159 309,498 - 16,970
		22,727,994
		December 31, 2021
		707,880,781 451,921,417 475,541,845 33,266,719 429,227
		1,669,039,989

(s) Deposits and remittances

(Continued)

39

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(t) Bank notes payable

Bonds			Terms of Transactions		Bond Issued
	Issue date	Maturity date	Interest Rate & repayment	Type	Amou	nt
2015-2A 2015-2B 2016-2 2017-1A 2017-1B 2017-1C 2017-2 2018-2 2019-1A 2019-1B 2020-1 2020-2 2021-1	08/31/2015 08/31/2015 12/20/2016 03/28/2017 03/28/2017 03/28/2017 05/23/2017 08/20/2018 03/21/2019 03/21/2019 03/25/2020 08/13/2020 11/17/2021	08/31/2023 08/31/2025 12/20/2023 03/28/2024 03/28/2025 03/28/2027 05/03/2027 08/20/2028 03/21/2026 03/21/2029 03/25/2030 None None	The debentures bear an annual interest rate of 2.05%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. The debentures bear an annual interest rate of 2.10%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. The debentures bear an annual interest rate of 1.40%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. The debentures bear an annual interest rate of 1.50%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. The debentures bear an annual interest rate of 1.60%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. The debentures bear an annual interest rate of 1.85%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. The debentures bear an annual interest rate of 1.85%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. 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. The debentures bear an annual interest rate of 1.20%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. The debentures bear an annual interest rate of 1.30%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. The debentures bear an annual interest rate of 0.8%. Simple interest is accrued and paid annually. The principal will be repaid in full at maturity. The debentures bear an annual interest rate of 1.62%.Simple interest is accrued and paid annually. After calculating the early redeemable bond is in line with the capital adequacy ratio under the consent of the competent authority, the debentures are redeemable per face value plus accrued interest at the interest payment date after five years and a month from the issue date . The debentures bear an annual interest rate of 1.60%.Simple interest is accrued and paid annually. After calculating the early redeemable bond is in line with the capital adequacy ratio under the consent of the competent authority, the debentures are redeemable per face value plus accrued interest at the interest payment date after five years and a month from the issue date .	Unsecured subordinated long-term financial debentures 〞 〞 〞 〞 〞 〞 〞 〞 〞 〞 Perpetual non- accumulated subordinated financial debentures 〞	December 31, 2022 $ 4,700,000 300,000 2,700,000 390,000 250,000 3,360,000 1,300,000 5,450,000 1,000,000 4,800,000 10,000,000 10,000,000 8,000,000 $ 52,250,000	December 31, 2021
						4,700,000 300,000 2,700,000 390,000 250,000 3,360,000 1,300,000 5,450,000 1,000,000 4,800,000 10,000,000 10,000,000 8,000,000
						52,250,000

(Continued)

40

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

The Bank issued $120,000 thousand and $180,000 thousand 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. In addition, the Bank considers that the designated economic relationship is evaluated by the SLMM model method, if the amount of changes in the fair value of the corporate bonds attributable to changes in credit risk is listed in other comprehensive gains and losses, it will trigger or aggravate the accounting ratio of gains and losses. Therefore, the amount is reported in the profit and loss.The debentures are as follows:

Bonds			Terms of Transactions		Bond Issued	nt December 31, 2021
	Issue date	Maturity date	Interest Rate & repayment	Type	Amou
2017-3 2018-3	10/27/2017 09/27/2018	10/27/2047 09/27/2048	The zero-coupon debentures with call options 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. The zero-coupon debentures with call options 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.	Unsecured dollar- denominated senior financial debentures 〞 Valuation adjustment	December 31, 2022 $ 3,687,000 5,530,500 150,095 $ 9,367,595
						3,318,600 4,977,900 (2,770) 8,293,730

The increase (decrease) in fair value of the financial liabilities that are attributable to changes in credit risk are as follows:

Fair value of corporate bonds Fair value increase (decrease) not attributable to changes in market conditions that give rise to market risk Difference between the carrying value and the amount payable at the end of the contract term (u) Other financial liabilities Cumulative earnings on appropriated loans fund	December 31, 2022 $ 9,367,595 170,133 150,095 December 31, 2022 $ 2,910,581	December 31, 2021 8,293,730 90,645 (2,770) December 31, 2021 4,365,294

Cumulative earnings on appropriated loan fund is the project contract signed by National Development Fund, Executive Yuan, 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. These accounts are used for transferring accounts and paying the deposit interests for each project contract.

(Continued)

41

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(v) Provisions

Provision for guarantee liabilities Provision for loan commitments Indeterminate indemnity provisions Provision for employee benefits Total	December 31, 2022 $ 237,076 100,236 74,619 2,264,171 $ 2,676,102	December 31, 2021 258,065 71,423 73,181 3,017,541 3,420,210

Change of provision

Provision for guarantee liabilities Provision for loan commitments Indeterminate indemnity provisions Provision for employee benefits Total Provision for guarantee liabilities Provision for loan commitments Indeterminate indemnity provisions Provision for employee benefits Total	January 1, 2022 $ 258,065 71,423 73,181 3,017,541 $ 3,420,210 January 1, 2021 $ 218,351 52,831 - 3,122,235 $ 3,393,417	Increase - 27,782 1,438 172,726 201,946 Increase 39,802 18,896 73,181 277,974 409,853	Decrease 21,496 - - 875,196 896,692 Decrease - - - 327,408 327,408	Use - - - 50,900 50,900 Use - - - 55,260 55,260	Foreign exchange 507 1,031 - - 1,538 Foreign exchange (88) (304) - - (392)	December 31, 2022
						237,076 100,236 74,619 2,264,171
						2,676,102
						December 31, 2021
						258,065 71,423 73,181 3,017,541
						3,420,210

Please refer to Note 6(aa) for the information with regard to provision for employee benefits shown above.

(w) Lease liabilities

Lease liabilities as follows:

Less than one year More than one year	December 31, 2022 $ 381,387 $ 835,123	December 31, 2021 331,216 813,856

The amounts recognized in profit or loss were as follows:

Interest on lease liabilities Expenses relating to short-term leases Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets	For the years ended December 31,	For the years ended December 31,
	2022 $ 16,297 $ 11,521 $ 16,106	2021
		17,577
		8,253
		16,468

(Continued)

42

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

The amounts recognized in the statement of cash flows were as follows：

Total cash outflow for leases	For the years ended December 31,	For the years ended December 31,
	2022 $ 440,760	2021
		436,548

(i) Real estate leases

The Bank leased buildings for its office space. Some leases include an option to renew the lease for an additional period of the same duration after the end of the contract term.

Some leases provide for additional rent payments that are based on changes in local price indices. Some also require the Bank to make payments that relate to the property taxes levied on the lessor and insurance payments made by the lessor; these amounts are generally determined monthly.

• (ii) Other leases

The Bank leased machinery and transportation equipment with lease terms of one to four years. In some cases, the Bank has options to purchase the assets at the end of the contract term; in other cases, it guarantees the residual value of the leased assets at the end of the contract term.

The Bank has elected not to recognize right-of-use assets and lease liabilities for leases of lowvalue assets and short term.

(x) Other liabilities

Advance interest receipts Unearned revenue Other advance receipts Guarantee deposits received Temporary receipts and suspense accounts Others Total	December 31, 2022 $ 6,396 306,036 56,554 3,304,956 - 3,220 $ 3,677,162	December 31, 2021
		2,019 259,251 59,435 1,223,817 1,126,269 2,938
		2,673,729

(y) Equity

• (i) Common stock

As of December 31, 2022 and 2021, the Bank’s authorized capital were $100,000,000 and $80,000,000, and the paid-in capital for common shares of the Bank were $80,296,934 and $77,431,952, the face value of each share is $10. The outstanding shares were 8,029,693 and 7,743,195 shares, respectively.

(Continued)

43

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Pursuant to the resolution approved by the regular stockholders’ meeting of the Bank on June 17, 2022, the Bank increased its capital from the retained earnings by $2,864,982 and issued 286,498 shares. The capital increase has been approved by Financial Supervisory Commission and came into effect on July 12, 2022. The record date of the capital increase is set on August 8, 2022. The Bank has completed the alteration of the registered capital amount on August 26, 2022.

(ii) Capital surplus

Sources and statement of the Bank's capital surplus were as follows:

Additional paid-in capital	December 31, 2022 $ 815,900	December 31, 2021
		815,900

According to the R.O.C. Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends based on the shareholder's initial number of shares. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring capital surplus in excess of par value should not exceed 10% of the total common stock outstanding.

(iii) 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. The accumulated retained earnings from prior periods are added back as part of the distributable dividends, 30 to 100% of the aggregated retained earnings are available to be distributed and will be resolved by the annual stockholders’ meeting according to the proposal submitted by the Board of Directors.

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

In compliance with the Company Act, 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.

(Continued)

44

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

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 2021 and 2020 in the shareholders’ meeting on June 17, 2022 and July 20, 2021, respectively. The dividends distributed were as follows:

Dividends to common shareholders Stock dividends Cash dividends Total	2021 Distribution rate (NT dollar) Amount $ 0.37 2,864,982 0.10 774,320 $ 3,639,302	2020	2020
		Distribution rate (NT dollar) 0.34 0.10	Amount
			2,546,118 748,858
			3,294,976

(iv) Other equity interest

January 1, 2022 Share of other comprehensive income of subsidiaries associates and joint ventures accounted for using equity method Investment in debt instruments measured at fair value through other comprehensive income -Unrealized amount -Realized amount Foreign currency translation difference－Exchange difference Disposal of investments in equity instruments measured at fair value through other comprehensive income December 31, 2022	Unrealized gains from financial assets measured at fair value through other comprehensive income $ 4,113,485 (4,729) (8,545,652) (4,976) - 1,270,030 $ (3,171,842)	Exchange differences on translation of foreign financial statements (1,807,265) 11,653 - - 1,197,779 - (597,833)	Total 2,306,220 6,924 (8,545,652) (4,976) 1,197,779 1,270,030 (3,769,675)

(Continued)

45

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

January 1, 2021 Share of other comprehensive income of subsidiaries associates and joint ventures accounted for using equity method Investment in debt instruments measured at fair value through other comprehensive income -Unrealized amount -Realized amount Foreign currency translation difference－Exchange difference Disposal of investments in equity instruments measured at fair value through other comprehensive income December 31, 2021	Unrealized gains from financial assets measured at fair value through other comprehensive income $ 5,187,824 4,546 (740,789) (302,904) - (35,192) $ 4,113,485	Exchange differences on translation of foreign financial statements (1,476,771) 2,674 - - (333,168) - (1,807,265)	Total 3,711,053 7,220 (740,789) (302,904) (333,168) (35,192) 2,306,220

(z) Income taxes

(i) The income tax expenses were as follows:

Current tax expense Current period Adjustment for prior period Deferred tax expense (income) Origination and reversal of temporary differences Income tax expenses	For the years ended December 31,	For the years ended December 31,
	2022 $ 2,095,680 13,319 2,108,999 (217,066) $ 1,891,933	2021
		707,610 (1,995) 705,615 (29,429) 676,186

(ii) The income tax expenses (income) recognized under follows: Items that will not be reclassified subsequently to profit or loss: Remeasurements of defined benefit plans	other comprehensive income were as For the years ended December 31, 2022 2021 $ 111,419 4,902	other comprehensive income were as For the years ended December 31, 2022 2021 $ 111,419 4,902
	2022 $ 111,419
		4,902

(Continued)

46

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign financial statements Unrealized gains (losses) on valuation of financial assets measured at fair value through other comprehensive income	For the years ended December 31,	For the years ended December 31,
	2022 $ 299,444 (30,000) $ 269,444	2021 (83,292) (15,291) (98,583)

The reconciliation between the income tax expense (income) and net income before tax of the Bank for 2022 and 2021 is as follows:

Income tax computed on net income before tax Tax-free income Overseas branch income tax expenses Overestimate prior income tax expense Other Income tax expense	For the years ended December 31,	For the years ended December 31,
	2022 $ 2,402,757 (676,685) 152,074 13,319 468 $ 1,891,933	2021 1,155,260 (564,059) 48,932 (1,995) 38,048 676,186

(Continued)

47

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

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

For the year ended December Beginning balance Recognized in profit or loss Recognized in other comprehensive income Temporary difference Deferred tax assets resulted from allowance for bad debts exceeding the limit regulated in Tax Law $ 770,707 261,944 - Loss on assets impairment 21,710 (2,338) - Reserve for employee benefit liabilities 374,495 (42,827) - Land value increment tax (879,056) - - Exchange differences from the translation of financial statements of foreign operations 430,575 - (299,444) Unrealized loss on valuation of financial assets measured at fair value through other comprehensive income (7,234) - 30,000 Actuarial gains and losses 311,474 - (111,419) Indeterminate indemnity provisions 14,636 287 - Net deferred tax assets (liabilities) $ 1,037,307 217,066 (380,863) The information stated on the balance sheet is as follows: Deferred tax assets $ 1,923,597 Deferred tax liabilities $ 886,290		For the year ended December	For the year ended December	31, 2022	Ending balance 1,032,651 19,372 331,668 (879,056) 131,131 22,766 200,055 14,923 873,510 1,752,566 879,056
			Recognized in other comprehensive income - - - - (299,444) 30,000 (111,419) - (380,863)	Others - - - - - - - - -

(Continued)

48

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

For the year ended December Beginning balance Recognized in profit or loss Recognized in other comprehensive income Temporary difference Deferred tax assets resulted from allowance for bad debts exceeding the limit regulated in Tax Law $ 702,104 68,603 - Loss on assets impairment 57,058 (35,348) - Reserve for employee benefit liabilities 392,957 (18,462) - Land value increment tax (879,056) - - Exchange differences from the translation of financial statements of foreign operations 347,283 - 83,292 Unrealized loss on valuation of financial assets measured at fair value through other comprehensive income (22,525) - 15,291 Actuarial gains and losses 316,376 - (4,902) Indeterminate indemnity provisions - 14,636 - Net deferred tax assets (liabilities) $ 914,197 29,429 93,681 The information stated on the balance sheet is as follows: Deferred tax assets $ 1,815,778 Deferred tax liabilities $ 901,581		For the year ended December	For the year ended December	31, 2021	Ending balance 770,707 21,710 374,495 (879,056) 430,575 (7,234) 311,474 14,636 1,037,307 1,923,597 886,290
			Recognized in other comprehensive income - - - - 83,292 15,291 (4,902) - 93,681	Others - - - - - - - - -

• (iv) Uncertainty over income tax treatments

For tax returns that have not yet been assessed, the Bank has assessed relevant factors, including relevant IFRIC interpretations and historical experience, and believe that sufficient income tax liabilities have been estimated.

• (v) The Bank’ s income tax returns through 2017 and 2019 have been assessed by the Tax Authority.

(Continued)

49

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(aa) Provision for employee benefit

As of December 31, 2022 and 2021, the balance of provision for employee benefit of the Bank was as follows:

Defined benefit plan Employee deposits with favorable rate	December 31, 2022 $ 1,211,918 1,052,253 $ 2,264,171	December 31, 2021
		1,966,215 1,051,326 3,017,541

(i) Defined benefit plan

As of December 31, 2022 and 2021, the balance of provision for employee benefit of the Bank were as follows:

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liabilities	December 31, 2022 $ 6,156,019 (4,944,101) $ 1,211,918	December 31, 2021
		6,870,061 (4,903,846) 1,966,215

The Bank makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pensions for employees upon retirement. Plans (covered by the Labour Standards Law) entitle a retired employee to receive retirement benefits based on years of service and average salary for the six months prior to retirement.

1) Composition of plan assets

According to the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund. With regard to the utilization of the funds, minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with interest rates offered by local banks.

The Bank of Taiwan labour pension reserve account balance for the Bank amounted to $4,944,101 and $4,903,846 on December 31, 2022 and 2021. For information on the utilisation of the labour pension fund assets including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labour Fund, Ministry of Labor.

(Continued)

50

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• 2) Movements in the present value of the defined benefit obligations

The movements in the present value of the defined benefit obligations of the Bank were as follows:

Defined benefit obligation on January 1 Current service and interest cost Remeasurements of the net defined benefit liability －Actuarial loss on experience adjustment －Actuarial loss on demographic assumptions changed －Actuarial loss on financial assumptions changed Benefits paid Defined benefit obligation at December 31	For the years ended December 31, 2022 2021 $ 6,870,061 7,217,819 191,252 197,748 443,097 (21,266) - 126,343 (593,737) (53,470) (754,654) (597,113) $ 6,156,019 6,870,061
	2022 $ 6,870,061 191,252 443,097 - (593,737) (754,654) $ 6,156,019

• 3) Movements of defined benefit plan assets

The movements in the fair value of defined benefit plan assets of the Bank were as follows:

Fair value of plan assets on Junuary 1 Interest income Remeasurements of the net defined benefit liability －plan assets revenue (excluded of current interest) Contributions made Benefits paid by the plan Fair value of plan assets on December 31	For the years ended December 31, 2022 2021 $ 4,903,846 5,027,251 19,453 14,921 406,458 76,119 368,998 382,668 (754,654) (597,113) $ 4,944,101 4,903,846
	2022 $ 4,903,846 19,453 406,458 368,998 (754,654) $ 4,944,101

4) Expenses recognized in profit or loss

The expenses recognized in profit or loss of the Bank were as follows :

Current service costs Net interest of the net liability of define benefit obligations	For the years ended December 31,	For the years ended December 31,
	2022 $ 164,454 7,345 $ 171,799	2021
		176,661 6,166
		182,827

(Continued)

51

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• 5) Remeasurements of the net defined benefit liability recognized in other comprehensive income

Remeasurements of the net defined benefit liability recognized in other comprehensive income for the years ended December 31, 2022 and 2021 were as follows：

Amount on January 1 Recognized during the period Amount on December 31	For the years ended December 31,	For the years ended December 31,
	2022 $ 1,557,373 (557,098) $ 1,000,275	2021
		1,581,885 (24,512)
		1,557,373

• 6) Actuarial assumptions

The principal actuarial assumptions at the reporting date were as follow :

Discount rate Future salary increase rate	December 31, 2022 December 31, 2021 % 1.70 % 0.40 % 1.50 % 1.50

The expected allocation payment made by the Bank to the defined benefit plans for the one-year after the reporting date is $245,000.

The weighted average lifetime of the defined benefit plans is 7 years.

• 7) Sensitivity analysis

The effects of changes in major actuarial assumptions adopted in defined benefit obligation on December 31, 2022 and 2021 were as follows :

December 31, 2022 Discount rate(Change 0.25%) Future salary increase rate(Change 0.25%) December 31, 2021 Discount rate(Change 0.25%) Future salary increase rate(Change 0.25%)	Influence of defined benefit plan obligation
	Increase 0.25% Decrease 0.25% % (1.70) % 1.74 % 1.67 % (1.64) % (1.90) % 1.96 % 1.87 % (1.82)

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2022 and 2021.

(Continued)

52

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(ii) Defined contribution plan

The Bank allocates 6% of each employee's monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Bank allocates a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation. Employees based abroad are contributed in accordance with the local government's regulations.

The pension costs incurred from the contributions to the Bureau of the Labor Insurance, oversea branches, and local authorities responsible for the Bank's subsidiaries amounted to $168,570 and $155,388 for the years ended December 31, 2022 and 2021, respectively.

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liability	December 31, 2022 $ 1,052,253 - $ 1,052,253	December 31, 2021
		1,051,326 -
		1,051,326

The Bank conducted the obligation of time deposit with favorable rate for retired and current employees based on the internal regulation “Saving Deposits for Employees”.

• 1) Movements in the present value of the defined benefit obligations

The movements in the present value of the defined benefit obligations of the Bank for the years ended December 31, 2022 and 2021, were as follows:

Defined benefit obligation on January 1 Interest cost Remeasurements of the net defined benefit liability -current actuarial gains and losses Benefits paid by the plan Defined benefit obligation on December 31	For the years ended December 31, 2022 2021 $ 1,051,326 931,667 39,953 35,363 175,487 290,695 (214,513) (206,399) $ 1,052,253 1,051,326
	2022 $ 1,051,326 39,953 175,487 (214,513) $ 1,052,253

• 2) Movements in fair value of the defined benefit plan assets

The movements in the present value of the defined plan assets of the Bank were as follows:

Fair value of plan assets on January 1 Contributions made Benefits paid by the plan Fair value of plan assets on December 31	For the years ended December 31, 2022 2021 $ - - 214,513 206,399 (214,513) (206,399) $ - -
	2022 $ - 214,513 (214,513) $ -

(Continued)

53

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• 3) Expenses recognized in profit or loss

The expenses recognized in profit or loss of the Bank were as follows :

Net interest on the net defined benefit liability	For the years ended December 31,	For the years ended December 31,
	2022 $ 215,440	2021
		326,058

• 4) Actuarial assumption

The material actuarial assumptions used to determine present value of a defined benefit obligation on the reporting date were as follow :

Discount rate of employee deposit with favorable rate Rate of return for capital deposited Annual diminishing rate of account balance Possibility that employee deposit with favorable rate be modified Earnings per share Net income Weighted average number of common stock shares outstanding (in thousands) (Note 1) Basic earnings per shares (in dollars) Dilutive potential common shares (in thousands) (Note 1,2) Weighted average number of shares outstanding for diluted EPS (in thousands) (Note 1) Diluted earnings per shares (in dollars)	December 31, 2022 December 31, 2021 % 4.00 % 4.00 % 2.00 % 2.00 % 1.00 % 1.00 % 50.00 % 50.00 For the years ended December 31,	December 31, 2022 December 31, 2021 % 4.00 % 4.00 % 2.00 % 2.00 % 1.00 % 1.00 % 50.00 % 50.00 For the years ended December 31,
	2022 $ 10,121,852 8,029,693 $ 1.26 34,862 8,064,555 $ 1.26	2021
		5,100,112
		8,029,693
		0.64
		38,869
		8,068,562
		0.63

• (ab) Earnings per share

Note 1: The earnings per share for the year ended December 31, 2022 has applied retrospective adjustments.

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

• (ac) Employees and directors' remuneration

In accordance with the articles of incorporation the Bank should contribute 1% to 6% of the profit as employee compensation and less than 0.6% as directors' remuneration when there is profit for the year. However, if the Bank has accumulated deficits, the profit should be reserved to offset the deficit.

(Continued)

54

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

For the years ended December 31, 2022 and 2021, the estimated employee remuneration were $451,457 and $371,068, and the estimated directors' remuneration were $75,243 and $37,107, the estimates are based on pre-tax net profit for the period, before deducting employees and directors' remuneration, multiplied by the elaboration of the Bank's Articles of Association of employees and the directors remuneration ratio, and recognized as operating cost. If the board’s meeting decides to release stock dividends as employees' bonuses, the total number of employees bonus stocks to be issued shall be determined by the common stock closing price of the day before the meeting date.

There is no difference with actual distributions of 2021 remuneration. The information is available at the Market Observation Post System website.

(ad) Net interest revenue

Interest income: Loans Secured loans Bills negotiated Bank overdrafts Discounts Time deposit from Central Bank Due from the Central Bank Call loans to banks Bonds International credit card Overdue loans Bills Due from Banks Others Subtotal Interest expense: Deposits Deposits from banks Call loans from banks Financial debentures Notes and bond issued under repurchase agreement Others Subtotal Total	For the years ended December 31,	For the years ended December 31,
	2022 $ 8,053,024 19,220,653 4,181 14,266 17,116 1,218,788 201,563 1,260,539 2,603,937 35,527 211,415 28,950 99,990 166,352 33,136,301 11,299,382 1,489 890,231 759,937 9,358 86,565 13,046,962 $ 20,089,339	2021
		4,963,356 15,150,729 2,025 12,544 9,007 612,953 90,494 565,684 2,084,103 38,908 189,009 26,131 172,981 119,933
		24,037,857
		5,278,716 13,220 102,288 895,377 4,327 63,439
		6,357,367
		17,680,490

(Continued)

55

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(ae) Net service fee revenue

Service fee income: Remittance service fee Import bills negotiated service fee Export bills negotiated service fee Letter of credit service fee Certification service fee Acceptance service fee Trust service fee Guarantee service fee Agency service fee Interbank service fee Card service fee Commission revenue of insurance premium Custodian service fee Foreign currency service fee Commission of futures Loan service fee Miscellaneous fees Subtotal Service fee expense: Foreign currency service fee Interbank service fee Trust service fee Agency service fee IC card service fee Check clearing service fee Remittance service fee Custodian service fee Call loans service fee Futures option fee Miscellaneous fees Subtotal Total	For the years ended December 31,	For the years ended December 31,
	2022 $ 64,477 45,635 12,653 8,887 1,482 1,677 595,144 242,678 34,481 108,774 113,297 1,535,440 197,542 85,707 2,939 852,045 412,480 4,315,338 29,427 178,644 857 1,567 66,106 8,877 5,386 58,378 9,029 43 22,599 380,913 $ 3,934,425	2021
		64,862 46,243 13,648 8,005 1,431 1,680 1,084,528 236,828 35,662 93,684 118,074 803,334 207,389 93,053 3,867 729,484 125,642
		3,667,414
		25,008 154,805 813 1,508 62,665 9,275 5,180 60,407 10,164 10 20,029
		349,864
		3,317,550

(Continued)

56

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(af) (Loss) gain on financial assets or liabilities measured at fair value through profit or loss

Valuation gains (losses): Corporate bonds Financial debentures Listed stocks Beneficiary certificates Private fund Commercial paper Derivative financial instruments Subtotal Disposal gains (losses): Corporate bonds Financial debentures Listed stocks Beneficiary certificates Commercial paper Derivative financial instruments Subtotal Dividend revenue Interest income Total	For the years ended December 31, 2022 2021 $ (5,636) 4,685 (546,927) (381,752) (14,528) 4,052 (6,437) (11,477) (1,548) 4,925 10,790 3,173 193,966 (12,459) (370,320) (388,853) 6,437 29,074 (4,098) (1,349) (39,776) (18,905) (21,734) 22,711 (2,574) (7,398) 1,463,644 843,655 1,401,899 867,788 11,314 4,397 201,178 78,864 $ 1,244,071 562,196	For the years ended December 31, 2022 2021 $ (5,636) 4,685 (546,927) (381,752) (14,528) 4,052 (6,437) (11,477) (1,548) 4,925 10,790 3,173 193,966 (12,459) (370,320) (388,853) 6,437 29,074 (4,098) (1,349) (39,776) (18,905) (21,734) 22,711 (2,574) (7,398) 1,463,644 843,655 1,401,899 867,788 11,314 4,397 201,178 78,864 $ 1,244,071 562,196
	2022 $ (5,636) (546,927) (14,528) (6,437) (1,548) 10,790 193,966 (370,320) 6,437 (4,098) (39,776) (21,734) (2,574) 1,463,644 1,401,899 11,314 201,178 $ 1,244,071
		4,685 (381,752) 4,052 (11,477) 4,925 3,173 (12,459) (388,853) 29,074 (1,349) (18,905) 22,711 (7,398) 843,655 867,788 4,397 78,864 562,196

(ag) Realized gain on financial assets at fair value through other comprehensive income

Gain on disposal of government bonds Gain on disposal of corporate bonds Gain (loss) on disposal of financial debentures Dividend revenue Total	For the years ended December 31, 2022 2021 $ 4,480 247,087 666 25,167 (170) 30,650 1,457,593 884,796 $ 1,462,569 1,187,700	For the years ended December 31, 2022 2021 $ 4,480 247,087 666 25,167 (170) 30,650 1,457,593 884,796 $ 1,462,569 1,187,700
	2022 $ 4,480 666 (170) 1,457,593 $ 1,462,569
		247,087 25,167 30,650 884,796 1,187,700

(Continued)

57

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(ah) (Impairment losses on assets) reversal of impairment loss on assets

Investment in debt instrument measured at fair value through other comprehensive income Investment in debt instrument measured at amortized cost Total	For the years ended December 31, 2022 2021 $ (1,521) (21,599) 13,210 (11,661) $ 11,689 (33,260)	For the years ended December 31, 2022 2021 $ (1,521) (21,599) 13,210 (11,661) $ 11,689 (33,260)
	2022 $ (1,521) 13,210 $ 11,689
		(21,599) (11,661) (33,260)

(ai) Share of profit of associates and joint ventures accounted for using equity method

Investment income- TBB International Leasing Co., Ltd. Investment income- TBB (Cambodia) Microfinance Institution Plc Investment income- TBB Venture Capital Co., Ltd. Investment income- TBB Consulting Co., Ltd. Total	For the years ended December 31, 2022 2021 $ 41,673 28,811 26,911 (6,173) 202,343 78,430 49,356 (1,409) $ 320,283 99,659
	2022 $ 41,673 26,911 202,343 49,356 $ 320,283

(aj) Net other revenue other than interest income

Rental revenue of operating assets Rental expense of operating assets Loss on disposal and retirement of property and equipment Loss of account error Gold deposit book Other operating expense Other miscellaneous income Total	For the years ended December 31, 2022 2021 $ 10,939 8,659 (1,796) (1,605) (944) (852) (163) (350) 2,536 2,630 (40,597) (122,396) 93,096 282,802 $ 63,071 168,888	For the years ended December 31, 2022 2021 $ 10,939 8,659 (1,796) (1,605) (944) (852) (163) (350) 2,536 2,630 (40,597) (122,396) 93,096 282,802 $ 63,071 168,888
	2022 $ 10,939 (1,796) (944) (163) 2,536 (40,597) 93,096 $ 63,071
		8,659 (1,605) (852) (350) 2,630 (122,396) 282,802 168,888

(Continued)

58

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(ak) Bad debts expenses, commitment and guarantee liability provision

Discounted and loans Call loans to banks Receivables and other financial assets Subtotal Provisions for guarantee liabilities Provisions for loan commitments Total	For the years ended December 31,	For the years ended December 31,
	2022 $ 2,419,063 384 (24,665) 2,394,782 (21,496) 27,782 $ 2,401,068	2021
		5,153,489 (2,938) (37,417)
		5,113,134 39,802 18,896
		5,171,832

(al) Employee benefits expenses

Salary expense Labor and health insurance Pension expense Directors' remuneration Other employee benefits Total	For the years ended December 31,	For the years ended December 31,
	2022 $ 7,203,433 528,718 339,764 89,213 622,143 $ 8,783,271	2021
		6,710,384 512,569 337,460 50,302 739,425
		8,350,140

(am) Depreciation and amortization expense

Depreciation Property and equipment Right-of-use assets Amortization Computer software Other deferred charges Total	For the years ended December 31,	For the years ended December 31,
	2022 $ 568,358 403,815 248,725 47 $ 1,220,945	2021
		462,781 399,428 170,708 33
		1,032,950

(Continued)

59

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(an) Other general and administrative expense

Compensation loss Utilities fee Postage and telecommunication fee Transportation fee Printing and advertisement fee Repair and maintenance fee Insurance fee Professional service fee Materials and supplies Rental expenses Duties and levies Membership, donation and partaking Storage, packing and processing fee Cash transit fee Others Total	For the years ended December 31,	For the years ended December 31,
	2022 $ 42 89,402 248,342 30,855 210,184 261,133 378,827 260,568 119,396 27,627 1,559,256 590,970 45,955 65,098 72,751 $ 3,960,406	2021
		59 90,119 243,412 22,242 200,224 249,335 331,254 243,637 168,332 24,721 1,234,932 641,967 49,429 63,742 64,612
		3,628,017

• (ao) Financial Instruments

(i) 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 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.

(Continued)

60

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• 2) The definition of fair value hierarchy

• a) Level 1

The input of this level is quoted prices in active markets for identical financial instruments. The 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 belong to Level 1.

b) Level 2

The input of this level is other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The investments with lower trade volume such as government bonds, corporate bonds, financial debentures, convertible corporate bonds and derivative instruments, including financial debentures the Bank issued are belong to Level 2.

c) Level 3

The input is 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 level 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 Level 3, due to the fact that their fair market value cannot be directly calculated. The equity instruments with no active market which the Bank invested are Level 3.

(Continued)

61

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

3) Based on fair value measurement

• a) The fair value hierarchy of information

The financial instruments which are record as fair value measure on an ongoing basis, the fair value hierarchy of information were as follows:

Assets and Liabilities		December 31, 2022	December 31, 2022
	Total $ 115,114 31,254,976 17,984,590 141,840,231 145,782 9,367,595 1,166,667 557,930	Level 1 115,114 250,691 12,676,936 91,536,068 145,782 - 26,860 -	Level 2 Level 3 - - 30,907,810 96,475 - 5,307,654 50,304,163 - - - 9,367,595 - 1,139,807 - 557,930 -
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 measure at fair value Security Investments Others Financial assets at fair value through other comprehensive income Security Investments Bond Investments Others Financial liabilities at fair value through profit or loss Financial liabilities designated at fair value through profit or loss Derivative financial assets and liabilities
Assets: Financial assets at fair value through profit or loss Liabilities: Financial liabilities at fair value through profit or loss

(Continued)

62

TAIWAN BUSINESS BANK LTD.

Notes to the Financial Statements

Assets and Liabilities		December 31, 2021	December 31, 2021
		Level 1 68,106 276,910 1,563,675 16,414,356 86,780,365 149,897 - 28,745 -	Level 2 Level 3 - - 79,230 - 37,015,444 102,223 - 4,940,042 49,213,865 - - - 8,293,730 - 523,891 - 142,307 -
Instruments measured at fair value on a recurring basis
Non-derivative financial assets and liabilities:

b) Valuation techniques used in estimating the fair values of financial instruments

If the financial instruments have quoted price in an active market, the quoted price is regarded as 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 have a quoted price in an active market. If the above conditions are not fulfilled, the market is inactive.

(Continued)

63

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Except for the above financial instruments of quoted price in an active market, there is no quoted price in an active market for the financial asset, its fair value is estimated on the basis of the result of a valuation technique that refers to quoted prices 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 (e.g. Taipei Exchange reference yield curve, Reuters quoted the average commercial paper rate, the Taipei Financial industry call loan rate fixing TAIBOR).

The financial asset's fair value is estimated on the basis of the result of a valuation technique, the Bank adopted that refers to quoted prices provided by financial institutions. Ask (bid) is used to evaluate the selling (buying) position by the Bank if the quoted price include ask and bid price. If there is not a quoted price for the financial asset, transaction price close to the balance sheet date is the fair value.

Fair value of financial derivatives is the amount of cash to be paid or to be received by the Bank, assuming that the contract will be terminated on the balance sheet date. The Bank adopts mark-to-model prices which are usually adopted among the banking industry, such as Discounted-Cash-Flow model and Black-Scholes model. The Bank adopts the price data from Reuters and Bloomberg to calculate the fair value of the holding position. The aforesaid price data is based upon the middle price and used consistently by the Bank. Furthermore, the fair value of the embedded financial derivatives is calculated based upon the quote from the counterparty, and separately calculated in accordance with the contracts.

c) Adjustment for fair value

i) The restraint of evaluation model and uncertain inputs

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

ii) Credit risk value adjustment

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

(Continued)

64

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

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

The Bank assesses 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.

• d) Transfers between Level 1 and Level 2

There were no transfers between Level 1 and 2 for the years ended December 31, 2022 and 2021.

• e) Changes in financial assets which were classified to Level 3 based on fair value measurement

Changes of financial assets categorized in Level 3 :

Name		Fo	Fo	r the years ended	December 31, 2	022
	Beginning balance	Valuation profit and loss		Incr	ease	Decr	ease Transfer out from Level 3 Ending balance - 96,475 - 5,307,654
		Recognized in profit or loss	Recognized in other comprehensive income	Purchase or issue	Transfer into Level 3	Sale Disposition or Settlement
Financial assets at fair value through profit or loss Investments in equity instruments measured at fair value through other comprehensive income	$ 102,223 4,940,042	(1,548) -	- 367,612	- -	- -	4,200 -

Name		Fo	Fo	r the years ended	December 31, 2	021
	Beginning balance	Valuation profit and loss		Incr	ease	Decr	ease Transfer out from Level 3 Ending balance - 102,223 - 4,940,042
		Recognized in profit or loss	Recognized in other comprehensive income	Purchase or issue	Transfer into Level 3	Sale Disposition or Settlement
Financial assets at fair value through profit or loss Investments in equity instruments measured at fair value through other comprehensive income	$ 104,498 4,475,144	4,925 -	- 464,898	- -	- -	7,200 -

(Continued)

65

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

f) Profit and loss information of Level 3

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

Recognized on profit and loss (reported as unrealized gain (loss) from investments instruments measured at fair value through profit and loss) Recognized on other comprehensive income (reported as unrealized gain (loss) from investments instruments measured at fair value through other comprehensive income)	For the years ended December 31,
	2022 2021 $ (935) 4,925 367,612 464,898

g) Quantified information of the fair value measurement of significant unobservable inputs (Level 3)

Financial asset at fair value through profit or loss Private fund Financial assets at fair value through other comprehensive income Unlisted stocks			December 31, 2022
	fair value $ 96,475 5,307,654	valuation methods assets approach market approach assets approach income approach income approach	significant unobservable inputs liquidity discount liquidity discount sustainable growth rate cost of equity	range inter-relationship between significant unobservable inputs and fair value measurement 10.00% The higher market liquidity discount, the lower fair value. 8.62%~26.57%. The higher market liquidity discount, the lower fair value. 0.00%~1.55% The higher sustainable growth rate, the higher fair value. 10.96%~12.68% The higher rate of cost of equity, the lower fair value.

(Continued)

66

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Financial assets at fair value through profit or loss Private fund Financial assets at fair value through other comprehensive income Unlisted stocks			December 31, 2021
	fair value $ 102,223 4,940,042	valuation methods assets approach market approach assets approach income approach income approach	significant unobservable inputs liquidity discount liquidity discount sustainable growth rate cost of equity	range inter-relationship between significant unobservable inputs and fair value measurement 10.00% The higher market liquidity discount, the lower fair value. 8.71%~34.60% The higher market liquidity discount, the lower fair value. 0.00%~1.48% The higher sustainable growth rate, the higher fair value. 10.60%~12.50% The higher rate of cost of equity, the lower fair value.

• h) Sensitivity analysis of reasonably possible alternative assumptions for fair value measurement in Level 3.

Valuation techniques used by the Bank 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:

• i) Assets approach/ Market approach

The evaluation methods of Level 3 financial instruments of the Bank are mainly based on the market approach or the assets approach. If the liquidity discount changes by 5% upwards or downwards, the impact on the other comprehensive profit and loss is as follows:

December 31, 2022 Financial assets at fair value through profit or loss Private fund Financial assets at fair value through other comprehensive income Unlisted stocks	the effects to the net income and other comprehensive income Favorable changes (-5%) Unfavorable changes (5%) $ 5,360 (5,360) 307,477 (307,477)

(Continued)

67

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

		the effects to the net income and	the effects to the net income and
		other comprehensive income
		Favorable	Unfavorable
		changes (-5%)	changes (5%)
December 31, 2021
Financial assets at fair value through profit
	or loss
	Private fund	$ 5,679	(5,679)
Financial assets at fair value through other
	comprehensive income
	Unlisted stocks	290,299	(290,299)
Income approach
Adopting the income approach to evaluate Level 3 financial instruments of
the	Bank. The evaluation parameters are divided into sustainable growth rate
and	cost of equity capital. The effects of the two evaluation parameters on the
other comprehensive profit and loss are		as follows:
1.	sustainable growth rate
		the effects to other comprehensive
		income
		Favorable	Unfavorable
		changes (0.3%)	changes (-0.3%)
December 31, 2022
Financial assets at fair value through other
	comprehensive income
	Unlisted stocks	$ 2,975	(2,781)
		the effects to other comprehensive
		income
		Favorable	Unfavorable
		changes (0.3%)	changes (-0.3%)
December 31, 2021
Financial assets at fair value through other
	comprehensive income
	Unlisted stocks	$ 3,084	(2,895)
2.	cost of equity
		the effects to other comprehensive
		income
		Favorable	Unfavorable
		changes (-3%)	changes (3%)
December 31, 2022
Financial assets at fair value through other
	comprehensive income
	Unlisted stocks	$ 61,250	(30,146)
			(Continued)

ii) Income approach

68

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

December 31, 2021 Financial assets at fair value through other comprehensive income Unlisted stocks	the effects to other comprehensive income Favorable changes (-3%) Unfavorable changes (3%) $ 64,070 (30,848)

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 following chart presents the financial instruments not based on fair value measurement of the Bank. Except those items, others' fair value is reasonably approximate value, the Bank does not disclosure their fair value.

Debt instruments measured at amortized cost Debt instruments measured at amortized cost	December 31, 2022	December 31, 2022
	Book value Fair value $ 236,774,247 236,657,427 December 31, 2021	Fair value
	Book value $ 279,035,906	Fair value
		279,993,077

b) The fair value hierarchy of information

Assets and Liabilities		December 31, 2022	December 31, 2022
	Total $ 236,657,427	Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) 31,336,817 205,320,610 - December 31, 2021
Debt instruments measured at amortized cost Assets and Liabilities
	Total $ 279,993,077	Quoted prices in active markets for identical assets (Level 1) 33,068,000	Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) 246,925,077 -
Debt instruments measured at amortized cost

(Continued)

69

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• c) Valuation techniques

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

• i) Cash and cash equivalents, due from Central Bank and call loans to banks, securities purchased under resell agreements, receivables, overdue receivables, 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.

• ii) 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.

• iii) Investment in debt instruments at amortized cost: 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 bank debentures (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.

(Continued)

70

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• (ap) Financial Risk Information

• (i) General description

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

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

• (ii) Risk management organization structure

• 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:

• a) Conduct Analysis and response project when significant domestic and foreign economic, financial 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 drawn 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.

(Continued)

71

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• 2) Assets and Liabilities Management Committee

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

3) Credit Examination Committee

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

• 4) Overdue Loans Clearing Committee

The convener of the Overdue Loans Clearing Committee is the supervising vice president. The convener holds meetings as needed to discuss measures on reducing nonperforming loans and approaches to handle overdue loans.

• 5) Cyber Security Management Committee

The Cyber Security Management Committee is convened by the supervising vice president who oversees the implementation and coordination of the Bank's cyber security policies. The committee holds meetings as needed to examine matters related to cyber security.

• (iii) Credit risk

• 1) Source and definition of credit risk

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

(Continued)

72

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• 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:

• i) Categorization of credit assets

The credit assets are classified into 5 categories. Except for normal credit assets which are classified as the first category, others are classified, based on the assurance status and the time overdue, as second category (need attention), third category (possible to recover), fourth category (difficult to retrieve) and the fifth category (unable to retrieve). In order to manage creditor's rights, the Bank established “Regulations Governing the Procedures to Evaluate Assets and Deal with Non-performing/Non-accrual Loans” , “ Regulations Governing the Reconciliation of Non-performing/Non-accrual Loans” and its operating procedure “ Operating procedure Governing the Collection of Non-performing/Non-accrual Loans” and “Code of Conduct to Deal With Non-Performing Loans” to serve as the guidelines for dealing with non-performing credit and overdue loans collection.

ii) 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.

(Continued)

73

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

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.

• c) Debt instrument investments and derivative financial instruments

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.

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

• 3) Determining the credit risk has increased significantly since initial recognition

At each reporting date, the Bank 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 considers 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

• i) The borrowers failed to pay the principal and interest overdue for more than 30 days, less than 90 days;

• ii) When the Bank 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;

(Continued)

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TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

  - iii) 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 is except;

  - iv) The bank knows (if it has received the notice from court) that the collaterals are compulsory executed by other banks;

  - v) Borrowers were notified the refund by the Bank and did not conduct refund notice;

  - vi) The letter of credit insurance fund notice due to the related company's overdue debt in other bank, the creditor to stop the delivery;

  - vii) Because the borrowers have been involved in litigation and unfavorable judgments, their ability of credit performance is affected;

  - viii) The customer is classified as an early warning account by the Bank or has bad credit that aware by others.

• b) Debt instrument investments

  • i) The latest credit rating on the report date was non-investment grade and fell more than two levels than the original rating, or;

  • ii) Investment target evaluation loss is up to 30% of investment cost.

• 4) The credit risk has not increased significantly or judged as low credit risk on the report date

On each report date, the Bank assessed that there was no significant increase in 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 investmentgrade or not on investment-grade but the ratings are not significantly reduced are also considered to be low-risk areas.

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75

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• 5) Definitions of default and credit-impaired financial assets

A financial asset is credit-impaired when one or more events that have a detrimental impact on the 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

  • i) Significant financial difficulty of the issuer or the borrower;

  • ii) A breach of contract, such as a default or past due event ;

  • iii) 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;

  • iv) It is becoming probable that the borrower will enter bankruptcy or other financial reorganization;

  • v) The disappearance of an active market for that financial asset because of financial difficulties;

  • vi) The purchase or origination of a financial asset at a considerable amount of discount that reflects the incurred credit losses;

• b) Debt instrument investments

  • i) Significant financial difficulty of the issuer;

  • ii) The disappearance of an active market for that financial asset because of financial difficulties;

  • iii) The purchase or origination of a financial asset at a considerable amount of discount that reflects the incurred credit losses.

  • iv) 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.

The following are indicators that the financial assets are uncollectible:

• a) The borrowers fail to recover all or part of the debt due to dissolution, escape, settlement, bankruptcy or other reasons.

(Continued)

76

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• 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, whose written-off claims may still have ongoing recourse, continues to follow laws and regulations to pursue the proceedings.

• 7) Modification of contractual cash flow of financial assets

The Bank 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 an 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

After considering the attributes of financial assets and credit assets and the adequacy of default 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.

(Continued)

77

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

In order to assess the expected credit losses of credit assets, the Bank is divided into the following combinations depending on the credit risk characteristics such as the identity of borrowers, products, and type of collateral:

Corporate banking	Government and public institution	Government and public institution
	Financial institution (including banks, ticket companies, securities finance companies)
	Large Enterprise	The guarantee of the credit guarantee mechanism
		Secured
		Non-secured
	Medium and small enterprises	The guarantee of the credit guarantee mechanism
		Secured
		Non-secured
Private banking	Mortgage
	Microcredit
	Other-Secured
	Other-Non-secured
Entrepreneurship	The guarantee of the credit guarantee mechanism
	Secured
	Non-secured

If the credit risk on a credit asset has not increased significantly since initial recognition or the credit asset has low credit risk at the reporting date, the Bank 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 shall measure the allowance for impairment using the lifetime expected credit losses.

In order to measure expected credit losses, the Bank 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.

(Continued)

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TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

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 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 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 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 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 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 considered to be appropriate after its assessment, the credit ratings will be included in the Bank's assessment of related expected credit losses.

(Continued)

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TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

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 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

• i) 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.

• ii) 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.

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TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

d) Enhancement of other credit

The assessment of credit business applies 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 party's 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. R.O.C SMEG, Agricultural Credit Guarantee Fund, Overseas Credit Guarantee Fund)

10) Information on the financial assets of the Bank that has been credit derogated and the collateral for mitigating potential losses are as follows:

December 31, 2022 Impairment financial assets： Receivables Interest receivable Discounts and loans Overdue receivable Total impairment financial assets December 31, 2021 Impairment financial assets： Receivables Accounts receivables Interest receivable Discounts and loans Overdue receivable Total impairment financial assets	Carrying amount $ 42,578 20,309,083 58,786 $ 20,410,447 Carrying amount $ 2,000 43,020 20,356,149 80,334 $ 20,481,503	Allowance impairment 7,050 4,784,155 15,898 4,807,103 Allowance impairment 681 4,960 3,635,336 25,545 3,666,522	Exposure (measured at amortized cost) 35,528 15,524,928 42,888 15,603,344 Exposure (measured at amortized cost) 1,319 38,060 16,720,813 54,789 16,814,981	Value of collateral
				- 22,707,890 -
				22,707,890
				Value of collateral
				- - 21,352,293 -
				21,352,293

Note: The value of collateral is the real estate appraisal information and credit guarantee agency guarantee amount levied by the Bank's credit assets.

(Continued)

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TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

11) Credit risk concentration

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

a) By industry

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

Industry	December 31,	2022 % % 63.09 % 0.45 % 4.98 % 0.21 % 24.40 % 0.49 % 6.14 % 0.24 % 100.00	December 31	, 2021
	Amount $ 894,970,270 6,415,252 70,682,095 2,919,516 346,079,715 6,899,993 87,153,772 3,372,838 $ 1,418,493,451		Amount 852,346,402 4,330,080 66,591,431 2,934,798 314,527,333 3,634,002 70,945,795 2,914,507 1,318,224,348	% % 64.66 % 0.33 % 5.05 % 0.22 % 23.86 % 0.28 % 5.38 % 0.22 % 100.00
Private business Public business Government institution Nonprofit organization Individual Foreign financial institution Foreign non-financial institution Foreign individual Total

• b) By geographic area

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

Area	December 31,	2022 % % 93.13 % 6.87 % 100.00	December 31, 2021	December 31, 2021
	Amount $ 1,321,066,848 97,426,603 $ 1,418,493,451		Amount 1,240,730,044 77,494,304 1,318,224,348	% % 94.12 % 5.88 % 100.00
Domestic Foreign Total

• c) By collateral

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

Collateral	December 31,	2022 % % 19.16 % 0.63 % 1.63 % 61.93 % 1.12 % 0.17 % 14.71 % 0.65 % 100.00	December 31	, 2021
	Amount $ 271,796,900 8,846,336 23,134,859 878,535,410 15,849,874 2,414,280 208,721,552 9,194,240 $ 1,418,493,451		Amount 234,949,230 9,101,690 26,102,842 802,113,094 16,117,256 2,949,127 216,270,546 10,620,563 1,318,224,348	% % 17.82 % 0.69 % 1.98 % 60.85 % 1.22 % 0.22 % 16.41 % 0.81 % 100.00
Unsecured Stocks Bonds Real estate Chattel Notes receivable Guarantees Others Total

Note: Secured credit are categorized in its respective item per the type of the collaterals. Non-secured credit (no collateral provided) is classified in unsecured. 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 unsecured. The accreditation value is the value calculated per the accreditation regulations of the Bank, not the discounted value of the signed contract.

(Continued)

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TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

12) Maximum credit risk exposure

• a) The maximum credit exposure of the assets in the financial statement is approximately the book value when not considering collaterals or other credit enhancement instruments. The maximum credit exposure off the balance sheet (when not considering collaterals or other credit enhancement instruments and not revocable) was as follows:

revocable) was as follows:
Off balance sheet items	Maximum credit	risk exposure
	December 31, 2022 $ 64,987,007 18,839,955 8,129,149 22,056,496 $ 114,012,607	December 31, 2021
Issued and irrevocable loan commitments Irrevocable credit card loan commitments Letters of credit issued yet unused Various guarantee proceeds Total		36,415,736 19,380,151 11,058,128 24,336,413
		91,190,428

The Management of the Bank 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.

(Continued)

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TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

b) The credit quality analyses of the financial assets

i) Credit quality analysis of discounts and loans, receivables, guarantee and commitments

December 31, 2022	12-month ECL	12-month ECL	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
	Excellent	Good	Medium	Acceptable	Under standard	No rating	Subtotal	Excellent	Good	Medium	Acceptable	Under standard	No rating	Subtotal	High risk	Allowance impairment	Total
Receivable
Credit card	$ 426,421	227,850	196,313	79	4,913	238,053	1,093,629	1,688	1,452	1,618	-	326	20	5,104	-	569	1,098,164
Acceptances receivable	375,279	232,317	119,969	25,670	-	38,049	791,284	-	-	-	-	-	-	-	-	7,913	783,371
Other receivables	401,011	579,726	493,641	35,741	24,719	2,459,168	3,994,006	408	945	1,952	897	2,387	600	7,189	42,578	61,519	3,982,254
Discounts and loans
Private banking	130,698,330	132,157,479	70,280,524	3,199,945	1,062,127	6,962,188	344,360,593	56,031	137,190	252,638	22,912	111,432	36,101	616,304	4,475,656	4,181,307	345,271,246
Corporate banking	245,799,786	365,067,368	272,870,989	26,218,577	15,363,104	125,044,694	1,050,364,518	288,453	355,127	556,056	930,623	562,350	150,344	2,842,953	15,833,427	13,897,309	1,055,143,589
Other financial assets
Overdue receivable	-	-	-	-	-	-	-	-	-	-	-	-	-	-	58,786	48,471	10,315
Total	$ 377,700,827	498,264,740	343,961,436	29,480,012	16,454,863	134,742,152	1,400,604,030	346,580	494,714	812,264	954,432	676,495	187,065	3,471,550	20,410,447	18,197,088	1,406,288,939
Guarantee and commitments	$ 26,669,887	15,125,762	5,916,207	174,424	45,746	65,833,294	113,765,320	43,098	11,091	421	-	98	-	54,708	192,579	337,312	113,675,295
December 31, 2021	12-month ECL								Lifetime ECL－not impaired						Lifetime ECL－ impaired
	Excellent	Good	Medium	Acceptable	Under standard	No rating	Subtotal	Excellent	Good	Medium	Acceptable	Under standard	No rating	Subtotal	High risk	Allowance impairment	Total
Receivable
Credit card	$ 368,690	246,002	192,898	325	4,924	216,176	1,029,015	129	1,550	1,993	13	655	-	4,340	-	1,693	1,031,662
Acceptances receivable	276,046	549,061	113,769	832	29,835	63,686	1,033,229	-	-	-	-	-	-	-	-	10,332	1,022,897
Other receivables	215,499	354,743	324,870	33,189	23,858	1,915,055	2,867,214	82	431	1,292	1,847	1,065	628	5,345	45,020	59,048	2,858,531
Discounts and loans
Private banking	113,609,203	116,551,170	66,928,175	4,268,868	1,700,024	9,170,592	312,228,032	21,412	53,655	207,948	21,550	81,566	10,059	396,190	4,817,619	3,662,551	313,779,290
Corporate banking	186,110,603	315,339,281	306,477,476	32,953,038	18,573,454	122,106,000	981,559,852	80,570	388,410	413,816	1,601,886	782,756	416,687	3,684,125	15,538,530	11,914,266	988,868,241
Other financial assets
Overdue receivable	-	-	-	-	-	-	-	-	-	-	-	-	-	-	80,334	51,392	28,942
Total	$ 300,580,041	433,040,257	374,037,188	37,256,252	20,332,095	133,471,509	1,298,717,342	102,193	444,046	625,049	1,625,296	866,042	427,374	4,090,000	20,481,503	15,699,282	1,307,589,563
Guarantee and commitments	$ 23,693,996	20,955,504	8,177,179	830,226	55,958	37,392,210	91,105,073	13,401	17,786	7,248	-	788	-	39,223	46,132	329,488	90,860,940

ii) Debt instruments

December 31, 2022	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－ impaired
	Investment	Sub investment	High risk	No rating	Subtotal	Investment	Sub investment	High risk	No rating	Subtotal	High risk	Total	Accumulated impairment(Note)
Investment in debt instruments measured at fair value through other comprehensive income
Overseas bonds	$ 50,304,163	-	-	-	50,304,163	-	-	-	-	-	-	50,304,163	15,793
NT bonds	91,536,068	-	-	-	91,536,068	-	-	-	-	-	-	91,536,068	75,059
Investment in debt instruments at amortized cost
Overseas bonds	10,420,185	-	-	-	10,420,185	-	-	-	-	-	-	10,420,185	3,247
NT bonds	30,769,411	-	-	-	30,769,411	-	-	-	-	-	-	30,769,411	13,846
Certificates of deposit with the Central Bank	195,595,000	-	-	-	195,595,000	-	-	-	-	-	-	195,595,000	57,763
Negotiable certificates of deposit	64,523	-	-	-	64,523	-	-	-	-	-	-	64,523	16
Total	$ 378,689,350	-	-	-	378,689,350	-	-	-	-	-	-	378,689,350	165,724

(Continued)

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TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

December 31, 2021	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－ impaired
	Investment	Sub investment	High risk	No rating	Subtotal	Investment	Sub investment	High risk	No rating	Subtotal	High risk	Total	Accumulated impairment(Note)
Investment in debt instruments measured at fair value through other comprehensive income
Overseas bonds	$ 49,213,865	-	-	-	49,213,865	-	-	-	-	-	-	49,213,865	15,600
NT bonds	86,780,365	-	-	-	86,780,365	-	-	-	-	-	-	86,780,365	72,192
Investment in debt instruments at amortized cost
Overseas bonds	15,296,961	-	-	-	15,296,961	-	-	-	-	-	-	15,296,961	5,916
NT bonds	32,373,347	-	-	-	32,373,347	-	-	-	-	-	-	32,373,347	13,214
Certificates of deposit with the Central Bank	231,395,000	-	-	-	231,395,000	-	-	-	-	-	-	231,395,000	68,334
Negotiable certificates of deposit	58,076	-	-	-	58,076	-	-	-	-	-	-	58,076	14
Total	$ 415,117,614	-	-	-	415,117,614	-	-	-	-	-	-	415,117,614	175,270

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

(Continued)

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TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

iii) The Maximum credit risk exposure for financial instruments are not subject to impairment regulations are as follows:

December 31, 2022	Maximum credit risk exposure $ 30,907,810 115,114 347,166 1,166,667 Maximum credit risk exposure $ 356,140 37,015,444 68,106 1,665,898 552,636	Collateral Enhancement of other credit - - - - - - 2,527,996 727,720 Collateral Enhancement of other credit - - - - - - - - 489,795 699,723
Financial assets at fair value through profit or loss －Commercial paper －Listed stocks －Beneficiary certificates －Derivative instrument December 31, 2021
Financial assets at fair value through profit or loss －Debit investments －Commercial paper －Listed stocks －Beneficiary certificates －Derivative instrument

• 13) Changes in the expected credit losses of the Bank

• a) Receivables

For the years ended December 31, 2022

Beginning balance Changes in financial instruments that have been identified at the beginning of the period： －Transferred to 12-months ECL －Transferred to lifetime ECL －Transferred to the credit- impaired financial assets －The financial assets that have been derecognized New financial assets originated or purchased Other changes Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans " Ending balance	12-month ECL $ 13,694 108 (5) (28) (8,542) 6,323 632 - $ 12,182	Lifetime ECL－not impaired 164 (12) 16 (10) (108) 168 3,935 - 4,153	Lifetime ECL－ impaired 5,641 (96) (11) 38 (2,030) 3,637 (129) - 7,050	Impaired (IFRS9) 19,499 - - - (10,680) 10,128 4,438 - 23,385	Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans" Total 51,574 71,073 - - - - - - - (10,680) - 10,128 - 4,438 (4,958) (4,958) 46,616 70,001 (Continued)

86

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Beginning balance Changes in financial instruments that have been identified at the beginning of the period： －Transferred to 12-months ECL －Transferred to lifetime ECL －Transferred to the credit- impaired financial assets －The financial assets that have been derecognized New financial assets originated or purchased Other changes Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans " Ending balance			For the years end	ed December 31, 2021	ed December 31, 2021	Total
	12-month ECL $ 13,208 1,123 (6) (15) (8,016) 8,192 (792) - $ 13,694	Lifetime ECL－not impaired 1,240 (954) 13 (61) (129) 25 30 - 164	Lifetime ECL－ impaired 5,304 (169) (7) 76 (2,658) 3,113 (18) - 5,641	Impaired (IFRS9) 19,752 - - - (10,803) 11,330 (780) - 19,499	Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans" 64,410 - - - - - - (12,836) 51,574
						84,162 - - - (10,803) 11,330 (780) (12,836) 71,073

(Continued)

87

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

b) Discounts and loans

Beginning balance Changes in financial instruments that have been identified at the beginning of the period： －Transferred to 12-months ECL －Transferred to lifetime ECL －Transferred to the credit- impaired financial assets －The financial assets that have been derecognized New financial assets originated or purchased Write-off Other changes Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans " Ending balance			For the years end	ed December 31, 2022	ed December 31, 2022	Total
	12-month ECL $ 4,166,467 154,551 (8,551) (25,545) (2,079,596) 2,921,806 - 753,408 - $ 5,882,540	Lifetime ECL－not impaired 129,977 (29,664) 21,718 (3,572) (85,034) 12,984 - 91,729 - 138,138	Lifetime ECL－ impaired 3,635,336 (124,887) (13,167) 29,117 (730,979) 388,582 (2,223,252) 3,823,405 - 4,784,155	Impaired (IFRS9) 7,931,780 - - - (2,895,609) 3,323,372 (2,223,252) 4,668,542 - 10,804,833	Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans" 7,645,037 - - - - - - - (371,254) 7,273,783
						15,576,817 - - - (2,895,609) 3,323,372 (2,223,252) 4,668,542 (371,254) 18,078,616

(Continued)

88

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Beginning balance Changes in financial instruments that have been identified at the beginning of the period： －Transferred to 12-months ECL －Transferred to lifetime ECL －Transferred to the credit- impaired financial assets －The financial assets that have been derecognized New financial assets originated or purchased Write-off Other changes Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans " Ending balance			For the years end	ed December 31, 2021	ed December 31, 2021	Total
	12-month ECL $ 3,133,215 1,089,009 (5,445) (16,929) (1,587,449) 1,861,459 - (307,393) - $ 4,166,467	Lifetime ECL－not impaired 951,010 (770,235) 9,047 (9,790) (71,342) 4,752 - 16,535 - 129,977	Lifetime ECL－ impaired 5,219,221 (318,774) (3,602) 26,719 (1,105,361) 292,035 (4,606,000) 4,131,098 - 3,635,336	Impaired (IFRS9) 9,303,446 - - - (2,764,152) 2,158,246 (4,606,000) 3,840,240 - 7,931,780	Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans" 5,022,711 - - - - - - - 2,622,326 7,645,037
						14,326,157 - - - (2,764,152) 2,158,246 (4,606,000) 3,840,240 2,622,326 15,576,817

(Continued)

89

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• c) Other financial assets

Beginning balance Changes in financial instruments that have been identified at the beginning of the period： －The financial assets that have been derecognized New financial assets originated or purchased Write-off Other changes Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans " Ending balance Beginning balance Changes in financial instruments that have been identified at the beginning of the period： －The financial assets that have been derecognized New financial assets originated or purchased Write-off Other changes Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans " Ending balance			For the years end	ed December 31, 2022	ed December 31, 2022	Total
	12-month ECL $ - - - - - - $ -	Lifetime ECL－not impaired - - - - - - -	Lifetime ECL－ impaired 25,545 (8) 7,633 (16,567) (705) - 15,898 For the years end	Impaired (IFRS9) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans" 25,545 25,847 (8) - 7,633 - (16,567) - (705) - - 6,726 15,898 32,573 ed December 31, 2021
						51,392 (8) 7,633 (16,567) (705) 6,726 48,471 Total
		Lifetime ECL－not impaired - - - - - - -	Lifetime ECL－ impaired 23,121 (83) 17,074 (15,308) 741 - 25,545	Impaired (IFRS9) 23,121 (83) 17,074 (15,308) 741 - 25,545	Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans" 31,930 - - - - (6,083) 25,847
						55,051 (83) 17,074 (15,308) 741 (6,083) 51,392

(Continued)

90

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

d) Guarantee and commitments

Beginning balance Changes in financial instruments that have been identified at the beginning of the period： －Transferred to 12-months ECL －Transferred to lifetime ECL －Transfer to the credit- impaired financial assets －The financial assets that have been derecognized New financial assets originated or purchased Other changes Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans " Ending balance Beginning balance Changes in financial instruments that have been identified at the beginning of the period： －The financial assets that have been derecognized New financial assets originated or purchased Other changes Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-Performing and Non-Accrual Loans " Ending balance			For the years end	ed December 31, 2022	ed December 31, 2022	Total
	12-month ECL $ 149,354 1,459 (86) (458) (74,692) 83,604 19,631 - $ 178,812	Lifetime ECL－not impaired 69 - 86 - (89) - (9) - 57	Lifetime ECL－ impaired 6,786 (1,459) - 458 (4,543) 6,517 53,866 - 61,625 For the years end	Impaired (IFRS9) Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans" 156,209 173,279 - - - - - - (79,324) - 90,121 - 73,488 - - (76,461) 240,494 96,818 ed December 31, 2021
						329,488 - - - (79,324) 90,121 73,488 (76,461) 337,312 Total
		Lifetime ECL－not impaired 880 (179) 10 (642) - 69	Lifetime ECL－ impaired 6,699 (5,520) 4,439 1,168 - 6,786	Impaired (IFRS9) 114,249 (57,406) 77,960 21,406 - 156,209	Impairment difference of "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non- Performing and Non- Accrual Loans" 156,933 - - - 16,346 173,279
						271,182 (57,406) 77,960 21,406 16,346 329,488

(Continued)

91

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

e) Debts investments

Beginning balance Additions Derecognition Other changes Ending balance Beginning balance Additions Derecognition Other changes Ending balance	For the years ended December 31, 2022 12-month ECL Lifetime ECL －not impaired Lifetime ECL －impaired Total $ 175,270 - - 175,270 68,255 - - 68,255 (78,262) - - (78,262) 461 - - 461 $ 165,724 - - 165,724 For the years ended December 31, 2021 12-month ECL Lifetime ECL －not impaired Lifetime ECL －impaired Total $ 142,418 - - 142,418 97,018 - - 97,018 (61,254) - - (61,254) (2,912) - - (2,912) $ 175,270 - - 175,270	For the years ended December 31, 2022 12-month ECL Lifetime ECL －not impaired Lifetime ECL －impaired Total $ 175,270 - - 175,270 68,255 - - 68,255 (78,262) - - (78,262) 461 - - 461 $ 165,724 - - 165,724 For the years ended December 31, 2021 12-month ECL Lifetime ECL －not impaired Lifetime ECL －impaired Total $ 142,418 - - 142,418 97,018 - - 97,018 (61,254) - - (61,254) (2,912) - - (2,912) $ 175,270 - - 175,270	For the years ended December 31, 2022 12-month ECL Lifetime ECL －not impaired Lifetime ECL －impaired Total $ 175,270 - - 175,270 68,255 - - 68,255 (78,262) - - (78,262) 461 - - 461 $ 165,724 - - 165,724 For the years ended December 31, 2021 12-month ECL Lifetime ECL －not impaired Lifetime ECL －impaired Total $ 142,418 - - 142,418 97,018 - - 97,018 (61,254) - - (61,254) (2,912) - - (2,912) $ 175,270 - - 175,270
	12-month ECL $ 142,418 97,018 (61,254) (2,912) $ 175,270	Lifetime ECL －not impaired - - - - -	Lifetime ECL －impaired - - - - -

• 14) 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 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.

(Continued)

92

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(iv) Liquidity risk

• 1) The origin and definition of liquidity risk

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

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

• a) Policy

  • i) In accordance with the target and limit for liquidity risk management approved by the board of directors and monitor all liquidity risk positions.

  • ii) 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.

  • iii) 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

  • i) Finance Department is in charge of daily capital deployment to ensure that the capital is sufficient to cope with various demands for capital.

  • ii) Risk Management Department is in charge of the identification, measurement, supervision and control of capital liquidity risk to establish a firm operation process and structure.

  • iii) 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.

(Continued)

93

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• c) Measurement

  • i) Maturity gap: To place the inflows and outflows of capital into various time zones accordingly based on the remaining days to maturity and calculate the gap of capital of each time zone in order to measure the capital deficiency of each time zone.

  • ii) 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.

  • iii) Capital concentration and stability: In order to prevent the Bank from overrelying 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.

  • iv) 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.

• 3) Financial assets possessed for managing liquidity risk and maturity analysis for nonderivative financial liability

• a) Financial assets possessed for managing liquidity risk

The Bank possesses cash and other high liquidity interest yielding assets to cope with payment obligations and potential emergent capital demands in the market. The assets possessed for managing liquidity risk include cash and cash equivalent, due from the Central Bank and call loans to banks, financial assets at fair value through profit or loss, discounts and loans, financial assets measured at fair value through other comprehensive income and investment in debt instruments at amortized cost.

(Continued)

94

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

b) Maturity analysis for non-derivative financial liabilities

The table below shows the cash outflows from the non-derivative financial liabilities which are 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.

Major matured cash outflow Deposits from the Central Bank and banks Overdrafts on banks Call loans from the Central Bank and banks Financial liabilities designated at fair value through profit or loss Notes and bonds issued under repurchase agreement Interest payable Deposits transferred from Chunghwa Post Co., Ltd. Demand deposits Time deposits Remittance Bank notes payable Cumulative earnings on appropriated loan fund Lease liabilities Major matured cash outflow Deposits from the Central Bank and banks Overdrafts on banks Call loans from the Central Bank and banks Due to the Central Bank and banks Financial liabilities designated at fair value through profit or loss Notes and bonds issued under repurchase agreement Interest payable Deposits transferred from Chunghwa Post Co., Ltd. Demand deposits Time deposits Remittance Bank notes payable Cumulative earnings on appropriated loan fund Lease liabilities			December 31, 2022	December 31, 2022
	0-30 days $ 1,098,020,121 937,523 1,084,076 27,012,375 - 458,662 310,520 9,820,000 954,109,937 103,804,595 428,111 - 2,250 52,072	31-90 days 221,619,539 - - 18,670,658 - 157,550 1,288,484 21,196,335 - 180,237,487 - - 3,750 65,275	91 days-1 year 1-5 years 479,735,057 92,821,185 - - - - - - - - 1,292,066 554,713 2,711,772 118,148 75,185,210 41,060,000 - - 392,763,469 42,587,346 - - 7,400,000 6,600,000 118,500 1,198,580 264,040 702,398 December 31, 2021		Over 5 years Total 49,342,954 1,941,538,856 - 937,523 - 1,084,076 - 45,683,033 9,367,595 9,367,595 - 2,462,991 9 4,428,933 - 147,261,545 - 954,109,937 5,124 719,398,021 - 428,111 38,250,000 52,250,000 1,587,501 2,910,581 132,725 1,216,510
	0-30 days $ 1,095,518,499 493,598 536,471 25,155,291 - - 44,197 458,151 10,500,000 955,013,566 102,844,567 429,227 - 1,750 41,681	31-90 days 184,664,045 - - 9,093,410 - - 144,716 812,851 21,359,335 - 153,191,825 - - 2,250 59,658	91 days-1 year 500,530,076 - - - 49,713,800 - 604,836 1,127,339 35,402,210 - 413,340,264 - - 111,750 229,877	1-5 years 75,324,151 - - - - - 1,266,944 71,242 - - 44,219,865 - 27,340,000 1,779,330 646,770	Over 5 years Total 35,841,707 1,891,878,478 - 493,598 - 536,471 - 34,248,701 - 49,713,800 8,293,730 8,293,730 - 2,060,693 2 2,469,585 - 67,261,545 - 955,013,566 675 713,597,196 - 429,227 24,910,000 52,250,000 2,470,214 4,365,294 167,086 1,145,072

(Continued)

95

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• 4) Derivative financial liabilities maturity analysis

• a) Derivative financial instruments settled by net amount

The derivative instruments of the Bank whose possession are settled by net amount include foreign derivative instruments, such as non-delivery forward contracts and net-delivery foreign exchange option. After evaluation the Bank concluded that the maturity date is the basic element to comprehend all the derivative financial instruments listed in the consolidated financial statement. The amount disclosed is based on the cash flows of the contracts and thus part of the amount disclosed may not correspond to the amount disclosed in the financial statement. As of December 31, 2021, the Bank had no derivative financial instruments settled by net amount. As of December 31, 2022, maturity analysis for the derivative financial liabilities settled by net amount is as follows:

Derivative financial liabilities at fair value through profit or loss －Foreign exchange derivative instrument			December 31, 2022	December 31, 2022
	0-30 days $ -	31-90 days 825	91-180 days 225	181 days to 1 year -	Over 1 year -	Total
						1,050

• b) Derivative financial instruments settled by gross amount

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

• i) Foreign exchange derivative financial instrument: Foreign exchange options settled by gross amount, foreign exchange forward contracts and currency swap contracts.

• ii) Interest rate derivative financial instruments: interest rate swap contracts.

The table below shows the derivative financial instruments of the Bank whose possession are settled by gross amount based on the remaining days from the 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 financial statement. The maturity analysis for derivative financial liabilities settled by gross amount is as follows:

(Continued)

96

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

December 31, 2022 0-30 days 31-90 days 91-180 days Derivative financial instruments at fair value through profit or loss －Foreign exchange derivative instruments Cash outflow $ 25,782,525 45,415,630 11,979,083 Cash inflow 27,862,886 48,002,551 12,577,650 －Interest rate derivative instrument Cash outflow - 1,168 587 Cash inflow - 2,021 724 Total cash outflow 25,782,525 45,416,798 11,979,670 Total cash inflow 27,862,886 48,004,572 12,578,374 Net cash flow $ (2,080,361) (2,587,774) (598,704) December 31, 2021 0-30 days 31-90 days 91-180 days Derivative financial instruments at fair value through profit or loss －Foreign exchange derivative instruments Cash outflow $ 4,498,580 6,093,790 6,071,884 Cash inflow 4,447,438 6,113,200 6,105,833 －Interest rate derivative instrument Cash outflow - 1,028 1,093 Cash inflow - 7,834 1,167 Total cash outflow 4,498,580 6,094,818 6,072,977 Total cash inflow 4,447,438 6,121,034 6,107,000 Net cash flow $ 51,142 (26,216) (34,023) 5) Maturity analysis of off-balance sheet items	181 days to 1 year 3,463,765 3,500,326 2,955 3,742 3,466,720 3,504,068 (37,348) 181 days to 1 year 2,768,967 2,777,705 2,556 2,412 2,771,523 2,780,117 (8,594)	Over 1 year - - 1,174 1,568 1,174 1,568 (394) Over 1 year - - 8,791 7,171 8,791 7,171 1,620	Total 86,641,003 91,943,413 5,884 8,055
			86,646,887
			91,951,468
			(5,304,581)
			Total 19,433,221 19,444,176 13,468 18,584
			19,446,689
			19,462,760
			(16,071)

December 31, 2022 Issued and irrevocable loan commitments Irrevocable credit card loan commitments Letters of credit issued yet unused Other guarantees Total December 31, 2021 Issued and irrevocable loan commitments Irrevocable credit card loan commitments Letters of credit issued yet unused Other guarantees Total	0-30 days $ 1,997,541 1,117 2,016,789 2,667,240 $ 6,682,687 0-30 days $ 84,608 2,747 3,905,350 3,419,240 $ 7,411,945		31-90 days		91-180 days		181 days to 1 year		Over 1 year 35,575,997 18,432,747 54,706 15,393,282 69,456,732 Over 1 year 30,319,691 19,060,236 7,672 12,695,082 62,082,681	Total 64,987,007 18,839,955 8,129,149 22,056,496
			512,056 34,225 4,985,416 1,001,432 6,533,129 31-90 days		22,218,395 55,553 716,174 656,793 23,646,915 91-180 days		4,683,018 316,313 356,064 2,337,749 7,693,144 181 days to 1 year
										114,012,607
										Total 36,415,736 19,380,151 11,058,128 24,336,413
			730,576 31,254 6,074,175 3,485,929 10,321,934		1,012,632 70,784 650,292 2,138,876 3,872,584		4,268,229 215,130 420,639 2,597,286 7,501,284
										91,190,428

(Continued)

97

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

6) Maturity analysis of lease contract commitments

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

December 31, 2022 Operating lease income (lessor) December 31, 2021 Operating lease income (lessor)	Below 1 year $ 1,027 Below 1 year $ 3,325	1-5 years 1,389 1-5 years 2,414	Over 5 years Total - 2,416 Over 5 years Total - 5,739

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:

December 31, 2022 Machinery and equipment Transportation equipment Right-of-use assets Miscellaneous equipment Total December 31, 2021 Machinery and equipment Transportation equipment Right-of-use assets Miscellaneous equipment Total	Below 1 year $ 1,496,409 2,098 620 1,024 $ 1,500,151 Below 1 year $ 1,208,486 1,313 405 1,914 $ 1,212,118	1-5 years - - 85 - 85 1-5 years - - 238 - 238	Over 5 years - - - - - Over 5 years - - - - -	Total
				1,496,409 2,098 705 1,024
				1,500,236
				Total
				1,208,486 1,313 643 1,914
				1,212,356

(Continued)

98

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(v) Market risk

1) Definition of market risk

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

• 2) Policies and procedures of market risk management

• a) Strategy

  • i) 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.

  • ii) Under the risk tolerance approved by the board of directors or board of executive 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 instruments, including fix income instruments, equity securities, foreign exchange transaction and derivative financial instruments.

• 3) Process for market risk management

• a) Risk identification

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 instruments 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.

(Continued)

99

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

b) Risk measurement

• i) Annually based on the business development of transaction units and submit to the board of directors or board of executive 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.

• ii) The risk measurements (or evaluations) of the financial instruments of the Bank are conducted through different information systems. For the market data and parameters of the models applied for evaluation, they shall be random inspected regularly to determine the rationality.

• c) Risk monitoring

• i) Valuation reports of various financial instruments are prepared regularly for executives to review and serve as the guidance for daily risk management operation.

• ii) All financial transactions are equipped with different regulations in terms of limit of loss and 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 executives to facilitate them to control the risk exposure status and adjust management procedures properly.

• 4) Scope and method of market risk management

• a) Foreign exchange risk management

  • i) Definition of 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.

• ii) Applicable scope

All the financial instruments which apply to trading book position and banking book position and involve in foreign currencies.

iii) Purpose for foreign exchange risk management

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

(Continued)

100

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• iv) Procedures of foreign exchange risk management

• 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.

• 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.

• v) Process of foreign exchange risk management

• Identification and measurement

  • a. Risk Management department established risk factor chart based on different financial 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 uses Greeks to measure the influence level of exchange rate for held-for-trading spot exchange and exchange rate derivative and setup Greek's sensitivity allowance, according to the yearly demand of trade units, the state of utilization, and monitor the load of fluctuation of exchange rate in each acceptable range.

  • 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.

(Continued)

101

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

  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 stoplimit 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 or executive directors.

     - b. Reports of operation results shall be prepared and submitted to the department heads for approval on a daily basis.

• b) Equity security risk management

• i) Definition of equity security risk

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.

• ii) Applicable scope

Financial instruments similar to equity security in all trading books.

• iii) Purpose of equity security risk management

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

• iv) Procedures of equity security risk management

• 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 or executive directors. The demand will be executed after approved by the board of directors.

• 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.

(Continued)

102

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• v) Process of equity security risk management

  1. Identification and measurement

     • 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 or 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 or executive directors regularly for future reference.

• c) Interest rate risk management

• i) Definition of interest rate risk

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.

• ii) Applicable scope

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

(Continued)

103

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

iii) Purpose of interest rate risk management

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

• iv) Procedures of interest rate risk management

• 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 evaluate the requirement and submit to the board of directors or executive directors for approval. The demand will be executed after the board of directors approved.

• The trade units shall consider safety, liquidity and profitability and gather market information to assess the potential risk and benefit. In addition, the trade units shall choose investment target prudently through analyzing the issuers’ credit, financial status, country risks and interest rate trends.

• v) Process of interest rate risk management

• Identification and measurement

  • a. The risk management department establish risk factor charts base on different financial 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.

• 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.

(Continued)

104

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

     - 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 or executive directors.

• d) Concentration management

  • i) The trade counterparties of the Bank are mostly financial institutions. To avoid the risk being over concentrated and enhance credit risk management, the Bank established financial institution credit risk limit based on the world ranking of Level 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.

  • ii) For equity security investments, the Bank set up limits for single institution and single related party.

• 5) Interest rate risk management of the banking book

• a) The definition and management purpose for the interest rate risk of the banking book

  • i) 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.

  • ii) 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

  • i) Identification and measurement

When the Bank conducts interest rate related products, it identifies the reprising risk, yield curve risk, basis risk and option characteristic risk and measures the possible influence on the earnings and economic value results from interest rate fluctuation.

(Continued)

105

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

ii) Monitoring and report

The Bank established limits of the ratio between interest-rate-sensitivity assets and interest-rate-sensitivity liabilities, the effect to NII in 1 year when the market interest rate parallel changes 1 BP and the effect to EVE when the market interest rate parallel changes 200 BP to control the banking book interest rate risk. The results of interest rate risk measurement are reported to the Assets and Liabilities Management Committee monthly and to the board of directors or 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 or 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 confidence interval.

• b) Value at Risk models and assumptions

In order to enhance the market risk control operation, the Bank established quantified indices of 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:

• i) Value at Risk cannot reflect the losses result from other type of risks, such as credit risk and liquidity risk.

• ii) Value at Risk measures the possible loss of the position on hand at the end of the transaction day, but it cannot reflect the distribution of the part which actual loss exceeds Value at Risk.

• iii) 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.

(Continued)

106

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• 7) Foreign exchange risk disclosure and sensitivity analysis

a) Foreign exchange risk exposure

• i) Significant net positions of foreign currencies (Market risk)

Significant net positions of foreign currencies (Market risk)	Significant net positions of foreign currencies (Market risk)
Significant net positions of foreign currencies (Market risk)
December 31, 2022
Currency USD JPY AUD ZAR EUR Significant net positions	Foreign currency amount (in thousands) NT$ amount $ 504,348 15,496,092 2,069,083 480,234 14,865 308,895 46,223 83,617 809 26,503 of foreign currencies (Market risk)
December 31, 2021
Currency USD JPY AUD EUR CNY	Foreign currency amount (in thousands) NT$ amount $ 448,924 12,414,993 2,103,814 505,967 13,590 273,023 2,113 66,306 11,566 50,208

Note 1: Main foreign currencies are the top five foreign currencies ranked in NTD value.

Note 2: Net foreign currency is the absolute value of the net positions of each foreign currency.

(Continued)

107

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

ii) Assets and liabilities of foreign currency

	December 31, 2022
Currency	Monetary financial assets Foreign currency amount (in thousands) Spot rate NTD amount $ 15,787,493 30.7250 485,070,722 4,985,648 20.7800 103,601,765 11,721,834 4.4110 51,705,010 184,707,477 0.2321 42,870,605 5,771,939 3.9400 22,741,440 352,406 32.7600 11,544,821 4,251,194 1.8090 7,690,410 45,244 37.0700 1,677,195 34,139 19.4500 664,004 14,564 22.6800 330,312 7,992 22.8700 182,777 34,420 2.9400 101,195 - - 114,540 Non-monetary financial assets 974 30.7250 29,926	Monetary financial liabilities
		Foreign currency amount (in thousands) Spot rate NTD amount 15,262,164 30.7250 468,929,989 4,890,551 20.7800 101,625,650 11,740,765 4.4110 51,788,514 183,141,677 0.2321 42,507,183 5,348,671 3.9400 21,073,764 352,361 32.7600 11,543,346 4,249,572 1.8090 7,687,476 45,236 37.0700 1,676,899 34,124 19.4500 663,712 14,475 22.6800 328,293 7,969 22.8700 182,251 34,431 2.9400 101,227 - - 119,278 Non-monetary financial liabilities
USD AUD CNY JPY HKD EUR ZAR GBP NZD CAD SGD SEK Others (Note) USD
		- - -

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

	December 31, 2021
	Monetary financial assets	Monetary financial liabilities
Currency		Foreign currency amount (in thousands) Spot rate NTD amount 12,870,218 27.6550 355,925,879 4,588,043 20.0900 92,173,784 5,206,836 4.3410 22,602,875 82,096,035 0.2405 19,744,096 4,989,090 3.5460 17,691,313 436,993 31.3800 13,712,840 3,150,118 1.7340 5,462,305 104,411 37.3600 3,900,795 52,980 18.9400 1,003,441 18,927 21.6600 409,959 10,869 20.4800 222,597 3,913 30.2150 118,231 - - 83,329 Non-monetary financial liabilities
USD AUD CNY JPY HKD EUR ZAR GBP NZD CAD SGD CHF Others (Note) USD
		- - -

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

(Continued)

108

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• 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%.

Currency USD AUD HKD JPY GBP SGD ZAR CHF CAD THB EUR NZD CNY Total		December 31, 2022	December 31, 2022	December 31, 2022
	Depreciate	by 1% Equity (63,299) (23,440) (19,240) (3,450) - - - - - - - - - (109,429)	Appreciate by 1% Income Equity 44,000 63,299 (4,060) 23,440 (3,029) 19,240 161 3,450 15 - 9 - 31 - (51) - 5 - 4 - 37 - 10 - 55,663 - 92,795 109,429
	Income $ (44,000) 4,060 3,029 (161) (15) (9) (31) 51 (5) (4) (37) (10) (55,663) $ (92,795)		Income 44,000 (4,060) (3,029) 161 15 9 31 (51) 5 4 37 10 55,663 92,795
				63,299 23,440 19,240 3,450 - - - - - - - - -
				109,429

Currency USD AUD HKD JPY GBP SGD ZAR SEK CHF CAD THB EUR NZD CNY Total		December 31, 2021	December 31, 2021	December 31, 2021
	Depreciate	by 1% Equity (55,511) (22,395) (15,842) (3,173) - - - - - - - - - - (96,921)	Appreciate by 1% Income Equity 54,235 55,511 (4,053) 22,395 (2,797) 15,842 5 3,173 (19) - (6) - 30 - 4 - (24) - (35) - 4 - (16) - 13 - 51,012 - 98,353 96,921
	Income $ (54,235) 4,053 2,797 (5) 19 6 (30) (4) 24 35 (4) 16 (13) (51,012) $ (98,353)			Equity 55,511 22,395 15,842 3,173 - - - - - - - - - - 96,921

(Continued)

109

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• 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).

Currency Trading book TWD Banking book TWD USD AUD HKD CNY ZAR Total	December 31, 2022	December 31, 2022	December 31, 2022
	Interest rate increases by 1 bp Income Equity $ (512) (2,661) - (46,200) - (3,993) - (364) - (70) - (1,335) - (161) $ (512) (54,784)	Interest rate decreases by 1 bp
	Income $ (512) - - - - - - $ (512)	Income 512 - - - - - - 512	Equity 2,661 46,200 3,993 364 70 1,335 161
			54,784

Currency Trading book TWD Banking book TWD USD AUD HKD CNY ZAR Total	December 31, 2021	December 31, 2021	December 31, 2021
	Interest rate increases by 1 bp Income Equity $ (230) (3,462) - (54,536) - (13,638) - (606) - (77) - (1,956) - (204) $ (230) (74,479)	Interest rate decreases by 1 bp
	Income $ (230) - - - - - - $ (230)	Income 230 - - - - - - 230	Equity 3,462 54,536 13,638 606 77 1,956 204
			74,479

b) Sensitivity analysis of expected net revenue/Sensitivity of equity in terms of interest rate fluctuation

Scenario Interest rate increases by 100 bp Interest rate decreases by 100 bp		December 31, 2022 in 1 year Effect on EVE USD TWD USD (24,074) (5,148,928) (58,960) 22,469 13,788,825 27,772
	Effect on NII	in 1 year USD (24,074) 22,469
	TWD 3,962,492 (4,598,328)

(Continued)

110

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Scenario Interest rate increases by 100 bp Interest rate decreases by 100 bp		December 31, 2021 in 1 year Effect on EVE USD TWD USD (34,660) (4,696,572) (45,509) 3,502 8,616,664 63,806
	Effect on NII	in 1 year USD (34,660) 3,502
	TWD 4,272,836 (5,293,553)

9) Managing interest rate benchmark reform and associated risks

A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as ‵IBOR reform’). The Bank has exposures to IBORs on its financial instruments that will be replaced or reformed as part of these market-wide initiatives. The Bank considers that a contract is not yet transitioned to an alternative benchmark rate when interest under the contract is indexed to a benchmark rate that is still subject to IBOR reform ,even if it includes a fallback clause that deals with the cessation of the existing IBOR (referred to as an ‵unreformed contract’).

The Bank's maining IBOR exposures at the reporting date are loans and corporate debt securities indexed to US dollar LIBOR. In March, 2021, the Financial Conduct Authority (FCA) announced that US dollar setting will either cease to be provided or no longer be representative after June 30 2023. The Bank had finished the process of implementing appropriate fallback clauses for all US dollar LIBOR-indexed exposures by the end of 2021.

The following tables show the total amounts of unreformed contracts and those with appropriate fallback language on December 31, 2022 and 2021. The amounts of financial assets and liabilities are shown at their carrying amounts, and derivatives are shown at their notional amounts.

December 31, 2022 Financial assets Discounts and loans Bond Investments Derivatives Interest rate swaps December 31, 2021 Financial assets Discounts and loans Bond Investments Derivatives Interest rate swaps	USD L	IBOR	EUR L	IBOR	GBP L	IBOR	JPY L	IBOR	CHF LIBOR
	Total amount of unreformed contracts	Amount with appropriate fallback clause	Total amount of unreformed contracts	Amount with appropriate fallback clause	Total amount of unreformed contracts	Amount with appropriate fallback clause	Total amount of unreformed contracts	Amount with appropriate fallback clause	Total amount of unreformed contracts Amount with appropriate fallback clause - - - - - - - - - - - -
	$ 55,072,000 17,391,000 5,531,000 70,757,000 22,804,048 9,402,700	23,939,000 1,259,000 5,531,000 22,182,000 691,000 9,402,700	- - - 402,000 - -	- - - 293,000 - -	- - - - - -	- - - - - -	- - - 1,830,000 - -	- - - 1,242,000 - -

(Continued)

111

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• 10) 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%.

Change Equity security price increases by 1 % Equity security price decreases by 1 % Change Equity security price increases by 1 % Equity security price decreases by 1 %	Currency TWD USD TWD USD Currency TWD USD TWD USD		December 31, 2022
			Income Equity 3,359 - 10 - (3,359) - (10) - December 31, 2021
			Income Equity 16,018 - 11 - (16,018) - (11) -

• b) Value at Risk of equity security

Value at Risk	From January 1, 2022 to December 31, 2022	From January 1, 2022 to December 31, 2022	From January 1, 2022 to December 31, 2022
	Average	Maximum	Minimum
Equity security risk	5,038	13,963	1,399
Value at Risk	From January 1, 2021 to December 31, 2021
	Average	Maximum	Minimum
Equity security risk	6,959	14,786	3,827

• (vi) Transferred financial assets that are not fully derecognized

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

As of December 31, 2022 and 2021, there were not any financial assets of the Bank that are not fully derecognized.

(Continued)

112

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(vii) Offsetting financial assets and financial liabilities

The Bank has an exercisable master netting arrangement or similar agreement in place with counterparties. When both parties reach a consensus regarding net settlement, the aforesaid exercisable master netting arrangement or similar agreement can be net settled by offsetting financial assets and financial liabilities. If not, the transaction can be settled at total amount. In the event of default involving one of the parties, the other party can have the transaction net settled.

The following tables present the aforementioned offsetting financial assets and financial liabilities:

				December 31, 2022	December 31, 2022	December 31, 2022					Net amount (e)=(c)-(d) (2,704,621) Net amount (e)=(c)-(d) (2,192,753) Net amount (e)=(c)-(d) (959,381) Net amount (e)=(c)-(d) (152,285)
	Financial assets un		de	r offsetting or general agreement of ne			t	amount settlement	o	r similar norm
Item	Gross amounts of recognized financial assets (a)		f	Gross amounts of inancial liabilities offset in the balance sheet (b)		Net amount of financial assets presented in the balance sheet (c)=(a)-(b)		Amounts not balance	s s	et off in the heet (d) Cash collateral received 2,527,996
								Financial instruments (Note)
Derivative financial instruments	$ 551,095			- D	e	551,095 cember 31, 2022		727,720
F	i	nancial liabilities u	n	der offsetting or general agreement of n			e	t amount settlemen	t	or similar norm
Item		Gross amounts of recognized financial liabilities (a)		Gross amounts of financial assets offset in the balance sheet (b)	f	Net amount of inancial liabilities presented in the balance sheet (c)=(a)-(b)		Amounts not balance	s s	et off in the heet (d) Cash collateral pledged 2,422,569
								Financial instrument (Note)
Derivative financial instruments	$ 229,816			- D	e	229,816 cember 31, 2021		-
		Financial assets un	de	r offsetting or general agreement of ne			t	amount settlement	o	r similar norm
Item		Gross amounts of recognized financial assets (a)	f	Gross amounts of inancial liabilities offset in the balance sheet (b)		Net amount of financial assets presented in the balance sheet (c)=(a)-(b)		Amounts not balance	s s	et off in the heet (d) Cash collateral received 489,795
								Financial instruments (Note)
Derivative financial instruments	$ 230,137			- D	e	230,137 cember 31, 2021		699,723
F	i	nancial liabilities u	n	der offsetting or general agreement of n			e	t amount settlemen	t	or similar norm
Item		Gross amounts of recognized financial liabilities (a)		Gross amounts of financial assets offset in the balance sheet (b)	f	Net amount of inancial liabilities presented in the balance sheet (c)=(a)-(b)		Amounts not balance	s s	et off in the heet (d) Cash collateral pledged 215,832
								Financial instruments (Note)
Derivative financial instruments	$ 63,547			-		63,547		-

Note: Master netting arrangements and non-cash financial collaterals are included.

(Continued)

113

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(aq) Capital Management

• (i) 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.

• (ii) 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 includes, 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.

• (iii) 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, interest rate risk of the banking book, and liquidity risk so as to be familiar with current business environment and monitors and adjusts capital adequacy effectively.

• (iv) 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 financial assets measured at fair value through other comprehensive income, 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 major investment on financial related business.

  • b) Other Tier 1 capital: 25% of the perpetual non-accumulated subordinated financial debentures deducted by the major investment on financial related business.

(Continued)

114

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

2) Tier 2 capital

The item includes perpetual accumulated subordinated financial debentures, long term subordinated 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, and 50% of the major investment on financial related business.

Item			December 31, 2022	December 31, 2021
Eligible capital	Common stock equity		100,331,709	96,157,516
	Other tier 1 capital		18,000,000	17,487,758
	Tier 2 capital		40,066,956	41,159,410
	Eligible Capital		158,398,665	154,804,684
Risk- weighted assets	Credit risk	Standardized approach	1,190,251,924	1,066,163,181
		Internal ratings-based approach	-	-
		Securitization	-	-
	Operational risk	Basic indicator approach	-	-
		Standardized approach/selective standardized approach	42,908,871	38,884,436
		Advanced measurement approach	-	-
	Market risk	Standardized approach	38,716,513	50,859,425
		Internal model approach	-	-
	Total risk-weighted assets		1,271,877,308	1,155,907,042
Capital adequacy ratio			% 12.45	% 13.39
Common stock equity/ Risk-weighted assets ratio			% 7.89	% 8.32
Tier 1 capital / Risk-weighted assets ratio			% 9.30	% 9.83
Leverage ratio			% 5.48	% 5.41

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”.

• b) The Bank shall fill out the capital adequacy of this period and last period. For the semi-annual report, the Bank shall disclose the capital adequacy of this period and last period and additionally disclose the capital adequacy of the previous period ended December 31.

• c) Note 1. Eligible Capital = Common stock equity ＋ Other Tier 1 Capital ＋ Tier 2 Capital

• Note 2. Total risk-weighted assets = Credit risk weighted asset＋(operational risk charge＋market risk charge) × 12.5

(Continued)

115

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

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

  - Note 4. Common stock equity / Risk-weighted assets ratio= Common stock equity / total risk weighted assets

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

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

• d) Above table is not required to be disclosed when preparing the financial reports of the first quarter and third quarter.

• (ar) Investing and financing activities not affecting current cash flow

The Bank’s investing and financing activities which did not affect the current cash flow for the nine months ended December 31, 2022 and 2021 were carried out to acquire right-of-use assets under leases. Please refer to Note 6(l).

Reconciliation of liabilities arising from financing activities were as follows:

Financial liabilities at fair value through profit or loss Bank notes payable Lease liabilities Total liabilities from financing activities	January 1, 2022 $ 8,293,730 52,250,000 1,145,072 $ 61,688,802	Cash flows - - (413,133) (413,133)	Non-cash changes Foreign exchange rate movement Fair value changes Other changes 921,000 152,865 - - - - 25,111 - 459,460 946,111 152,865 459,460	Non-cash changes Foreign exchange rate movement Fair value changes Other changes 921,000 152,865 - - - - 25,111 - 459,460 946,111 152,865 459,460	December 31, 2022 9,367,595 52,250,000 1,216,510
			Foreign exchange rate movement 921,000 - 25,111 946,111	Fair value changes 152,865 - - 152,865
					62,834,105

Financial liabilities at fair value through profit or loss Bank notes payable Lease liabilities Total liabilities from financing activities	January 1, 2021 $ 8,411,020 53,250,000 1,054,665 $ 62,715,685	Cash flows - (1,000,000) (411,827) (1,411,827)	Non-cash changes Foreign exchange rate movement Fair value changes Other changes (133,500) 16,210 - - - - 302 - 501,932 (133,198) 16,210 501,932	Non-cash changes Foreign exchange rate movement Fair value changes Other changes (133,500) 16,210 - - - - 302 - 501,932 (133,198) 16,210 501,932	December 31, 2021 8,293,730 52,250,000 1,145,072
			Foreign exchange rate movement (133,500) - 302 (133,198)	Fair value changes 16,210 - - 16,210
					61,688,802

(Continued)

116

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

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

• (i) The table below presents the types of structured entities that the Bank does not include in financial reports but in which they hold an interest:

Types of structured

Types of structured
entities	Nature and purpose Interests held by the Bank Investing in funds that cannot be freely traded on the open market Investing in units or limited partnership interests issued by these funds. Investing in commercial real estate assets securitization products Investment in asset-backed securities issued by unconsolidated structured entities
Private fund Asset securitization product

• (ii) The scales of structures entities not included in financial reports were as follow:

Private fund Asset securitization product Total	December 31, 2022 $ 96,475 560,023 $ 656,498	December 31, 2021
		102,223 728,147
		830,370

• (iii) The carrying amounts of interests held by the Bank in these structured entities were as follows:

Assets held by the Bank	December 31, 2022 $ 96,475 475,485 84,538 $ 656,498	December 31, 2021
Financial assets at fair value through profit or loss Financial assets at fair value through other comprehensive income Investments in debt instruments at amortized cost Total		102,223 578,850 149,297
		830,370

The maximum amount of risk exposure to the Bank endures to a loss incurred from special purpose entities that are not includedraren financial reports is the carrying amount of interests held by the Bank.

• (iv) As of December 31, 2022 and 2021, the Bank has not provided any financial support to its special purpose entities that is not included in consolidated financial reports.

(Continued)

117

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(7) Related-party transactions

(a) Names and relationship with related parties

The followings are entities that have had transactions with related party during the periods covered in the financial statementsconsolidated financial statements.

Name of related party	Relationship with the Bank and subsidiaries
Bank of Taiwan	Corporate director of the Bank
Ministry of Finance, R.O.C	Corporate director of the Bank
National Development Fund, Executive	Corporate director of the Bank
Yuan (Note 1)
Land Bank of Taiwan (Note 2)	Corporate director of the Bank
Taiwan Business Bank Guild	Corporate director of the Bank
TBB International Leasing Co., Ltd.	Investee company of the Bank
TBB (CAMBODIA) Microfinance	Investee company of the Bank
Institution Plc.
TBB Venture Capital Co., Ltd.	Investee company of the Bank
TBB Consulting Co., Ltd.	Investee company of the Bank
Taiwan Business Bank International Leasing	Investee companies measured by using the equity
Co., Ltd.	method
Small and Medium Enterprise Credit	Substantive related parties
Guarantee Fund of Taiwan
TBB No. 1 Venture Capital Limited	Substantive related parties
Partnership (Note 3)
Media Talk Consulting Co., Ltd. (Notes 3)	Associates
Others	Management and other related parties of the Bank

Note 1: Become a related party commencing from the third quarter of 2021.

Note 2: No longer a related party commencing from the third quarter of 2021.

Note 3: Become a related party commencing from the first quarter of 2022.

• (b) Significant transactions with related parties

• (i) Due from banks

Bank of Taiwan Bank of Taiwan	December 31, 2022	December 31, 2022
	Amount % $ 164,936 0.72 December 31, 2021	%
		0.72
		%
		1.03

Interest rates are the same as those with regular clients.

(Continued)

118

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(ii) Call loans to banks

For the years ended December 31, 2022 Bank of Taiwan For the years ended December 31, 2021 Bank of Taiwan Land Bank of Taiwan Total	Maximun balance $ 1,098,264 Maximun balance $ 3,038,983 1,507,961 $ 4,546,944		December 31, 2022 - December 31, 2021 - - -	Interest Income Annual interest rate 1,358 0.13%~3.81% Interest Income Annual interest rate 1,064 0.14%~3.80% 1,069 0.09%~3.30% 2,133

Interest rates are the same as those with regular clients.

• (iii) Call loans from banks

For the years ended December 31, 2022 Bank of Taiwan For the years ended December 31, 2021 Bank of Taiwan Land Bank of Taiwan Total	Maximun balance $ 9,434,791 Maximun balance $ 8,768,558 1,384,796 $ 10,153,354		December 31, 2022 1,786,360 December 31, 2021 3,374,798 - 3,374,798	Interest Income Annual interest rate 61,939 0.04%~5.18% Interest Income Annual interest rate 18,925 0.01%~2.80% 135 0.09%~2.35% 19,060

Interest rates are the same as those with regular clients.

(iv) Deposits

TBB International Leasing Co., Ltd. Taiwan Business Bank International Leasing Co., Ltd. TBB Venture Capital Co., Ltd. TBB Consulting Co., Ltd. Others Total	December 31, 2022	December 31, 2022
	Amount $ 19,594 177,399 102,534 56,279 1,851,872 $ 2,207,678	%
		- 0.01 0.01 - 0.11
		0.13

(Continued)

119

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

		December 31, 2021	December 31, 2021
		Amount	%
TBB International Leasing Co., Ltd.	$	43,794	-
Taiwan Business Bank International Leasing Co., Ltd.		175,563		0.01
TBB Venture Capital Co., Ltd.		120,727		0.01
TBB Consulting Co., Ltd.		43,083	-
Others		2,435,868		0.15
Total	$	2,819,035		0.17

Interest rates are the same as those with regular clients.

(v) Credit

Credit	Credit	Credit	Credit	Credit	Credit	Credit	Credit
December 31, 2022
Category	Number of clients or name of relatedparty	Highest balance	Ending balance	Performing situations		Collaterals	Transaction terms are different to regular clients
				Performing loan	Non-performing Loans
Employee consumer loans	46	18,311	14,727	14,727	-	none	none
Self-use home mortgages loans	127	557,503	511,280	511,280	-	real estate	none
Others	Natural person	617,163	590,656	590,656	-	real estate	none
December 31, 2021
Category	Number of clients or name of relatedparty	Highest balance	Ending balance	Performing situations		Collaterals	Transaction terms are different to regular clients
				Performing loan	Non-performing Loans
Employee consumer loans	40	17,353	13,480	13,480	-	none	none
Self-use home mortgages loans	130	517,303	490,456	490,456	-	real estate	none
Others	Natural person	499,016	463,274	463,274	-	real estate	none

(vi) Donation::

Small and Medium Enterprise Credit Guarantee Fund of Taiwan Taiwan Business Bank Guild Total	For the years ended December 31,	For the years ended December 31,
	2022 $ 318,530 2,500 $ 321,030	2021
		377,867 2,500 380,367

(vii) Guarantees: None.

(viii) Service fees: None.

(Continued)

120

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(ix) Rental revenue:

TBB International Leasing Co., Ltd. TBB Venture Capital Co., Ltd. TBB Consulting Co., Ltd. Total	For the years ended December 31,	For the years ended December 31,
	2022 $ 691 172 716 $ 1,579	2021
		691 324 87
		1,102

• (x) Derivatives financial instrument transactions: None.

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

• (c) Major management salary information

Salary and other short-term employee benefits Post-employment benefits Total	For the years ended December 31,	For the years ended December 31,
	2022 $ 124,242 2,150 $ 126,392	2021
		85,181 2,362
		87,543

• (8) Pledged assets: Please refer to notes 6(h) for more details.

(9) Commitments and contingencies:

(a) Significant commitments and contingencies were as follows:

Marketable securities held for custody Bills collected for others Bills lent for others Guarantees and letters of credit Trust liabilities Items held for custody Registered government bonds for sale Registered short-term bills for sale Guarantee notes payable	December 31, 2022 December 31, 2021 $ 8,659,768 9,417,776 43,238,126 48,911,218 49,785,210 40,504,652 30,185,645 35,394,541 218,150,077 212,285,576 901,998 1,163,471 66,327,700 65,741,100 4,290,113 3,080,457 54,054,530 53,651,900

• (b) Unrecognized contractual commitments:

As of December 31, 2022 and 2021, major constructions in progress and purchases amounted to $1,018,993 and $583,601 respectively, of which $911,848 and $408,698 respectively, remained unpaid.

(Continued)

121

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• (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, 2022 and 2021 is as follows:

Trust Balance Sheet

December 31, 2022 and 2021

Trust Assets	December 31, 2022 $ 6,303,284 928,987 73,259,462 2,935,786 21,657,475 112,621,601 443,482 $ 218,150,077 December 31, 2022 $ 9 112,621,601 105,439,231 (332,731) 421,967 $ 218,150,077	December 31, 2021 6,885,022 845,570 71,899,727 1,356,856 16,703,682 114,091,688 503,031 212,285,576 December 31, 2021 9 114,091,688 98,115,347 (2,478,944) 2,557,476 212,285,576
Cash in Bank Stocks Funds Bonds Real estate Securities custody Other assets Total trust assets Trust Liabilities
Payables Securities held for custody Trust capital Accumulated loss Net income Total trust liabilities

(Continued)

122

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Trust Property Accounts

December 31, 2022 and 2021

Investment in	December 31, 2022 $ 6,303,284 928,987 73,259,462 2,935,786 14,422,800 29,556 7,205,119 112,621,601 443,482 $ 218,150,077	December 31, 2021
Cash in bank Stocks Funds Bonds Real estate Land Buildings Construction in progress Securities in custody Other assets Total		6,885,022 845,570 71,899,727 1,356,856 13,642,172 34,674 3,026,836 114,091,688 503,031
		212,285,576

Note: As of December 31, 2022 and 2021, the amounts above included OBU transaction on “foreign currency designated trust funds investment in foreign negotiable securities business” amounting to $1,580,471 and $1,254,366, respectively.

(Continued)

123

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Trust Income Statement

For the years ended December 31, 2022 and 2021

Investment items Trust Revenue Interest income Realized capital gain-fund Realized gain-stocks Realized gain-bonds Dividend revenue Other revenues Sub-total Trust Expense Administrative expenses Postage and telecommunication expense Duties Realized loss-stocks Realized loss-bonds Capital fee Other expenses Sub-total Income before income tax Income tax expense Net income	For the years ended December 31, 2022 2021 $ 87,436 69,014 338,547 1,700,677 3,147 1,112 5,059 24,585 2,147,052 1,981,168 4,179 5,007 2,585,420 3,781,563 43,494 63,735 841 1,546 49 19 2,104,595 1,151,680 11,072 5,033 - 441 3,195 1,592 2,163,246 1,224,046 422,174 2,557,517 (207) (41) $ 421,967 2,557,476	For the years ended December 31, 2022 2021 $ 87,436 69,014 338,547 1,700,677 3,147 1,112 5,059 24,585 2,147,052 1,981,168 4,179 5,007 2,585,420 3,781,563 43,494 63,735 841 1,546 49 19 2,104,595 1,151,680 11,072 5,033 - 441 3,195 1,592 2,163,246 1,224,046 422,174 2,557,517 (207) (41) $ 421,967 2,557,476
	2022 $ 87,436 338,547 3,147 5,059 2,147,052 4,179 2,585,420 43,494 841 49 2,104,595 11,072 - 3,195 2,163,246 422,174 (207) $ 421,967

(Continued)

124

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• (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 International Comagnie de Commercialization et d’ Invertissement (I.C.C.I.) of the Republic of Zaire, suffered a loss thereon. In November 1998, I.C.C.I. initiated a case with the Court of Commerce of Brussels in Belgium, requested the L/C opening bank (Banque Bruxelles Lambert, or BBL) and the Bank to jointly pay compensation of USD$7,830 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 USD$7,674 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. However, the Bank and I.C.C.I couldn't reach an agreement on the exchange rate and the calculation of the compensation. 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 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 then filed a lawsuit objecting to the debt through the attorney. The case was dismissed by the Court of Frankfurt in November 2018, and remanded back to trial court in November 2019 after the Bank's appeal was granted by the High Court of Frankfurt. I.C.C.I. has filed a statement of grounds for objection to the Federal Court of Justice on March 16, 2019. And request to revoke the "Return of the Judgment of the Frankfurt High Court". The Bank has appointed a lawyer to act as an attorney in the German Federal Court of Justice and filed a defense against I.C.C.I. of objections. The case is currently being tried by the Regional Court of Frankfurt. The Federal Court of Justice has denied the I.C.C.I interlocutory appeal on May 20, 2021. In October and November 2019, the Bank received subpoenas from the court of the Democratic Republic of Congo by a third person Star Marine, who demanded I.C.C.I to pay USD$1,130 in compensation and held the Bank as jointly liable, and by I.C.C.I, which demanded the Bank to pay USD$20,060 less its reimbursed amount to make a security deposit of EUR$14,000. The Bank has engaged local attorneys to represent itself in court. The Court of Congo will merge the two cases for court. In April 2021, the translation of judgement from the Court of Congo, judgeing that the Bank should pay around EUR$20,060 for I.C.C.I. Also, I.C.C.I must compensate Star Marine for USD$1,130 as well as make a security deposit of EUR$14,000 in the domestic bank in Congo. I.C.C.I has been paid around EUR$14,860. According to the statement of plantiff and considering that I.C.C.I has already received about EUR $14,860, an addition of $73,181 thousand has been provision for lawsuit in 2021. Please refer to Note 6(v) for more details. As of December 31, 2022, the Bank has accrued the compensation of $259,635 and EUR$9,660.

(10) Loss from major disasters:None

(11) Subsequent Events:None

(Continued)

125

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(12) Others:

• (a) Information on loan quality, concentration of credit extensions, interest rate-sensitivity, profitability and maturity analysis

• (i) Loan quality:

Items	Month/Year	Month/Year	December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022
			Non-performing loans	Total loans	Non-performing loan ratio	Allowance for credit losses	Coverage ratio
Corporate finance	Secured		1,602,465	713,092,812	0.22 %	8,945,106	558.21 %
	Unsecured		691,641	372,391,080	0.19 %	4,952,203	716.01 %
Consumer finance	Residence mortgages(Note 4)		187,800	170,335,261	0.11 %	2,130,940	1,134.69 %
	Cash cards		-	-	- %	-	- %
	Microcredit(Note 5)		4,802	325,663	1.47 %	7,370	153.48 %
	Others (Note 6)	Secured	266,055	149,120,110	0.18 %	1,868,990	702.48 %
		Unsecured	14,614	13,228,525	0.11 %	174,007	1,190.69 %
Total loan busin	ess		2,767,377	1,418,493,451	0.20 %	18,078,616	653.28 %
			Overdue receivables	Total receivables	Delinquency ratio	Allowance for credit losses	Coverage ratio
Credit cards bus	iness		437	1,122,771	0.04 %	14,292	3,270.48 %
Account receiva (Note 7)	ble factoring-without recourse		-	-	- %	-	- %
Items	Month/Year		December 31, 2021
			Non-performing loans	Total loans	Non-performing loan ratio	Allowance for credit losses	Coverage ratio
Corporate finance	Secured		1,324,552	686,386,566	0.19 %	7,855,442	593.06 %
	Unsecured		1,800,964	330,974,304	0.54 %	4,246,313	235.78 %
Consumer finance	Residence mortgages(Note 4)		228,806	141,504,543	0.16 %	1,625,312	710.35 %
	Cash cards		-	2	- %	-	- %
	Microcredit(Note 5)		6,085	417,829	1.46 %	8,809	144.77 %
	Others (Note 6)	Secured	307,198	147,964,837	0.21 %	1,702,136	554.08 %
		Unsecured	17,548	10,976,267	0.16 %	138,805	791.00 %
Total loan busin	ess		3,685,153	1,318,224,348	0.28 %	15,576,817	422.69 %
			Overdue receivables	Total receivables	Delinquency ratio	Allowance for credit losses	Coverage ratio
Credit cards bus	iness		720	1,062,097	0.07 %	18,375	2,552.08 %
Account receiva (Note 7)	ble factoring-without recourse		-	-	- %	-	- %

• 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÷ 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.

(Continued)

126

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• Note 4 For residential mortgage loans, a borrower provides his/her (or spouse’ s or minor child’ s) house as collateral in full and pledges it to the financial institution for the purpose of obtaining funds to purchase property and to construct or repair a house.

• Note 5 Microcredit loans are defined by Jin-Kuan-Yin-(4)-Zi No. 09440010950, dated December 19, 2005, and do not include credit cards or cash cards.

• Note 6 Others in consumer finance are secured and unsecured consumer loans other than residential mortgage loans, cash card loans, and microcredit loans, and do not include credit cards.

• Note 7 In accordance with Jin-Kuan-Yin-(5)-Zi No. 0945000494, dated July 19, 2005, the amounts of without-recourse factoring will be classified as overdue receivables within three months from the date that suppliers or insurance companies resolve not to compensate the loss.

Overdue loans and receivables exempted from reporting

December Loans may be exempted from reporting as a non-performing loan Pursuant to a contract under a debt negotiation plan (Note1) $ 258 Pursuant to a contract under a debt liquidation plan and a debt relief plan (Note 2) 54,109 Total $ 54,367	December	31, 2022	December	31, 2021
	Loans may be exempted from reporting as a non-performing loan	Receivables may be exempted from reporting as overdue receivables	Loans may be exempted from reporting as a non-performing loan	Receivables may be exempted from reporting as overdue receivables
		1,112 22,489 23,601	372 51,418 51,790	1,486 26,536
				28,022

• 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 and Jin-Kuan-Yin-Fa-Zi No. 10500134790, dated September 20, 2016, a bank is required to make supplemental disclosure of credit information once debtors apply for pre-negotiation, pre-conciliation, relief and liquidation under the “ Consumer Debt Clearance Act.”

(Continued)

127

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(ii) Concentration of credit extensions

Concentration of credit extensions	Concentration of credit extensions	Concentration of credit extensions	Concentration of credit extensions
December 31, 2022
Ranking	Group enterprise	Credit amount	Credit amount to equity ratio (%)
1	A company. (Railway transportation)	21,202,474	% 20.37
2	B group. (Real estate for sale and rental with own or leased property)	16,381,315	% 15.74
3	C group. (Other holding)	9,788,164	% 9.40
4	D group. (Real estate development)	8,982,725	% 8.63
5	E group. (Steel rolling and extruding)	8,715,755	% 8.37
6	F group. (Computers manufacturing)	6,523,340	% 6.27
7	G group. (Real estate development)	6,261,408	% 6.01
8	H group. (Real estate development)	6,027,170	% 5.79
9	I group. (Liquid crystal panel and components manufacturing)	5,531,674	% 5.31
10	J group. (Financial leasing)	4,565,169	% 4.39

December 31, 2021	December 31, 2021	December 31, 2021	December 31, 2021
Ranking	Group enterprise	Credit amount	Credit amount to equity ratio (%)
1	A company. (Railway transportation)	23,637,474	% 23.26
2	B group. (Real estate for sale and rental with own or leased property)	11,438,878	% 11.25
3	E group. (Steel rolling and extruding)	9,135,146	% 8.99
4	D group. (Real estate development)	9,024,525	% 8.88
5	C group. (Other holding)	8,571,432	% 8.43
6	H group. (Real estate development)	6,383,825	% 6.28
7	F group. (Computers manufacturing)	5,977,657	% 5.88
8	G group. (Real estate development)	5,893,403	% 5.80
9	K group. (Air transportation)	4,393,761	% 4.32
10	J group. (Financial leasing)	4,201,781	% 4.13

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.

(Continued)

128

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Note 2 Enterprise group is as defined in Article 6 of the “Supplementary Provisions to the Taiwan Stock Exchange Corporation Rules for Review of Securities Listings”.

• Note 3 Consists of loans (import/export bills negotiated, bills and notes discounted, overdrafts, short-term loans, short-term secured loans, margin loans receivable, medium-term loans, medium-term secured loans, long-term loans, long-term secured loans, overdue loans), exchange bills negotiated, accounts receivable factoring without recourse, bankers’ acceptance receivable, guarantees proceeds.

• Note 4 In the calculation of Credit amount to equity ratio, the domestic bank should be calculated in the net value of head office. The Foreign bank should be calculated in the net value of Taiwan branch.

(iii) Interest rate-sensitivity information

• 1) Analysis of interest rate-sensitive assets and liabilities (New Taiwan dollars)

Unit : %

December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022
Item	1~90 days	91~180 days	181days~1year	over 1 year	total
Interest rate-sensitive assets	$ 1,464,207,488	24,207,477	42,324,132	136,449,514	1,667,188,611
Interest rate-sensitive liabilities	1,333,797,410	31,475,346	65,933,051	49,486,811	1,480,692,618
Interest rate sensitivity gap	130,410,078	(7,267,869)	(23,608,919)	86,962,703	186,495,993
Net worth					104,107,258
Ratio of interest rate-sensitive assets to liabilities (%)					112.60
Ratio of interest rate-sensitive gap to net worth (%)					179.14

December 31, 2021	December 31, 2021	December 31, 2021	December 31, 2021	December 31, 2021	December 31, 2021
Item	1~90 days	91~180 days	181days~1year	over 1 year	total
Interest rate-sensitive assets	$ 1,390,843,739	26,502,324	66,351,438	138,336,920	1,622,034,421
Interest rate-sensitive liabilities	1,260,163,540	78,136,810	107,263,390	57,890,778	1,503,454,518
Interest rate sensitivity gap	130,680,199	(51,634,486)	(40,911,952)	80,446,142	118,579,903
Net worth					101,659,972
Ratio of interest rate-sensitive assets to liabilities (%)					107.89
Ratio of interest rate-sensitive gap to net worth (%)					116.64

• Note 1 Listed amount 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 revenues or costs of interest– yielding assets and interest–bearing liabilities, which are affected by interest rate fluctuations.

• Note 3 Interest rate-sensitivity gap = Interest rate-sensitive assets - Interest-rate-sensitive liabilities.

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

(Continued)

129

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

2) Analysis of the interest-sensitive assets and liabilities (US dollars)

Unit : In Thousands of US Dollars, %

December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022
Item	1~90 days	91~180 days	181days~1year	over 1 year	total
Interest rate-sensitive assets	$ 5,161,097	219,595	116,768	993,718	6,491,178
Interest rate-sensitive liabilities	7,302,641	1,388,445	2,402,052	1,139	11,094,277
Interest rate sensitivity gap	(2,141,544)	(1,168,850)	(2,285,284)	992,579	(4,603,099)
Net worth					3,388,357
Ratio of interest rate-sensitive assets to liabilities (%)					58.51
Ratio of interest rate-sensitive gap to net worth (%)					(135.85)

December 31, 2021	December 31, 2021	December 31, 2021	December 31, 2021	December 31, 2021	December 31, 2021
Item	1~90 days	91~180 days	181days~1year	over 1 year	total
Interest rate-sensitive assets	$ 5,768,616	985,190	124,536	812,271	7,690,613
Interest rate-sensitive liabilities	6,805,950	1,222,606	1,984,997	-	10,013,553
Interest rate sensitivity gap	(1,037,334)	(237,416)	(1,860,461)	812,271	(2,322,940)
Net worth					3,676,007
Ratio of interest rate-sensitive assets to liabilities (%)					76.80
Ratio of interest rate-sensitive gap to net worth (%)					(63.19)

• Note 1 Listed amount refers to the Bank's amount of US 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-bearing 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 rate-sensitive liabilities (US dollars interest-rate-sensitive assets and US dollars interest-rate-sensitive liabilities).

(Continued)

130

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(iv) Profitability

Unit: %

			Unit: %
Item		December 31, 2022	December 31, 2021
The ratio of return on assets	Before income tax	0.59	0.30
	After income tax	0.49	0.27
The ratio of return on equity	Before income tax	11.68	5.77
	After income tax	9.84	5.09
Net income ratio		35.67	21.29

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 = Net income 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 end.

• (v) Maturity analysis for assets and liabilities

• 1) Maturity analysis in New Taiwan dollars

		December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022
	Total	Amount during the maturity period from the balance sheet date to due date
		0-10days	11-30days	31-90days	91-180days	181days-1year	Over 1 year
Major maturity capital inflow	$ 1,798,278,148	171,214,261	167,605,412	186,953,929	204,957,223	152,184,634	915,362,689
Major maturity capital outflow	2,201,577,109	79,002,934	115,025,374	262,893,103	184,927,959	384,673,313	1,175,054,426
Gap	(403,298,961)	92,211,327	52,580,038	(75,939,174)	20,029,264	(232,488,679)	(259,691,737)

Note: Listed amounts are denominated in New Taiwan dollars of the Bank, including loan commitments of credit agreement and estimates to outflow $390,839,630.

		December 31, 2021	December 31, 2021	December 31, 2021	December 31, 2021	December 31, 2021	December 31, 2021
	Total	Amount during the maturity period from the balance sheet date to due date
		0-10days	11-30days	31-90days	91-180days	181days-1year	Over 1 year
Major maturity capital inflow	$ 1,750,694,486	161,102,012	173,091,966	160,017,985	191,111,216	183,481,924	881,889,383
Major maturity capital outflow	2,080,919,419	58,109,342	96,378,346	197,106,878	230,402,505	383,878,329	1,115,044,019
Gap	(330,224,933)	102,992,670	76,713,620	(37,088,893)	(39,291,289)	(200,396,405)	(233,154,636)

Note: Listed amounts are denominated in New Taiwan dollars of the Bank, including loan commitments of credit agreement and estimates to outflow $321,721,283.

(Continued)

131

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

2) Maturity analysis in US dollars

Unit : In Thousands of US Dollars

		December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022
	Total	Amount during the maturity period from the balance sheet date to due date
		0-30days	31-90days	91-180days	181days-1year	Over 1 year
Major maturity capital inflow	$ 16,353,649	5,107,519	4,629,214	1,287,440	1,713,177	3,616,299
Major maturity capital outflow	17,155,496	3,645,117	4,045,473	2,484,679	3,910,394	3,069,833
Gap	(801,847)	1,462,402	583,741	(1,197,239)	(2,197,217)	546,466

Note: Listed amounts are denominated in US dollars of the Bank, including loan commitments of credit agreement and estimates to outflow USD $912,002.

		December 31, 2021	December 31, 2021	December 31, 2021	December 31, 2021	December 31, 2021
	Total	Amount during the maturity period from the balance sheet date to due date
		0-30days	31-90days	91-180days	181days-1year	Over 1 year
Major maturity capital inflow	$ 13,916,218	2,980,694	3,107,058	1,979,387	2,382,222	3,466,857
Major maturity capital outflow	14,541,102	2,963,483	2,492,268	1,795,298	2,996,995	4,293,058
Gap	(624,884)	17,211	614,790	184,089	(614,773)	(826,201)

Note: Listed amounts are denominated in US dollars of the Bank, including loan commitments of credit agreement and estimates to outflow USD $824,028.

(Continued)

132

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

(13) Other disclosures:

• (a) Information on significant transactions:

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

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

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

• (iv) Discount of commissions fees with related parties amounting to over $5,000: None.

• (v) Receivables from related parties amounting to over $300,000 or 10% of paid-in capital: None.

• (vi) Sale of non-performing loans information: None.

• (vii) Types of securitization instruments and related information approved by financial assets securitization rules or real estate securitization rules: None.

• (viii) Other significant transactions that might have influence over the decision-making process of the financial statements users: None.

• (b) Information on investees:

• (i) The following is the information on investees (excluding information on investees in Mainland China):

(Unit : thousand shares)

Name of investee	Location	Main business scope	Shareholding ratio	Book value	Investment gain (loss)	The cross holding of the B	The cross holding of the B	ank and its related parties	ank and its related parties	Note
						Number of shares	Number of proforma shares	Total
								Number of shares	Shareholding ratio
TBB International Leasing Co., Ltd.	Taiwan	Leasing business	100.00 %	1,516,406	41,673	150,000	-	150,000	100.00 %
TBB (Cambodia) Microfinance Institution Plc	Cambodia	SMEs and personal finance business	100.00 %	624,591	26,911	20	-	20	100.00 %
TBB Venture Capital Co., Ltd.	Taiwan	Investing business	100.00 %	1,258,512	202,343	105,000	-	105,000	100.00 %
TBB Consulting Co., Ltd.	Taiwan	Consulting business	100.00 %	97,947	49,356	5,000	-	5,000	100.00 %
Media Talk Consulting Co., Ltd.	Taiwan	Investing cultural and creative business	20.00 %	808	(1,192)	200	-	200	20.00 %

• (ii) Loans to others:

NO.	Creditor	Debtor	Interaction Account	Related party	Highest Amount	Ending balance	Actual drawdown amount	Range of interest rate	Nature of the loan	Dealing amount	The necessary reason for short-term loans	Allowance for bad debts	Guarantee	Guarantee	Limited amount for individual object	Total limited amount for loan
													Name	Value
1	TBB International Leasing Co., Ltd.	Chao-Yang International Co., Ltd.	Financial receivables	No	28,442	11,781	20,000	2%-10%	2	-	To the lender for buying goods	120	None	-	379,101	1,516,403
1	TBB International Leasing Co., Ltd.	Hsin Chuan Construction Co., Ltd.	Financial receivables	No	146,155	62,745	100,000	2%-10%	2	-	To the lender for buying goods	634	None	-	379,101	1,516,403
1	TBB International Leasing Co., Ltd.	Sian Shang Frozen Food Co., Ltd.	Financial receivables	No	28,442	10,115	20,000	2%-10%	2	-	To the lender for buying goods	103	None	-	379,101	1,516,403
1	TBB International Leasing Co., Ltd.	Xi Quan Restaurant Co., Ltd	Financial receivables	No	104,957	53,000	106,000	2%-10%	2	-	To the lender for buying goods	550	None	-	379,101	1,516,403
1	TBB International Leasing Co., Ltd.	Acon-Holding INC.	Financial receivables	No	37,570	7,570	30,000	2%-10%	2	-	To the lender for buying goods	76	None	-	379,101	1,516,403
1	TBB International Leasing Co., Ltd.	Pei Xian Seafood Co., Ltd.	Financial receivables	No	28,442	11,781	20,000	2%-10%	2	-	To the lender for buying goods	120	None	-	379,101	1,516,403

(Continued)

133

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

NO.	Creditor	Debtor	Interaction Account	Related party	Highest Amount	Ending balance	Actual drawdown amount	Range of interest rate	Nature of the loan	Dealing amount	The necessary reason for short-term loans	Allowance for bad debts	Guarantee	Guarantee	Limited amount for individual object	Total limited amount for loan
													Name	Value
1	TBB International Leasing Co., Ltd.	Maw Shing Top Co., Ltd.	Financial receivables	No	26,481	10,971	15,000	2%-10%	2	-	To the lender for buying goods	112	None	-	379,101	1,516,403
1	TBB International Leasing Co., Ltd.	Yu Ding Investment Co., Ltd.	Financial receivables	No	77,555	50,000	50,000	2%-10%	2	-	To the lender for buying goods	518	None	-	379,101	1,516,403
1	TBB International Leasing Co., Ltd.	Chaishan Foods Co., Ltd.	Financial receivables	No	50,000	-	50,000	2%-10%	2	-	To the lender for buying goods	-	None	-	379,101	1,516,403
1	TBB International Leasing Co., Ltd.	Yu Shan Environmental Engineering Co., Ltd.	Financial receivables	No	15,000	-	15,000	2%-10%	2	-	To the lender for buying goods	-	None	-	379,101	1,516,403
1	TBB International Leasing Co., Ltd.	Chao-Chi Property Management Consulting Co.,Ltd.	Financial receivables	No	15,000	10,078	15,000	2%-10%	2	-	To the lender for buying goods	103	None	-	379,101	1,516,403
1	TBB International Leasing Co., Ltd.	Tai Chang Fiber Co., Ltd	Financial receivables	No	15,000	10,092	15,000	2%-10%	2	-	To the lender for buying goods	103	None	-	379,101	1,516,403
1	TBB International Leasing Co., Ltd.	Risingsun Wide Food Corp.	Financial receivables	No	30,000	28,082	30,000	2%-10%	2	-	To the lender for buying goods	288	None	-	379,101	1,516,403
1	TBB International Leasing Co., Ltd.	Yu Cheng Precision Industry Co.,Ltd.	Financial receivables	No	12,000	9,045	12,000	2%-10%	2	-	To the lender for buying goods	92	None	-	379,101	1,516,403
1	TBB International Leasing Co.,Ltd.	Jiou Chang Motor Co., Ltd.	Financial receivables	No	10,000	10,000	10,000	2%-10%	2	-	To the lender for buying goods	103	None	-	379,101	1,516,403
1	TBB International Leasing Co.,Ltd.	Liang-wei Tobacco & Liquor Co., Ltd.	Financial receivables	No	10,000	10,000	10,000	2%-10%	2	-	To the lender for buying goods	103	None	-	379,101	1,516,403
1	TBB International Leasing Co.,Ltd.	Jia Ho Food Co., Ltd.	Financial receivables	No	20,000	20,000	20,000	2%-10%	2	-	To the lender for buying goods	206	None	-	379,101	1,516,403

Note1: The meaning of the number is as follows.

(1) Zero stands for issuer.

(2) Investee companies are numbered in a sequence of Arabic numerals from 1 based on company category.

Note2: The amount of loans is still valid up to now.

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

(1) 1 stands for business relation.

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

Note4: Limited amount for individual object：25% net worth of the latest TBB International Leasing Co.,Ltd's audited financial statements.

Note5: Total limited amount for loan： 100% net worth of the latest TBB International Leasing Co.,Ltd.'s audited financial statements.

(iii) Endorsements and guarantee for others: None

(iv) Acquisition of securities:

Company acquired	Type and name of the security	Relationship with the security issuer	Account	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
				Number of shares	Carrying amount	Share proportion (Note 2)	Market price (Note 1)
TBB International Leasing Co., Ltd.	Taiwan Buisness International Leasing Co., Ltd.	Parent company	Investment under equity method	-	953,828	100.00 %	953,828
TBB International Leasing Co., Ltd.	G12245、G12246	-	Financial assets at fair value through profit or loss	-	100,000	- %	100,000	Financial debentures
				(Continued)

134

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Company acquired	Type and name of the security	Relationship with the security issuer	Account	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
				Number of shares	Carrying amount	Share proportion (Note 2)	Market price (Note 1)
TBB Venture Capital Co., Ltd.	G12245	-	Financial assets at fair value through profit or loss	-	100,000	- %	100,000	Financial debentures
TBB Venture Capital Co., Ltd.	Powerchip Semiconductor Manufacturing Corporation	-	Financial assets at fair value through profit or loss	250	8,013	0.01 %	8,013	Listed Stocks
TBB Venture Capital Co., Ltd.	Eir Genix, Inc.	-	Financial assets at fair value through profit or loss	845	104,780	0.28 %	104,780	OTC Stocks
TBB Venture Capital Co., Ltd.	Chenfull Precision Co.,Ltd.	-	Financial assets at fair value through profit or loss	380	27,930	0.64 %	27,930	OTC Stocks
TBB Venture Capital Co., Ltd.	Lungteh Shipbuilding Co., Ltd.	-	Financial assets at fair value through profit or loss	1,702	113,163	1.74 %	113,163	Emerging Stocks
TBB Venture Capital Co., Ltd.	Ping Ho Environmental Technology Co., Ltd.	-	Financial assets at fair value through profit or loss	150	8,730	0.51 %	8,730	Emerging Stocks
TBB Venture Capital Co., Ltd.	Handa Pharmaceuticals, Inc.	-	Financial assets at fair value through profit or loss	1,141	139,737	0.88 %	139,737	Emerging Stocks
TBB Venture Capital Co., Ltd.	Tigerair Taiwan Co.,Ltd.	-	Financial assets at fair value through profit or loss	1,973	61,360	0.49 %	61,360	Emerging Stocks
TBB Venture Capital Co., Ltd.	Energenesis Biomedical Co., Ltd.	-	Financial assets at fair value through profit or loss	340	14,399	0.51 %	14,399	Emerging Stocks
TBB Venture Capital Co., Ltd.	Evergreen Aviation Technologies Corporation	-	Financial assets at fair value through profit or loss	468	37,580	0.13 %	37,580	Emerging Stocks
TBB Venture Capital Co., Ltd.	Locus Cell Co., Ltd.	-	Financial assets at fair value through profit or loss	1,362	48,760	0.68 %	48,760	Emerging Stocks
TBB Venture Capital Co., Ltd.	Starlux Airlines Co., Ltd.	-	Financial assets at fair value through profit or loss	3,860	73,147	0.21 %	73,147	Emerging Stocks
TBB Venture Capital Co., Ltd.	Pinkoi Inc.	-	Financial assets at fair value through profit or loss	93	30,156	0.53 %	30,156	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Song Chuan Precision Co., Ltd.	-	Financial assets at fair value through profit or loss	415	24,898	0.74 %	24,898	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Techplasma Technology Co., Ltd.	-	Financial assets at fair value through profit or loss	821	54,267	2.87 %	54,267	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Hephas Energy Co., Ltd.	-	Financial assets at fair value through profit or loss	680	88,349	2.96 %	88,349	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Ren Chin Electric Conductor Co., Ltd.	-	Financial assets at fair value through profit or loss	250	3,835	2.61 %	3,835	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Manford Machinery Co., Ltd.	-	Financial assets at fair value through profit or loss	1,195	20,315	2.99 %	20,315	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Yuh Shan Enviromental Engineering Co., Ltd.	-	Financial assets at fair value through profit or loss	500	22,005	1.96 %	22,005	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Huang Chieh Metal Holdings Co., Ltd.	-	Financial assets at fair value through profit or loss	286	2,940	0.48 %	2,940	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Iovtec Co., Ltd.	-	Financial assets at fair value through profit or loss	424	21,857	2.93 %	21,857	Unlisted Stocks
TBB Venture Capital Co., Ltd.	e-Formula Technologies, Inc.	-	Financial assets at fair value through profit or loss	600	8,952	2.76 %	8,952	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Han-win Technology Co., Ltd	-	Financial assets at fair value through profit or loss	453	6,272	2.20 %	6,272	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Ina Energy Corporation	-	Financial assets at fair value through profit or loss	2,000	25,800	1.00 %	25,800	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Amazing Cool Technology Corporation.	-	Financial assets at fair value through profit or loss	390	3,916	2.86 %	3,916	Unlisted Stocks

(Continued)

135

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

Company acquired	Type and name of the security	Relationship with the security issuer	Account	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
				Number of shares	Carrying amount	Share proportion (Note 2)	Market price (Note 1)
TBB Venture Capital Co., Ltd.	Long-Shun Green EnergyTechnology Ltd.	-	Financial assets at fair value through profit or loss	720	28,800	2.40 %	28,800	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Gamamobi Taiwan Co., Ltd	-	Financial assets at fair value through other comprehensive income	200	1,690	1.00 %	1,690	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Toyo Automation Co., Ltd.	-	Financial assets at fair value through profit or loss	250	26,250	0.95 %	26,250	Unlisted Stocks
TBB Venture Capital Co., Ltd.	aetherAI Co., Ltd.	-	Financial assets at fair value through profit or loss	400	10,000	0.72 %	10,000	Unlisted stocks
TBB Venture Capital Co., Ltd.	GoodLinker Co., Ltd.	-	Financial assets at fair value through profit or loss	100	3,000	2.86 %	3,000	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Yiyi Pictures Co Ltd.	-	Financial assets at fair value through profit or loss	9	2,992	1.10 %	2,992	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Inbound Asia Co., Ltd.	-	Financial assets at fair value through profit or loss	83	3,000	0.41 %	3,000	Unlisted Stocks
TBB Venture Capital Co., Ltd.	TFBS Bioscience, Inc.	-	Financial assets at fair value through other comprehensive income	250	13,500	0.75 %	13,500	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Asia Hydrogen Energy Corporation	-	Financial assets at fair value through profit or loss	132	5,000	1.98 %	5,000	Unlisted Stocks
TBB Venture Capital Co., Ltd.	kuang shih AI Co., Ltd.	-	Financial assets at fair value through profit or loss	1,600	20,800	8.89 %	20,800	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Longwalk social enterprise, Co., Ltd.	-	Financial assets at fair value through profit or loss	120	3,000	12.77 %	3,000	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Carpost Co., Ltd.	-	Financial assets at fair value through profit or loss	330	3,960	2.92 %	3,960	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Honley Auto. Parts Co., Ltd.	-	Financial assets at fair value through profit or loss	3,000	36,000	1.78 %	36,000	Unlisted Stocks
TBB Venture Capital Co., Ltd.	Taiwania Buffalo III Biotechnology VentureCapital LLP.	-	Financial assets at fair value through profit or loss	-	35,119	4.57 %	35,119	Private fund
TBB Venture Capital Co., Ltd.	Ju He Venture Capital LLP.	-	Financial assets at fair value through profit or loss	-	19,071	2.46 %	19,071	Private fund
TBB Venture Capital Co., Ltd.	TBB No. 1 Venture Capital Limited Partnership	-	Financial assets at fair value through profit or loss	-	11,831	1.12 %	11,831	Private fund
TBB Venture Capital Co., Ltd.	Jia Da International Development Co., Ltd.	-	Financial assets at fair value through other comprehensive income	2,919	29,807	8.52 %	29,807	Unlisted Stocks
TBB Consulting Co., Ltd.	Media Talk Consulting Co., Ltd.	Associates	Investment under equity method	-	808	20.00 %	808
TBB Consulting Co., Ltd.	TBB No. 1 Venture Capital Limited Partnership	-	Financial assets at fair value through profit or loss	-	1,183	0.11 %	1,183	Private fund

Note 1: Listed companies apply the market price to calculate the net worth of the shares possessed. Unlisted companies apply the proportion of shares calculate the net worth of the shares possessed. The net worth of preferred stock is calculated based on the liquidation price plus dividends in arrears.

Note 2: The proportion of shares the preferred stock is calculated based on the shares the Bank possessed divided by the shares issued.

(v) Accumulative purchases or sales of the same investee companies amounting to over $300,000 or 10% of paid-in capital: None.

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

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

(viii) Discount of commissions and handling fees with related parties amounting to over $5,000: None.

(ix) Receivables from related parties amounting to over $300,000 or 10% of paid-in capital: None.

(x) Transactions of financial derivatives: None.

(Continued)

136

TAIWAN BUSINESS BANK LTD. Notes to the Financial Statements

• (xi) Sale of non-performing loans information: None.

• (xii) Types of securitization instruments and related information approved by financial assets securitization rules or real estate securitization rules: None.

• (xiii) Other significant transactions that might have substantial influence over the decision making of the financial statement users: None.

• (c) Information on investments in Mainland China:

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

Name of investee company in Mainland China	Major business	Paid-in capital	Investment method (Note 1)	Accumulated amount transferred from Taiwan, beginning of the period	Investment transferred out or recovered	Investment transferred out or recovered	Accumulated amount transferred from Taiwan, end of the period	The current profit or loss of the investee (Note 2)	Shares directly or indirectly possessed by the Bank	Investment income for the period (Notes 2 and 4)	Ending carring value of investment	Accumulated inward remittance of earnings as of the end of period
					Transferred out	Recovered
Taiwan Business Bank , Ltd. Shanghai branch	Banking business	3,910,537 (CNY800 million) (Operating capital)	(3)	3,910,537 (CNY800 million)	-	-	3,910,537 (CNY800 million)	-	Shanghai branch of the Bank, not an investee company	Note 4	4,325,735	None
Taiwan Business Bank , Ltd. Wuhan branch	Banking business	3,942,815 (CNY800 million) (Operating capital)	(3)	3,942,815 (CNY800 million)	-	-	3,942,815 (CNY800 million)	-	Wuhan branch of the Bank, not an investee company	Note 4	4,130,790	"
Taiwan Business Bank International Leasing Co., Ltd.	Leasing business	838,305 (CNY170 million) (Operating capital)	(1)	838,305 (CNY170 million)	-	-	838,305 (CNY170 million)	34,290 2(c)	100%	34,290 2(c)	953,828	"

Note 1: Investment method is divided into three categories and are listed as follows:

• (1) Directly invest in Mainland China.

• (2) Investment in Mainland China companies through a third region.

• (3) Others: establishment of oversea branches

• Note 2: The column of “Investment gains (losses)”:

• (1) If the company is still in the preparation process, and does not have any investment gain or loss, please specify.

• (2) The bases for recognition of investment income or loss have three methods, please specify.

• a. The audited financial reports that are issued by an international accounting firm which is connected to an accounting firm in Taiwan.

• b The audited financial reports that are issued by the Taiwan parent company’s designated accounting firm.

• c. Others

• (3) Please specify if information regarding current gains or losses of an investee is not retrievable.

Note 3: The number is expressed in New Taiwan Dollars.

Note 4: The operating result of Shanghai and Wuhan branch have been included in the Bank.

• (ii) Limitation on investment in Mainland China:

Name of Company	Accumulated outflow of investment from Taiwan to Mainland China, as of the end of period	Investment amount authorized by Investment Commission, MOEA	Upper limit on investment authorized by Investment Commission, MOEA
Taiwan Business Bank, Ltd.(Note)	8,691,657 (CNY 1,770 million)	8,691,657 (CNY 1,770 million)	62,464,355

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

• (d) Information of major shareholders:

Information of major shareholders:
Shareholding Shareholder’s Name	Shares	Percentage
Bank of Taiwan	1,301,907,315	% 16.21
National Development Fund, Executive Yuan	471,075,689	% 5.87

(14) Segment information:None

137

TAIWAN BUSINESS BANK LTD.

Statement of Cash and Cash Equivalents

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item	Summary	Amount
Cash on hand, revolving funds and foreign currencies Checks for clearing Due from other banks Total	NTD USD 11,433 , spot rate 30.7250 HKD 26,931 , spot rate 3.9400 JPY 1,170,758 , spot rate 0.2321 EUR 4,969 , spot rate 32.7600 CNY 22,013 , spot rate 4.4110 Subtotal NTD USD 139,730 , spot rate 30.7250 HKD 485,228 , spot rate 3.9400 AUD 171,145 , spot rate 20.7800 JPY 49,017,124 , spot rate 0.2321 CNY 277,968 , spot rate 4.4110 Others Subtotal	$ 14,042,490 351,281 106,109 271,733 162,772 97,100 15,031,485 11,029,785 199,497 4,293,189 1,911,800 3,556,386 11,376,874 1,226,116 254,715 22,818,577 $ 48,879,847

138

TAIWAN BUSINESS BANK LTD.

Statement of Receivables

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item Interest receivable Less: allowance for bad debts Net Acceptances receivable Less: allowance for bad debts Net Accrued incomes Accounts receivable Less: allowance for bad debts Net Spot exchange receivable, foreign currencies Refinancing guaranty deposits Guaranteed proceeds receivable from refinancing Credit cards accounts receivable Less: allowance for bad debts Net Receivable price of securities purchased for customers Other receivables Less: allowance for bad debts Net Total	Summary Advance payment-letter of credit Advance payment International debit cards payment Others Subtotal	Amount $ 4,091,548 (16,655) 4,074,893 791,284 (7,913) 783,371 140,805 376 (2) 374 9,096 1,505 1,158 1,098,733 (569) 1,098,164 179,159 138,989 54,214 11,790 20,612 225,605 (44,862) 180,743 $ 6,469,268

139

TAIWAN BUSINESS BANK LTD.

Statement of Financial Assets at Fair Value through Profit or Loss

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item Financial assets at fair value through profit or loss, mandatorily measured at fair value Total	Summary Forward contracts Currency swap contracts Foreign currency options-call Stock index futures Interest rate contract Commercial paper Listed stocks Beneficiary certificates	Amount $ 27,271 1,088,827 17,813 26,860 5,896 30,907,810 115,114 347,166 $ 32,536,757	Note
			Note Note Note Note Note Note Table 1 Table 2

Note: None of the other items exceeds 5% of the account balance.

140

TAIWAN BUSINESS BANK LTD.

Statement of Financial Assets at Fair Value through Profit or Loss

- Listed stocks

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Table 1

Item king slide DELTA SUNON AVC IEI TWM IGS HU LANE ASolid Others (Note) Total	Summary	Number of shares (thousand) 15 90 165 60 90 312 21 40 130 138	Acquisition cost $ 6,249 23,477 7,493 6,285 6,514 31,979 8,535 6,298 9,066 11,373 $ 117,269	Valuation Adjustment (489) 2,308 (447) 435 (142) (2,433) 569 (518) (668) (770) (2,155)	Fair value Unit price Total Note 384.00 5,760 286.50 25,785 42.70 7,046 112.00 6,720 70.80 6,372 94.70 29,546 433.50 9,104 144.50 5,780 64.60 8,398 - 10,603 115,114
					Unit price 384.00 286.50 42.70 112.00 70.80 94.70 433.50 144.50 64.60 -

Note: None of the other items exceeds 5% of the account balance.

141

TAIWAN BUSINESS BANK LTD.

Statement of Financial Assets at Fair Value through Profit or Loss - Beneficiary certification

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item	Numbers of shares (thousand) Acquisition cost 8,500 $ 85,000 100 30,725 3,929 132,156 10,000 100,000 $ 347,881	Table 2 Fair value	Table 2 Fair value
		Unit price 11.35 299.26 31.08 9.8652	Total
Taiwania Capital Biotechnology II Corporation Yuanta Global Leaders Balanced Fund-USD (A) Yuanta U.S. Treasury 20+ Year Bond ETF Yuanta 2-10 Year Investment Grade Corporate Bond Fund-TWD(A) Total			96,475 29,926 122,113 98,652 347,166

142

TAIWAN BUSINESS BANK LTD.

Statement of Financial Assets at Fair Value

through Other Comprehensive Income

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item Investment in debt instruments measured at fair value through other comprehensive income Government bonds Corporate bonds Financial debentures Subtotal Investment in equity instruments measured at fair value through other comprehensive income Listed stocks Unlisted stocks Real estate investment trust Subtotal	Summary	Amount Note $ 48,754,854 Table 1 60,445,796 Note 32,639,581 Note 141,840,231 12,676,936 Table 2 5,307,654 Table 3 145,782 Note 18,130,372 $ 159,970,603

Note: None of the other items exceeds 5% of the account balance.

143

TAIWAN BUSINESS BANK LTD.

Statement of Financial Assets at Fair Value through Other Comprehensive Income - Government Bonds

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Table 1

Item Summary A03113 Annual interest payment 9/26, maturity date 2024/9/26 A10107 Annual interest payment 6/23, maturity date 2031/6/23 Others (Note) Total	Number of shares (thousand)	Total par value (thousand) $ 3,750,000 2,900,000 42,750,035 $ 49,400,035	Coupon rate % 1.625 % 0.375 0.25%~5.75%		Cost 3,803,776 2,882,470 44,483,121 51,169,367	Accumulated impairment (1,123) (851) (11,872) (13,846)	Valuation adjustment (21,883) (190,385) (2,202,245) (2,414,513)	Fair value Unit price Total Note 100.85 3,781,893 92.83 2,692,085 - 42,280,876 48,754,854
								Unit price 100.85 92.83 -
	37,500 29,000 -

Note：None of the other items exceeds 5% of the account balance.

144

TAIWAN BUSINESS BANK LTD.

Statement of Financial Assets at Fair Value through Other Comprehensive Income - Listed stocks

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Table 2

Item THSRC ACC FPC HON HAI ASUS CHT CHB Others (Note) Total	Summary	Number of shares (thousand) 44,500 17,128 8,200 6,900 2,370 6,405 148,220 147,496	Acquisition cost $ 445,000 735,980 807,472 695,285 767,666 708,572 2,636,028 5,692,838 $ 12,488,841	Valuation Adjustment 834,375 (33,732) (95,712) (5,975) (131,321) 15,193 (94,053) (300,680) 188,095	Fair value Unit price Total Note 28.75 1,279,375 41.00 702,248 86.80 711,760 99.90 689,310 268.50 636,345 113.00 723,765 17.15 2,541,975 - 5,392,158 12,676,936
					Unit price 28.75 41.00 86.80 99.90 268.50 113.00 17.15 -

Note: None of the other items exceeds 5% of the account balance.

145

TAIWAN BUSINESS BANK LTD.

Statement of Financial Assets at Fair Value through Other Comprehensive Income - Unlisted stocks

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Table 3

Item Taiwan Stock Exchange Corporation Taiwan Futures Exchange Corporation CDIB & Partners Investment Holding Corp. Taiwan Asset Management Corporation Taiwan Sugar Corporation Others (Note) Total	Summary	Number of shares (thousand) 9,737 4,786 54,000 60,000 16,832 34,956	Acquisition cost $ 198,012 20,000 500,000 600,000 58,294 555,921 $ 1,932,227	Valuation adjustment 1,061,023 446,775 (118,760) 127,200 1,682,760 176,429 3,375,427	Fair value Unit price Total Note 129.30 1,259,035 97.53 466,775 7.06 381,240 12.12 727,200 103.44 1,741,054 - 732,350 5,307,654
					Unit price 129.30 97.53 7.06 12.12 103.44 -

Note: None of the other items exceeds 5% of the account balance.

146

TAIWAN BUSINESS BANK LTD.

Statement of Investment in Debt Instruments at Amortized Cost

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item Certificates of deposit with the Central Bank Government bonds Corporate bonds Financial debentures Negotiable certificates of deposit Total	Summary	Amortized balance $ 195,595,000 24,370,304 7,481,434 9,337,858 64,523 $ 236,849,119		Accumulated impairment (57,762) (6,887) (7,005) (3,202) (16) (74,872)		Carrying Amount Note 195,537,238 Note1 24,363,417 Table 1 7,474,429 Table 2 9,334,656 Table 3 64,507 Note 2 236,774,247

Note 1: In order to comply with the immediate tax settlements mechanism of Central Bank and the interbank funds transfer system, the Bank provided certificates of deposit with the Central Bank amounting to $2,000,000 as overdraft guarantee. The amount of the guarantee could be modified anytime and the remaining amount could be served as liquid reserves.

As of December 31, 2022, the Bank provided Central bank with certificates of deposit with par value of $29,000,000 and $200,000 respectively to serve as a guarantee for borrowing US and JPY dollars from Central bank. Guarantee of national treasury matters is $20,000,000.

Note 2: Overseas branches' reserve of overdraft guarantee is $64,523.

147

TAIWAN BUSINESS BANK LTD.

Statement of Investment in Debt Instruments at Amortized Cost -

Government Bonds

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Table 1

Financial instrument	Summary Annual interest payment 8/10, maturity date 2032/8/10 Annual interest payment 3/3, maturity date 2024/3/3 Annual interest payment 9/11, maturity date 2025/9/11 Annual interest payment 2/25, maturity date 2025/2/25 Annual interest payment 2/14, maturity date 2027/02/14	Number of units (thousand)	Total par value $ 3,370,000 1,850,000 2,200,000 1,500,000 6,050,000 8,644,650 $ 23,614,650	Coupon rate % 1.500 % 1.500 % 1.125 % 2.375 % 2.000 0.625%~4.5%	Accumulated Impairment (1,017) (550) (655) (457) (1,863) (2,345) (6,887)	Unamortized (discount) price 72,557 13,160 17,411 48,576 257,809 346,141 755,654	Carrying amount Note 3,441,540 $97,400 have been pledged 1,862,610 $15,900 have been pledged 2,216,756 $217,800 have been pledged 1,548,119 6,305,946 8,988,446 $523,400 have been pledged 24,363,417
A01107 A03106 A04112 A94103 A96102 Others (Note) Total		33,700 18,500 22,000 15,000 60,500 76,000

Note：None of the other items exceeds 5% of the account balance.

148

TAIWAN BUSINESS BANK LTD.

Statement of Investment in Debt Instruments at Amortized Cost -

Corporate Bonds

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Table 2

Financial instrument	Summary	Number of units (thousand)	Total par value	Coupon rate	Accumulated impairment	Accumulated impairment	Unamortized (discount) price	Unamortized (discount) price		Carrying amount Note 399,992 404,324 398,685 499,771 5,771,657 7,474,429
B903V7 B702AJ B94703 B618DA Others (Note) Total	Annual interest payment 5/3, maturity date 2023/5/3 Annual interest payment 1/17, maturity date 2026/1/17 Annual interest payment 4/27, maturity date 2023/4/27 Annual interest payment 10/20, maturity date 2027/10/20	4,000 4,000 4,000 5,000 -	$ 400,000 400,000 400,000 500,000 5,784,837 $ 7,484,837	% 1.53 % 2.03 % 1.07 % 1.75 0.63%~3.50%		(184) (343) (1,181) (229) (5,068) (7,005)		176 4,667 (134) - (8,112) (3,403)

Note：None of the other items exceeds 5% of the account balance.

149

TAIWAN BUSINESS BANK LTD.

Statement to Investment in Debt Instruments at Amortized Cost -

Financial Bonds

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Table 3

Financial instrument MAYBANK FRN(Malayan Banking Berhad) ICBC BANK OF CHINA LIMITED ,MACAU BRANCH CHINA CONSTRUCTION BANK CORP., SINGAPOR BRANCH Bank of Communications Co.,Ltd. Hong Kong Branch Bank of Communications Co.,Ltd. Luxembourg Branch Natixis S.A. FIRST ABU DHABI BANK PJSC FRN Others (Note) Total	Summary Maturity date 2023/11/07 Maturity date 2023/06/14 Maturity date 2023/11/20 Maturity date 2023/02/01 Maturity date 2023/05/17 Maturity date 2023/08/16 Maturity date 2023/09/26 Maturity date 2024/08/22	Total per value $ 613,886 921,750 614,500 614,500 614,500 612,349 768,125 614,500 3,961,331 $ 9,335,441	Coupon rate 3M LIBOR+0.83% 3M LIBOR+0.83% 3M LIBOR+0.85% 3M LIBOR+0.95% 3M LIBOR+0.85% 3M LIBOR+0.85% 3.55% 3M LIBOR+0.9%	Accumulated impairment (190) (343) (152) (152) (152) (190) (190) (152) (1,681) (3,202)		Unamortized premium 492 - - - - 1,855 - - 70 2,417		Carrying amount Note 614,188 921,407 614,348 614,348 614,348 614,014 767,935 614,348 3,959,720 9,334,656

Note：None of the other items exceeds 5% of the account balance.

150

TAIWAN BUSINESS BANK LTD.

Statement of Changes in Investments Measured by Equity Method

For the year ended December 31, 2022

(Expressed in Thousands of New Taiwan Dollars, Thousands Shares)

Company	Beginning balance Number of shares Amount 150,000 $ 1,463,080 20 537,297 100,000 1,068,059 5,000 48,591 $ 3,117,027	Incre	ase Amount 53,326 87,294 202,343 49,356 392,319	Decre	ase Amount - - 11,890 - 11,890	Ending balance	Ending balance	Amount 1,516,406 624,591 1,258,512 97,947 3,497,456	Market value o	r net worth Total	Guaranteed or pledged Note None The increase is the investment gains and the cumulative translation adjustment accounted for using equity method. 〞 The decrease is the investment losses and the cumulative translation adjustment accounted for using equity method. 〞 The increase is the issuance of shares, the investment gains and other comprehensive income accounted for using equity method. 〞 The increase is due to making new investment, the decrease is the investment losses accounted for using equity method.
	Number of shares	Number of shares - - 5,000 -		Number of shares - - - -		Number of shares 150,000 20 105,000 5,000	Shareholding ratio% 100.00 100.00 100.00 100.00		Unit Price 10.11 31,229.55 11.99 19.59
TBB International Leasing Co., Ltd. TBB (Cambodia) Microfinance Institution Plc TBB Venture Capital Co., Ltd. TBB Consulting Co., Ltd. Total	150,000 20 100,000 5,000									1,516,406 624,591 1,258,512 97,947 3,497,456

151

TAIWAN BUSINESS BANK LTD.

Statement of Changes in Intangible Assets

For the year ended December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item	Beginning balance $ 553,784	Increase 451,763	Decrease 248,844	Ending balance Note 756,703
Computer software

Note 1： An increase of $451,763 includes purchasing of $288,032 and a transferred from prepayments for equipment amounted to $163,731.

Note 2： A decrease of $248,844 includes amortizations of $248,725 and exchange differences of $119.

152

TAIWAN BUSINESS BANK LTD.

Statement of Other Assets

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item Office supplies Prepayments Operation guarantee deposits and settlement fund Guarantee deposits paid Less: allowance for bad debts Net Deferred assets Temporary payments and suspense Proceeds of settlement and margin trading Miscellaneous Assets Total	Amount $ 29,019 8,037,111 60,614 23,163 46,546 8,167,434 31,753 54,502 55,855 13,820 10,400 2,422,569 15,595 35,123 - 2,607,864 128 4,690,927 60,139 176,432 $ 15,763,696	Summary
		Prepayments for inter-bank clearing fund and network system Prepayments for other taxes Amortization of other expenses Others Subtotal House deposit Membership deposit for golf clubs Money lodged at courts Performance bonds Transactions of financial derivatives Guarantee oflitigation Other

153

TAIWAN BUSINESS BANK LTD.

Statement of Deposits from the Central Bank and Banks

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item Deposits from the Central Bank Due from the Central Bank Deposits from banks Call loans from banks Overdrafts on banks Deposits transferred from Chunghwa Post Co., Ltd.	Summary USD 503,207, spot rate 30.7250 JPY 5,000,004, spot rate 0.2321 HKD 1,441,595, spot rate 3.9400 AUD 337,983, spot rate 20.7800 CNY 50,000, spot rate 4.4110 SGD 100, spot rate 22.8700 NTD Subtotal USD 28,889, spot rate 30.7250 EUR 1,048, spot rate 32.7600 JPY 465,558, spot rate 0.2321 CNY 9,926, spot rate 4.4110 AUD 495, spot rate 20.7800 Subtotal Total	Amount
		$ 232,262 14,133,500 705,261 15,461,021 1,160,501 5,679,885 7,023,289 220,550 2,287 2,002,000 31,549,533 887,610 34,347 108,056 43,784 10,279 1,084,076 147,261,545 $ 194,966,177

154

TAIWAN BUSINESS BANK LTD.

Statement of Payables

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item Accrued interest Accounts payable Acceptances Accrued expenses Collection payable Spot exchange payable, foreign currencies Deposits received from securities borrowers Guaranteed price deposits received from securities borrowers Other payable Prices payable of securities sold for customers Others Total	Amount $ 800,001 2,226,544 869,974 532,414 4,428,933 11,029,786 12,773 11,042,559 802,824 1,151,539 546,819 527,018 339,584 263,511 108,902 299,830 3,237,203 236,523 99,616 84,438 59,508 46,818 45,063 101,136 673,102 13,625 116,196 108,289 231,200 63,981 73,001 96,242 78,314 109,593 182,361 834,692 137,155 40,444 6,474 $ 21,441,496	Summary
		Non-drawing time savings deposits interest Bond interest Time deposits interest Others Subtotal Checks for clearing Others Subtotal Performance bonus Overtime premium Employee and directors compensation Annual bonuses Business tax Business promotion fee Others Subtotal Media transfer Payments under taxes Tax Matured bond lodged at courts Receipts under custody-tax authority account Clearing House media exchange automatic transfer Others Subtotal Deposits from dishonored account Temporary credit Labor retirement fund Pending accounts Stop payment reserve fund Deposit account settlement Others Subtotal Dividends and other taxes payable

155

TAIWAN BUSINESS BANK LTD.

Statement of Deposits and Remittances

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item Savings deposits Time deposits Demand deposits Checking account deposits Remittances Total	Amount $ 439,807,324 15,501,952 247,570 821 72,357,796 209,743,817 737,659,280 1,333,322 190,345,846 245,368,848 437,048,016 12,685,617 342,068,753 110,754,110 465,508,480 33,292,182 427,849 262 428,111 $ 1,673,936,069	Summary
		Savings account deposits Staff demand savings deposits Club savings deposits Annuity savings deposits Non-drawing time savings deposits Interest drawing savings deposits Subtotal Government treasury Time deposits Foreign currencies Subtotal Government treasury New Taiwan dollars Foreign currencies Subtotal Remittances outstanding Remittances under custody Subtotal

156

TAIWAN BUSINESS BANK LTD.

Statement of Lease Liabilities

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item	Summary	Leasing Period 2015.10.01~2040.09.30 2015.01.26~2026.07.31 2018.11.01~2025.08.29 2018.12.22~2027.12.31	Discount Rate	Ending Note $ 1,157,875 85 51,023 7,527 $ 1,216,510
Buildings Machinery and equipment Transportation equipment Miscellaneous equipment			1.37%~1.68% 1.37%~1.68% 1.37%~1.68% 1.37%~1.68%

157

TAIWAN BUSINESS BANK LTD.

Statement of Other Liabilities

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item Unearned revenue Advance interest receipts Other advance receipts Guarantee deposits received Deferred revenue Total	Amount $ 187,880 70,927 47,229 306,036 6,396 37,124 19,430 56,554 163,605 203,132 266,092 2,482,580 132,423 57,124 3,304,956 3,220 $ 3,677,162	Summary
		Advance receipt for guarantee service fee revenue Advance receipt for trust administrative expense Others Subtotal Credit card prepayments Other Subtotal Rental deposit Letter of credit for domestic and international deposit Performance bond CSA Warranty bond Others Subtotal

158

TAIWAN BUSINESS BANK LTD.

Statement of Foreign Exchange Gain

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item USD AUD CAD HKD GBP SGD ZAR SEK CHF JPY THB EUR NZD CNY	Amount $ 668,328 15,153 2,319 13,980 5,531 1,795 10,971 (3,986) (207) 84,778 13,750 96,239 1,628 14,891 $ 925,170	Note
		.

159

TAIWAN BUSINESS BANK LTD.

Statement of Employee Benefits Expenses

For the year ended December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item	Amount	Amount	Amount	Amount	Note
	Employee benefit expenses	Net other revenue other than interest income	Other general and administrative expense	Total
Salary expense	$ 7,203,433	-	72,810	7,276,243
Labor and health insurance	528,718	-	-	528,718
Pension expense	339,764	-	-	339,764
Director's remuneration	89,213	-	898	90,111
Other employee benefits	622,143	-	2,040	624,183

Note:：

• 1.The employee numbers amounted to 5,530 and 5,436 people and the number of directors who are not employees amounted to 12 and 12 people as of December 31, 2022 and 2021, respectively.

• 2.Financial statements for the years ended December 31, 2022 and 2021 should disclose the following information:

• (1) The average of employee benefits expenses for the years ended December 31, 2022 and 2021 are $1,589 and $1,538 respectively .

• (2) The average of salary expense for the years ended December 31, 2022 and 2021 are $1,319 and $1,245 respectively.

• (3) The average movement of employees' salary is 5.94%.

• (4) The supervisor's remuneration is $ 0 in 2022, and the supervisor's remuneration is $ 0 in 2021 .

• (5) Information on the Bank's remuneration policy:

• A. Directors' remuneration is paid with reference to peer industry standards, personal performance, company operating performance, and performance evaluation results of the board of directors. The remuneration of independent directors is executed in accordance with the monthly remuneration proposal approbated by the shareholders meeting in 2011. Exclude the monthly fixed remuneration, the independent directors will not draw the remuneration according to the corporation by-laws.

• B. The remuneration of managers and employees not only refers to the standards of the same industry, but also considers personal performance and the company's operating performance. Respectively in accordance with the relevant regulations of the Bank, such as the "Guidelines for Staff Salary Payment", "Guidelines for Issuance of Annual and Performance Bonus", "Guidelines for Staff Remuneration" and "Organizational Rules of the Salary and Compensation Committee".

160

TAIWAN BUSINESS BANK LTD.

For the year ended December 31, 2022

Please refer to the notes below for information on statements of other significant accounts:

• (1) Statement of securities purchased under resell agreements, Note 6(d)

• (2) Statement of discounts and loans, Note 6(f)

• (3) Statement of other financial assets, Note 6(j)

• (4) Statement of changes in accumulated impairment of property and equipment, Note 6(k)

• (5) Statement of changes in property and equipment, Note 6(k)

• (6) Statement of changes in accumulated depreciation of property and equipment, Note 6(k)

• (7) Statement of changes in right-of-use assets, Note 6(l)

• (8) Statement of changes in accumulated depreciation of right-of-use assets, Note 6(l)

• (9) Statement of deferred taxes assets, Note 6(z)

• (10) Statement of financial liabilities at fair value through profit or loss, Notes 6(p) and (t)

• (11) Statement of notes and bonds issued under repurchase agreements, Note 6(q)

• (12) Statement of bank notes payable, Note 6(t)

• (13) Statement of other financial liabilities, Note 6(u)

• (14) Statement of provisions, Note 6(v)

• (15) Statement of deferred tax liabilities, Note 6(z)

• (16) Statement of interest income, Note 6(ad)

• (17) Statement of interest expenses, Note 6(ad)

• (18) Statement of net service fee revenue, Note 6(ae)

• (19) Statement of gains (losses) on financial assets or liabilities measured at fair value through profit or loss, Note 6(af)

• (20) Statement of realized gains (losses) on financial assets at fair value through other comprehensive income, Note 6(ag)

• (21) Statement of gains arising from derecognition of financial assets measured at amortized cost, Note 6(h)

• (22) Statement of (impairment loss on assets) reversal of impairment loss on assets, Note 6(ah)

• (23)Statement of share of profit (loss) of associates and joint ventures accounted for using equity method, Note 6(ai)

• (24) Statement of net revenue other than interest, Note 6(aj)

• (25) Statement of bad debts expenses, commitment and guarantee liability provision, Note 6(ak)

• (26) Statement of depreciation and amortization expense, Note 6(am)

• (27) Statement of other general and administrative expenses, Note 6(an)

161

TAIWAN BUSINESS BANK LTD. SECURITIES DIVISION DISCLOSURE

For the Years Ended December 31, 2022 and 2021

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

162

Table of contents

Contents 1. Cover Page 2. Table of Contents 3. Balance Sheets 4. Statements of Comprehensive Income 5. Notes to the Financial Statements (1) Company history (2) Approval date and procedures of the financial statements (3) New standards, amendments and interpretations adopted (4) Summary of significant accounting policies (5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty (6) Explanation of significant accounts (7) Related-party transactions (8) Pledged assets (9) Commitments and contingencies (10) Loss from major disasters (11) Subsequent Events (12) Others (13) Other disclosures (a) Information on significant transactions (b) Information of investees (c) Information on investments in Mainland China (14) Segment information List of major account titles

Page

161 162 163 164 165 165 165 165～166 166 167～177 177 177 177 177 177 177 178 178 178 179～189

163

(English Translation of Financial Statements and Report Originally Issued in Chinese) SECURITIES DIVISION DISCLOSURE

Balance Sheets

December 31, 2022 and 2021

(Expressed in Thousands of New Taiwan Dollars)

Assets Current Assets： 113200 Current financial assets at fair value through other comprehensive income (Notes 6(a) and (r)) 114030 Margin loans receivable (Note 6(b)) 114040 Refinancing margin 114050 Refinancing collateral receivable 114130 Accounts receivable (Notes 6(c)) 119000 Other current assets Total current assets Non-current Assets： 123200 Non-current financial assets at fair value through other comprehensive income (Notes6(a) and (r)) 123300 Non-current financial assets at amortized cost (Notes 6(d) and (r)) 125000 Property and equipment, net (Note 6(e)) 127000 Intangible assets 129000 Other non-current assets Total non-current assets Total assets	December 31, 2022 Amount ％ $ 651,983 7 2,645,176 28 1,505 - 1,158 - 262,501 4 68,288 1 3,630,611 40 5,408,506 57 298,840 3 26,263 - 11,282 - 32,709 - 5,777,600 60 $ 9,408,211 100	December 31, 2021 Amount ％ 853,799 7 3,213,062 26 33 - 36 - 395,870 3 1,315,560 11 5,778,360 47 6,268,870 51 299,866 2 20,715 - 13,991 - 32,449 - 6,635,891 53 12,414,251 100 Liabilities and equity Current Liabilities： 214010 Liabilities for bonds with attached repurchase agreements (Note 6(g)) 214040 Securities financing refundable deposits (Note 6(b)) 214050 Deposits payable for securities financing (Note 6(b)) 214130 Accounts payable (Note 6(h)) 219000 Other current liabilities Total current liabilities 229030 Guaranteed deposits received 229110 Inter-department accounts, credit Total non-current liabilities Total liabilities 301110 Assigned working capital 304020 Special reserve 304040 Unappropriated retained earnings 305290 Other equity interest-other Total equity Total liabilities and equity	December 31, 2022		December 31, 2021
					Amount % 793,749 6 115,541 1 149,272 1 309,799 2 1,361,338 11 2,729,699 21 20 - 6,816,143 55 6,816,163 55 9,545,862 76 2,200,000 19 185,127 1 438,522 4 44,740 - 2,868,389 24 12,414,251 100

164

(English Translation of Financial StatementsFinancial Statements Originally Issued in Chinese.) Reviewed only, not audited in accordance with generally accepted auditing standards.

SECURITIES DIVISION DISCLOSURE

Statements of Comprehensive Income

For the years ended December 31, 2022 and 2021

(Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Common Share)

Revenues： 401000 Brokerage handling fee revenue (Note 6(j)) 401110 Handling fees from securities financing 421200 Interest revenue (Note 6(k)) 424100 Future commission revenue 425300 Impairment loss (impairment gain and reversal of impairment loss) 428000 Other operating income (Note 6(l)) Expenses： 501000 Brokerage handling fee expenses (Note 6(m)) 503000 Refinancing processing fee expenses 521200 Financial costs (Note 6(n)) 528000 Other operating expenditure (Note 6(o)) 530000 Operating expenses (Note 6(p)) 602000 Other (gains) and losses (Note 6(q)) Net income 805000 Other comprehensive income： 805615 Unrealized gains from investment in debt instruments measured at fair value through other comprehensive income 805699 Add: Income tax related to components of other comprehensive income 805000 Other comprehensive income (net amount after tax) Total comprehensive income	For the year ende	d December 31, 2021 Amount ％ 616,408 77 1,553 - 183,527 23 3,867 - 74 - 217 - 805,646 100 42,262 5 119 - 2,608 - 869 - 329,678 41 (8,412) (1) 367,124 45 438,522 55 (141,950) (18) - - (141,950) (18) 296,572 37
	2022 Amount ％ $ 360,931 67 1,315 - 171,850 32 2,939 1 358 - 177 - 537,570 100 26,314 5 124 - 2,179 - 823 - 294,954 55 581 - 324,975 60 212,595 40 (201,192) (37) - - (201,192) (37) $ 11,403 3

165

(English Translation of Financial Statements Originally Issued in Chinese) REVIEWED ONLY, NOT AUDITED IN ACCORDANCE WITH GENERALLY ACCEPETED AUDITING STANDARDS AS OF SEPTEMBER 30, 2022 AND 2021.

SECURITIES DIVISION DISCLOSURE

Notes to the Financial Statements

For the years ended December 31, 2022 and 2021

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

(1) Company history

The securities division of Taiwan Business Bank, Ltd. was approved by the Securities Regulatory Commission, Ministry of Finance on May 8, 1976 to concurrently operate in proprietary securities and brokerage businesses and began its operation in the same year.

(2) Approval date and procedures of the financial statements:

The approval date and procedures of the financial statements of the securities division are consistent with those of the Bank. Please refer to the Bank’s financial statements.

(3) New standards, amendments and interpretations adopted:

The new standards, amendments, and interpretations adopted by the securities division are consistent with those of the Bank. Please refer to the Bank’s financial statements.

(4) Summary of significant accounting policies:

The financial statements for the securities division have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Firms.

Except for the following items, the significant accounting policies of the securities division are consistent with those of the Bank. Please refer to the Bank’s financial statements.

• (a) Classification of current and non-current assets and liabilities

Current assets are held primarily for the purpose of trading and expected to be converted to cash within 12 months from the balance sheet date.

Current liabilities are obligations due on demand within 12 months from the balance sheet date.

Assets and liabilities that are not classified as current are classified as non-current assets and liabilities, respectively.

• (b) Margin loans, short sales, relending, and securities refinancing

When conducting margin purchase operations in securities trading, the securities division recognizes financing funds from securities investors purchasing stocks as margin loans receivable. All stocks purchased by the margin financiers are used as collaterals, which are to be returned when repayment from the financiers is settled.

(Continued)

166

SECURITIES DIVISION DISCLOSURE Notes to the Financial Statements

When conducting short sale operations in securities trading, the securities division recognizes deposits from short sellers as deposits and charges short sale proceeds (deducting securities transaction tax, handling fee from brokered trading and handling fee from securities financing) as collateral, recognizing it as deposits payable for securities financing. Both deposits and short sale proceeds are to be returned when repayment from short sellers is settled.

When conducting margin purchase and short sale operations in securities trading, the securities division with insufficient fund shall recognize refinancing from securities finance company as refinancing borrowings and all shares purchased are to be used as collaterals. The securities division may borrow securities from securities finance company via refinancing borrowings, and deposits paid are recognized as refinancing margin. The short sale proceeds paid by short sellers as refinancing collateral to the security finance company are recognized as deposits payable for securities financing and refinancing collateral receivable respectively.

According to the former No.82416 of Taiwan Financial Certificate issued by the Securities and Futures Commission, Ministry of Finance, when the overall collateral maintenance ratio of the customer margin account falls below the required number, and the account fails to cover the deficiency within deadline, the finance receivable balance is recognized as overdue receivable. If the securities in customer margin account cannot be disposed of, the securities finance receivable balance is recognized as other receivables or overdue receivables, and assessed as well as recognized allowance for bad debts by its impairment amount in accordance with the IFRS 9.

(c) Assigned working capital

The working capital refers to the amount allocated to the securities division as the Bank concurrently operates in securities business.

(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

The securities division's significant accounting assumptions and judgments, and major sources of estimation uncertainty is consistent with those of the Bank. Please refer to the Bank's financial statements.

(Continued)

167

SECURITIES DIVISION DISCLOSURE Notes to the Financial Statements

(6) Explanation of significant accounts:

• (a) Financial asset at fair value through other comprehensive income

Current: Government bonds Corporate bonds Valuation adjustment on securities held for operations-proprietary Total Non-current: Government bonds Corporate bonds Valuation adjustment on securities held for operations-proprietary Total	December 31, 2022 $ 350,774 301,951 (742) $ 651,983 $ 5,051,689 514,697 (157,880) $ 5,408,506	December 31, 2021
		50,037 800,445 3,317
		853,799
		5,408,132 821,842 38,896
		6,268,870

• (i) Investment in debt instruments measured at fair value through other comprehensive income

The securities division of the Bank 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. Some of the investment in debt instruments measured at fair value through other comprehensive income are held for reverse repurchase agreement. Please refer to Note 6 (g).

• (ii) Please refer to the financial statements for information on credit risk (including the impairment in debt instruments) and market risk.

• (iii) The securities division of the Bank assessed the impairment of financial assets measured at fair value through other comprehensive income as of December 31, 2022 and 2021. The changes in allowance for credit losses attribute to the financial assets were as follows:

Beginning balance Reversal Ending balance	For the years ended December 31, 2022 2021 $ 2,527 2,594 (357) (67) $ 2,170 2,527
	2022 $ 2,527 (357) $ 2,170

(Continued)

168

SECURITIES DIVISION DISCLOSURE Notes to the Financial Statements

• (b) Margin loans receivable

• (i) The securities financing transactions as of December 31, 2022 and 2021 were as follows:

Margin loans receivable Less: allowance for bad debts Total	December 31, 2022 $ 2,672,159 (26,983) $ 2,645,176	December 31, 2021 3,245,824 (32,762) 3,213,062

The change in allowance for bad debts was as follows:

The change in allowance for bad debts was as follows:
Beginning balance Provision (reversal of provision) Ending balance	For the years ended December 31,
	2022 $ 32,762 (5,779) $ 26,983	2021 21,674 11,088 32,762

• (ii) The guaranteed deposits received from securities transaction of the securities division as of December 31, 2022 and 2021 are $116,196 and $115,541, respectively; the deposits payable for securities financing are $108,289 and $149,272, respectively.

• (iii) Since the securities divison is doing securities lending/ borrowing, the collateral securities provided by clients and the securities information on short sales as of December 31, 2022 and 2021 were as follows:

Financing-backed securities Margin lending securities	December 31, 2022 Number of shares (Note) Par value 109,966 $ 1,099,656 1,602 $ 16,020	December	31, 2021
	Number of shares (Note) 109,966 1,602	Number of shares (Note) 118,307 2,450	Par value
			1,183,066 24,500

Note: the unit is in thousands.

• (c) Accounts receivable

Receivable price of securities purchased for customers Settlement price Interests receivable Less: allowance for bad debts Total	December 31, 2022 $ 179,159 - 83,354 (12) $ 262,501	December 31, 2021 177,964 141,261 76,659 (14) 395,870

(Continued)

169

SECURITIES DIVISION DISCLOSURE Notes to the Financial Statements

Change in allowance for bad debts:

Beginning balance Reversal Ending balance	For the years ended December 31,	For the years ended December 31,
	2022 $ 14 (2) $ 12	2021
		15 (1) 14

• (d) Financial assets at amortized cost

Non-current: Government bonds Less:Accumulated impairment Total	December 31, 2022 $ 298,928 (88) $ 298,840	December 31, 2021 299,955 (89) 299,866

The securities division of the Bank 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.

• (i) Please refer to the independent auditor's audit report in the financial statements for credit risk information.

• (ii) The pledged assets provided by the above investment in debt instruments at amortized cost were shown follows:

Operation guarantee deposits

December 31, 2022 $ 270,000	December 31, 2021 270,000

• (iii) The securities division of the Bank assessed the impairment of investment in debt instruments at amortized cost as of December 31, 2022 and 2021. The changes in allowance for credit losses attribute to these financial assets were as follows:

Beginning balance Provision Ending balance	For the years ended December 31,	For the years ended December 31,
	2022 $ 89 (1) $ 88	2021
		96 (7) 89

(Continued)

170

SECURITIES DIVISION DISCLOSURE Notes to the Financial Statements

(e) Property and equipment

The statement of changes in the securities division's property and equipment cost, depreciation and impairment loss were as follows:

• (i) The beginning and ending book values and accumulated depreciation of the property and equipment

				Accumulated
December 31, 2022			Cost	depreciation	Total
Equipment		$	96,793	(70,530)	26,263
				Accumulated
December 31, 2021			Cost	depreciation	Total
Equipment		$	91,366	(70,651)	20,715
Statement of changes in property		and equipment costs
					December 31,
	January 1, 2022		Increase	Decrease	2022
Equipment	$	91,366	14,952	(9,525)	96,793
					December 31,
	January 1, 2021		Increase	Decrease	2021
Equipment	$	82,227	11,887	(2,748)	91,366

• (ii) Statement of changes in property and equipment costs

• (iii) Statement of changes in accumulated depreciation of property and equipment

January 1, 2022 $ 70,651 January 1, 2021 $ 65,654	Increase 9,142 Increase 7,738	Decrease (9,263) Decrease (2,741)	December 31, 2022
			70,530
			December 31, 2021
			70,651

Property and equipment are depreciated on a straight-line basis with an useful life between 3 to 8 years basis.

Property and equipment are not pledged as collateral.

(f) Right-of-use assets

Information about leases on costs, depreciation and impairment for which the securities division of the Bank as a lessee is presented below:

December 31, 2022	Cost $ 24	Accumulated depreciation (24)	Accumulated impairment -	Total -
Miscellaneous and equipment

(Continued)

171

SECURITIES DIVISION DISCLOSURE Notes to the Financial Statements

December 31, 2021	Cost $ 24 Increase - Increase -	Accumulated depreciation (24) Decrease - Decrease (1,022)	Accumulated impairment - Foreign Exchange - Foreign Exchange -	Total -
Miscellaneous and equipment Change of cost January 1, 2022 Miscellaneous and equipment $ 24 January 1, 2021 Miscellaneous and equipment $ 1,046
				December 31, 2022 24
				December 31, 2021 24

Change of depreciation January 1, 2022 Miscellaneous and equipment $ 24 January 1, 2021 Miscellaneous and equipment $ 972	Increase - Increase 74	Decrease - Decrease (1,022)	Foreign Exchange - Foreign Exchange -	December 31, 2022 24
				December 31, 2021 24

• (g) Liabilities for bonds with attached repurchase agreements

Assets	December 31, 2022	December 31, 2022	December 31, 2022	December 31, 2022
	Par value	Selling Price (Recognized in securities sold under repurchase agreements)	Designated repurchase amount	Designated repurchase date
Financial assets at fair value through other comprehensive income	$ 665,600	736,781	738,219	Prior to May 4, 2023
Assets	December 31, 2021
	Par value	Selling Price (Recognized in securities sold under repurchase agreements)	Designated repurchase amount	Designated repurchase date
Financial assets at fair value through other comprehensive income	$ 717,100	793,749	794,238	Prior to May 6, 2022

(Continued)

172

SECURITIES DIVISION DISCLOSURE Notes to the Financial Statements

(h) Accounts payable

Prices payable of securities sold for customers Settlementcost Interest payable Total	December 31, 2022 $ 137,155 40,444 690 $ 178,289	December 31, 2021
		309,498 - 301
		309,799

(i) Lease liabilities

The amounts recognized in the statement of cash flows were as follows：

Total cash outflow for leases (j) Brokerage handing fee revenue Settlement from brokered trading-TWSE Settlement from brokered trading-OTC Front-end load Total (k) Interest income Financing and securities refinancing interest Bond interest Total (l) Other operating income	For the years ended December 31,	For the years ended December 31,
	2022 2021 $ - 74 For the years ended December 31,	2021
		74
	2022 2021 $ 279,398 494,905 80,686 120,236 847 1,267 $ 360,931 616,408 For the years ended December 31,	2021
		494,905 120,236 1,267
		616,408
	2022 $ 111,252 60,598 $ 171,850	2021
		117,744 65,783
		183,527

Clearing and settlement interest Miscellaneous income Total	For the years ended December 31,	For the years ended December 31,
	2022 $ 52 125 $ 177	2021
		42 175
		217

(Continued)

173

SECURITIES DIVISION DISCLOSURE Notes to the Financial Statements

(m) Brokerage handing fee expense

Brokerage handling fee expense Proprietary handling fee expense Total	For the years ended December 31,	For the years ended December 31,
	2022 $ 26,288 26 $ 26,314	2021 42,224 38 42,262

(n) Financial costs

Securities financing interest expense Securities sold under repurchase agreements interest expense Total Other operating expenses Processing fee expenses	For the years ended December 31,
	2022 2021 $ 448 431 1,731 2,177 $ 2,179 2,608 For the years ended December 31,
	2022 2021 $ 823 869

(o) Other operating expenses

Processing fee expenses

(Continued)

174

SECURITIES DIVISION DISCLOSURE Notes to the Financial Statements

(p) Operating expenses

Salary expense Overtime premium Stationery printing Traveling expense Postage expenses Repairs and maintenance expense Employee benefits Other benefits Utilities expense Insurance expense Miscellaneous purchases Labor service fees Meal expense Subscription and magazine Taxes Commissions expense Depreciations Amortizations Information technology expense Membership fee Loss on error trading Transportation expense Pension expense Depository service expense Micellaneous disbursements Rental expense Total	For the years ended December 31,	For the years ended December 31,
	2022 $ 166,866 5,685 785 57 14,535 753 733 58 3,825 17,975 870 2,927 6,490 197 9,534 2,494 8,051 7,986 18,207 232 163 656 10,004 7,740 7,615 516 $ 294,954	2021 199,970 5,411 699 60 12,839 619 1,125 - 3,917 17,933 1,070 2,670 6,516 240 14,797 2,460 6,611 6,187 18,434 307 350 688 9,961 12,507 3,812 495 329,678

(Continued)

175

SECURITIES DIVISION DISCLOSURE Notes to the Financial Statements

• (q) Other gains and losses

Financial income Losses (Gains) reversal of bad debts Other income Financial expenses Assets retirement losses Other expences Total	For the years ended December 31,	For the years ended December 31,
	2022 $ (182,761) (5,818) (1,570) 190,472 18 240 $ 581	2021 (186,735) 10,846 (1,461) 168,691 7 240 (8,412)

• (r) Financial Instruments disclosure

• (i) Fair value information

The fair value information of the securities division is consistent with that of the Bank. Please refer to the Bank's financial report.

• (ii) Based on fair value measurement

• 1) The fair value hierarchy of information

The financial instruments which are record as fair value measure on an ongoing basis, the fair value hierarchy of information were as follows:

Assets and Liabilities		December 31, 2022	December 31, 2022
	Total $ 651,983 5,408,506	Level 1 Level 2 Level 3 651,983 - - 5,408,506 - - December 31, 2021
Instruments measured at fair value on a recurring basis
Non-derivative financial assets and liabilities:
Current financial assets at fair value through other comprehensive income Non-current financial assets at fair value through other comprehensive income Assets and Liabilities
	Total $ 853,799 6,268,870	Level 1 853,799 6,268,870	Level 2 Level 3 - - - -
Instruments measured at fair value on a recurring basis
Non-derivative financial assets and liabilities:
Current financial assets at fair value through other comprehensive income Non-current financial assets at fair value through other comprehensive income

(Continued)

176

SECURITIES DIVISION DISCLOSURE Notes to the Financial Statements

• 2) Valuation techniques used in estimating the fair values of financial instrument

The valuation techniques used in estimating the fair values of financial instruments by the securities division is consistent with those of the Bank. Please refer to the Bank's financial report.

• (iii) Not based on fair value measurement

• 1) Fair value information

The following chart presents the financial instruments not based on fair value measurement of the Bank. Except those items, others' fair value is reasonably approximate value, the Bank does not disclosure their fair value.

Investmentin debt instruments at amortized cost - non current Investmentin debt instruments at amortized cost - non current	December	31, 2022
	Book value $ 298,840 December	Fair value
		299,194 31, 2021
	Book value $ 299,866	Fair value
		301,690

• 2) The fair value hierarchy of information

Assets and Liabilities		December 31, 2022	December 31, 2022
	Total $ 299,194	Quoted prices in active markets for identical assets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) 299,194 - - December 31, 2021
Investment in debt instruments at amortized cost - non current Assets and Liabilities
	Total $ 301,690	Quoted prices in active markets for identical assets (Level 1) 301,690	Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) - -
Investment in debt instruments at amortized cost - non current

• 3) Valuation techniques

The valuation techniques used by the securities division for fair value evaluation of financial instruments are consistent with those of the Bank. Please refer to the Bank's financial report.

(Continued)

177

SECURITIES DIVISION DISCLOSURE Notes to the Financial Statements

(s) Financial risk information

In order to achieve the goals of risk management, the Bank develops risk control strategies corresponding to different types of risks. Please refer to the Bank's financial report for relevant financial risk information on credit risk, market risk, liquidity risk and cash flow risk resulted from changes in the interest rate.

(7) Related-party transactions: None

• (8) Pledged assets:None Please refer to notes 6(d) for more details.

(9) Commitments and contingencies:None

(10) Loss from major disasters:None

(11) Subsequent Events:None

(12) Others:

• (a) A summary of current-period employee benefits, depreciation, and amortization, by function, is as follows:

By item Employee benefits expense Salaryexpense Labor and health insurance expense Pensionexpense Other employee benefits expense Subtotal Depreciation expense Amortization expense Total	For the year ended December 31	For the year ended December 31
	2022 Operating Expense $ 172,551 17,975 10,004 7,281 207,811 8,051 7,986 $ 223,848	2021
		Operating Expense
		205,381 17,933 9,961 7,641
		240,916 6,611 6,187
		253,714

As of December 31, 2022 and 2021, The securities division of the Bank has 204 and 198 employees, respectively.

(Continued)

178

SECURITIES DIVISION DISCLOSURE Notes to the Financial Statements

(13) Other disclosures:

• (a) Information on significant transactions:None

• (b) Information of investees:None

• (c) Information on investments in Mainland China: None.

(14) Segment information:

The securities divison of the Bank is dealing and brokerage business of military securities, which is a single industry and therefore not applicable.

179

TAIWAN BUSINESS BANK LTD. SECURITIES DIVISION DISCLOSURE

Statement of Current Financial Assets at Fair Value through Other Comprehensive Income

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Financial Instrument Government bonds－ A07107 A Other (Note1) Subtotal Corporate bonds－ B903VF A Total	Summary nnual interest payment 07/20，maturity date 2023/07/20 nnual interest payment 11/22，maturity date 2023/11/22	Number of units	Par value	Total amount $ 350,000 1,000 351,000 300,000 $ 651,000	Interest rate % 0.625 % 2.500 % 1.940	Acquisition cost 349,774 1,000		Accumulated impairment (Note2) 104 - 104 138 242	Fair	value Total amount Note 349,313 1,002 350,315 301,668 651,983
									Unit price 99.80 - 100.56
		3,500 10 3,000	100 100 100
						350,774
						301,951
						652,725

Note1：None of the other items exceeds 5% of the total account balance.

Note2：The accumulated impairment of debt instuments measured at fair value through other comprehensive income is recognized as other equity.

180

TAIWAN BUSINESS BANK LTD. SECURITIES DIVISION DISCLOSURE

Statement of Margin Loans Receivable

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Name of Securities	Number of shares	Amount	Note
Others Less: allowance for bad Total	109,625,000 -	$ 2,672,159 (26,983) $ 2,645,176	Note

Note：None of the items exceeds 5% of the total amount.

Statement of Other Current Assets

Item	Summary	Amount	Note
Prepayments Amount held for settlement Margin trading Other receivable Total	Other prepaid taxes Prepaid share	$ 7,935 55,972 4,167 214 $ 68,288

181

TAIWAN BUSINESS BANK LTD. SECURITIES DIVISION DISCLOSURE

Statement of Non-current Financial Assets at Fair Value through Other Comprehensive Income

For the year ended December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Financial Instrument Government bonds－ A07107 A04112 A05104 A05111 A95107 A09109 Others (Note1) Subtotal Corporate bonds－ B401D6 Other (Note1) Subtotal Total		Beginning balance Number of units Fair Value 3,500 $ 350,402 9,000 922,731 10,500 1,058,813 7,500 754,186 4,000 429,507 10,000 961,975 9,310 947,088 53,810 5,424,702 3,000 326,278 5,000 517,890 8,000 844,168 61,810 $ 6,268,870	Increase Number of units Amount - - - - - - - - - - - - - - - - - - - - - - - -	Decrease Number of units Amount (3,500) (350,402) - (23,669) - (28,241) - (18,590) - (15,030) - (35,737) (10) (49,421) (3,510) (521,090) - (22,782) (3,000) (316,492) (3,000) (339,274) (6,510) (860,364)	Ending balance Number of units Fair Value - - 9,000 899,062 10,500 1,030,572 7,500 735,596 4,000 414,477 10,000 926,238 9,300 897,667 50,300 4,903,612 3,000 303,496 2,000 201,398 5,000 504,894 55,300 5,408,506	Accumulated impairment (Note 2) - 267 310 221 123 294 277 1,492 263 173 436 1,928	Guaranteed or pledged Note
			Number of units - - - - - - - - - - - -	Number of units (3,500) - - - - - (10) (3,510) - (3,000) (3,000) (6,510)	Number of units - 9,000 10,500 7,500 4,000 10,000 9,300 50,300 3,000 2,000 5,000 55,300

The financial assets at fair value through other comprehensive income shown above are hold for resale agreement.

Note1：None of the other items exceeds 5% of the total account balance.

Note2：The accumulated impairment of debt instuments measured at fair value through other comprehensive income is recognized as other equity.

182

TAIWAN BUSINESS BANK LTD. SECURITIES DIVISION DISCLOSURE

Non-current Financial Assets at Amortised Cost

For the year ended December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item Debt instruments Corporate bonds－ A01109 A90201 Total		Beginning Balance Number of units Amount 3,000 $ 299,955 - - 3,000 $ 299,955	Increase Number of units Amount - - 3,000 298,928 3,000 298,928	Decrease Number of units Amount (3,000) (299,955) - - (3,000) (299,955)	Ending Balance Number of units Par value - - 3,000 298,928 3,000 298,928	Accumulated impairment - 88 88	Grananteed or pledged Note Par value of pledged asset is $270,000
			Number of units - 3,000 3,000	Number of units (3,000) - (3,000)	Number of units - 3,000 3,000

183

TAIWAN BUSINESS BANK LTD. SECURITIES DIVISION DISCLOSURE

Statement of Other Non-current Assets

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Item Operation guarantee deposits Securities for operation guarantee deposits Clearing and settlement fund Guarantee deposits paid Overdue receivables Less: allowance for bad debts Total	Summary	Amount Note $ 270,000 (270,000) 31,753 695 1,053 (792) $ 32,709

184

TAIWAN BUSINESS BANK LTD. SECURITIES DIVISION DISCLOSURE

Statement of Liabilities for Bonds with Attached Repurchase

Agreements

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Terms of Transactions Amount Financial instrument Issue date Maturity date Interest rate Type Par value Turnover A05111 2022.11.04 2023.05.04 0.30%~0.60% Government bonds $ 665,600 736,781

Note

185

TAIWAN BUSINESS BANK LTD. SECURITIES DIVISION DISCLOSURE Statement of Securities Financing Refundable Deposits

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Securities	Number of shares	Amount Note $ 116,196 Note
Others	1,643,000

Note：None of the securities balance exceeds 5% of the total amount.

Statement of Deposits Payable for Securities Financing

Securities	Number of shares	Amount Note $ 108,289 Note
Others	1,643,000

Note：None of the securities balance exceeds 5% of the total amount.

186

TAIWAN BUSINESS BANK LTD. SECURITIES DIVISION DISCLOSURE

Statement of Accounts Payable

December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Client Name		Summary
Client Taipei Exchange Item
Advance receipts Receipts under custody Accrued expenses Other payables Total	Labor and health insurance expense and pension Business tax, welfare fund and stamp tax Bonus for unused vacation, yearend and group bonus Handling fee expense, depository premiums, and securities investor protection service expense fee Underwriting processing fee, the payment of lottery stocks, and cash voucher repayment

187

TAIWAN BUSINESS BANK LTD. SECURITIES DIVISION DISCLOSURE

Statement of Brokerage Handling Fee Revenue

For the year ended December 31, 2022

(Expressed in Thousands of New Taiwan Dollars)

Handling fee revenues from brokered trading

Month	Brokered trading-TWSE		Brokered trading-OTC	Handling fees from securities financing	Handling fees from securities financing	Other handling fee revenues Note 70 31 88 35 45 35 24 124 86 22 78 209 847
January February March April May June July August September October November December	$ 23,623 21,182 34,483 24,437 21,070 24,914 22,099 22,981 20,741 17,675 24,443 21,750 $ 279,398		6,527 5,054 7,476 6,598 6,182 6,661 5,633 7,651 7,325 4,986 8,536 8,057 80,686		85 76 94 118 132 148 129 135 122 105 113 58 1,315

188

TAIWAN BUSINESS BANK LTD. SECURITIES DIVISION DISCLOSURE

Statement of Employees benefits, Depreciation, Amorization and Other Operating Expenses

For the years ended December 31, 2022 and 2021

(Expressed in Thousands of New Taiwan Dollars)

Item	Amount 2022 2021 Note $ 172,551 205,381 17,975 17,933 10,004 9,961 7,281 7,641 8,051 6,611 7,986 6,187 71,106 75,964 $ 294,954 329,678
	2022 $ 172,551 17,975 10,004 7,281 8,051 7,986 71,106 $ 294,954
Employee benefit expenses Salary expense Labor and health insurance expenses Pension expenses Other employee benefit Depreciation expenses Amortization expenses Other operating expences Total

Notes:

1. As of December 31, 2022 and 2021, the securities division of the Bank has 204 and 198 employees, respectively, and the number of directors who are not employees amounted to 0 people.

2. Financial statement for the years ended December 31, 2022 and 2021 shuld disclose the following information:

3. (1) The average of employee benefit expenses for the years ended December 31, 2022 and 2021 are $ 1,019 and $ 1,217 respectively.

4. (2) The average of salary expense for the years ended December 31, 2022 and 2021 are $ 846 and $ 1,037 respectively.

5. (3) The average movement of employees' salary is (18)%.

6. (4) The supervisor's remuneration for this year and the previous year are both $ 0 .

7. (5) Please refer to the Bank’s financial report for the remuneration policies.

189

TAIWAN BUSINESS BANK LTD. SECURITIES DIVISION DISCLOSURE

December 31, 2022

Please refer to the notes below for information on statements of other significant accounts:

(1)Statement of accounts receivable, Note 6(c).

(2)Statement of changes in cost and accumulated depreciation of property and equipment, Note 6(e).

(3)Statement of changes in cost and accumulated depreciation of right-of-use assets, Note 6(f).

(4)Statement of interest revenue, Note 6(k).

(5)Statement of finance cost, Note 6(n).