T.C.C.B. — Annual Report 2012

Jul 1, 2013

2012

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Taichung Commercial Bank Company Limited

No. 87, Min Chuan Road, Taichung, Taiwan, R.O.C. Tel.:(04)2223-6021 Website:http://www.tcbbank.com.tw

Company Spokesman

Name:Chi-Chuang Fang Job title:Executive Vice President Tel.:(04)2223-6021 Email:4663@ms2.tcbbank.com.tw

Acting Spokesman

Name:Hsueh-Hsien Liao Job title:Executive Vice President Tel.:(04)2223-6021 Email:lsn@ms2.tcbbank.com.tw

Shares Registrar

Name:by internal function

Address:11F., No. 50, Sec. 1, XinSheng South Road, ZhongZheng District, Taipei, Taiwan, R.O.C. Website:http://www.tcbbank.com.tw Tel.:(02)2395-7388

Credit Rating Agency

Name:Fitch Ratings Limited, Taiwan Branch Address:Suite 1306, 13F., No. 205, Tun Hwa N. Road, Taipei, Tawian, R.O.C. Tel.:(02)8175-7600

External Auditors in the Most Recent Year

Name of CPA firm:Deloitte & Touche

Name of CPA:Wen-Ya Hsu & Tze-Chun Wang,

Address:12F., No. 156, MinSheng East Road, Sec. 3, Song Shan District, Taipei, Taiwan, R.O.C. Website:http://www.deloitte.com.tw Tel.:(02)2545-9988

Name of any exchanges where the Company's securities are traded overseas, and the method by which to access information on said offshore securities : None

Index

	Index
1	A MESSAGE TO THE SHAREHOLDERS ................................................................................ 1
2	A PROFILE OF TAICHUNG BANK ........................................................................................... 7
3	CORPORATE GOVERNANCE REPORT ................................................................................. 8
I.	ORGANIZATION.................................................................................................................................. 8
II.	PROFILES OFDIRECTORS, SUPERVISORS, PRESIDENT, EXECUTIVEVICEPRESIDENTS, ASST. VP,AND
	SUPERVISORS OF THE VARIOUS DEPARTMENTS AND BRANCHES....................................................... 11
III.	STATUS OFCORPORATEGOVERNANCE............................................................................................ 46
IV.	DISCLOSURE OF THE ACCOUNTANT’S FEE........................................................................................ 85
V.	CHANGES OFACCOUNTANTS........................................................................................................... 85
VI.	DISCLOSE THE NAMES AND JOB TITLE OF THE CHAIRMAN,PRESIDENT,FINANCIAL AND ACCOUNTING
	MANAGER OF THEBANK WHO HAS WORKED WITH THECPAFIRM WHO CONDUCTS THE AUDIT OF THE
	BANK OR THE AFFILIATES TO SUCH FIRMS IN THE MOST RECENT ONE YEAR,AND THE DURATION OF
	THEIR EMPLOYMENT IN THECPAFIRM AND ITS AFFILIATE.............................................................. 85
VII.	IN THE MOST RECENT YEAR TO THE DATE THIS REPORT WAS PRINTED,THE ASSIGNMENT OF EQUITY
	SHARES AND PLEDGE THE EQUITY SHARES UNDER LIEN BY DIRECTORS,SUPERVISORS,MANAGERS,
	AND PARTICULAR PERSON OR PARTICULAR RELATED PARTY HOLDING THE SHARES OF PARTICULAR
	BANK WITH VOTING RIGHTS TO CERTAIN PROPORTION THAT REQUIRED DECLARATION PURSUANT TO
	ARTICLE11OF THE MANAGEMENT REGULATION............................................................................. 85
VIII.	THE TOP10SHAREHOLDERS BY PROPORTION OF SHAREHOLDING AND INFORMATION ON THEIR
	AFFILIATIONS................................................................................................................................... 92
IX.	QUANTITY OF SHAREHOLDINGS OF THE SAME INVESTEE BY THEBANK AND DIRECTORS,
	SUPERVISORS,PRESIDENTS, EXECUTIVEVICEPRESIDENTS, ASST. EXECUTIVEVICEPRESIDENTS,
	SUPERVISORS OF THE VARIOUS DEPARTMENTS AND BRANCHES,AND DIRECT OR INDIRECT
	SUBSIDIARIES IN PROPORTION TO THE COMBINED HOLDINGS OF ALL................................................ 94
4	STATUS OF CAPITAL PLANNING ......................................................................................... 96
I	SHARES ANDDIVIDENDS.................................................................................................................. 95
II	ISSUANCE OFFINANCIALBONDS................................................................................................... 101
III	ISSUANCE OFPREFERREDSTOCKS................................................................................................. 113
IV	ISSUANCE OFOVERSEASDEPOSITORYRECEIPTS........................................................................... 113
V	EMPLOYEESTOCKOPTIONS........................................................................................................... 113
VI	ACQUISITION ORASSIGNMENT OFOTHERFINANCIALINSTITUTIONS............................................. 113
VII	IMPLEMENTATION OFFUND UTILIZATION PLAN............................................................................. 113
5	OPERATION PROFILE ........................................................................................................... 116
I	BUSINESSCONTENTS..................................................................................................................... 116

II	EMPLOYEES................................................................................................................................... 131
III	ENTERPRISERESPONSIBILITIES ANDETHICALBEHAVIOR.............................................................. 136
IV	IT EQUIPMENT............................................................................................................................... 136
V	LABOR-MANAGEMENTRELATIONS............................................................................................... 138
VI	MAJORAGREEMENTS.................................................................................................................... 139
VII	SECURITIZED PRODUCTS AND RELATED INFORMATION.................................................................. 140
6	FINANCIAL STATUS ............................................................................................................... 140
I	BRIEFBALANCESHEET ANDINCOMESTATEMENT FROM THE PAST FIVE YEARS............................ 140
II	FINANCIALANALYSIS FOR THE MOST RECENT FIVE YEARS............................................................ 145
III	SUPERVISORS’ REVIEWREPORT ON THEFINANCIALSTATEMENT OF2012 .................................... 151
IV	FINANCIAL STATEMENTS2012 ....................................................................................................... 152
V	CONSOLIDATED FINANCIAL STATEMENTS2012 ............................................................................. 152
VI	IN THE CASE OF ANY INSOLVENCY OF THEBANK AND ITS AFFILIATES,SPECIFY ITS EFFECT ON THE
	FINANCIALSTATUS OF THEBANK.................................................................................................. 152
7	REVIEW AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS; RISK
MANAGEMENT MATTERS ............................................................................................................ 152
I	FINANCIALSTATUS........................................................................................................................ 152
II	FINANCIAL PERFORMANCE............................................................................................................. 154
III	CASH FLOWS.................................................................................................................................. 155
IV	THE MATERIAL EFFECT ON FINANCIAL STRUCTURE FROM SUBSTANTIAL CAPITAL EXPENDITURE IN
	THE LAST FEW YEARS..................................................................................................................... 155
V	DIRECT INVESTMENT POLICY,THE MAIN REASONS FOR PROFIT OR LOSS,AND CORRECTIVE
	ACTION PLAN IN THE MOST RECENT YEAR,AND INVESTMENT PLAN IN THE NEXT YEAR.................. 157
VI	RISKMANAGEMENT...................................................................................................................... 157
VII	CRISIS MANAGEMENT MECHANISM................................................................................................ 170
VIII	THE FOLLOWING METHODS AND HYPOTHESES FOR THE VALUATION OF FAIR VALUE OF FINANCIAL
	INSTRUMENTS ARE APPLIED........................................................................................................... 170
IX	OTHER IMPORTANT NOTES............................................................................................................. 172
8	SPECIAL NOTES ....................................................................................................................... 173
I	SPECIALNOTES.............................................................................................................................. 173
II	CONDITIONS THAT WILL MATERIALLY AFFECT SHAREHOLDERS’EQUITY OR PRICE OF SECURITIES179
9	BRANCHES OF TAICHUNG COMMERCIAL BANK AT A GLANCE ........................... 180

1 A Message to the Shareholders

• I. Business result in 2012

• (I) Domestic and foreign financial environment

  • Global economic recovery was frail in 2012, which also affect the speed of economic growth in USA and in China and in turn the sluggish economic growth in Taiwan. Fortunately, the Euro debt crisis did not get worse. With the launch of the currency easing policy by USA, Europe, and Japan, the economic signal in December 2012 turned yellow-blue. According to the forecast of the Directorate-General of Budget, Accounting, and Statistics (DGBAS), economic growth in 2013 will be at 3.59%.

• (II) Changes in organization

  1. The “Treasury Marketing Unit” was established as a functional unit of the “Treasury Department” to provide consultation service for the customers in hedging and investment tools. With this new function, the Bank will make further effort to secure more business and strengthen its competitive power in the domestic banking market.

  2. Make effort in the development of corporate banking business and enlarge the scale of financing to small and medium enterprises. Establish the “Corporate Banking Direct Marketing Team”, and continue its advantage in providing banking services for the small and medium enterprises with its good experience.

  3. Diversify the development of trust business and custodian service, and upgrade the competitive power in the innovation of core business. For this end, the Bank established the “Trust Dept., Taipei Office” in Taipei.

  4. Relocated the OBU to Taipei and upgrade the competitive advantage of offshore banking.

• (III) Operating result of business plans and strategies

  1. The earnings before taxation in 2012 amounted to NTD3,304 million with EPS of NTD1.43 before taxation. ROA before taxation was 0.80% while ROE before taxation was 12.34%. The profitability indicators indicated growth in 2012 as compared with 2011, which was also the best performance in the last 5 years.

  2. Despite the influence of the surging prices of oil and electricity supply and the declaring of capital gains taxation in 2012, domestic economic growth in Taiwan was increased by 1.26%. The Bank had growth in deposit and loan at 15%, and in import, export and remittance at 22%. This is the manifestation of the perpetual value of the Bank in endeavor of “local banking”.

  3. The Financial Supervisory Commission applauded the Bank in its effort of cultivating long-term partnership with the small and medium enterprises and

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assisting these enterprises to access to working capital. In the 7[th] “Program to Encourage Lending By Domestic Banks to Small and Medium Enterprises”, and was cited as Class A Bank. This is the advantage of the Bank in its effort of “banking service for the small and medium enterprises”. The Bank has successfully issued NT3 billion worth of subordinate debentures in 2012 for fortifying its financial structure and upgrading its capital adequacy ratio for broadening its business horizon. After the issuance of the instrument, the Bank has strengthened its financial position and significantly increased its capital reserve. As of December 31 2012, the BIS ratio of the Bank was 10.54%, with the BIS ratio of Tier I at 8.57%. The two ratios are conformity to the standards set forth by Basel III Accord. Set up a full-range structure of banking network with the economy of scale in establishing the Taichung Commercial Bank Lease Enterprise through direct investment. This company makes its gravity of business in “deployment in Mainland China” and the “development of niche market of the small and medium enterprises” to satisfy the capital needs of the enterprises, and move towards the goal of corporate value in development of “diversified banking”.

1. For vitalizing the function of the branches in banking service, 53 branches of the Bank have been incrementally approved by the Central Bank as “designated foreign exchange bank” and provide the services of “outward and inward remittances” and “foreign currency deposits”. With the performance of such functions, the Bank has the opportunity to run CNY operation and cross-border banking.

2. The Financial Supervisory Commission has approved the securities headquarters of the Bank, the securities branches at Yuanlin, Taipei, and Taichung to run the futures IB operation. This helps to provide a wider array of financial products and services to the customers. The Bank will make further effort in the development of “customer-oriented” financial products, and broaden the business scope between the Bank and the customers.

3. (IV) Budget execution in 2012

4. The average deposit balance (including foreign currency) amounted to NTD381,938 million or at the budget attainment rate of 102.17%.

5. The average loan balance (including foreign currency) amounted to NTD320,892 million or at the budget attainment rate of 101.91%.

6. The remittances undertaken by the Bank amounted to NTD10,502 million or at the budget attainment rate of 109.19%.

7. The average balance of trust assets (AUM) amounted to NTD37,942 million, which was an increase of 5.84% from the same period of 2011.

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• (V) Financial income and expenditure, and profitability analysis

• The earnings before taxation in 2012 amounted to NTD3,304 million, which was an increase of 72.62% from the same period of 2011. Corporate earnings in the same period amounted to NTD2,778 million, which was an increase of 91.06% from the same period of 2011.

• KPI: Key Performance Indicator

	Indicators	Indicators	2012	2012	2012	2012
	Capital adequacy ratio (BIS)		10.54%
	Return on Assets (ROA)		(Before taxation) 0.80%
	Return on Equity (ROE)		(Before taxation) 12.34%
	Earnings Per Share (EPS)		(Before taxation) NTD1.43
	NPL ratio		0.37%
	Coverage ratio		275.39%
	Rating agency	Date of rating		Credit rating
				Long-term	Short-term	Outlook
Fitch Ratings Limited Taiwan Branch		101.10.9		A-(twn)	F2(twn)	Stable

• (VI) R&D

• Reinforcement of the IT security management by introducing the ISO 27001 Information Security Management System (ISMS) and has been accredited the ISO 27001:2005 standard by BSI (British Standards Institution) in information security management since August 2012. Additional effort has been made to ensure security of customer information and the rights of the customers on information.

• Develop and install the “Data Warehouse and Customer Relation Management System” for systematic cultivation and maintenance of customer relation through supporting marketing tools and marketing events. Upgrade the asset value and satisfaction of the customers by the corporate banking and wealth management professional team.

• Establish the model for the evaluation of credit risk and default relevant with the requirement of the bank to upgrade the asset quality of loan in compliance with the requirement of the competent authority on financial institutions, and complete the “SMEs Application Scorecard System” model for facilitating the control of loan asset and make credit information and loan review more efficient and standardized.

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• II. Effect of external competitive environment, laws & regulations and entire business environment

• (I) External competitive environment Maintain the low profit margin standard in the financial market. In an environment where competition in the domestic financial market is keen, many banks tend to focus on small and medium enterprise as their business targets. The Bank provide good quality service to augment its established clientele base of small and medium enterprises with its viable financial plans, convenient e-ecommerce platform, and cash management through a diverse portfolio of financial products. In addition, the Bank also take proactive action to explore the needs of the customers through which the Bank can achieve overall business result.

• (II) Laws & regulations

  1. In supporting the Basel III Accord, Financial Supervisory Commission amended and promulgated the “Regulation for Banks in the Management of Capital Adequacy” on November 26 2012 thereby move the BIS ratio, ratio of Tier 1 capital and the equity ratio of common stock to the required level incrementally every year. As of December 31 2012, The Bank has met the aforementioned requirements. The Bank will continue to strengthen its management in capital allocation to enhance its risk tolerance capacity in different areas.

  2. The Bank supports the introduction of the International Financial Reporting Standards or known as the IFRSs effective 2013, and has already set up a task force and retained certified public accounts to assist the introduction of the system to the Bank. The progress and the tasks for the implementation of the system were carried out as planned. The accounting policy at the time of book opening and subsequent bookkeeping has been mapped out in compliance with the “Regulations Governing the Preparation of Financial Reports by Public Banks” and IFRSs. The accounting of the Bank has already adopted the IFRSs and will make corresponding adjustment in line with the amendments of applicable legal rules of the competent authority and IFRSs.

  3. After the establishment of the clearing and settlement mechanism between NTD and CNY, the competent authority will officially apply the “Foreign Exchange Control Act” to CNY and will amend some of the provisions in the “Regulation Governing Foreign Exchange Business of Banks” As the business interaction between Taiwan and Mainland China intensified, we should learn from the experience and the practice of Hong Kong in handling CNY business and upgrade the competitive power of the Bank in international banking.

• (III) Entire business environment

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The road of global economic development is still risky and is so unpredictable. As such, the Bank should take caution in properly control the risks it bound to face and optimize its assets and liabilities with the efficient use of capital. This is the way to tackle with the challenges of the overall operation environment.

• III. Future development strategies

• In responding to the changes in the external operation environment in order to “tackle with the challenges and take cautious step in moving forward” as its core business strategy and sketch out its blueprint for development. Under this strategy, the Bank will further its overseas deployment in banking as an extension of its business development, enlarge the market size and enhance profitability.

• (I) In responding to the changes and opportunities from the market and economic situation, the Bank seeks to enlarge the scale of its core business.

• (II) The Bank will adjust and optimize its profit structure in order to achieve the goal of stable business volume with increasing profit.

• (III) The Bank will augment its channeling strategy for better result, and develop the domestic market in further depth and the market of Greater China.

• (IV) The Bank will make use of the advantage given by its organization, and will increase its stakes in other direct investments and product marketing for synergy.

• (V) The Bank will vitalize the quality of its assets, materialize the early warning system in risk management, and enhance its capital utilization efficiency.

• (VI) Make hearty effort to demonstrate its advantage in service and perform its corporate social responsibility.

• IV. Summary of business plan 2013

• Adjust its structure of return and increase the proportion of non-interest incomes. Materialize its full-range service to the small and medium enterprises to upgrade its competitive power. Enhance the integrated marketing among the banking-end, securities, leasing, and insurance agent operations, upgrade the quality of service as the three main business directions. The business plan in 2013:

• (I) Continue the momentum of growth of return in 2012, seek stable growth in the volume of deposits and loans, enhance return on capital investment, develop wealth management business, and reduce the dependence of interest income from lending.

• (II) Make effort to enter the international financial centers and increase the banking locations in counties and cities that have the potential for further development, and adjust existing banking locations to enhance the business efficiency of the branches.

• (III) Make addition effort to absorb more business in current account deposits to improve the ratio of current account deposits and to effectively reduce the cost of capital in operation for making the spread thicker.

• (IV) Make use of the opportunity of the deregulation of CNY business and tremendous effort to absorb more business in CNY and develop lending business at the OBU for fulfilling the demand of cross-border financial business.

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• (V) By way of the profit sharing framework of “quasi financial holding”, the banking-end and direct investments together provides one-stop integrated marketing service.

• (VI) Construct the new generation cash flow service platform and provide full-range and convenient electronic transaction channels to support group accounts in their operation, global fund allocations and cross-border account overview services for the satisfaction of corporate and individual needs of the customers in full-range.

• (VII) Continue to enlarge the asset size of the Bank and take caution in putting the early warning system of risk management and control in place. Maintain the quality of assets at a level senior to the industry level of domestic banks, and fortify the capacity of the Bank in profitability.

• (VIII) Expected business objectives

Scope of business	Objective bythe end of 2013
Deposits (including foreign currencies)	Average balance amounted to NTD421,087 million
Lending (including foreign currencies)	Average balance amounted to NTD356,674 million.
Foreign Exchanges Operations	Annual amount USD11,433 million
Trust Operations	The average balance of trust assets amounted to NTD41,800 million

The Bank has its 60[th] anniversary in 2013. In the future, the Bank will continue its corporate spirit of “whole-heartedness” in order to demonstrate its brand value of “Heritages for Six Decades Heritage and Whole-heartedness forever” to provide the public a wide array of financial products and good quality professional service. The Bank is dedicated to perpetual corporate development and is conceived with the mission of creating value for the shareholders. In addition, the Bank will make full effort to develop into a regional bank in Greater China, and ask for the continued support from the shareholders.

Best regards,

To All Shareholders

May I wish you all good health and good luck.

President

Chairman

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2 A profile of Taichung Bank:

Formerly a cooperative savings company in Taichung established in April 1953, the predecessor of Taichung Bank started its operation in savings and loans in August 1[st] of the same year. The scope of business then covered Taichung City, Taichung County, Chang Hwa County and Nantou County. The Bank has reorganized as “Taichung Small and Medium Business Bank” in 1978 in responding to the promulgation of the Banking Act and business development needs. On May 15, 1984, the Bank went public and expanded its scale of operations, and has successfully been listed on the centralized market.

In September 1995, the Taipei Branch was established with business covering different districts, which set a new milestone of the operation of the Bank. The Bank continued to relocate its branches, which were previously located in central Taiwan, to northern and southern Taiwan. After this process of expansion, the Bank has banking locations across Taiwan. With the effort of all, the Bank prospered in business, and has officially reorganized as “Taichung Business Bank” on December 9 1998. Since then, the Bank has emerged as a national commercial bank. In 2010, the Bank has been recognized as a financial institution in good standing by Financial Supervisory Commission, and has been approved to establish its Tucheng Branch in May of 2011. Now the Bank has 80 branches and 1 OBU across Taiwan. On December 27 2012, the OBU relocated to Taipei, the economic hub of Taiwan, to continue its operation. This allows the Bank to get closer to the center of the financial market and upgrade its value of its channel in operation.

With 6 decades of whole-hearted operation and development, the capital of the Bank has increased from NTD500,000 at its initial stage of operation to NTD23,187 million as of December 31 2012. The Bank also expanded to 80 branches and 1 OBU from 5 branches at the time of its establishment. The scope and volume of business of the Bank multiplied over the years. The variety and size of the operation far exceeded that at the time of its establishment as a cooperative saving company. The achievement was the feedback of the whole-hearted operation of the Bank. The growth and the excellence in operation of Taichung Commercial Bank have been witnessed by the public.

• Massive transactions or changes in equity shares by Directors, Supervisors, or shareholders holding more than 1% of the total outstanding shares in the most recent year: None.

• Changes in the management in the most recent year: None.

• Major events affecting the rights and privileges of the investors and the effect on the Bank: None.

• Reinvested affiliate: Taichung Commercial Bank Insurance Broker Co., Ltd., Reliance Securities Investment Trust Co., Ltd. and Taichung Commercial Bank Lease Enterprise

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3 Corporate Governance Report

• I. Organization

(I) Organizational Structure

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

Office of the Board of Directors
Auditing Office of the Board
Business Development Dept.
International Business Dept.
Trust Dept.
Information Dept.
Risk Management Dept.
Treasury Dept.
General Affairs Dept.
Human Resources Dept.
Accounting Dept.
Securities Dept.
Corporate Finance Dept.
Wealth Management Dept.
Loan Administration Dept.
District Center
Dept. of Debt Collection and
Asset Recovery
Chief Auditor
Committee
Investment Committee
NPL Management Committee
Loan Supervision Committee
Asset and Liability Management Personnel Evaluation Committee
Trust Asset Assessment Committee
Financial Products Review Committee
Directors Chairman President
Assistant VP
Vice Chairman
Shareholders’ meeting Board of Directors Board of Managing
Executive Vice President
Business units (include Business Dept.), OBU
Remuneration Committee
Risk Management Committee
Supervisor’ meeting Supervisors Resident
----- End of picture text -----

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• (II) Operations & Functions

• Auditing Office of Board: Administer the general auditing of the Bank, including operation audit, computer information audit, internal self-audit, internal audit, corrective actions as per the requests of competent authority, and related reporting.

• Office of the Board of Directors: Call for sessions and elections of the Standing Committee of the Board, the Board of Directors and Supervisors, General Meeting of the Shareholders, shares registration and related matters, public relations, press release.

• Business Development Dept.: Administer the planning and development of deposits and remittances, e-banking and credit card operations.

• International Banking Dept.: Administer the planning, promotion, management and operation of foreign exchanges.

• Trust Dept.: Administer the planning, management and operation of trust business.

• Information Dept.: Administer the planning, configuration and operation of IT system and banking information package software.

• Risk Management Dept.: Administer the decision-making of the risk management policies for the whole bank, supervise the departments to establish the risk control mechanism, control of the overall exposures of the Bank and other risk related management.

• Treasury Dept.: Administer the appropriation of funds and investments of the whole bank and other financial matters.

• General Affairs Dept.: Administer the articles of incorporation, organization, important documents and corporate seals, cashier service, general purchase, custody of assets, procurement and lease of real properties, improvement and repair of properties, and labor safety & health issues, property insurance, and any matters other than those administered by the other departments/offices.

• Human Resources Dept.: Administer human resources management and review, and employee welfare, and also administer employee continuing education and training, library management, and publication and printing of journals.

• Accounting Dept.: Administer accounting affairs, management accounting, annual budget settlement, and inter-branch transactions.

• Securities Dept.: Administer planning, execution and management of the securities business, and process any other securities approved by the competent authority.

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1. Corporate Finance Department: administer the planning, formulation, supervision and assessment of the all forms of corporate financing, account receivables, syndicated loans, and financing of Taiwan enterprises in overseas investment.

2. Wealth Management Dept.: Administer the planning and execution of the financial planning businesses throughout the nation, management of financial planning staff, preparation and revision of the wealth management policy and operating procedure, and promotion, supervision and management of wealth management customers’ investment in the financial planning business.

3. Loan Administration Dept.: Administer the planning, review, management, research, analysis and consultation service of the various credit extensions, investigations and consumer banking.

4. Dept. of Debt Collection and Asset Recovery: Administer the precautionary and review after granting loan, and planning, promotion, supervision and statistic analysis of the collection of delinquent accounts, performance appraisal of the collection, review of writing off non-performing loans, examination and management of Collaterals Assumed, participation and cooperation in the process of resolving legal issues, retaining of external attorneys-at-law, and drafting, promotion, supervision and performance appraisal of the compliance system.

5. Business Dept.: Administer the operation of different types of deposits, loans, foreign exchange settlements and banking matters.

6. District Center: administer the lending (except consumer loans, cash card, and credit card), review and approval of foreign exchange financing, banking supervision, and collection of overdue accounts in the districts under their respective jurisdictions.

7. Overseas Banking Branch: Administer the planning, promotion, management and operation of international banking.

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Feb. 28, 2013	Other Chief, Supervisors or Directors with a Spousal or Other Immediate Relative	Relation	-	-	-	-	None
		Name	-	-	-	-	None
		Title	-	-	-	-	None
	Current Bank & Other	positions	-	-	-	-	None
	Major (academic degree)	experience	-	-	-	-	Chairman of Taiwan Business Bank; MBA of New York Institute of Technology
	Shareholding under the title of a third party	Ratio of Shareholding %	0	0	0	0	0
		Quantity	0	0	0	0	0
	Current Shares Held by Spouse & Dependents	Ratio of Shareholding %	0	0	0	0	0
		Quantity	0	0	0	0	0
	Current shareholding	Ratio of Shareholding %	6.35	0.71	0.06	0.38	0
		Quantity	147,154,866	16,366,590	1,399,830	8,796,422	0
	Shares at Election	Ratio of Shareholding %	6.68	0.88	0.06	0.48	0
		Quantity	115,740,767	15,308,183	1,101,000	8,227,568	0
	Inauguration date		2002/5/17	2008/6/13	2011/6/22	2011/6/22	2002/5/17
	Duration		3 years	3 years	3 years	3 years	3 years
	Election (Appointment) Date		2011/6/22	2011/6/22	2011/6/22	2011/6/22	2011/6/22
	Name		Pan Asia Chemical Corporation	I Joung Investment Co., Ltd.	Ho Yang Management Consultant Co., Ltd.	Chou Chang Co., Ltd.	Pan Asia Chemical Corporation Representative: Jin-Fong Soo
	Title		Institutional Director	Institutional Director	Institutional Director	Institutional Director	Chairman

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Other Chief, Supervisors or Directors with a Spousal or Other Immediate Relative	Relation	None	12
	Name	None
	Title	None
Current Bank & Other	positions	Director, Chou Chin Corporation; Director, Nan Chung Petrochemical Corporation; Chairman Reliance Securities Investment Trust Co., Ltd.; Chairman, Rui Yu Investment Co., Ltd.; Chairman, Pan Asia Chemical Corporation; Chairman, Taichung Commercial Bank Insurance Agent Co., Ltd; Director, Ge Ling Co., Ltd.; Director, Chou Chang Co., Ltd.; Chairman, Deh Hsing Securities Investment Trust Co., Ltd.; Director, CPC Corporation; Chairman, Pan Feng Investment Co., Ltd; Executive Director and President, China Man-Made Fiber Corporation; Director, Chung Chien Investment Co., Ltd.; Chairman, Hsu Tian Investment Co., Ltd.; Director, Pan Asia Investment Co., Ltd.; Director, Melasse; Director, Chairman, Rui Yan Investment Co., Ltd.; Tai Yi Investment Co., Ltd.; Director, Ta Fa Investment Co., Ltd.;Chairman, Pan Hsu Investment Co., Ltd.
Major (academic degree)	experience	P, Corporate Financing Dept., BNP Paribas Hong Kong; MBA of NYU
Shareholding under the title of a third party	Ratio of Shareholding %	0
	Quantity	0
Current Shares Held by Spouse & Dependents	Ratio of Shareholding %	0
	Quantity	0
Current shareholding	Ratio of Shareholding %	0.01
	Quantity	258,945
Shares at Election	Ratio of Shareholding %	0.01
	Quantity	203,667
Inauguration date		2002/5/17
Duration		3 years
Election (Appointment) Date		2011/6/22
Name		Pan Asia Chemical Corporation Representative: Kuei-Fong Wang
Title		Vice Chairman

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Other Chief, Supervisors or Directors with a Spousal or Other Immediate Relative	Relation	None
	Name	None
	Title	None
Current Bank & Other	positions	Chairman, I Jong Investment Co., Ltd.; Director Chairman, Taichung Commercial Bank Insurance Agent Co., Ltd; Director, An Wang Investment Co., Ltd; Supervisor, Zhi Zhan Corporation; Supervisor, ClearVision; Director, Taigene Electric Machinery Co., Ltd.; Director, Yu Ta Trading Co., Ltd.; Chairman, Deh Hsing Securities Investment Trust Co.,Ltd.; Director, Hu Wang Investment Co., Ltd.; Chairman, Model Construction Development Co., Ltd.; Director, Yu-Feng Industrial Co., Ltd.; Supervisor, Heng Wang Investment Co., Ltd.; Director, Harborview Cable TV.
Major (academic degree)	experience	Chairman of Lehigh Technology; Master of Science of Government Apparatus, Lehigh University
Shareholding under the title of a third party	Ratio of Shareholding %	0
	Quantity	0
Current Shares Held by Spouse & Dependents	Ratio of Shareholding %	0
	Quantity	0
Current shareholding	Ratio of Shareholding %	0.43
	Quantity	9,897,442
Shares at Election	Ratio of Shareholding %	0.53
	Quantity	9,257,387
Inauguration date		2008/6/13
Duration		3 years
Election (Appointment) Date		2011/6/22
Name		I Joung Investment Co., Ltd. Representative: Yi-Der Chen
Title		Managing Director

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Other Chief, Supervisors or Directors with a Spousal or Other Immediate Relative	Relation	None	None	None
	Name	None	None	None
	Title	None	None	None
Current Bank & Other	positions	Supervisor, Huang Hsiang Construction Corporation; Director, Taichung Commercial Bank Lease Enterprise	None	None
Major (academic degree)	experience	Chairman of Taiwan Financial Holdings; Dept of International Trade, National Chengchi University	Representative of TC Bank, Taipei Representative Office; National Chung Hsing University, Department of Agricultural Economics	Vice General Manager of Cooperative Bank; Chairman of Cooperative Bank Insurance Agency Co., Ltd.; Department of Transportation and Communication Management Science, NCKU
Shareholding under the title of a third party	Ratio of Shareholding %	0	0	0
	Quantity	0	0	0
Current Shares Held by Spouse & Dependents	Ratio of Shareholding %	0	0	0
	Quantity	0	0	0
Current shareholding	Ratio of Shareholding %	0	0	0
	Quantity	0	0	0
Shares at Election	Ratio of Shareholding %	0	0	0
	Quantity	0	0	0
Inauguration date		2002/5/17	2008/6/13	2010/6/15
Duration		3 years	3 years	3 years
Election (Appointment) Date		2011/6/22	2011/6/22	2011/6/22
Name		Pan Asia Chemical Corporation Representative: Jer-Shyong Tsai	Hsi-Rong Huang	Chen-Le Liu
Title		Managing Director	Managing Director (Independent director)	Independent director

14

Other Chief, Supervisors or Directors with a Spousal or Other Immediate Relative	Relation	None	None	None
	Name	None	None	None
	Title	None	None	None
Current Bank & Other	positions	CEO of Cathay International Holdings Ltd.	Director, Chang Pu Industrial Co., Ltd.; Vice Chairman, Super Dragon Technology Co., Ltd.	President, Taichung Commercial Bank
Major (academic degree)	experience	Responsible person of JP Morgan Chase in China; Co-responsible person of BNP in Asia; CEO of Fubon Bank (Hong Kong) Limited; and graduated from Harvard Business School	President, Capital Securities Corp; VP, GTSM; Graduate from St.Thomas University, USA	Vice President, Taiwan Business Bank; Independent Director of Taichung Commercial Bank; MBA, National Taiwan University College of Management
Shareholding under the title of a third party	Ratio of Shareholding %	0	0	0
	Quantity	0	0	0
Current Shares Held by Spouse & Dependents	Ratio of Shareholding %	0	0	0
	Quantity	0	0	18,102
Current shareholding	Ratio of Shareholding %	0	0	0.02
	Quantity	0	0	480,944
Shares at Election	Ratio of Shareholding %	0	0	0.01
	Quantity	0	0	190,500
Inauguration date		2011/6/22	91/5/17	2002/5/17
Duration		3 years	3 years	3 years
Election (Appointment) Date		2011/6/22	2012/10/1	2011/6/22
Name		Jin-Yi Lee	Pan Asia Chemical Corporation Representative: Kang-Chi Chou	Pan Asia Chemical Corporation Representative: Chun-Sheng Lee
Title		Independent director	Director	Director

15

Other Chief, Supervisors or Directors with a Spousal or Other Immediate Relative	Relation	None	None	None	None	None
	Name	None	None	None	None	None
	Title	None	None	None	None	None
Current Bank & Other	positions	Vice Chairman of China Man-Made Fiber Corporation	Supervisor of Taichung Commercial Bank Lease Enterprise	Chairman of Taichung Commercial Bank Lease Enterprise	Chairman, Chun Fu Development Co., Ltd.	None
Major (academic degree)	experience	Director of ITOCHU CORPORATION , Taipei Branch; Department of Political Science, National Taiwan University	Chief Auditor, Land Bank of Taiwan; Master in Land Administration, National Chung Hsing University	President, Chang Hwa Bank, Graduate from Tamkang University	Reliance Securities Investment Trust Co., Ltd., Graduate from Deh Ming Commercial School, Special Assistant, China Man-Made Fiber Corporation.	V.P., Taichung Business Bank; Kainan High School of Commerce and Industry, Senior Class, Business
Shareholding under the title of a third party	Ratio of Shareholding %	0	0	0	0	0
	Quantity	0	0	0	0	0
Current Shares Held by Spouse & Dependents	Ratio of Shareholding %	0	0	0	0.03	0
	Quantity	57,585	0	0	589,951	0
Current shareholding	Ratio of Shareholding %	0	0	0	0	0
	Quantity	0	0	0	0	65,918
Shares at Election	Ratio of Shareholding %	0	0	0	0	0.00
	Quantity	0	0	0	0	66,542
Inauguration date		2002/5/17	2002/5/17	2011/6/22	2002/5/17	2008/6/13
Duration		3 years	3 years	3 years	3 years	3 years
Election (Appointment) Date		2011/6/22	2011/6/22	2012/6/8	2012/10/1	2011/6/22
Name		Pan Asia Chemical Corporation Representative: Ming-Shan Chuang	Pan Asia Chemical Corporation Representative: Hsin-Ching Chang	Chou Chang Co., Ltd. Representative: Wei-Liang Lin	Pan Asia Chemical Corporation Representative: Meng-Liang Chang	I Joung Investment Co., Ltd. Representative: Ching-Hsin Chang
Title		Director	Director	Director	Director	Director

16

Other Chief, Supervisors or Directors with a Spousal or Other Immediate Relative	Relation	None	-	-	None	None	None	None
	Name	None	-	-	None	None	None	None
	Title	None	-	-	None	None	None	None
Current Bank & Other	positions	Chairman of Ho Fa Construction Co., Ltd.; Chairman of Sakura Construction Co., Ltd.	-	-	None	None	None	None
Major (academic degree)	experience	Master of Science, University of Southampton, UK	-	-	Manager of Chiao Tung Bank; Department of Accounting, National Chung Hsing University	Manager of Taiwan Cooperative Bank; Yu Da High School of Commerce and Home Economics	Manager of Pacific Computers; Fuxing Senior High School	Vice Chief Auditor, Taiwan Business Bank; Wen Shan Senior High School
Shareholding under the title of a third party	Ratio of Shareholding %	0	0	0	0	0	0	0
	Quantity	0	0	0	0	0	0	0
Current Shares Held by Spouse & Dependents	Ratio of Shareholding %	0	0	0	0	0	0	0
	Quantity	0	0	0	0	0	0	0
Current shareholding	Ratio of Shareholding %	0	0.33	0.03	0	0	0	0
	Quantity	0	7,711,704	788,435	0	0	0	0
Shares at Election	Ratio of Shareholding %	0	0.28	0.04	0	0	0	0
	Quantity	0	4,800,000	737,449	0	0	0	0
Inauguration date		2011/6/22	2011/6/22	2008/6/13	2011/6/22	2011/6/22	2011/6/22	2011/6/22
Duration		3 years	3 years	3 years	3 years	3 years	3 years	3 years
Election (Appointment) Date		2011/6/22	2011/6/22	2011/6/22	2011/6/22	2011/6/22	2011/6/22	2011/6/22
Name		Ho Yang Management Consultant Co., Ltd. Representative: Chia-Hung Lin	Xin Rui Investment Co., Ltd.	Tai Jiunn Enterprise Co., Ltd.	Xin Rui Investment Co., Ltd. Representative: Jiann-Ell Huang	Xin Rui Investment Co., Ltd. Representative: Shu-Li Huang	Xin Rui Investment Co., Ltd. Representative: Chien-Hwa Lee Fu	Xin Rui Investment Co., Ltd. Representative: Ching-Huang Tsai
Title		Director	Institute Supervisor	Institute Supervisor	Resident Supervisor	Supervisor	Supervisor	Supervisor

17

Other Chief, Supervisors or Directors with a Spousal or Other Immediate Relative	Relation	None
	Name	None
	Title	None
Current Bank & Other	positions	None
Major (academic degree)	experience	VP of Changhua Bank; Department of Economics, National Taiwan University
Shareholding under the title of a third party	Ratio of Shareholding %	0
	Quantity	0
Current Shares Held by Spouse & Dependents	Ratio of Shareholding %	0
	Quantity	0
Current shareholding	Ratio of Shareholding %	0
	Quantity	0
Shares at Election	Ratio of Shareholding %	0
	Quantity	0
Inauguration date		2008/6/13
Duration		3 years
Election (Appointment) Date		2011/6/22
Name		Tai Jiunn Enterprise Co., Ltd. Representative: Chao-Nan Hsieh
Title		Supervisor

18

1. Major Shareholders of Corporate Shareholders:

2.	Major Shareholders of Corporate Shareholders:
	Feb.28,2013
Corporate shareholder Name	Major shareholder of corporate shareholder and shareholding Ratio of Shareholding thereof
Pan Asia Chemical Corporation	China Man-Made Fiber Co., Ltd. (42.89%); Sheng Jen Knitted Textiles Co., Ltd. (5.99%); CMFC Investment (4.95%); Deh Hsing Securities Investment Trust Co., Ltd. (4.53%); Yu Huei Co., Ltd. (3.26%); Tai Yi Investment Co., Ltd. (2.28%); Ke Yi Bao Investment Co., Ltd (0.73%);Ya-Ying Jhu (0.72%); Pan Asia Investment Co., Ltd. (0.61%);Pan AsiaEmployee Welfare Committee (0.60%).
Chou Chang Co., Ltd.	Chou Chin Industrial Co., Ltd. (48.24%), Pan Asia Investment Co., Ltd. (36.39%), Deh Hsing Securities Investment Trust Co., Ltd. (14.78%), Chou Huei Investment Co., Ltd. (0.25%), Ge Ling Co., Ltd. (0.19%), Tai Yi Investment Co., Ltd. (0.05%), Hsiun-Ching Hsu (0.05%), Chung-Yi Chen (0.02%), Chung-Tien Hsu (0.01%), Yun-Ling Chen(0.01%)
I Joung Investment Co., Ltd.	Yi-Jen Chen (33.17%), Yi-Der Chen (27.77%), Yee-Fan Chen (12.37%), Ching-Shuan Chen Ting (6.47%), Hsiun-Fan Lo (5.51%), Yee-ChenChen(4.7%),Min-Yuan Yeh(0.56%)
Ho Yang Management Consultant Co.,Ltd.	Shu-Cyong Zen (81%), Chen-Hai Lin (19%)
Xin Rui Investment Co., Ltd.	You-Ciang Yang (34.8%), Ying-Huei Liou (32.4%), Mei-Jyuan Syong (26.8%)
Tai Jiunn Enterprise Co., Ltd.	Yi-Jen Chen (46.13%), GIUM CO., LTD (42.84%), Ming-Yuan Yeh (0.69%), Ching-ShuanChen Ting (0.21%)

1. Major Shareholders of Major Corporate Shareholder:

3.	Major Shareholders of Major Corporate Shareholder:
	Feb. 28, 2013
Corporate shareholder Name	Major shareholder of corporate shareholder and shareholding Ratio of Shareholdingthereof
China Man-Made Fiber Co., Ltd.	Pan Asia Chemical Corporation (14.97%); Sheng Jen Knitted Texiles (4.21%); Formosa Imperial Wineseller Corp (3.52%); Pan Asia Investment Co., Ltd. (3.00%); Chung Chien Investment Co., Ltd. (2.51%); Netherlands Pension Robert Bacal Investment Account at Citibank (1.14%); Deh Hsing Securities Investment Trust Co., Ltd. (0.67%); Chou Chang Co., Ltd. (0.63%); Central Bank of Norway Investment Account at JP Morgan Chase Taipei (0.61%); 1st Discretionary Investment of President Securities Investment Trust at the appointment ofNational AnnuityFund (0.59%).
Tai Yi Investment Co., Ltd.	Pan Asia Investment Co., Ltd. (41.80%), Ta Fa Investment Co., Ltd. (38.17%), Tsung Hao Enterprise Co., Ltd. (9.93%), Chao-Jia Lee (6.31%), Sian-Jhang Syu (2.53%), Guei-LianJheng (1.26%).
Chung Chien Investment Co., Ltd.	Ta Fa Investment Co., Ltd. (28.08%); Pan Asia Investment Co., Ltd. (17.67%); Chin-Yuan Huang (14.72%); Tung Hao Enterprises Corp. (14.30%); Hsuan Deh Consultants Co., Ltd. (10.16%); Chun Foo Development Co., Ltd. (7.95%); Kuei-Hsien Wang (1.70%); Hsu Tian Investment Co., Ltd. (1.62%), Kuei-Fong Wang (1.55%); Yu Huei Co., Ltd. (1.47%).
Pan Asia Investment Co., Ltd.	Tai Yi Investment Co., Ltd. (47.42%), Ta Fa Investment Co., Ltd. (42.63%), Tsung Hao Enterprise Co., Ltd. (9.95%), Kuei-Hsien Wang (0.51%)

19 19

Corporate shareholder Name	Major shareholder of corporate shareholder and shareholding Ratio of Shareholdingthereof
Yu Hui Limited	Kuei-Hsien Wang (100%).
Ke Yi Bao Investment Co.,Ltd.	Yun-Jyun Deng (99.99%).
Sheng Jen Knitted Textiles Co., Ltd.	CMFC Investment Co., Ltd. (93.87%）, Chao-Chang Wang（5.57%） , Wang Kuei-Hsien（0.25%）, Shang-Jr Chiang（0.15%）, Shi-Yi Chiang （0.10%）,Chao-ChingWang（0.05%）.
Deh Hsing Securities Investment Trust Co., Ltd.	China Man-Made Fiber Corporation (100%).
Pan Asia Chemical Corporation Employee Welfare Committee	Not applicable.
Chou Chin Corporation	China Man-Made Fiber Co., Ltd. (45.81%); Da Fa Investment Co., Ltd. (32.35%), Kuan Ching-Chun(7.4%), Kuei-Hsien Wang (6.00%), Deh Hsing Securities Investment Trust Co., Ltd. (2.45%), Reliance Securities (1.44%), Special adjustment account (1.04%), Nurske County Investment Account at HSBC Taipei Branch (0.64%), Chou Chin Enterprise Co. Ltd. treasury stock (0.64%), Chung-Yi Chen (0.40%)
Chou Heui Investment Co., Ltd.	Li-Kai Chuang (21.36%), Hsin-Yi Chuang (13.49%), Chien-Huei Chuang (13.43%), Man-Yen Chuang Chen (12.14%), Teng-Hsin Chuang (8.17%),Lai-Zi Kuo (5.01%)
Ge Ling Co., Ltd.	Chou Chin Corporation. (89.78%), Chou Chang Co., Ltd. (5.74%), Ching-Long Tu (1.72%), Tsui-Chueh Chan (0.20%), Chiung-Er Wang (0.17%), Shu-Chin Kuo (0.17%), Shu-Yun Hsu Chu (0.12%), Chi-Chien Chan (0.08%), Rong-Li Chen (0.08%), Mei-Keui Lin (0.07%)
GIUMCO.,LTD	GIUMCO.,LTD(100%).

20 20

1. Information on Directors and Supervisors in professionalism and impartiality

		impartiality	impartiality
Conditions Name	Have more and the	than 5 years of experience following professional qualifications		Status of independence (note)										Number of public companies where the person holds the title as independent director
	Lecturer or above in commerce, law, finance, accounting or subjects required by the business of the bank in pubic or private colleges or universities	Passed the qualification examination with proper licensing by the national Government Apparatus as court judge, prosecutor, lawyers, certified public accountant or other professional designations required by the business of the Bank	Required Work experience in commerce, law, finance, accounting or others required by the Bank	1	2	3	4	5	6	7	8	9	10
Jin-Fong Soo														0
Kuei-Fong Wang														0
Jer-Shyong Tsai														0
Yi-Der Chen														0
Hsi-Rong Huang														0
Chen-Le Liu														0
Jin-Yi Lee														0
Kang-Chi Chou														0
Chun-Sheng Lee														0
Meng-Liang Chang														0
Hsin-Ching Chang														0
Ming-Shan Chuang														0
Wei-Liang Lin														0
Ching-Hsin Chang														0
Chia-Hung Lin														0

21 21

Jiann-Ell Huang														0
Shu-Li Huang														0
Chien-Hwa Lee Fu														0
Ching- Huang Tsai														0
Chao-Nan Hsieh														0

Note: Respective director and supervisor who meet the following qualifications 2 years before assumption of office and at the time of assumption office shall put a “  ” in the appropriate space.

• (1) Not an employee of the Bank or its affiliates.

• (2) Not a director or supervisor of the Bank or its affiliates (excluding the capacity of independent director of the Bank or its parents, or a subsidiary directly or indirectly held by the Bank with more than 50% of the stakes).

• (3) Not a natural person, spouse, underage children, or under the title of a third party who holds more than 1% of the outstanding shares issued by the Bank or among the top 10 natural person shareholders.

• (4) Not a spouse, kin at the second pillar under the Civil Code, or the lineal blood relatives within the fifth pillar under the Civil Code as specified in (1) through (3).

• (5) Not a director, supervisor or employee of an institutional shareholder who holds more than 5% of the outstanding shares issued by the Bank, or a director, supervisor or employee of an institutional shareholder who is among the top 5 shareholders.

• (6) Not a director, supervisor, manager or shareholder holding more than 5% of the outstanding shares of specific company or institution in business or financial relation with the Bank.

• (7) Not a professional, owner, partner, director, supervisor, manager of proprietorship, partnership, company or institution that provide business, legal, financial and accounting services to the Bank or a spouse to the aforementioned persons. Except the members of the Remuneration Committee in exercising their authority within the scope of empowerment pursuant to Article 7 of the Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter.

• (8) Not a spouse to or kin at the second pillar under the Civil Code to any other director.

• (9) Not under any of the categories stated in Article 30 of the Company Act.

• (10) No Government Apparatus agency, juristic person or its representative is elected under Article 27 of the Company Act.

22 22

(II) President, Executive Vice Presidents, Assistant Executive Vice Presidents and managers of the departments and branches Feb. 28, 2013	Spouse or kin within the second pillar under the Civil Code and who is a manager	Relation	None	None	None	None	None	23
		Name	None	None	None	None	None
		Title	None	None	None	None	None
	Positions with other companies		Director, Taichung Commercial Bank; Manager, Taichung Commercial Bank.	None	Supervisor, Taichung Bank Insurance Broker Co., Ltd.; Director, Taichung Bank Leasing co., Ltd.; Director, Hsiang Feng Development Co., ; Director, Eureka Investment Co., Ltd.	Director of Reliance Securities Investment Trust Co., Ltd.	None
	Major experience		Vice President of Taiwan Business Bank; Commerce Master of National Taiwan University College of Management	Regional Center Director of Land Bank of Taiwan; Department of Business Administration, Tamkang University	Chief Secretary, Office of the Board; Department of Law, National Chengchi University	Manager, Business Development Dept.; Finance Master, National Chung Hsing University College of Management	Manager, HR Dept.; Department of Accounting; Fu Jen Catholic University
	Shareholding under the title of a third party	Ratio of Shareholding %	0	0	0	0	0
		Quantity	0	0	0	0	0
	Shares Held by Spouse & Dependents	Ratio of Shareholding %	0.001	0	0	0.001	0
		Quantity	18,102	0	0	33,195	0
	Status of shareholding	Ratio of Shareholding %	0.021	0.003	0.000	0.018	0.014
		Quantity	480,944	77,203	1,254	422,742	317,819
	Election Date		2010/10/13	2010/5/5	2010/7/30	2010/8/4	2009/8/27
	Name		Chun-Sheng Lee	Rong-Hua Kao	Kai-Yu Lin	Hsueh-Hsien Liao	Chih-Chuan Fang
	Title		President	Executive Vice President	Executive Vice President	Executive Vice President	Executive Vice President

23

Spouse or kin within the second pillar under the Civil Code and who is a manager	Relation	None	None	None	None	None	None	None	24
	Name	None	None	None	None	None	None	None
	Title	None	None	None	None	None	None	None
Positions with other companies		None	Supervisor, Taichung Bank Insurance Broker Co., Ltd.; Director, Taichung Bank Leasing Co., Ltd.; Director, Hsiang Feng Development Co.,; Director, Eureka Investment Co., Ltd.	None	None	None	None	None
Major experience		Chief Auditor and Director-General of Cosmos Bank; Graduate Institute of Finance, Tamkang University	Director of General Affairs Department; Department of Law, National Chengchi University	Deputy Director of General Affairs Department; Department of Fiber, Ming Chi College	Manager, Erlin Branch;Department of Technology Management, Chung Hua University	Taichung Regional Center Manager, Taichung Institute of Technology(Open Education Program), Banking and Insurance	Manager, Personnel Administration Section, Human Resources Department; School of Chemistry, Stellenbosch University of South Africa	Deputy Manager, Accounting Dept.; Graduate Institute of Accounting, National Chengchi
Shareholding under the title of a third party	Ratio of Shareholding %	0	0	0	0	0	0	0
	Quantity	0	0	0	0	0	0	0
Shares Held by Spouse & Dependents	Ratio of Shareholding %	0	0	0	0	0	0	0
	Quantity	0	0	0	0	0	0	0
Status of shareholding	Ratio of Shareholding %	0.009	0.000	0.007	0.016	0.018	0.000	0.003
	Quantity	205,469	1,254	159,070	364,913	419,774	0	76,788
Election Date		2009/9/14	2007/11/19	2008/6/10	2011/11/24	2013/1/25	2012/7/2	2009/11/9
Name		Min-Chin Shen	Kai-Yu Lin (concurrent post)	Ching-hu Hsieh	Chun-Ying Wang	Yi-Yuan Tung	Chung-Ping Yang (Deputy manager on behalf of manager)	Yi-Ying Chung
Title		Chief Auditor	Office of the Board of Directors Chief Secretary	Manager, General Affairs Dept.	Manager, Business development Dept.	Manager, Loan Administration Dept.	Manager, HR Dept.	Manager, Accounting

24

Spouse or kin within the second pillar under the Civil Code and who is a manager	Relation		None	None	None	None	None	None	None	None	None
	Name		None	None	None	None	None	None	None	None	None
	Title		None	None	None	None	None	None	None	None	None
Positions with other companies			None	None	Director of Reliance Securities Investment Trust Co., Ltd.	None	None	Director of Sheng-Yong International Enterprise Co., Ltd.; Director of Quin-Sheng Investment Co., Ltd.	None	None	Director of Reliance Securities Investment Trust Co.,
Major experience		University	Deputy Manager, Business Department; Department of Information Science, Fengchia University	Deputy Manager, International Business Dept.; Department of Accounting, Feng Chia University	Deputy Manager, Loan Administration Dept.; Graduate Institute of Information Management, National Sun Yat-Sen University	Deputy Manager, Dept of Debt Collection and Asset Recovery; Department of Law, Soochow University	Manager, IT Department; Department of Statistics, National Cheng Kung University	Deputy Manager of Securities Dept.; Accounting and Statistics, Shih Chien University	Deputy Manager, Risk Management Department; Department of Finance and Banking, National Taiwan University	Deputy Manager, Treasury Department; Department of International Business, National Taiwan University.	Deputy Manager, Loan Administration Dept.; Graduate Institute of Information Management, National Sun Yat-Sen University
Shareholding under the title of a third party	Ratio of Shareholding %		0	0	0	0	0	0	0	0	0
												25
	Quantity		0	0	0	0	0	0	0	0	0
Shares Held by Spouse & Dependents	Ratio of Shareholding %		0.001	0	0	0	0.000	0	0	0.000	0
	Quantity		28,271	0	0	0	304	0	0	1,655	0
Status of shareholding	Ratio of Shareholding %		0.008	0.001	0.005	0.001	0.008	0.000	0.003	0.007	0.005
	Quantity		193,852	18,767	112,065	24,180	187,632	0	78,578	171,233	112,065
Election Date			2013/1/25	2006/5/4	2010/8/4	2010/4/29	2013/1/25	2011/6/16	2012/6/27	2013/6/27	2013/1/25
Name			Chun-Sheng Lin	Cheng-Yu Lai	Yu-Chung Lin	Mei-Li Wu	Deh-Wei Chia	Feng-Lang Chen	Jhen-Ying Wu	Guang Jhong Siao	Yu-Chung Lin
Title		Dept.	Manager, Information Dept.	Manager, International Banking Dept.	Manager, Trust Dept.	Manager, Dept of Debt Collection and Asset Recovery	Manager, Corporate Finance Dept.	Manager, Securities Dept.	Manager, Risk Management Dept.	Manager, Treasury Dept.	Manager, Wealth Management Dept.

25

Spouse or kin within the second pillar under the Civil Code and who is a manager	Relation		None	None	None	None	None	None	None	None	None	None	None	None	None
	Name		None	None	None	None	None	None	None	None	None	None	None	None	None
	Title		None	None	None	None	None	None	None	None	None	None	None	None	None
Positions with other companies		Ltd.	None	None	None	None	None	None	None	None	None	None	None	None	None
Major experience			Deputy Manager, Ban Chiao Branch; Department of Banking and Finance, Takming University of Science and Technology	Manager, Puli Branch; Graduate Institute of Industrial Management, National Cheng Kung University	Deputy manager of Securities Brokerage; Department of International Trade, Feng Chia University	Deputy Manager, Risk Management Department; Graduate Institute of Business Administration, Fengchia University.	Deputy Manager, Taichung Regioal center; Accounting and Statistics, Tamsui Institute of Business Administration	Manager, Dadu Branch; Department of Business Administration, Mingshin University of Science and Technology	Manager, Shejioujia Branch; Banking and Insurance, Taichung Institute of Technology (Open Education Program)	Manager, Peitou Branch; School of Humanity Studies, National Sun Yat-Sun University	Manager, Nantun Branch; Department of Applied Commerce, Taichung Institute of Technology (Open Education Program)	Manager, Taichungkang Branch; International Trade, Overseas Chinese College of Commerce	Deputy Manager, W. Taichung Branch; Department of Applied Commerce, Taichung Institute of Technology (Open Education Program)	Deputy Manager, Taichung Regional Center; Business Administration, Taichung Commercial School	Manager, Trust Dept.; Department of Cooperative Economics, Feng Chia University
Shareholding under the title of a third party	Ratio of Shareholding %		0	0	0	0	0	0	0	0	0	0	0	0	0
	Quantity		0	0	0	0	0	0	0	0	0	0	0	0	0
Shares Held by Spouse & Dependents	Ratio of Shareholding %		0	0	0	0	0	0	0.003	0	0	0	0.000	0	0
	Quantity		0	0	0	0	0	0	70,894	0	0	0	1,403	0	0
Status of shareholding	Ratio of Shareholding %		0.001	0.010	0.000	0.002	0.000	0.012	0.003	0.009	0.001	0.014	0.000	0.009	0.008
	Quantity		16,000	228,041	0	35,192	2,418	271,089	73,036	209,003	24,947	323,375	1,108	202,328	184,761
Election Date			2012/12/17	2009/8/28	100/8/5	2012/10/23	2011/3/2	2008/9/22	2009/8/28	2013/1/25	2010/5/4	2011/3/2	2013/1/25	2013/1/25	2009/12/31
Name			Chih-Hung Lu	Chien-Min Chou	Ruei-Fen Tsai	Chi-Long Huang	Dong-Hsu Liu	Rai-Cheng Yang	Han-Ching Tsai	Kwei-Ching Ho	Yu-Ing Chen	Ching-Kun Lin	Chung-Rong Lin	Hsin-Ru Kao	Chung-Teng Hung
Title			Manager, Overseas Banking Branch	Manager, Business Dept.	Manager, Securities Brokerage	Manager, Daching Branch	Manager, W. Taichung Branch	Manager, Jhongzhen Branch	Manager, Hsitun Branch	Manager, Nantun Branch	Manager, Neihsin Branch	Manager, Dadu Branch	Manager, N. Taiping Branch	Manager, Taichungkang Branch	Manager, Szumin Branch

26

Spouse or kin within the second pillar under the Civil Code and who is a manager	Relation	None	None	None	None	None	None	None	None	None	None	None	None	None	None	None	27
	Name	None	None	None	None	None	None	None	None	None	None	None	None	None	None	None
	Title	None	None	None	None	None	None	None	None	None	None	None	None	None	None	None
Positions with other companies		Shareholder, Huan Lin Co., Ltd.	None	None	None	None	None	None	None	None	None	None	None	None	None	None
Major experience		Manager, Daching Branch; Institute of Business and Management, Feng Chia University	Deputy Manager, S. Taichung Branch; Department of Taxation and Public Finance, Feng Chia University	Deputy Manager,Dachia Branch; Department of International Trade, Overseas Chinese College of Commerce	Manager, Neihsin Branch; Commerce, Shin Min Commercial & Industrial Vocational High School	Manager, Chingsui Branch; Department of Applied Commerce, Taichung Institute of Technology (Open Education Program)	Manager, N. Taiping Branch; Institute of Business and Management, Asia University, Taiwan	Deputy Manager, Fong Yuan Branch; International Trade, Ling Tung College	Deputy Manager, Nanyang Branch; Dept of Banking and Finance, Chaoyang University of Technology	Manager,Shihu Branch; Department of Statistics, Tung Hai University	Manager, Datu Branch; International Trade, Ling Tung College	Manager, Chunan Branch; Department of Insurance Management, Chao Yang University of Technology	Manager, Accounting Dept.; Department of Accounting, National Cheng Kung University	Deputy Manager, Lukang Branch; MBA, Institute of Health and Management	Manager, Lungjing Branch; Department of Cooperative Economics, National Chung Hsing University	Manager, Shihu Branch; Institute of Business and Management, Feng Chia University
Shareholding under the title of a third party	Ratio of Shareholding %	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
	Quantity	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Shares Held by Spouse & Dependents	Ratio of Shareholding %	0	0	0	0	0.000	0	0.000	0.000	0	0.002	0	0	0.000	0.000	0
	Quantity	0	0	0	0	2,860	0	6,054	3,101	0	51,732	0	0	119	586	0
Status of shareholding	Ratio of Shareholding %	0.000	0.005	0.000	0.015	0.000	0.005	0.002	0.000	0.009	0.020	0.006	0.015	0.000	0.009	0.000
	Quantity	2,084	116,848	0	352,758	4,001	118,665	42,073	10,380	213,452	464,960	135,156	341,678	738	219,840	871
Election Date		2009/2/27	2011/7/7	2013/1/25	2010/5/4	2009/12/31	2009/8/28	2008/8/7	2013/1/25	2013/1/25	2011/3/2	2013/1/25	2009/11/9	2013/1/25	2013/1/25	2009/8/28
Name		Hwei-Chin Lu	Huan-Chang Tseng	Min-Hsuan Chiang .	Chung-Hsien Lee	Pi-Hwa Chang	Chia-Wei Tsai	Yu-Chen Yang	Yi-Cheng Liao	Pao-Yuan Chen	Tung-Po Yang	Ming-Ren Hsu	Shu-Chen Chen	Chao-Chi Tseng	Chang-Chi Liu	Chien-Hao Chen
Title		Manager, Chungkang Branch	Manager, S. Taichung Branch	Manager, N. Taichung Branch	Manager, Taiping Branch	Manager, Houli Branch	Manager, Daya Branch	Manager, Tan Tzu Branch	Manager, Sheg Kang Branch	Manager, Fongyuan Branch	Manager, Dachia Branch	Manager, Chingsui Branch	Manager, Shalu Branch	Manager, Wufong Branch	Manager, Dongshih Branch	Manager, E. Fongyuan Branch

27

Spouse or kin within the second pillar under the Civil Code and who is a manager	Relation	None	None	None	None	None	None	None	None	None	None	None	Brothers	None	None	28
	Name	None	None	None	None	None	None	None	None	None	None	None	Cheng- Wen Ni	None	None
	Title	None	None	None	None	None	None	None	None	None	None	None	Manager	None	None
Positions with other companies		Director of Zhi Sen Compound Materials Co., Ltd.	None	None	None	None	None	None	None	None	None	None	None	None	None
Major experience		Manager, Shui Li Branch; Department of Business Administration, Ling Tung College	Deputy Manager, Hsinchu Branch; Graduate School of Statistics, National Taipei University	Manager, Shangkong Branch; Finance, Taichung Institute of Technology (Open Education Program)	Deputy Manager, Erlin Branch; Department of Law, National Taiwan University	Deputy Manger, Puli Branch; Department of International Trade, University of Chinese Culture.	Manager, Changhua Branch; Accounting and Statistics, Taichung Husbandry and Commerce Vocational School	Manager, Min Hsiung Branch; Business Administration, Taichung Commercial School on Open education program	Manager, Siangshang Branch; Department of Accounting, Feng Chia University	Deputy Manager, Nantou Branch; Dept of Business Administration, Chaoyang University of Technology	Manager, Siushui Branch; Department of Business Administration, Tamsui Institute of Business Administration	Manager, Nantun Branch; Department of Business Administration, Ming Dao University	Manager, Puhsin Branch; Department of Business Administration, Feng Chia University	Manager, Dachu Branch; Enterprise Information Management, Chung Chou Institute of Technology, Affiliated College of Continuing Education	Manager, Huatan Branch; Business, Holy Savior High School
Shareholding under the title of a third party	Ratio of Shareholding %	0	0	0	0	0	0	0	0	0	0	0	0	0	0
	Quantity	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Shares Held by Spouse & Dependents	Ratio of Shareholding %	0.000	0	0	0	0	0	0	0.000	0.000	0	0	0	0	0.003
	Quantity	618	0	0	0	0	0	0	1,049	1,038	0	0	0	0	64,469
Status of shareholding	Ratio of Shareholding %	0.000	0.001	0.000	0.003	0.002	0.008	0.001	0.000	0.000	0.008	0.001	0.000	0.004	0.007
	Quantity	670	20,196	10,000	80,966	51,900	195,144	30,683	7,119	432	184,372	13,357	327	85,658	158,050
Election Date		2013/1/25	2009/2/27	2009/8/28	2010/5/4	2013/1/25	2013/1/25	2012/4/30	2008/9/22	2013/1/25	2010/8/4	2013/1/25	2011/11/24	2009/2/27	2009/8/28
Name		Chien-ting Lin	Chi-Hung Wu	Chun-Chun You	Tsung-Yi Liu	Shin-Hsiung Huang	Ya-Ching Peng	Ming-Yu Chiu	Yung-Chang Lai	Yung-Sung Chien	Chung-Cheng Wu	Hung-Ping Chen	Cheng-Hsien Ni	Ming-Cheng Wu	Hsin-Hsin Lee
Title		Manager, Wutze Branch	Manager, S. Fongyuan Branch	Manager, Nanyang Branch	Manager, Nantou Branch	Manager, Chushan Branch	Manager, Shuili Branch	Manager, Puli Branch	Manager, Tsaotun Branch	Manager, Changhua Branch	Manager, Lukang Branch	Manager, Shihu Branch	Manager, Erlin Branch	Manager, Peitou Branch	Manager, Teinchung

28

Spouse or kin within the second pillar under the Civil Code and who is a manager	Relation		None	Brothers	None	None	None	None	None	None	None	None	None	None	None	None	None
	Name		None	Cheng- Hsien Ni	None	None	None	None	None	None	None	None	None	None	None	None	None
	Title		None	Manager	None	None	None	None	None	None	None	None	None	None	None	None	None
Positions with other companies			None	None	None	None	None	None	None	None	None	None	None	None	None	None	None
Major experience			Deputy Manager, Shen kang Branch; Department of Business Administration, Chung Hua University	Manager, Risk Management Dept.; Department of Business Administration, Ling Tung College	Manager, Yungchiung Branch; Department of Cooperative Economics, Feng Chia University	Manager,Zhongzhen Branch; Graduate Institute of Finance, National Chung Hsing University	Deputy Manager, Shalu Branch; Graduate Institute of Agricultural Economics, National Chung Hsing University	Manager, Fongyuan Branch; Department of Accounting, National Chung Hsing University	Manager, Yuanlin Branch; Department of Business Administration, Feng Chia University	Manager, N. Yuanlin Branch; Graduate Institute of Finance, National Yunlin University of Technology and Science	Deputy Manager, Huatan Branch; Department of Business Administration, National Chung Hsing University	Manager, Wutze Branch; Tourism Department, Tamsui Institute of Business Administration	Manager, S. Taichung Branch; Department of Law, Fu Jen Catholic University	Deputy Manager, Chunan Branch; Applied Foreign Language, Taichung Commercial School on Continuing Education	Manager, Sung shan Branch; Graduate Institute of Law, Soochow University	Manager, Wufeng Branch; Business Administration, Ling Tung College	Yongho Branch of Citibank (Taiwan); Department of banking, National Chengchi University
Shareholding under the title of a third party	Ratio of Shareholding %		0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
																		29
	Quantity		0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Shares Held by Spouse & Dependents	Ratio of Shareholding %		0	0	0	0.001	0	0	0	0	0	0	0	0	0	0.000	0
	Quantity		0	0	0	14,140	0	0	0	0	0	0	0	0	0	5,009	0
Status of shareholding	Ratio of Shareholding %		0.000	0.003	0.000	0.023	0.010	0.003	0.010	0.007	0.000	0.002	0.004	0.001	0.006	0.008	0.005
	Quantity		7,923	70,804	618	528,361	239,740	77,850	223,063	153,227	1,131	46,071	88,899	33,035	134,349	184,786	105,168
Election Date			2009/8/28	2011/7/12	2010/8/4	2009/8/28	2010/5/10	2013/1/25	2009/8/28	2009/2/27	2013/1/25	2013/1/25	2009/12/31	2011/11/24	2009/9/2	2013/1/25	2009/10/1
Name			Ching-Yuan Lin	Cheng-Wen Ni	Tsung-Chang Tseng	Kee-Hsien Lee	Chi-Hua Yao	Wei-Huang You	Wen-Tung You	Shun-Deh Tsai	Chun-Min Huang	Shih-Huei Wang	Yi-Ping Lin	Jhih-Hao Liang	Rong-Kuo Cheng	Kuo-Chin Chi	Tien-Hou Tsai
Title		Branch	Manager, Yuanlin Branch	Manager, Homei Branch	Manager, Shetou Branch	Manager, Huatan Branch	Manager, Yungchiung Branch	Manager, Siushui Branch	Manager, Shangkong Branch	Manager, Dachu Branch	Manager, N. Yuanlin Branch	Manager, Peitou Branch	Manager, Peitun Branch	Manager, Puhsin Branch	Manager, Taipei Branch	Manager, Lungjing Branch	Manager, Sung shan Branch

29

Spouse or kin within the second pillar under the Civil Code and who is a manager	Relation	None	None	None	None	None	None	None	None	None	None	None	None	None	None	None	30
	Name	None	None	None	None	None	None	None	None	None	None	None	None	None	None	None
	Title	None	None	None	None	None	None	None	None	None	None	None	None	None	None	None
Positions with other companies		None	None	None	None	None	None	None	None	None	None	None	None	None	None	None
Major experience		Manager, Cosmos Bank, Chien Cheng Branch; Business Administration, National Taipei Junior College of Business on Air education program	Corporate banking manager, Cosmos Bank, Hsin Hsing Branch; Graduate Institute of Financial Operations, National Kaohsiung First University of Science and Technology	Deputy Manager, Tucheng Branch; Department of International Trade, Tamkang University	Deputy Manager, Er Lin Branch; Bank Management, Tamsui Institute of Business Administration	Manager, Peitun Branch; Business Administration, Taitung Institute of Technology	Manager, Jhongli Branch; Department of Economics, Tung Hai University	Deputy Manager, Homei Branch; Department of Commerce, National Open University	Manager, Wutze Branch; Department of International Trade, Chienkou Technology University	Deputy Manager, Sung Shan Branch; Department of Business Administration, Tung Hai University	Assistant Manager, CitiBank (Taiwan); Graduate Institute of Financial Operations, National Kaohsiung First University of Science and Technology	Manager, Tayuan Branch; Department of Banking, National Chengchi University	Deputy Manager, Sungshan Branch; Department of Industrial Management, National Taiwan University of Science and Technology	Deputy Manager, Lukang Branch; International Trade, Aletheia University.	Manager, Nankan Branch; Dept. of Business Administration, Vanung University	Manager, Citibank Fu Cheng Branch;
Shareholding under the title of a third party	Ratio of Shareholding %	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
	Quantity	0	0	0	0	0	0	0	0	0	0	0	0	0	0	0
Shares Held by Spouse & Dependents	Ratio of Shareholding %	0	0	0	0	0	0.001	0.000	0	0	0	0	0	0	0	0
	Quantity	0	0	0	0	0	13,459	121	0	0	0	0	0	0	0	0
Status of shareholding	Ratio of Shareholding %	0.001	0.003	0.000	0.004	0.004	0.006	0.006	0.000	0.006	0.001	0.004	0.000	0.000	0.007	0.003
	Quantity	31,140	80,288	1,520	103,800	102,670	140,003	129,164	2,081	131,738	21,565	83,968	0	0	157,020	60,204
Election Date		2009/3/9	2009/3/11	2013/1/25	2008/8/7	2009/12/31	2013/1/25	2009/2/27	2010/8/4	2010/4/30	2008/4/25	2013/1/25	2013/1/25	2012/4/30	2013/1/25	2010/6/1
Name		Ruei-Chang Lee	Chiang-Kai Liu	Yin-Ta Tsai	Chen-Hsiang Chuang	Kuang-Chi Chen	Cheng-Huan Huang	Shun-Chi Ke	Chiu-Wen Chang	Tsai-Tuan Chen	Wen-Kai Tsai	Chun-wen Chen	Chien-Min Feng	Ching-Tang Tsai	Shih-Fan Weng	Chung-Hsien
Title		Manager, Sanchong Branch	Manager, Kaohsiung Branch	Manager, Linko Branch	Manager, Huwei Branch	Manager, Yuanli Branch	Manager, Chunan Branch	Manager, Dounan Branch	Manager, Neihu Branch	Manager, Ban Chiao Branch	Manager, Feng Shan Branch	Manager, Xinzhuang Branch	Manager, Pingjhen Branch	Manager, Min Hsiung Branch	Manager, Taoyuan Branch	Manager,

30

Spouse or kin within the second pillar under the Civil Code and who is a manager	Relation		None	None	None	None	None	None	None	None	None	None	None	None	31
	Name		None	None	None	None	None	None	None	None	None	None	None	None
	Title		None	None	None	None	None	None	None	None	None	None	None	None
Positions with other companies			None	None	None	None	None	None	None	None	None	None	None	None
Major experience		Comprehensive Commerce Depertment, National Tainan Commercial Vocational Senior High School	Manager, Standard Chartered Bank, Chu Pei Branch; Department of Taxation and Public Finance, National Cung Hsing University	Manager, Xinzhuang Branch; Graduate Institute of Management Science, National Chiao Tung University	Manger, North Taiwan Regional Center; Graduate Institute of Finance and Banking, National Central University	Manager, Standard Chartered Bank, Management Dept.; Department of Banking Insurance, Feng Chia University	Manager, Pingjhen Branch; University of Tennessee School of Business Administration	Manager, Neili Branch; Department of Applied Business, Taipei Institute of Commerce and Technology	Deputy Manager, Chu Pei Branch; Department of Business Administration, Soochow University	Manager, Cosmos Bank, Corporate Banking Center of Taoyung District; Graduate School of Management, Yuan Ze University	Manager, Pingjhen Branch; Department of Cooperative Economics, Feng Chia University	Manager, Cosmos Bank, Corporate Banking Center of North 1st District; Graduate School of Management, Yuan Ze University	Assistant Manager of Taiwan International Securities Corporation; Graduate Institute of Business; Administration, Da-Yeh University	Asst VP, Jih Sun Securities, Dept of Business Administration, American International University
Shareholding under the title of a third party	Ratio of Shareholding %		0	0	0	0	0	0	0	0	0	0	0	0
	Quantity		0	0	0	0	0	0	0	0	0	0	0	0
Shares Held by Spouse & Dependents	Ratio of Shareholding %		0	0	0	0	0	0	0.001	0	0	0	0.000	0
	Quantity		0	0	0	0	0	0	32,074	0	0	0	3,207	0
Status of shareholding	Ratio of Shareholding %		0.006	0.000	0.005	0.005	0.004	0.010	0.005	0.000	0.009	0.000	0.000	0.000
	Quantity		146,020	507	120,417	124,000	92,101	236,789	116,659	0	198,448	4,152	0	0
Election Date			2008/6/2	2013/1/25	2013/1/25	2008/9/1	2010/4/30	2013/1/25	2009/6/16	2009/5/25	2009/6/16	2011/3/7	2011/7/25	2012/12/3
Name		Lee	Chien-Hung Lin	Hsin-Fa Wang	Pei-Miao Jan	Cheng-Hua Lee	Chen-Hung Cheng	Jr-Hsin Lee	Chang-Sheng Liu	Yu-Heui Tseng	Ting-Kuang Huang	Su-Lang Huang	Hong-Lun Chang	Kuang-Chiang Lee
Title		Yung Kung Branch	Manager, Chu Pei Branch	Manager, Nan Kang Branch	Manager, Nei Li Branch	Manager, Hsinchu Branch	Manager, Gueishan Branch	Manager, Jhongli Branch	Manager, Hsinfong Branch	Manager, Ta Yuan Branch	Manager, Yangmei Branch	Manager, Tucheng Branch	Manager, Yuanlin Branch Securities Brokerage	Manager, Taipei Branch Securities

31

Spouse or kin within the second pillar under the Civil Code and who is a manager	Relation		None	None	None	None
	Name		None	None	None	None
	Title		None	None	None	None
Positions with other companies			None	None	None	None
Major experience			Manager of First Securities, Jhongli Branch; Department of Electronic Equipment Repair, LiRen Private High School	Manager, North Taiping Branch; International Trade, Tamsui Institute of Business Administration	Manager, S. Fongyuan Branch; Department of International Trade, Feng Chia University	Deputy Manager, North Regional Center, Department of Economics, National Chung Hsing University
Shareholding under the title of a third party	Ratio of Shareholding %		0	0	0	0
	Quantity		0	0	0	0
Shares Held by Spouse & Dependents	Ratio of Shareholding %		0	0	0.001	0
	Quantity		0	0	16,903	0
Status of shareholding	Ratio of Shareholding %		0.000	0.005	0.013	0.000
	Quantity		0	120,429	312,438	448
Election Date			2011/8/26	2013/1/25	2009/2/27	2013/1/25
Name			Wun-Jheng Lee	Zai-Hong Yang	Kuo-Chi Lin	Ho Kuo-Liang
Title		Brokerage	Manager, Jhongli Branch Securities Brokerage	Manager, Taichung Regional Center	Manager, Chang Hwa Regional Center	Manager, North Regional Center

32

	Remuneration paid to directions from	an invested company other than the company’s subsidiary	an invested company other than the company’s subsidiary				54	33
	The sum of A, B, C, D, E, F and G in proportion to Earnings (%)	All companies mentioned in the financial statements					1.02
		The Bank					0.95
Remuneration in the capacity as employees	Number of new restricted employee shares acquired	All companies mentioned in the financial statements					0
		The Bank					0
	Quantity of shares entitled under employee stock option (H)	All companies mentioned in the financial statements					0
			The Bank				0
	Employee bonus from earnings (G) (Note 1)	All companies mentioned in the financial statements	Free-Gratis Dividends				0
			Cash Dividends				2
		The Bank	Free-Gratis Dividends				0
			Cash Dividends				2
	Pension (F)	All companies mentioned in the financial statements					0
		The Bank					0
	Salaries, bonus and special subsidies (E)	All companies mentioned in the financial statements					3,945
		The Bank					3,945
	The sum of A, B, C and D in proportion to Earnings (%)	All companies mentioned in the financial statements					0.87
		The Bank					0.80
Remuneration to Directors	For services (D)	All companies mentioned in the financial statements					2,064
		The Bank					1,858
	Retained Shares Distribution (C) (Note 1)	All companies mentioned in the financial statements					59
		The Bank					59
	Pension (B)	All companies mentioned in the financial statements					0
		The Bank					0
	Director fees (A)	All companies mentioned in the financial statements					22,149
		The Bank					20,390
		Name		Jin-Fong Soo	Kuei-Fong Wang, Jer-Shyong Tsai Hsi-Rong Huang (independent director)	Chen-Le Liu, Jin-Yi Lee	Kuei-Hsien Wang, Hsin-Ching Chang Ming-Shan Chuang, Chun-Sheng Lee Ming-Hsiung Huang, Chia-Hung Lin Meng-Liang Chang
		Title		Chairman	Managing Director	Independent director	Director

33

			0	0	0	0	0	0	Note 1: The employee bonus and remuneration to directors/supervisors are allocated according to the earnings allocation motion in the most recent year. The proportion of allocation this year is imputed based on the proportion of allocation in the most recent year. Note 2: The pledge ratio of I Joung Investment Co., Ltd. and Chou Chang Co., Ltd. is more than 50%.
			0.05	0.03	0	0.02	0	0.03
			0.05	0.03	0	0	0	0.03
			0	0	0	0	0	0
			0	0	0	0	0	0
			0	0	0	0	0	0
			0	0	0	0	0	0
			0	0	0	0	0	0
			0	0	0	0	0	0
			0	0	0	0	0	0
			0	0	0	0	0	0
			0	0	0	0	0	0
			0	0	0	0	0	0
			0	0	0	0	0	0
			0	0	0	0	0	0
			0.05	0.03	0	0.02	0	0.03
			0.05	0.03	0	0	0	0.03
			180	50	5	55	0	0
			145	50	5	30	0	0
			0	0	0	0	13	6
			0	0	0	0	13	6
			0	0	0	0	0	0
			0	0	0	0	0	0
			1,320	840	0	475	0	840
			1,200	840	0	0	0	840
Kang-Chi Chou	Pan Asia Chemical Corporation	Ho Yang Management Consultant Co., Ltd.	Managing Director Yi-Der Chen (Note 2)	Director Ching-Hsin Chang (Note 2)	Director Jer-Nan Wang (Note 2)	Director Wei-Liang Lin (Note 2)	I Joung Investment Co., Ltd. (Note 2)	Chou Chang Co., Ltd. (Note 2)

34

Name of Directors	Total (A+B+C+D+E+F+G)	All companies mentioned in the financial statements J	Yi-Der Chen, Chen-Le Liu, Jin-Yi Lee, Kuei-Hsien Wang, Kang-Chi Chou, Hsin-Ching Chang, Ming-Shan Chuang, Ming-Hsiung Huang, Chia-Hung Lin, Jer-Nan Wang, Ching-Hsin Chang, Meng-Liang Chang, Wei-Liang Lin, I Jong Investment Co., Ltd., Ho Yang Management Consultant Co., Ltd., Chou Chang Co., Ltd..	Jin-Fong Soo, Jer-Shyong Tsai, Hsi-Rong Huang, Kuei-Fong Wang, Chun-Sheng Lee, Pan Asia Chemical Corporation	None	None	None	None	None	None	22 persons
		The Bank	Yi-Der Chen, Chen-Le Liu, Jin-Yi Lee, Kuei-Hsien Wang, Kang-Chi Chou, Hsin-Ching Chang, Ming-Shan Chuang, Ming-Hsiung Huang, Chia-Hung Lin, Jer-Nan Wang, Ching-Hsin Chang, Meng-Liang Chang, Wei-Liang Lin, I Jong Investment Co., Ltd., Ho Yang Management Consultant Co., Ltd., Chou Chang Co., Ltd..	Jin-Fong Soo, Jer-Shyong Tsai, Hsi-Rong Huang, Kuei-Fong Wang, Chun-Sheng Lee, Pan Asia Chemical Corporation	None	None	None	None	None	None	22 persons
	Total (A+B+C+D)	All companies mentioned in the financial statements I	Yi-Der Chen, Chen-Le Liu, Jin-Yi Lee, Kuei-Hsien Wang, Kang-Chi Chou, Hsin-Ching Chang, Ming-Shan Chuang, Chun-Sheng Lee, Ming-Hsiung Huang, Chia-Hung Lin, Jer-Nan Wang, Ching-Hsin Chang, Meng-Liang Chang, Wei-Liang Lin, I Jong Investment Co., Ltd., Ho Yang Management Consultant Co., Ltd., Chou Chang Co., Ltd..	Jin-Fong Soo, Jer-Shyong Tsai, Hsi-Rong Huang, Kuei-Fong Wang, Pan Asia Chemical Corporation	None	None	None	None	None	None	22 persons
		The Bank	Yi-Der Chen, Chen-Le Liu, Jin-Yi Lee, Kuei-Hsien Wang, Kang-Chi Chou, Hsin-Ching Chang, Ming-Shan Chuang, Chun-Sheng Lee, Ming-Hsiung Huang, Chia-Hung Lin, Jer-Nan Wang, Ching-Hsin Chang, Meng-Liang Chang, Wei-Liang Lin, I Jong Investment Co., Ltd., Ho Yang Management Consultant Co., Ltd., Chou Chang Co., Ltd..	Jin-Fong Soo, Jer-Shyong Tsai, Hsi-Rong Huang, Kuei-Fong Wang, Pan Asia Chemical Corporation	None	None	None	None	None	None	22 persons
	Classification of remuneration paid to directors		Less than 2,000,000	2,000,000(inclusive)~5,000,000 (exclusive)	5,000,000 (inclusive)~10,000,000 (exclusive)	10,000,000 (inclusive)~15,000,000 (exclusive)	15,000,000 (inclusive)~30,000,000 (exclusive)	30,000,000 (inclusive)~50,000,000 (exclusive)	50,000,000 (inclusive)~100,000,000 (exclusive)	100,000,000 above	Total

35

Remuneration paid to directions from	Remuneration paid to directions from	an invested company other than the company’s subsidiary	0	0			Note: The employee bonus and remuneration to directors/supervisors are allocated according to the earnings allocation motion in the most recent year. The proportion of allocation this year is imputed based on the proportion of allocation in the most recent year.
The sum of A, B, C and D in proportion to Earnings (%)		All companies mentioned in the financial statements	0.18
		The Bank	0.18
Remuneration to Supervisors	For services (D)	All companies mentioned in the financial statements	455
		The Bank	455
	Retained Shares Distribution (C) (Notes)	All companies mentioned in the financial statements	31
		The Bank	31
	Pension (B)	All companies mentioned in the financial statements	0
		The Bank	0
	Director fees (A)	All companies mentioned in the financial statements	4,560
		The Bank	4,560
		Name	Jiann-Ell Huang	Ching-Huang Tsai, Shu-Li Huang Chao-Nan Hsieh, Chien-Hwa Lee Fu	Xin Rui Investment Co., Ltd.	Tai Jiunn Enterprise Co., Ltd.
		Title	Resident Supervisor	Supervisor

36

Classification of remuneration	Name of Supervisors	Total (A+B+C+D)	All companies mentioned in the financial statements E	Jiann-Ell Huang,Ching-Huang Cai, Shu-Li Huang, Chian-Hwa Lee Fu, Chao-Nan Hsieh, and Tai Jiunn Enterprise Co., Ltd.	Xin Rui Investment Co., Ltd.	None	None	None	None	None	None	7 persons	37
			The Bank	Jiann-Ell Huang,Ching-Huang Cai, Shu-Li Huang, Chian-Hwa Lee Fu, Chao-Nan Hsieh, and Tai Jiunn Enterprise Co., Ltd.	Xin Rui Investment Co., Ltd.	None	None	None	None	None	None	7 persons
	Classificationof remuneration paid to supervisors			Less than 2,000,000	2,000,000 (inclusive)~5,000,000 (exclusive)	5,000,000 (inclusive)~10,000,000 (exclusive)	10,000,000 (inclusive)~15,000,000 (exclusive)	15,000,000 (inclusive)~30,000,000 (exclusive)	30,000,000 (inclusive)~50,000,000 (exclusive)	50,000,000 (inclusive)~100,000,000 (exclusive)	100,000,000 above	Total

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Remuneration paid to directions from an invested company other than the company’s subsidiary	Remuneration paid to directions from an invested company other than the company’s subsidiary	Remuneration paid to directions from an invested company other than the company’s subsidiary			36	36			Note: The employee bonus and remuneration to directors/supervisors are allocated according to the earnings allocation motion in the most recent year. The proportion of allocation this year is imputed based on the proportion of allocation in the most recent year.
Number of new restricted employee shares acquired	All companies mentioned in the financial statements				0
	The Bank				0
Employee share subscription warrants	All companies mentioned in the financial statements				0
	The Bank				0
The sum of A, B, C and D in proportion to Earnings (%)	All companies mentioned in the financial statements				0.68
		The Bank			0.66
Employee bonus of earning distribution(D) (Note )	All companies mentioned in the financial statements	Free-Gratis Dividends			0
		Cash Dividends			8
	The Bank	Free-Gratis Dividends			0
		Cash Dividends			8
Bonus and special Disbursement (C)	All companies mentioned in the financial statements				3,953
	The Bank				3,953
Pension (B)	All companies mentioned in the financial statements				0
	The Bank				0
Salary (A)	All companies mentioned in the financial statements				14,944
	The Bank				14,434
	Name		Chun-Sheng Lee	Kung-Hua Kao	Chi-Chuan Fang	Kai-Yu Lin	Hsueh-Hsien Liao	Min-Chin Shen
	Title		President	Executive Vice President	Executive Vice President	Executive Vice President	Executive Vice President	Chief Auditor

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Classification of remuneration	Name of Presidents and Executive Vice Presidents	Classificationof Remuneration paid to presidents and Executive Vice Presidents The Bank All companies mentioned in the financial statements E	Less than 2,000,000 None None	Chun-Sheng Lee, Jung-Hua Kao,	2,000,000 (inclusive) ~ 5,000,000 (exclusive) Chih-Chuan Fang Kai-Yu Lin, Hsueh-Hsien Liao, Chun-Sheng Lee, Jung-Hua Kao, Chih-Chuan Fang Kai-Yu Lin, Hsueh-Hsien Liao, Min-Chin Shen	Min-Chin Shen	5,000,000 (inclusive) ~10,000,000 (exclusive) None None	10,000,000 (inclusive) ~15,000,000 (exclusive) None None	15,000,000 (inclusive) ~30,000,000 (exclusive) None None	30,000,000 (inclusive) ~50,000,000 (exclusive) None None	50,000,000 (inclusive) ~100,000,000 (exclusive) None None	100,000,000 above None None	Total 6 persons 6 persons	Note 1: Vehicles and monthly rent provided to the Chairman and President in 2012	Unit: NTD thousand	Title Name Monthly rent Remuneration paid to driver in 2012 Remarks	Chairman Jin-Fong Soo 0 1,180 The driver is the Bank’s employee. President Chun-Sheng Lee The driver is retained externally.	Note 2: Imputed house rent provided to Chairman, President and Executive Vice Presidents in 2012	Unit: NTD thousand	Title Name House and the land value Imputed monthly rent Remarks	Chairman Jin-Fong Soo The dormitory as provided was	15,127 77 owned by the Bank itself. The	house cost was based on the Vice Chairman Kuei-Fong Wang	39

39

information of the land cost and the price of acquisition less allowance for depreciation of the buildings thereon (exclusive of the accessory equipment, additions and renovation of the buildings) specified in the catalogue of property at the end of December 2012.	information of the land cost and the price of acquisition less allowance for depreciation of the buildings thereon (exclusive of the accessory equipment, additions and renovation of the buildings) specified in the catalogue of property at the end of December 2012.	information of the land cost and the price of acquisition less allowance for depreciation of the buildings thereon (exclusive of the accessory equipment, additions and renovation of the buildings) specified in the catalogue of property at the end of December 2012.
Chun-Sheng Lee	Chih-Chuan Fang Jung-Hua Kao	Ming-Chin Shen
President	Executive Vice President	Chief Auditor

40

4. Members of management team receiving employee bonus and bonus distribution:

Dec. 31, 2012

			Dec. 31, 2012
				Unit:	NTDthousand; %
Title	Name	Free-Gratis Dividends	Cash Dividends (Note)	Total	Total/after-tax profit (%)
President	Chun-ShengLee	0	69	69	0
Executive Vice President	Hsueh-Hsien Liao
Executive Vice President	Rong-Hua Kao
Executive Vice President	Kai-Yu Lin
Executive Vice President	Chi-Chuan Fang
Chief Auditor	Min-Chin Shen
Manager	Ching-huHsieh
Manager	Chun-Ying Wang
Manager	Kuo-Chun Liu
Manager	Yi-Ying Chung
Manager	Deh-WeiChia
Manager	Mei-LiWu
Manager	Jhen-Ying Wu
Manager	Guang-Jhong Siao
Manager	Cheng-Yu Lai
Manager	Chih-HungLu
Manager	Yu-ChungLin
Manager	Feng-Lang Chen
Manager	Chien-MinChou
Manager	Ruei-Fen Tsai
Manager	Chi-Long Huang
Manager	Dong-HsuLiu
Manager	Rai-ChengYang
Manager	Han-ChingTsai
Manager	Hung-Ping Chen
Manager	Yu-Ing Chen
Manager	Ching-Kun Lin
Manager	Zai-Hong Yang
Manager	Tzer-HsiuLin
Manager	Chiung-TengHung
Manager	Hwei-Chin Lu
Manager	Huan-Chang Tseng
Manager	Wen-ChuLee
Manager	Chung-Hsien Lee
Manager	Pi-Hwa Chang
Manager	Chia-Wei Tsai
Manager	Yu-Chen Yang
Manager	He-ChinChang
Manager	Wei-HuangYou

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Title	Name	Free-Gratis Dividends	Cash Dividends (Note)	Total	Total/after-tax profit (%)
Manager	Tung-Po Yang	(Continued from previous page)	(Continued from previous page)	(Continued from previous page)	(Continued from previous page)
Manager	Yao-PinChen
Manager	Shu-ChenChen
Manager	Kuo-ChinChi
Manager	Pi-WeiWang
Manager	Chien-Hao Chen
Manager	Shih-Huei Wang
Manager	Chi-Hung Wu
Manager	Chun-Chun You
Manager	Tsung-Yi Liu
Manager	Chang-YungHuang
Manager	Chien-tingLin
Manager	Ming-Yu Chiu
Manager	Yung-Chang Lai
Manager	Ya-ChingPeng
Manager	Chung-Cheng Wu
Manager	Pao-YuanChen
Manager	Cheng-HsienNi
Manager	Ming-Cheng Wu
Manager	Hsin-Hsin Lee
Manager	Ching-Yuan Lin
Manager	Cheng-WenNi
Manager	Tsung-ChangTseng
Manager	Kee-Hsien Lee
Manager	Chi-HuaYao
Manager	Yu-Nien Kang
Manager	Wen-Tung You
Manager	Shun-Deh Tsai
Manager	Yi-Ren Teng
Manager	Kwei-ChingHo
Manager	Yi-Pin Lin
Manager	Jhih-HaoLiang
Manager	Rong-Kuo Cheng
Manager	Chang-Chi Liu
Manager	Tien-HouTsai
Manager	Ruei-ChangLee
Manager	Chiang-Kai Liu
Manager	Wen-Che Chen
Manager	Chen-Hsiang Chuang
Manager	Kuang-ChiChen
Manager	Ming-Ren Hsu
Manager	Shun-Chi Ke
Manager	Chiu-WenChang
Manager	Tsai-TuanChen
Manager	Wen-Kai Tsai
Manager	Hsin-Fa Wang
Manager	Wen-Chuan Zhuang
Manager	Ching-TangTsai
Manager	Chiu-wen Chen
Manager	Chung-Hsien Lee
Manager	Chien-HungLin
Manager	Shih-FanWeng

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Title	Name	Free-Gratis Dividends	Cash Dividends (Note)	Total	Total/after-tax profit (%)
Manager	Jr-Hsin Lee	(Continued from previous page)	(Continued from previous page)	(Continued from previous page)	(Continued from previous page)
Manager	Cheng-HuaLee
Manager	Chen-Hung Cheng
Manager	Cheng-Huan Huang
Manager	Chang-ShengLiu
Manager	Yu-Heui Tseng
Manager	Ting-Kuang Huang
Manager	Su-Lan Huang
Manager	Hong-LunChang
Manager	Kuang-ChiangLee
Manager	Wun-JhengLee
Manager	Yi-Yuan Tung
Manager	Kuo-Chi Lin
Manager	Pei-Miao Jan

• Note: Proposed employee bonus for 2012 is NTD 219,097. Based on the ratio of actual distributed amount for managerial staff last year, the proposed employee benefits for managerial staff is NTD 68,577. [(125,710/401,746)*219,097]

• (IV) Individually explain and compare the analysis of the total compensation paid out to Directors, Supervisors, General Manager, and Vice General Manager in the past two years as a percentage of net profit after tax for each financial statement at our bank and all companies referred to in the consolidated financial statements. In addition, explain the compensation policy, standard, combination of compensation items, and codify the procedures of compensation determination and the linkage between compensation and operating performance as well as future risks. 1. Analysis on Proportion to Earnings

			Unit: NTD thousand	Unit: NTD thousand
	2012		2011(Note 2)
	TheBank	Consolidation	TheBank	Consolidation
Directors(Note 1)	25,437	28,056	23,385	24,905
Supervisor	5,046	5,046	4,410	4,410
President/Executive VicePresidents	18,395	18,905	18,108	18,278
Total	48,878	52,007	45,903	47,593
Total/after-taxprofit	1.76%	1.87%	3.16%	3.27%

Note 1: The remuneration to directors less the salary received by President for assuming employees concurrently.

• Note 2: The NTD 15 thousand of em ployee bonus accrued in 2011 for the main managerial level has been further disclosed based on the amount actually paid out in December 2012.

• Compensation policy, standards, and combinations:

  • Our bank’s compensation and standard combination for Directors, Supervisors, General Manger, and Vice General Manger is based on our company’s Articles of Incorporation and the resolution of the compensation committee. Relevant articles are as follows:

  • (1) Article 27-1: The compensation for the Chairman of the Board is based on the total compensation for the General Manger and calculated as 1.25 times that amount. The compensation for the Vice Chairman of the Board, Executive Director, and Independent Directors is at the discretion of the board, taking into consideration

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compensation at the industry level. Said compensation is based on the total compensation of the General Manager but may not exceed 1.1 times that amount. Independent Directors are not eligible for our bank’s earnings distribution. Our bank may pay for liability insurance policies that cover the liabilities for damages as defined by statutes or court ruling within the scope of the business of Directors and Supervisors.

• (2) Article 29-1: The compensation for Executive Supervisor is at the discretion of the board, taking into consideration compensation at the industry level. Said compensation is based on the total compensation of the General Manager but may not exceed 1.1 times that amount.

• (3) Article 35: If, after closing our book for the year, our bank has net profit left, aside from paying corporate income tax as required by the law, our bank should first use it to cover the retained losses from previous years, then recognize 30% of the remainder as legal reserve, and finally recognize the special reserve as required by law. If there is still profit left after the above, dividends to shareholders should be declared and paid. The remainder after the dividend is distributed in the following order:

• A. 1%-5% for employee bonus.

• B. Remuneration to directors/supervisors granted based on 50% of the allocated employee bonus.

• C. Shareholder bonus.

The aforementioned earnings distribution should be proposed by the board, taking into consideration factors such as the business environment, operation and investment needs, and required capital preservation, and resolved at the shareholders’ meeting:

  - A. The cash dividends shall be no less than 10% of the Dividends and bonus allocated to shareholders.

  - B. Notwithstanding, if the Dividends are allocated at less than or equal to NTD0.3 per share, the earnings may be allocated in the form of stock Dividends in full.

     - If the capital adequacy ratio fails to reach the legal ratio, the earnings shall be allocated in accordance with the Banking Act and the competent authority’s requirements.

1. Codify the procedures of compensation and the linkage between compensation and operating performance as well as future risks:

2. (1) The bonus for the General Manager and the Vice General Manager is based on our company’s regulations on bonus pay as ratified by the Board or the Executive Board, using factors such as profit and operational result evaluation in various business lines for the calculation of bonus and adjusted for the company’s operational outcome.

3. (2) The remuneration to directors/supervisors includes the attendance fee, remuneration, and compensation allocated

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from earnings. The remuneration to President/Executive Vice Presidents includes salary, bonus and special subsidies, and employee bonus allocated from earnings.

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III. Status of Corporate Governance (I) The function of the Board

The Board called 10 meetings in 2012. The attendance of directors/supervisors is specified as follows:

（ 101.1.1~101.12.31 ）

Title	Name	Attendance (attend as observer)	Attend through proxy	Attendance rate (%) (note)	Remarks
Chairman	Jin-Fong Soo (Representative of Pan Asia ChemicalCorporation)	10	0	100
Vice Chairman	Kuei-Fong Wang (Representative of Pan Asia Chemical Corporation)	10	0	100
Managing Director	Yi-Der Chen (Representative of I Joung Investment Co.,Ltd.)	8	1	80
Managing Director	Jer-Shyong Tsai (Representative of Pan Asia ChemicalCorporation)	8	1	80
Managing Director (Independent Director)	Hsi-Rong Huang	10	0	100
Independent director	Chen-Le Liu	9	1	90
Independent director	Jin-Yi Lee	8	2	80
Director	Kuei-Hsien Wang (Representative of Pan Asia Chemical Corporation)	3	4	42.85	Discharged on October 1, 2012, the number of attendance to the Board session is 7.
Director	Hsin-Ching Chang (Representative of Pan Asia ChemicalCorporation)	10	0	100
Director	Ming-Shan Chuang (Representative of Pan Asia ChemicalCorporation)	10	0	100
Director	Chia-Hung Lin (Representative of Ho Yang Management Consultant Co.,Ltd.)	10	0	100
Director	Wei-Liang Lin (Representative of Chou Chang Co., Ltd.)	6	0	100	2012.6.8 Institutional shareholders reappointed their representatives, six meetings should be attended.
Director	Ming-Hsiung Huang (Representative of Pan Asia Chemical Corporation)	6	0	85.71	Discharged on October 1, 2012, the number of attendance to the Board session is 7.
Director	Ching-Hsin Chang (Representative of IJoung	10	0	100

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Title	Name	Attendance (attend as observer)	Attend through proxy	Attendance rate (%) (note)	Remarks
	Investment Co., Ltd.)
Director	Jer-Nan Wang (Representative of Chou Chang Co., Ltd.)	1	3	25	Discharged on June 8, 2012, the number of attendance to the Board session is4.
Director	Chun-Sheng Lee (Representative of Pan Asia ChemicalCorporation)	10	0	100
Director	Meng-Liang Chang (Representative of Pan Asia Chemical Corporation)	3	0	100	2012.10.1 Institutional shareholders reappointed their representatives, three meetings should be attended.
Director	Kang-Chi Chou (Representative of Pan Asia Chemical Corporation)	2	1	66.66	2012.10.1 Institutional shareholders reappointed their representatives, three meetings should be attended.
Other notes: 1. The content of the particulars inscribed in Article14-III of the Securities and Exchange Act, and of the adverse opinions or qualified opinions of the independent directors with record or declaration in writing shall be stated with the date of the Board meeting, the session, the content of the motions, the opinions of all independent directors, and the response to such opinions: none. 2. The avoidance of the conflict of interest by the Directors on related motions, specify the names of the Directors, the content of the motions, the principle of the avoidance of the conflict of interest, and the participation in casting the ballots: (1) 2012.4.18- in the 4thsession of the 21stBoard of Directors, on the discussion of the motion of “application for leasing the surplus space at Min Chuan Building (at No. 87, Min Chuan Road, West District, Taichung) for the use of Taichung Commercial Bank Lease Enterprise”, only Executive Director Tsai Jer-Shyong and Director Chang Hsin-Ching were excused before the discussion. All other Directors present in the meeting acted in favor of the motion. (2) 2012.6.27- In the 9thspecial session of the 21stBoard of Directors, the discussion on the motion of “the investment in Mainland China for the establishment of financing leasing company by subsidiaries of the Bank”, only Executive Director Tsai Jer-Shyong and Director Chang Hsin-Ching were excused before the discussion. All other Directors present in the meeting acted in favor of the motion. (3) 2012.8.8- In the 5thsession of the 21stBoard of Directors, the discussion on the motion of “The Bank intends to subscribe the new shares issued by Taichung Commercial Bank Insurance Broker Co., Ltd. for raising capital with the pledge of real properties”, only Vice Chairman Kuei-Fong Wang, Executive Director Chen Yi-Der were excused before the discussion. All other Directors present in the meeting acted in favor of the motion. (4) 2012.8.8- In the 5thsession of the 21stBoard of Directors, the discussion on the motion of “Lin Chen-Hai of Taoyuan Branch application for consent of cancellation”, only Director Lin Chia-Hung was excused before the discussion. All other Directors present in the meeting acted in favor of the motion. (5) 2012.9.5- In the 6thsession of the 21stBoard of Directors, the discussion on the motion of “The use of the office space in 2F of No. 45, Min Tzu Road (Min Tzu Building) in Central District,Taichung”, onlyExecutiveDirector TsaiJer-Shyong andDirector

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Title Name Attendance (attend as observer) Attend through proxy Attendance rate (%) (note) Remarks Chang Hsin-Ching were excused before the discussion. All other Directors present in the meeting acted in favor of the motion. (6) 2012.9.5- In the 6thsession of the 21stBoard of Directors, the discussion on the motion of “The Bank intends to subscribe the new shares issued by Taichung Commercial Bank Insurance Broker Co., Ltd. for raising capital with the pledge of real properties, and the terms and conditions for subscription” only Vice Chairman Kuei-Fong Wang, Executive Director Chen Yi-Der were excused before the discussion. All other Directors present in the meeting acted in favor of the motion. (7) 2012-10.17- In the 7thsession of the 21stBoard of Directors, the discussion on the motion of “the Bank intends to increase its holding of shares in Reliance Securities Investment Trust Co., Ltd”, only Vice Chairman Kuei-Fong Wang was excused before the discussion. All other Directors present in the meeting acted in favor of the motion. (8) 201212.12- In the 8thsession of the 21stBoard of Directors, the discussion on the motion of “The amount for distribution of fees for Directors and Supervisors in 2011”, 3 independent directors who did not get remunerations acted in favor of the motion. 3. The objective of fortifying the functions of the Board in current year and the most recent year (e.g., the establishment of the Auditing Committee, and enhancement of the transparency of information) and the assessment of the result of execution: In the 3rdspecial session of the 21stBoard of Directors dated 2011.8.13, the Board resolved to establish the Remuneration Committee for the routine review of the policies, systems, standards, and structures of the evaluation of the performance of the Directors, Supervisors, and mangers, and their remunerations.	Name	Attendance (attend as observer)	Attend through proxy	Attendance rate (%) (note)	Remarks

• Note : (1) Where a specific director or supervisor may be relieved from duties before the end of the fiscal year, specify their date of discharge. Their attendance (%) to Board session shall be calculated on the basis of the actual number of sessions held and the number of sessions they attended.

• (2) Where an election may be held for filling the vacancies of director or supervisor before the end of the fiscal year, list out both the new and the discharged directors and supervisors, and specify if they are the former director or supervisor, or newly elected, re-elected and the date of the election. Their attendance (%) at the Board session shall be calculated on the basis of the actual number of sessions held and the number of sessions they attended.

(II) The function of Audit Committee or Supervisors’ Participation in the Function of Board of Directors

The Board called 10 meetings in 2012 (A). The attendance of directors/supervisors is specified as following:

Title	Name	Actual number of attendance (B)	Actual attendance ratio (%) (B/A) (Note1)	Remarks
Resident Supervisor	Jiann-Ell Huang (Representative ofXin Rui Investment Co.,Ltd.)	10	100
Supervisor	Chien-Hwa Lee Fu (Representative ofXin Rui Investment Co.,Ltd.)	8	80
Supervisor	Ching-Huang Tsai (Representative ofXin Rui Investment Co.,Ltd.)	10	100
Supervisor	Shu-Li Huang (Representative ofXin Rui Investment Co.,Ltd.)	10	100
Supervisor	Chao-Nan Hsieh (Representative of Tai Jiunn	9	90

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Title	Name	Actual number of attendance (B)	Actual attendance ratio (%) (B/A) (Note1)	Remarks
	Enterprise Co., Ltd.)
Other notes: 1. The organization of supervisors and their duties: (1) The organization of supervisors and their duties: Communications between the Supervisors and the employees and shareholders: The communication may be made via the hotline and e-mail. (2) Communication between supervisors and internal audit officers and CPA: The supervisors shall call the supervisors’ meeting periodically, in which the President and Executive Vice Presidents shall be present, and the internal audit unit (chief auditor) shall propose the various business inspection reports and have the relevant department supervisors report the business development. If necessary, the supervisors may ask CPAs to attend the supervisors’ meeting called by them to provide explanation. 2. If any supervisor attends the directors’ meeting to state their opinion, it is necessary to specify the date, session, motions and resolution of the directors’ meeting, and the Bank’s response to the opinion stated by the supervisor: Supervisors attended directors’ meeting frequently to provide their positive opinion, butnorecord showing opinion fordissentisretained.

• Note 1: (1) Where a specific supervisor may be relieved from duties before the end of the fiscal year, specify their date of discharge in the “Remarks” Section. Their attendance (%) to the Board session shall be calculated on the basis of the actual number of sessions they attended.

• (2) Where an election may be held for filling the vacancies of supervisor before the end of the fiscal year, list out both the new and the discharged supervisors, and specify if they are the former supervisor, or newly elected, re-elected and the date of the election. Their attendance (%) to Board session shall be calculated on the basis of the actual number of sessions they attended during the term of office.

• Note 2 The Bank has not yet installed the Audit Committee.

  • (III) Items to be disclosed according to the Corporate Governance Best-Practice Principles for the Banking Industry

    • Please refer to the Bank’s website (www.tcbbank.com.tw) About Taichung Bank → Disclosure of Information → Information to be Disclosed under Laws

  • (IV) Status of Corporate Governance as required for banks, and any nonconformity to the Corporate Governance Best-Practice Principles for Banking Industry and reasons thereof

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Item	Implementation Status	Deviation from the Corporate Governance Best-Practice Principles for the Banking Industry andreasons
I. Equity structure and shareholders’ equity (I) Handling suggestions from shareholders and disputes (II) Control of the name list of Principle shareholders and the dominant parties behind such shareholders (III) The establishment of risk control mechanism and firewall between the Bank and affiliated companies	(I) The Bank has built the hotline and email dedicated to handling the suggestions from shareholders and disputes, and published them in the Bank’s official website. (II) The Bank pays attention to the increase/ decrease in or mortgage/ pledge of the equity of shareholders holding more than 5% of the total outstanding shares or shareholders assuming directors/ supervisors, and disclose such information on the MOPS site as required. (III) The transactions between the Bank and the subsidiaries have been conducted in accordance with applicable legal	Conformity to the “Corporate Governance Best-Practice Principles for the Banking Industry”

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Item	Implementation Status	Deviation from the Corporate Governance Best-Practice Principles for the Banking Industry andreasons
	rules. As such, it is not necessary to monitor, control and handle. There are also the criteria for the monitoring and handling of subsidiaries in place.
II. The organization of the Board and their duties (I) The position of independent directors (II) Regular review and assessment on the impartiality and independence of the external auditor	(I) Three independent directors were installed in the office according to the Bank’s Articles of Incorporation. (II) The Bank has not retained the same external auditor to conduct financial audit for many years consecutively. The Bank's assessment report on the impartiality and independence of the external auditor also	Conformity to the “Corporate Governance Best-Practice Principles for the Banking Industry”

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Item	Implementation Status	Deviation from the Corporate Governance Best-Practice Principles for the Banking Industry andreasons
	passed 21stterm Board in its 3rd Board Session on March 8, 2012.
III. Communication channels with stakeholders.	(I) The Bank has already disclose it on the Bank’s intranet pursuant to the Banking act and the competent authority’s requirements about limitation on the credit extended to stakeholders, and also held the seminars for laws and regulations irregularly to enable the persons-in-charge to comply with and know the laws and regulations, and request completion of the stakeholder information list immediately upon the stakeholder’s	Conformity to the “Corporate Governance Best-Practice Principles for the Banking Industry”

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Item	Implementation Status	Deviation from the Corporate Governance Best-Practice Principles for the Banking Industry andreasons
	transfer. The communication channel is considered uninterrupted. (II) The Bank not only disclosed the message on the MOPS site as required but also published it on the Bank’s official website to help investors’ search.
IV. Disclosures (I) The company has established a website for the disclosure of its Financial Status and status of corporate governance. (II) The company also adopts other means for disclosure (establish a website in the English language, with specific personnel to gather and disclose relevant information, properly implement the system of spokesman, and meetings with institutional investors for	(I) The company has established a website for the disclosure of its Financial Status and status of corporate governance. (II) The Bank has one spokesman and one deputy spokesman. The spokesman is assumed by the Executive Vice President. The spokesman makes a speech upon the supervisor’s order and also supervises the press release, media communication and other public relations handled by the competent units. Where	Conformity to the “Corporate Governance Best-Practice Principles for the Banking Industry”

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Item	Implementation Status	Deviation from the Corporate Governance Best-Practice Principles for the Banking Industry andreasons
offering will also be posted on the company website).	the spokesman is unable to perform his/her duty, the deputy spokesman will act on behalf of him/her.
V. The operation of the functional committees established by the Bank	The 21~~st~~ Board of Directors resolved in its 3rdspecial session on 2011.8.18 to establish the Remuneration Committee. The Committee has convened on December 1 2011, June 27 2012, and November 14 2012 for three instances.	Conformity to the “Corporate Governance Best-Practice Principles for the Banking Industry”
VI. Please specify the status of the Bank’s corporate governance, and any deviation from the "Corporate Governance Principles for the Banking Industry" and reasons thereof: The practice of corporate governance by the Bank is in compliance with the “Corporate GovernanceBest-PracticePrinciplesfor Banks”
VII. Other vital information that can help to understand the status of corporate governance by the Bank (examples are, the continuing education of the directors and the supervisors, the participation of the directors and the presence of the supervisors in the meetings of the Board, the enforcement of risk management policy and risk assessment standards, the protection of consumers and the pursuit of the customer policy, the status of the avoidance of the conflict of interest by the directors, the taking of liability insurance by the Bank for the protection of the directors and the supervisors, the donation to political parties, stakeholders, and social charity groups): (I) Continuing education and training programs related to corporate governance attended by directors/supervisors and managers 1. Continuing education for the Directors and Supervisors: (1) 2012.1.10- Independent Director Lee Chin-Yi attended the “The influence of the taxation principles on the enterprises and case study” program held by Accounting Research and Development Foundation for 3 hours. (2) 2012.1.10- Independent Director Lee Chin-Yi attended the “Common practice of the enterprises in cost saving, and the influence on financial position and the assessment of the result” seminar held by Accounting Research and Development foundation for 3 hours. (3) 2012.3.9- Supervisor Hsieh Chao-Nan, Executive Director Chen Yi-Der, and Director Chang Ching-Hsin, attended the “Conflict in the procedure of general meeting of shareholders and the practice for prevention” seminar held by Taiwan Corporate Governance Association for 3 hours. (4) 2012.3.13- IndepdentDirectorChen-LeLiu attended the“New

54

54

Deviation from the Corporate Governance Item Implementation Status Best-Practice Principles for the Banking Industry and reasons challenges to Remuneration Committee and the Trend of International Remuneration Governance” seminar held by Taiwan Corporate Governance Association for 3 hours.

• (5) 2012.3.15- Supervisor Lee-Fu Chien-Hua, Supervisor Shu-Li Huang, Supervisor Chin-Huang Tsai attended the “Important Notice of the new amendment to the Company Act and the Board of Directors and General Meeting of Shareholders” seminar held by Chinese National Association of Industry and Commerce, Taiwan (CNAIC), for 3 hours.

• (6) 2012.4.27- Director Jer-Nan Wang (discharged) attended the “The issue of dual-track – short-swing trade and insider trade” seminar held by Taiwan Corporate Governance Association for 3 hours.

• (7) 2012.5.11- Executive Independent Director Huang Shi-Rong, Independent Director Chen-Le Liu attended the “Description of the Functions of Independent Directors of Listed Companies Seminar” held by Securities & Futures Institute (SFI) for 3 hours.

• (8) 2012.6.19- Director Ming-Hsiung Huang and Director Jer-Nan Wang (discharged) attended the “New challenges to Remuneration Committee and the Trend of International Remuneration Governance” seminar held by Taiwan Corporate Governance Association for 3 hours.

• (9) 2012.7.20- Director Chun-Sheng Lee attended the “2012 Seminar of Insiders of Listed Companies in Compliance with Applicable Laws in Equity Transactions” held by Securities & Futures Institute (SFI) for 3 hours.

• (10) 2012.8.7- Director Wei-Liang Lin attended the “2012 Seminar of Insiders of Listed Companies in Compliance with Applicable Laws in Equity Transactions” held by Securities & Futures Institute (SFI) for 3 hours.

• (11) 2012.8.16- Vice Chairman Kuei-Fong Wang attended the “Financial Risks and Case Study” seminar held by Chinese National Association of Industry and Commerce, Taiwan (CNAIC) for 3 hours.

• (12) 2012.8.17- Chairman Jin-Fong Soo attended the “Directors and Supervisors vs. Insider Trade – Judicial Investigation and Case Study on Trial” held by Taiwan Corporate Governance Association for 3 hours.

• (13) 2012.9.7- Director Lin Chia-Hung attended the “The Risk Management Committee of the Board of Directors” held by Taiwan Corporate Governance Association for 3 hours.

• (14) 2012.10.25- Director Chun-Sheng Lee attended the “8[th] Taipei Forum of Corporate Governance” held by Financial Supervisory Commission for 6 hours.

• (15) 2012.11.2- Director Kang-Chi Chou attended the “Advanced Seminar of the Practice of (Independent) Directors and Supervisors [Business Secrets and Avoidance of the Conflict of Interest of Directors and supervisor]” held by Securities & Futures

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• Deviation from the

• Corporate Governance

• Item Implementation Status Best-Practice Principles for the Banking Industry and reasons

• Institute (SFI) for 3 hours.

• 1. Continuing education for managers: (1) 2012.2.2- International Department Manager Cheng-Yu Lai attended the “Seminar of Regional Banking Statistics Quarterly Report” held by the Department of Information Management of the Central Bank of the ROC (Taiwan) for 2.5 hours.

• (2) 2012.2.10- Treasury Department Manager Kuang-Chung Hsiao attended the “Seminar of Banking in Taiwan and Mainland China” held by Executive Yuan Financial Supervisory Commission for 1 hour.

• (3) 2012.2.21- Vice Manager Mu-Ken Chang of Wealth Management Department attended the “Seminar of Financial Consumers Protection Act and related bylaws” held by Trust Association of the ROC for 6 hours.

• (4) 2012.2.21- Manger Mei-Li Wu of Loan Administration Department attended the “Seminar of Financial Consumers Protection Act and related bylaws” held by Trust Association of the ROC for 6 hours.

• (5) 2012.3.7- Vice President Hsueh-Hsien Liao attended the “2012 On-Job Training Seminar of Senior Sales Managers of Securities Firms” held by Taiwan Securities Association for 8 hours.

• (6) 2012.3.7~21- Manger Mei-Li Wu of Loan Administration Department attended the “System for the training of key banking personnel – program in compliance” held by Taiwan Academy of Banking and Finance (TABF) for 16 hours.

• (7) 2012.4.17- Manager Wen-Cheng Lee of TCB Securities Chungli Branch attended the “Seminar of Sharing the Experience and Assessment of Shortcomings Detected in Audits” held by Taiwan Stock Exchange Corporation for 2.5 hours.

• (8) 2012.4.17- Manager Chien-Yu Lin of TCB Securities Taipei Branch attended the “Seminar of Sharing the Experience and Assessment of Shortcomings Detected in Audits” held by Taiwan Stock Exchange Corporation for 2.5 hours.

• (9) 2012.4.24- Manger Wen-Cheng Lee of TCB Securities Chungli Branch attended the “On-Job Training for Labor Health and Safety Mangers and Management Personnel” held by Industrial Safety and Health Association(ISHA) of the ROC for 7 hours.

• (10) 2012.5.6- Manager Chen-Ying Wu of Risk Management Department attended the “Basic Training for Spss Modler Application Tools” held by AsiaMiner Inc. for 6.5 hours.

• (11) 2012.5.6- Manager Cheng-Yu Lai of International Department attended the “Seminar of Continuing Education for Trust Supervisor” held by Trust Association of the ROC for 6 hours.

• (12) 2012.5.6- Manager Yi-Ying Chung of Accounting Department attended the “Seminar of Continuing Education for Trust Supervisor” held by Trust Association of the ROC for 6 hours.

• (13) 2012.5.6-Manager Te-Wei Chia of IT Department attended the

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• Deviation from the

• Corporate Governance

• Item Implementation Status Best-Practice Principles for the Banking Industry and reasons

• “Seminar of Continuing Education for Trust Supervisor” held by Trust Association of the ROC for 6 hours.

• (14) 2012.5.6-Manager Ching-Hu Hsieh of General Affairs Department attended the “Seminar of Continuing Education for Trust Supervisor” held by Trust Association of the ROC for 6 hours.

• (15) 2012.5.6- Vice President Hsueh-Hsien Liao attended the “Seminar of Continuing Education for Trust Supervisor” held by Trust Association of the ROC for 6 hours.

• (16) 2012.5.6- Vice President Kai-Yu Lin attended the “Seminar of Continuing Education for Trust Supervisor” held by Trust Association of the ROC for 6 hours.

• (17) 2012.5.8~15- Manager Chen-Ying Wu of Risk Management Department attended the the “System for the training of key banking personnel – program in liquidity risk management” held by Taiwan Academy of Banking and Finance (TABF) for 12 hours.

• (18) 2012.5.11- Manager Yi-Ying Chung of Accounting Department attended the “Seminar of the practice of preparing consolidated financial statements” held by Accounting Research and Development Foundation for 6 hours.

• (19) 2012.5.14- Manager Yi-Ying Chung of Accounting Department attended the “Seminar of the practice of preparing statements of cash flows” held by Accounting Research and Development Foundation for 4 hours.

• (20) 2012.5.30~2012.6.13- Manger Mei-Li Wu of Debt Management Department attended the “System for the training of key banking personnel – program in laws applicable to wealth management operation” held by Taiwan Academy of Banking and Finance (TABF) for 18 hours.

• (21) 2012.6.4~25- Manger Mei-Li Wu of Debt Management Department attended the “System for the training of key banking personnel – intermediate training program for collection personnel” held by Taiwan Academy of Banking and Finance (TABF) for 28 hours.

• (22) 2012.6.5- Chief Auditor Ming-Chin Shen attended the “Seminar of Business Policy and Management of Proposer Institutions -2012 Supervision and Risk Management of the Financial Sector” held by Central Deposit Insurance Corporation for 7 hours.

• (23) 2012.6.9- Vice President Chih-Chuan Fang attended the “Seminar of Continuing Education for Trust Supervisor” held by Trust Association of the ROC for 6 hours.

• (24) 2012.6.9- Chief Auditor Ming-Chin Shen attended the “Seminar of Continuing Education for Trust Supervisor” held by Trust Association of the ROC for 6 hours.

• (25) 2012.6.12- Manager Hung-Lun Chang of TCB Securities Yuanlin Branch attended the “Seminar of Sharing the Experience and

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Item	Implementation Status	Deviation from the Corporate Governance Best-Practice Principles for the Banking Industry andreasons
Assessment of Shortcomings Detected in Audits” held by Taiwan Stock Exchange Corporation for 2.5 hours. (26) 2012.6.12- Manager Jui-Fen Tsai of TCB Securities Co., Ltd. attended the “Seminar of Sharing the Experience and Assessment of Shortcomings Detected in Audits” held by Taiwan Stock Exchange Corporation for 2.5 hours. (27) 2012.6.12-Manager Chen Fen-Lan of Securities Department attended the “Seminar of Sharing the Experience and Assessment of Shortcomings Detected in Audits” held by Taiwan Stock Exchange Corporation for 2.5 hours. (28) 2012.6.12- Chief Auditor Ming-Chin Shen attended the “Seminar of Sharing the Experience and Assessment of Shortcomings Detected in Audits” held by Taiwan Stock Exchange Corporation for 2.5 hours. (29) 2012.6.25~2012.12.14- Manager Te-Wei Chia of IT Department attended the “Leading Executive Apex Program (LEAP)” held by the Bankers Association of the ROC for 121 hours. (30) 2012.6.26- Manager Yi-Ying Chung of Accounting Department attended the “Promulgation of the [Enforcement Rules for the Personal Information Protection Act ] by the competent authority- the legal responsibilities of the enterprises and the responses of the senior management” program held by Accounting Research and Development Foundation for 3 hours. (31) 2012.7.6-27- Manager Yi-Ying Chung of Accounting Department attended the “System for the training of key banking personnel – intermediate training program for accounting personnel-accounting laws and knowledge in the banking industry” held by Taiwan Academy of Banking and Finance (TABF) for 30 hours. (32) 2012.7.10- Acting Vice Manager Chung-Ping Yang of Human Resources Department attended the “The Training of People in the Financial Sector of Taiwan and Related Problems” held by Taiwan Academy of Banking and Finance (TABF) for 2.5 hours. (33) 2012.7.14~15- Manager Huei-Chin Lu of Junkung Branch attended the “Orientation for Personnel Engaged in Trust Business” held by Trust Association of the ROC for 12 hours. (34) 2012.7.20- President Chun-Sheng Lee attended the “2012 Seminar of Insiders of Listed Companies in Compliance with Applicable Laws in Equity Transactions” held by Securities & Futures Institute (SFI) for 3 hours. (35) 2012.8.9- Vice President Jung-Hua Kao attended the “Banking and Financial Courses on Taiwan and Mainland China-seminar on the practice of banking in Mainland China by Taiwanese Banks-Chapter of Corporate Banking” held by Taiwan Academy of Banking and Finance (TABF) at the appointment of the Bankers Association of the ROC for 12 hours. (36) 2012.8.15- ManagerCheng-YuLaiof International Department

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• Deviation from the

• Corporate Governance

• Item Implementation Status Best-Practice Principles for the Banking Industry and reasons

• attended the “KPMG Seminar of Financial Development in Taiwan and Mainland China” held by KPMG Taiwan for 3 hours.

• (37) 2012.8.15- Manager Chun-Ying Wang of Sales Department attended the “KPMG Seminar of Financial Development in Taiwan and Mainland China” held by KPMG Taiwan for 3 hours.

• (38) 2012.8.16~17- Manger Mei-Li Wu of Debt Management Department attended the “Banking and Financial Courses on Taiwan and Mainland China-seminar on the practice of banking in Mainland China by Taiwanese Banks-Chapter of Collection of overdue accounts” held by Taiwan Academy of Banking and Finance (TABF) at the appointment of the Bankers Association of the ROC for 12 hours.

• (39) 2012.8.17- Chief Auditor Ming-Chin Shen attended the “Seminar of the Financial Consumers Protection Act-Compliance of Financial People and Introduction to the function of Ombudsman” held by Financial Ombudsman Institution for 2.5 hours.

• (40) 2012.8.23~24- Manager Chen-Ying Wu of Risk Management Department attended the “Banking and Financial Courses on Taiwan and Mainland China-seminar on the practice of banking in Mainland China by Taiwanese Banks-Chapter of Risk Management and Internal Audits” held by Taiwan Academy of Banking and Finance (TABF) at the appointment of the Bankers Association of the ROC for 12 hours.

• (41) 2012.8.29- Vice President Jung-Hua Kao attended the “|Seminar of Banking and Finance in Taiwan and Mainland China – Business Opportunity in Financing Small and Medium Enterprises in Mainland China and Risk Management” held by Taiwan Academy of Banking and Finance (TABF) at the appointment of the Bankers Association of the ROC for 7.5 hours.

• (42) 2012.8.29- Manager Yu-Chung Lin of Trust Department attended the “Seminar of new trusts products of Mitsubishi UFJ Trust and Banking of Japan and Experience Sharing” held by held by Taiwan Academy of Banking and Finance (TABF) at the appointment of the Bankers Association of the ROC for 3 hours.

• (43) 2012.8.30~31Manager Yi-Ying Chung of Accounting Department attended the “Banking and Financial Courses on Taiwan and Mainland China-seminar on the practice of banking in Mainland China by Taiwanese Banks-Chapter of Accounting and Taxation” held by Taiwan Academy of Banking and Finance (TABF) at the appointment of the Bankers Association of the ROC for 12 hours.

• (44) 2012.9.4- Manager Yi-Ying Chung of Accounting Department attended the “Legal Rules Governing the Investment of Taiwanese Enterprises in Mainland China and the Responses” held by Accounting Research and Development Foundation for 3 hours.

• (45) 2012.9.8~15-Former Manager Chi-Hung Wu of South Fengyuan Branch attended the “On-Job Seminar of Trust Management

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Item	Implementation Status	Deviation from the Corporate Governance Best-Practice Principles for the Banking Industry andreasons
Personnel” held by Taiwan Academy of Banking and Finance (TABF) for 12 hours. (46) 2012.9.14- Acting Vice Manger Mu-Ken Chang of Wealth Management Department attended the “Seminar of the Wealth Management Market in Mainland China and CNY Products” held by Taiwan Academy of Banking and Finance (TABF) for 3.5 hours. (47) 2012.9.15~22- Manger Jih-Hsin Lee of Neili Branch attended the “On-Job Seminar of Trust Management Personnel” held by Taiwan Academy of Banking and Finance (TABF) for 12 hours. (48) 2012.9.15~22- Manager Rung-Kuo Cheng of Taipei Branch attended the “On-Job Seminar of Trust Management Personnel” held by Taiwan Academy of Banking and Finance (TABF) for 12 hours. (49) 2012.9.21~22- Manager Chen Fen-Lan of Securities Department attended the “On-Job Training for People of Futures Business –Senior Manger Class” held by Chinese National Futures Association for 13.5 hours. (50) 2012.9.21~22- Manager Chien-Yu Lin of TCB Securities Taipei Branch attended the “On-Job Training for Securities Personnel” held by Taiwan Securities Association for 5 hours. (51) 2012.9.27- Manager Mei-Li Wu of Debt Management Department attended the “Seminar of Risk Management of Selling Financial Products in the Financial Service Sector of Hong Kong” held jointly by Trust Association of the ROC and the Bankers Association of the ROC for 6 hours. (52) 2012.9.27- Manager Chen-Hung Cheng of Kueishan Branch attended the “Seminar of Risk Management of Selling Financial Products in the Financial Service Sector of Hong Kong” held jointly by Trust Association of the ROC and the Bankers Association of the ROC for 6 hours. (53) 2012.10.4- Manager Chen-Hung Cheng of Kueishan Branch attended the “Forum on International Financial Trend – the practice of offshore CNY bonds operation in Hong Kong” held by Taiwan Academy of Banking and Finance (TABF) for 7 hours. (54) 2012.10.11- Acting Vice Manger Mu-Ken Chang of Wealth Management Department attended the “The challenges to the financial market under uncertainty of economic growth” held by Taiwan Financial Services Roundtable for 3 hours. (55) 2012.10.25-President Chun-Sheng Lee attended the “8thTerm Taipei Corporate Governance Forum” held by Financial Supervisory Commission for 6 hours. (56) 2012.11.6- Manager Kuang-Chung Hsiao of Treasury Department attended the “Seminar of Economic Trend in 2013” held by Taiwan Institute of Economic Research for 3.5 hours. (57) 2012.11.13~14- Manager Mei-Li Wu attended the “Seminar on Exchange ofComplianceintheFinancialSectorof Taiwan” held

60 60

• Deviation from the

• Corporate Governance

• Item Implementation Status Best-Practice Principles for the Banking Industry and reasons

• by Taiwan Academy of Banking and Finance (TABF) for 10 hours.

• (58) 2012.11.27~28- Chief Auditor Ming-Chin Shen attended the “Seminar of Lead Auditors” held by Taiwan Academy of Banking and Finance (TABF) for 13 hours.

• (59) 2012.11.29~30- Acting Vice Manager Chung-Ping Yang of Human Resources Department attended the “Colloquium of Senior Human Resources Managers” held by Taiwan Academy of Banking and Finance (TABF) for 7.5 hours.

• (60) 2012.12.8~15- Manager Chi-Lung Huang of Taiching Branch attended the “On-Job Seminar of Trust Management Personnel” held by Taiwan Academy of Banking and Finance (TABF) for 12 hours.

• (II) Attendance of directors and supervisors to the Board sessions: All of them attended the Bank’s Board sessions as scheduled.

• (III) The implementation of risk management policies and the standards for risk assessment:

• To deal with the risk management requirements and upgrade the Bank’s risk control ability under the New Basel Capital Accord, the Bank continues planning the risk management structure and information platform for credit, market and operational risks, and further enhance the control and management of various risks to ensure the effective promotion of various risk management policies, evaluate the related operational risk, define the risk limits bearable by the various businesses and urge the management unit to take the necessary actions to enhance the risk management sensitivity effectively.

• The risk management policy has been subject to change on due time to ensure its effectiveness. The Risk Management Committee convenes regularly to confirm the effect of risk control and make appropriate adjustment of the risk control measures.

• The status of the Bank’s execution of the various risk assessments: (1) Credit risk: The Bank’s current assessment on the credit risk factors of the Bank’s businesses covers all transactions on-balance sheet and off-balance sheet, and the Bank will proceed with the multi-departmental planning and discussion before releasing any new product and business, and then have the relevant business departments to conduct the appropriate risk control pursuant to the requirements and rules. The Bank manages its credit risks for individual loans and loan portfolios through limit control, post-approval management, collateral management, and asset quality management. In addition, the mechanism for monitoring credit risk is in place with regular reports on the aforementioned result of risk monitoring for the reference of the Risk Management Committee and the Board for decision-making.

(2) Operational risk: The Bank also made record of various exposures. By introducing the Operational risk identification, assessment, control and report management mechanism, the Bank

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• Deviation from the

• Corporate Governance

• Item Implementation Status Best-Practice Principles for the Banking Industry and reasons

• establishes and centrally manages the database for the Bank’s Operational risk losses and summarizes the Operational risk information and implementation status, and submit the report and suggestions to Risk Management Committee and reporting them to the Board for approval. Further, in order to enhance the monitoring of operational risks, the Bank also establishes Key Risk Indicators and Risk Control Self Assessments according to the four dimensions of operational risk, i.e. internal procedure, people, systems and external events. In order to reduce the operational risk loss effectively, the Bank can transfer or write off the loss and impact of incidents caused by operational risk through insurance and outsourcing, in part or in whole.

• (3) Market risk: The trading information related to the market risk to the business supervisory unit and Risk Management Dept. Risk Management Dept. shall consolidate and summarize the information and present the report to Risk Management Committee and the Board. The contents of said report cover all market risk positions and ensure that the various transactions are conducted under authorization and the specific limitation. The information system currently used by the Bank mainly deals with limit control. Transactions entail market risk are subject to control by limits of different instruments of investments. Limits are also set to regulate counterparty risks by their respective credit rating and financial positions to avoid excessive concentration of capital. The dealing units of the Bank make appropriate adjustment of the investment position in line with the changes in the market environment within the authorized limits. Where necessary, the Bank may engage in derivative trade for hedging and proceed to stop loss. Said relevant requirements shall be reviewed and revised subject to the operation plan, business development and changes in the entire financial environment.

• (IV) Customers’ or consumers’ complaints or disputes shall be handled pursuant to the complaining procedure defined by the Bank, and followed up thereafter.

• (V) The Bank’s directors would avoid any motions in which they had conflict of interest pursuant to Banking Act and Company Act, and would never participate in the voting.

• (VI) Donation to political parties, stakeholders, and social charity groups: 1. To help the “Dajiama Society Welfare Foundation Taichung City Private Zhen Lan Children Home” to raise invoices, and set up the invoice box at the lobby of the Bank’s Central Taiwan Branch.

• The Bank has allocated a fraction of the amount consumed via the Ma Tsu Safety Card as contribution to Ta Chia Zhen Lan Temple for worshiping the Ma Tsu to help religious development and for social charity.

• Sponsor the “2012 Ming Dao International University Basketball Game” organized by Ming Dao University.

• Sponsorship of the 2012 Ta Chia Mazu Cultural Season events, “Bike for Touring Taichung”, and “Ta Chia Marathon” organized by Zhen Lan

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Item	Implementation Status	Deviation from the Corporate Governance Best-Practice Principles for the Banking Industry andreasons
Temple of Ta Chia. 5. Sponsorship to Little Giant Chinese Chamber Orchestra to help promotion of traditional Chinese musical arts. 6. Sponsorship for professional golfer Hsien-Wen Huang and triathlon athlete Yi-Wen Wang in order to promote sportsmanship in Taiwan as a mean of performing corporate social responsibility. 7. Donation of graduation scholarship to Ta Deh Senior High School of Commerce and Industry and Wen Hsing Senior High School in Changhwa Country. 8. Sponsor the “Commendation Awarded to National Model Labors in 2012” organized by Chinese Federation of Labor. 9. Sponsorship of the concert presented by Little Giants Chinese Chamber Orchestra in the 2012 Hakka Tung Blossom Festival in supporting the cultural innovation industry and the development of local tourism. 10. Support the “2012 National Taiwan University of Arts and DaGuan Guzheng Music Retrospective Exhibition” for assistance to the development of cultural innovation industry and traditional Chinese music. 11. Sponsor the “19th Term Care Cup 3rd-Level Baseball Game” organized by Taiwan Aboriginal Baseball Development Association to care the aboriginal groups and boost baseball games in the development. VIII. If there is any internal self-audit on corporate governance or audit conducted by external professional auditors, specify the result (or evaluation by external professional auditors), the majorshortcomings (or recommendations) given, and the status ofcorrective action: None.

(V) Establishment, functions and operations of Remuneration committee

		1. Informationonthemembers oftheRemunerationCommittee	1. Informationonthemembers oftheRemunerationCommittee	1. Informationonthemembers oftheRemunerationCommittee	1. Informationonthemembers oftheRemunerationCommittee
By identity (Note 1)	Conditions	Have more than 5 years of experience and the following professional qualifications	Status of independence (note 2)	Number of public companies	Remarks (Note 3)

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	Name	Lecturer or above in commerce, law, finance, accounting or subjects required by the business of the bank in pubic or private colleges or universities	Passed the qualification examination with proper licensing by the national Government Apparatus as court judge, prosecutor, lawyers, certified public accountant or other professional designations required by the business of the Bank	Required Work experience in commerce, law, finance, accounting or others required by the Bank	1	2	3	4	5	6	7	8	where the members of the Remuneration Committee are also the members of the remuneration committees of these companies
Independent Managing Director	Hsi-Rong Huang												0	Yes
Independent director	Chen-Le Liu												0	Yes
Director	Kuei-Fong Wang												0	Yes

• Note 1. Fill in the title of Director, Independent Director, or others.

• Note 2. If any of the following conditions is applicable to the members within 2 years before office and during the term of office, please put the “  ” sign in the appropriate box below.

• (1) Not an employee of the Bank or its affiliates.

• (2) Not a director or supervisor of the Bank or its affiliates. Excluding the capacity of independent director of the Bank or its parents, or a subsidiary directly or indirectly held by the Bank with more than 50% of the stakes.

• (3) Not a natural person, spouse, underage children, or under the title of a third party who holds more than 1% of the outstanding shares issued by the Bank or among the top 10 natural person shareholders.

• (4) Not a spouse, kin at the second pillar under the Civil Code, or the lineal blood relatives within the third pillar under the Civil Code as specified in (1) through (3).

• (5) Not a director, supervisor or employee of an institutional shareholder who holds more than 5% of the outstanding shares issued by the Bank, or a director, supervisor or employee of an institutional shareholder who is among the top 5 shareholders.

• (6) Not a director, supervisor, manager or shareholder holding more than 5% of the outstanding shares of specific company or institution in business or financial relation with the Bank.

• (7) Not a professional, owner, partner, director, supervisor, manager of proprietorship, partnership, company or institution that provide business, legal, financial and accounting services to the Bank or a spouse to the aforementioned persons.

• (8) Not under any of the categories stated in Article 30 of the Company Act.

• Note 3. If the members are Directors, specify if Article 6-5 of the “Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter” is duly complied.

  1. The operation of the Remuneration Committee

• (1) The Remuneration Committee of the Bank is consisted of 3 members.

• (2) Term of office of current committee members: August 18 2011 to June 21 2014. The Remuneration Committee has convened for 3 times in the most recent year (A). The

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qualifications of the members and their attendance to the meetings are shown below:

Title	Name	Actual number of attendance (B)	Attend through proxy	Attendance rate (%) (B/A) (Note)	Remarks
Convener	Hsi-Rong Huang	3	0	100%
Committee	Chen-Le Liu	3	0	100%
Committee	Kuei-Fong Wang	3	0	100%
Other notes: I Where the Board may not take or revise the advice of the Remuneration Committee, specify the date and the session of the Board, the content of the motion, the resolution of the Board, and the response to the opinions of the banks towards the advice of the Remuneration Committee (If the resolution of the Board suggested better position of remuneration than the advice of the Remuneration Committee, specify the reasons and the variations): None. II Where members of the Remuneration Committee may have adverse opinions or qualified opinions in their resolutions on record or in written declaration, specify the date and session of the committee, the content of the motion, the opinions of all other members, and the responses to the adverse opinions: None.

• Note: (1) If specific member of the Remuneration Committee resigned before the expiration of the term of office in the committee, specify the date of resignation in the field of “Remarks”. The actual attendance rate to committee meetings (%) shall be calculated on the basis of the total number of meetings and the actual number of meetings attended by the member during his/her term of employment.

• (2) Before the end of the fiscal year, new members were elected to the Remuneration Committee to fill the vacancies left behind by the members with tenure expired. Specify both the details of the new and former members of the committee in the field of “Remarks” as original term, new term, or renewed term, and the date of the election. The actual attendance rate (%)shall be calculated on the basis of the total number of meetings and the actual number of meetings attended by the member during his/her term of employment.

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(VI) Corporate Social Responsibility	Deviations from “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies” and reasons	Compliance with the “Corporate Social Responsibility Best Practice Principles for TSEC/GTSM Listed Companies”.	66
	Implementation Status	(1) The Bank has established the “Corporate Social Responsibility Best Practice”. According to Article 6 of the Code, the Board of Directors shall urge the Bank to fulfill the corporate social responsibility with due diligence and shall examine the results of the implementation and continue making improvement, to ensure fulfillment of the corporate social responsibility policies. (2) The “Office of the Board” shall be the concurrent unit dedicated to promoting the corporate social responsibility. (3) The Bank organizes regular training on business ethics and promotion of matters prescribed for directors, supervisors and employees, and incorporates the
	Item	1. Exercising Corporate Governance (1) The company declares its corporate social responsibility policy and examines the results of the implementation. (2) The company establishes exclusively (or concurrently) dedicated units to be in charge of proposing and enforcing the corporate social responsibility policies. (3) The company organizes regular training on business ethics and promotion of matters prescribed in the preceding Article for directors, supervisors and employees, and should incorporate the foregoing

66

Deviations from “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies” and reasons		Compliance with the “Corporate Social Responsibility Best Practice Principles for TSEC/GTSM Listed Companies”.
Implementation Status	foregoing into its employee performance appraisal system to establish a clear and effective reward and discipline system.	 Proceed with the improvement on SOP, reduce the paper for vouchers and general paper, and continue simplifying the SOP.  Work with Gold FM to organize the Moon Festival-related energy saving activity “Lightened by Moon”.  The clerks shall bring their own cups and be provided with environmental tableware to avoid utilization of disposable tableware.  General Affairs Dept. shall be the unit dedicated to the environment protection.  Article 18 of Corporate Social Responsibility Best Practice, it is necessary to pay attention to the impact of climate change on its operations and establish the Bank’s strategies for energy conservation and carbon and greenhouse gas
			67
Item	into its employee performance appraisal system to establish a clear and effective reward and discipline system.	2. Fostering a Sustainable Environment (1) The company endeavors to utilize all resources more efficiently and uses renewable materials which have a low impact on the environment. (2) The company establishes proper environmental management systems based on the characteristics of their industries. (3) The company establishes dedicated units or assigns dedicated personnel for environment management to maintain the environment. (4) The company monitors the impact of climate change on its operations and should establish

67

Deviations from “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies” and reasons		Compliance with the “Corporate Social Responsibility Best Practice Principles for TSEC/GTSM Listed Companies”.
Implementation Status	reduction, in order to reduce the impact to be brought by the Bank’s operation to the natural environment.	(1) The Bank has established related internal regulations for the protection of the legitimate rights and privileges of the employees, and has confirmed that the employment policy is non-discriminatory against gender, race, and age. The Bank has also designed appropriate management methods and procedures to materialize the equality in the conditions for employments, remuneration, training, and promotion. (2) The Bank has defined the
			68
Item	company strategies for energy conservation and carbon and greenhouse gas reduction.	3. Preserving Public Welfare (1) The Bank has complied with applicable laws governing labor force and respected the fundamental principle of human right for the employees, and safeguards the lawful rights of the employees and adopts the non-discriminatory policy thereby established appropriate methods for management, procedures with proper enforcement. (2) The bank provides safe and healthy work

68

Deviations from “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies” and reasons
Implementation Status	work-rule of safe and healthy, and arrange for employees’ health inspection and training on a regular basis. (3) The Bank calls for labor-management meetings regularly for two-way communications and hearing to opinions, and announced to the employees on all business activities and decisions in the internet. A mailbox has been set up for communication with and suggestions of the employees so that the employees are accessible to information and have the rights of expression. This help to buttress a win-win situation. (4) The Bank has defined the relevant procedures and operating rules to maintain consumers’ interests and rights, and provides the procedure for accepting
Item	environments for its employees, and organizes training on safety and health for its employees on a regular basis. (3) The Bank set up the mechanism for routine communication with the employees, and have notified the employees of any change in the operation that may significantly affect the employees. (4) The bank establishes and discloses policies on consumer rights and interests and provides a clear and effective procedure for accepting consumer complaints. (5) The bank cooperates with its suppliers to jointly upgrade of corporate

69

Deviations from “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies” and reasons		Compliance with the “Corporate Social Responsibility Best Practice Principles for TSEC/GTSM Listed Companies”.
Implementation Status	consumer complaints for follow-up. (5) As in P. 42, VI, other information critical to the understanding of our bank’s corporate social responsibility and how it is put into practice. (6) As in P. 42, VI, other information critical to the understanding of our bank’s corporate social responsibility and how it is put into practice.	(1) The Bank has established a website for the disclosure of its corporate social responsibility. (2) The Bank produces corporate social responsibility reports disclosing the status of their implementation of the corporate social responsibility policy.
Item	social responsibility. (6) The bank, through commercial activities, non-cash property endowments, volunteer service or other free professional services, participates in community development and charities events.	4. Enhancing Information Disclosure (1) The measures of disclosing relevant and reliable information relating to their corporate social responsibility. (2) The bank produces corporate social responsibility reports disclosing the status of their implementation of the corporate social responsibility policy.

70

5. If the bank has established corporate social responsibility principles based on “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies”, please describe any discrepancy between the principles and their implementation: The Bank has defined its “Corporate Social Responsibility Best Practice”, and implements its corporate social responsibility according to the Practice. Therefore, there is no discrepancy between the principles and their implementation.	6. Other important information to facilitate better understanding of the Company’s corporate social responsibility practices (e.g., systems and measures that the company has adopted with respect to environmental protection, community participation, contribution to society, service to society, social and public interests, consumer rights and interests, human rights, safety and health, other corporate social responsibilities and activities, and the status of implementation.): (1) The Bank is always dedicated to taking part in social welfare activities, and sponsoring the following activities: 1. Work with “Eden Social Welfare Foundation” in the charity petty cash donation activity and install petty cash donation boxes at the business locations of the Bank’s branches. 2. Assist the donation campaign held by “Eden Social Welfare Foundation” by printing the donation form at the back of the credit card statement. 3. Broadcast the welfare commercial for “Quit Smoking Promoted by the John Tung Foundation” in the multi-media channels at the Bank’s branches. 4. Broadcast the film for “Anti-Fraud – Kidnapping” in the multi-media channels at the Bank’s business locations. 5. To work with the Child Welfare League Foundation in the fund-raising event entitled “Heart United Makes Home Reunion”, the Bank helps find missing children and juvenile, and establishes the link from the Bank’s site to the official site of the Child Welfare League Foundation. 6. To help the “Dajiama Society Welfare Foundation Taichung City Private Zhen Lan Children Home” to raise invoices, and set up the invoice box at the lobby of the Bank’s Central Taiwan Branch. 7. The Bank has allocated a fraction of the amount consumed via the Ma Tsu Safety Card as contribution to Dajia Zhen Lan Temple for worshiping the Ma Tsu to help religious development and for social charity. 8. Assist the donation promoted by: “Child Welfare League Foundation” and run the list of donations on the back side of the Bank’s credit card debit notes. 9. Apply recycled paper to print the Bank’s annual report. 10. Sponsor the “2012 Ming Dao International University Basketball Game” organized by Ming Dao University. 11. Sponsorship of the 2012 Dajia Ma Tzu Cultural Season events, “Bike for Touring Taichung”, and “Ta Chia Marathon” organized by Zhen Lan Temple of Dajia. 12. Sponsorship to Little Giant Chinese Chamber Orchestra to help promotion of traditional Chinese musical arts. 13. Organize the visit tour of students from Department of Finance of National Chung Hsing University, Taiwan to provide the students with the chance to learn and observe, and to train excellent talents in banking business. 14. Engaged in a cooperative education program with Feng Chia University by giving opportunities for students majored in	71

71

banking and finance for visiting the facilities of the Bank. 15. Sponsorship for professional golfer Hsien-Wen Huang and triathlon athlete Yi-Wen Wang in order to promote sportsmanship in Taiwan as a mean of performing corporate social responsibility. 16. Donation of graduation scholarship to Ta Deh Senior High School of Commerce and Industry and Wen Hsing Senior High School in Changhwa Country. 17. Sponsor the “Commendation Awarded to National Model Labors in 2012” organized by Chinese Federation of Labor. 18. Sponsorship of the concert presented by Little Giants Chinese Chamber Orchestra in the 101 Hakka Tung Blossom Festival in supporting the cultural innovation industry and the development of local tourism. 19. Support the “2012 National Taiwan University of Arts and DaGuan Guzheng Music Retrospective Exhibition” for assistance to the development of cultural innovation industry and traditional Chinese music 20. Organized the “Blood donation in whole-heartedness by Taichung Commercial Bank” campaign jointly with the Taipei Blood Center and Taichung Blood Center of Taiwan Blood Services Foundation to rally for social support in blood donation. 21. Organized the “Lightened by Moon” event for the celebration of Mid-Autumn Festival jointly with the City FM in supporting the energy saving and safe the earth campaign. 22. Sponsor the “19th Term Care Cup 3rd-Level Baseball Game” organized by Taiwan Aboriginal Baseball Development Association to care the aboriginal groups and boost baseball games in the development. (2) The Bank has employed 21 persons who are physically or mentally disordered until the end of February 2013.	7. If the products or corporate social responsibility reports have received assurance from external institutions, they should state so below: None	(VII) The best-practice of business integrity and the policies	Difference with other companies listed in TWSE/GTSM in best-practice principles of business integrity	In compliance with the best-practice principles of integrity for TWSE/GTSM-listed companies
			Implementation Status	The official website of the Bank has shown the declaration of internal control system of the Bank signed by the Chairman, President, Chief Auditor, and the Chief Compliance Officer of the Bank. The declaration states that the Bank duly compliance with the
			Item	1. The policy and plan of business integrity (I) The Bank has explicitly expressed its policy of business integrity in its internal code and external

72

Difference with other companies listed in TWSE/GTSM in best-practice principles of business integrity		In compliance with the best-practice principles of
Implementation Status	Regulation Governing the implementation of internal control system by financial holding companies and banks, and has announced the areas of internal control system that required additional efforts and corrective action plans. The Bank has also set the stop loss limits or the limit of risk concentration in all transactions, investments, and loans by the nature of the operation, and reviews such limits regularly with relevant adjustment with reference to related economic indicators and the status of business development of the Bank. The Bank has instituted the system of compliance officer and related training to educate the people in banking and finance in compliance with the principle of integrity and applicable laws. The Bank has instituted the criteria for external donations in compliance with applicable laws thereby regulate the recipients and amount of donations.	The Bank shall duly comply with applicable
			73
Item	documents, and the positive effort of the Board and the Management in their commitment to realize business integrity. (II) The Bank has established regulation for the prevention of the breach of integrity, and related operation procedure, code of conduct and training in practice. (III) In the formulation of plans for the prevention of the breach of integrity, the Bank has taken measures in governing business with higher risk of the breach of integrity within the scope of operation, like the prevention of giving and taking bribes, provides illegal political donations.	2. The Materialization of Business

73

Difference with other companies listed in TWSE/GTSM in best-practice principles of business integrity	integrity for TWSE/GTSM-listed companies	74
Implementation Status	legal rules in conducting transactions and making purchases thereby avoids business transactions with parties that have a record of the breach of integrity. The Auditing Office of the Bank conducts the audits in accordance with the Regulation Governing the Implementation of Internal Control System and Internal Audit System by Financial Holding Companies and Banks, and dispatches related auditors to conduct audit in accordance with the annual audit plan.
Item	Integrity (I) The Bank avoids business transactions with parties that have a record of breach of integrity, and has explicitly stated the clause of business integrity in the business agreements of the Bank. (II) The operation of the designated full-time (part-time) body for administering business integrity and the supervision of the Board. (III) The policy of the avoidance of the conflict of interest made by the Bank and the availability of appropriate channels for operation. (IV) The operation of the effective accounting system and internal control

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Difference with other companies listed in TWSE/GTSM in best-practice principles of business integrity		In compliance with the best-practice principles of integrity for TWSE/GTSM-listed companies	In compliance with the best-practice principles of integrity for TWSE/GTSM-listed companies
Implementation Status		The channels for external complaints are monitored by the supervisors with 24-hour customer service hotline. The Bank has Human Resources Evaluation Committee and the punishment and complaint system in place.	The Bank has disclosed the details required for disclosure as a part of public information at the official website.
				75
Item	system established by the Bank for the materialization of business integrity, and the audits conducted by the internal auditors.	3. The Bank has established the channels for reporting and the system for the punishment of the breach of business integrity, and the operation of the complaint system.	4. Enhancing Information Disclosure (I) The Bank has established an official website for the disclosure of information on business integrity in business operation. (II) Other means adopted by the Bank in disclosures (the establishment of an English language website, appointment of designated personnel to gather relevant information on the Bank and load for disclosure to the official website).

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Difference with other companies listed in TWSE/GTSM in best-practice principles of business integrity	5. If the bank has established performance of good-faith management best practice principles based on “Ethical Corporate Management Best Practice Principles for TWSE/GTSM-Listed Companies”, please describe any discrepancy between the principles and their implementation: The Bank runs its operation in accordance with the “Ethical Corporate Management Best Practice Principles for TWSE/GTSM-Listed Companies”.	6. Other vital information that helps to understand the status of operation under the principle of business integrity (for example, the determination and policy of the Bank to educate the enterprises that have business relation with the Bank of business integrity, and invites these enterprises to participate in the training and the review for the revision of the principles of business integrity established by the Bank): None.	(VIII) Corporate Governance Practices and the relevant regulations: Please refer tohttp://newmops.tse.com.tw/ corporate governance (IX) Other important information: Please refer to http://newmops.tse.com.tw/important information
Implementation Status
Item

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• (X) Status of Internal Control

• Statement of Declaration of Internal Control System

Statement of Declaration of Internal Control System of Taichung Commercial Bank

The Undersigned hereby duly declares on behalf of Taichung Commercial Bank that Taichung Commercial Bank has complied with the Regulations for the Implementation of Internal Control and Internal Audit Systems by Banks to establish its internal control system and exercise risk management. An independent and impartial Audit Department of the Bank has conducted an audit covering the period from January 1 to Dec. 31, 2012, in accordance with applicable legal rules, and has reported to the Board and the Supervisors on a regular basis. The audit of securities dealing operations has been conducted in accordance with the Standards for Service Industries Securities and Futures Markets in the Establishment of Internal Control System promulgated by the Securities and Futures Bureau of the Financial Supervisory Commission to identify the effectiveness of the internal control system, and determines if the design and enforcement of internal control are effective. Caution has been taken in the assessment of audits. Other than the circumstances referred to in the attached schedules, all functional units of the Bank have effectively enforced the internal control system of the Bank and acted in compliance with applicable legal rules. This statement constitutes the summary content of Taichung Commercial Bank annual Report of current year and the Offering Prospectus, and shall be disclosed to the public. Any misrepresentation or concealment of the aforementioned disclosures shall be liable to violation of Articles 20, 32, 171 and 174 of the Securities and Exchanges Act and the legal consequences thereof.

To:

Financial Supervisory Commission

Declarant:

Chairman: Jin-Fong Soo

7777

President: Chun-Sheng Lee

Chief Auditor: Ming-Chin Shen

Chief Compliance Officer: Chi-Chuang Fang

D a t e : M a r c h 1 3 , 2 0 1 3

Improvement and Corrective Action of Internal Control System of Taichung Commercial Bank

(Record Date: December 31, 2012)

Scheduled to Complete Improvement Corrective Action Corrective Action on Asst vice manager OO Corrective Action: Corrective action Yen of OO Branch 1. For intensifying the review of correction in has been taken in made use of his job the transactions conducted by the banking February 2013. position to embezzle units, the supervisor approval account the deposits of the statement will be generated on the day after customers. Three the transactions if the transactions were banking units, conducted by using the supervisor accounts. including oo Branch, Updated transaction statement will also be failed to exercise printed out for verification. Further, the internal control when transactions “replacement of deposit processing transactions certificate” and the “automatic renewed in withdrawal and deposit certificate” could also be applied deposits. Internal with the delivery of account statement in the control and internal next month. If the transactions are management have not conducted by secret accounts that do not been properly enforced. require the “delivery of account statement”, the information on such accounts will be fed to the “Account Statement without Delivery” to relevant banking units for confirmation with the customers by telephone, personal visits, or any other feasible means and specify the means of confirmation and the result in the statement. 2. 2012.1.18- The Bank has released an internal circular to all banking units for reiterating the control of blank printed

7878

Improvement Corrective Action matters by complying with related procedures thereby registration is required for each instance of the release of document and stocktaking is required on a daily basis. The unused printed matters shall be stored in the vault after office hours. 3. 2012.1.21- The Bank has released an internal circular to all banking units that the keeping of passbooks, signed/sealed withdrawal slips of the customers by banking staff is strictly prohibited for preventing corruption. Those who violate this principle shall be subject to disciplinary action and the manager, vice manager, asst vice manger of the unit shall also be subject to strict punishment. All of the Bank shall duly comply with the requirements of the Bank in this operation, and shall never engage in any investment of high risk and beyond the financial capacity of the Bank. 4. 2013.1.22- The Bank has released an internal circular to alert the banking units to intensify control over the following: (1) All processing staff shall keep the teller accounts, personal seal and all important stamps and seals of the Bank properly, and shall log off the teller accounts and put the personal seal and all other important stamps and seals in a safe place when leaving the desk to avoid possible unauthorized use, or avail the teller account for the use of a third party. (2) The daily DPS displayed the “Supervisor Account Transaction Statement”, “Statement of Changes in Transaction Content” of the previous business day. The manger of the banking unit shall appoint a supervisor to double-check the content of the two statements (the double-checking and release shall be performed by different persons). (3) Banking units shall comply with the regulation governing “Post-Approval Management of Opening New Accounts” thereby check the details as shown in the “Customer Information Sheet On Accounts Opened on the Previous Day” item by item and coordinate with relevant units on the day after the processing of the new

Scheduled to Complete Corrective Action on

7979

Scheduled to Complete Improvement Corrective Action Corrective Action on accounts. 5. 2013.1.28- The Bank has released an internal circular to all functional units to severely reiterate compliance with the operation procedures of the Bank in: (1) Supervisors are strictly prohibited in operating teller-terminal and shall request the teller to do the operation if inquiry and the printout of related information are necessary. (2) The tellers of all banking units shall properly check the seals applied to the transaction vouchers and documents before proceeding to related operation. (3) In accepting the application of the customers for certificate of deposits, passbook, stop payment and reporting for lost of seal, replacement of seal and change in account title, ask the customers to fill in the “Application for certificate of deposit/passbook/stop payment and reporting lost of seal/replacement of seal and change in account title”. In processing the request of the customers in making change in contact information, ask the customers to fill in the “Agreement on change in the transactions of deposits”. Authenticate the identity of the customers properly before processing the aforementioned requests, and keep photocopies of related identification documents and supporting documents for record. (4) The keeper of vital printed matters (e.g.: blank certificate of deposit, passbook, and checks) shall properly keep such items during banking hours, and shall not release the items to any party not requested for use in due procedure. After the accounts were settled for the day, check the quantity of the said printed matters on inventory and lock them into the vault. 6. Audit Office has listed said corrective actions as the highlights of audit, and will continue enhancing the special audit and internal audit on cash inventory. 7. The Bank will continue enhancing various business training programs, and also train the intrabank clerks to keep their risk awareness and fulfill the internal control

8080

	Improvement		Corrective Action	Corrective Action	Scheduled to Complete Corrective Action on
			through internal audit and compliance education, so as to prevent any illegal activities from time to time, and also fulfill the units’ self-inspection and enhance employees’ concept about laws, lest lawbreaking should arise again.
	(XI)
	Item	Case		Status of corrective action
Processing officer or staff charged by public prosecutors on professional misconducts		Clerk ○○ Liu took advantage of his duty to withdrew the cash with the blank slip affixed with the seal and the passbook in his custody on behalf of the client and misappropriated the client’s deposit. The investigation on the case was concluded by Taichung District Prosecutors Office in March 2012, and the indictment was brought against the suspect for the offense of exercising forged private instruments under the Criminal Code.		The Bank has discussed the relevant operating requirements and taken the various corrective actions against the internal control, and also continue urging the various units that they shall fulfill the internal contract strictly, enhance the internal management, complete the compliance training program, and enhance the appraisal on the clerks’ compliance of law and ethics.
Fined by Financial Supervisory Commission for violation of laws and regulations		Clerk ○○ Liu withdrew the cash with the blank slip affixed with the seal and the passbook in his custody on behalf of the client and misappropriated the client’s deposit. As a result, the Bank was fined by FSC NTD2 million for violating Article 45-1 of the Banking Act.		The Bank has discussed the relevant operating requirements and taken the various corrective actions against the internal control, and also continue urging the various units that they shall fulfill the internal contract strictly, enhance the internal management, complete the compliance training program, and enhance the appraisal on the clerks’ compliance of law and ethics.
Defects to be corrected upon request of Financial Supervisor		None		None

8181

Commission
Disciplined by FSC under Article 61-1 of the Banking Act	The Bank was ordered to terminate the employment of Clerk ○○ Liu who misappropriated the client’s deposits.	The Bank has terminated the employment with the clerk on May 25, 2011.
Casualty or accident due to corruption, major incident or failure to comply with the safety measures, which caused damage exceeding NTD50 million in a particular incident or in particular fiscal year	None	None
Other matters requiring disclosure commanded byFSC	None	None

• (XII) Important resolutions of shareholders’ meetings and Board sessions: 1. Important resolutions of general shareholders’ meeting 2012 (June 6 2012)

  • (1) Recognize the business report and financial statement 2011.

  • (2) Pass the earnings allocation plan 2011.

  • (3) Ratify the motion for capital increase by recapitalization of earnings in 2011.

  • (4) The amendment to part of the provisions contained in the Procedure for the Acquisitions and Dispositions of Assets has been passed.

  • (5) Resolution has been made in favor of the motion of the split up of the Securities Department of the Bank for the establishment of a securities firm under the title of “Taichung Commercial Bank Securities Co., Ltd.” for broadening the scope of operation and synergy. The paid-in capital for the new business entity amounted to NTD1,500 million. Taichung Commercial Bank Securities Co., Ltd. issued the shares to the Bank and has established its Articles of Incorporation.

• Important resolutions of the Board sessions (from January 1, 2012 to February 28, 2013)

  • (1) 7th special Board session of 21st term of the Board on January 11, 2012.

    • Resolution has been made in favor of the motion of the establishment of “Taipei Office”.

  • (2) 3rd Board session of 21th term of the Board on March 8, 2012

8282

	A.	Ratify the motion for applying for addition of
		“Business Contributed to Futures Transactions”
		into the business lines of the Taipei Branch and
		Zhongli Branch.
	B.	Ratify the motion for application for capital
		increase by recapitalization of earnings in 2011.
	C.	Ratify the date, location and cause of the general
		shareholders’ meeting 2012.
	D.	Resolution has been made in favor of the motion
		of “OBU foreign currency special money trust for
		the investment of offshore securities”.
	E.	Resolution has been made in favor of the motion
		of a joint venture between the Bank and the Bank
		of Taiwan in passbook saving of gold.
(3)	4th Board session of 21st term of the Board on April 18,
	2012
	A.	Resolution has been made in favor of the motion
		of the split up of the Securities Department and
		the direct investment in “Taichung Commercial
		Bank Securities Co., Ltd.”.
	B.	Resolution has been made in favor of the motion
		of running securities business and the application
		for running “proprietary securities trade”.
(4)	8th special Board session of 21st term of the Board on
	May 16,	2012
	A.	Resolution has been made in favor of the motion
		of running passbook saving in gold.
	B.	Resolution has been made in favor of the motion
		of direct investment in “Taichung Commercial
		Bank Consolidated Securities Co., Ltd.”.
(5)	9th special Board session of 21st term of the Board on
	June 27,	2012
	Resolution has been made in favor of the motion of the
	establishment of financing leasing company in Mainland
	China through the subsidiaries of the Bank.
(6)	5th Board session of 21st term of the Board on August 8,
	2012
	A.	Confirmation of the capitalization of retained
		earnings and the ex-right and ex-dividend date,
		the period for the suspension of the transactions
		of shares and the dividend day for the release of
		cash dividends for fiscal year 2011.
	B.	Resolution has been made in favor of the motion
		of the adjustment of the conversion price for the
		1stissue of unsecured convertible financial
		debentures in 2011.
	C.	Resolution has been made in favor of the
		subscription of the new shares issued by
		“Taichung Commercial Bank Insurance Broker
		Co., Ltd.” for raising capital with the pledge of
		real properties.
(7)	6th special Board session of 21st term of the Board on

8383

• September 5, 2012 A. Resolution has been made in favor of the motion of the application with Financial Supervisory Commission for the issuance of subordinate bonds amounting to NTD3 billion.

• B. Resolution has been made in favor of the motion of the terms and conditions for the subscription of the new shares issued by “Taichung Commercial Bank Insurance Broker Co., Ltd.” for raising capital with the pledge of real properties.

• (8) 7th Board session of 21st term of the Board on October 17, 2012 Resolution has been made in favor of the motion of additional investment in “Reliance Securities Co., Ltd.” for increasing the proportion of shareholding.

• (9) 10th special Board session of 21st term of the Board on November 14, 2012 Resolution has been made in favor of the motion of running “Dual-Currency Investment Business”.

• (10) 8th Board session of 21st term of the Board on December 12, 2012

• Resolution has been made in favor of the motion of acting as an acquirer bank of the Union Pay Card system.

• (11) 9th Board session of 21st term of the Board on January 23, 2013

  • A. Resolution has been made in favor of the motion of making May 2 2013 as the official split up date of the Securities Department of the Bank.

  • B. Resolution has been made in favor of the motion of running the “Structured products of time deposit in foreign currencies linked to forwards options (including dual-currency investment)”.

• (XIII) Adverse opinion from directors or supervisor over important resolution of the Board in the most recent year until the day the Annual Report was printed with records and written declaration, and the contents of such opinion: None.

• (XIV) In the most recent year to the date this report was printed, the information on the resignation and discharge of parties related to the Bank and parties related to financial reporting (including the Directors, Supervisors, Chairman, President, chief financial officer, chief accountant, chief internal auditor, and chief of R&D): Feb. 28, 2013

	auditor, and ch	iefof R&D):			Feb. 28,2013
Title	Name	Election Date	Termination Date		Cause of Resignation or Termination
Director	Jer-Nan Wang	100/6/22	101/6/8		Institutional shareholder Jou Chang Co., Ltd. appointed new representatives
Director	Kuei-Hsien Wang	100/6/22	101/10/1		Institutional shareholder Pan Asia Chemical Corporation
Director	Ming-Hsiung Huang				Institutional shareholder Pan AsiaChemicalCorporation
		100/6/22	101/10/1

8484

IV. Disclosure of the accountant’s fee:

Firm Name	CPA Name	CPA Name	Duration of Audit	Remarks
Deloitte & Touche
	Wen-Ya Hsu	Tzu-Chun Wan	2012
		g

Note: If the CPA or CPA office is replaced in the then year, please specify the duration of audit separately, and the cause of replacement in the “Remarks” Section.

Unit: NTD thousand

Fee items Fee levels	Fee items Fee levels	Auditing fee	Non-Auditing fee	Total
1	Less than 2,000 thousand
2	2,000(inclusive)thousand~4,000 thousand	ˇ
3	4,000 thousand(inclusive)~6,000 thousand
4	6,000 thousand(inclusive)~8,000 thousand		ˇ
5	8,000 thousand(inclusive)~10,000 thousand
6	10,000 thousand above			ˇ

• (I) When non-audit fee paid to the auditing CPA, the CPA’s firm, and its related business entity exceeds one fourth of the audit fee, the amount of audit and non-audit fees and the content of the non-audit service should be disclosed. Audit fee is defined as the fee for financial statement audit, review, compilation, financial statement forecast, and corporate tax filing:

Unit: NTD thousand

Firm Name	CPA	Name	Auditing fee		Non-Auditing fee	Non-Auditing fee			The duration of the audit	Remarks
				System Design	Corporate Registration	Human Resources	Others (Notes)	Subtotal
Deloitte & Touche	Wen-Ya Hsu	Tzu-Chun Wang	3,750	-	60	-	6,372	6,432	2012	-

Note: The content of the non-audit service include: Consulting service for establishing and introducing information security regulations, at a fee of NTD 3,465 thousand; the rest of the service include reviewing our bank’s retained earnings to increase paid-in capital, IFRS adoption, and other opinions, with fees totaling NTD 2,907 thousand.

• (II) Change of Accounting firm and the auditing fee of the year changing the Accounting firm less than that of the previous year, and the amount of audit fees before and after the change, and reasons of the change: None.

• (III) Auditing fee were 15% less than that of the previous year: None.

• V. Changes of Accountants: None.

• VI. Disclose the names and job title of the chairman, president, financial and accounting manager of the Bank who has worked with the CPA firm who conducts the audit of the Bank or the affiliates to such firms in the most recent one year, and the duration of their employment in the CPA firm and its affiliate: None

• VII. In the most recent year to the date this report was printed, the assignment of equity shares and pledge the equity shares under lien by directors, supervisors, managers, and particular person or particular related party holding the shares of particular bank with voting rights to certain proportion that required declaration pursuant to Article 11 of the management regulation.

(I) Changes in shareholdings

	Title	Name	2012	Jan. 1, 2013 ~ Feb. 28, 2013

8585

		Increase (decrease) in No. of Shares	Increase (decrease) in No. of Pledged Shares	Increase (decrease) in No. of Shares	Increase (decrease) in No. of Pledged Shares
Managing Director	Pan Asia Chemical Corporation	5,387,172	0	0	0
Managing Director	I Joung Investment Co., Ltd.	599,162	0	0	0
Independent ManagingDirector	Hsi-Rong Huang	0	0	0	0
Director	Ho Yang Management Consultant Co.,Ltd.	51,246	0	0	0
Director	Chou Chang Co., Ltd.	322,027	(8,227,000)	0	0
Independent director	Chen-Le Liu	0	0	0	0
Independent director	Jin-Yi Lee	0	0	0	0
Supervisor	Xin Rui Investment Co., Ltd.	282,316	0	0	0
Supervisor	Tai Jiunn Enterprise Co., Ltd.	28,863	0	0	0
President	Chun-Sheng Lee	17,606	0	0	0
Executive Vice President	Jung-Hua Kao	(13,879)	0	(70,000)	0
Executive Vice President	Kai-Yu Lin	(103,746)	0	0	0
Executive Vice President	Hsueh-Hsien Liao	(19,206)	0	0	0
Executive Vice President	Chih-Chuan Fang	11,635	0	0	0
Chief Auditor	Ming-Chin Shen	7,522	0	0	0
Office of the Board of Directors Chief Secretary	Kai-Yu Lin (concurrent post)	(103,746)	0	0	0
Manager, General Affairs Dept.	Ching-hu Hsieh	5,823	0	0	0
Manager, Business developmentDept.	Chun-Ying Wang	13,359	0	0	0
Manager, Loan Administration Dept.	Yi-Yuan Tung	(87,591)	0	(135,000)	0
Manager, HR Dept.	Chung-Ping Yang (Deputy manager on behalfof manager)	0	0	0	0
Manager, AccountingDept.	Yi-Ying Chung	(49,212)	0	0	0
Manager, Information Dept.	Chun-Sheng Lin	(105,511)	0	(70,000)	0
Manager, International BankingDept.	Cheng-Yu Lai	(49,030)	0	(63,000)	0

8686

Title	Name	2012	2012	Jan. 1, 2013 ~ Feb. 28, 2013	Jan. 1, 2013 ~ Feb. 28, 2013
		Increase (decrease) in No. of Shares	Increase (decrease) in No. of Pledged Shares	Increase (decrease) in No. of Shares	Increase (decrease) in No. of Pledged Shares
Manager, Trust Dept.	Yu-Chung Lin	(13,898)	0	0	0
Manager, Dept of Debt Collection and AssetRecovery	Mei-Li Wu	(15,820)	0	(70,000)	0
Manager, Corporate FinanceDept.	Te-Wei Chia	(124,837)	0	0	0
Manager, Securities Dept.	Fen-Lan Chen	0	0	0	0
Manager, Risk ManagementDept.	Chen-Ying Wu	2,876	0	0	0
Manager, Treasury Dept.	Kuang-Chung Hsiao	6,268	0	0	0
Manager, Wealth Management Dept.	Yu-Chung Lin	(13,898)	0	0	0
Overseas Banking Branch	Chih-Hung Lu	(127,000)	0	0	0
Manager, Business Dept.	Chien-Min Chou	8,348	0	0	0
Manager, Securities Brokerage	Jui-Fen Tsai	(41,000)	0	0	0
Manager, Daqing Branch	Chi-Long Huang	(73,558)	0	0	0
Manager, W. Taichung Branch	Tung-Hsu Liu	(59,912)	0	0	0
Manager, Zhong Zheng Branch	Jui-Cheng Yang	9,924	0	0	0
Manager, Xitun Branch	Han-Ching Tsai	(33,327)	0	0	0
Manager, Nantun Branch	Kwei-Ching Ho	8,310	0	(18,000)	0
Manager, Neixin Branch	Yu-Ying Chen	(40,792)	0	(45,000)	0
Manager, Dadu Branch	Ching-Kun Lin	11,838	0	0	0
Manager, N. TaipingBranch	Chung-Rong Lin	(57,763)	0	0	0
Manager, Taichungkang Branch	Hsin-Ru Kao	7,407	0	0	0
Manager, Simin Branch	Chiung-Teng Hung	8,411	0	(45,000)	0
Manager, Junkong Branch	Hui-Chin Lu	76	0	0	0
Manager, S. TaichungBranch	Huan-Chang Tseng	4,277	0	0	0
Manager, N. TaichungBranch	Min-Hsuan Chiang .	(56,054)	0	0	0

8787

Title	Name	2012	2012	Jan. 1, 2013 ~ Feb. 28, 2013	Jan. 1, 2013 ~ Feb. 28, 2013
		Increase (decrease) in No. of Shares	Increase (decrease) in No. of Pledged Shares	Increase (decrease) in No. of Shares	Increase (decrease) in No. of Pledged Shares
Manager, Taiping Branch	Tsung-Hsien Lee	12,914	0	0	0
Manager, Houli Branch	Pi-Hua Chang	(76,925)	0	0	0
Manager, Daya Branch	Chia-Wei Tsai	(30,338)	0	0	0
Manager, Tanzi Branch	Yu-Chen Yang	(75,177)	0	(36,000)	0
Manager, Shengang Branch	Yi-Cheng Liao	(84,244)	0	0	0
Manager, Fongyuan Branch	Pao-Yuan Chen	7,814	0	0	0
Manager, Dajia Branch	Tung-Po Yang	17,021	0	0	0
Manager,Qingshui Branch	Ming-Ren Hsu	4,947	0	0	0
Manager, Shalu Branch	Shu-Chen Chen	12,508	0	0	0
Manager, Wufong Branch	Chao-Chi Tseng	(77,983)	0	(34,000)	0
Manager, Dongshi Branch	Chang-Chi Liu	8,048	0	0	0
Manager, E. Fongyuan Branch	Chien-Hao Chen	(82,969)	0	0	0
Manager, Wuri Branch	Chien-ting Lin	(33,903)	0	(2,000)	0
Manager, S. Fongyuan Branch	Chih-Hung Wu	(25,273)	0	(10,000)	0
Manager, Nanyang Branch	Chun-Chun Yu	(74,323)	0	0	0
Manager, Nantou Branch	Tsung-Yi Liu	(5,707)	0	0	0
Manager, Zhushan Branch	Shin-Hsiung Huang	(4,100)	0	0	0
Manager, Shuili Branch	Ya-Ching Peng	7,144	0	0	0
Manager, Puli Branch	Ming-Yu Chiu	(50,900)	0	0	0
Manager, Caotun Branch	Yung-Chang Lai	(70,422)	0	0	0
Manager, Changhua Branch	Yung-Sung Chien	(57,985)	0	0	0
Manager, Lukang Branch	Chung-Cheng Wu	6,749	0	0	0
Manager, Xihu Branch	Hung-Ping Chen	(40,511)	0	0	0
Manager, Erlin Branch	Cheng-Hsien Ni	(26,988)	0	0	0

8888

Title	Name	2012	2012	Jan. 1, 2013 ~ Feb. 28, 2013	Jan. 1, 2013 ~ Feb. 28, 2013
		Increase (decrease) in No. of Shares	Increase (decrease) in No. of Pledged Shares	Increase (decrease) in No. of Shares	Increase (decrease) in No. of Pledged Shares
Manager, Peitou Branch	Ming-Cheng Wu	(129,668)	0	0	0
Manager, TianzhongBranch	Hsin-Hsin Lee	5,786	0	0	0
Manager, Yuanlin Branch	Ching-Yuan Lin	(69,100)	0	0	0
Manager, Homei Branch	Cheng-Wen Ni	(75,114)	0	(18,000)	0
Manager, Shetou Branch	Tsung-Chang Tseng	(19,978)	0	0	0
Manager, Huatan Branch	Chi-Hsien Lee	19,342	0	0	0
Manager, Yongjing Branch	Chih-Hua Yao	8,776	0	0	0
Manager, Xiushui Branch	Wei-Huang You	2,850	0	0	0
Manager, Shenkang Branch	Wen-Tung Yu	8,166	0	0	0
Manager, Dazhu Branch	Shun-Te Tsai	(32,890)	0	(1,000)	0
Manager, N. Yuanlin Branch	Chun-Min Huang	3,128	0	(57,000)	0
Manager, Peitou Branch	Shih-Huei Wang	(15,655)	0	(9,000)	0
Manager, Peitun Branch	Yi-Pin Lin	3,254	0	0	0
Manager, Puxin Branch	Chih-Hao Liang	(24,803)	0	0	0
Manager, Taipei Branch	Rung-Kuo Cheng	4,918	0	0	0
Manager, Lungjing Branch	Kuo-Chin Chi	(37,577)	0	0	0
Manager, Songshan Branch	Tien-Hou Tsai	5,168	0	(36,000)	0
Manager, Sanzhong Branch	Jui-Chang Lee	1,140	0	0	0
Manager, KaohsiungBranch	Chiang-Kai Liu	2,939	0	0	0
Manager, Linko Branch	Yin-Ta Tsai	(38,480)	0	0	0
Manager, Huwei Branch	Chen-Hsiang Chuang	(39,200)	0	0	0
Manager, Yuanli Branch	Kuang-Chih Chen	(3,924)	0	(27,000)	0
Manager, Zhunan Branch	Cheng-Huan Huang	5,125	0	0	0
Manager, Dounan Branch	Shun-Chi Ke	4,728	0	0	0

8989

Title	Name	2012	2012	Jan. 1, 2013 ~ Feb. 28, 2013	Jan. 1, 2013 ~ Feb. 28, 2013
		Increase (decrease) in No. of Shares	Increase (decrease) in No. of Pledged Shares	Increase (decrease) in No. of Shares	Increase (decrease) in No. of Pledged Shares
Manager, Neihu Branch	Chiung-Wen Chang	(77,984)	0	0	0
Manager, Ban ChiaoBranch	Tsai-Tuan Chen	4,822	0	0	0
Manager, Feng Shan Branch	Wen-Chieh Tsai	(57,014)	0	0	0
Manager, XinzhuangBranch	Chun-wen Chen	3,074	0	0	0
Manager, Pizgzhen Branch	Chien-Min Feng	0	0	0	0
Manager, Min HsiungBranch	Ching-Tang Tsai	(58,000)	0	0	0
Manager, Taoyuan Branch	Shih-Fan Weng	5,345	0	11,000	0
Manager, Yung KungBranch	Tsung-Hsien Lee	2,204	0	0	0
Manager, Chu Pei Branch	Chien-Hung Lin	5,345	0	0	0
Manager, Nan KangBranch	Hsin-Fa Wang	(67,982)	0	0	0
Manager, Nei Li Branch	Pei-Miao Jan	(3,933)	0	(9,000)	0
Manager, Hsinchu Branch	Cheng-Hua Lee	5,046	0	0	0
Manager, Kueishan Branch	Chen-Hung Cheng	4,030	0	(18,000)	0
Manager, Jhongli Branch	Jr-Hsin Lee	8,668	0	0	0
Manager, Hsin FengBranch	Chang-Sheng Liu	4,270	0	0	0
Manager, Ta Yuan Branch	Yu-Hui Tseng	(66,000)	0	0	0
Manager, Yangmei Branch	Ting-Kuang Huang	(2,649)	0	(49,000)	0
Manager, Tucheng Branch	Shu-Lan Huang	(152,848)	0	0	0
Yuanlin Securities Branch Manager	Hung-Lun Chang	(60,000)	0	0	0
Taipei Securities Branch Manager	Kuang-Chiang Lee	0	0	0	0
Jhongli Securities Branch Manager	Wen-Cheng Lee	0	0	0	0
Manager, Taichung Regional Center	Zai-Hong Yang	4,408	0	0	0
Manager, Changhua Regional Center	Kuo-Chi Lin	11,438	0	0	0

9090

Title	Name	2012	2012	Jan. 1, 2013 ~ Feb. 28, 2013	Jan. 1, 2013 ~ Feb. 28, 2013
		Increase (decrease) in No. of Shares	Increase (decrease) in No. of Pledged Shares	Increase (decrease) in No. of Shares	Increase (decrease) in No. of Pledged Shares
Northern Regional Center Manager	Ho Kuo-Liang	(96,984)	0	0	0
Major Shareholder	China Man-Made Fiber Corporation	19,484,916	0	0	19,000,000
Principle shareholder	Chen-Hai Lin	24,215,823	0	0	0
Principle shareholder	Lin Yuan Investment Corporation	3,171,972	0	0	0
Principle shareholder	Wan Bau Development Co.,Ltd.	1,505,687	0	0	0
Principle shareholder	Far Glory Life Insurance Corporation Ltd.	5,743,985	0	0	0
Principle shareholder	Taiwan Fire & Marine Insurance Co.,Ltd.	1,250,994	0	0	0
Principle shareholder	Netherlands Pension Robert Bacal Investment Account at Citibank (Taiwan)	7,205,313	0	0	0

(II) Information of shares ownership transfer: Not applicable, because the counterparts of said shares ownership transfer are not stakeholders. (III) Information of shares ownership pledge: Not applicable, because the counterparts of said shares ownership pledge are not stakeholders.

9191

Feb. 28, 2013	Remarks
	If there are related parties, spouses, kindred within the 2ndtier under the Civil Code among the top 10 shareholders, give the names and affiliations of such shareholders.	Relation	Brother of the Chairman of Board of its parents	Brothers	None	Brother of the Chairman of Board of its subsidiary	Brothers	None
		Name	Pan Asia Chemical Corporation	Pan Asia Chemical Corporation Responsible person: Kuei-Fong Wang	None	China Man-Made Fiber Co., Ltd.	China Man-Made Fiber Co., Ltd. Responsible person: Kuei-Fong Wang	None
	Shareholdings under the title of a third party	Ratio of Shareholding	0	0	0	0	0	0
		Quantity	0	0	0	0	0	0
	Shares Held by Spouse & Dependents	Ratio of Shareholding	0	0	0	0	0	0
		Quantity	0	0	0	0	0	0
	Self Status of shareholding	Shareholding Proportion (%)	22.95	0	8.77	6.35	0.01	4.92
		Quantity	532,245,888	0	203,345,912	147,154,866	258,945	114,179,615
	Name		China Man-Made Fiber Co., Ltd.	China Man-Made Fiber Co., Ltd. Responsible person: Kuei-Fong Wang	Chen-Hai Lin	Pan Asia Chemical Corporation	Pan Asia Chemical Corporation Responsible person: Kuei-Hsien Wang	Far Glory Life Insurance Corporation Ltd.

92

Remarks
If there are related parties, spouses, kindred within the 2ndtier under the Civil Code among the top 10 shareholders, give the names and affiliations of such shareholders.	Relation	None	The same as chairman	None	The same as chairman	None	None	None
	Name	None	Wan Bau Development Co., Ltd.	None	Lin Yuan Investment Co., Ltd.	None	None	None
Shareholdings under the title of a third party	Ratio of Shareholding	0	0	0	0	0	0	0
	Quantity	0	0	0	0	0	0	0
Shares Held by Spouse & Dependents	Ratio of Shareholding	0	0	0	0	0	0	0
	Quantity	0	0	0	0	0	0	0
Self Status of shareholding	Shareholding Proportion (%)	0	3.74	0	1.77	0	1.47	0.13
	Quantity	0	86,644,944	0	41,129,050	0	34,171,900	3,114,000
Name		Far Glory Life Insurance Corporation Ltd. Chung-Sheng Tu	Lin Yuan Investment Co., Ltd.	Lin Yuan Investment Co., Ltd. Responsible person: Ong-Chuan Lin	Wan Bau Development Co., Ltd.	Wan Bau Development Co., Ltd. Responsible person: Ong-Chuan Lin	Taiwan Fire & Marine Insurance Co., Ltd.	Taiwan Fire & Marine Insurance Co., Ltd. Responsible

93

Remarks								IX. Quantity of shareholdings of the same investee by the Bank and directors, supervisors, presidents, Executive Vice Presidents, Asst. Executive Vice Presidents, supervisors of the various departments and branches, and direct or indirect subsidiaries in proportion to
If there are related parties, spouses, kindred within the 2ndtier under the Civil Code among the top 10 shareholders, give the names and affiliations of such shareholders.	Relation		None	None	None	None	None
	Name		None	None	None	None	None
Shareholdings under the title of a third party	Ratio of Shareholding		0	0	0	0	0
	Quantity		0	0	0	0	0
Shares Held by Spouse & Dependents	Ratio of Shareholding		0	0	0	0	0
	Quantity		0	0	0	0	0
Self Status of shareholding	Shareholding Proportion (%)		1.05	0.71	0.43	0.69	0.33
	Quantity		24,237,654	16,366,590	9,897,442	16,056,260	7,675,557
Name		person: Tai-Hung Lee	Netherlands Pension Robert Bacal Investment Account at Citibank (Taiwan)	I Joung Investment Co., Ltd.	I Joung Investment Co., Ltd. Responsible person: Yi-Der Chen	Wise Target Investment Co., Ltd.	Wise Target Investment Co., Ltd. Responsible person: Yu-Fang Tsai

94

Combined investment	Ratio of Shareholding	100.00%	44.74%	100.00%
	Quantity	8,236,000	13,958,562	100,000,000
Investment made by directors, supervisors, presidents, executive vice presidents, assistant VPs, supervisors of branches, and direct or indirect subsidiaries	Ratio of Shareholding	-	6.28%	-
	Quantity	-	1,958,562	-
Investment made by the Bank	Ratio of Shareholding	100.00%	38.46%	100.00%
	Quantity	8,236,000	12,000,000	100,000,000
Investee		Taichung Commercial Bank Insurance Agency Co., Ltd.	Reliance Securities Investment Trust Co., Ltd.	Taichung Commercial Bank Lease Enterprise

95

4 Status of Capital Planning I Shares and Dividends (I) Sources of shares and dividends

Year and month	Issuing price	Authorized shares capital	Authorized shares capital	Paid-in shares capital	Paid-in shares capital	Remarks
		Quantity of Stock (Shares)	Amount (NTD)	Quantity of Stock (Shares)	Amount (NTD)	Sources of shares and dividends	Others
2006		1,538,014,400	15,380,144,000	1,538,014,400	15,380,144,000	-	None
March 2007	11.5 (NTD/share)	2,000,000,000	20,000,000,000	1,304,088,000	13,040,880,000	Issuance of common stock for cash	None
November 2008	10 (NTD/share)	2,000,000,000	20,000,000,000	1,371,900,576	13,719,005,760	Recapitalization of earnings	None
December 2010	10 (NTD/share)	2,000,000,000	20,000,000,000	1,731,900,576	17,319,005,760	Issuance of common stock for cash	None
September 2011	10 (NTD/share)	2,000,000,000	20,000,000,000	1,783,857,594	17,838,575,940	Recapitalization of earnings and capital surpus	None
November 2011	10 (NTD/share)	4,320,000,000	43,200,000,000	2,233,857,594	22,338,575,940	Issuance of common stock for cash	None
September 2012	10 (NTD/share)	4,320,000,000	43,200,000,000	2,318,744,183	23,187,441,830	Recapitalization of earnings	None

Note: The Company’s special shareholders’ meeting resolved on December 7, 2006 to reduce the shares and dividends of the Bank to NTD7,339,264,000 with the elimination of 733,926,400 outstanding shares. At the same time the meeting also resolved to increase capital by issuing new shares of common stock amounting to 500 million shares at NTD10 per share. The resolutions have been reported to FSC on January 22, 2007 under Jin-Guan-Zheng-Yi-Zi No. 0950158669 confirmation letter. As of 2006, the Company has successfully raised NTD5.75 billion (including the issue at premium) and the investments have been fully collected by the end of March 2007. The Company’s shareholders’ meeting resolved on June 13, 2008 to recapitalize the earnings amounting to NTD678,125,760 by issuing new shares of common stock amounting to 67,812,576 shares at NTD10 per share. The resolution has been reported to FSC on August 21, 2008 under Jin-Guan-Zheng-Yi-Zi No. 0970041379 confirmation letter. The Company’s special board session resolved on October 6, 2010 to increase the capital by issuing new shares of common stock totaling 360 million shares at NTD10 per share. The resolution has been reported to FSC on November 2, 2010 under Jin-Guan-Zheng-Fa-Zi No. 0990058141 confirmation letter. The investments have been fully collected on December 10, 2010. The Company’s shareholders’ meeting resolved on June 22, 2011 to recapitalize the earnings amounting to NTD519,570,180 by issuing new shares of common stock amounting to 51,957,018 shares at NTD10 per share. The resolution has been reported to FSC on July 20, 2011 under Jin-Guan-Zheng-Fa-Zi No. 1000032577 confirmation letter. The Company’s special board session resolved on July 7, 2011 to increase the capital by issuing new shares of common stock totaling 450,000,000 shares at NTD10 per share. The resolution has been reported to FSC on August 9, 2011 under Jin-Guan-Zheng-Fa-Zi No. 1000035963confirmation letter. The investments have been fully collected on November 8, 2011. The Company’s shareholders’ meeting resolved on June 6, 2012 to recapitalize the earnings amounting to NTD848,865,890 by issuing new shares of common stock amounting to 84,886,589 shares at NTD10 per share. The resolution has been reported to FSC on July 6, 2012 under Jin-Guan-Zheng-Fa-Zi No. 1010032195 confirmation letter.

9696

	Stock Type	Stock Type	Authorized shares capital	Authorized shares capital	Authorized shares capital	Authorized shares capital	Authorized shares capital	Authorized shares capital	Authorized shares capital	Remarks	Remarks
			Outstanding shares		Unissued Shares			Total
	Registered common shares		2,318,744,183		2,001,255,817			4,320,000,000		Listed
			(II) Composition of Shareholders							Feb.28,2013
Composition of Shareholders Amount			Government Apparatus	Financial Institution		Other Juridical		Individual	Foreign Institution and Foreigner		Total
No. of Person			4	3		170		74,759	113		75,049
Shares			2,384	157,873,089		934,430,972		1,111,634,050	114,803,688		2,318,744,183
Ratio of Shareholding			0.00%	6.81%		40.30%		47.94%	4.95%		100%
			(III) Diversification of Shareholdings

Unit: share; person: % Feb. 28, 2013

			Feb.28,2013
Range of Shares	No. of Shareholders	Shares	Ratio of Shareholding
1 to 999	27,998	8,423,436	0.36%
1,000 to 5,000	23,816	53,623,202	2.31%
5,001 to 10,000	9,341	61,061,434	2.63%
10,001 to 15,000	4,887	56,409,439	2.43%
15,001 to 20,000	1,586	27,153,601	1.17%
20,001 to 30,000	2,436	56,763,297	2.45%
30,001 to 50,000	1,923	72,599,910	3.13%
50,001 to 100,000	1,558	103,814,094	4.48%
100,001 to 200,000	835	110,328,544	4.76%
200,001 to 400,000	372	99,249,135	4.28%
400,001 to 600,000	104	50,739,348	2.19%
600,001 to 800,000	48	33,144,219	1.43%
800,001 to 1,000,000	12	10,621,675	0.46%
1,000,001 to 1,200,000	22	24,083,689	1.04%
1,200,001 to 1,400,000	11	14,306,412	0.62%
1,400,001 to 1,600,000	11	16,539,180	0.71%
1,600,001 to 1,800,000	7	11,967,021	0.52%

9797

Range of Shares	No. of Shareholders	No. of Shareholders	Shares	Shares	Ratio of Shareholding
1,800,001 to 2,000,000	6		11,522,418		0.50%
2,000,001 and above	76		1,496,394,129		64.53%
Total	75,049		2,318,744,183		100.00%
(IV) Name of Principle shareholder
Stock Name of Principle shareholder			Shares		Ratio of Shareholding
Chi na M an-Ma de Fi ber Co., Lt d.			532,245,888		22.95%
C h e n - H a i L i n			203,345,912		8.77%
P a n A s i a C h e m i c a l C o r p o r a t i o n			147,154,866		6.35%
Far Glory Life Insurance Corporation Ltd.			114,179,615		4.92%
L i n Y u a n I n v e s t m e n t C o . , L t d .			86,644,944		3.74%
Wa n B a u D e v e l o p me n t C o . , L t d .			41,129,050		1.77%
Taiwan Fire & Marine Insurance Co., Ltd.			34,171,900		1.47%
Netherlands Pension Robert Bacal Investment A c c o u n t a t C i t i b a n k(T a i w a n)			24,237,654		1.05%
I J o u n g I n v e s t m e n t C o . , L t d .			16,366,590		0.71%
Wise Target Investment Co., Ltd.			16,056,260		0.69%

(V) Information on market price, net value, earnings and dividends per share in the most recent 2 years

	the most recent 2 years	the most recent 2 years	the most recent 2 years	the most recent 2 years	the most recent 2 years
	Unit: NTD; %
Item	Year		2011	2012	Until Feb. 28, 2013
Market Price Per Share	The Highest		14.45	10.35	11.10
	The Lowest		7.92	8.26	10.05
	Average		12.11	9.66	10.60
Net Value Per Share	Before Distribution		11.40	12.11	12.46
	After Distribution		10.98	-	-
Earnings Per Share	Weighted average shares		1,850,433	2,318,744	2,318,744
	EPS(before adjustment)		0.79	1.20	0.20
	EPS (after adjustment)		0.76	-	-
Dividend Per Share	Cash Dividends		0.05	-	-
	Free-Gratis Dividends	Retained Shares Distribution	0.38	-	-

9898

Item	Year	Year	2011	2012	Until Feb. 28, 2013
		Capital Reserve Shares Distribution	-	-	-
	Retained Dividends		-	-	-
Return on investment Analysis	P/E ratio (before the distribution)		14.24	7.88	-
	P/E ratio (after the distribution)		14.80	-	-
	Dividend Yield		225	-	-
	Cash Dividend Yields		0.44	-	-

• (VI) Dividend Policy and the Status of Implementation

• Dividend policy in the Bank’s Articles of Incorporation:

Article 7: The Bank’s Dividends shall be allocated subject to resolution of the shareholders’ meeting upon the proposal made by the Board of Directors, provided that no capital may be provided as Dividends where the Bank has retained no earnings.

Article 35: Any profit from settlement of the year shall be subject to applicable taxes as the top Seniority, followed by the offsetting of losses carried forward from previous years and thirty percent of the remainder of such profit shall be allocated as legal reserve, and special reserve shall be provided pursuant to laws. The balance, if any, plus the unallocated accumulated retained earnings for the previous years shall be allocated as the shareholders’ Dividends, and the remainder thereof, if any, shall be allocated in the following order:

• (1) 1%-5% for employee bonus.

• (2) Remuneration to directors/supervisors granted based on 50% of the allocated employee bonus.

• (3) Shareholder bonus.

The Board shall retain the required fund subject to the change of operating environment, operation and investment needs before proposing the proportion between cash and stock Dividends for the approval of the shareholders’ meeting:

• (1) The cash dividends shall be no less than 10% of the Dividends and bonus allocated to shareholders.

• (2) Notwithstanding, if the Dividends are allocated at less than or equal to NTD0.3 per share, the earnings may be allocated in the form of stock Dividends in full.

• If the capital adequacy ratio fails to reach the legal

9999

ratio, the earnings shall be allocated in accordance with the Banking Act and the competent authority’s requirements.

1. The Dividends distribution proposed at the shareholders’ meeting: Not yet resolved before the Board session on February 28, 2013

2. (VII) Effect of Dividends distribution proposed at the shareholders’ meeting on the operation performance of the Bank and the Earnings Per Share: Not yet resolved before the Board session on February 28, 2013.

3. (VIII) Employee bonus and remuneration paid to directors and supervisors:

4. Ratio of Shareholding or scope of employee bonus and Remuneration to Directors and supervisors as stated in the Bank’s Articles of Incorporation:

   • Any profit from settlement of the year shall be subject to applicable taxes as the top Seniority, followed by the offsetting of losses carried forward from previous years and thirty percent of the remainder of such profit shall be allocated as legal reserve, and special reserve shall be provided pursuant to laws. The balance, if any, plus the unallocated accumulated retained earnings for the previous years shall be allocated as the shareholders’ Dividends, and the remainder thereof, if any, shall be allocated in the following order:

   • (1) 1%-5% for employee bonus.

   • (2) Remuneration to directors/supervisors granted based on 50% of the allocated employee bonus.

   • (3) Shareholder bonus. The Board shall retain the required fund subject to the change of operating environment, operation and investment needs before proposing the proportion between cash and stock Dividends for the approval of the shareholders’ meeting:

   • (1) The cash dividends shall be no less than 10% of the Dividends and bonus allocated to shareholders.

   • (2) Notwithstanding, if the Dividends are allocated at less than or equal to NTD0.3 per share, the earnings may be allocated in the form of stock Dividends in full.

   • If the capital adequacy ratio fails to reach the legal ratio, the earnings shall be allocated in accordance with the Banking Act and the competent authority’s requirements.

5. The difference between estimated and actual employee bonus and remuneration to directors and supervisors as well as stock dividends distributed shall be handled by accountants as follows:

   • (1) Accrued employee benefit and board compensation payable this year is the amount estimated according to the company’s Articles of Incorporation and other regulations. In 2012, after recognizing legal reserve at 30% of net profit after tax, recognizing the legally required special reserve, adding in the undistributed earnings from previous years, and deducting dividends from net profit after tax, the remainder is the basis for accrued employee

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benefit and board compensation at NTD 1,278 thousand and NTD 639 thousand respectively. These amounts will be paid in cash.

• (2) In the case of material change in the allocation resolved by the Board session at the end of the fiscal year, the difference shall be adjusted by the expense of the original fiscal year.

• (3) If the shareholders’ meeting resolves the actual allocated amount different from the estimate, it shall be handled as the “change in accounting estimates” in the year of the resolution made by the shareholders’ meeting.

• Information about any proposed allocation of employee bonus resolved by the Board session: Not yet resolved before the Board session on February 28, 2013.

• Actual employee bonus and remuneration to directors and supervisors for the preceding year:

• (1) Employee bonus in cash: NTD401,746.

• (2) Remuneration to directors/supervisors: NTD200,873.

• (3) Comparison with the distribution plan proposed by the Board: no difference.

(IX) Repurchase of the Bank Shares: None. II Issuance of Financial Bonds

Type	1st term of 2007 Subordinated Financial Bonds
Date & Approval No.	Ching-Kuan-Yin (4) Tze No. 09600481190 dated November 14,2007
Issue Date	December 21,2007
Face Value	NTD10,000,000
Place of Issue and Trading	Taiwan R.O.C.
Currency	NTD
Issuing price	At Par Value
Total amount	NTD2.4 billion
Interest rate	Annual interest rate is index interest rate plus 1.02%. Index interest rate is the displayed floating rates for one-year term deposits of Chunghwa Post Co.,Ltd.
Maturity	5.5years,matured on June 21,2013
Seniority	Prevail over the shareholders’ right to allocate residual property, and follow the Bank’s depositors and other creditors
Guarantee Institution	None
Trustee	None
Consignee	None
Certified Lawyer	None
Certified CPA	None

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Certified financial institution	None
Repayment Methods	Repayment in lumpsum upon maturity
Unredeemed balance	NTD2.4 billion
Paid-in shares capital in last Fiscal Year	NTD 15,380,144 thousand
After-tax Net Worth in last Fiscal Year	NTD 8,324,959 thousand
Performance	Normal
Redemption or earlier redemption	None
Conversion and exchange conditions	None
Limitation Article	Subordinated bond
Fund utilizationplan	Mid-term and long-term loans
Balance of Bonds as a Ratio of Shareholding of After-tax net worth(%)	28.83%
Whether it is accounted for equity capital and type	Tier II Capital
Name of credit rating agency, date of rating and ratings	Name: Fitch Ratings Limited Taiwan Branch (Fitch) Rating: National Long-term at BBB+ (twn); National short-term at F2 (twn), with stable outlook Date of rating: 2012/10/09

Type	1st term of 2009 Subordinated Financial Bonds
Date & Approval No.	Ching-Kuan-Yin (4) Tze No. 09800104050 dated March 20,2009
Issue Date	June 26, 2009
Face Value	NTD100,000
Place of Issue and Trading	Taiwan R.O.C.
Currency	NTD
Issuing price	At Par Value
Total amount	NTD1.8 billion
Interest rate	Annual interest rate is index interest rate plus 1.40%. Index interest rate is the displayed floating rates for one-year term deposits of Chunghwa Post Co.,Ltd.
Maturity	7years, matured on June 26, 2016
Seniority	Prevail over the shareholders’ right to allocate residual property,and follow the Bank’s depositors and other

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	creditors
Guarantee Institution	None
Trustee	None
Consignee	None
Certified Lawyer	None
Certified CPA	None
Certified financial institution	None
Repayment Methods	Repayment in lumpsum upon maturity
Unredeemed balance	NTD4.2 billion
Paid-in shares capital in last Fiscal Year	NTD 13,719,006 thousand
After-tax Net Worth in last Fiscal Year	NTD 15,504,958 thousand
Performance	Normal
Redemption or earlier redemption	None
Conversion and exchange conditions	None
Limitation Article	Subordinated bond
Fund utilization plan	Strengthen financial structure, upgrade capital adequacy ratio and expand business scale
Balance of Bonds as a Ratio of Shareholding of After-tax net worth(%)	27.09%
Whether it is accounted for equity capital and type	Tier II Capital
Name of credit rating agency, date of rating and ratings	Name: Fitch Ratings Limited Taiwan Branch (Fitch) Rating: National Long-term at BBB+ (twn); National short-term at F2 (twn), with stable outlook Date of rating: 2012/10/09

Name of credit rating agency, date of rating and ratings	Name: Fitch Ratings Limited Taiwan Branch (Fitch) Rating: National Long-term at BBB+ (twn); National short-term at F2 (twn), with stable outlook Date of rating: 2012/10/09
Type	2nd term of 2009 Subordinated Financial Bonds
Date & Approval No.	Ching-Kuan-Yin (4) Tze No. 09800104050 dated March 20,2009
Issue Date	December 10, 2009
Face Value	NTD500,000
Place of Issue and Trading	Taiwan R.O.C.
Currency	NTD
Issuing price	At Par Value

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Type	2nd term of 2009 Subordinated Financial Bonds
Total amount	NTD0.1 billion
Interest rate	Coupon rate at 2.75% fixed rate
Maturity	7years, matured on December 10, 2016
Seniority	Prevail over the shareholders’ right to allocate residual property, and follow the Bank’s depositors and other creditors
Guarantee Institution	None
Trustee	None
Consignee	None
Certified Lawyer	None
Certified CPA	None
Certified financial institution	None
Repayment Methods	Repayment in lumpsum upon maturity
Unredeemed balance	NTD4.3 billion
Paid-in shares capital in last Fiscal Year	NTD 13,719,006 thousand
After-tax Net Worth in last Fiscal Year	NTD 15,504,958 thousand
Performance	Normal
Redemption or earlier redemption Limitation Article	None
Conversion and exchange conditions	None
Limitation Article	Subordinated bond
Fund utilization plan	Strengthen financial structure, upgrade capital adequacy ratio and expand business scale
Balance of Bonds as a Ratio of Shareholding of After-tax net worth(%)	27.73%
Whether it is accounted for equity capital and type	Tier II Capital
Name of credit rating agency, date of rating and ratings	Name: Fitch Ratings Limited Taiwan Branch (Fitch) Rating: National Long-term at BBB+ (twn); National short-term at F2 (twn), with stable outlook Date of rating: 2012/10/09
Type	3rd term of 2009 Subordinated Financial Bonds
Date & Approval No.	Ching-Kuan-Yin(4)Tze No. 09800104050 dated March

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Type	3rd term of 2009 Subordinated Financial Bonds
	20, 2009
Issue Date	December 18, 2009
Face Value	NTD500,000
Place of Issue and Trading	Taiwan R.O.C.
Currency	NTD
Issuing price	At Par Value
Total amount	NTD1.2 billion
Interest rate	Annual interest rate is index interest rate plus 1.50%. Index interest rate is the displayed floating rates for one-year term deposits of Chunghwa Post Co.,Ltd.
Maturity	7years, matured on December 18, 2016
Seniority	Prevail over the shareholders’ right to allocate residual property, and follow the Bank’s depositors and other creditors
Guarantee Institution	None
Trustee	None
Consignee	None
Certified Lawyer	None
Certified CPA	None
Certified financial institution	None
Repayment Methods	Repayment in lumpsum upon maturity
Unredeemed balance	NTD5.5 billion
Paid-in shares capital in last Fiscal Year	NTD 13,719,006 thousand
After-tax Net Worth in last Fiscal Year	NTD 15,504,958 thousand
Performance	Normal
Redemption or earlier redemption	None
Conversion and exchange conditions	None
Limitation Article	Subordinated bond
Fund utilization plan	Strengthen financial structure, upgrade capital adequacy ratio and expand business scale
Balance of Bonds as a Ratio of Shareholding of After-tax net worth(%)	35.47%
Whether it is accounted for equity capital and type	Tier II Capital

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Type	3rd term of 2009 Subordinated Financial Bonds
Name of credit rating agency, date of rating and ratings	Name: Fitch Ratings Limited Taiwan Branch (Fitch) Rating: National Long-term at BBB+ (twn); National short-term at F2 (twn), with stable outlook Date of rating: 2012/10/09
Type	4th term of 2009 Subordinated Financial Bonds
Date & Approval No.	Ching-Kuan-Yin (4) Tze No. 09800104050 dated March 20,2009
Issue Date	December 30, 2009
Face Value	NTD500,000
Place of Issue and Trading	Taiwan R.O.C.
Currency	NTD
Issuing price	At Par Value
Total amount	NTD1.1 billion
Interest rate	Annual interest rate is index interest rate plus 1.48%. Index interest rate is the displayed floating rates for one-year term deposits of Chunghwa Post Co.,Ltd.
Maturity	6.5 years, matured on June 30, 2016
Seniority	Prevail over the shareholders’ right to allocate residual property, and follow the Bank’s depositors and other creditors
Guarantee Institution	None
Trustee	None
Consignee	None
Certified Lawyer	None
Certified CPA	None
Certified financial institution	None
Repayment Methods	Repayment in lump sum upon maturity
Unredeemed balance	NTD6.6 billion
Paid-in shares capital in last Fiscal Year	NTD 13,719,006 thousand
After-tax Net Worth in last Fiscal Year	NTD 15,504,958 thousand
Performance	Normal
Redemption or earlier redemption	None
Conversion and exchange conditions	None
Limitation Article	Subordinated bond
Fund utilization plan	Strengthen financial structure, upgrade capital adequacy

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Type	4th term of 2009 Subordinated Financial Bonds
	ratio and expand business scale
Balance of Bonds as a Ratio of Shareholding of After-tax net worth(%)	42.57%
Whether it is accounted for equity capitaland type	Tier II Capital
Name of credit rating agency, date of rating and ratings	Name: Fitch Ratings Limited Taiwan Branch (Fitch) Rating: National Long-term at BBB+ (twn); National short-term at F2 (twn), with stable outlook Date of rating: 2012/10/09

Type	1st term of 2010 Subordinated Financial Bonds
Date & Approval No.	Ching-Kuan-Yin (4) Tze No. 09800104050 dated March 20,2009
Issue Date	January 28, 2010
Face Value	NTD500,000
Place of Issue and Trading	Taiwan R.O.C.
Currency	NTD
Issuing price	At Par Value
Total amount	NTD0.6 billion
Interest rate	Annual interest rate is index interest rate plus 1.50%. Index interest rate is the displayed floating rates for one-year term deposits of Chunghwa Post Co.,Ltd.
Maturity	7 years, matured on January 28, 2017
Seniority	Prevail over the shareholders’ right to allocate residual property, and follow the Bank’s depositors and other creditors
Guarantee Institution	None
Trustee	None
Consignee	None
Certified Lawyer	None
Certified CPA	None
Certified financial institution	None
Repayment Methods	Repayment in lump sum upon maturity
Unredeemed balance	NTD7.2 billion
Paid-in shares capital in last Fiscal Year	NTD 13,719,006 thousand
After-tax Net Worth in last Fiscal Year	NTD 15,361,003 thousand

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Type	1st term of 2010 Subordinated Financial Bonds
Performance	Normal
Redemption or earlier redemption	None
Conversion and exchange conditions	None
Limitation Article	Subordinated bond
Fund utilization plan	Strengthen financial structure, upgrade capital adequacy ratio and expand business scale
Balance of Bonds as a Ratio of Shareholding of After-tax net worth(%)	46.87%
Whether it is accounted for equity capitaland type	Tier II Capital
Name of credit rating agency, date of rating and ratings	Name: Fitch Ratings Limited Taiwan Branch (Fitch) Rating: National Long-term at BBB+ (twn); National short-term at F2 (twn), with stable outlook Date of rating: 2012/10/09

Type	2nd term of 2010 Subordinated Financial Bonds
Date & Approval No.	Ching-Kuan-Yin (4) Tze No. 09800104050 dated March 20,2009
Issue Date	February 9, 2010
Face Value	NTD10,000,000
Place of Issue and Trading	Taiwan R.O.C.
Currency	NTD
Issuing price	At Par Value
Total amount	NTD0.2 billion
Interest rate	Annual interest rate is index interest rate plus 1.50%. Index interest rate is the displayed floating rates for one-year term deposits of Chunghwa Post Co.,Ltd.
Maturity	6 years, matured on February 9, 2016
Seniority	Prevail over the shareholders’ right to allocate residual property, and follow the Bank’s depositors and other creditors
Guarantee Institution	None
Trustee	None
Consignee	None
Certified Lawyer	None
Certified CPA	None
Certified financial institution	None

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Type	2nd term of 2010 Subordinated Financial Bonds
Repayment Methods	Repayment in lump sum upon maturity
Unredeemed balance	NTD7.4 billion
Paid-in shares capital in last Fiscal Year	NTD 13,719,006 thousand
After-tax Net Worth in last Fiscal Year	NTD 15,361,003 thousand
Performance	Normal
Redemption or earlier redemption	None
Conversion and exchange conditions	None
Limitation Article	Subordinated bond
Fund utilization plan	Strengthen financial structure, upgrade capital adequacy ratio and expand business scale
Balance of Bonds as a Ratio of Shareholding of After-tax net worth(%)	48.17%
Whether it is accounted for equity capitaland type	Tier II Capital
Name of credit rating agency, date of rating and ratings	Name: Fitch Ratings Limited Taiwan Branch (Fitch) Rating: National Long-term at BBB+ (twn); National short-term at F2 (twn), with stable outlook Date of rating: 2012/10/09

Type	3rd term of 2010 Subordinated Financial Bonds
Date & Approval No.	Ching-Kuan-Yin (4) Tze No. 09900204230 dated June 4, 2010
Issue Date	June 25, 2010
Face Value	NTD10,000,000
Place of Issue and Trading	Taiwan R.O.C.
Currency	NTD
Issuing price	At Par Value
Total amount	NTD0.9 billion
Interest rate	Annual interest rate is index interest rate plus 1.75%. Index interest rate is the displayed floating rates for one-year term deposits of Chunghwa Post Co.,Ltd.
Maturity	7 years, matured on June 25, 2017
Seniority	Prevail over the shareholders’ right to allocate residual property, and follow the Bank’s depositors and other creditors
Guarantee Institution	None

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Type	3rd term of 2010 Subordinated Financial Bonds
Trustee	None
Consignee	None
Certified Lawyer	None
Certified CPA	None
Certified financial institution	None
Repayment Methods	Repayment in lump sum upon maturity
Unredeemed balance	NTD8.3 billion
Paid-in shares capital in last Fiscal Year	NTD 13,719,006 thousand
After-tax Net Worth in last Fiscal Year	NTD 15,361,003 thousand
Performance	Normal
Redemption or earlier redemption	None
Conversion and exchange conditions	None
Limitation Article	Subordinated bond
Fund utilization plan	Strengthen financial structure, upgrade capital adequacy ratio and expand business scale
Balance of Bonds as a Ratio of Shareholding of After-tax net worth(%)	54.03%
Whether it is accounted for equity capitaland type	Tier II Capital
Name of credit rating agency, date of rating and ratings	Name: Fitch Ratings Limited Taiwan Branch (Fitch) Rating: National Long-term at BBB+ (twn); National short-term at F2 (twn), with stable outlook Date of rating: 2012/10/09

Type	1st term of 2011 unsecured convertible Financial Bonds issued domestically
Date & Approval No.	Ching-Kuan-Cheng-Fa Tze No. 1000018296 dated May 16, 2011
Issue Date	June 15,2011
Face Value	NTD100,000
Place of Issue and Trading	Taiwan R.O.C.
Currency	NTD
Issuing price	At Par Value
Total amount	NTD2.3 billion
Interest rate	0％
Maturity	3years,matured on June 15,2014
Seniority	1stSeniority

110110

Type	1st term of 2011 unsecured convertible Financial Bonds issued domestically
Guarantee Institution	None
Trustee	Chinatrust Commercial Bank
Consignee	KGI Securities Co.,Ltd.
Certified Lawyer	None
Certified CPA	None
Certified financial institution	None
Repayment Methods	Repayment in lump sum upon maturity, other than those converted or redeemedpursuant to the conversion rules
Unredeemed balance	NTD2.3 billion
Paid-in shares capital in last Fiscal Year	NTD 17,319,006 thousand
After-tax Net Worth in last Fiscal Year	NTD 19,415,020 thousand
Performance	None
Redemption or earlier redemption	In the event of any of the following circumstances from December 16,2011 (the day following maturity of six months after issuance) until May 6, 2014 (40 days prior to maturity), the Bank may send the “Notice of Call” to be matured in one month (Note 1) to the Financial Bonds holder (Note 2) via registered mail within the agreed time limit, and notify the GTSM in writing and call the outstanding Financial Bonds at the face value upon expiration of said-noted period: (1) If the closing price of the Bank’s common shares exceeds the current conversion price by more than 30% for 30 consecutive business days, the Bank may send the “Notice of Call” to be matured in one month to the Financial Bonds holder via registered mail within 30 business days. (2) If the balance of the outstanding Financial Bonds is less than 10% of the initial total issue price, the Bank may send the “Notice of Call” to be matured in one month to the Financial Bonds holder via registered mail at any time.
Conversion and exchange conditions	None
Limitation Article	None
Fund utilization plan	Strengthen financial structure, upgrade capital adequacy ratio and expand business scale
Balance of Bonds as a Ratio of Shareholding of After-tax net worth (%)	54.60％
Whether it is accounted for equity capital and type	Not included
Name of credit rating agency, date of rating and ratings	Name: Fitch Ratings Limited Taiwan Branch (Fitch) Rating: National Long-term at BBB+ (twn); National short-term at F2 (twn), with stable outlook Date of rating: 2012/10/09

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• Note 1: Said-noted period was counted from the date when the Bank issued the letter and the record date of the call was the expiry date of the period. Meanwhile, the conversion suspension period referred to in Article 9 of the Bank’s Rules for Issuing and Conversion of 1st term of 2011 unsecured converbible Financial Bonds issued domestically should not fall in said-noted period.

Note 1: Said-noted period was counted from the date when the Bank issued the letter and the record date of the call was the expiry date of the period. Meanwhile, the conversion suspension period referred to in Article 9 of the Bank’s Rules for Issuing and Conversion of 1st term of 2011 unsecured converbible Financial Bonds issued domestically should not fall in said-noted period.	Note 1: Said-noted period was counted from the date when the Bank issued the letter and the record date of the call was the expiry date of the period. Meanwhile, the conversion suspension period referred to in Article 9 of the Bank’s Rules for Issuing and Conversion of 1st term of 2011 unsecured converbible Financial Bonds issued domestically should not fall in said-noted period.
Note 2: Financial Bonds holder: To be identified based on the name list of Financial Bonds holders prevailing within five business days prior to mailing of the Notice of Call, provided that the investor who holds the Financial Bonds due to transaction or other causes subsequently should be published by public notice. Type 1st term of 2012 Subordinated Financial Bonds Date & Approval No. Ching-Kuan-Yin-Piao Tze No. 10100305900 dated September 24,2012 Issue Date November 13, 2012 Face Value NTD1,000,000 Place of Issue and Trading Taiwan R.O.C. Currency NTD Issuing price At Par Value Total amount NTD3.0 billion Interest rate Coupon rate at 2.10% fixed rate Maturity 7 years, matured on November 13, 2019 Seniority Prevail over the shareholders’ right to allocate residual property, and follow the Bank’s depositors and other creditors Guarantee Institution None Trustee None Consignee None Certified Lawyer None Certified CPA None Certified financial institution None Repayment Methods Repayment in lump sum upon maturity Unredeemed balance NTD13.6 billion Paid-in shares capital in last Fiscal Year NTD 22,338,576 thousand After-tax Net Worth in last Fiscal Year NTD 25,461,054 thousand Performance Normal Redemption or earlier redemption None Conversion and exchange conditions None Limitation Article Subordinated bond Fund utilization plan Strengthen financial structure, upgrade capital adequacy ratio and expand business scale
Type	1st term of 2012 Subordinated Financial Bonds
Date & Approval No.	Ching-Kuan-Yin-Piao Tze No. 10100305900 dated September 24,2012
Issue Date	November 13, 2012
Face Value	NTD1,000,000
Place of Issue and Trading	Taiwan R.O.C.
Currency	NTD
Issuing price	At Par Value
Total amount	NTD3.0 billion
Interest rate	Coupon rate at 2.10% fixed rate
Maturity	7 years, matured on November 13, 2019
Seniority	Prevail over the shareholders’ right to allocate residual property, and follow the Bank’s depositors and other creditors
Guarantee Institution	None
Trustee	None
Consignee	None
Certified Lawyer	None
Certified CPA	None
Certified financial institution	None
Repayment Methods	Repayment in lump sum upon maturity
Unredeemed balance	NTD13.6 billion
Paid-in shares capital in last Fiscal Year	NTD 22,338,576 thousand
After-tax Net Worth in last Fiscal Year	NTD 25,461,054 thousand
Performance	Normal
Redemption or earlier redemption	None
Conversion and exchange conditions	None
Limitation Article	Subordinated bond
Fund utilization plan	Strengthen financial structure, upgrade capital adequacy ratio and expand business scale

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Type	1st term of 2012 Subordinated Financial Bonds
Balance of Bonds as a Ratio of Shareholding of After-tax net worth(%)	53.41%
Whether it is accounted for equity capitaland type	Tier II Capital
Name of credit rating agency, date of rating and ratings	Name: Fitch Ratings Limited Taiwan Branch (Fitch) Rating: National Long-term at BBB+ (twn); National short-term at F2 (twn), with stable outlook Date of rating: 2012/10/23

• III Issuance of Preferred Stocks: None.

• IV Issuance of Overseas Depository Receipts: None.

• V Employee Stock Options: None.

• VI Acquisition or Assignment of Other Financial Institutions: None. VII Implementation of Fund utilization plan

• (I) Contents of the plan:

  1. In order to strengthen the structure of capital and upgrade the capital adequacy ratio, the Bank applied with FSC for issuing the Subordinated Financial Bonds in 2006, 2009, 2010 and 2012 respectively:

(1) The FSC approved the Bank’s application in 2006 for issuance of Subordinated Financial Bonds in the amount of NTD2.4 billion via its Letter under Ching-Kuan-Yin (4) Tze No. 09600481190 dated November 14, 2007. The Bank issued the “1st term of 2007 Subordinated Financial Bonds of Taichung Commercial Bank” (Bond No. G13001) on December 21, 2007. The total issued amount was NTD2.4 billion with the duration of 5.5 years. The Subordinated Financial Bonds were traded on GreTai markets on Dec. 24, 2007.

(2) The FSC approved the Bank’s application in 2008 for issuance of Subordinated Financial Bonds in the amount of NTD5 billion via its Letter under Ching-Kuan-Yin (4) Tze No. 09800104050 on March 20, 2009.

Term & Financial Bonds Item	1~~st~~term 2009	2~~nd~~term 2009	3~~rd~~term 2009	4~~th~~term 2009	1~~st~~term 2010	2~~nd~~term 2010
Bond No.	G13002	G13003	G13004	G13005	G13006	G13007
Issue Date	Jun. 6, 2009	Dec.10, 2009	Dec.18, 2009	Dec. 30, 2009	Jan. 28 2010	Feb. 9, 2010
Total Issued	NTD1.8 billion	NTD0.1 billion	NTD1.2 billion	NTD1.1 billion	NTD0.6 billion	NTD0.2 billion
Duration	7 years	7 years	7 years	6.5 years	7 years	6 years
Listing Date	Jun. 6, 2009	Dec.10, 2009	Dec.18, 2009	Dec. 30, 2009	Jan. 28 2010	Feb. 9, 2010

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• (3) The FSC approved the Bank’s application in 2010 for issuance of Subordinated Financial Bonds in the amount of NTD0.9 billion via its Letter under Ching-Kuan-Yin-Piao Tze No. 0900204230 on June 4, 2010. The Bank issued the “3rd term of 2010 Subordinated Financial Bonds of Taichung Commercial Bank” (Bond No. G13008) on June 25, 2010. The total issued amount was NTD0.9 billion with the duration of 7 years. The bond was traded on GreTai markets on the same date.

• (4) The FSC approved the Bank’s application in 2012 for issuance of Subordinated Financial Bonds in the amount of NTD3.0 billion via its Letter under Ching-Kuan-Yin-Piao Tze No. 10100305900 on September 24, 2012. The Bank issued the “1st term of 2012 Subordinated Financial Bonds of Taichung Commercial Bank” (Bond No. G13009) on November 13, 2012. The total issued amount was NTD3.0 billion with the duration of 7 years. The bond was traded on GreTai markets on the same date.

• Recapitalization through issuing common share in amount of NTD3.6 billion in 2010:

For reinforcing the financial structure of and upgrading the BIS ratio of the Bank and the extension of business operation, the Bank applied with the Securities and Futures Bureau of Financial Supervisory Commission on October 14 2010 for raising capital of NTD3,600 million by issuing new shares. The application has been caused into effect under Letter Ching-Kuan-Zheng-Fa-Tze No. 0990058141 dated November 2 2010. The Bank has raised capital amounting to NTD3,600 million by issuing new shares in 2010. Investment has been paid in full as of December 9, 2010 and the shares have been listed in TWSE for offering on December 15, 2010.

1. 1st term of 2011 unsecured convertible Financial Bonds issued domestically in amount of NTD2.3 billion:

For reinforcing the financial structure of and upgrading the BIS ratio of the Bank, the Bank offered the 1[st] issue of unsecured financial debentures amounting to NTD2,800 million at the approval of Financial Supervisory Commission under Letter Ching-Kuan-Zheng-Fa-Tze No. 1000018296 dated May 16 2011. The 20[th] Board of Directors resolved to adjust the total amount of the debt instruments to NTD2,300 million in the 15[th] session. Each lot of the said instrument shall amount to NTD100,000 and a total of 2,300 lots shall be issued. The conversion price was set at NTD11.89, with the duration of 3 years (from June 15, 2011 until June 15, 2014), at the time of issuance. The total of NTD2,300 million has been paid in full as of June 13 2011. The instrument is listed in GTSM on June 15 2011 for trading.

1. Capital increase by recapitalization of earnings and capital surplus in amount of NTD519,570,180 in 2010:

2. In order to strengthen the Bank’s financial structure, upgrade the Bank's capital adequacy ratio and expand the Bank’s business scale,

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the Bank applied with Securities and Futures Bureau of FSC for capital increase by recapitalization of earnings and capital surplus by NTD519,570,180 on July 4, 2011 and the capital increase has been reported to FSC and approved on July 20, 2011 under Ching-Kuan-Zheng-Fa-Tze No. 1000032577 confirmation letter. The capital increase was registered on September 22, 2011, and the Bank’s paid-in capital became NTD17,838,575,940, and the gross capital NTD20,000,000,000.

1. Recapitalization through issuing common share in amount of NTD4.5 billion in 2011:

   • In order to strengthen the Bank’s financial structure, upgrade the Bank’s capital adequacy ratio and expand the Bank’s business scale, the Bank applied with Securities and Futures Bureau of FSC for recapitalization through issuing common share in amount of NTD4.5 billion on July 22, 2011 and the case approved on August 9, 2011 under Ching-Kuan-Zheng-Fa-Tze No. 1000035963 confirmation letter. The stock payment in the amount of NTD4.5 billion has been fully collected on November 8, 2011, and the new shares were listed on November 11, 2011.

2. In 2011, capitalization of retained earnings into news shares amounting to NTD848,865,890:

   • In order to strengthen the Bank’s financial structure, upgrade the Bank's capital adequacy ratio and expand the Bank’s business scale, the Bank applied with Securities and Futures Bureau of FSC for capital increase by recapitalization of earnings by NTD848,865,890 on July 10, 2012 and the capital increase has been reported to FSC and approved on July 26, 2012 under Jin-Guan-Zheng No. 1010032195 confirmation letter. The capital increase was registered on September 25, 2012, and the Bank’s paid-in capital became NTD23,187,441,830, and the gross capital NTD43,200,000,000.

3. (II) Status of implementation:

The Bank issued the Subordinated Financial Bonds in 2007, 2009, 2010, and 2012 increased capital by recapitalization of earnings and capital surplus in 2010, increased capital through issuing common share and issued the domestic 1st unsecured convertible Financial Bonds and recapitalize the earnings in 2011, in order to strengthen the Bank’s financial structure, upgrade the Bank's capital adequacy ratio and expand the Bank’s business scale. The said plan had positive contribution to the Bank’s financial structure and financial ratios. The Bank’s important financial ratios for 2010, 2011 and 2012 are summarized as follows:

Year Financial ratio	2012	2011	Comparison between 2012 and2011	2010	Comparison between 2011 and2010
ROA (%)	0.67	0.40	0.27	0.13	0.27
ROE (%)	10.38	6.48	3.90	2.37	4.11
Capital adequacy ratio (%)	10.54	11.63	(1.09)	11.10	0.53
Net income (Thousand NTD)	2,777,958	1,454,000	1,323,958	411,956	1,042,044

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5 Operation Profile

Earnings Per Share (NTD)	1.20	0.76	0.44	0.29	0.47

• I Business Contents

• (I) Principal business of the Bank by business type, assets under respective business units and/or their proportion to total assets and/or revenue, and the status of growth.

  1. Principal business of the Bank by business type: (1) Deposits Operations: passbooks, check deposits, certificates of deposit, negotiable certificates of deposit.

  (2) Loan Operations: personal loans, corporate loans, syndicate loans, discounts of instruments, issuance of local L/C and local guarantee making.

   - (3) Foreign Exchanges Operations: import, export, foreign exchange settlements, deposits, and loans of foreign currency.
  

(4) Wealth Management Operations: Administer the planning and execution of the financial planning businesses throughout the nation, management of financial planning staff, preparation and revision of the wealth management policy and operating procedure, and promotion, supervision and management of wealth management customers’ investment in the financial planning business. (5) Corporate Finance Operations: Administer corporate banking business related to corporate banking, corporate syndicate loans and factoring, et al. (6) E-banking Operations: Network banking, e-ATM, ATM and Phone banking. (7) Trust Operations: Investment in domestic and overseas marketable securities through special monetary trustee accounts, Certified auditors of marketable securities, real estate trust and specific independent money management and utilization trust. (8) Investment Operations: Dispatch of funds in NTD and foreign currency, foreign exchange, marketable securities trading and long-term equity investment. (9) Securities operation: securities trade, margin trade and short sales of securities, and futures Introducing Broker 2. Assets under respective business units and/or their proportion to total assets and/or revenue, and the status of growth: (1) Deposit Operations:

Unit: NTD thousand; %

						Unit: NTD thousand; %	Unit: NTD thousand; %
Item	Year					Comparison between 2012
		2012		2011
						and2011
							Increase
						Increase
							(decrease)
		Amount	Proportion	Amount	Proportion	(decrease) in
							in
						amount
							proportion
Demand	Check deposits
		7,662,273	1.97	7,012,760	2.09	649,513	9.26

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Deposit Balance	Current deposits						16.83
		77,831,422	20.07	66,620,964	19.84	11,210,458
	Current saving deposits						8.88
		88,448,284	22.81	81,231,495	24.19	7,216,789
	Subtotal						12.32
		173,941,979	44.85	154,865,219	46.12	19,076,760
	Time deposits						41.76
		85,985,510	22.17	60,654,582	18.06	25,330,928
Time Deposit Bl	Time saving deposits						6.44
		125,933,000	32.47	118,312,830	35.23	7,620,170
aance	Subtotal						18.41
		211,918,510	54.64	178,967,412	53.29	32,951,098
Others	Accounts transfer and deposits via post office						（1.13）
		1,963,595	0.51	1,986,115	0.59	（22,520）
	Total						15.49
		387,824,084	100.00	335,818,746	100.00	52,005,338

Note 1: Current deposits and Current deposits include deposits in foreign currencies and treasury deposits.

Note 2: Accounts transfer and deposits via post office include the national development fund tied in with accounts transfer and deposits.

(2) Loan Operations:

(2) Loan Operations:	(2) Loan Operations:	(2) Loan Operations:	(2) Loan Operations:	(2) Loan Operations:	(2) Loan Operations:	(2) Loan Operations:
Unit: NTDthousand; %
Year Item	2012		2011		Comparison between 2012 and2011
	Amount	Proportion	Amount	Proportion	Increase (decrease) in amount	Increase (decrease) in proportion
Balance of Short-term secured loans	60,624,756	18.08	48,851,378	17.10	11,773,378	24.10
Balance of Short-term credit loans	42,538,465	12.68	33,924,033	11.87	8,614,431	25.39
Subtotal	103,163,221	30.76	82,775,411	28.98	20,387,809	24.63
Balance of Mid-term secured loans	87,237,740	26.01	82,832,302	29.00	4,405,438	5.32
Balance of Mid-term credit loans	32,254,212	9.62	26,781,468	9.37	5,472,744	20.43
Subtotal	119,491,952	35.63	109,613,770	38.37	9,878,182	9.01
Balance of Long-term secured loans	100,303,767	29.91	85,425,962	29.90	14,877,805	17.42
Balance of Long-term credit loans	2,553,682	0.76	1,592,791	0.56	960,891	60.33
Subtotal	102,857,449	30.67	87,018,753	30.46	15,838,696	18.20
Others	9,889,349	2.95	6,268,477	2.19	3,620,873	57.76
Subtotal	9,889,349	2.95	6,268,477	2.19	3,620,873	57.76

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Total 335,401,971 100.00 285,676,411 100.00 49,725,560 17.41

Note: Said table includes foreign currencies, OBU, delinquent accounts, Acceptances receivable and receivable security bonds

(3) Foreign Exchanges Operations:

					Unit: USD thousand; %	Unit: USD thousand; %
Year Item	2012		2011		Comparison between 2012 and 2011
	Amount	Proportion	Amount	Proportion	Increase (decrease) in amount	Increase (decrease) in proportion
Import	1,777,446	16.92	1,412,516	15.72	364,930	25.84
Export	626,660	5.97	552,916	6.15	73,744	13.34
Outward remittance	3,956,894	37.68	3,804,229	42.33	152,665	4.01
Inward remittance	4,140,665	39.43	3,217,223	35.80	923,442	28.70
Total	10,501,665	100.00	8,986,884	100.00	1,514,781	16.86
Balance of deposit in foreign currencies	703,762		490,991		212,771	43.34
Balance of loans in foreign currencies	715,784		554,393		161,391	29.11

(4) Wealth Management:

					Unit: NTDthousand; %	Unit: NTDthousand; %
Year Item	2012		2011		Comparison between 2012and2011
	Amount	Proportion	Amount	Proportion	Increase (decrease) in amount	Increase (decrease) in proportion
Trust service fee revenue	259,756	40.14	290,861	52.97	（31,105）	（10.69）
Insurance service feerevenue	387,426	59.86	258,291	47.03	129,135	50.00
Total	647,182	100.00	549,152	100.00	98,030	17.85

(5) Corporate Finance:

(5) Corporate Finance:	(5) Corporate Finance:	(5) Corporate Finance:	(5) Corporate Finance:	(5) Corporate Finance:	(5) Corporate Finance:	(5) Corporate Finance:
Unit: NTD million; %
Year Item	2012		2011		Comparison between 2012 and 2011
	Amount	Proportion	Amount	Proportion	Increase (decrease) in amount	Increase (decrease) in proportion
Balance of loans to SMEs	122,395	69.10	95,241	65.46	27,154	28.51
Balance of loans to large-size enterprises	34,512	19.48	33,040	22.71	1,472	4.46
Balance of loans to governments and public enterprises	0	0.00	800	0.55	(800)	(100.00)
Balance of corporate	156,907	88.58	129,081	88.72	27,826	21.56

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Finance loans in NTD
Balance of loans in foreign currency	20,224	11.42	16,410	11.28	3,814	23.24
Total	177,131	100.00	145,491	100.00	31,640	21.75

(6) e-Banking Operations:

A. Number of new network accounts

Year Item	2012	2012	2011	2011	Comparison between 2012 and 2011	Comparison between 2012 and 2011
	Number of active accounts	Number of new accounts	Number of active accounts	Number of new accounts	Increase (decrease) in number of active accounts	Increase (decrease) in proportion %
Number of new network accounts	122,472	23,616	98,713	18,110	23,759	24.07
		B.	e-Banking tradingratio
Year Item	2012		2011		Comparison between 2012 and 2011
	Accumulative transactions	Proportion to Total Transactions %	Accumulative transactions	Proportion to Total Transactions %	Increase (decrease) in transactions	Proportion to increase (decrease) in total transactions %
e-Banking transaction	5,994,279	48.93	5,707,491	47.76	286,788	5.02

Note: The transactions exclude those for inquiries.

(7) Trust Operations:

Unit: NTD thousand; %

Item	Year	2012	2012	2011	2011	Comparison between 2012 and 2011	Comparison between 2012 and 2011
		Amount	Proportion	Amount	Proportion	Increase (decrease) in amount	Increase (decrease) in proportion
Investment in domestic and overseas marketable securities through special monetary trustee accounts	Balance of trust in domestic funds	6,417,176	15.33	5,692,959	14.73	724,217	12.72
	Service Fee	37,079	11.65	32,411	10.57	4,668	14.40
	Overseas funds Balance of trust	30,911,769	73.84	30,174,736	78.08	737,033	2.44
	Service Fee	221,870	69.69	257,758	84.04	（37,628）	（14.60）

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Item	Year	2012	2012	2011	2011	Comparison between 2012 and 2011	Comparison between 2012 and 2011
		Amount	Proportion	Amount	Proportion	Increase (decrease) in amount	Increase (decrease) in proportion
	ETF balance	32,096	0.08	36,844	0.09	（4,748）	（12.87）
	Service Fee	160	0.05	692	0.23	（532）	（76.88）
	Balance of structure note	658,871	1.57	663,484	1.72	（4,613）	（0.69）
	Service Fee	-	-	-	-	-	-
Custody of securities	Balance of securities in custody	1,466,085	3.50	-	-	-	-
	Service Fee	647	0.20	-	-	-	-
Certified auditors of marketable securities	Business volume	2,873,106	-	3,265,939	-	（392,833）	（12.03）
	Service Fee	690	0.22	402	0.13	288	71.64
Real estate trust	Balance oftrust	1,032,082	2.47	690,879	1.79	341,203	49.39
	Service Fee	25,287	7.94	5,190	1.69	20,097	387.23
Specific independent money management and utilization trust	Balance of trust	1,345,363	3.21	1,387,135	3.59	（41,772）	（3.01）
	Service Fee	32,650	10.25	10,242	3.34	22,408	218.79
Balance of trust assets		41,863,442	100.00	38,646,037	100.00	3,217,405	8.33

management and utilization trust Service Fee 32,650 10.25 10,242 3.34 22,408 218.79 Balance of trust assets 41,863,442 100.00 38,646,037 100.00 3,217,405 8.33	management and utilization trust Service Fee 32,650 10.25 10,242 3.34 22,408 218.79 Balance of trust assets 41,863,442 100.00 38,646,037 100.00 3,217,405 8.33	management and utilization trust Service Fee 32,650 10.25 10,242 3.34 22,408 218.79 Balance of trust assets 41,863,442 100.00 38,646,037 100.00 3,217,405 8.33	management and utilization trust Service Fee 32,650 10.25 10,242 3.34 22,408 218.79 Balance of trust assets 41,863,442 100.00 38,646,037 100.00 3,217,405 8.33	management and utilization trust Service Fee 32,650 10.25 10,242 3.34 22,408 218.79 Balance of trust assets 41,863,442 100.00 38,646,037 100.00 3,217,405 8.33	management and utilization trust Service Fee 32,650 10.25 10,242 3.34 22,408 218.79 Balance of trust assets 41,863,442 100.00 38,646,037 100.00 3,217,405 8.33	management and utilization trust Service Fee 32,650 10.25 10,242 3.34 22,408 218.79 Balance of trust assets 41,863,442 100.00 38,646,037 100.00 3,217,405 8.33
(8) Investments Operations: Unit: NTDthousand; %
Year Item	2012		2011		Comparison between 2012 and2011
	Amount	Proportion	Amount	Proportion	Increase (decrease) in amount	Increase (decrease) in proportion
Long-term/short-term investmentrevenue	165,778	17.05	(157,350)	(31.12)	323,128	205.36
Interest income – NTD/foreigncurrency	726,669	74.73	578,117	114.33	148,552	25.70

120120

Exchange revenue – spot	79,903	8.22	84,903	16.79	(5,000)	(5.89)
Total income (exclusive of the reserve fund and own reserves)	972,350	100.00	505,670	100.00	466,680	92.29

(9) Securities:

						Units: NTD 1,000; %;lots	Units: NTD 1,000; %;lots
Item	Year	2012		2011		Comparison between 2012 and2011
		Amount	Proportion	Amount	Proportion	Increase (decrease) in amount	Increase (decrease) in proportion
Brokerage	Amount of transactions of Securities brokerage	52,629,588	-	51,217,173	-	1,412,415	2.76
	Average balance of Purchase on margin	325,276	-	227,095	-	98,181	43.23
	Quantity in lots of futures IB operation	159,644	-	-	-	159,644	-
Service Fee	Brokerage fee revenue	53,061	93.31	56,945	97.77	（3,884）	（6.82）
	Incomes from futures IB operation	1,672	2.94	-	-	1,671	-
	Short Sale revenue	1,838	3.23	1,105	1.90	733	66.33
	Underwriting revenue	294	0.52	193	0.33	101	52.33
	Total service fee	56,865	100.00	58,243	100.00	（1,379）	（2.37）
Interest revenue	Interest incomes from financing	17,418	-	18,610	-	（1,192）	（6.41）

Note: Brokerage fee revenue less discount of service charges.

(II) Business plan for 2013:

1. Deposit Operations

(1) Make additional effort in the development of business in current account deposit and upgrade the ratio of current account deposit to reduce the cost of capital.

• (2)

Continue improving SOP, simplifying routine operating, reducing operating cost and upgrading the processing efficiency.

(3) Vitalize the function of e-banking service, and proactively promote this service to the customers in order to develop cash transactions of the customers to bring in more commission incomes.

(4) Develop the number of customers, promote development of the source of relevant derivatives, and increase various operating revenue.

1. Loan Operations

2. (1) The Bank targets at the small and medium enterprises in financing, and works in conjunction with the Small and

121121

Medium Enterprises Credit Guarantee Fund in order to diversify the credit risk of the Bank and intensify the training in credit guarantee fund to prevent the denial of subrogation of compensation.

(2) Adjust the interest rate for mortgage loans in line with the changes in the market. (3) Adjust the rates for commission charges to reflect the cost of operation and increase the incomes from commission. (4) Make additional effort to develop home mortgage insurance to enhance the value added to mortgage loan and bring in higher incomes for the Bank. (5) The Bank makes additional effort in the supervision of lending and continues to provide related education and training for improving the quality of loans and operation efficiency, and to upgrade the professional standing of the banking staff in lending business. (6) The Bank seeks to continue the improvement of its business process and review related regulations governing lending procedures to upgrade its service quality. 3. Foreign Exchanges Operations (1) Simplify SOP, upgrade service quality, enhance the various staff’s expertise and development ability with respect to foreign exchanges, upgrade the Bank’s competitiveness. (2) Actively develop the international banking business and cross-strait trade financing transactions to increase revenue. (3) Strengthen R&D and transactions of financial derivatives, upgrade the Bank’s skills in operating finance in order to satisfy customers’ diversified needs. (4) Actively solicit foreign currency deposits, by promoting the preferential Program for foreign currency deposit to diversify the funds. (5) Upgrading and developing foreign exchange’s e-banking function. 4. Wealth Management (1) The Bank will introduce dual-currency investment, passbook saving in gold, bonds in secondary market, and other new financial products to enrich the product portfolio in investment for the customers. (2) Provide such new investment methods as efficient investment method to increase the modes of investment by customers. (3) The Bank will establish the positions of Financial Advisors and Sales Heads for the effective management of wealth management accounts. (4) Wealth Management Dept. will work with various branches to provide the exclusive service for one-by-one consultation on investment in fund irregularly. (5) The Bank will hold conferences and seminars of different sizes to improve the professional image of the Bank and fortify the bonding with the customers, and will forward

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timely financial information all over the world for the reference of the customers.

(6) Enhance the market analysis and investment strategies by providing financial planning specialists and branches with the real-time market information, portfolio messages and sale strategies through phone conference, and making available to business unit managers and financial planning specialists the latest market information, global index, selected funds, ETF and suggestions via email on a daily basis and on a weekly basis, to help them provide customers with professional suggestions.

1. Corporate Finance (1) Strength visits to customers to develop new clientele, continue providing excellent customers with the pricing policy based on the interest rate in money market, develop new financial derivatives, and include corporate banking integrated marketing.

2. (2) The Bank will continue to strengthen its core business of “lending to small and medium enterprises”, and provide the customers full-range financing service with proper balance of the size of loan and asset quality to bring in more incomes.

3. (3) Increase the volume of business in “syndicated loans” and enhance the liaison with other banks a larger share of incomes from management fees as the lead bank.

4. (4) Accelerate the promotion of “receivable accounts” to enhance the trading cash flow business development.

5. (5) Establish the service counters for SMEs and micro-enterprises according to the national economic development policies and actively promote “Program to Encourage Lending By Domestic Banks to Small and Medium Enterprises”, continue providing various preferential funding services to domestic SMEs tied with the SME credit guarantee fund to reduce the Bank's credit extension risk.

6. (6) Readjust the target groups of borrowers and continue the focus in financing small and medium enterprises to augment the niche of the Bank. The Bank shall continue to comply with the principle of risk control, and increase the ratio of guaranty and low risk assets, and integrate effective resources for better service quality. These would help to enhance customer contribution.

7. Trust Operations

8. (1) General Trust Operations:

   • A. Real estate trust: Plan the overall marketing model of land and construction financing and credit extension to increase the service fee revenue.

   • B. Purchase fund trust: undertake financing by account and mortgage loans matched with the mechanism of trust to ensure security in real

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property trade and bring in more incomes from commission.

C. Presale Housing Performance Trust: this product is launched in supporting the “presale housing contractual performance mechanism” by offering trust for real estate development and proceeds for presale housing in order to provide the customers the most suitable service and support the government in protecting the rights of the public in home buying and for transaction security.

  - D. Insurance trust: this is a joint venture with Taichung Commercial Bank Insurance Agency Co., Ltd. and Cigna Life whereby the insurance trust business under the “Wealth Sharing Insurance Project” was launched to provide customer insurance protection and trust products for the development of the insurance and trust products offered by the Bank.

  - E. Advance payment trust: Develop trust in gift vouchers for broadening the scope of regular trust business of the Bank and bring in more incomes from commission.

• (2) Mutual fund:

  • A. Introduction of new products: overseas secondary bond market and the short sale of professional investors or leverage ETFs products.

  • B. Provide new investment strategy: Efficient investment method (feeder fund) and easy fund investment such as deposit of service fee.

• (3) Custodian bank: Act as the custodian for securities investment trust in keeping fund assets, broaden the scope of banking business, and develop stable and long-term incomes from commission.

• (III) Market Analysis 1. Territories of banking business: The Bank has 80 branches of which 21 are in northern Taiwan, 53 are in central Taiwan, and 6 are in southern Taiwan. There is also 1 OBU established in Taipei to provide private banking, corporate banking, wealth management and other full-range banking services.

• 1. Supply and Demand of the market and growth in the future Global economy has been mired in the debt crisis in Europe and in the USA in the first half of 2012, and remained weak. It was echoed with the lack of momentum in economic growth in the USA and China. As such, economic growth in Taiwan was stagnant. In the second half of the 2012, the debt crisis in Europe did not go worse. With the positive economic data released by USA and China, and the new economic policy pronounced by the new government of China, economic recovery tended to take place, which in turn help to stabilize the economic performance of Taiwan.

In 2013, the short-lived economic recovery in the Euro Zone and the fiscal cliff of the USA slowed down global economic

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development. As such, global economic recovery in 2013 will still be sluggish.

1. Transformation and challenge of market structure

2. The development of financial globalization helps to speed up innovation in banking service. This emerged as a vital factor for the development of the banking industry. Banks must respond to market development, vitalize banking service and functions in order to maintain an edge under keen competition in the operation environment. Global economic environment is still so unpredictable and challenging. Banks must link to the international market with further effort in risk management for protecting the financial security and vitality in operation.

Banking deregulation on Taiwan and Mainland China was kicked off in recent years. After the governments of both sides have entered into the MOU of cooperation and the ECFA, and the activation of the clearing and settlement between CNY and NTD, banking on both sides of the Taiwan Strait has been engaged in direct link. In the future, the issue will be how to replicate the model of the success in Taiwan to Mainland China. With the foundation established by investors from Taiwan, the Bank will enlarge its scale in the market and go further for economic cooperation between the two sides. This will be the area of further investment by both sides.

1. Competitive niche, favorable and unfavorable factors for development in the future, and countermeasures. (1) SWOT analysis on favorable and unfavorable factors

2. Strength Weakness

3. The branch channels of the Bank have  Financial innovation ability is inferior been developed in proper balance. than that of international large-scale With the effort in long-term cultivation financial organization. of the customers from small and  Business scale is still impossible to medium enterprises, the Bank has an rival large-size financial organizations. edge in clientele base in operation.  No overseas branch so far, which is a

4. Concentrate in the development of the loss in the opportunity for business local market in central Taiwan and with the investors from Taiwan. expand the clientele base of stable  No experience in international banking customers. service. International competitive

5. Maintain superior level of asset quality power is yet to be enhanced. and vitalize the financial structure of the Bank.

6. Maintain credit rating on the Bank as specific level and go for long-term stability. Opportunity Threat

7. The incremental deregulation of  Given the global financial banking on Taiwan and Mainland development, the Bank is facing the China will help to bring in profit and challenge from international groups. the opportunity for expansion to the  Multi-sectorial competition from international market of the Bank. holding companies which have

8. The concept of asset management has strength in scale and cost. been upgraded, which is good for  The industry peers in the banking

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Strength linking to the international market and upgrade of international competitive power (e.g., the launch of IFRSs and Basel III).	Weakness
	industry are highly homogenous, which narrowed the room for profit.  Industrial and capital dislocation, which hampered the financing needs of the enterprises, and in turn caused directimpact onthe bankingindustry.

• (2) Countermeasures A. In responding to the changes and opportunities from the market and economic situation, the Bank seeks to enlarge the scale of its core business .

• B. The Bank will adjust and optimize its profit structure in order to achieve the goal of stable business volume with increasing profit .

• C. The Bank will augment its channeling strategy for better result, and develop the domestic market in further depth and the market of Greater China .

• D. The Bank will make use of the advantage given by its organization, and will increase its stakes in other direct investments and product marketing for synergy .

• E. The Bank will vitalize the quality of its assets, materialize the early warning system in risk management, and enhance its capital utilization efficiency .

• F. Make hearty effort to demonstrate its advantage in service and perform its corporate social responsibility .

(IV) Research and Development of financial products and status of business development

1. Primary financial products and new banking units, their sizes and income in the most recent two years

(IV)	responsibility. Research and Development of financial products and status of business development 1. Primary financial products and new banking units, their sizes and income in the most recent two years	responsibility. Research and Development of financial products and status of business development 1. Primary financial products and new banking units, their sizes and income in the most recent two years	responsibility. Research and Development of financial products and status of business development 1. Primary financial products and new banking units, their sizes and income in the most recent two years	responsibility. Research and Development of financial products and status of business development 1. Primary financial products and new banking units, their sizes and income in the most recent two years	responsibility. Research and Development of financial products and status of business development 1. Primary financial products and new banking units, their sizes and income in the most recent two years	responsibility. Research and Development of financial products and status of business development 1. Primary financial products and new banking units, their sizes and income in the most recent two years
	Currency unit: NTD 1,000;lot
	Until Feb. 28, 2013		2012/end		2011/end
Item	Trade	Operating	Trade value/volume	Operating revenue	Trade value/volume	Operating revenue
	value/volume	revenue
Corporate Finance
Volume of corporate loans			156,907,576	4,050,706	129,081,019	3,410,331
	152,694,884	664,106
Personal banking
Consumer loans	49,902,616	183,995	49,313,961	1,098,298	44,415,697	1,027,690
Non-Consumer loans	98,932,877	422,789	99,085,960	2,058,480	89,520,272	1,890,980
Credit card loans	737,553	26,628	3,924,159	98,509	2,873,196	110,840
Trust Operations
Balance of trust assets			41,863,442	318,383	38,646,037	306,695
	40,913,957	65,345
Financial management

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Securities trade	5,235,988	16,435	25,091,784	63,802	4,170,355	(248,768)
Securities Brokerage Business
Securities brokerage	7,111,267	7,075	52,629,588	55,193	51,217,173	58,243
Futures Introducing Brokers and futures in lots			159,644	1,672	-	-
	78,995	735
Volume of financing (Average balance)			325,276	17,418	227,095	18,610
	309,269	3,160

• Note 1: The “operating revenue” from securities trading means the income from disposition and evaluation of securities trading.

• Note 2: Brokerage fee revenue less discount of service charges.

• Note 3: Corporate banking and private banking (excluding credit card charging amount), in NTD only, excluding foreign currencies and OBU amount.

• R&D expenditure and results in the most recent two years, and the future R&D plans

(1) R&D spending and result in the last 2 years: R&D spending amounted to NTD70.68 million.

Name of R&D product	Descriptions of R&D	Results
Installments by credit card payment	Developed the function of installment by credit card payment with shops. In 2012, the Bank has entered into agreement with 20 shops in MOMO Fubononline shopping.	Attract customers to use credit card to pay for consumption through the installment by credit card payment function, and increase the volume of credit card spending.
Automatic roll-over system	Install the system of fully secured cases for automatic roll-over of loans via the computer system.	Simplify the procedure for roll-over of personal short-term secured loans and enhance the operation efficiency at the branches.
e-Statement of account	All electronic statements have been encrypted and delivered to the customers of the Bank with advertisements via e-mail.	Keep saving on the papers, printed matters, packing and postage for the delivery of bank statements in conformity to the idea of low-carbon and energy saving environment.
Installation of securities trading servers	Installation of new transaction mainframe.	Enhance the performance of the transaction system and the alternate site backup system.
Computer software and hardware contracts system	Installation of the new AP version online ordering HTS “Winner System” hardware.	Upgrade the efficiency of e-orders for securities.
HTS e-Trading System and Platform Integration Program	Installation of the new AP version online ordering HTS “Winner System” application software.	1. Configure complete on-line order placement system: including AP, WEB, backup for traders, enhancing the efficiency of order placement, increasing volume of business fore-order.

127 127

Name of R&D product	Descriptions of R&D	Results
		2. Control client’s income and contract information in a timely manner to upgrade client's satisfaction.
Data warehouse and relations with customers management application system	1. Infrastructure: data warehouse, business intelligence platform. 2. Application management: customer relation management system, KPI management system, marketing management system, multi-dimensional analysis platform system.	1. Upgrade the competitive power of the Bank in conformity to the needs of information development in mid and long-term. 2. Strengthen customer relation management, understand the attributes, contribution, and needs of the customers for improving the result of marketing. 3. The management staff can quickly keep the operation performance status, trend, and change in control and strengthen their own proactive management capacity.
SMEs Application Scorecard System Project.	Establish the default risk assessment model of the Bank.	1. Comply with the competent authority’s requirements to continue improving the risk management system and provide credit extensions and investigations for reference to reduce the Bank’s credit extension risk. 2. Utilize the project to accumulate the Bank’s skills in developing other credit rating models independently and ability to calibrate and modify the subsequentmodels.

128 128

		(2) Development plan for the future: further investment of NTD91 million intoR&D	(2) Development plan for the future: further investment of NTD91 million intoR&D
Plan in the most recent year	Status	Scheduled to complete in	Key factors to success of future R&D
Collected note operating system	The new system is in the process of installation	December 2013	1. Resolve such problems as old equipment and complicated operating procedures to make the operations uniform and upgrade efficiency. 2. Add such functions as image scanning, withdrawal and access at the branch ends to reduce the risk in loss of notes in the process ofdelivery.

129 129

Plan in the most recent year	Status	Scheduled to complete in	Key factors to success of future R&D
The new generation of e-Bank	Under construction	Phase I will be launched to service in June 2013. Phase II will be launched to service in February 2014.	1. Mobile Bank: This system allows the customers to access to the system for inquiry of the NTD accounts, fund investment, or credit card business with mobile devices (smart phone and tablets). In addition, the customers may also conduct prearranged fund transfer, payment by credit card, fund overview and related account transaction (it is expected that the system accomplished in Phase I can provide the functions of account inquiry and Phase II can provide transaction function). 2. Corporate banking network: this network provides the customers with multiple languages support, group account service, global fund allocation service, and overview of cross-border account inquiry to meet the needs of the enterprises in internationalization and the capital needs of Taiwanese investors worldwide. This is a full-range and integrated financial service platform (it is expected that the system will be launched to service in Phase II of the plan). 3. Private banking network: this system provides transaction services of fund transfer in NTD and foreign currencies, online trading of fund units, online transaction of passbook saving in gold, credit card transaction inquiry and payment, payment of public utilities bills and fees (it is expected that the system will be launched to service in Phase II of the plan).
Full-range payment service platform	The system is under planning	December 2013	Collection of school tuition fees, community management fee, membership fee or annual fee of groups and organizations, and business payment. In addition, diverse and convenient channels for payment will also be available to the customers with rapid and accurate account settlement and matching platform.
(V) Long-term and short-term business development plans (業務部) 1. Short-term business development plan: Please refer to (Ⅱ) business

130 130

plan for 2013.

1. Long-term business development plan: Please refer to Section Ⅲ Future Development Strategies of a Message to Shareholders.

II Employees (I) Employees’ information

Item	Year	2011	2012	Until Feb. 28,
				2013
	More than 50years old	110	138	145
Emplo	More than 40years old	870	907	902
	More than 30years old	506	498	499
yee	More than 20years old	485	480	468
No.	Less than 20years old	4	7	4
	Total	1,975	2,030	2,018
	Average age	37.3	37.6	37.8
	Average seniority	10.7	10.6	10.8
Educat Backgro	Master	8.7%	9.7%	9.7%
	Bachelor	55.9%	57.7%	57.9%
	College	26.6%	25.2%	25.1%
ion und	Senior High School	8.8%	7.4%	7.3%
	Below Senior High School	0%	0%	0%
	Securities sales traders	316	324	331
Pr	Investment Insurance Products	947	973	979
ofessi	Securities investment trust/investment advice sales traders	144	149
				150
onal d	Initial credit extension personnel’s professionalability	819	809
				813
esignation an em	Advanced credit extension personnel’s professionalability	42	39
				36
	Futures sales traders	116	121	120
	Life Insurance Agent	1,633	1,665	1,686
d licen ployee	Bond sales qualified in professional ability test	20	20
				21
sing, s	Initial foreign exchange personnel’s professionalability	429	431
				431
and n	Wealth management and planning personnel	517	511
				511
umber o	Trust Operations Personnel	1,501	1,508	1,504
	Bank’s internal control basic test	934	924	921
f su	Senior Securities sales traders	190	193	196
ch	PropertyInsurance Agent	1,584	1,598	1,612
	Notes and bills traders	20	23	23

131131

Item	Year	2011	2012	Until Feb. 28,
				2013
	Marketable securities, financing and financial instruments sales traders	30	30
				30
	Internal auditor	3	3	3
	Stock affairs personnel qualified in professionalability test	14	17
				16
	Foreign exchangeprofessional ability	7	8	8
	Financial personnel’s professional ability in appraising collaterals for credit extension	7	9
				9

Note: The employees include part-time student workers.

(II) Personnel involved in the transparency of information licensed by the competent authorityindesignated areaFebruary282013.	(II) Personnel involved in the transparency of information licensed by the competent authorityindesignated areaFebruary282013.	(II) Personnel involved in the transparency of information licensed by the competent authorityindesignated areaFebruary282013.	(II) Personnel involved in the transparency of information licensed by the competent authorityindesignated areaFebruary282013.
License	By department	Total	Total
Securities sales traders	TreasuryDept.	4	331
	AccountingDept.	4
	Audit Office	8
	Other entities	315
Investment Insurance Products	TreasuryDept.	11	979
	AccountingDept.	8
	Audit Office	18
	Other entities	942
Securities investment trust/investment advice sales traders	TreasuryDept.	11	150
	AccountingDept.	3
	Audit Office	2
	Other entities	134
Initial credit extension personnel’s professional ability	TreasuryDept.	14	813
	AccountingDept.	5
	Audit Office	20
	Other entities	774
Advanced credit extension personnel’s professional ability	TreasuryDept.	0	36
	AccountingDept.	0
	Audit Office	0
	Other entities	36
Futures sales traders	TreasuryDept.	8	120
	AccountingDept.	1
	Audit Office	3
	Other entities	108
Life Insurance Agent	TreasuryDept.	17	1,686
	AccountingDept.	12
	Audit Office	30
	Other entities	1,627
Bond sales qualified in professional ability test	TreasuryDept.	5	21
	AccountingDept.	2
	Audit Office	1

132132

License	By department	Total	Total
	Other entities	13
Initial foreign exchange personnel’s professional ability	TreasuryDept.	13	431
	AccountingDept.	3
	Audit Office	10
	Other entities	405
Wealth management and planning personnel	TreasuryDept.	14	511
	AccountingDept.	5
	Audit Office	14
	Other entities	478
Trust Operations Personnel	TreasuryDept.	18	1,504
	AccountingDept.	12
	Audit Office	26
	Other entities	1,448
Bank’s internal control basic test	TreasuryDept.	12	921
	AccountingDept.	6
	Audit Office	17
	Otherentities	886
Senior Securities sales traders	TreasuryDept.	13	196
	AccountingDept.	4
	Audit Office	3
	Otherentities	176
Property Insurance Agent	TreasuryDept.	15	1,612
	AccountingDept.	12
	Audit Office	32
	Otherentities	1,553
Notes and bills traders	TreasuryDept.	10	23
	AccountingDept.	3
	Audit Office	1
	Otherentities	9
Marketable securities, financing and financial instruments sales traders	TreasuryDept.	1	30
	AccountingDept.	0
	Audit Office	3
	Otherentities	26
Internal auditor	TreasuryDept.	0	3
	AccountingDept.	2
	Audit Office	0
	Otherentities	1
Stock affairs personnel qualified in professional ability test	TreasuryDept.	2	16
	AccountingDept.	2
	Audit Office	0
	Otherentities	12
Foreign exchange professional ability	TreasuryDept.	3	8
	AccountingDept.	1
	Audit Office	0
	Otherentities	4
Financial personnel’s professional ability in appraising collaterals for credit extension	TreasuryDept.	0	9
	AccountingDept.	0
	Audit Office	0

133 133

License	By department	Total	Total
	Otherentities	9

• (III) Continuing education and training programs related to corporate governance attended by managers:

• Please see Paragraph 7. Other information essential for the understanding of corporate governance on P.33.

• (IV) Employees’ advanced studies and training:

• The Bank firmly holds that the good nature and willingness to learn of the employees are the corner stone for perpetual corporate development and improvement. For this, the Bank makes tremendous effort in the development of the employees. The Bank designs all education and training program pursuant to Chapter X of the Human Resources Management Regulation, on “Continuing Education and Training”. These programs will be designed and launched by designated department responsible for employee training, and will be designed to meet the professional needs of respective functions of the Bank for upgrading its human capital and create competitive advantage.

• Learning and coaching all the times: Heritage and mentorship has always been the core value of our corporate culture. The Bank organizes different kinds of training programs for different banking functions (e.g.: deposit and remittance, lending, and wealth management), and appoint colleagues in professional standing in respective fields to act as the tutors in internal training for helping the employees in job design and career planning. In 2012, the Bank has organized 126 classes of trainings with 8,147 participants/participations. The spending on education and training amounted to NTD3.775 million in the same period. As of February 28 2013, the Bank has organized 13 classes of training with 720 participants/participations.

• You will lose if you do not keep up with learning: In attuning to the beats of the changeable market, the Bank requests all employees to get familiarized with the latest knowledge in banking and finance, product information, applicable laws and systems, and market trend in order to provide good qualify professional service to the customers. In practice, the Bank extensively dispatched its personnel to external training for new knowledge. In 2012, the Bank has sent 1,001 persons/time to participate in external training amounting to NTD1.335 million. As of February 28 2013, the Bank has sent 79 persons/times to external training.

• Enrich with knowledge and be courteous: The Bank upholds the philosophy of “whole-heartedness” and incorporated service courtesy and courteous languages in training. Through its internal operation procedure and education on the rule of law, the Bank allows for the internalization of benevolence into all employees, which will be manifested in their attitudes and behaviors in treating the customers and working. Employees with competence and integrity will be the foundation of the Bank in

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perpetual corporate development.

• (V) Employees’ code of conduct or ethics:

• All employees shall be law abiding and perform their duties with utmost effort.

• The principles of honesty, integrity, caution, diligence shall be duly observed by all and there shall be no arrogance, greed, luxury, unrestrained, loitering and gambling at the expense of the reputation of the Bank. Be humble and courteous in treating the customers and efficient at work.

• All employees shall keep the information on the business of the Bank, the customers and their transactions with the Bank, and any other secretive activities in strict confidence, and shall not disclose to any third party. This code shall be applicable to employees who resigned or discharged from the Bank.

• Employees shall not have transaction with current customers of the Bank in lending and borrowing, or shall not act as guarantor or the subject of guarantee.

• Employees shall not act as guarantor under their occupational title.

• Employees shall not undertake any part-time work beyond the duties of the Bank unless otherwise approved by the Bank.

• Employees shall not run business homogenous to the operation of the Bank, and shall not engage in any speculative works privately.

• Except in weekend and recognized holidays, employees shall report to duties in designated span of time, and shall be punctual and shall not leave their duties before the end of the working day. In addition, no employee may be absent from their duties without the approval of the supervisor.

  • The aforementioned regulations shall be posted in the official website of the Bank for announcements for the inquiry and observance of the employees.

no employee may be absent from their duties without the approval of the supervisor. The aforementioned regulations shall be posted in the official website of the Bank for announcements for the inquiry and observance of the employees.	no employee may be absent from their duties without the approval of the supervisor. The aforementioned regulations shall be posted in the official website of the Bank for announcements for the inquiry and observance of the employees.
(VI) Workenvironment and employees’personalsafety protection measures:
Item	Contents
Entrance guard safety	1. Under the precision entrance guard control system all day. 2. Contract with the security company to maintain the safety of the office premises at nighttime and holidays. 3. Access to the police authority hotline for caution.
Maintenance and inspection of equipment	1. According to the Building Public Safety Inspection and Declaration Rules, the Bank will commission the profession service provider to conduct the public safety inspection and report per two or four years. 2. According to Fire Act, the Bank will outsource the fire inspection per year. 3. According to the Labor Safety and Health Act, the Bank will conduct maintenance and inspection on high-voltage/low-voltage electrical and mechanical equipment, lifters, air conditioners, water dispensers and fire-protection equipment per month or six months.
Disaster prevention measures and response	The Bank has defined the instructions to rescue disasters and reporting procedure for occupational accidents, such as “Disaster Urgent Response Action Manual”, “Guidelines for Dealing with Important Contingencies”, “Instructions to Safety Protection and Organization of Relevant Business

135 135

Item	Contents
actions	Units”, “Labor Safety and Health Automatic Inspection Plan”, and “Instructions to Maintenance of Facility Safety”, expressly defining the job responsibilities to be taken by the Bank’s staff before and after important events, such as force majeure and robbery, and also requiring the various business units to perform the robbery-proof drills for two times per year.
Physical/mental health	1. Health inspection: The Bank provides the in-service staff with the health inspection service per two years. 2. No smoking at the business locations pursuant to requirements; defining the complaining requirements and relevant punishment rules against “Sexual Harassment Control”. 3. Set up the inter-bank forum as the opinion exchange platform.
Insurance	Be enrolled in the labor insurance and health insurance programs pursuant to laws. In the case of any casualty, it is necessary to designate the dedicated personnel to safeguard evidence, contact the insurance company, work with the accidental liability insurance investigation conducted by the employer, filing of the claims and report to the competent authority.
III Enterprise Responsibilities and Ethical Behavior Refer to 3-Corporate Governance Report →ⅢThe Status of Corporate Governance → (Ⅳ) The Status of Corporate Governance as required for banks, and any nonconformity to the Corporate Governance Best-Practice Principles for Banking Industry and reasons thereof. →ⅦOther vital information that can help to understand the status of corporate governance by the Bank, and 3 Corporate Governance Report →ⅢThe Status of Corporate Governance → (Ⅵ) The Corporate Social Responsibility.

• IV IT Equipment (I) The Bank has the following major IT systems: 1. NTD Account System: NEC dual mainframe and peripherals. 2. Foreign Exchange Account System: Sun duo server and peripherals.

• 1. Trust System: IBM server and peripherals. 4. Call Center: Wintel multiple server and peripherals. 5. Network Bank System: Wintel multiple server and peripherals. 6. e-ATM System: Wintel multiple server and peripherals. 7. Credit Card System: Wintel multiple server and peripherals. 8. Customer relation management (CRM) application system: IBM server and peripherals.

• (II) Plans for development and procurement in the future: 1. Gold passbook: provide a wider array of investment and wealth management tools and services to our customers.

• Mobile banking and the new generation e-Bank: In response to the popularity of mobile communication and the change in the habits of the users, the new generation of e-banking system and mobile banking system are built in 2013 and 2014. These systems will provide our customers good quality e-banking service and will help to upgrade the competitive power of the Bank and enhance the operation performance of e-banking.

• Information Security System: The IT Department of the Bank has been accredited by BSI as dictated by the promulgation of the Enforcement Rules of the Personal Information Protection Act. For the sustained reinforcement of data and asset protection, the Bank will introduce the data event gathering and analysis system whereby the control of the daily audit log of the system, access to

136

136

the network, the monitoring and control of special accounts, data access, and routine review of log will be intensified.

• (III) Emergency and safety protection assessments:

• Disaster recovery site backup system: mainframe systems for NTD, foreign currencies, and trust, will be synchronized at the alternate site. The data will be synchronized to the disaster recovery backup site at Panchiao. This enhance the capacity of the Bank in responding to severe disasters and compressing the time of recovery, reducing operation risk, and upgrading the customer service level.

• The data synchronizing storage system (EMC): This system offers synchronized storage of data. The synchronized data will be stored in two different machine rooms and will upgrade the security of the data. After the merging with the sever virtualization system and related system, this system will also provide backup to different machine rooms in order to reduce the operation risk under disasters.

• Continuous Data Protection system (CDP): To provide the frequent data protection ability.

• The file backup and storage system (NBU): Important files will be backed up for easy recovery.

• Virtualization of servers: To upgrade the backup ability of servers and comply with the Green IT energy conservation.

• Double system fire wall: Able to prevent any unlicensed link and access to the system.

• Intrusion prevention system: Update the features of intrusion prevention system periodically, and send dedicated personnel to continue analyzing the network attack packets detected by the intrusion prevention system, and submit the proposals to fix or defend the intranet or internet threats, if any. Meanwhile, the Bank also prohibited internal users from using live messengers, P2P file sharing software and Tunnel software.

• Filtering of webpages and mails: Filter the contents of webpages and mails to reduce the access of harmful contents (such as malicious software, malicious websites and spam) to the Bank’s intranet, and also prohibit users from accessing live messengers, pornographic websites, illegal software, P2P file sharing, chatroom, streaming media and malicious websites to save the network bandwidth and reduce the computer’s risk of being hacked.

• Web Anti-defacement and Code Review: the former can help to prevent intentional attack to the internet bank, online ATM and the WAN system while the latter can help to eliminate program design error through the detection of the source code.

• Configuration of bandwidth management system: Configure the bandwidth management system at the Internet portal and all branches’ portals to make the related business access more bandwidth to facilitate the operations.

• IP-MAC control: Lock the IP-MAC of computer equipments in all of the branches to prevent any access from external computers and to enhance the information security.

• Anti-virus software upgrade: Upgrade the anti-virus server operating system and corporate anti-virus software release to

137 137

provide more defensive measures and to reduce the infection of malicious software.

  13. Configuration of Microsoft AD directory service and information center safety audit platform: Configure the lowest-layer certification and management platform to enhance the centralization of computer management affairs and other information safety management.

  14. According to the Guidelines for Business Continuity Management, the mainframe system for information at “essential” level (NTD, foreign currencies, trust, internet banking) shall be subject to exercise drill under different environments at least once every half year. The mainframe system for information at the levels of “second importance” and “regular” shall be subject to exercise drill and recovery at regular intervals.

  15. Proceed with information safety propagation and education per year.

• V Labor-Management Relations

• (I) Current important employees’ interest, Labor-Management Agreement and the status of execution

  1. Staff fringe benefits

     • (1) Provide labor insurance, national health insurance, and group accident insurance.

     • (2) Staff bonus and Free-Gratis Dividends.

     • (3) Scholarships for the children of Staffs.

     • (4) Gifts for Spring Festival and Mid-Autumn Festival, subsidies for marriage, funeral and other celebrities, funds for travels, and staff birthdays.

     • (5) Periodic health inspection.

  2. Retirement System

(1) Pension will be disbursed to employees under the Retirement Regulation of the Bank.

• (2) The Bank contributed to the employee pension fund under the Statute for Labor Retirement.

• (3) Traveling expenses, birthday celebration subsidy and gifts for employees about to retire.

• Other important benefits

(1) At the end of the year, employees may apply for retaining the unconsumed special leave until Q3 of next year insofar as the special leave not consumed by the employees is less than one-thirds of the total days of the special leave in the current year.

(2) In 2012, the Bank has elected 76 personnel for a seminar tour to Kunming, China in different batches.

(3) Rules for Reward & Compensation for the Acquisition of License and Certificate by Staff.

1. Labor-management agreement: None

2. Employees’ interest and right protection assessments

(1) Personnel Review Committee’s functions: review of in-service staff’s promotion and performance appraisal guidelines, review of in-service staff’s promotion and performance appraisal cases, and review of employees’ reward and punishment, and review of applications.

138 138

• (2) The scope of labor-management meeting agenda: development of labors, business plan and overview of business, mediation of labor-management relations, promotion of labor-management cooperation, labor terms and conditions, labor benefits planning, and enhancement of working efficiency.

(II) Labor-management dispute

(II)	Labor-management dispute
Counterpart	Descriptions	Status	Countermeasures and anticipated loss
Lin oo	Claim for disbursement of pension	Judicial proceeding of the 1stinstance in progress	The case is still in proceeding, no loss or compensation for the time being.
Lin oo	1. Incomplete remuneration, including deferred payment. 2. pension forpacifying	Judicial proceeding of the 1stinstance in progress	The case is still in proceeding, no loss or compensation for the time being.
Wu oo	Claim for disbursement of pension	Labor-management dispute not yet settled	Labor-management dispute in mediation process. No loss or compensation for the time being.

VI Major Agreements

Nature of agreement	Contracting Parties	Term of Agreement	Summary Content	Limitation Article
Labor service contracts	Leebao Security Co., Ltd.	June 1 2009 – May 31 2012 (extended to May 31 2013).	Outsourced fund delivery services	None
Labor service contracts	Goyun Security Co., Ltd.	Sep. 1 2012 – Aug. 30 2014	Security guard on-site services	None
Lease agreement	NEC Taiwan Ltd.	Sep. 15 2012 – Sep. 14 2015	NEC mainframe system maintenance service	None
Lease agreement	NEC Taiwan Ltd.	Sep. 1 2012 – Aug. 31 2015	Remote backup support for foreign exchange server	None
Lease agreement	Ares International Corporation	Feb. 1 2012 – Jan. 31 2015	SWIFT software professional consultationservice	None
Lease agreement	CHT	Nov. 12 2010 – Oct. 31 2018	Lease of telephone switching system	None
Purchase contracts	NEC Taiwan Ltd.	July 30 2010 – July 29 2013	Backup ability of open system and expansion of backup capacity	None
Purchase contracts	K Way Information Co., Ltd.	Feb. 8 2012-Configuration Completed	HTS e-Trading System and Platform Integration Program software and hardware	None

139139

6	Nature of agreement	Contracting Parties	Term of Agreement	Summary Content	Limitation Article
	Purchase contracts	IBM	Dec. 2 2011-Configuration Completed	Data warehouse and relations with customers management system configuration	None
	Purchase contracts	IBM	Dec. 27 2012-Configuration Completed	2nd generation e-Bankingsystem	None
	Outsourcing Agreement	Chunghwa Post Co., Ltd.	May 1 2012-Apr. 30 2013	Outsourced works on mutual funds transactions statements	None
	Outsourcing Agreement	Yuen Foong Paper Co., Ltd.	Apr.14 2012 – Apr. 13 2013	Statement of accounts or notice sent periodically or irregularly in accordance with the requirements of the competent authority ortheBank	None
	Outsourcing Agreement	TWNCH	Aug. 15 2012 – Aug. 14 2013	Processing of non-MICR instruments	None
	Outsourcing Agreement	Transnational Group of Companies	Apr. 20 2012 – Apr. 19 2013	Delivery service of financial instruments and documents	None
	Outsourcing Agreement	Well Long Information Co., Ltd.	July 1 2012 – Jun. 30 2013	Exclusive check books provided to customers to facilitate branches	None
	Hardware equipment procurement agreement	New Image Co., Ltd.	June 1 2010-Configuration Completed	Centralized operating system for seizure of deposits	None
	Maintenance agreement	Harmonation Inc.	Oct. 1 2012 – Sep. 30 2013	Maintenance of collected note scanners, et al.	None
	Maintenance agreement	Harmonation Inc.	Oct. 1 2012 – Sep. 30 2013	Maintenance of high speed draft machine	None
	VII Securitized products and related information: None Financial Status

I Brief Balance Sheet and Income Statement from the most recent five years – R.O.C. GAAP

GAAP	GAAP
		Brief Balance Sheet Unit: NTDthousand
Year Item		Financial information fromthe pastfive years (note)
		2008	2009	2010	2011	2012
Cash and cash equivalent Due from Central Bank of China andlend toBanks	58,731,905		67,439,659	73,281,789	82,617,614	76,602,227
Financialassets atfairvalue	537,560		494,712	1,646,562	1,096,769	6,545,279

140140

Year Item	Year Item	Financial information fromthe pastfive years (note)	Financial information fromthe pastfive years (note)	Financial information fromthe pastfive years (note)	Financial information fromthe pastfive years (note)	Financial information fromthe pastfive years (note)
		2008	2009	2010	2011	2012
throughprofit or loss
Available-for-Sale Financial Assets		-	678,453	1,099,035	4,211,580	18,519,719
Discounts andloans		201,741,645	217,689,020	244,463,233	277,756,366	324,029,419
Accountsreceivable		2,625,758	3,540,368	3,389,297	2,888,283	2,553,343
Financial assets held to maturity		14,770,415	12,696,240	10,382,868	9,439,040	8,782,945
Stocks-equitymethod		90,275	291,021	337,561	216,970	1,295,662
Assetsheldforsale		-	-	150,763	41,639	-
Fixed assets		3,672,458	3,562,226	3,230,721	3,335,981	3,325,763
Other financialassets		181,549	181,549	144,453	850,396	905,934
Otherassets		3,392,549	2,930,173	2,338,643	1,892,043	1,811,777
Totalassets		285,744,114	309,503,421	340,464,925	384,346,681	444,372,068
Due to Central Bank of China and banks		3,450,987	6,470,385	2,306,957	3,439,998	5,151,548
Customer deposits and remittances		258,881,337	276,577,319	302,849,512	333,832,631	385,862,841
Financial liabilities at fair value throughprofit or loss		654,605	67,348	110,069	51,804	91,591
Bills and bonds sold under repurchase agreements		-	-	1,477,800	-	264,045
Funds borrowed from CBC and otherbanks		-	320,300	1,602,150	2,877,550	1,887,600
Financial bonds payable		2,400,000	6,600,000	8,300,000	10,512,559	13,548,277
Payables		4,235,256	3,504,465	3,872,015	7,683,501	8,896,768
Accruable pension liabilities		118,128	173,748	122,602	136,764	223,704
Other financial liabilities		-	-	-	22,521	17,208
Other liabilities		498,843	428,853	408,800	328,299	347,386
Total liabilities	Before Distribution	270,239,156	294,142,418	321,049,905	358,885,627	416,290,968
	After Distribution	270,383,206	294,142,418	321,049,905	358,997,320	-
Capitalstock		13,719,006	13,719,006	17,319,006	22,338,576	23,187,442
Capital surplus		750,000	766,813	792,069	675,537	675,537
Retained earnings	Before Distribution	742,399	617,337	1,029,293	2,212,377	4,029,776
	After Distribution	598,349	617,337	734,870	1,251,818	-
Unrealized revaluation increment		293,553	283,744	283,744	283,744	283,744
Unrealized gain/loss from financial instruments		-	(25,897)	(9,092)	10,960	91,865
Adjustment of accumulated conversion		-	-	-	-	477
Othershareholders’equity		-	-	-	(60,140)	(187,741)
Total shareholders’ equity	Before Distribution	15,504,958	15,361,003	19,415,020	25,461,054	28,081,100
	After Distribution	15,360,908	15,361,003	19,415,020	25,349,361	-

141141

Note: The financial information for the most recent five years has been audited by accountant.

Year Item	Financial information fromthe pastfive years (note)
	2008	2009	2010	2011	2012
Net interest income	5,430,157	3,629,406	4,383,460	4,943,296	5,459,110
Net income other than interest income	(281,113)	(321,356)	154,137	769,561	1,394,607
Bad debt expenses	(1,788,126)	(349,553)	(933,359)	(664,948)	(238,244)
Operating expenses	(3,103,251)	(2,668,676)	(2,765,417)	(3,133,733)	(3,311,211)
Income before taxation of continued operations	257,667	289,821	838,821	1,914,176	3,304,262
Income after taxation of continued operations	205,535	18,988	411,956	1,454,000	2,777,958
Netincome	205,535	18,988	411,956	1,454,000	2,777,958
Earnings Per Share	0.15	0.01	0.29	0.76	1.20

Note 1: The financial information for the most recent five years has been audited by accountant. Note 2: Per board resolutions dated 2010.11.4 and 2011.7.7, respectively, our bank has decided to increase paid-in capital by issuing and selling 360 million and 450 million shares of common stock, respectively, for cash. Taking into consideration the retained earnings appropriated for capital increase in 2010 and 2011, and the capital reserve appropriated for capital increase in 2010, the weighted average number of shares outstanding and earnings per share from 2008 to 2011 should be adjusted retrospectively.

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Information from simplified balance sheet and statement of comprehensive income

Brief Balance Sheet Unit: NTDthousand	Brief Balance Sheet Unit: NTDthousand	Brief Balance Sheet Unit: NTDthousand
Year Item		Current year financial information up to 2013.2.28 (note)
Cash and cash equivalent, Due from Central BankofChina andlend toBanks		75,742,681
Financial assets at fair value through profit andloss		6,952,947
Available-for-SaleFinancial Assets		20,953,253
Bonds and securities sold under repurchase agreements		4,908,968
Receivable,net		4,029,272
Currentincome taxasset		82,934
Notes discounted andloans– net		321,062,019
Held-to-maturityfinancialassets		9,371,617
Investment by equitymethod– net		1,305,905
Other financialassets– net		1,112,477
Property, plant, and equipment– net		3,375,403
Intangible assets– net		61,522
Deferred taxassets– net		523,765
Otherassets		596,230
Totalassets		450,078,993
Due to Central BankofChina and banks		5,513,120
Funds borrowed from CBC and other banks		1,928,225
Financial liabilities at fair value through profit andloss		90,517
Bills and bonds sold under repurchase agreements		257,218
Payables		9,537,960
Current tax liabilities		127,412
Customerdeposits andremittances		389,521,694
Bonds payable		13,554,035
Other financial liabilities		14,555
Liabilityreserve		239,143
Deferred tax liabilities		111,021
Other liabilities		293,822
Total liabilities	BeforeDistribution	421,188,722
	After Distribution	-
Equity ofthe parent company		-
Capitalstock		23,187,442
Capitalsurplus		675,537
Retained earnings	BeforeDistribution	5,077,074
	After Distribution	-
Otherequity		(49,782)
Treasury stock		-
Non-controllinginterest		-
Total equity	BeforeDistribution	28,890,271
	After Distribution	-

143143

Note: Current year financial information up to 2013.2.28 is prepared by us.

Brief Income Statement Unit: NTDthousand	Brief Income Statement Unit: NTDthousand
Year Item	Current year financial information up to 2013.2.28 (note)
Interestrevenue	1,539,890
Less:interest expense	(579,608)
Netinterestincome	960,282
Netincome otherthan interestincome	294,814
Netrevenue	1,255,096
Bad debt expense and guarantyreserve	(86,085)
Operating expenses	(612,295)
Business units in continuing operation Net profit before taxation	556,716
Income tax(expense) gain	83,758
Current year profit of continuing business units	472,958
Current year net profit (netloss)	472,958
Current year other comprehensive income (net, aftertax)	(54)
Current year other comprehensive income. (Gross)	472,904
Net profit attributable to parent company	472,958
Net profit attributable to non-controllinginterest	-
Comprehensive income, gross, and net profit attributable to parent company	472,904
Comprehensive income, gross, attributable tonon-controllinginterest	-
EarningsPerShare	0.20

Note: Current year financial information up to 2013.2.28 is prepared by us.

The names of CPA conducting financial audits in the most recent five years and their audit

opinions

			opinions
Year Audit	2008	2009	2010	2011	2012
Deloitte & Touche	Wen-Ya Hsu Hsiun-Lien Lin	Wen-Ya Hsu Hsiun-Lien Lin	Wen-Ya Hsu Tzu-ChunWang	Wen-Ya Hsu Tzu-ChunWang	Wen-Ya Hsu Tzu-ChunWang
Audit opinions	Modified unqualified opinions (Note1)	Modified unqualified opinions (Note2)	Modified unqualified opinions (Note2)	Modified unqualified opinions (Note2)	Modified unqualified opinions (Note2)

Note 1: As of January 1, 2008 official letter under Ji-Mi-Zi No. 052 issued by Accounting Research and Development Foundation in Taiwan was applied. Accordingly, the employee bonus and remuneration to directors/supervisors shall be stated as expenses instead of allocation of earnings. Modified unqualified opinions have been issued for the change in the accounting principles.

Note 2: The CPA audited the equity investment of Reliance Securities Investment Trust Co., Ltd. and Taichung Commercial Bank Lease Enterprise under equity method in the financial statements 2009, 2010, 2011 and 2012 based on the audit report issued by the other CPA, and the modified unqualified opinions were issued therefore.

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II Financial Analysis for the most recent five years

Financial Analysis Unit: NTD thousand

Year Analytical items	Year Analytical items	Year Analytical items	Financial Analysis for the most recent five years	Financial Analysis for the most recent five years	Financial Analysis for the most recent five years	Financial Analysis for the most recent five years	Financial Analysis for the most recent five years	Consolidated financial analysis for the most recent twoyears	Consolidated financial analysis for the most recent twoyears
			2008	2009	2010	2011	2012	2011	2012
Operating ability	Loans to deposits ratio		79.06	79.65	81.60	84.08	84.82	84.12	84.90
	NPL ratio		1.54	1.27	0.60	0.30	0.37	0.30	0.37
	Interest expenses to annual average deposit ratio		1.57	0.89	0.60	0.78	0.87	0.78	0.88
	Interest income to annual average loan ratio		4.60	2.77	2.57	2.76	2.77	2.76	2.78
	Total assets turnover (times)		1.81	1.07	1.33	1.49	1.54	1.50	1.58
	Average operation revenueper employee		2,585	1,773	2,481	2,893	3,376	2,888	3,354
	Average profit per employee		103	10	225	736	1,368	727	1,323
Profitability	Return on Tier I Capital		1.69	1.94	5.04	8.95	13.03	9.01	12.95
	ROA		0.07	0.01	0.13	0.40	0.67	0.40	0.67
	ROE		1.31	0.12	2.37	6.48	10.38	6.48	10.38
	Netprofit rate		3.99	0.57	9.08	25.45	40.53	25.16	39.46
	Earnings Per Share (NTD)		0.15	0.01	0.29	0.76	1.20	0.76	1.20
Financial structure	Liabilities to total assets ratio		94.53	95.02	94.28	93.37	93.67	93.37	93.68
	Fixed assets to shareholders’ equity ratio		23.69	23.19	16.64	13.10	11.84	13.11	11.93
Growth rate	Asset Growth Rate		8.58	8.31	10.00	12.89	15.62	12.93	15.73
	Profit Growth Rate		(87.75)	12.48	189.43	128.20	72.62	120.70	71.97
Cash flows	Cash flow ratio		75.81	-	32.51	58.59	-	57.56	-
	Cash flow adequacy ratio		921.43	527.99	311.62	744.94	704.58	756.53	648.27
	Cash flow for operating to cash flow from investingratio		(15.99)	-	(7.29)	(16.56)	-	(16.32)	-
Liquidity Reserve Ratio			17.57	19.07	19.03	19.63	19.74	19.63	19.74
Related party secured loans			1,378,697	1,337,906	1,219,243	1,377,605	1,869,324	1,377,605	1,869,324
Related party secured loans to total loan ratio			0.66	0.60	0.49	0.48	0.56	0.48	0.56
Operating Scale		Asset market share	0.71	0.76	0.79	0.84	0.94	0.84	0.94
		Market share of net worth	0.73	0.66	0.78	0.98	1.00	0.98	1.00
		Market share of deposits	0.95	0.96	1.00	1.06	1.18	1.06	1.18
		Market share of loans	1.11	1.18	1.25	1.34	1.51	1.34	1.51

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Explanation for the reason of changes in financial ratios in the past two years (may be omitted if the change is less than 20%):

• I Past-due loan ratio increased because, in April 2012,the NTD 310 million loan to ProMOS Technologies has been classified as past-due as advised by government authority.

• II The increase in interest expenses to average deposit balance ratio is a result of the average deposit balance in 2012 more than that in 2011 by NTD44,107 million, and the increase in average interest rate for time deposit and saving deposit by 0.1%.

• III The drastic increase in average profit per employee, return on Tier 1 Capital, ROA, ROE, profit rate and EPS is a result of the income before income tax and income after income tax in 2012 more than those in 2011 (income before income tax by NTD1,390 million and income after income tax by NTD1,324 million).

• IV The increase in asset growth rate is a result of the increase in total assets by NTD60,025 million in 2012, more than that, NTD43,882 million, in the total assets in 2011. The increase of total assets in 2012 is mostly derived from the NTD 46,273 million increase in discount operations and loans, and the NTD 14,308 million increase in held-for-sale financial assets. The increase of total assets in 2011 is mostly derived from the NTD 33,293 million increase in discount operations and loans, the NTD 5,655 million increase of deposit at central bank and interbank loans, and the NTD 3,113 million increase in held-for-sale financial assets.

• V The decrease in profit growth rate is a result of the increase in the income before income tax in 2011, NTD1,914 million, more than that in 2010, NTD839 million, by 128% (due to the low base period in 2010), and the increase in the income before income tax in 2012, NTD3,304 million, more than that in 2011, NTD1,914 million, by 73% (due to the high base period in 2011).

• VI The total balance of secured loans to related parties increased due to the NTD 492 million increase in secured loans to related parties.

• Note 1: The financial information for the most recent five years and the consolidated financial information for the most recent two years have been audited.

• Note 2: Equations for financial analysis:

1.	Operating	ability
	(1)	Loans/deposits ratio = Total amount/total deposits.
	(2)	NPL rate = Total non-performing loans/Total amount.
	(3)	Interest expense to average annual deposit balance ratio = total interest expenses/average
		annual deposit balance
	(4)	Interest income to average annual loan balance ratio = total interest incomes/average annual
		loan balance
	(5)	Total assets turnover rate = Earnings/Total assets.
	(6)	Employee average return (Note 6) = Earning/Total Employee No.
	(7)	Employee average profit rate = Earnings/Total Employee No.
2.	Profitability
	(1)	Return on Tier I Capital = EBT/Average total amount of Tier I capital.
	(2)	ROA = Income after taxation/Average total assets.
	(3)	ROE = Income after taxation/Average net shareholders equity.
	(4)	Profit rate = Income after taxation/income-net.
	(5)	Earnings Per Share = (earnings – dividends from preferred shares)/weighed average
		quantity of outstanding shares. (Note 4)
3.	Financial structure
	(1)	Liabilities to total assets =Total liabilities/total assets.
	(2)	Fixed assets to net worth =net total assets/net shareholders’ equity.
4.	Growth rate
	(1)	Asset growth rate = (Total assets of current year – total assets of previous year)/total assets
		of previous year.
	(2)	Profit growth rate = (EBT of current year – EBT of previous year)/EBT of previous year.
5.	Cash flow	(Note 7)
	(1)	Cash flow ratio= net cash flow from operation /(Call loans and overdraft from banks +
		payable CP + financial liabilities which change in fair value is recognized as gain (loss) +
		R/P and bond liabilities + current portion of payables.
	(2)	Net cash flow adequacy rate= net cash flow from operation in the last 5 years/ (capital
		spending + Cash Dividends) in the last 5 years.
	(3)	Cash flow satisfied rate = Cash flow from operation/ cash flow from investments.
6.	Liquidity Reserve Ratio = Central Bank Required Current Assets/Allowance for liquidity of liabilities.
7.	Operating	Scale
	(1)	Asset market share rate = Total assets/total assets of all financial institutions available for
		making deposits and loans) (Note 5).
	(2)	Net worth market share rate = Net worth/total net worth of all financial institutions
		available for making deposits and loans.
	(3)	Deposit market share rate = total deposits/total deposits of all financial institutions available
		for making deposits and loans.
	(4)	Loan market share rate = Total amount/Total amount of all financial institutions available
		for making deposits and loans.

• Note 3: Total liabilities net of reserve, allowance for loss from bill trade, allowance for default, and allowance for contingency.

• Note 4: The following shall be considered in assessing the equation for EARNINGS PER SHARE as aforementioned:

146146

1. Weighted average quantity of shares is on the basis of common stock, not the outstanding shares as of the end of the year.

2. The quantity of new shares for raising new capital or treasury stock trade shall be included in the weighted average quantity of shares during their effective term.

3. Where the shares may be issued through the capitalization of retained earnings or capital surplus, make adjustment in proportion to the quantity of shares issued in calculating the semi-annual or annual EARNINGS PER SHARE of the year. The period for the release of such new shares may be omitted.

4. If the preferred stock is non-convertible cumulative preferred stocks, dividend for the year (issued or not) shall be subtracted from earnings or added to earnings.

5. If the preferred stock is non-cumulative preferred stocks, dividend on the preferred stock shall be subtracted from earnings after income tax, if any. If there are no earnings after income tax, no adjustment shall be made.

6. Note 5: Financial institutions that can undertake deposits and withdrawals included domestic banks, branches of foreign banks in Taiwan, Credit Unions, Credit Departments of Farmers and Fishermen Associations, and investment trust firms.

7. Note 6: Return rate refers to the total of incomes from interests and other sources.

Note 7: Consider the followings in conducting cash flow analysis:

1. Net cash flow from operation refers to net cash inflow from operation as stated in the Statement of Cash Flow.

2. Capital spending refers to the cash outflow to annual capital investments.

3. Cash Dividends includes the dividends in cash paid to holders of common shares and preferred shares.

4. Gross fixed assets refer to total fixed assets before subtracting by accumulated depreciation.

147147

Capital Adequacy Unit: NTD thousand

			Capital Adequacy	Capital Adequacy	Capital Adequacy	Capital Adequacy	Capital Adequacy	Unit: NTD thousand	Unit: NTD thousand
Year (note 1) Analytical items			Capital adequacy ratio in the past five years					Consolidated Capital adequacy ratio in the last 2years
			2008	2009	2010	2011	2012	2011	2012
Self-owned Capital	Tier I Capital	Common stock	13,719,006	13,719,006	17,319,006	22,338,576	23,187,442	22,338,576	23,187,442
		Perpetual non-cumulative preferred shares	-	-	-	-	-	-	-
		Non-cumulative subordinated debt without maturitydate	-	-	-	-	-	-	-
		Capital collected in advance	-	-	-	-	-	-	-
		Capital reserves (except the value appreciation of fixed assets)	750,000	766,813	792,069	675,537	675,537	675,537	675,537
		Legal reserve	532,993	594,653	600,350	723,937	1,160,137	723,937	1,160,137
		Special reserve	-	-	16,987	32,599	83,647	32,599	83,647
		Accumulated profit or loss	209,406	22,684	411,956	1,455,841	2,785,992	1,455,841	2,785,992
		Minority equity	-	-	-	-	-	-	-
		Other shareholders’ equity	-	(30,491)	(20,903)	(65,005)	(187,505)	(65,005)	(187,505)
		Less: goodwill	-	-	-	-	-	-	-
		Less: unamortized loss from sale of NPL	-	-	-	-	-	-	-
		Less: capital deductions	121,012	221,385	670,169	842,498	1,300,377	797,919	715,888
		Total Tier I capital	15,090,393	14,851,280	18,449,296	24,318,987	26,404,873	24,363,566	26,989,362
	Tier II Capital	Perpetual cumulative preferred shares	-	-	-	-	-	-	-
		Cumulative subordinated debt without maturitydate	-	-	-	-	-	-	-
		Fixed asset revaluation increment surplus (including appreciations)	293,553	283,744	283,744	283,744	283,744	283,744	283,744
		45% of unrealized gain on available-for-sale financial	-	2,067	5,138	4,492	32,409	4,492	32,409
		Convertible Bonds	-	-	-	-	-	-	-
		Operating reserve and provisions for bad debts	662,655	63,699	-	-	-	-	-
		Long-term subordinated bond	1,920,000	5,640,000	6,860,000	5,500,000	6,840,000	5,500,000	6,840,000
		Non-perpetual preferred stock	-	-	-	-	-	-	-

148148

Year (note 1) Analytical items The sum of Perpetual non-cumulative preferred stocks and non-cumulative subordinated debt without maturity date exceeding 15% of total Tier I Capital Less: capital deductions Total Tier II capital Tier III Capital Short-term subordinated bond Non-perpetual preferred stock Total Tier III capital Self-owned Capital	Year (note 1) Analytical items The sum of Perpetual non-cumulative preferred stocks and non-cumulative subordinated debt without maturity date exceeding 15% of total Tier I Capital Less: capital deductions Total Tier II capital Tier III Capital Short-term subordinated bond Non-perpetual preferred stock Total Tier III capital Self-owned Capital	Year (note 1) Analytical items The sum of Perpetual non-cumulative preferred stocks and non-cumulative subordinated debt without maturity date exceeding 15% of total Tier I Capital Less: capital deductions Total Tier II capital Tier III Capital Short-term subordinated bond Non-perpetual preferred stock Total Tier III capital Self-owned Capital	Year (note 1) Analytical items The sum of Perpetual non-cumulative preferred stocks and non-cumulative subordinated debt without maturity date exceeding 15% of total Tier I Capital Less: capital deductions Total Tier II capital Tier III Capital Short-term subordinated bond Non-perpetual preferred stock Total Tier III capital Self-owned Capital	Capital adequacy ratio in the past five years	Capital adequacy ratio in the past five years	Capital adequacy ratio in the past five years	Capital adequacy ratio in the past five years	Capital adequacy ratio in the past five years	Consolidated Capital adequacy ratio in the last 2years	Consolidated Capital adequacy ratio in the last 2years
				2008	2009	2010	2011	2012	2011	2012
		The sum of Perpetual non-cumulative preferred stocks and non-cumulative subordinated debt without maturity date exceeding 15% of total Tier I Capital		-	-	-	-	-	-	-
		Less: capital deductions		121,012	221,385	478,293	541,568	1,080,486	496,989	495,997
		Total Tier II capital		2,755,196	5,768,125	6,670,589	5,246,668	6,075,667	5,291,247	6,660,156
	Tier III Capital	Short-term subordinated bond		-	-	-	-	-	-	-
		Non-perpetual preferred stock		-	-	-	-	-	-	-
		Total Tier III capital		-	-	-	-	-	-	-
	Self-owned Capital			17,845,589	20,619,405	25,119,885	29,565,655	32,480,540	29,654,813	33,649,518
Total risk-weighted assets	Credit Risk		Standardized Approach	177,949,841	188,394,903	214,191,716	244,298,087	297,177,443	244,284,117	298,765,919
			Internal Ratings-Based Approach	-	-	-	-	-	-	-
			Asset Securitization	-	-	-	-	-	-	-
	Operation Risk		Basic Indicator Approach	10,929,313	10,546,325	9,921,300	9,243,025	9,572,388	9,340,762	9,686,638
			Standard Method /Optional Standard Method	-	-	-	-	-	-	-
			Advanced Measurement Approach	-	-	-	-	-	-	-
	Market Risk		Standardized Approach	2,386,925	930,825	2,180,938	782,175	1,481,200	782,175	1,481,200
			Internal Models Approach	-	-	-	-	-	-	-
	Total risk-weighted assets			191,266,079	199,872,053	226,293,954	254,323,287	308,231,031	254,407,054	309,933,757
Capital adequacy ratio				9.33%	10.32%	11.10%	11.63%	10.54%	11.66%	10.86%
Proportion of Tier I capital to risk assets				7.89%	7.43%	8.15%	9.56%	8.57%	9.58%	8.71%
Proportion of Tier II capital to risk assets				1.44%	2.89%	2.95%	2.07%	1.97%	2.08%	2.15%
Proportion of Tier III capital to risk assets				-	-	-	-	-	-	-
Ratio of common stock to total assets				4.81%	4.43%	5.09%	5.81%	5.22%	5.81%	5.21%

★If any consolidated financial statement is prepared, the consolidated capital adequacy ratio shall also be disclosed.

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• Note 1: The year(s) which is not audited shall be specified expressly.

• Note 2: The Shares and dividends and the amount of weighed average risk assets shall be filled in as required in “Regulation for Banks in the Management of Capital Adequacy”, and “Explanation and Forms for the Calculation of Shares and dividends and Risk Assets by Banks”.

• Note 3: Where banks may calculate credit risk in transitional periods, fill in the amount of risk-based assets under the Credit Risk Standardized Approach.

• Note 4: The following equation shall be identified at the end of the annual report:

• Total Self-owned Capital = Tier I Capital + Tier II Capital + Tier III Capital.

• Total amount of risk-weighed-assets = Credit risk-weighed assets + Capital charge of (operational risk + market risk) x 12.5.

• Capital Adequacy ratio = Total self-owned capital / Total amount risk-weighed assets.

• Proportion of Tier I capital to risk assets = Tier I Capital / Total risk-weighted asset.

• Proportion of Tier II capital to risk assets = Tier II Capital / Total risk-weighted asset.

• Proportion of Tier III capital to risk assets = Tier III Capital / Total risk-weighted asset.

• Ratio of common stock to total assets = Common stock/ Total assets.

• Note 5: List the listed companies, or companies trading at the securities firms’ business places in the quarter prior to the date of publication of the Annual Report. Also specify whether the financial information is certified or audited, or uncertified or unaudited, by CPA.

• Note 6: If Basel I was implemented in the year, the Form shall be specified in the following manner.

• To be in line with the Basel II format, the capital deduction items were distributed 50% to Tier I capital and the other 50% to Tier II capital.

• Basel II credit risk capital requirement shall be stated as capital requirements of credit risk “Standardized Approach”.

Capital adequacy ratio

“Standardized Approach”. Capital adequacy ratio	“Standardized Approach”. Capital adequacy ratio	“Standardized Approach”. Capital adequacy ratio	“Standardized Approach”. Capital adequacy ratio
Unit: NTDthousand
Year (note 1) Analytical items			Capital adequacy ratio, current year up to Feb. 28, 2013 (Note 4)
Self-owned Capital	Common stock equity		26,908,342
	Other Tier 1 capital other than common stock equity		-
	Tier II Capital		5,964,580
	Self-owned Capital		32,872,922
Total risk-weighted assets	Credit Risk	Standardized Approach	297,867,331
		Internal Ratings-Based Approach	-
		Asset Securitization	-
	Operation Risk	Basic Indicator Approach	11,590,725
		Standard Method/Optional Standard Method	-
		Advanced Measurement Approach	-
	Market Risk	Standardized Approach	3,742,618
		Internal Models Approach	-
	Total risk-weighted assets		313,200,674
Capital adequacy ratio			10.50%
Proportion of Tier I capital to risk assets			8.59%
Common stock equity as a percentage of risk assets			8.59%

150150

Year (note 1) Analytical items	Capital adequacy ratio, current year up to Feb. 28, 2013 (Note 4)
Leverage ratio	4.62%

Note: 1 The year(s) which is not audited shall be specified expressly. The capital adequacy ratio up to current year, Feb 28, 2013 is calculated by us.

1. The self-owned capital, risk assets, and total exposure in this table should be calculated according to the regulations in “Regulation on Bank Capital Adequacy and Capital Tiers” and “Clarification on Bank Equity Capital and Risk Capital Calculation Methods and Forms.”

2. This table should demonstrate the following formula: (1) Total self-owned capital = Common stock equity + Tier I capital other than common stock + Tier II Capital.

3. (2) Total amount of risk-weighed-assets = Credit risk-weighed assets + Capital charge of (operational risk + market risk) x 12.5.

4. (3) Capital Adequacy ratio = Total self-owned capital / Total amount risk-weighed assets.

5. (4) The ratio of Tier I capital to Risk Weighted Assets = (Common stock equity + Tier 1 capital other than common stock)/Total risk weighted assets.

6. (5) Ratio of common stock equity to risk assets = common stock equity / Total risk weighted assets. (6) Leverage ratio = Net Tier I capital / Total exposure.

7. List the listed companies, or companies trading at the securities firms’ business places in the quarter prior to the date of publication of the Annual Report. Also specify whether the financial information is certified or audited, or uncertified or unaudited, by CPA.

III Supervisors’ Review Report on the Financial Statement of 2012

Supervisors’ Audit Report

The board drafted the business report, proposal for earnings distribution, and financial statements (including balance sheet, income statement, change of shareholders’ equity, and the statement of cash flows) for year 2012. Of these, the financial statements (including financial statements consolidated with subsidiaries) have

been ratified by the board. The board believes that they represent fairly the financial condition of the company as of Dec. 31, 2012 and the results of operation and cash flows in 2012. The Supervisors have reviewed the above-mentioned statement in accordance with Article 219 of the Company Act and Article 36 of the Securities and Exchanges Act and hereby provide such audit report. Please review the information.

To:

2013 Shareholders’ meeting, Taichung Commercial Bank Co. Ltd.

Resident Supervisor: Institutional Representative to Xin Rui Investment Co., Ltd. Jiann-Ell Huang

Supervisor: Institutional Representative to Xin Rui Investment Co., Ltd. Ching-Huang Tsai

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Supervisor: Institutional Representative to Xin Rui Investment Co., Ltd. Shu-Li Huang Supervisor: Institutional Representative to Xin Rui Investment Co., Ltd. Chien-Hwa Lee Fu Supervisor: Institutional Representative to Tai Jiunn Enterprise Co., Ltd. Chao-Nan Hsieh

M

a r

c h 1 3 , 2 0 1 3

IV Financial statements 2012: See Appendix 1. V Consolidated financial statements 2012: See Appendix 2.

VI In the case of any insolvency of the Bank and its affiliates, specify its effect on the Financial Status of the Bank: N/A.

7 Review and analysis of financial condition and results, and Risk management matters I Financial Status

I Financial Status
			Unit: NTD thousand Variation Amount % (6,015,387) (7) 5,448,510 497 14,308,139 340 46,273,053 17 (334,940) (12) (656,095) (7) 1,078,692 497 (41,639) (100) (10,218) - 55,538 7 (80,266) (4) 60,025,387 16 1,711,550 50 52,030,210 16
Year Item	2012	2011	Variation
			Amount	%
Cash and cash equivalent, Due from Central Bank of China and lend to Banks	76,602,227	82,617,614	(6,015,387)	(7)
Financial assets at fair value through profit or loss	6,545,279	1,096,769	5,448,510	497
Available-for-Sale Financial Assets	18,519,719	4,211,580	14,308,139	340
Notes discounted and loans – net	324,029,419	277,756,366	46,273,053	17
Receivable – net	2,553,343	2,888,283	(334,940)	(12)
Held to maturityinvestments – net	8,782,945	9,439,040	(656,095)	(7)
Stocks- equitymethod	1,295,662	216,970	1,078,692	497
Assets held for sale	-	41,639	(41,639)	(100)
Fixed assets, net	3,325,763	3,335,981	(10,218)	-
Other financial assets	905,934	850,396	55,538	7
Other assets	1,811,777	1,892,043	(80,266)	(4)
Total assets	444,372,068	384,346,681	60,025,387	16
Due to Central Bank of China and banks	5,151,548	3,439,998	1,711,550	50
Deposits and remittances	385,862,841	333,832,631	52,030,210	16

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Year Item	2012	2011	Variation	Variation
			Amount	%
Financial liabilities at fair value through profit or loss	91,591	51,804	39,787	77
Bills and bonds sold under repurchase agreements	264,045	0	264,045	-
Funds borrowed from CBC and other banks	1,887,600	2,877,550	(989,950)	(34)
Financial bondspayable	13,548,277	10,512,559	3,035,718	29
Payables	8,896,768	7,683,501	1,213,267	16
Accruablepension liabilities	223,704	136,764	86,940	64
Other financial liabilities	17,208	22,521	(5,313)	(24)
Other liabilities	347,386	328,299	19,087	6
Total liabilities	416,290,968	358,885,627	57,405,341	16
Capital stock	23,187,442	22,338,576	848,866	4
Capital surplus	675,537	675,537	-	-
Retained earnings	4,029,776	2,212,377	1,817,399	82
Unrealized revaluation increment	283,744	283,744	-	-
Adjustment of accumulated conversion	477	-	477	-
Unrealized gain/loss from financial instruments	91,865	10,960	80,905	738
Other shareholders’ equity	(187,741)	(60,140)	(127,601)	212
Total shareholders’ equity	28,081,100	25,461,054	2,620,046	10

Analysis of variance:

• (I) At the end of 2012, the increase of financial assets at fair value through income statement is due to the increase in short duration bills and commercial papers of NTD 5,187 million, compared to year-end 2011.

• (II) The increase in available-for-sale financial assets is a result of the increase in the income from fixed income instruments and thereby causes the increase in investment in domestic bonds by NTD14,270 million from the end of 2012 to the end of 2011.

• (III) Equity method investment increased due to our company’s new investment of NTD 1,000,000 thousand dollars and 100,000 thousand shares, in 100% of Taichung Commercial Bank Lease Enterprise.

• (IV) Assets to be sold decreased due to the closing in year 2012 of Chung-de branch office listed for sale.

• (V) At the end of 2012, Deposit at Central Bank and Interbank Deposit increased due to the increase of NTD 1,711 million in interbank loans compared to year-end 2011.

• (VI) At the end of 2012, the increase of Financial liabilities at fair value through profit or loss is due to the increase of foreign exchange SWAP by NTD 43 million compared to year-end 2011.

• (VII) Loans from the Central Bank and Interbank Loans decreased due to fund management and the reduced cost of foreign exchange swaps. As a result, at the end of 2012, Interbank Loans decreased by NTD 990 million from 2011 levels.

• (VIII) Financial Bonds Payable increased because the bank issued NTD 3,000 million of Second Priority financial bond in 2012.

• (IX) The change in Accrued pension Liabilities: Based on the actuary report, minimum pension liabilities should be added to Accrued Pension Liabilities.

• (X) Other Financial Liabilities decreased because the deposit from National Development Fund decreased by NTD 5 million at year end 2012 compared to year end 2011.

• (XI) Retained Earnings increased because NTD 2,778 million of after tax net profit from 2012 has been allocated to Undistributed Earnings. Additionally, the distribution of 2011 earnings consists of

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NTD 0.38 per share of stock dividend and NTD 0.05 per share of cash dividend. As a result, undistributed earnings decreased by NTD 961 million.

• (XII) Unrealized Loss or Gain on Financial Assets increased because the following have been reclassified from Unrealized Loss or Gain in Held-for-sale Financial Assets to an Adjustment in Shareholders’ Equity: NTD 42 million increase in Domestic Corporate Bond, NTD 24 million increase in Foreign Bond, and NTD 14 million increase in stocks.

• (XIII) Chief among other items in Shareholders’ Equity is the net loss of pension cost not yet recognized, based on the actuary report drafted by an actuary. Its balance increased by NTD 128 million compared to last year.

II Financial performance

Shareholders’ Equity: NTD 42 million increase in Domestic Corporate Bond, NTD 24 million increase in Foreign Bond, and NTD 14 million increase in stocks. II) Chief among other items in Shareholders’ Equity is the net loss of pension cost not yet recognized, based on the actuary report drafted by an actuary. Its balance increased by NTD 128 million compared to last year. II Financial performance	Shareholders’ Equity: NTD 42 million increase in Domestic Corporate Bond, NTD 24 million increase in Foreign Bond, and NTD 14 million increase in stocks. II) Chief among other items in Shareholders’ Equity is the net loss of pension cost not yet recognized, based on the actuary report drafted by an actuary. Its balance increased by NTD 128 million compared to last year. II Financial performance	Shareholders’ Equity: NTD 42 million increase in Domestic Corporate Bond, NTD 24 million increase in Foreign Bond, and NTD 14 million increase in stocks. II) Chief among other items in Shareholders’ Equity is the net loss of pension cost not yet recognized, based on the actuary report drafted by an actuary. Its balance increased by NTD 128 million compared to last year. II Financial performance	Shareholders’ Equity: NTD 42 million increase in Domestic Corporate Bond, NTD 24 million increase in Foreign Bond, and NTD 14 million increase in stocks. II) Chief among other items in Shareholders’ Equity is the net loss of pension cost not yet recognized, based on the actuary report drafted by an actuary. Its balance increased by NTD 128 million compared to last year. II Financial performance	Shareholders’ Equity: NTD 42 million increase in Domestic Corporate Bond, NTD 24 million increase in Foreign Bond, and NTD 14 million increase in stocks. II) Chief among other items in Shareholders’ Equity is the net loss of pension cost not yet recognized, based on the actuary report drafted by an actuary. Its balance increased by NTD 128 million compared to last year. II Financial performance
Unit: NTDthousand
Item	2012	2011	Variation	Variation Ratio %
Net interest income	5,459,110	4,943,296	515,814	10
Net income other than interestincome	1,394,607	769,561	625,046	81
Bad debt expenses	(238,244)	(664,948)	(426,704)	(64)
Operatingexpenses	(3,311,211)	(3,133,733)	(177,478)	6
Income before taxation of continued operations	3,304,262	1,914,176	1,390,706	73
Income after taxation of continued operations	2,777,958	1,454,000	1,323,958	91
Net income	2,777,958	1,454,000	1,323,958	91
Earnings Per Share (NTD)	1.20	0.76	0.44	58

Difference Analysis:

• (I) The increase in net interest income is a result of the increase in interest revenue in 2012 more than that in 2011 by NTD38,408 million (a result of the increase in the average balance of notes discounted and loans by NTD1,191 million and the increase in the average interest rate by 0.01%), and the increase in interest expenses by NTD676 million (a result of the increase in the average balance of time deposits and saving deposits by NTD31,065 million and the increase in the average interest rate by 0.1%).

• (II) The increase in net revenue other than interest is due to the following:

• The net revenue from service charges in 2012 was NTD 1,142 million, showing an increase of NTD 252 million from 2011 levels. The main contributors to the increase are the NTD 137 million increase in jointly promoted insurance policies and the NTD 93 million increase in loan application fees.

• In 2012, net gain or loss on financial assets and liabilities at fair value through income statement has increased by NTD 768 million from 2011 levels. The main contributors of the increase are as follows: Gain on the disposal and valuation of domestic publicly traded and OTC stocks increased by NTD 311 million, and the gain on the disposal and valuation of financial derivatives increased by NTD 455 million. In addition, NTD 136 million of foreign exchange loss was recognized in 2012, which is a decrease of NTD 459 million from the exchange gain of NTD 323 million recognized in 2011. Additionally, most of the derivative contracts that our bank entered into were foreign exchange swaps. Once we combine the gain on the disposal and valuation of financial derivatives and foreign exchange (loss) gain, the derivative (loss) gain was NTD 64 million, which is a decrease of only NTD 5 million from the NTD 69 million in 2011.

• Other Non-interest Net Loss or Gain amounted to NTD 86 million, which is an increase of NTD 45 million from the NTD 41 million in 2011. The main reason for the increase is the NTD 78 million apportioned recovery from the loan to Kuang San.

• (III) In 2012 the bank recognized NTD 238 million of delinquent loans expense. Compared to the NTD 665 million recognized in 2011, the reduction is NTD 427 million. The chief reason is that, in 2011, the bank increased allowance for delinquent loans based on the assessment on asset quality. The increase in allowance was mostly attributed to loans made to ProMOS

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Technologies and Powerchip. There has been no significant impairment in 2012, and the impairments as valued by applicable statements of financial accounting standards have been fully recognized. Hence the decrease in delinquent loan expense.

• (IV) The increase in net income and EPS is a result of the increase in net interest income by NTD516 million, the increase in net income other than interest income by NTD613 million, decrease in bad debt expenses by NTD427 million and the increase in operating expenses by NTD177 million.

III Cash flows

(I) Analysis on liquidity in the most recent two years

			Unit: %
Year Item	2012	2011	Increase/Decrease Ratio
Cash flow ratio (%)	-	58.59	-
Cash flow adequacy ratio(%)	704.58	744.94	(40.36)
Cash flow for operating to cash flow from investing ratio (%)	-	(16.56)	-

Analysis of variance in increase/decrease:

1. Because cash flow from operating activities is negative, the calculation of cash flow ratio and cash flow satisfied ratio is ignored.

2. The decline in cash flow adequacy ratio is attributed to the increase in the purchase of financial assets for trading purposes – short term bills.

(II) Cash flows: Most recent year cash flow fluctuation analysis, improvement plan for lack of liquidity, and future cash flow analysis

				Unit: NTDthousand	Unit: NTDthousand
Beginning f	Expected net i h	Expected net cash flow of investing and	Cash surplus dfii	Remediation measures against expected cash flow deficit
o year cash balance	operatng cas flow for the	financing	(ect) amount++ 	Investment	Wealth management
	whole year	activities for h hl
		te woe year 
9,848,878	8,155,969	(8,991,495)	9,013,352	-	-

Analysis of variance in cash flows:

  1. Operating activities: Expecting that the economic growth rate will recover in Taiwan in 2013, the Bank will work hard to develop its business and upgrade the fund utilization effect. It is expected that earnings will be generated in the year to contribute to the net cash inflow from operating activities.

  2. Investing activities: It is expected that the increase in discounts and loans, due from Central Bank of China and banks will contribute to the net cash outflow from investing activities.

  3. Financing activities: The issuance of subordinated debt and increase in estimated deposits and remittances will contribute to the net cash inflow from financing activities.  The net cash flow from investing activities and financing activities will be cash outflow in the year.

• (III) Corrective action against insufficient liquidity: N/A.

• IV The material effect on financial structure from substantial capital expenditure in the last few years:

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(I) Major capital expenditure and funding sources

					Unit: NTDthousand	Unit: NTDthousand	Unit: NTDthousand
Plans	Actual and expected funding source	Actual and expected Completion Date	Total capital required	Actual	and expected capitalutilization
				2011	2012	2013	2014
Update of main server NX7700i	Self-owned Capital	2012.03	163,600	81,800	81,800	-	-
Windows Directory Service (AD)	Self-owned Capital	2015.12 (Has to coordinate this task with the timing of hardware upgrading at each business unit)	32,500	12,500	12,500	7,500	-
Data warehouse and relations with customers management application system	Self-owned Capital	2013.03	45,000	6,750	27,000	11,250	-
The new generation of e-BankSystem	Self-owned Capital	2014.03	75,000	-	11,250	45,000	18,750

(II) Projected potential benefits

1. Update of main server NX7700i: The original server has been used for many years. In order to provide more real-time and stable information system to deal with the Bank’s business development and information system expansion, the main server was updated.

2. Windows Directory Service (Active Directory): Windows Directory service is the foundation of information security. With the revision of Personal Information Protection Act, this task is urgent. Initially the headquarters is the domain of installation. Subsequently branches would be the domain of installation. After the installation, we can provide centralized account authentication and authorization and enhance our internet information security management mechanisms. We can also provide Single Sign-On (SSO) in the application system and achieve centralized data access control. This installation will affect the majority of future installations of information security systems.

3. Data warehousing and customer relationship management application system: Enhance our bank’s competitiveness in the industry and match the needs of medium- and long-term IT development. Improve customer relationship management. Fully understand the attributes, contribution, and needs of our clients. Increase the effectiveness of marketing efforts. This can also allow management personnel at all levels of our bank to quickly grasp

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     - our bank’s operation outcome, trends and changes, and increase the ability of active management.

  4. Next generation internet banking system: with current internet banking functions as the foundation, we will construct and add the following functions: multi-level authorization, multilingual, group account management, trans-system multi-browser financial XML, installation of RA/CA, global internet banking embedded interface, cloud enterprise service platform, online customer service / wealth management specialist. These functions would be connected to personalized internet banking and form a multi-layer security certification mechanism.

• V Direct investment policy, the main reasons for profit or loss, and corrective action plan in the most recent year, and investment plan in the next year

• (I) Direct investment policy in the most recent year:

  • The Bank engaged in the internal direct investment to meet the business development demand for the purpose of establishing the complete financial product transaction platform and ensuring the Bank’s sustainable operation and development. The external direct investment made by the Bank complied with the Government’s financial and economic policies, and assessed the ideal investment objects to upgrade the service quality in the entire financial market.

• (II) Root cause of investment gains or loss in the most recent year: The Bank is used to adhering to the stable management philosophy. The performance of businesses invested by the Bank appears to be fair in risk control, business development and cooperative promotion of business. The entire performance of the investment by the Bank appears to continue earning profit for the time being.

• (III) Corrective action plan: In addition to continuing enhancing the risk control and cooperative promotion of business in the invested companies, the Bank will carefully review the performance and business expansion of the invested companies.

• (IV) Investment plan in the year ahead: Taichung Commercial Bank Lease Enterprise, a direct investment of the Bank, opened to service in 2012 for meeting the needs of business development and for the construction of a platform for the marketing of a complete portfolio of financial products and wide array of banking services to the customers. The split up of the Securities Department of the Bank and the establishment of the Taichung Commercial Bank Securities Co., Ltd. has also been approved by Financial Supervisory Commission under Letter Jin-Guan-Zheng-Quan-Zi No. 1010059030 dated 2013.3.1

VI Risk Management (I) Qualitative and quantitative information about the various risks

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1. Credit risk management system and capital requirement:

Credit risk management system

Credit risk management system	Credit risk management system
2012
Item	Contents
1. Credit risk strategies, objectives, policies and processes	1. Credit risk strategies and objectives: (1) Comply with The New Basel Capital Accord and upgrade the Bank’s risk management ability. (2) Develop well-founded risk management mechanisms and execute them strictly. (3) Strengthen the loan asset portfolio quality, risk management information integration, analysis, control and precautionary effect, and play the role of risk management. 2. Credit risk policies: (1) Establish the business strategies and organizational culture valuing credit risk management and provide the qualitative and quantitative management method as the reference for enactment of business strategies. (2) Establish the entire credit risk management system to be executed by the Bank’s Board, the management and employees jointly, and control the various business risks to the tolerable extent through identification, assessment, control and report of risks in the qualitative and quantitative management manner, so as to achieve the Bank’s credit risk objectives. (3) Establish the effective method and control procedure to control the adequacy of the deposits/withdrawals to ensure the shareholders’ equity as the first priority. 3. Credit risk management process: Risk identification, risk assessment, risk control and risk report include: (1) Define the credit risk management related regulations. (2) Establish the credit risk rating model. (3) Establish the control mechanism and define the limit for the various large-sum exposures. (4) Upgrade the entire asset quality and establish the proper management mechanism step by step. (5) Continue developing and executing the stress tests for credit risks that comply with the competent authority’s requirements. (6) Review andreport periodically.
2. Credit risk management organization and structure	The Risk Management Organization of the Bank is consisted of the Board, Risk Management Committee, Loan Review Committee, and the regional credit review committees, the NPL Management Committee, the Risk Management Committee, all functional units at the Head Office, all banking units (including the regional centers), and the Auditing Office undertheBoard.Thefunctions undercreditrisk management are

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Item

Contents

specified as following: 1. Board of Directors: The Board is the supreme decision-making entity in credit risk management of the bank, and takes the ultimate responsibility for the Bank's credit risk management. 2. Risk Management Committee: Risk Management Committee takes charge of the Bank’s credit risk management mechanism, review of the credit risk regulations and the multi-departmental communication and coordination of credit risk management, and continuous supervision of the performance, according to the risk management policy authorized by the Board. 3. Loan Review Committee and credit review Committee of the regional centers: Review the credit extension applications in accordance with the credit extension policies, credit extension authorization rules and the relevant requirements. 4. Delinquent Accounts Review Committee: The Committee processes the delinquent accounts, receivables on demand and bad debt in accordance with the Rules for Establishment of Delinquent Accounts Review Committee, Rules for Allowance for Loss of Asset Evaluation and Collection of Delinquent Account, Receivable on Demand and Bad Debt, and the relevant requirements. 5. Risk Management Dept.: (1) Credit Risk Management Department is the Bank’s unit dedicated to the risk management, responsible for planning, establishing and integrating the Bank’s credit risk management operation and executing the Bank’s entire credit risk management control. (2) Be responsible for the study, design, or recommendation for revising the credit risk management policy and related regulations of the Bank, and report to relevant level of management or the Board for final approval. (3) Summarize the Bank’s credit risk information periodically and report it to the Risk Management Committee and Board. (4) Establish the Bank’s entire framework of assess, control and qualitative and quantitative management method. 6. Business management units of Head Office: Fully understand the credit risk of the businesses handled by them according to the Bank’s risk management policies and regulations, so as to fulfill the various requirements defined in the process of risk management, and supervise the execution of the various business units’ risk management in a timely manner and work with Risk Management Department to complete the control over the Bank’s risks. 7. The Bank’s business units (including regional centers): (1) Responsible for identifying, evaluating and assessing risks, and taking the proper response against the risks. (2) Comply withtheBank’srulesforcreditinvestigation,

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Item	Contents
	credit extension and credit risk management, fulfill the routine jobs and risk management, and report the risk to the various business supervisory departments. (3) Routine work integrated with the risk control, and identify the accuracy and integrity of the operation information. 8. Audit Office of the Board: Audit Office of the Board will periodically audit the execution of the Bank’s credit risk management system impartially and independently, and provide the suggestions about corrective actions.
3. Scope and characteristics of credit risk report and measurement system	1. Scope and characteristics of credit risk report: (1) The Board’s report (Comprehensive risk report) (2) Risk Management Committee report (Comprehensive risk report) (3) Asset quality report (4) Report for the individual limit in the various countries (5) Risk Management Control (to disclose the information about credit risk) (6) Stress test scenario analysis report 2. Credit risk assessment system includes: (1) Capital requirement calculation platform information system (2) Credit investigation and extension system (3) Debt collection management system (4) Credit review and precaution management system (5) SMEsApplicationScorecard System
4. Credit risk hedging or mitigation policies, and effective strategies and process for controlling risk hedging and mitigation tools	1. Credit risk hedging or reduction policies: (1) Review the business with concentration of risk or higher risk, and conduct the credit risk hedging. (2) Comply with The New Basel Capital Accord and upgrade the Bank’s risk management ability 2. Effective strategies and procedures for controlling risk hedging and reduction tools: (1) Establish the risk control mechanism to control the credit risk of individual credit extension and credit extension portfolio; the control mechanism includes the limit management, post-loaning management, collateral management and asset quality management. (2) Enhance the credit account guarantee by demanding collaterals, guarantors or transfer of SME credit guarantee fund. (3) Respond to the domestic and international economic situations and industry outlook to control industry risk on due time and adjust the limit and ratio of lending to specific industry for sorting out customers in good standingfor financing.
5. Approach for regulatory Capital Charge	Standardized Approach

Exposure and capital requirement under the credit risk standardized approach after risk

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mitigation

mitigation	mitigation	mitigation
December 31, 2012 Unit: NTD thousand
Type of exposure	Exposure after risk mitigation	Capital requirement
Sovereigns	2,689,590	0
Non-central government public sectorentities (PSEs)	3,618,666	144,747
Banks (including multilateral development banks-MDBs)	9,843,806	360,728
Corporates (including securities and Insurance companies)	146,566,255	11,133,929
Retail	156,670,469	10,026,639
Residential mortgage	38,101,106	1,567,614
Equitysecurities investments	29,000	9,280
Other assets	81,935,845	531,258
Total	439,454,737	23,774,195

1. Risk management system, exposure and capital requirement of securitization

Risk management system of securitization

2012

Risk management system of securitization 2012
Item	Contents
1. Securitization management strategyand process	Not applicable
2. Securitization management organization and structure	Not applicable
3. Scope and characteristics of securitization report and measurement system	Not applicable
4. Securitization risk hedging or mitigation policies, and effective strategies and process for controlling risk hedging and mitigation tools	Not applicable
5. Approach for regulatory Capital Charge	Not applicable
6. Overall qualitative requirements for disclosure, including: (1) The purpose of engagement in securitization and the types of risks to be taken and reserved by the Bank after re-securitization. (2) Other risks inherent to securitized assets (e.g., liquidity risk). (3) The different roles played by the Bank in the process of securitization, and the degree of participation by the Bank in each process. (4) Elaborate the monitoring and control procedure for dealing with the changes in credit and market risk involved in the exposure under securitization. (5) Where the Bank may reserves specific risk after de-securitization or re-securitization, the policy for the management ofoffsetting creditrisk.	Not applicable
7. Specify the accounting policy of the Bank in securitization	Not applicable

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Item	Contents
8. The external credit rating agencies (ECAI) in the Banking Book, and the exposure ofthe securitizationofeachcategory ofassets	Not applicable
9. Explain major changes in the quantitative data after the release of the last report (e.g., the transfer of assets in the banking book and the trading book)	Not applicable

3. Operational risk management system and capital requirement Operational risk management system

2012

	3. Operational risk management system and capital requirement Operational risk management system 2012
Item	Contents
1. Operational risk management strategies and processes	1. Operational risk management strategies: By establishing and executing the sound operational risk management mechanism, the Bank manages the operational risk actively, generally evaluates the frequency and effect of the various potential risks in routines and management and takes the appropriate counter-assessments to avoid, transfer or write off, control and bear the risk to reduce the substantial loss and frequencies. 2. Operational risk management process: (1) Risk identification The risk identification approaches include Loss Data Collection (LDC), Key Risk Indicators (KRIs), Risk and Control Self Assessment (RCSA), audit report and external loss event. (2) Risk assessment Assess such factors as possibility and effect of the risks as identified. (3) Risk measurement Gather information on the cases of loss in accordance with the 7 major categories of loss and 8 major categories of business under the New Basel Accord and referred to quantitative analysis by intensities of high (red signal), moderate (yellow signal), and low (green signal). (4) Risk control Control the operational risk events, KRIs and risk control exposure, quality of risk write-off and control actions, and the effect of other cases. (5) Risk report Report the information about operational risk exposure to Risk Management Committee and theBoard periodically.
2. Operational risk management organization and structure	The operational risk management organization includes the Board, Risk Management Committee, Risk Management Dept., the business management units, units of the Bank, all staff and Audit Office of the Board. The authorities and responsibilities of the organizations are specified below. 1. Board of Directors The Board is the supreme decision-making entity in operational risk management of the bank, and takes the ultimate responsibility for theBank’s operational risk management.

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Item	Contents
	2. Risk Management Committee Administer risk management mechanism, review the operation risk of all products, activities, processes and systems of the Bank, and all risk management affairs of all functional units at the Head Office, and continue the monitoring of the performance result as per the operation risk management policy approved by the Board. 3. Risk Management Dept. Responsible for researching and drafting the Bank’s operational risk management policies and procedures, establishing and centrally managing the Bank’s operational risk loss database, collecting, summarizing and analyzing the information about loss, and reporting it to Risk Management Committee and the Board periodically. 4. Business management units They respectively fully understanding the risk which is encountered, and supervising the various units to execute the necessary risk management tasks in a timely manner, and assist Risk Management Dept. to complete the various risk controls. 5. Units of the Bank Comply with and implement the operational risk management rules, and report the risk events pursuant to the requirements. 6. Whole staff The whole staff shall be responsible for dealing with the operational risk jointly, and shall implement the operational risk management tasks strictly within their functions. 7. Audit Office of the Board Audit Office of the Board shall conduct the audit independently, assess and audit the effectiveness of the Bank’s operational risk management structure and processes, and provide the suggestions forcorrective action ina timelymanner.
3. Scope and characteristics of operational risk report and measurement system	When measuring the Operational risk, each unit of the Bank shall analyze the cause, consequence, frequency and effect thereof and conclude the degree of individual risk to verify the exposure of the Bank’s Operational risk. The Bank also made record of various exposures. By introducing the Operational risk identification, assessment, control and report management mechanism, the Bank establishes and centrally manages the database for the Bank’s Operational risk losses and summarizes the Operational risk information and implementation status, and submit the report and suggestions to Risk Management Committee and reportingthem to the Board for approval.
4. Operational risk hedging or mitigation policies, and effective strategies and process for controlling risk hedging and mitigation tools	For intensifying the monitoring and control of operational risk, the Bank established Key Risk Indicators and Risk Control Self Assessments according to the four dimensions of operational risk, i.e. internal procedure, people, systems, and external events. In addition, the Bank will observe the changes in the said indicators, and can transfer or write off the loss and impact of incidents caused by operational risk through insurance and outsourcing in part or in whole for the effective reduction of loss deriving from operation risk.

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Item	Contents
5. Approach for regulatory CapitalCharge	Basic Indicator Approach

Capital requirement for operational risk

December31,2012	December31,2012	Unit: NTDthousand
	Gross profit	Capital requirement
2009	4,576,975
2010	5,020,931
2011	5,717,907
Total	15,315,813	765,791

1. Market risk management system and capital requirement

Market risk management system

Market risk management system	Market risk management system
2012
Item	Contents
1. Market risk management strategies and processes	1. The Bank’s market risk management strategy is to develop the sound and effective market risk management mechanism. The mechanism shall correspond to the Bank’s business scale, nature and complexity to ensure the proper management of the market risk to be borne by the Bank and seek the balance between the tolerable risk level and expect return level. 2. The Bank’s market risk management process covers the risk identification, evaluation, assessment, control and report. The contents thereof cover the market risk related to the Bank’s major traded products, trading activities, process and system. (1) Risk identification: The Bank’s relevant units identified the source of market risk by means of business analysis or product analysis to define the market risk factors of the various financial products (the market risk factors were categorized as interest rate risk, foreign, equity securities price risk and commodity price risk) and the relevant requirements. (2) Risk evaluation and assessment: Establish the effective valuation mechanism to evaluate the income of position precisely, and conduct the independent market price evaluation procedure with respect to the short-term investment position for which the reference market price is available. Establish the quantitative model step by step to assess the market risk in such manners as sensitivity analysis, VaR calculation, scenario drill and stress testing, and integrated with the routine risk management. (3) Risk control: Define the relevant rules governing excess of limit, stop-loss mechanism and operating procedure for excess of limit in order to control the market risk effectively. (4) Risk report:

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Item	Contents
	Report to the Risk Management Committee and the Board on the status of overall market risk management of the Bank at regular intervals. In case of significant change in the market, related functional units shall report immediately to reduce market risk. Disclose the Bank’s market risk information to the public periodically pursuant to the competent authority’s requirements.
2. Market risk management organization and structure	The Bank’s market risk management organization and structure includes the Board, Risk Management Committee, Risk Management Dept., business supervisory units, business trading units and Audit Office of the Board. The authorities and responsibilities of the organizations are specified below: 1. Board of Directors: The Board is the supreme decision-making unit in market risk management of the bank, and takes the ultimate responsibility for the Bank's market risk management. 2. Risk Management Committee: Control the risk management mechanism according to the market risk management policies approved by the Board. 3. Risk Management Dept.: Risk Management Dept. is the unit dedicated to the Bank’s market risk management, responsible for consolidating and executing the Bank’s entire market risk management. 4. Business supervisory departments of head office: Business supervisory departments of head office are responsible for managing and supervising the necessary risk management tasks to be executed by business trading units and working with Risk Management Department to complete the control of the Bank’s risks. Meanwhile, they are also responsible for defining the proper limit control, stop-loss mechanism and operating procedure for excess of limit with respect to the products and process of transaction. 5. Business trading units: Business trading units are responsible for executing the risk identification, assessment and measurement, and taking appropriate countermeasures in accordance with the Bank’s market risk management rules. Take positive action in monitoring the enforcement of different limits, and report to the supervisors or notify Risk Management Department as required. 6. Audit Office of the Board: Audit Office of the Board executes the market risk management auditing business independently and provides the suggestions for corrective action.
3. Scope and characteristics of market risk report and measurement system	The Bank’s existing IT system is primarily engaged in the limit management. The trading information related to the market risk to the business supervisory unit and Risk Management Dept. Risk Management Dept. shall consolidate and summarize the information and present the report to Risk Management Committee and the Board. The contents of report cover all market risk positions and ensure that the various transactions are conducted under authorization and the specificlimitation.
4. Market risk hedging or mitigation	The Bank’s transactions subject to market risk have defined the limits of the various investment objects in the relevant rules. The specific limit is also set against the trading counterpart based on its creditrating andfinancialstatus to

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Item	Contents
policies, and effective strategies and processes for controlling risk hedging and mitigation tools	prevent the operation of fund from being highly concentrated. Each business trading unit shall adjust the operational position according to the change in the relevant market environments under the authority granted to it, and adopt any available derivative product to hedge risk in a timely manner and execute the relevant stop-loss mechanism whenever necessary. Said relevant requirements shall be reviewed and revised subject to the operation plan, business development and changes in the entire financial environment.
5. Approach for regulatory Capital Charge	Standardized Approach

Capital requirements for market risk

Dec. 31, 2012

	Unit: NTDthousand
Type of risk	Capital requirement
Interest rate risk	31,280
Equity securities risk	70,378
Foreign Exchange risk	16,838
Commodity risk	0
Total	118,496

1. Liquidity risk includes the analysis of maturity of assets and liabilities, and also explains the management method for asset liquidity and capital gap liquidity.

For the appropriate management of liquidity risk and prompt for health operation, the Bank has instituted the “Assets and Liabilities Management Policy”, “Liquidity Risk Management Policy”, and “Guidelines for the Implementation of Liquidity Management”, and has established the Assets and Liabilities Management Committee. The committee will report to the Board on necessary monitoring and control measures in liquidity risk management at regular intervals. In addition, the Bank will prepare the monthly Maturity Analysis Sheet and USD Maturity Analysis Sheet with the establishment of indicators for quantitative analysis for the control of liquidity risk.

Analysis of maturity structure of NTD

		Analysis of maturity structure of NTD
		December 31, 2012 Unit: NTD thousand
	Total	Remaining balance to maturity

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		0 to 10 days	11 to 30 days	31 to 90 days	91 to 180 days	181 days to 1 year	More than 1 year
Main capital inflow upon maturity	420,818,471	43,271,453	44,671,458	27,937,317	37,720,849	61,345,405	205,871,989
Main capital outflow upon maturity	501,906,144	25,413,675	29,354,823	63,285,690	101,500,710	115,498,201	166,853,045
Gap	(81,087,673)	17,857,778	15,316,635	(35,348,373)	(63,779,861)	(54,152,796)	39,018,944

Analysis of maturity structure of USD

			December31,2012 Unit: US thousand	December31,2012 Unit: US thousand	December31,2012 Unit: US thousand	December31,2012 Unit: US thousand
	Total		Remaining balance to maturity
		0 to 30 days	31 to 90 days	91 to 180 days	181 days to 1 year	More than 1 year
Main capital inflow upon maturity	1,096,567	189,831	231,917	195,528	42,447	436,844
Main capital outflow upon maturity	945,971	238,965	181,303	393,739	131,964	-
Gap	150,596	(49,134)	50,614	(198,211)	(89,517)	436,844

Note 1: Refers to the amount in USD of the whole Bank.

Note 2: Where offshore assets account for more than 10% of the Bank’s total assets, it is necessary to provide supplementary disclosure.

(II) The influence of domestic and foreign major policies and law amendment exerting on the bank’s financial structure and responding measures:

1. Install the following additional systems to deal with the promulgation and enforcement of Computer-Processed Personal Data Protection Law Enforcement Rules:

2. (1) The Bank has been accredited by BSI in August 2012 in ISO-27001 system in ISMS.

3. (2) The installation of the NTD mainframe and the open server for log collection and analysis system is expected to complete by the end of 2013.

4. (3) File encryption management system configuration

5. Financial Supervisory Commission amended and promulgated the “Regulation for Banks in the Management of Capital Adequacy” in response to the requirement of Basel III. There are 18 articles in the regulation after the amendment. With the exception of Article IV on the lowest leverage ratio, which will come into effect on January

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1 2018, the remainder of the regulation shall be effective on January 1 2013. The said regulation requires banks to move the BIS ratio upward annually and incrementally. By 2019, the lowest BIS ratio, tier 1 capital ratio, and equity ratio of common stocks shall be 10.5%, 8.5%, and 7%. As of December 31 2012, the BIS ratio, tier 1 capital ratio, and equity ratio of common stocks of the Bank have already met the standards set forth to be accomplished in 2019. In the future, the Bank will continue to fortify its equity capital as the goal in order to tackle with different forms of risks and mitigate possible impact on the Bank.

1. In order to prepare for the adoption of IFRSs from 2012 onwards, our bank has organized a task force and enlisted the help of CPAs for said adoption. The timing and tasks of the adoption have been on schedule. Each quarter the execution of the adoption plan has been briefed to the Board. Initial adoption and subsequent accounting policies have been proposed and submitted to the Board for ratification, taking into consideration “Regulations Governing the Preparation of Financial Reports by Public Banks” and IFRSs. As of now, we have finalized the adjustment amounts between the two accounting principles for all accounts on IFRS adoption day. Subsequently we will abide by the regulations from government agencies and the revision of IFRS and adjust accordingly and in a timely manner.

2. (III) The effect of technological and industrial changes on the Financial Status and operation of the Bank and countermeasures:

3. The information technology has been improved drastically. The bank’s equipment and operation becomes rapid due to the change in the social life and custom. Such e-banking services as e-ATM, network bank and voice bank have been well received by the public. As a result, the operating cost may be reduced and the operating efficiency may be upgraded relatively. The Bank will continue providing more diversified on-line transaction services and providing customers with more complete, convenient and safe choices.

4. (IV) The effect of the change in the corporate image of the Bank and countermeasures:

5. As of 2009 until now, the Bank has promoted the “branch demonstration and learning system”. In addition to establishing the various standardized service requirements and upgrading the customer service quality, the Bank also introduced the “CIS” (Corporate Identity System) to strengthen the Bank’s corporate identity by integrated planning and communication of idea discrimination, vision discrimination and activity discrimination.

6. The Bank has launched series of TV advertisement in the New Year to let the public know the corporate image of “Whole-heartedness” of the Bank. This TV commercial presented the spirit of the Bank in serving the local community with positive attitude. In the future, the Bank is determined and motivated to know the best of the needs and dynamics of the customers in order to provide a wide array of financial products, upgrading the satisfaction of the customers, and also enhance its competitive power in market.

7. (V) Expected result and possible risks of mergers and acquisitions and Counter

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assessments: None.

• (VI) Expected result for establishing more business locations, possible risk and countermeasures:

• A complete network of market channels is the foundation for market expansion. This is also a vital platform for the liaison with and service for the customers. By expanding business locations, the Bank may not only upgrade its operating performance but also receive positive effect in personnel training and dispersion of risk. The industry peers in the banking industry are highly homogeneous, and the competition among the peers is keen with high cost of operation. As such, a broad clientele base and well-developed business opportunities shall be necessary. In establishing new banking locations, the Bank has taken into consideration the regulations of the competent authority and conducted caution assessment and evaluation in order to reduce risk and reinforce the niche in operation.

• (VII) The risk confronting the over concentration of business, and countermeasures:

• The Bank has maintained a proper balance of banking services and there is no over concentration to the extent that dispersion of risk is impossible.

• (VIII) The effect of change in the management produced to the Bank, possible risk and countermeasures: None.

• (IX) The massive transfer of equity shares by directors, supervisors, or dominant shareholders holding more than 1% of the outstanding shares of the Bank, the risk and countermeasure: None.

• (X) Contentious matters and non-contentious matters:

• The Kuang San Group’s illegal and excessive borrowing and the improper investment and default in the delivery of stocks issued by Shun Ta Yu were uncovered in November 1998. In the aforementioned lawsuit, the Prosecutors’ Office of Taichung District Court and Taichung District Court have seized the amount of NTD2,560 million. After being appealed and remanded for retrials for several instances, the Bank considered that the Criminal judgment of Ruling 99 Jin-Shang-Chong-Geng (3) Zi No. 24 was wrongfully determined, and petitioned with the Prosecutor for appeal with the Supreme Court. At this moment, the amount to be returned by the court is not yet finally determined.

• The Bank has laid charges against the core members and important members, and the Bank’s employees, directors and supervisors in the illegal loans, improper investment and default stock delivery of the Kuang San Group Case to claim damages. The claim for damages amounting to NTD11,200 million for joint and several liabilities filed against the chief suspect and accomplice O-Jen Tseng, is now still pending in the court. Part of the judgment is final now, and part of the case is still pending in the Taichung District Court.

• O-Yi Chang and Tseng O-Jen are accomplices in the case of Kuang San Group’s illegal financing and default in settlement of securities. In 1999, O-Yi Chang was the Chairman of Shun Ta Yu Co., Ltd. As such, the Bank petitioned with the court to claim for the damages under joint and several liabilities against Chang claiming the amount of NTD650 million. Favorable decision was made by Taichung Branch of the High Court of Taiwan under Court Ruling 99 Jin-Shang-Geng (2) Zi No. 5. In addition, the Supreme Court of

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Taiwan also overruled the appeals filed by Chang and others by Ruling 101 Tai-Shang-Zi No. 167. As such, the aforesaid court judgment in favor of the Bank is final.

• (XI) Other major risks and counter-assessments: None.

• VII Crisis management mechanism For the rapid settlement of unusual withdrawal and deposits, massive draining of capital, severe damage to the good will of the Bank and other crisis in operation, or the handicap of solvency and ability to repay debts, due to unanticipated factors, the Bank has established the “Emergency Response Handbook” as guideline. For fortifying the security measures and functions of all banking units and for the upgrading of security protection, the Bank has established the “Regulation for Security Management”. In addition, the “Emergency Response Team” and the “Security Supervision Team” have also been set up to deal with emergency and take appropriate actions.

• For the preservation of the information system in an emergency, the Bank has established the “Guideline for Response and Backup of the Information System in Emergency” so that the personnel of the Bank can maintain normal operation of the information system in case of emergency.

• VIII The following methods and hypotheses for the valuation of fair value of financial instruments are applied

• (I) Financial Instruments at Fair Value through Profit or Loss: Financial instruments classified as financial assets or financial liabilities at fair value through profit or loss (“FVTPL”) include financial assets or financial liabilities held for trading and those designated as at FVTPL on initial recognition. The Bank recognizes a financial asset or a financial liability on its balance sheet when the Bank becomes a party to the contractual provisions of the financial instrument. A financial asset is derecognized when the Bank has lost control of its contractual rights over the financial asset. A financial liability is derecognized when the obligation specified in the relevant contract is discharged, cancelled or expired.

  • FVTPL is initially measured at fair value plus transaction costs, and at each balance sheet date subsequent to issue of initial recognition, it is measured at fair value, with changes in fair value recognized directly in profit or loss in the period in which it arises. On de-recognition of a financial instrument, the difference between its carrying amount and the sum of the consideration received and receivable or consideration paid and payable is recognized in profit or loss. The purchase or disposal of financial assets in customary transactions shall be subject to accounting on the date of transaction. A derivative that does not meet the criteria for hedge accounting is classified as a financial asset or a financial liability held for trading. If the fair value of the derivative is positive, the derivative is recognized as a financial asset; otherwise, the derivative is recognized as a financial liability.

  • Basis of fair value: The fair value of stocks traded on the TSEC (GreTai) market and depository receipt is based on the closing price on the balance sheet. The fair value of open-ended funds is based on the net asset value on the balance sheet date. The fair value of bonds is based on the reference price on the balance sheet date in the GreTai Securities Market. The fair value of financial products for which no market price is available shall be evaluated based on the evaluation method.

  • FVTPL which are mixed instruments, or for the reason of elimination or material reduction of the difference in accounting practices, can be

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designated as financial instruments at fair value through profit or loss at the initial recognition. Financial instruments portfolios, based on the Bank’s risk-management or investment policy, may also be designated as financial instruments at fair value through profit or loss.

• (II) Available-for-Sale Financial Assets: Assets at fair value through income statement and the changes in value are recognized under the title of adjustment of shareholders’ equity. The stocks and beneficiary securities of the Bank will be entered into book on a daily basis for accounting purpose. At the time of initial recognition, the financial products shall be evaluated at fair value with the addition of the cost of acquisition or transaction cost at the time of issuance. Where there is evidence showing impairment, it shall be stated as the loss of impairment. In case of impairment in the duration of holding, the impairment of financial products available for sales shall be recognized as adjustments of shareholders’ equity. If the amount of impairment of financial assets available for sales is obviously related to specific event occurred after the recognition for impairment, such amount shall be reversed and recognized as income in current period.

• (III) Held-to-maturity financial assets: The interest rate in effect shall be used to calculate the amortization cost and other interest incomes. All debt securities of the Bank are entered in book on a daily basis for accounting purpose. At the time of initial recognition, evaluation will be made on the basis of fair value of the financial instruments plus the cost of acquisition or the transaction cost at the time of issuance. Where there is evidence showing impairment, it shall be stated as the loss of impairment. In case of impairment in the duration of holding, the impairment shall be recognized as adjustments of shareholders’ equity. If the amount of impairment is obviously related to specific event occurred after the recognition for impairment, such amount shall be reversed and recognized as income in current period. However, the reversal shall not cause the book value in excess of the amortization cost before the recognition of impairment.

• (IV) Stocks- equity method: The equity investment under equity method refers to the equity of unlisted (non-OTC) companies and no open market price thereof is available. Besides, it is impossible to evaluate the possibility of various estimates in the variance interval and it is impossible to measure the fair value. Therefore, the fair value of such investment shall be the book value thereof. The valuation by equity method shall be applicable to investees where the Bank and subsidiaries included in the consolidated financial statement jointly hold 20% or more of their equity shares or less than 20% but are influential in the investees.

For the disposal of equity investment recognized under the equity method, the difference between the sale price and the book value as of the day of disposal shall be recognized as gain or loss from disposition of equity. In case of a balance of capital surplus in book deriving from long-term equity investment, recognize for income in current period in proportion the sold equity.

• (V) Investment in financial assets at cost:

• The financial assets at cost which are the stocks other than those traded on the TSEC (GreTai) market will have no public market price available, and the fair value thereof can be sought only at the price exceeding the

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reasonable cost. Therefore, it is impossible to measure the fair value of such investment. For investment in equity products that cannot be assessed on the basis of reliable fair value, evaluate on the basis of the cost initially recognized. If there is objective evidence implicating impairment, recognize for impairment loss and such amount shall not be reversed. IX Other important notes

• Settlement of disputes Subsequent negotiations for Lehman Brothers structured notes dispute: In order to settle the dispute over Lehman Brothers structured notes effectively, the Bank has complied with the competent authorities’ instruction to settle the dispute with customers. Until February 28, 2012, the Bank has filed a total of 727 cases over the dispute with the “Banking Dispute Review Board”, and settled 710 cases amicably, the settlement ratio of 97.66%, after 62 review meetings for the Lehman Brothers case were called.

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8 Special Notes

• I Special Notes

• (I) Information regarding the bank’s subsidiaries

  1. Consolidated Report on business operations:

     • (1) Chart showing the bank’s subsidiaries:

       • A. The controlling Company and subsidiary companies

Taichung Commercial Bank Co., Ltd.

==> picture [296 x 206] intentionally omitted <==

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

100% 100%
Taichung Taichung Commercial
Commercial Bank Bank Lease Enterprise
Insurance Broker
Co., Ltd. 100%
TCCBL Co., Ltd.
100%
Taichung Commercial
Bank Leasing (Suzhou)
Ltd.
----- End of picture text -----

Taichung Commercial Bank Leasing (Suzhou) Ltd.	Taichung Commercial Bank Leasing (Suzhou) Ltd.	Taichung Commercial Bank Leasing (Suzhou) Ltd.	Taichung Commercial Bank Leasing (Suzhou) Ltd.	Taichung Commercial Bank Leasing (Suzhou) Ltd.
B. Cross-investment: None. C. Subsidiaries and subsidiaries: None. (2) Profiles of the bank’s subsidiaries:
Name of enterprise	Date of establishment	Address	Paid-in shares Captial	Major operations
Controlling company: Taichung Commercial Bank Co., Ltd. Subsidiary companies: Taichung Commercial Bank Insurance Broker Co., Ltd. Taichung Commercial Bank Lease Enterprise TCCBL Co., Ltd. Taichung Commercial Bank Leasing (Suzhou) Ltd.	1953.8.26 2007.9.26 2012.1.13 2012.6.13 2012.12.11	No. 87, Min Chuan Road, West District, Taichung 8F, No. 87, Min Chuan Road, West District, Taichung 7F.-7, No.50, Sec. 1, Xinsheng S. Rd., Zhongzheng Dist., Taipei City P.O. Box 957,Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands. Room 402, Property Business Plaza, No.158, Wangdun Road, Industrial Park of Suzhou, Jiangsu	23,187,442 82,360 1,000,000 395,159 395,159	Banking business as permitted under the Banking Act. Insurance brokerage. Leasing Operation. Leasing and investments. Leasing.

Unit: NTD thousand

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• (3) Entities presumed in control-subsidiary relations and information on identical: None.

• (4) A. The industries housed in the same business location of the whole business group:

  • (a) Commercial bank: Banking business as permitted under the Banking Act.

  • (b) Insurance broker: Please refer to Paragraph (2), Profiles of the bank’s subsidiaries.

  • (c) Lease operation: Same as the information listed in the business knowledge of affiliated businesses section, disclosed in previous pages.

• B. The division of labor of the business group:

  • The business group started with banking through Taichung Commercial Bank. Taichung Commercial Bank Insurance Broker acted as brokerage for personal and property insurance business and developed the business through employees of Taichung Commercial Bank.

Taichung Commercial Bank Lease Enterprise operates a full range of leasing business, offering diverse services and financial products, including leasing, installment management, accounts receivable factoring, and financing loans to our clients.

TCCBL Co., Ltd is a foreign holding subsidiary 100% owned by Taichung Commercial Bank Lease Enterprise. Its main business purpose is acting as an investor in Taichung Commercial Bank Leasing (Suzhou) Ltd.; additionally, it also runs leasing operations. The business purpose of Taichung Commercial Bank Leasing (Suzhou) Ltd. is providing Taiwanese businesses in China leasing and other related services.

Through joint marketing efforts between the bank, leasing, and insurance brokerage companies, we can implement well-rounded service to small and medium enterprises, increase the ratio of non-interest revenue, boost our competitiveness, and strengthen our service quality.

• (5) Information on endorsements and/or guarantees, loaning of funds, and derivatives transactions

• A. Endorsements/guarantees to others:

Unit: NTD thousand

No.	The company providing the endorsement and/or guarantee	The party receiving the endorsement and/or guarantee	The party receiving the endorsement and/or guarantee	The limit of endorsements and/or guarantees to a single business entity	The highest balance of endorsements and/or guarantees in the current period	The ending balance of endorsements and/or guarantees	The endorsements and/or guarantees secured with property	Total endorsements and guarantees as a percentage of equity in the most recent financial statement	The upper limit of an endorsement and/or guarantee.
		Company name	Relation
1	Taichung Commercial Bank Lease Enterprise	TCCBL Co., Ltd.	100% and directly owned subsidiary	5,920,632	500,000	500,000	-	50.67％	9,867,720

• B. Loans to others: None.

C. Transactions of derivative products: None.

• (6) Profiles of Directors, Supervisors and Presidents of the bank’s subsidiaries

			Unit:Thousand shares
Name ofenterprise	Title	Companyname or representative	Status ofshareholding

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			Quantity	Ratio of Shareholding (%)
Controlling company: Taichung Commercia Bank Co., Ltd. Subsidiary companies: Taichung Commercia Bank Insurance Broker Co., Ltd. Taichung Commercia Bank Lease Enterprise TCCBL Co., Ltd.	l Chairman Vice Chairman Managing Director Managing Director Managing Director (Independent director) Director Director Director Director Independent director Independent director Resident Supervisor Supervisor Supervisor General Manager l Chairman Director Supervisor l Chairman Director Supervisor Chairman	Pan Asia Chemical Corporation Corporation: Jin-Fong Soo Pan Asia Chemical Corporation Representative: Kuei-Hsien Wang Pan Asia Chemical Corporation Representative: Jer-Shyong Tsai I Joung Investment Co., Ltd. Representative: Yi-Jen Chen Hsi-Rong Huang Pan Asia Chemical Corporation Representative: Chun-Sheng Lee Kang-Chi Chou Ming-Shan Chuang Hsin-Ching Chang Meng-Liang Chang I Joung Investment Co., Ltd. Representative: Ching-Hsin Chang Ho Yang Management Consultant Co., Ltd. Representative: Chia-Hung Lin Chou Chang Co., Ltd. Representative: Wei-Liang Lin Chen-Le Liu Jin-Yi Lee Xin Rui Investment Co., Ltd. Representative: Jiann-Ell Huang Xin Rui Investment Co., Ltd. Representative: Chien-Hwa Lee Fu Ching-Huang Tsai Shu-Li Huang Tai Jiunn Enterprise Co., Ltd. Representative: Chao-Nan Hsieh Chun-Sheng Lee Taichung Commercial Bank Co., Ltd. Representative: Kuei-Hsien Wang Taichung Commercial Bank Co., Ltd. Representative: Huan-Te Wang Yi-Der Chen Taichung Commercial Bank Co., Ltd. Representative: Kai-Yu Lin Taichung Commercial Bank Co., Ltd. Representative: Wei-Liang Lin Taichung Commercial Bank Co., Ltd. Representative: Jer-Shyong Tsai Kai-Yu Lin Kuo-Chun Liu Yao-Hsiang Shih Taichung Commercial Bank Co., Ltd. Representative: Hsin-Ching Chang Taichung Commercial Bank Lease Enterprise Representative:Hsin-Ching Chang	147,155 - 147,155 259 147,155 - 16,367 9,897 - 147,155 481 - - - - 16,367 66 1,400 - 8,796 - - - 7,712 - 7,712 - - - 788 - 481 8,236 - 8,236 - - 8,236 - 100,000 - 100,000 - - - - 100,000 - 13,500 -	6.35 - 6.35 0.01 6.35 - 0.71 0.43 - 6.35 0.02 - - - - 0.71 - 0.06 - 0.38 - - - 0.33 - 0.33 - - - 0.03 - 0.02 100.00 - 100.00 - - 100.00 - 100.00 - 100.00 - - - - 100.00 - 100.00 -

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Taichung Commercia Bank Leasing (Suzhou) Ltd.	l Chairman Director Supervisor	Taichung Commercial Bank Lease Enterprise Representative: Hsin-Ching Chang Taichung Commercial Bank Lease Enterprise Representative: Kai-Yu Lin Kuo-Ming Lo Taichung Commercial Bank Lease Enterprise Representative:Yao-Hsiang Shih	- - - - - - -	100.00 - 100.00 - - 100.00 -

(7) Operation overview of the bank’s subsidiaries

Unit: in NTD thousand unless otherwise specified

Name of enterprise	Capital	Total assets	Total liabilities	Equity	Net Income (loss)	Income (loss) before taxation	Income (loss) after taxation	Earnings Per Share (ioss) (NTD) (After income tax)
Controlling company Taichung Commercial Bank Co., Ltd. Subsidiary companies: Taichung Commercial Bank Insurance Broker Co., Ltd. Taichung Commercial Bank Lease Enterprise TCCBL Co., Ltd. Taichung Commercial Bank Leasing (Suzhou)Ltd.	23,187,442 82,360 1,000,000 395,159 395,159	444,372,068 303,731 1,445,784 496,284 397,644	416,290,968 121,524 459,012 101,743 2,710	28,081,100 182,207 986,772 394,541 394,934	6,853,717 235,164 30,427 113 96	3,304,262 114,272 (13,705) (1,094) (702)	2,777,958 93,847 (13,705) (1,094) (702)	1.20 11.39 (0.14) (0.08) -

2. Consolidated financial statement of subsidiaries

The Bank is required to prepare consolidated financial statements with its subsidiaries under the “Standards for the Preparation of Consolidated Report on Operation, Consolidated Financial Statements, and Report on Affiliations between Parent and Subsidiaries”. Subsidiaries of the Bank under the aforementioned legal rule are identical with the subsidiaries defined under Financial Accounting Standard No. 7 on “Consolidated Financial Statements”. Information on Financial Status and operation performance of such subsidiaries has been included in the disclosure of the aforementioned consolidated financial statement between parent and subsidiaries and therefore will not be prepared separately. For further information, please refer to the aforementioned consolidated statement between parent and subsidiaries.

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Statement of Declaration

The Bank Affiliation Report 2012 (from January 1, 2012 to December 31, 2012) was prepared in accordance with the “Criteria Governing Preparation of Report on Affiliations, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises”, and the information disclosed herein is materially consistent with that disclosed in the notes to the financial statement for the previous period.

Company name: Taichung Commercial Bank Co., Ltd.

Responsible Person: Jin-Fong Soo

March 13, 2013

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CPA’s Review Comments

To: Taichung Commercial Bank Co., Ltd.

We conducted the audit on the financial statements of Taichung Commercial Bank Company Limited for 2012 in accordance with the “Standards on the Audit of Financial Statements” and the audit principle generally accepted in the Republic of China, and we have issued modified unqualified opinions dated March 13, 2013. The purpose of the audit is to give an opinion on the fair presentation of the said financial statements. The Affiliation Report for 2012 prepared by Taichung Commercial Bank was attached. Such report was prepared in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises”. An audit review requires us to proceed with the necessary procedures, including the acquisition of customers’ declaration and the confirmation on related information. The review has been successfully accomplished.

In our opinion, the Affiliation Report for 2012 prepared by Taichung Commercial Bank is in compliance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” and the contents of financial information are identical with those presented in the financial statements. No material amendments to the information shall be required.

Deloitte & Touche Wen-Ya Hsu, CPA Tzu-Chun Wang, CPA

Securities and Futures Bureau Securities and Futures Bureau Approval Document No. Approval Document No. Tai-Cai-Jheng (6) No. 0920123784 Tai-Cai-Jheng (6) No. 0920123784

March 13, 2013

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3. Affiliation Report:

• A. Relations between parent and subsidiaries

Unit: share; %

					Unit: share; %	Unit: share; %
Name of holding company	Reason of holding	Status of shareholding and lien of stock by holding company			Directors, Supervisors or managers appointed byholding company
		Shares	Ratio of Shareholding	Shares under lien	Title	Name
Pan Asia Chemical Corporation China Man-Made Fiber Co., Ltd. Chung Chien Investment Co., Ltd.	Win a majority of director seats of the Bank Indirectly control over the HR, finance or operation of the Bank Indirectly control over the HR, finance or operation of the Bank	147,154,866 Shares 532,245,888 Shares -	6.35% 22.95% -	- 139,000,000 Shares -	Chairman Vice Chairman Managing Director Director Director Director Director Director - -	Jin-Fong Soo Kuei-Fong Wang Jer-Shyong Tsai Chun-Sheng Lee Kang-Chi Chou Ming-Shan Chuang Hsin-Ching Chang Meng-Liang Chang - -

  - B. Transactions between subsidiaries and Parent Name of enterprise: None

  - C. Guarantees/endorsements between subsidiaries and Parent Name of enterprise: None.

• (II) Private placement of securities and Bank debentures: None.

• (III) In the most recent year to the date this report was printed, the holding or disposition of the shares of the Bank held by the subsidiaries: none.

• (IV) Other Supplementary Disclosure: None.

• II Conditions that will materially affect shareholders’ equity or price of securities:

Date	Conditions
2012.1.11	The Board has ratified the letter of intent for property transaction, which is an agreement the bank entered into with the owner of the property in Neihu District, TaipeiCity.
2012.3.8	Notice: Our bank will cancel the private placement of securities resolved at the Shareholders’ Meetingin 2011.
2012.4.18	Taichung Bank will spin off its securities division as Taichung Commercial Bank Consolidated Securities Co. Ltd.
2012.8.8	Notice: The Board of our company has resolved to participate in the increase of capital of Taichung Bank Insurance Agency Co. Ltd. and would use real estate as consideration.
2012.10.17	Notice: The Board of our company has resolved to increase our investment in Reliance Securities Investment Trust Co. Ltd.

Record date: 2013.2.28

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9 Branches of Taichung Commercial Bank at a Glance

Name	Tel. No.	Fax No.	Postal code	Address
Head Office
Min Chuan Building	04-22236021	04-22240748	40341	No. 87, Min Chuan Road, West District, Taichung
Min Zu Building	04-22236023	04-22278584	40041	No. 45, Min Tsu Rd., Central Dist., Taichung
Trust Dept.	04-22236021	04-22202327	40341	8F, No. 87, Min Chuan Road, West District, Taichung
International BusinessDept.	04-22212933	04-22202046	40341	2F, No. 87, Min Chuan Road, West District, Taichung
Securities Brokerage	04-22268588	04-22267708	40041	1F, No. 45, Min Tsu Rd., Central Dist., Taichung
Taipei City
Taipei Branch	02-23211819	02-23212659	10049	No. 85, JhongsiaoE.Rd., Sec.1,Taipei
Songshan Branch	02-27658666	02-27658368	11072	No. 176, Keelung Rd., Sec. 1, Xin Yi Dist., Taipei
Neihu Branch	02-26579899	02-26578887	11492	No. 306, Ruei Guang Rd., Neihu Dist., Taipei
Overseas Banking Branch	02-23219858	02-23216358	10049	8F.-4, No.85, Jhongsiao E. Rd., Sec. 1, Taipei
Taipei Securities Branch	02-23216266	02-23215020	10049	4F.-1, No.85, Jhongsiao E. Rd., Sec. 1, Taipei
New Taipei City
Banchiao Branch	02-29563456	02-29581616	22067	No. 28-2, Min Sheng Rd., Sec. 1, Banchiao Dist., NewTaipei
Sanzhong Branch	02-29877878	02-29872411	24141	No. 2, Jhongzhen Rd., Sanzhong Dist., New Taipei
Xinzhuang Branch	02-29017888	02-29013040	24257	No. 651, Zhong Zheng Rd., Xinzhuang Dist., NewTaipei
LinkouBranch	02-26021888	02-26014522	24443	No. 8, ChuLin Rd.,LinkoDist., NewTaipei
Tucheng Branch	02-82603158	02-82601658	23659	No. 56, Ming-De Rd., Tucheng Dist., New Taipei
Taoyuan County
Neili Branch	03-4610566	03-4620277	32067	No. 24, Zhong Xiao Rd., Jhongli City, Taoyuan
Jhongli Branch	03-4228828	03-4228826	32085	No. 326, Yanping Rd., Jhongli City, Taoyuan
Pizgzhen Branch	03-4915688	03-4912789	32441	No. 18, Jhongfong Rd., Pingzhen City, Taoyuan
Taoyuan Branch	03-3333389	03-3331599	33058	1&2F, No. 324, Zhong Shan Rd., Taoyuan City,Taoyuan
Yangmei Branch	03-4855288	03-4855859	32645	No. 337-1, Xin Nong Street, Yangmei Township,Taoyuan
Nankang Branch	03-3216611	03-2223311	33859	No. 288, Nan Kang Rd., Sec. 1, Lu Zhu Hsiang,Taoyuan
Kueishan Branch	03-3590005	03-3591266	33342	No. 1185, Wan Shou Rd., Sec. 2, Gueishan Hsiang,Taoyuan
Tayuan Branch	03-3857001	03-3859033	33753	No. 47, Da Guan Rd., Tayuan Hsiang, Taoyuan
Jhongli Securities Branch	03-4251366	03-4251172	32085	2F, No. 18, Zhong Mei Rd., Jhongli City, Taoyuan
Hsinchu City
HsinchuBranch	03-5257288	03-5233566	30046	No.128, SiWei Rd.,Hsinchu

180180

Name	Tel. No.	Fax No.	Postal code	Address
Hsinchu County
Zhupei Branch	03-6675188	03-6675168	30264	No. 276, Kuang Ming 6th Rd., East Sec. 1, ZhuPei,Hsinchu
Hsinfeng Branch	03-5590929	03-5590788	30442	No. 155-12, Chien Hsing Rd., Sec. 1, Hsinfong,Hsinchu
MiaoliCounty
Zhunan Branch	037-481148	037-480465	35041	No. 66, Ho Ping Street, Zhu Nan Township, Miaoli
Yuanli Branch	037-866366	037-866316	35844	No. 79, Xin Yi Rd., Yuan Nan Li, Yuan Li Township,Miaoli
Taichung City
Zhongzheng Branch	04-22245181	04-22251969	40044	No. 189, Zhong-Zheng Rd., Central Dist., Taichung
N.TaipingBranch	04-22121298	04-22120800	40147	No. 66, WuDongRd.,EastDist.,Taichung
S. Taichung Branch	04-22244187	04-22253055	40247	No. 355, Fu Xin Rd., Sec. 3, South Dist., Taichung
Daqing Branch	04-22634838	04-22634846	40256	No. 295, Fu Xin Rd., Sec. 1, South Dist., Taichung
Business Dept.	04-22274567	04-22232926	40341	1F, No. 87, Min-Chuan Rd., West Dist., Taichung
W. Taichung Branch	04-23212501	04-23211847	40356	No. 369, Gong Yi Rd., West Dist., Taichung
N.TaichungBranch	04-22920832	04-22957526	40462	No. 624,DaYaRd., North Dist.,Taichung
Peitun Branch	04-22316266	04-22316168	40646	No. 80, Ching Hua N. Rd., Peitun Dist., Taichung
Junkong Branch	04-24371151	04-24367374	40663	No. 222, Tung Shan Rd, Sec. 1, Pei Tun Dist.,Taichung
Simin Branch	04-24226165	04-24226567	40673	No. 199, Chong De Rd., Sec. 3, Pei Tun Dist.,Taichung
Xitun Branch	04-27060696	04-27010309	40744	No. 436, Sec. 2, Ho-Nan Rd., Xitun Dist., Taichung
Nantun Branch	04-23824358	04-23828070	40869	1F & 2F No. 663, Wu Chuan W. Rd., Sec.2, Nan Tun Dist.,Taichung
Taiping Branch	04-22700756	04-22708629	41142	No. 115, Zhong Xing Rd, Tai Ping Dist., Taichung
Neixin Branch	04-24830345	04-24838958	41254	No. 339, Zhong Xing Rd., Sec. 2, Da Li Dist.,Taichung
Wufeng Branch	04-23391165	04-23326083	41341	No. 829, Zhong-Zheng Rd., Wufong Dist., Taichung
Wuri Branch	04-23373176	04-23373180	41442	No. 107, San Min St., Wu Ri Hsiang, Taichung
S. Fongyuan Branch	04-25261195	04-25284637	42050	No. 232, Zhong Shan Rd., Fong Yuan Dist., Taichung
Nanyang Branch	04-25244426	04-25284638	42051	No. 338, Yuan Wan E. Rd, Fong Yuan Dist., Taichung
Fongyuan Branch	04-25244171	04-25244178	42056	No. 302-1, Zhong Shan Rd., Fong Yuan Dist.,Taichung
E. Fongyuan Branch	04-25260175	04-25279944	42060	No. 203, Zhong Shan Rd., Fong Yuan Dist., Taichung
Houli Branch	04-25571180	04-25573081	42151	No. 95, Min Sheng Rd., Hou Li District, Taichung City
Dongshi Branch	04-25872185	04-25875203	42343	No. 61, Zhong Shan Rd., Dongshi Dist., Taichung

181181

Name	Tel. No.	Fax No.	Postal code	Address
Tanzi Branch	04-25323121	04-25338460	42751	No. 76, Tan Xing Rd., Sec. 3, Tan Zi Dist., Taichung
Daya Branch	04-25668161	04-25671143	42843	1&2F, No. 39, Zhong Qing S. Rd., Daya Dist.,Taichung
Shengang Branch	04-25621501	04-25627404	42944	No. 40, Mintzu Rd., Shengang Dist., Taichung
Dadu Branch	04-26991166	04-26991170	43242	No. 778, Sha Tian Rd., Sec. 2, Dadu Dist., Taichung
Shalu Branch	04-26621101	04-26622467	43350	1&2F, No. 298, Zhong Shan Rd., Sha Lu Dist.,Taichung
Lungjing Branch	04-26326788	04-26323566	43448	No. 77, You Yuan S. Rd., Lung Jing Dist., Taichung
Taichungkang Branch	04-26571191	04-26571517	43542	No. 36, Ba De Rd., Wu Qin Dist., Taichung
Qingshui Branch	04-26226106	04-26227587	43653	No. 104, Zhong Shan Rd., Qingshui Dist., Taichung
DajiaBranch	04-26862151	04-26875838	43746	No.42, CKSRoute,DajiaDist.,Taichung
Changhwa County
ChanghuaBranch	04-7224641	04-7221431	50061	No.126, Guang-FuRd., Changhua
DazhuBranch	04-7387648	04-7386907	50078	No. 364, Jang Nan Rd., Sec.1, Changhwa
Huatan Branch	04-7868775	04-7869067	50343	No. 446, Zhong Shan Rd., Sec. 1, Hua Tan Hsiang, Changhwa
Xiushui Branch	04-7693525	04-7698148	50448	1&2F, No. 597, Jang Shui Rd., Sec. 2, Xiu Shui Hsiang, Changhwa
Lukang Branch	04-7780545	04-7762275	50563	No. 266, Zhong Shan Rd., Lu Kang Township, Changhwa
Homei Branch	04-7562171	04-7562175	50846	No. 393, Lu Ho Rd., Sec. 6, Ho Mei Township, Changhwa
Shenkang Branch	04-7983171	04-7988403	50941	No. 111, Zhong Shan E. Rd., Shen Kang Hsiang, Changhwa
Yuanlin Branch	04-8326141	04-8332927	51046	No. 27, Zhong Shan S. Rd., Yuan Lin Township, Changhwa
N. Yuanlin Branch	04-8322141	04-8354844	51050	No. 116, Da Tung Rd., Sec. 2, Yuan Lin Township, Changhwa County
Shetou Branch	04-8731466	04-8720427	51141	No. 311, Yuan Jing Rd., Sec. 2, She Tou Township, Changhwa
Yongjing Branch	04-8232363	04-8232549	51247	No. 71, Xi Men Rd., Yong Jing Hsiang, Changhwa
Puxin Branch	04-8281437	04-8281442	51347	No. 217, Zhong Zheng Rd., Sec. 1, Pu Xin Hsiang, Changhwa
Xihu Branch	04-8853311	04-8814498	51452	No. 290, Jang Shui Rd., Sec. 3, Xi Hu Township, Changhwa
Tianzhong Branch	04-8742206	04-8741514	52042	No. 197, Zhong Zhou Rd., Sec. 1, Tian ZhongTownship, Changhwa
Peitou Branch	04-8884146	04-8885331	52146	No. 180, Tou Yuan Rd., Sec. 1, Pei Tou Township, Changhwa
Pitou Branch	04-8924606	04-8924335	52341	No. 163, Tou Yuan W. Rd., Pei Tou Hsiang, Changhwa
Erlin Branch	04-8962125	04-8962677	52662	No. 496, Jen Ai Rd., Pei Ping Li, Er Lin Township, Changhwa
Yuanlin Securities Branch	04-8329000	04-8311283	51041	3F, No. 462, Zhong Zheng S. Rd., Yuan Lin Township, Changhwa
Nantou County

182182

Name	Tel. No.	Fax No.	Postal code	Address
NantouBranch	049-2222146	049-2222481	54058	No. 52,MinSheng St., Nantou City, Nantou
Caotun Branch	049-2334146	049-2303149	54263	No. 141, Pi Shan Rd., Cao Tun Township, Nantou
Puli Branch	049-2984001	049-2901265	54555	No. 62, Xi Kang Rd., Pu Li Township, Nantou
Shui Li Branch	049-2772177	049-2770046	55343	No. 270, Min Chuan Rd., Shui Li Hsiang, Nantou
Zhushan Branch	049-2643181	049-2653081	55747	No. 148, Zhu Shan Rd., Zhu Shan Township, Nantou
YunlinCounty
Dounan Branch	05-5954879	05-5954891	63041	No. 151-9, Zhong Shan S. Rd., Tou Nan Township,Yunlin
Huwei Branch	05-6313788	05-6310599	63246	No. 57-2, Lin Sen Rd., Sec. 2, Hu Wei Township,Yunlin
Chiayi County
Minghsiung Branch	05-2208833	05-2205533	62159	No. 78, Jien Kuo Rd., Sec. 2, Ming Hsiung Hsiang, Chiayi
TainanCity
Yongkang Branch	06-3026678	06-3035659	71049	No. 760, Zhong Hua Rd., Yong Kang Dist., Tainan
Kaohsiung City
Kaohsiung Branch	07-3355275	07-3346981	80251	1&2F, No. 11, Min Chuan 1st Rd., Ling Ya Dist.,Kaohsiung
Fongshan Branch	07-7216719	07-7211423	83081	1&2F, No. 172, Wu Qing 2nd Rd., Fong Shan Dist.,Kaohsiung

183183

Taichung Commercial Bank Co., Ltd.

Annual Report 2012 (Audit Report Attached)

Address: No. 87, Min Chuan Road, West District, Taichung City, TEL.: (04) 22236021

184 ‐ 184 -

Auditor’s Report

To: Taichung Commercial Bank Co., Ltd.

We have audited the accompanying balance sheet of Taichung Commercial Bank Co., Ltd. as of December 31, 2012 and 2011, and the related income statement, changes in shareholders’ equity and cash flows for the years then ended. Said financial statement is the responsibility of the management. Our responsibility is to express an opinion on the consolidated financial statement based on our audits. We did not audit the financial statements prepared by Reliance Securities Investment Trust Co., Ltd., and Taichung Commercial Bank Lease Enterprise, investees of the Company recognized under the equity method of evaluation, as stated in the aforementioned financial statements. The opinions of these statements were presented by third party auditors. The opinions and the financial figures on the financial statements of the aforementioned investees so presented are based on the audit opinions of the third party auditors. As per the audit report presented by the third party opinions on the investees recognized under the equity method, the Company held equity shares of the investees amounted to NTD1,113,455 thousand and NTD127,811 thousand as of December 31 2012 and 2011, which accounted for 0.25% and 0.03% of the total assets of the Company, respectively. The net loss from investment of the Company recognized under the equity method amounted to NTD14,833 thousand and NTD10,262 thousand in the period of January 1 to December 31, 2012 and 2011, respectively, which accounted for (0.45%) and (0.54%) of the earnings before taxation of the Company in the same period, respectively.

We conducted our audit in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants”, and generally accepted auditing standards in the Republic of China. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the financial statement is free of material misstatement. An audit includes examining, through random sampling, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the other auditors' report may provide a reasonable basis for our opinion.

‐ 185 -185

In our opinion, based on our audit result and the other auditors’ report, the financial statements referred to in the first paragraph present fairly, in all material respects, the Financial Status of the Bank as of December 31, 2012 and 2011, and its operation results and cash flows for years then ended in conformity with the “Rules Governing the Preparation of Financial Statements of Public Issued Banks”, “Rules Governing the Preparation of Financial Statements of Securities Firms”, “Business Entity Accounting Act”, the provisions related to financial accounting standards referred to in the “Regulation on Business Entity Accounting Handling”, and generally accepted accounting principles in the Republic of China.

As described in Note 3 to the financial statements, Taichung Commercial Bank Co., Ltd., since January 1, 2011, has adopted revised SFAS No. 34 “Accounting for Financial Instruments” and newly issued SFAS No. 41 “Disclosure of Operating Segments” and adopted early the provision concerning the grant date for capital increase by cash retained for subscription by employees stated in Letter (2012) Ji-Mi-Jin No. 038 issued by Accounting Research and Development Foundation.

We have also audited the consolidated financial statements of the Bank for 2012 and 2011, and have expressed modified unqualified opinions on such financial statements.

The statement of important accounting titles of the financial statement for 2012 was provided to supplement the analysis only, and has been audited by us in accordance with the procedure referred to in Paragraph 2 herein. In our opinion, the statement of such titles is consistent with the relevant information provided in the financial statement referred to in Paragraph 1 herein in all material respects.

Deloitte & Touche Wen-Ya Hsu, CPA

Tzu-Chun Wang, CPA

Securities and Futures Bureau Approval Document No. Tai-Cai-Jheng-Zi (6) No. 0920123784

Securities and Futures Bureau Approval Document No. Tai-Cai-Jheng-Zi (6) No. 0920123784

March 13, 2013

‐ 186 -186

Unit: NTD thousand	Percentage	December 31, 2011 of Variation	Amount (%)	$ 3,439,998 50		2,877,550 ( 34 )			51,804 77		- -		7,683,501 16		333,832,631 16		10,512,559 29			136,764 64			22,521 ( 24 )		328,299 6	328,299 6	358,885,627 16	358,885,627 16			22,338,576 4			569,058 -	106,479 -	106,479 -		723,937 60	32,599 157	1,455,841 91	283,744 -	283,744 -	- -				10,960 738	10,960 738		( 60,140 ) 212	( 60,140 ) 212	25,461,054 10	25,461,054 10	$ 384,346,681 16	$ 384,346,681 16
		December 31, 2012	Amount	$ 5,151,548		1,887,600			91,591		264,045		8,896,768		385,862,841		13,548,277			223,704			17,208		347,386		416,290,968				23,187,442			569,058	106,479			1,160,137	83,647	2,785,992	283,744		477				91,865			( 187,741 )		28,081,100		$ 444,372,068
	Percentage	December 31, 2011 of Variation	Amount (%) Code Liabilities and Shareholders’ Equity	$ 8,349,890 18 21000 Deposits of CBC and other banks (Note 16)	Funds borrowed from CBC and other banks (Notes 17	74,267,724 ( 10 ) 21500 and 31)	Financial liabilities at fair value through profit or loss	22000 (Note 2 and Note 6)	1,096,769 497	Bills and bonds sold under repurchase agreements (Notes	22500 2 & 18)	2,888,283 ( 12 )	23000 Payables (Note 19)	41,639 ( 100 )	23500 Deposits and remittances (Notes 20 and 30)	277,756,366 17	24000 Financial bonds payable (Note 2 & 21)		4,211,580 340	25000 Accruable pension liabilities (Notes 2 and 22)		9,439,040 ( 7 )	25500 Other financial liabilities (Note 23)		216,970 497 29500 Other liabilities (Notes 2, 24 and 30)		850,396 7 20000 Total liabilities		Shareholders' equity (Note 25)	Capital stock	1,619,138 ( 2 ) 31001 Common stock capital	1,849,721 - Capital surplus		34,821 11 31501 Stock premiums	1,071,640 ( 2 ) 31599 Other capital surplus		4,575,320 ( 1 ) Retained earnings	605,170 - 32001 Legal reserve	( 1,856,059 ) ( 7 ) 32003 Special reserve	( 77,000 ) - 32011 Accumulated earnings	88,550 ( 86 ) 32501 Unrealized revaluation increment (Note 2)		3,335,981 - 32521 Adjustment of accumulated conversion		Unrealized gain on available-for-sale financial assets	32523 (Note 2)	1,892,043 ( 4 )		32544 Net loss not recognized as pension cost (Note 22)			30000 Total shareholders’ equity		$ 384,346,681 16 Total Liabilities and Shareholders’ Equity		The notes attached shall constitute an integral part of this financial statement.	(Refer to Auditor’s Report presented by Deloitte & Touche dated March 13, 2013)	Chief accountant: Yi-Ying Chung
		December 31, 2012	Amount	$ 9,848,878		66,753,349			6,545,279			2,553,343		-		324,029,419			18,519,719			8,782,945			1,295,662		905,934				1,588,248	1,840,555		38,820	1,047,727		4,515,350	605,170	( 1,729,844 )	( 77,000 )	12,087		3,325,763				1,811,777							$444,372,068				Manager: Chun-Sheng Lee
			Code Assets	11000 Cash and cash equivalents (Note 4)	11500 Due from CBC and lend to banks (Note 5)		12000 Financial assets at fair value through profit or	loss (Notes 2 & 6)		13000 Receivables – net (Notes 2, 7, 9, 28 & 30)				13400 Assets held for sale (Notes 2 & 8)		13500 Discounts and loans – net (Notes 2, 9 & 30)		14000 Available-for-sale financial assets (Notes 2,	10 and 31)		14500 Held-to-maturity financial assets - net (Notes	2, 11 & 31)		15000 Equity investment under equity method	(Notes 2 & 12)		15500 Other financial assets, net (Notes 2, 9 & 13)		Fixed assets, net (Notes 2 & 14)	Cost	18501 Land	18521 Buildings and structures	18541 Transportation and communication	equipment	18551 Miscellaneous equipment		Total cost	Revaluation increment	Less: accumulated depreciation	Less: accumulated impairment	18575 Prepayments for equipment		18500 Net				19500 Other assets (Notes 2, 15 & 28)							10000 Total assets				Chairman: Jin-Fong Soo
																													187

Taichung Commercial Bank Co., Ltd. Income Statement Years Ended December 31, 2012 and 2011

Unit: NTD thousands, except Earnings Per Share (NTD)

Code 41000 Interest revenues (Notes 2 and 30) 51000 Interest expenses (Notes 2 and 30) Net interest income Net income (loss) other than interest income 49100 Net income from service fees (Notes 2, 26 and 30) 49200 Net (loss) gain on financial assets and liabilities at fair value through profit or loss (Notes 2 and 6) 49300 Realized net gain on available-for-sale financial assets (Note 2) 49500 Net gain on equity investment under equity method (Notes 2 & 12) 49600 Net gain (loss) on foreign exchange (Note 2) 48063 Net loss on disposal of Fixed assets (Note 2) 49700 Gain (loss) on reversal of asset impairment (Notes 2, 8, 10, 11, 13 and 15) 49805 Net gain from financial assets carried at cost 58023 Net loss on disposal of collateral accepted 58089 Other provision (Note 32) 48099 Other non-interest income (Note 2) Net revenue 51500 Bad debts expense (Notes 2 and 9)		2012		2011	Percentage of Variation (%)
		Amount		Amount
	$ 8,607,239 (3,148,129 ) 5,459,110 1,142,043 265,023 14,540 79,014 ( 136,482 ) ( 38,370 ) ( 1,837 ) 19,157 ( 24,200 ) ( 10,400 ) 86,119 6,853,717 ( 238,244 )		$ 7,415,723 (2,472,427 ) 4,943,296 889,894 ( 503,030 ) - 66,897 323,494 ( 33,264 ) 10,741 24,861 ( 45,657 ) ( 5,050 ) 40,675 5,712,857 ( 664,948 )		16 27 10 28 153 - 18 ( 142 ) 15 ( 117 ) ( 23 ) ( 47 ) 106 112 20 ( 64 )

(Continued on next page)

‐ 188 -188

(Continued from previous page)

Code Operating expenses (Note 27) 58500 Employee expenses 59000 Depreciation and amortization expenses 59500 Business and administrative expenses Total operating expenses 61001 Income before taxation 61003 Income tax expenses (Notes 2 & 28) 69000 Net income of current period Code EPS (Note 29) 69500 Basic earnings per share 69700 Diluted earnings per share	Code Operating expenses (Note 27) 58500 Employee expenses 59000 Depreciation and amortization expenses 59500 Business and administrative expenses Total operating expenses 61001 Income before taxation 61003 Income tax expenses (Notes 2 & 28) 69000 Net income of current period Code EPS (Note 29) 69500 Basic earnings per share 69700 Diluted earnings per share	2012 2011 Amount Amount ( $ 2,105,332 ) ( $ 1,913,089 ) ( 162,818 ) ( 140,914 ) (1,043,061 ) (1,079,730 ) (3,311,211 ) (3,133,733 ) 3,304,262 1,914,176 ( 526,304 ) ( 460,176 ) $ 2,777,958 $ 1,454,000 Before taxation After taxation Before taxation $ 1.43 $ 1.20 $ 1.00 $ 1.32 $ 1.11 $ 0.95	2011	Percentage of Variation (%)	Percentage of Variation (%)
			Amount
				10 16 ( 3 ) 6 73 14 91 After taxation
					$ 0.76 $ 0.72

The notes attached shall constitute an integral part of this financial statement. (Refer to Auditor’s Report presented by Deloitte & Touche dated March 13, 2013)

Chairman: Jin-Fong Soo

Manager: Chun-Sheng Lee Chief accountant: Yi-Ying Chung

‐ 189 -189

Unit: NTD thousand		Total		shareholders’	equity	$ 19,415,020		-	-	-	-	4,500,000	-		83,039		25,576		20,052		23,507	( 60,140 )	1,454,000	1,454,000	25,461,054		-	-	-	( 111,693 )	-			477		80,905	( 127,601 )	2,777,958	2,777,958	$ 28,081,100
	Other shareholders’ equity	Adjustment of Unrealized gain Net loss not		accumulated (loss) on financial recognized as	conversion instruments pension cost	$ - ( $ 9,092 ) $ -		- - -	- - -	- - -	- - -	- - -	- - -		- - -		- - -		- 20,052 -		- - -	- - ( 60,140 )	- - -		- 10,960 ( 60,140 )		- - -	- - -	- - -	- - -	- - -			477 - -		- 80,905 -	- - ( 127,601 )	- - -		$ 477 $ 91,865 ( $ 187,741 )
		Capital surplus Retained earnings Unrealized		revaluation Other capital Accumulated	increment Stock premiums surplus Legal reserve Special reserve earnings	$ 775,256 $ 16,813 $ 600,350 $ 16,987 $ 411,956 $ 283,744		- - 123,587 - ( 123,587 ) -	- - - 9,092 ( 9,092 ) -	- - - ( 16,987 ) 16,987 -	- - - - ( 294,423 ) -	- - - - - -	( 225,147 ) - - - - -		- 83,039 - - - -		18,949 6,627 - - - -		- - - - - -		- - - 23,507 - -	- - - - - -	- - - - 1,454,000 -		569,058 106,479 723,937 32,599 1,455,841 283,744		- - 436,200 - ( 436,200 ) -	- - - 60,140 ( 60,140 ) -	- - - ( 9,092 ) 9,092 -	- - - - ( 111,693 ) -	- - - - ( 848,866 ) -			- - - - - -		- - - - - -	- - - - - -	- - - - 2,777,958 -		$ 569,058 $ 106,479 $1,160,137 $ 83,647 $ 2,785,992 $ 283,744	The notes attached shall constitute an integral part of this financial statement.	(Refer to Auditor’s Report presented by Deloitte & Touche dated March 13, 2013)	Manager: Chun-Sheng Lee Chief accountant: Yi-Ying Chung
		Capital stock		Common stock	capital	$ 17,319,006		-	-	-	294,423	4,500,000	225,147		-		-		-		-	-	-		22,338,576		-	-	-	-	848,866			-		-	-	-		$ 23,187,442
						Balance as of January 1, 2011	Allocation of earnings 2010	Legal reserve	Special reserve	Reversal of special reserve	Stock dividends	Issuance of common stock for cash	Capital surplus transferred to capital	Equity component of convertible financial	bonds	Recognition of employee stock option	compensation cost	Available-for-sale financial asset price	difference adjustment	Default loss reserve transferred as special	reserve (Note 24)	Net loss not recognized as pension cost	Net income 2011		Balance as of December 31, 2011	Distribution of incomes in 2011	Legal reserve	Special reserve	Reversal of special reserve	Cash Dividends	Stock dividends	Adjustment of shareholders’ equity of the	investees recognized under the equity	method	Available-for-sale financial asset price	difference adjustment	Net loss not recognized as pension cost	Net income 2012		Balance as of December 31, 2012			Chairman: Jin-Fong Soo

190

Taichung Commercial Bank Co., Ltd. Statements of Cash Flow Years Ended December 31, 2012 and 2011

Cash flow from operating activities Net income of current period Provision of allowance for bad debts Recovery of bad debts Write-off of non-performing loans Income of investment under the equity method Cash dividends under equity method Available-for-sale financial asset premium amortization Capital gains from the disposition of financial assets available for sale. Gain from disposal of financial assets carried at cost Amortization of premium on held-to-maturity financial assets Amortization of discount on convertible financial bonds Depreciation and amortization (depreciation of assets not for business operation included) Net loss on disposal of Fixed assets, available-for-sale assets and collateral accepted Asset impairment loss (reversal gain) Deferred income tax expenses Defined benefit pension fund Employee stock option compensation cost Unrealized exchange (gain) loss Increase (decrease) in operating assets Financial assets-Trading Accounts receivable Other assets Increase (decrease) in operating liabilities Financial assets-Trading Payables Other liabilities Net cash inflow (outflow) from operating activities Cash flow from investing activities Decrease (Increase) in Due From CBC and lend to Banks Increase in discounts and loans Proceeds from disposal of financial assets carried at cost (Continued on next page)	Unit: NTD thousand 2012 2011 $ 2,777,958 $ 1,454,000 238,244 664,948 244,606 230,394 ( 83,387 ) ( 553,966 ) ( 79,014 ) ( 66,897 ) 799 187,488 7,308 2,599 ( 14,540 ) - - ( 12,327 ) 33,748 64,910 35,718 19,518 163,031 141,111 62,570 78,921 1,837 ( 10,741 ) 190,511 455,369 11,274 5,284 - 25,576 264,925 ( 257,127 ) ( 5,448,510 ) 549,793 335,631 247,001 ( 24,201 ) 15,807 39,787 ( 82,185 ) 1,213,267 3,811,486 ( 5,160 ) ( 19,188 ) ( 33,598 ) 6,951,774 7,514,375 ( 5,655,264 ) ( 46,648,872 ) ( 33,567,843 ) - 12,420	Unit: NTD thousand 2012 2011 $ 2,777,958 $ 1,454,000 238,244 664,948 244,606 230,394 ( 83,387 ) ( 553,966 ) ( 79,014 ) ( 66,897 ) 799 187,488 7,308 2,599 ( 14,540 ) - - ( 12,327 ) 33,748 64,910 35,718 19,518 163,031 141,111 62,570 78,921 1,837 ( 10,741 ) 190,511 455,369 11,274 5,284 - 25,576 264,925 ( 257,127 ) ( 5,448,510 ) 549,793 335,631 247,001 ( 24,201 ) 15,807 39,787 ( 82,185 ) 1,213,267 3,811,486 ( 5,160 ) ( 19,188 ) ( 33,598 ) 6,951,774 7,514,375 ( 5,655,264 ) ( 46,648,872 ) ( 33,567,843 ) - 12,420
		$ 1,454,000 664,948 230,394 ( 553,966 ) ( 66,897 ) 187,488 2,599 - ( 12,327 ) 64,910 19,518 141,111 78,921 ( 10,741 ) 455,369 5,284 25,576 ( 257,127 ) 549,793 247,001 15,807 ( 82,185 ) 3,811,486 ( 19,188 ) 6,951,774 ( 5,655,264 ) ( 33,567,843 ) 12,420

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(Continued from previous page)

(Continued from previous page)
Proceeds from the disposition of financial assets available for sales and redemption at maturity Proceeds from acquisition of available-for-sale financial assets Redemption of held-to-maturity financial assets Proceeds from acquisition of held-to-maturity financial assets Proceeds of the acquisition of investment under the equity method Increase in other financial assets Proceeds from disposal of Fixed assets, available-for-sale assets and collateral accepted Purchase of Fixed assets and deferred expenses Increase in refundable deposits Net cash outflow from investing activities Cash flow from financing activities Issuance of common stock for cash Cash dividend released Increase in Deposits of CBC and other banks Increase (decrease) in Funds borrowed from CBC and other banks Increase (decrease) in Bills & Bonds Sold under Repurchase Agreements Increase in deposits and remittances Issuance of financial bonds Decrease in other financial liabilities Increase (decrease) in deposits received Net cash inflow from financing activities Net increase in cash and cash equivalents Balance of cash and cash equivalents, beginning of period Balance of cash and cash equivalent, end of period Supplementary disclosures of cash flow Interest payment Income tax payment Non-cash investing and financing cash flow Undistributed earnings and capital surplus transferred to capital increase	2012 $ 8,325,936 ( 22,594,500 ) 763,848 ( 504,586 ) ( 1,000,000 ) ( 115,104 ) 89,847 ( 186,709 ) ( 20,545 ) (54,376,310 ) - ( 111,693 ) 1,711,550 ( 989,950 ) 264,045 52,030,210 3,000,000 ( 5,313 ) 10,047 55,908,896 1,498,988 8,349,890 $ 9,848,878 $ 3,028,499 $ 72,592 $ 848,866	2011
		$ - ( 3,119,816 ) 550,000 - - ( 116,795 ) 166,604 ( 209,211 ) ( 29,783 ) (41,969,688 ) 4,500,000 - 1,160,371 1,275,400 ( 1,477,800 ) 30,983,119 2,300,000 ( 4,809 ) ( 37,806 ) 38,698,475 3,680,561 4,669,329 $ 8,349,890 $ 2,420,413 $ 56,513 $ 519,570

The notes attached shall constitute an integral part of this financial statement. (Refer to Auditor’s Report presented by Deloitte & Touche dated March 13, 2013)

Chairman: Jin-Fong Soo Manager: Chun-Sheng Lee Chief accountant: Yi-Ying Chung

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Taichung Commercial Bank Co., Ltd.

Notes to financial statements

2012 and 2011

(In Thousands of New Taiwan Dollars, unless otherwise specified)

1. Organization and operations

Taichung Commercial Bank Co., Ltd. (hereinafter referred to as the “Bank”) was incorporated as a cooperative savings company in Taichung per the order of the Taiwan Provincial Government Apparatus on Sept. 27, 1952 and the incorporation was approved in April 1953. The Bank started business as of August in the same year. Upon promulgation and enforcement of the amended Banking Act in July 1975, the Bank was approved to be reformed as “Taichung Small and Medium Business Bank Company Limited” in Jan. 1, 1978, and to list its stock on May 15, 1984.

In order to cope with national financial policy, provide the pubic with financial services and support economic construction and develop industrial and commercial business, the Bank was renamed Taichung Commercial Bank Co., Ltd. in Dec. 1998. As of Dec. 31, 2012, it had established a Business Department, Trust Department, International Banking Department and 79 local branches, an International Banking Branch and Securities Brokerages. It is engaged mainly in financial operations regulated by Banking Law, trust business, offshore banking business and others approved by the competent authority.

The Bank’s capital was NTD500 thousand when the Bank was incorporated. In order to found its capital structure and comply with the Government Apparatus's order and decree, the Bank has increased/reduced its capital over the past years. As of Dec. 31, 2012, its paid-in capital was NTD23,187,442 thousand. Until December 31, 2012 and 2011, the number of employees of the Bank amounted to 2,030 persons and 1,975 persons, respectively.

2. Summary of significant accounting policies

The accompanying financial statements have been prepared in conformity with the “Regulations Governing the Preparation of Financial Reports by Public Issued Banks”, “Regulations Governing the Preparation of Financial Reports by Securities Firms”, “Business Entity Accounting Act”, “Regulation on Business Entity Accounting Handling”, and accounting principles generally accepted. The Bank’s significant accounting policies are summarized as follows:

• (1) Principles for preparation of financial statements

The accompanying financial statements include the accounts of the Head Office, OBU and all branches. The accounts of inter-branch and intra-branch transactions among Head Office, branches and international banking business branches have been written off in the process of preparing the financial statements.

• (2) Accounting estimates

It is necessary to apply reasonable estimates to provide financial asset valuation, allowance for bad debt, depreciation and amortization, deferred income tax assets valuation, pension fund, reserve for guarantee liability, loss for pending legal action, employee bonus, and remuneration to directors/supervisors when preparing the

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financial statements in accordance with said guidelines, rules and principles. Since the estimates are subject to individual judgment, the actual result may vary.

Because it was difficult to ascertain the business cycle due to the operational characteristics of a bank, it was not necessary for the Bank to categorize assets and liabilities into current or non-current items according to the Statement of Financial Accounting Standards No. 28 on Disclosure of Bank’s Financial Statement. However, the assets and liabilities have been categorized by nature and in the order subject to the equivalent liquidity. The analysis on maturity of assets and liabilities are also disclosed in Note 34.

(3) Foreign Currency Transactions

Assets, liabilities, revenues or expenses denominated in foreign currencies as a result of foreign-currency transactions of non-derivative financial instruments are recorded in New Taiwan dollars at the exchange rates prevailing on the dates of transactions. Any exchange difference caused by different foreign exchange rates applied when assets or liabilities denominated in foreign currencies are settled are credited to or charged against income.

Assets or liabilities denominated in foreign currencies are translated at the exchange rates prevailing on the balance sheet date, and the resulting exchange differences are included in profit or loss for the current year.

At the balance sheet date, non-monetary assets and liabilities denominated in foreign currency (e.g. equity instruments) that are measured at fair value are reported at the rate that was in effect when the fair values were determined. Subsequent adjustments to carrying values of such non-monetary assets and liabilities, including the effects of changes in exchange rates are reported in profit or loss for the period, except that if movement in fair value of a non-monetary item is recognized directly in equity, any foreign exchange component of that adjustment is also recognized directly in equity. Those evaluated based on cost shall be measured based on the historical exchange rate on the date of transaction.

(4) Financial Instruments at Fair Value through Profit or Loss

Financial instruments classified as financial assets or financial liabilities at fair value through profit or loss (“FVTPL”) include financial assets or financial liabilities held for trading and those designated as at FVTPL on initial recognition. The Bank recognizes a financial asset or a financial liability on its balance sheet when the Bank becomes a party to the contractual provisions of the financial instrument. A financial asset is derecognized when the Bank has lost control of its contractual rights over the financial asset. A financial liability is derecognized when the obligation specified in the relevant contract is discharged, cancelled or expired.

FVTPL is initially measured at fair value plus transaction costs, and at each balance sheet date subsequent to issue of initial recognition, it is measured at fair value, with changes in fair value recognized directly in profit or loss in the period in which it arises. On de-recognition of a financial instrument, the difference between its carrying amount and the sum of the consideration received and receivable or consideration paid and payable is recognized in profit or loss. The purchase or disposal of financial assets in customary transactions shall be subject to accounting on the date of transaction.

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A derivative that does not meet the criteria for hedge accounting is classified as a financial asset or a financial liability held for trading. If the fair value of the derivative is positive, the derivative is recognized as a financial asset; otherwise, the derivative is recognized as a financial liability.

The foundation of fair value: the value of stocks and depository receipts listed in TWSE/GTSM is based on the closing price of the date of the balance sheet was prepared. The value of open-end funds is based on the net worth of the Company as of the date the balance sheet was prepared. The value of bonds is based on the benchmark price of GTSM as of the date the balance sheet was prepared or other methods of valuation. The value of financial assets without active market shall be based on the pricing method for assessing the fair value.

FVTPL which are mixed instruments, or for the reason of elimination or material reduction of the difference in accounting practices, can be designated as financial instruments at fair value through profit or loss at the initial recognition. Financial instruments portfolios, based on the Bank’s risk-management or investment policy, may also be designated as financial instruments at fair value through profit or loss.

• (5) Bonds Purchased under Resell/Notes Issued under Repurchase Agreements

When a bond is purchased under a resell agreement, its purchase price is listed as “bonds purchased under resell agreements,” an asset account. For a note issued under the repurchase agreement, the selling price is listed as “notes issued under repurchase agreements,” a liability account. It is considered a financing transaction and the relevant interest revenue or expense shall be recognized on an accrual basis.

(6) Accounts receivable

Credit card receivables are recorded when merchants report the amount and the related interest revenue is recognized on an accrual basis.

If the principal or interest for credit card debt still has not yet been collected upon expiration of the specific time limit, the provision of income revenue shall be suspended and the principal or interest shall be stated under delinquent loans.

The interest revenue and service fee revenue generated from factoring and management have been recognized when it is realized or becomes realizable and the allowance for bad debt shall be provided based on the collectability of the revenue evaluated based on the balance of factoring at the end of the period. The factoring payment due to the seller shall be stated under accounts payable.

• (7)

• Assets held for sale

The Fixed assets and other assets, of which the book value is primarily collected by virtue of sale instead of reuse, and which are available for immediate sale by the enterprise in accordance with generally applicable terms and commercial practices, and for which completion of sale is highly probable shall be re-stated as non-current assets held for sale at the book value, and no depreciation, depletion or amortization may be provided thereof. They shall be measured at the lower of book value and net fair value at the end of year. If the net fair value is less than the book value, the price difference shall be stated as impairment loss. The net fair value revaluation, if any, shall be stated as reversal of gain, provided that the reversal shall be no more than recognized accumulated impairment.

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The liabilities directly related to assets held for sale and recognized as the adjustment item of shareholders’ equity shall be identified on the balance sheet separately. The assets and liabilities shall not be offset against each other. The interest and other expenses related to liabilities shall still be stated.

• (8) Delinquent loans

According to “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans”, loans and other credit payment items which are not repaid upon maturity of the repayment shall be stated as Delinquent loans together with the interest receivable as recognized.

Delinquent loans transferred from loans shall be stated under discounts and loans. The delinquent loans, other than those transferred from loans (e.g. transferred from guarantee, acceptance, factoring and credit card loans), shall be stated in other financial assets.

• (9) Allowance for bad debt and reserve for guarantee liability

The Bank started to adopt the third revised provision of SFAS No. 34 “Accounting for Financial Instruments” on January 1, 2011, which includes loans, discounts, inward remittance and accounts receivable. Therefore, the Bank evaluates whether there is any sign for impairment for loans, discounts and inward remittance, accounts receivable on each balance sheet date. If there is objective evidence showing that estimated cash flows in the future for original loans, discounts, inward remittance and accounts receivable are affected due to a single or several event(s) occurring after recognition of original loans, discounts, inward remittance and accounts receivable, the original loans, discounts, inward remittance and accounts receivable are considered impaired. Objective evidence for impairment may include:

1. The debtor encounters significant financial difficulties; or

2. Original loans, discounts, inward remittance and accounts receivable are overdue; or

3. High probability of debtor declaring bankruptcy or undertaking of other financial restructuring.

After certain loans, discounts, inward remittance and accounts receivables are individually evaluated and indicate no sign of impairment, the entire credit portfolio is evaluated for impairment. Objective evidence of impairment for the portfolio of loans, discounts, inward remittance and accounts receivable may include the historical collection experience of the Bank, increase of delayed payment of the portfolio, and changes in observable national or regional economic situations relating to default on loans, discounts, inward remittance and accounts receivable.

Furthermore, from January 1, 2011, according to the Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans, the Bank evaluates the collectability of loaned assets according to the borrower’s financial condition and the repayment of principal and interest and also based on the evaluated value of the collateral provided for specific credit. As mentioned, non-performing assets are classified as “Loss”, “Doubtful”, “Substandard”, “Special Mention” and “Normal” by the status of surety and the duration of delinquency, and are at least allocated to respective categories of provisions for non-performing loans in the proportions of 100%, 50%, 10%, 2%, and 0.5%, respectively. The aforementioned provisions of bad debts were recognized in

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accordance with the Financial Supervisory Commission Letter Jin-Guan-Yin-Fa-Zi No. 10010006830. The provisions for bad debts accounted for more than 1% of the total loans.

Impairment loss to be recognized is the difference between the carrying value of the asset and the estimated future cash flow (has reflected the effect of collateral or guarantee) discounted at the original effective interest rate of loans, discounts, inward remittance and accounts receivable. The carrying value of loans, discounts, inward remittance and accounts receivable is reduced through a valuation allowance item. When any loan, discount, inward remittance and receivable account is considered uncollectible, the valuation allowance item is written off. Subsequent recovery of any account written off is credited to the valuation allowance item. A change in the carrying value of the valuation allowance item is recognized as bad debt loss.

Uncollectible credit as identified shall be reported by the Board of Directors to the Board of Managing Directors and written off upon approval of the Board of Managing Directors. If the bad debt that has been written off is collected, it shall be stated as the reversal of allowance for bad debt according to the Statement of Financial Accounting Standards No. 28 on Disclosure of Bank’s Financial Statement.

(10) Available-for-Sale Financial Assets

When recognizing available-for-sale financial assets initially, such assets shall be evaluated based on fair value, plus the acquisition or issue price. The following evaluation shall be based on fair value and the changes in value shall be stated into the adjustment items of shareholders’ equity. Cumulative gain or loss shall be stated as income for the current period when financial assets are de-recognized. The purchase or sale of financial assets in customary transactions shall be subject to accounting on the date of transaction.

The times to recognition or removal and basis for fair value of financial assets in available-for-sale are similar to those of financial instruments at fair value through profit or loss.

Cash Dividends from securities products are stated as income on the ex-dividend date or the date of resolution set by the shareholders’ meeting, provided that the cash dividends announced based on the income before investment shall be deducted from the investment cost. Free-Gratis Dividends are not stated as income investment, provided that the increase in shares is noted and the cost per share is recalculated according to the total shares after the increase. The difference between the amount of liability products recognized initially and due amount shall be amortized under the interest method and stated as the income for the current period.

Where there is evidence showing impairment, it shall be stated as the loss of impairment. The decrease in impairment of equity products in available-for-sale is stated as the adjustment item of shareholders’ equity. Where the decrease in impairment of liability products in available-for-sale is obviously related to the events subsequent to recognition of impairment, it shall be reversed and stated as income for the current period.

(11) Held-to-maturity financial assets

Held-to-maturity financial assets shall be stated at cost upon amortization. When recognizing the held-to-maturity financial assets initially, such assets shall be

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evaluated based on fair value, plus the acquisition or issue price. The purchase or sale of financial assets in customary transactions shall be subject to accounting on the date of transaction.

Where there is evidence showing impairment, it shall be stated as the loss of impairment. Where the decrease in impairment is obviously related to the events subsequent to recognition of impairment, it shall be reversed and stated as income for the current period, provided that the book value upon reverse shall be no more than the cost after amortization if the impairment is not recognized.

(12) Stocks- equity method

The stocks- equity method shall be stated at the original cost of acquisition. Equity investment holding more than 20% of equity shall be valued under the equity method. Equity investment holding less than 20% of equity but able to materially influence the investee shall still be valued under equity method.

Where Free-Gratis Dividends are received from the investee, only the increase in shares is noted. No adjustment will be made to the book value of the investments and no investment income shall be recognized.

When equity is obtained or the equity method is initially applied, the investment cost shall be analyzed first in accordance with the Statement of Financial Accounting Standards No. 5 on Accounting Principles for Long-term Equity Investment under the Equity Method. The excess of investment costs in the fair value of the investee’s identifiable net assets, if any, shall be recognized as goodwill, which will not be amortized, provided that the impairment test shall be conducted per year. Meanwhile, where any specific events or environmental changes show the potential impairment of goodwill, it is also necessary to conduct the impairment test. Where the fair value of the investee’s identifiable net assets exceeds the investment cost, the difference thereof will be decreased relatively subject to the fair value of the various non-current assets (excluding the financial assets not valued under the equity method, assets held for sale, deferred income tax assets and prepaid pension or other pension benefits).The balance, if any, shall be stated as extraordinary income. Notwithstanding, where equity is acquired from an affiliate, the capital surplus shall be adjusted based on the difference between the investment cost and net value of the investee’s equity. Where the adjustment reflects write-off of capital surplus while the capital surplus generated from the equity investment under the equity method is insufficient, the retained earnings shall be written off.

(13) Other financial assets

Financial assets at cost mean investment in equity products that cannot be evaluated based on fair value, including unlisted (non-OTC) stock and emerging stock, which shall be evaluated at the original acquisition cost. The accounting of Free-Gratis Dividends thereof is similar to that of available-for-sale financial assets. Where there is evidence showing impairment, it shall be stated as the loss of impairment, and cannot be reversed.

• (14) Fixed assets / Non-Operating Assets

Fixed assets are stated at acquisition or at construction costs plus appreciation and less cumulative depreciation and impairment. Major updates and improvements were treated as capital spending. Routine repair and maintenance expenditures were expensed during the year of incursion. Depreciation thereof is provided using the

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average method and in accordance with the useful life provided in the “Table of Service Life of Fixed assets” promulgated by the Executive Yuan.

Leased assets shall be stated at the lower of the total of each rent installment (less the performance cost to be borne by lesser) and preferential acquisition cost or residual value guaranteed by lessee upon expiration of the lease, or fair value of the assets on the commencing date of lease, and receivable rent liability shall be recognized at the same time. The imputed interest of each installment rent is stated as the interest expenses for the current period.

Upon the scrapping or sale of properties, the related cost (including appreciations), cumulative depreciation, cumulative depreciation, and unrealized appreciations shall be written off, and any related income is charged to non-operating income or non-operating loss accounts for the year and any related gains or losses are charged to other non-interest Investment income for the year.

Where the Fixed assets are not available for business operation, related cost and cumulative depreciation shall be transferred to other assets-assets not available for business operation.

(15) Deferred expenses

Deferred charges are stated at cost and amortized on a straight-line basis over five years.

(16) Collateral accepted

Collateral accepted (stated as other assets) shall be stated at the cost of pledge. Its fair value shall be evaluated at the end of the year. The difference resulting from the cost more than net fair value shall be recognized as the impairment loss. As required by the Executive Yuan Financial Supervisory Commission, Collateral accepted which has not yet been disposed upon expiration of the statutory time limit shall also be recognized as the impairment loss in the full amount.

(17) Impairment of Assets

According to the Statement of Financial Accounting Standards No. 35 on Accounting Principles on Asset Impairment, it is necessary to evaluate the balance sheet date for whether there is any sign showing that assets (including individual assets or cash generation units) might suffer material impairment. If there is, it is necessary to evaluate the collectable amount of the assets. If their book value exceeds the collectable amount, a loss on asset impairment shall be recognized. Where a loss on asset impairment does not exist, or is decreased, the gain reversed from asset impairment shall be recognized insofar as it does not exceed the originally recognized impairment loss, provided that the book value upon reversal shall not exceed the book value of the assets less depreciation or amortization to be provisioned when no impairment losses of the assets are recognized. Goodwill impairment loss cannot be reversed.

Where asset appreciation has been made pursuant to laws, the impairment shall deduct the unrealized appreciation included in the shareholders’ equity and the deficit, if any, shall be recognized as loss. The gain shall be recognized firstly within the scope of originally recognized loss, and the balance, if any, shall be reversed to unrealized appreciation. In order to proceed with the impairment test, the good will acquired upon merger of enterprises shall be amortized to cash generation entities. The excess in Book Value of the cash generation entity

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(including the Book Value of goodwill) against collectable amount shall be recognized as impairment loss. When recognizing impairment loss, it is necessary to deduct the Book Value of goodwill already amortized to the cash generation entity. If there is a deficit, the other impairment loss shall be amortized to the various assets on a proportional basis according to the Book Value of the assets in the cash generation entity (including corporate assets).

(18) Convertible financial bonds

For convertible financial bonds issued after January 1, 2006, the total issuance price minus the amount of the liability component individually measured is allocated to the equity component (capital surplus – stock options). Liability components which are not embedded derivatives are measured at amortized cost under interest method, while liability components which are embedded non-equity derivatives are measured at fair value. When financial bonds are converted, the carrying amount of liability components and equity components is used as a basis to record the common shares issued.

(19) Share-based payment

Employees’ stock options granted after January 1, 2008 (including January 1, 2008) shall be processed in accordance with the Statement of Financial Accounting Standards No. 39 on “Accounting Principles for Benefits Based on Shares”. The stock option amount is calculated based on the optimally estimated quantity of expected vested stock option and the fair value on the grant date, and recognized as expenses in the current period based on Straight-line method in the vested period, and the additional paid-in capital – employees’ stock option is adjusted at the same time. If the subsequent information shows that the expected vested stock option quantity is different from that estimated originally, the quantity originally estimated may be amended.

(20) Pension Plan

The Bank has provided defined benefit rules for formal employees in accordance with the “Labor Standard Act”. According to the rules, employees whose seniority is less than 15 years are awarded with 2 points per year and 1 point per year for seniority beyond the 15 year. One point represents the average monthly salary of the employee for the six months prior to his/her retirement, provided that the cumulative points shall be no more than 45. Employees who resign upon expiration of specific seniority will be paid the pension according to their cumulative points. As of July 1, 2005 when the “Labor Pension Act” was promulgated by the Government Apparatus, the Bank also provided the defined contribution rules. 6% of the salary of employees who choose to apply the rules will be contributed to the exclusive personal account at the Bureau of Labor Insurance on a monthly basis during their service year. The seniority accruing before promulgation of the Act shall be reserved.

A specific proportion of the salary of the general staff who choose the defined benefit rules will be contributed to the exclusive pension fund account at Bank of Taiwan on a monthly basis. A specific proportion of the salary of managers (above) will be contributed to the exclusive pension fund account at the Workers' Pension Fund Management Commission.

For the pension of employees who apply the defined benefit rules, it is necessary to recognize and disclose the related assets and liabilities under the

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actuarial method pursuant to the Statement of Financial Accounting Standards No. 18 on Pension Fund Accounting Principles.

The pension fund of employees who apply the defined contribution rules to be contributed to the exclusive personal account shall be recognized as pension costs during the employees’ service years.

(21) Reserve

Securities firms engaging in brokerage trading of marketable securities are required to provide 0.0028% of the monthly transaction volume as the default loss provision until the balance of this provision reaches NTD200,000 thousand. In accordance with Jin-Guan-Yin-Fa-Zi Directive No. 10010000440 and Jin-Guan-Zheng-Quan-Zi Directive No. 09900738571, effective January 1, 2011, provisions of “Reserve for transaction loss” and “Reserve for default loss” should be transferred to special reserve. After the transfer, the reserve should be used to offset a deficit. When the reserve reaches 50% of the Bank’s paid-in capital, it can only be transferred to capital stock as legal reserve. With secured collateral, the allowance for guarantee liability shall be no more than 1% of the guaranteed limit. Without secured collateral, the allowance for guarantee liability shall be no more than 3% of the guaranteed limit, provided that the allowance provided by the added balance of the receivable guarantee payment in the year shall be no more than the total service charges for the guarantee business in the same year.

• (22) Recognition of Interest Revenues and Service Fees

The interest accruing on loans shall be stated on an accrual basis, provided that the calculation of the interest transferred to receivable on demand due to non-performance upon expiration shall be ceased as of the date of transfer, and the income thereof shall be recognized after the cash is received.

According to the Ministry of Finance, the interest revenue approved to be stated into account due to financing and agreement of extension shall be stated as deferred income (stated as other liabilities) as of the date of bookkeeping and recognized as revenue after the cash is received.

Service fee revenue has mostly been recognized in the process of realized or realizable gains.

(23) Corporate Income Tax

The Bank adopted the Statement of Financial Accounting Standards No. 22, Accounting Principles for Income Taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation Provisions for reserve accounts are provided to reduce deferred tax assets that are not certain to be realized.

According to SFAS No. 12, “Accounting for Income Tax Credits,” the Bank recognizes tax benefit from research and development and personnel training expenses in the year the tax credit was earned.

Adjustment of prior years’ income tax is added to or deducted from the current income tax expense (benefit) in the year the adjustment is made.

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The 10% additional income tax levied on Accumulated earnings calculated according to the Income Tax Law is stated as income tax expenses in the year of the resolution made by the shareholders’ meeting.

• (24) Significant undertaking or contingent liabilities

If assets are very likely to have already impaired or generated liabilities on the balance sheet date and it is possible to estimate the reasonable loss, it shall be recognized as a loss for the current period. If the loss is very likely to have already been caused but it is impossible to estimate the loss, it shall be disclosed in the notes to the financial statement.

• (25) Reclassification of accounting titles

In order to cope with the expression of the financial statements 2012, some accounting titles in the financial statement 2011 have been reclassified.

3. Reasons and effects of changes in accounting principles

• (1) Accounting for financial instruments

Effective January 1, 2011, the Bank adopted revised SFAS No. 34 “Accounting for Financial Instruments”. Main revisions include: (1) the application of SFAS No. 34 to original loans and receivables; (2) a new regulation concerning impairment of financial assets measured at amortized cost when related terms are revised at financial difficulties; and (3) the debtor’s accounting treatment when debt terms are revised. This accounting change resulted in a decrease of NTD40,807 thousand in continuing operating income before tax, a decrease of NTD33,870 thousand in net income and a decrease of NTD0.02 in after-tax basic EPS for the year ended December 31, 2011.

• (2) Disclosure of operating segments

The Bank has adopted the newly issued SFAS No. 41 “Disclosure of Operating Segments” since January 1, 2011. Provisions in the statement are based on certain information relating to corporate formation which is used when the management makes operating decisions. Identification of operating segments is based on the internal report which is regularly reviewed by main decision makers to allocate resources to each segment and evaluate performance. The Company adopted SFAS No. 20 “Disclosure of Financial Information by Segments” thereby applied only the reporting by segment of the Company.

• (3) Accounting for share-based payment

Effective January 1, 2011, the Bank adopted early the provision stated in (2012) Ji-Mi-Zi Interpretation Letter No. 038 issued by the Accounting Research and Development Foundation to determine the grant date for capital increase by cash retained for subscription by employees. The interpretation letter mainly describes that if the practice of corporate capital increase by cash retained for subscription by employees includes a procedure of further advising employees of or confirming with employees the number of share subscription after the resolution of the Board of Directors, the date when the corporation advises employees of or confirms with employees the number of share subscription may be the grant date, not subject to the provision concerning the grant date for capital increase by cash retained for subscription by employees described in (2009) Ji-Mi-Zi Interpretation Letter No. 111, which refers to the date when the Board of Directors resolves and approves the price

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and the number of shares for subscription. This accounting change resulted in an increase of NTD55,822 thousand in continuing operating income before tax, an increase of NTD46,332 thousand in net income and a decrease of NTD0.03 in after-tax basic EPS for the year ended December 31, 2011.

4. Cash and cash equivalents

Cash and cash equivalents
Cash on hand Notes and checks for clearing Deposits of CBC and other banks	December 31,2012 $ 3,020,965 6,221,983 605,930 $ 9,848,878	December 31,2011
			$ 2,674,443 5,165,311 510,136 $ 8,349,890

1. Due from Central Bank of the Republic of China (Taiwan) and lend to Banks

Reserve for deposits Reserve for deposits –checking account Reserve for deposits –demand account Financial Information Service Co., Ltd. – liquidated account Reserve for deposits in foreign currency Certificate of deposit of the Central Bank Call loans to banks	December 31,2012 $ 7,964,503 11,150,532 473,706 20,909 47,000,000 143,699 $ 66,753,349	December 31,2011	December 31,2011
			$ 7,420,167 9,520,465 444,482 18,780 56,800,000 63,830 $ 74,267,724

The deposit reserves in the CBC are calculated by multiplying the average monthly balances of all deposit accounts by the legally required ratio. The demand account reserve can be used only for the monthly adjustment of the deposit reserve.

The guarantee amounts for allocation and liquidation of funds in interbanks under the certificate of deposit of the Central Bank pursuant to laws on December 31, 2012 and 2011 were both NTD1,500,000 thousand.

6. Financial Instruments at Fair Value through Profit or Loss

Financial assets-Trading Commercial papers Listed stocks - domestic Foreign exchange contracts Beneficiary certificate Forward contracts	December 31,2012 $ 5,196,688 1,131,755 29,479 19,688 16,118	December 31,2011
		$ 9,968 982,393 85,395 17,728 1,285

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Negotiable assets swap agreement FX options contracts Financial assets-Trading Put options of convertible financial bonds (Note 21) Foreign exchange contracts Forward contracts FX options contracts	December 31,2012 $ 149,119 2,432 $ 6,545,279 $ 21,850 50,902 16,407 2,432 $ 91,591	December 31,2011	December 31,2011
			$ - - $ 1,096,769 $ 42,090 8,393 1,321 - $ 51,804

• (1) Financial derivative contract related to a foreign exchange rate is a non-trading operation performed for the purpose of providing customers with a hedging tool for the foreign exchange position generated from import/export and foreign exchange and hedging the risk from business and meeting the need for foreign exchange funds.

• (2) The foreign exchange contracts which have not yet matured before December 31, 2012 and 2011 are specified as follows:

2012 and 2011 are specified as follows:
December 31,2012 Contract amount (NTD1,000) Date of maturity Sold EUR 60,800 2013/01/07~2013/01/31 USD 161,568 2013/01/04~2013/04/24 JPY1,026,421 2013/01/11~2013/01/29 SEK 3,272 2013/01/31 Bought USD 65,653 2013/01/07~2013/01/31 NZD 7,472 2013/01/18~2013/01/29 AUD 2,500 2013/01/10 HKD 32,546 2013/01/28 CAD 1,678 2013/01/14 GBP 1,600 2013/01/17 SGD 2,564 2013/01/17 ZAR 65,109 2013/01/22 JPY 155,898 2013/01/29 CNY 29,162 2013/01/17~2013/02/19	December 31,2011
Contract amount (NTD1,000) Sold EUR 60,800 USD 161,568 JPY1,026,421 SEK 3,272 Bought USD 65,653 NZD 7,472 AUD 2,500 HKD 32,546 CAD 1,678 GBP 1,600 SGD 2,564 ZAR 65,109 JPY 155,898 CNY 29,162	Contract amount (NTD1,000) Sold USD 187,259 EUR 72,000 JPY 541,515 Bought USD 41,450 CAD 2,803 GBP 3,900 HKD 22,563 NZD 10,367 AUD 2,000 SGD 778 ZAR 33,244	Date of maturity
		2012/01/03~2012/03/28 2012/01/03~2012/02/27 2012/01/17 2012/01/06~2012/05/18 2012/01/20 2012/01/03~2012/02/03 2012/01/19 2012/01/06~2012/01/17 2012/01/05 2012/01/06 2012/01/06

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• (3) The forward contracts which have not yet matured before December 31, 2012 and 2011 are specified as following:

December 31, 2012 Forward exchange sold Forward exchange sold Forward exchange sold Forward exchange sold Forward exchange bought Forward exchange bought Forward exchange bought Forward exchange bought December 31, 2011 Forward exchange sold Forward exchange sold Forward exchange sold Forward exchange bought	Currency USD translated into NTD EUR translated into NTD JPY translated into NTD DEM translated into NTD NTD translated into USD NTD translated into JPY USD translated into RMB USD translated into JPY USD translated into NTD EUR translated into NTD JPY translated into NTD NTD translated into USD	Date of maturity 2013/01/02~ 2013/05/24 2013/02/08~ 2013/02/27 2013/02/27~ 2013/05/29 2013/03/01 2013/01/08~ 2013/05/24 2013/02/27~ 2013/06/14 2013/01/14 2013/03/18~ 2013/05/17 2012/01/04~ 2012/05/27 2012/02/10~ 2012/05/01 2012/04/27 2012/01/13~ 2012/05/23	Contract amount(NTD1,000)
			USD 13,545/ NTD 396,041 EUR 699/ NTD 25,987 JPY 37,757/ NTD 13,749 GBP 110/ NTD 5,086 NTD 312,334/ USD 10,665 NTD 21,691/ JPY 62,670 USD 200/ CNY 1,245 USD 420/ JPY 35,633 USD 4,909/ NTD 148,529 EUR 316/ NTD 12,380 JPY 30,270/ NTD 11,846 NTD 95,249/ USD 3,149

• (4) As of December 31 2012, the Company undertook negotiable assets swap contracts amounting to NTD148,100 thousand at interest range of 1.3% ～ 1.7%.

• (5) As of December 31 2012, the Company undertook FX options contracts amounting to NTD3,816 thousand (USD131 thousand).

• (6) The income from financial instruments at fair value through profit or loss in 2012 and 2011 is summarized as following:

Realized net profit (loss) Free-Gratis Dividends revenue Net profit (loss) from domestic stock traded on TSEC (Gretai Securities Market) Earnings from beneficiary certificates Net profit (loss) from financial derivatives Net valuation (loss) profit Net profit (loss) from domestic stock traded on TSEC (Gretai Securities Market) Net profit (loss) from beneficiary certificates Net loss from financial derivatives		2012 $ 44,032 11,147 5,113 278,414 338,706 1,550 1,960 77,193 ) 73,683 ) $ 265,023	2011
	( (		$ 52,380 ( 87,621 ) 3,404 ( 102,777 ) ( 134,614 ) ( 211,176 ) ( 5,786 ) ( 151,454 ) ( 368,416 ) ($ 503,030 )

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7. Receivable, net

Receivable, net
Receivable spot exchange settlement payment Acceptances receivable Interests receivable Accounts receivable Tax refund receivable (Note 28) Receivable out-of-pocket expenses for attorney fees and cost of action Notes receivable Receivable proceeds from interbank clearing Other receivables Less: allowance for bad debt (Note 9)	December 31,2012 $ 435,894 741,337 639,321 466,520 56,589 25,102 61,119 124,662 113,706 2,664,250 ( 110,907 ) $ 2,553,343	December 31,2011
	(	(	$ 1,036,724 605,123 569,687 408,087 237,088 55,323 638 9,017 78,194 2,999,881 111,598 ) $ 2,888,283

The Bank classifies receivables based on credit risk features of products as follows:

	Item		Total receivables	Allowance for bad debt	Total receivables	Allowance for bad debt
			December 31, 2012	December 31, 2012	December 31, 2011	December 31, 2011
With individual objective evidence of impairment	Individual evaluation of impairment	Corporate banking	$ 21,429	$ 2,204	$ 3,874	$ 716
		Personal banking	2,243	114	1,782	173
	Portfolio evaluation of impairment	Corporate banking	4,088	1,041	3,971	1,187
		Personal banking	32,984	17,657	33,913	15,649
Without individual objective evidence of impairment	Portfolio evaluation of impairment	Corporate banking	924,760	15,486	760,604	15,688
		Personal banking	634,196	8,712	561,385	9,011
		Others	70,664,544	57,967	76,789,865	70,533
Total			72,284,244	103,181	78,155,394	112,957

As of December 31, 2012 and 2011, above-mentioned receivables of the Bank include amount due from Central Bank of the Republic of China (Taiwan) and other banks, accounts receivable, interest receivable, acceptance receivable, Deposits of Central Bank of the Republic of China (Taiwan) and lend to banks, delinquent loans other than loans transferred from loans and refundable deposits.

The aforementioned provision for bad debts has been recognized by the nature of the risks and disclosed on a monthly basis in accordance with SFAS No. 34 “Accounting for Financial Instruments” amended for the 3[rd] instance. However, the amount of non-lending loan assets as of December 31 2012 fell below the requirement of 1% and above in loan coverage ratio as stated in Letter Jin-Guan-Yin-Fa-Zi No. 10010006830. As such, the provision for bad debts as of December 31 2012 was recognized at NTD110,907 thousand in conformity to the estimated amount required by Letter Jin-Guan-Yin-Fa-Zi No. 10010006830.

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8. Assets held for sale

Cost Balance, beginning Increase Decrease Reclassified in the current period Balance, ending Accumulated depreciation Balance, beginning Increase Decrease Reclassified in the current period Balance, ending Accumulated impairment Balance, beginning Increase Decrease Reclassified in the current period Balance, ending Net, ending		2012	Total $ 114,078 - ( 114,078 ) - - 25,685 - ( 25,685 ) - - 46,754 - ( 46,754 ) - - $ -		2011
	Land $ 43,615 - ( 43,615 ) - - - - - - - 19,621 - ( 19,621 ) - - $ -	Buildings and structures $ 70,463 - ( 70,463 ) - - 25,685 - ( 25,685 ) - - 27,133 - ( 27,133 ) - - $ -		Land $ 166,043 - ( 71,517 ) ( 50,911 ) 43,615 - - - - - 50,441 - ( 30,820 ) - 19,621 $ 23,994	Buildings and structures $ 118,305 - ( 30,963 ) ( 16,879 ) 70,463 50,653 - ( 14,169 ) ( 10,799 ) 25,685 32,491 - ( 5,358 ) - 27,133 $ 17,645	Total
						$ 284,348 - ( 102,480 ) ( 67,790 ) 114,078 50,653 - ( 14,169 ) ( 10,799 ) 25,685 82,932 - ( 36,178 ) - 46,754 $ 41,639

The Bank sold the impaired assets held for sale in 2012 and 2011. The cause of initial impairment has extinguished, and gains on reversal of impairment were recognized for NTD46,754 thousand and NTD36,178 thousand, respectively.

9. Discounts and loans, net

Discounts and loans, net
Bills negotiated and discounts Overdraft Secured overdraft Accounts receivable financing Short-term loan Securities receivable financing Short-term secured loans Mid-term loans Mid-term secured loans Long-term loans Long-term secured loans Delinquent loans Add: Adjustment of premium/discount Less: allowance for bad debt	December 31,2012 $ 562,371 3,167 15,718 383,890 42,154,575 325,878 60,298,878 32,254,212 87,237,740 2,553,682 100,303,767 1,198,605 327,292,483 55,557 ( 3,318,621 ) $ 324,029,419	December 31,2011
	(	(	$ 381,296 1,755 18,572 283,939 33,640,094 221,514 48,629,864 26,781,468 82,832,302 1,592,791 85,425,962 883,616 280,693,173 5,995 2,942,802 ) $ 277,756,366

• (1) The balances of loans and other loans on which no interest has accrued by the Bank on December 31, 2012 and 2011 were NTD1,188,582 thousand and NTD872,792 thousand, respectively. The interest receivable on which no interest has accrued internally in 2012 and 2011 were NTD30,434 thousand and NTD34,396 thousand, respectively.

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• (2) There was no credit loan written off without pursuit in 2012 and 2011.

• (3) The Bank classifies discounts and loans based on credit risk features of products as follows:

Discounts and loans

follows: Discounts	and loans
	Item		Total amount	Allowance for bad debt	Total amount	Allowance for bad debt
			December 31, 2012	December 31, 2012	December 31, 2011	December 31, 2011
With individual objective evidence of impairment	Individual evaluation of impairment	Corporate banking	$ 2,205,275	$ 917,576	$ 1,491,714	$ 613,435
		Personal banking	624,265	50,246	386,583	14,839
	Portfolio evaluation of impairment	Corporate banking	466,886	184,450	401,838	150,785
		Personal banking	1,197,451	165,834	985,300	186,564
Without individual objective evidence of impairment	Portfolio evaluation of impairment	Corporate banking	175,849,753	1,807,112	144,387,729	1,712,984
		Personal banking	146,948,853	180,423	133,040,009	264,195
			327,292,483	3,305,641	280,693,173	2,942,802

The aforementioned provision for bad debts has been recognized by the nature of the risks and disclosed on a monthly basis in accordance with SFAS No. 34 “Accounting for Financial Instruments” amended for the 3[rd] instance. However, the provision for bad debts as of December 31 2012 fell below the requirement of 1% and above (in loan coverage ratio) as stated in Letter Jin-Guan-Yin-Fa-Zi No. 10010006830. As such, the provision for bad debts as of December 31 2012 was recognized at NTD3,318,621 thousand in conformity to the estimated amount required by Letter Jin-Guan-Yin-Fa-Zi No. 10010006830.

• (4) Details and changes of allowance for bad debts for receivables and discounts and loans for 2012 and 2011 are summarized as follows:

Balance, beginning Provided in the current period Write-off of non-performing loans Collection of written off bad debt Exchange effects Reclassification Balance, ending	December31,2012	December31,2012
	Accounts receivable $ 112,957 420 ( 11,571 ) 16,911 ( 127 ) ( 3,895 ) $ 114,695	Discounts and loans $ 2,942,802 237,824 ( 71,816 ) 227,695 ( 7,579 ) ( 10,305 ) $ 3,318,621	Total
			$ 3,055,759 238,244 ( 83,387 ) 244,606 ( 7,706 ) ( 14,200 ) $ 3,433,316

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Balance, beginning Provided in the current period Write-off of non-performing loans Collection of written off bad debt Exchange effects Reclassification Balance, ending	December31,2011	December31,2011
	Accounts receivable $ 42,992 5,864 ( 14,166 ) 20,904 - 57,363 $ 112,957	Discounts and loans $ 2,668,092 659,084 ( 539,800 ) 209,490 3,299 ( 57,363 ) $ 2,942,802	Total
			$ 2,711,084 664,948 ( 553,966 ) 230,394 3,299 - $ 3,055,759

Allowance for bad debts for above-mentioned receivables includes allowance for bad debts for delinquent loans other than loans transferred from loans. Please refer to Note 13 for details.

10. Available-for-Sale Financial Assets

refer to Note 13 for details. Available-for-Sale Financial Assets
Corporate bond Overseas bonds-valued in USD, were USD16,071 thousand and USD14,217 thousand on December 31, 2011 and 2011, and those valued in AUD were AUD20,355 thousand and AUD20,185 thousand on December 31, 2012 and 2011. Listed stocks - overseas Debt instruments – denominated in USD, which amounted to USD0 thousand and USD145 thousand as of December 31 2012 and December 31 2011, respectively. Depository receipts – denominated in USD, which amounted to USD0 thousand and USD9 thousand as of December 31 2012 and December 31 2011, respectively.	December 31,2012 $ 17,388,602 1,080,823 50,294 - - $ 18,519,719	December 31,2011
			$ 3,118,259 1,051,320 37,352 4,389 260 $ 4,211,580

• (1) After evaluating overseas bonds, certificates of creditor’s right and depository receipts, the Bank recognized an impairment loss of NTD14,266 thousand and NTD63,833 thousand in total respectively for the year ended December 31, 2012 and 2011.

• (2) As of December 31, 2012 and 2011, the book value of available-for-sale overseas bonds securing funds borrowed from banks was NTD777,640 thousand (USD6,000

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thousand and AUD20,000 thousand) and NTD1,039,060 thousand (USD14,000 thousand and AUD20,000 thousand). Please refer to Note 31 for details.

11. Held to maturity investments, net

December 31, 2012 December 31, 2011 Overseas bonds-valued in USD, were USD189,000 thousand and USD197,000 thousand on December 31, 2012 and 2011, and those valued in EUR was EUR84,000 thousand on December 31, 2012 and 2011. $ 8,720,880 $ 9,259,930 Government bonds 1,689,890 1,803,652 Financial bonds 100,000 100,000 10,510,770 11,163,582 Less: accumulated impairment ( 1,727,825 ) ( 1,724,542 ) $ 8,782,945 $ 9,439,040

• (1) As of December 31, 2012 and 2011, book values of the held-to-maturity overseas bonds securing RP were NTD261,360 thousand (USD9,000 thousand) and NTD0 thousand, respectively.

• (2) After evaluating the overseas bonds, the Bank recognized asset impairment loss of NTD70,324 thousand and NTD496,299 thousand for 2012 and 2011, respectively. Until December 31, 2012, impairment provided for financial bonds held to maturity and overseas bonds has been NTD100,000 thousand and NTD1,627,825 thousand (USD56,055 thousand), respectively.

• (3) As of December 31, 2012 and 2011, the book value of held-to-maturity overseas bonds securing the funds borrowed from banks was NTD3,850,800 thousand (USD69,000 thousand and EUR48,000 thousand) and NTD4,213,930 thousand (USD77,000 thousand and EUR48,000 thousand). Please refer to Note 31 for details.

12. Stocks- equity method

Stocks-equity method
Taichung Commercial Bank Lease Enterprise Taichung Bank Insurance Brokers Co., Ltd. Reliance Securities Investment Trust Co., Ltd.	December 31,2012 Stated amount Shareholding % $ 986,772 100.00 182,207 100.00 126,683 38.46 $1,295,662	December	31,2011
	Stated amount $ 986,772 182,207 126,683 $1,295,662	Stated amount $ - 89,159 127,811 $ 216,970	Shareholding %
			- 100.00 38.46

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(1) The Bank’s investment income (loss) recognized under the equity method in 2012 and 2011 are summarized as follows:

Investee Taichung Commercial Bank Lease Enterprise Taichung Bank Insurance Brokers Co., Ltd. Reliance Securities Investment Trust Co., Ltd.	Investment income(loss) 2012 2011 ( $ 13,705 ) $ - 93,847 77,159 ( 1,128 ) ( 10,262 ) $ 79,014 $ 66,897	Investment income(loss) 2012 2011 ( $ 13,705 ) $ - 93,847 77,159 ( 1,128 ) ( 10,262 ) $ 79,014 $ 66,897		Initial Investment Cost	Initial Investment Cost	Initial Investment Cost
	2012	(		2012		2011
	( $ 13,705 ) 93,847 ( 1,128 ) $ 79,014			$ 1,000,000 6,000 120,000 $ 1,126,000		$ - 6,000 120,000 $ 126,000

• (2) The Company has established a wholly-owned subsidiary, Taichung Commercial Bank Lease Enterprise, with capital investment of NTD1, 000,000 thousand in 100,000 thousand shares or at 100% of shareholding.

• (3) The Company has prepared its consolidated financial statements covering all its subsidiaries in compliance with the SFAS No. 7 (Consolidated Financial Statements) and “Rules Governing the Preparation of Financial Statements of Public Issued Banks”

13. Other financial assets - net

Banks” Other financial assets-net
Financial assets at cost Other financial assets - others Other Delinquent loans, net	December 31,2012 $143,486 760,074 2,374 $905,934	December 31,2011
			$ 143,486 706,910 - $ 850,396

• (1) Details of the financial assets carried at cost are summarized as follows:

Publicly offering of domestic common stock Common stock other than publicly offering of domestic common stock (2) Other financial assets - others Insurance policy assets issued by PEM Group Less: accumulated impairment	December 31,2012 $ 2 143,484 $143,486 December 31,2012 $ 1,896,281 (1,136,207 ) $ 760,074	December 31,2011	December 31,2011
		$ 2 143,484 $ 143,486 December 31,2011
	(	(	$ 1,864,258 1,157,348 ) $ 706,910

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The receivables as compensation of structured notes to the Company amounted to NTD534,885 thousand (USD69,527 thousand net of recognized provision for bad debts amounting to USD51,165 thousand, refer to Note 32) as of January 1 2011. In 2011, the Company has further received compensation from PEM amounting to USD11,900 thousand. The Board of the Company resolved on February 24 2011 to work in conjunction with the US court ruling on the appointment of an official receiver of the PEM case and related schedule thereby assumed the assets in the form of insurance policy amounting to USD17,110 thousand (USD57,627 thousand net of recognized provision for bad debt amounting to USD40,517 thousand) and recognized for reversal of impairments recognized in 2011 amounting to NTD321,618 thousand (USD10,648 thousand). The Company has also established an insurance policy asset trust jointly with other creditor institutions and completed the signing of related documents thereby assumed the assets in the form of insurance policy from the official receiver and keep on paying the premium to make the policy valid.

After evaluating the value of insurance policy assets issued by PEM Group, the Bank recognized a gain on reversal of impairment loss of NTD26,963 thousand and NTD69,939 thousand respectively for the year ended December 31, 2011 and 2012.

(3) Details of other delinquent accounts, net are summarized as follows:

Non-delinquent loans restated from loans Less: allowance for bad debt (Note 7 and 9)	December 31,2012 $ 6,162 ( 3,788 ) $ 2,374	December 31,2011	December 31,2011
	(	(	$ 1,359 1,359 ) $ -

14. Fixed assets

Cost Balance, beginning Increase Decrease Reclassified in the current period Balance, ending Revaluation increment Balance, beginning Increase Decrease Reclassified in the current period Balance, ending Accumulated depreciation Balance, beginning Increase Decrease Reclassified in the current period Balance, ending					20	12
		Land $ 1,619,138 - - 30,890 ) 1,588,248 472,960 - - - 472,960 - - - - -		Buildings and structures $ 1,849,721 - - 9,166 ) 1,840,555 132,210 - - - 132,210 911,978 34,822 - 6 946,806	Transportation and communication equipment $ 34,821 5,132 ( 1,133 ) - 38,820 - - - - - 21,061 3,727 ( 1,107 ) - 23,681	Miscellaneous equipment $ 1,071,640 41,925 ( 237,276 ) 171,438 1,047,727 - - - - - 923,020 72,577 ( 236,240 ) - 759,357		Prepayments for equipment $ 88,550 123,629 - 200,092 ) 12,087 - - - - - - - - - -	Total
	(		(				(		$ 4,663,870 170,686 ( 238,409 ) ( 68,710 ) 4,527,437 605,170 - - - 605,170 1,856,059 111,126 ( 237,347 ) 6 1,729,844

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Accumulated impairment Balance, beginning Increase Decrease Reclassified in the current period Balance, ending Net, ending Cost Balance, beginning Increase Decrease Reclassified in the current period Balance, ending Revaluation increment Balance, beginning Increase Decrease Reclassified in the current period Balance, ending Accumulated depreciation Balance, beginning Increase Decrease Reclassified in the current period Balance, ending Accumulated impairment Balance, beginning Increase Decrease Reclassified in the current period Balance, ending Net, ending					20	12
		Land $ 77,000 - - - 77,000 $ 1,984,208		Buildings and structures $ - - - - - $ 1,025,959	Transportation and communication equipment $ - - - - - $ 15,139 20		Miscellaneous equipment $ - - - - - $ 288,370		Prepayments for equipment $ - - - - - $ 12,087		Total
						11					$ 77,000 - - - 77,000 $ 3,325,763
		Land $ 1,573,285 - - 45,853 1,619,138 472,960 - - - 472,960 - - - - - 77,000 - - - 77,000 $ 2,015,098		Buildings and structures $ 1,835,820 - - 13,901 1,849,721 132,210 - - - 132,210 868,721 33,529 - 9,728 911,978 - - - - - $ 1,069,953	Transportation and communication equipment $ 40,446 5,381 ( 11,034 ) 28 34,821 - - - - - 28,676 3,391 ( 11,034 ) 28 21,061 - - - - - $ 13,760				Prepayments for equipment $ - 88,550 - - 88,550 - - - - - - - - - - - - - - - $ 88,550		Total
										$ 4,517,540 146,136 ( 59,560 ) 59,754 4,663,870 605,170 - - - 605,170 1,814,989 90,882 ( 59,540 ) 9,728 1,856,059 77,000 - - - 77,000 $ 3,335,981

The consumption status of the part of the lands and buildings of the Company was listed as non-business use assets. Refer to Note 15 for detail.

1. Other assets

Other assets
Refundable deposits Deferred income tax assets (Note 28) Deferred pension cost (Note 22) Deferred expenses	December 31,2012 $ 1,076,227 233,367 214,388 119,652	December 31,2011
		$ 966,582 423,878 266,323 131,167

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Reserve for trust funds compensation Prepayments Assets not available for business operation, net Others	December 31,2012 $ 50,000 57,781 59,158 1,204 $ 1,811,777	December 31,2011	December 31,2011
			$ 50,000 34,122 19,309 662 $ 1,892,043

• (1) The Government bonds held to maturity deposited as the security bond for provisional seizure at court and for business guarantee on December 31, 2012 and 2011 were NTD949,700 thousand and NTD865,100 thousand, which are stated as refundable deposits.

• (2) Change of deferred expenses is stated as follows:

refundable deposits. Change of deferred expenses is stated	as follows:
Balance, beginning Increase Amortization in the current period Reclassified in the current period Balance, ending	2012 $131,167 16,023 ( 51,692) 24,154 $119,652	2011
		$ 117,979 63,075 ( 49,887) - $ 131,167

• (3) The Reserve for trust funds compensation by Government bonds held to maturity on December 31, 2012 and 2011 is stated at the par value of NTD50,000 thousand.

• (4) Details of assets not available for business operation leased to others are as follows:

Cost Balance, beginning Increase Decrease Reclassified in the current period Balance, ending Accumulated depreciation Balance, beginning Increase Decrease Reclassified in the current period Balance, ending Net, ending			2012		Total $ 25,634 - - 40,056 65,690 6,325 213 - 6 ) 6,532 $ 59,158			2011
		Land $ 14,701 - - 30,891 45,592 - - - - - $ 45,592	Buildings and structures $ 10,933 - - 9,165 20,098 6,325 213 - ( 6 ) 6,532 $ 13,566				Land $ 9,643 - - 5,058 14,701 - - - - - $ 14,701	Buildings and structures $ 7,955 - - 2,978 10,933 5,057 197 - 1,071 6,325 $ 4,608		Total
			(	(						$ 17,598 - - 8,036 25,634 5,057 197 - 1,071 6,325 $ 19,309

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(5) Collateral accepted – net:

Collateral accepted – net:
Land Buildings and structures Less: allowance for loss from price declination	December 31,2012 $ 82,178 103,006 ( 185,184 ) $ -	December 31,2011
	(	(	$ 120,507 127,639 248,146 ) $ -

The Bank sold some assumed collateral which have been impaired in 2012 and 2011. The cause of initial impairment has been extinguished, and gains on reversal of impairment were recognized for NTD62,962 thousand and NTD143,138 thousand, respectively.

16. Due to Central Bank of the Republic of China (Taiwan) and banks

Due to Chunghwa Post Co., Ltd. Call loans to banks Deposits of other banks	December 31,2012 $ 1,963,594 3,186,000 1,954 $ 5,151,548	December 31,2011	December 31,2011
			$ 1,963,594 1,475,310 1,094 $ 3,439,998

17. Funds borrowed from CBC and other banks

Funds borrowed from banks	December	31,2012 Amount $ 1,887,600	December 31,2011	December 31,2011	December 31,2011
	Interest rate 0.85%~1.44%		Interest rate 0.74%~1.31%		Amount
					$ 2,877,550

1. As of December 31, 2012 and 2011, the bonds securing RP were NTD264,045 thousand and NTD0 thousand, and the redemption price as agreed were NTD264,159 thousand and NTD0 thousand, respectively.

19. Payables

and NTD0 thousand, respectively. Payables
Notes and checks in clearing Payable spot exchange settlement payment Acceptances payable Accrued expenses Interest payable Payable income tax (Note 28)	December 31,2012 $ 6,221,983 435,786 749,315 601,401 410,262 263,278	December 31,2011
		$ 5,165,311 1,036,226 617,918 348,244 290,632 -

(Continued on next page)

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(Continued from previous page)

Collection payable Deposit payable for securities financing Guarantee deposits received for financing instruments Payable structured note indemnity (Note 32) Others	December 31,2012 $ 29,162 21,773 20,043 7,096 136,669 $ 8,896,768	December 31,2011	December 31,2011
			$ 21,679 6,382 5,778 18,291 173,040 $ 7,683,501

20. Customer deposits and remittances

Customer deposits and remittances
Check deposits Current deposits Current saving deposits Time deposits Time saving deposits Remittances	December 31,2012 $ 7,662,273 77,831,423 88,448,284 85,985,510 125,933,000 2,351 $ 385,862,841	December 31,2011
			$ 7,012,760 66,620,964 81,231,495 60,654,582 118,312,830 - $ 333,832,631

21. Financial bonds payable

Financial bonds payable
Subordinate financial bonds Convertible financial bonds	December 31,2012 $ 11,300,000 2,248,277 $ 13,548,277	December 31,2011
			$ 8,300,000 2,212,559 $ 10,512,559

(1) Subordinate financial bonds

1. As approved by FSC’s Letter under Jin-Guan-Yin (4) Zi No. 09600481190 dated November 14, 2007, the Bank issued 1st term subordinate financial bonds on December 21, 2007 upon the following terms and conditions:

2. (1) Approved: NTD3,500,000 thousand.

3. (2) Issued: NTD2,400,000 thousand.

4. (3) Denomination: NTD10,000 thousand, issued at par value.

5. (4) Duration: 5.5 years, matured on June 21, 2013.

6. (5) Bond interest rate is the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 1.02%.

7. (6) Repayment Methods: repayment in lump sum upon maturity.

8. (7) Payment of interest: interest paid per six months as of the date of issuance.

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1. As approved by FSC’s Letter under Jin-Guan-Yin (4) Zi No. 09800104050 dated March 20, 2009, the Bank issued 1st term to 4th term subordinate financial bonds for 2009 on June 26, December 10, December 18, and December 30, 2009 and 1st term to 2nd term subordinate financial bonds for 2010 on January 28 and February 9, 2010 upon the following terms and conditions:

2. (1) Approved: NTD5,000,000 thousand.

3. (2) Issued:

   • A. 1[st] term 2009: NTD1,800,000 thousand.

   • B. 2[nd] term 2009: NTD100,000 thousand.

   • C. 3[rd] term 2009: NTD1,200,000 thousand.

   • D. 4[th] term 2009: NTD1,100,000 thousand.

   • E. 1[st] term 2010: NTD600,000 thousand.

   • F. 2[nd] term 2010: NTD200,000 thousand.

4. (3) Book value:

   • A. 1[st] term 2009: NTD100 thousand, issued at par value.

   • B. 2[nd] term 2009: NTD500 thousand, issued at par value.

   • C. 3[rd] term 2009: NTD500 thousand, issued at par value.

   • D. 4[th] term 2009: NTD500 thousand, issued at par value.

   • E. 1[st] term 2010: NTD500 thousand, issued at par value.

   • F. 2[nd] term 2010: NTD10,000 thousand, issued at par value.

5. (4) Duration:

   • A. 1[st] term 2009: 7 years, matured on June 26, 2016.

   • B. 2[nd] term 2009: 7 years, matured on December 10, 2016.

   • C. 3[rd] term 2009: 7 years, matured on December 18, 2016.

   • D. 4[th] term 2009: 6.5 years, matured on June 30, 2016.

   • E. 1[st] term 2010: 7 years, matured on January 28, 2017.

   • F. 2[nd] term 2010: 6 years, matured on February 9, 2016.

6. (5) Bond interest rate:

   • A. 1[st] term 2009: the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 1.40%.

   • B. 2[nd] term 2009: the fixed annual rate of 2.75%.

   • C. 3[rd] term 2009: the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 1.50%.

   • D. 4[th] term 2009: the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 1.48%.

   • E. 1[st] term 2010: the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 1.50%.

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  - F. 2[nd] term 2010: the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 1.50%.

• (6) Repayment Methods: repayment in lump sum upon maturity.

• (7) Payment of interest: interest paid per six months as of the date of issuance.

• As approved by FSC’s Letter under Jin-Guan-Yin-Piao-Zi No. 09900204230 dated June 4, 2010, the Bank issued 3[rd] term subordinate financial bonds on June 25, 2010 upon the following terms and conditions:

• (1) Approved: NTD900,000 thousand.

• (2) Issued: NTD900,000 thousand.

• (3) Denomination: NTD10,000 thousand, issued at par value.

• (4) Duration: 7 years, matured on June 25, 2017.

• (5) Bond interest rate is the displayed floating rates for one-year term deposits of Chunghua Post Co., Ltd. plus 1.75%.

• (6) Repayment Methods: repayment in lump sum upon maturity.

• (7) Payment of interest: interest paid per six months as of the date of issuance.

• As approved by FSC’s Letter under Jin-Guan-Yin-Piao-Zi No. 10100305900 dated September 24, 2012, the Bank issued 1[st] term subordinate financial bonds on November 13, 2012 upon the following terms and conditions:

• (1) Approved: NTD3,000,000 thousand.

• (2) Issued: NTD3,000,000 thousand.

• (3) Denomination: NTD1,000 thousand, issued at par value.

• (4) Duration: 7 years, matured on November 13, 2019.

• (5) Coupon rate: Fixed annual interest rate 2.1%.

• (6) Repayment Methods: repayment in lump sum upon maturity.

• (7) Payment of interest: interest paid per six months as of the date of issuance.

(2) Convertible financial bonds

December 31, 2012 December 31, 2011

1[st] unsecured convertible financial bonds Unsecured convertible financial bonds of NTD2,300,000 thousand were issued on June 15, 2011 with duration of 3 years and coupon rate of 0% $ 2,300,000 $ 2,300,000 Less: Discount on corporate bond discount ( 51,723 ) ( 87,441 ) $ 2,248,277 $ 2,212,559

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1. As approved by FSC’s Letter under Jin-Guan-Zheng-Fa-Zi No. 1000018296 dated May 16, 2011, the Bank issued first unsecured convertible financial bonds of NTD2,300,000 thousand with the coupon rate of 0% on June 15, 2011. In accordance with SFAS No.36, the convertible rights and liabilities were separately recognized as equity and liabilities. The equity portion amounted to NTD83,039 thousand and was stated as “capital surplus – stock option”; liability components were recognized as embedded financial derivatives and non-derivative liabilities. The evaluated fair value for said embedded financial derivatives as of December 31, 2012 amounted to NTD21,850 thousand, and non-derivative liabilities measured at amortized cost as of December 31, 2012 amounted to NTD2,248,277 thousand.

2. Issuance terms for the Bank’s first domestic unsecured convertible financial bonds are summarized as follows:

3. (1) Approved: NTD2,800,000 thousand.

4. (2) Issued: NTD2,300,000 thousand.

5. (3) Denomination: NTD100 thousand, issued at par value.

6. (4) Duration: 3 years, matured on June 15, 2014.

7. (5) Coupon rate: 0%.

8. (6) Repayment: A single payment in cash is made for unconverted bonds or for exercise of put options.

9. (7) Interest payment: Nil.

10. (8) Conversion price: NTD11.89.

11. (9) Put options: Bondholders may ask the Bank to redeem the financial bonds at the par value plus a yield rate of 1.5% in cash within forty days before the date as of which the convertible financial bonds have been issued for two years (June 15, 2013).

12. (10) Call option: From the date after six months from the issuance date to forty days before the expiration date of the convertible financial bonds, if the amount of unconverted bonds is lower than 10% of total issuance amount and the closing prices of common shares of Taichung Bank exceed 30% of the current conversion price for consecutive thirty business days, the Bank may recall outstanding bonds at the denomination of the bonds in cash.

13. The conversion procedure for the Bank’s first domestic unsecured convertible financial bonds is summarized as follows:

14. (1) Underlying stock:

Common shares of the Bank. The conversion is made by issuance of new shares.

• (2) Conversion period:

Bondholders may from time to time ask the Bank to convert their bonds into common shares from July 16, 2011 (the next date after one month from the issuance date of the bonds) to June 5, 2014 except to stock dividend transfer suspension day, from fifteen business days before

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cash dividend transfer suspension day or suspension day for subscription of common shares for cash capital increase to base day for right distribution, from base day for capital decrease to the day before the share replacement date for capital decrease and other common stock transfer suspension period upon laws and regulations.

• (3) Procedures to ask for conversion:

  • A. Bondholders complete the “Conversion/Redemption/Put Back Application for Convertible Financial Bond Book Entry” (please mark “Conversion”) at their original securities company to make the application through Taiwan Depository & Clearing Corporation (hereinafter referred to as "TDCC"). TDCC submits the application to the Bank’s stock transfer agent after receiving it. The application becomes effective upon receipt of application and can not be cancelled. The conversion procedure will be completed within 5 business days after delivery and stocks will be directly transferred into bondholders’ central depository accounts.

  • B. When overseas Chinese or foreigners apply to convert the bonds they hold into shares of the Bank, shares are distributed through book entry by TDCC.

• (4) The conversion price at issuance is NTD11.89. After issuance of financial bonds, the conversion price should be adjusted in accordance with the prescribed formula for any increase in issued common shares except for replacement of common shares due to issuance of various securities with common share convertible rights or stock options. The Bank conducted the ex-right and ex-dividend procedure in September 2012. The conversion price was accordingly adjusted to NTD10.82 in accordance with the prescribed formula.

• Changes in accounts relevant to convertible financial bonds payable for the current period are summarized as follows:

Balance, beginning Discount amortization of corporate bonds Evaluation adjustments, end of year Balance, ending Balance, beginning Issuance of convertible financial bonds Discount amortization of corporate bonds Evaluation adjustments, end of year Balance, ending		2012	2012
	Financial liabilities at fair value through profit or loss $ 42,090 - ( 20,240 ) $ 21,850	Corporate bonds payable Capital surplus – stock options of convertible corporate bonds $ 2,212,559 $ 83,039 35,718 - - - $ 2,248,277 $ 83,039 2011		Benefit from effects of profit and loss accounts
	(			( (	$ - 35,718 ) 20,240 $ 15,478 )
	Financial liabilities at fair value through profit or loss $ - 23,920 - 18,170 $ 42,090	Corporate bonds payable $ - 2,193,041 19,518 - $ 2,212,559	Capital surplus – stock options of convertible corporate bonds $ - 83,039 - - $ 83,039	Benefit from effects of profit and loss accounts
				( ( (	$ - - 19,518 ) 18,170 ) $ 37,688 )

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22. Pension Plan

• (1) The Bank’s pension costs provided under the defined contribution rules in 2012 and 2011 were NTD55,685 thousand and NTD87,253 thousand. The net pension costs provided under the defined benefit rules were NTD84,827 thousand and NTD80,612 thousand.

thousand.
Service costs Interest costs Unrecognized amortization of transitional net benefit obligation Expected return of pension fund assets Unrecognized unamortized balance of service costs in previous period Amortization of unrecognized pension loss Net pension cost	2012 $ 20,433 21,441 25,765 2012 ( $ 16,749 ) 26,170 7,767 $ 84,827	2011
		$ 20,262 20,655 25,765 2011
		( $ 15,904 ) 26,170 3,664 $ 80,612

• (2) The contribution of pension fund and stated accrued pension liabilities under the defined benefit rules are adjusted as follows:

Benefit obligation: Vested benefit obligation Non-vested benefit obligation Cumulative benefit obligation Effects of increase in salary Projected benefit obligation Fair value of pension fund assets Contribution Unrecognized transitional benefit obligation Unrecognized service costs from previous period Unrecognized pension loss Minimum accruable pension liabilities Accruable pension liabilities	December 31,2012 ($ 348,936) ( 698,852 ) ( 1,047,788) ( 142,740 ) ( 1,190,528) 824,084 ( 366,444) 7 214,381 330,481 ( 402,129 ) ($ 223,704 )	December 31,2011
		( $ 196,337) ( 735,452 ) ( 931,789) ( 140,267 ) ( 1,072,056) 795,025 ( 277,031) 25,772 240,551 200,407 ( 326,463 ) ($ 136,764 )

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• (3) The Bank’s actuarial hypothesis of pension benefit obligation under the defined benefit rules is specified as follows:

benefit rules is specified as follows:
Discounted rate Increase rate of future salary Expected rate of return of pension fund assets	2012 1.88% 1.50% 1.88%	2011
		2.00% 1.50% 2.00%

• (4) The vested benefit calculated by the Bank under the defined benefit rules until Dec. 31, 2012 and 2011 is specified as follows:

Vested benefit	December 31,2012 $416,357	December 31,2011	December 31,2011
			$ 241,218

1. Other financial liabilities

23.	Other financial liabilities
24.	Allocated to lending fund Other liabilities Advances Reserve for land revaluation increment tax (“LRIT”) Deposits received Reserve	December 31,2012 $ 17,208 December 31,2012 $132,267 111,021 67,261 36,837 $347,386	December 31,2011
			$ 22,521 December 31,2011
				$ 137,427 111,021 57,214 22,637 $ 328,299

The breakdown and change of the various reserves:

Balance, beginning Deposit in the current period Write off in the current period Reclassified in the current period Balance, ending				2012		Total $ 22,637 - - 14,200 $ 36,837				2011
		Reserve for guarantee liability $ 22,637 - - 14,200 $ 36,837		Reserve for default loss $ - - - - $ -				Reserve for guarantee liability $ 22,637 - - - $ 22,637		Reserve for default loss $ 23,507 - - 23,507 ) $ -		Total
									(		(	$ 46,144 - - 23,507 ) $ 22,637

The deposit of reserve for guarantee liability is stated as bad debt expenses. The deposit of reserve for default loss is stated as other non-interest expenses. In accordance with Directive Jin-Guan-Yin-Fa-Zi No. 10010000440 and Directive Jin-Guan-zheng-Quan-Zi No. 09900738571, effective January 1, 2011, reserve for default loss is transferred as special reserve.

25. Shareholders’ equity

(1) Capital stock

The Bank’s paid-in capital was NTD17,319,006 thousand on January 1, 2011, divided into 1,731,901 thousand shares at NTD10 per share and offered as common

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stock in whole. The Company conducted capital increase out of earnings of NTD294,423 thousand and capital surplus of NTD225,147 thousand in September 2011 and also made capital increase in cash in October 2011, which issued 450,000 thousand shares at par value. Therefore, the Bank’s paid-in capital increased to NTD22,338,576 thousand as of December 31, 2011, which were 2,233,858 thousand common shares with par value of NTD10.

The Company has issued new shares by capitalization of retained earnings amounting to NTD848,866 thousand in September 2012. After the injection of the new capital, the paid-in capital of the Company amounted to NTD23,187,442 thousand in 2,318,744 thousand common shares as of December 31 2012 at NTD10/share.

(2) Capital surplus

Under the related regulations, capital surplus shall not be used except to offset a deficit. However, capital surplus arising from issuance of shares in excess of par value (including issuance in excess of common stock par value, issuance of shares for combinations and treasury stock transactions, etc.) and donation may be transferred to common stock on the basis of the Ratio of Shareholding of shares held by the stockholders. Such capital surplus transferred to common stock shall be within a certain Ratio of Shareholding prescribed by the related regulations. In accordance with revised articles of the Company Law announced on January 4, 2012, aforementioned capital surplus may be distributed in cash.

Details of capital surplus are as follows:

Premium on issuance of shares Employee stock option compensation cost Equity component of convertible financial bonds (Note 21) Generated from long-term investments		December 31,2012 Stock premiums Other capital surplus $ 550,109 $ - 18,949 6,627 - 83,039 - 16,813 $ 569,058 $ 106,479	December 31,2012 Stock premiums Other capital surplus $ 550,109 $ - 18,949 6,627 - 83,039 - 16,813 $ 569,058 $ 106,479		December	31,2011	31,2011
		Stock premiums $ 550,109 18,949 - - $ 569,058			Stock premiums $ 550,109 18,949 - - $ 569,058	Other capital surplus
							$ - 6,627 83,039 16,813 $ 106,479

(3) Earnings allocation and dividend policy

According to the Bank’s Articles of Incorporation, any profit from settlement of the year shall be subject to applicable taxes as the top Seniority, followed by the offsetting of losses carried forward from previous years and thirty percent of the remainder of such profit shall be allocated as legal reserve, and special reserve shall be provided pursuant to laws. The balance, if any, plus the unallocated accumulated retained earnings for the previous years shall be allocated as the shareholders’ Dividends, and the remainder thereof, if any, shall be allocated in the following order:

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1. 1%-5% for employee bonus.

2. Remuneration to directors/supervisors granted based on 50% of the allocated employee bonus.

3. Shareholder bonus.

The Board shall retain the required fund subject to the change of operating environment, operation and investment needs before proposing the proportion between cash and stock Dividends for the approval of the shareholders’ meeting:

1. The cash dividends shall be no less than 10% of the Dividends and bonus allocated to shareholders.

2. Notwithstanding, if the Dividends are allocated at less than or equal to NTD0.3 per share, the earnings may be allocated in the form of stock Dividends in full.

Free-Gratis Dividends for the approval of the shareholders’ meeting. Before the legal reserve amounts to the total Paid-in capital, the maximum allocation of earnings in cash shall be no more than 15% of total capital. Where the rates of Shares and dividends and risk-based assets fail to meet the standard required by the business competent authority, allocation of earnings in cash or with other property shall be restricted or prohibited by the relevant requirements provided by the business competent authority.

When allocating earnings, the Bank shall provide equivalent special reserve for the difference between loss on sale of NPL and amortized loss, and also provide special reserve from Earnings or Accumulated earnings for the previous period with respect to the amount under the “less” item of shareholders’ equity for the current year and previous years. Where the amount under the “less” item of shareholders’ equity is collected afterwards, earnings may be allocated from the reversal.

Employees’ bonuses and remuneration to directors/supervisors payable by the Bank were estimated in accordance with the Bank’s Articles of Incorporation. After the Bank provided legal reserve at 30% of the earnings in 2012 and 2011, and special reserve required by laws plus the unallocated earnings for the previous years and less the shareholders’ Free-Gratis Dividends, employees’ bonus and remuneration to directors/supervisors as provided totaled NTD1,917 thousand and NTD2,550 thousand, respectively. The change in the allocated amount resolved by board session at the end of FY, if any, shall apply to adjustment of the annual expenses initially provided. If the shareholders’ meeting resolves an actual allocated amount different from the estimate, it shall be stated as a change in accounting valuation in the year of the resolution made by the shareholders’ meeting. If the shareholders’ meeting resolves to allocate stock as the employee bonus, the quantity of stock shall be determined based on the amount of the employee bonus divided by fair value of the stock. The fair value of the stock is based on the closing price on the day prior to the day of resolution made by the shareholders' meeting and takes the effect of ex-right and After Distribution into consideration.

Upon the resolution by the Board of Directors, the Bank provided NTD436,200 thousand for legal reserve and NTD60,140 thousand for special reserve and reversed NTD9,092 thousand provided for special reserve in previous years. Then the Bank distributed stock dividends of NTD848,866 thousand by capital increase out of earnings and NTD111,693 thousand by capital increase in cash. The Board also resolved to distribute employee bonus of NTD402 thousand and remuneration to

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directors and supervisors of NTD201 thousand. The difference between the resolution and the recognition of NTD1,700 thousand in the annual financial statements for employee bonus and remuneration to directors and supervisors amounted to NTD850 thousand, mainly due to changes in estimation, which has been adjusted as income of 2012.For the relevant information, please view MOPS of TSEC.

The Board has acted in favor of motion for the distribution of incomes for fiscal year 2012 on March 13 2013, including the allocation of NTD833,387 thousand as statutory reserve, and NTD35,260 thousand as special reserve, stock dividends amounted to NTD1,681,090 thousand and cash dividends amounted to NTD231,874 thousand. The Board also resolved to allocate employee cash bonus amounting to NTD219 thousand and remunerations to directors and supervisors amounting to NTD110 thousand. The difference between the resolution of the Board on employee bonus and remunerations to directors and supervisors and the employee bonus and remunerations to directors and supervisors recognized in the financial statement of the same fiscal year, and amounted to NTD1,278 thousand and NTD639 thousand is the result of change in estimation. If the shareholders’ meeting resolves the actual allocated amount different from the estimate, it shall be handled as the “change in accounting estimates” in the year of the resolution made by the shareholders’ meeting. For relevant information to the resolution of the Board of Directors, please view MOPS of TSEC.

26. Service Fee, Net

view MOPS of TSEC. Service Fee, Net
Service Fee Service fee expenses		2012 $ 1,229,002 86,959 ) $ 1,142,043		2011
	(		(	$ 970,478 80,584 ) $ 889,894

27. Employee Expenses, Depreciation, Depletion And Amortization Summarized by functions:

Summarized by functions:
Employee expenses Salaries and wages Labor insurance and national health insurance Pension expenses Other employee expenses Depreciation expenses Amortization expenses	2012 Operatingexpenses $ 1,782,982 125,941 140,512 55,897 $ 2,105,332 $ 111,126 $ 51,692	2011
		Operatingexpenses
			$ 1,571,596 117,213 167,865 56,415 $ 1,913,089 $ 91,027 $ 49,887

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28. Corporate Income Tax

• (1) The Bank’s payable income tax (receivable refundable tax) in the current period is estimated as follows:

estimated as follows:
Income before taxation Permanent difference Temporary difference Less: loss deduction Estimated general taxable income Payable general tax Add: additional 10% income tax levied on unallocated earnings Add: Supplemented minimum tax Payable income tax for the current period Less: Investment exemption Less: prepaid and withheld tax Payable income tax (receivable refundable tax) in the current period Receivable refundable tax-beginning Add: Receivable refundable tax in the current period Add: Adjustment of income tax for the previous period Less: Refunded tax in current period Receivable refundable tax-ending	December 31,2012 $ 3,304,262 ( 198,994) 118,051 3,223,319 ( 1,213,739 ) 2,009,580 341,629 619 - 342,248 ( 6,378) ( 72,592 ) $ 263,278 $ 237,088 - 77 ( 180,576 ) $ 56,589	December 31,2011
		$ 1,914,176 695,675 ( 641,804 ) 1,968,047 (1,968,047 ) - - 184 - 184 ( 184) ( 56,513 ) ($ 56,513 ) $ 236,918 56,513 ( 4,807 ) ( 51,536 ) $ 237,088

• (2) The Bank’s net deferred income tax assets consist of the following:

Deferred income tax assets (liabilities) Unrealized loss from structured note indemnity Unrealized impairment loss Excess allowance for bad debt Unrealized loss (gain) on financial instruments Loss deduction Investment exemption Unrealized exchange gain Less: Allowance for deferred income tax assets Net deferred income tax assets	December 31,2012 $ 210,393 18,627 6,249 3,128 - - ( 5,030) - $ 233,367	December 31,2011
		$ 207,713 26,188 22,010 ( 9,995 ) 207,897 6,378 ( 29,935) ( 6,378 ) $ 423,878

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• (3) The Bank’s income tax expenses in the current period are specified as follows:

Payable income tax for the current period Decrease in deferred income tax assets Adjustment of income tax for the previous period Income tax expenses		2012 $ 335,870 190,511 77 ) $526,304		2011
	(			$ - 455,369 4,807 $ 460,176

• (4) The information regarding shareholders’ deductible tax:

Shareholders’ deductible tax account-Balance Projected deductible rate of earnings allocation for the current year	December 31,2012 $ 565,497 20.52%	December 31,2011	December 31,2011
			$ 775,625 20.50%

Projected deductible rate of earnings allocation for the current year includes the payable income tax estimated for the current year. According to the Income Tax Law, no net dividends or earnings may be deducted unless they refer to the dividends allocated from a company or cooperative or the profit-making business income tax paid by an investee or cooperative as included in the total earnings, in the territory of the R.O.C.. Notwithstanding, said shall not apply where additional 10% income tax shall be levied as no earnings are allocated by the investee or cooperative.

• (5) As of December 31, 2012, there were no unallocated earnings of the Bank for 1997 and the previous years.

• (6) The income tax returns of the Bank until 2010 have been authorized by the tax collection authority.

29. Earnings Per Share

The numerator and denominator for calculating Earnings Per Share are disclosed as follows:

follows:
2012 Basic earnings per share Earnings of current period vested in shareholders of common stock Effect of dilutive potential common stock Convertible financial bonds Employee bonus	Amount(numerator) Before taxation After taxation $ 3,304,262 $ 2,777,958 35,718 29,646 - -		Number of shares (denominator) (thousand shares) 2,318,744 212,570 122	Earnings Per Share(NTD)
	Before taxation $ 3,304,262 35,718 -				Before taxation $ 1.43		After taxation
							$ 1.20

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Diluted earnings per share Earnings of current period vested in shareholders of common stock plus effect of dilutive potential common stock 2011 Basic earnings per share Earnings of current period vested in shareholders of common stock Effect of dilutive potential common stock Convertible financial bonds Employee bonus Diluted earnings per share Earnings of current period vested in shareholders of common stock plus effect of dilutive potential common stock	Amount(numerator) Before taxation After taxation $ 3,339,980 $ 2,807,604 $ 1,914,176 $ 1,454,000 19,518 16,200 - - $ 1,933,694 $ 1,470,200	Amount(numerator) Before taxation After taxation $ 3,339,980 $ 2,807,604 $ 1,914,176 $ 1,454,000 19,518 16,200 - - $ 1,933,694 $ 1,470,200	Number of shares (denominator) (thousand shares) 2,531,436 1,920,749 110,938 195 2,031,882	Earnings Per Share(NTD)	Earnings Per Share(NTD)	Earnings Per Share(NTD)	Earnings Per Share(NTD)
	Before taxation $ 3,339,980 $ 1,914,176 19,518 - $ 1,933,694				Before taxation $ 1.32 $ 1.00 $ 0.95		After taxation
							$ 1.11 $ 0.76 $ 0.72

The General Meeting of the shareholders of the Company resolved to capitalize retained earnings amounting to NTD848,866 thousand into new shares on June 6 2012. As such, the basic EPS of the Company after taxation in 2011 has been adjusted retrospectively.

When calculating diluted EPS, the Bank assumes that employee bonus is made through share distribution. Such potential common shares with dilution effect will be added into weighted average outstanding shares to calculate diluted EPS. When diluted EPS is calculated, the closing price of such potential common shares on the balance sheet date is used as the judgment basis for number of shares for issuance. When diluted EPS is calculated in the next year before the Board of Directors resolves the number of share distribution for employee bonus, the dilution effect is also considered for such potential common shares.

30. Important transactions with stakeholders

potential common shares. Important transactions with stakeholders
Name Jin-Fong Soo (Representative to Pan Asia Chemical Corporation) (Note 1) Shiu-Nan Huang (Legal representative to Pan Asia Chemical Corporation) (Note 1) Kuei-Fong Wang (Legal representative to Pan Asia Chemical Corporation) (Note 3) Pan Asia Chemical Corporation and I Joung Investment Co., Ltd.	Affiliation
	New Chairman of the Bank and the legal representative to the original Resident Supervisor Original Chairman of the Bank Vice Chairman of the Bank Managing Director of the Bank

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Name Affiliation Hsi-Rong Huang Managing Director and Independent Director of the Bank Yi-Der Chen and Jer-Shyong Tsai Legal representative to Managing Director of the Bank Jiann-Ell Huang (Note 2) Legal representative to Resident Supervisor of the Bank Pan Asia Chemical Corporation, I Joung Investment Director of the Bank Co., Ltd., Chou Chang Co., Ltd. and He Yang Management Consultant Co., Ltd. (Note 2) Ming-Shan Chuang, Hsin-Ching Chang, Jer-Shyong Legal representative to Director of the Bank Tsai, Kuei-Fong Wang, Ching-Hsin Chang, Jer-Nan Wang, Lin Wei-Liang (Note 4), Ming-Hsiung Huang, Kuei-Hsien Wang (Note 3), Meng-Liang Chang, Kang-Chi Chou (Note 5), Jin-Fong Soo, Chun-Sheng Lee, Yi-Der Chen and Chia-Hung Lin (Note 2) Chiung Tung Investment Corporation (Note 2) Ex-Director of the Bank Ching-Hsin Chang (Note 2) Legal representative to ex-Director of the Bank Zin Rui Investment Co., Ltd. and Tai Jiunn Enterprise Supervisor of the Bank Co., Ltd. (Note 2) Shu-Li Huang, Ching-Huang Cai, Chian-Hwa Lee Fu, Legal representative to Supervisor of the Bank and Chao-Nan Hsieh (Note 2) Chou Chang Corporation (Note 2) Ex-Supervisor of the Bank Jiann-Ell Huang, Shu-Li Huang, Chian-Hwa Lee Fu, Legal representative to ex-Supervisor of the and Ching-Huang Cai (Note 2) Bank Hsi-Rong Huang, Jin-Yi Lee, and Chen-Le Liu (Note Independent Director of the Bank 2) Chun-Sheng Lee President of the Bank 106 persons including Chih-Chuan Managers (above) of Head Office and managers of the various entities of the Bank 41 persons including the Chairman’s spouse Spouses and kin at the second tier under the Civil Code of directors, supervisors, Chairman of the Board and President of the Bank Taichung Commercial Bank Cultural and Educational Corporations receiving donation amounted to Foundation, Taichung Commercial Bank Workers’ more than one-thirds of the Bank’s Paid-in Welfare Commission capital Taichung Bank Insurance Brokers Co., Ltd. Subsidiary of the Bank Taichung Commercial Bank Lease Enterprise Subsidiary of the Bank TCCBL Co., Ltd. Subsidiary of the Bank Taichung Commercial Bank Leasing (Suzhou) Co., Subsidiary of the Bank Ltd. Reliance Securities Investment Trust Co., Ltd. Investee valued under equity method China Man-Made Fiber Co., Ltd. Principle shareholder holding more than 10% of the Bank’s shares Chung Chien Investment Co., Ltd. Holding company of China Man-Made Fiber Co., Ltd. Pan Asia Investment Co., Ltd. Director of China Man-Made Fiber Co., Ltd. De-sing Securities Investment Trust Co., Ltd. Affiliate Moon Stone Investment Ltd. Affiliate Greencol Taiwan Corporation Affiliate

(Continued on next page)

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Name Chou Chin Corporation Greenworld Food Co., Ltd. Nan Chung Petrochemical Corp. Je Mi Fang Corporation Rai Yu Investment Co., Ltd. Rai Yen Investment Co., Ltd. Rai Chia Investment Co., Ltd. Hsiang Feng Development Co., Ltd. Reliance Consolidated Securities Co., Ltd. Sheng Jen Knitted Textiles Co., Ltd. Da Fa Investment Co., Ltd. Tai Yi Investment Co., Ltd. Formosa Imperial Wineseller Corp.	Affiliation
	Affiliate Affiliate Affiliate Affiliate Affiliate Affiliate Affiliate Affiliate Affiliate business Affiliate business Affiliate business Affiliate business Affiliate business

• Note 1: The original Chairman of the Bank, Shiu-Nan Huang resigned on March 31, 2011 and Jin-Fong Soo took over the position of Chairman and concurrently resigned as Resident Supervisor of the Bank on April 1, 2011.

• Note 2: The Bank completed re-election of directors and supervisors on June 22, 2011. The attachment is provided for reference.

• Note 3: The original Vice Chairman of the Bank, Kuei-Hsien Wang resigned in November 2011. Director Kuei-Fong Wang was elected as Vice Chairman of the Board at the Managing Directors’ meeting on November 17, 2011.

• Note 4: Jer-Nan Wang, former representatives of Institutional Investor Chou Chang Co., Ltd., were replaced by Wei-Liang Lin on June 6, 2012.

• Note 5: Ming-Hsiung Huang and Kuei-Hsien Wang, former representatives of Institutional Investor Pan Asia Chemical Corporation, were replaced by Chang Meng-Liang and Chou Kang-Chi on October 1, 2012.

• Summarization of important transactions between the Bank and stakeholders:

• (1) Accounts receivable

Accounts receivable
Name Taichung Bank Insurance Brokers Co., Ltd.		December 31,2012 Amount Percentage of receivables (%) $ 31,895 1			December 31,2011
		Amount $ 31,895			Amount $ 20,178	Percentage of receivables (%)
							1

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(2) Loans

Loans
Type	Number of accounts or name of stakeholder ~~38~~ 25 Wen-Tung Yu Chen-Ying Wu Chih-Hao Liang Ming-Yu Chiu Chen-Hsiang Chuang Wen-Chu Lee Wei-Huang You Tse-Hsiu Lin Cheng-Hsien Ni Zai-Hong Yang Tung-Po Yang Chang-Yung Huang Sin-Fu Liang Ching-Tang Tsai Wen-Chuan Zhuang Hui-Chin Lu Chien-ting Lin Number of accounts or name of stakeholder ~~46~~ 22 Ming-Yu Chiu Chen-Hsiang Chuang Wen-Tung Yu Hui-Chin Lu Wei-Huang You Tse-Hsiu Lin Cheng-Hsien Ni Wen-Chu Lee Zai-Hong Yang Tung-Po Yang Wen-Chuan Zhuang Tsung-Hsien Lee Te-Wei Chia Ching-Hsin Chang Chien-ting Lin	Maximum balance – current period ~~$~~ ~~18,158~~ 47,833 5,000 4,912 3,200 2,905 2,612 2,000 1,466 1,145 1,039 978 898 284 4,000 2,744 1,700 1,490 400 Maximum balance – current period ~~$~~ ~~25,734~~ 44,715 3,000 2,745 3,444 1,490 1,500 1,247 1,245 1,000 1,000 1,107 700 2,046 1,546 3,900 400	2 Balance, ending ~~$~~ ~~9,873~~ 36,092 2,500 4,700 3,112 2,777 2,478 1,000 1,263 1,041 829 356 686 195 - - - - - 2 Balance, ending ~~$~~ ~~15,757~~ 40,365 2,905 2,612 2,500 1,490 1,466 1,145 1,039 1,000 978 898 700 - - - 400	012 Perfo	rmance	Interest revenue	U Collateral Contents ~~Credit~~ loans Real estate 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 Certificate of deposit U Collateral Contents ~~Credit~~ loans Real estate 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 Certificate of deposit	nit: NTD thousand Difference in trading conditions and terms with non-stakeholders
				Normal loans	Non-performing loans
~~Consumer loans to~~ employees Residential mortgage loans Other loans Type				~~$~~ ~~9,873~~ 36,092 2,500 4,700 3,112 2,777 2,478 1,000 1,263 1,041 829 356 686 195 - - - - - 011 Perfo	~~$~~ ~~-~~ - - - - - - - - - - - - - - - - - - rmance	~~$~~ ~~288~~ 602 44 83 37 50 40 18 24 18 20 17 17 11 32 54 22 7 9 Interest revenue		~~None~~ 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 nit: NTD thousand Difference in trading conditions and terms with non-stakeholders
				Normal loans	Non-performing loans
~~Consumer loans to~~ employees Residential mortgage loans Other loans				~~$~~ ~~15,757~~ 40,365 2,905 2,612 2,500 1,490 1,466 1,145 1,039 1,000 978 898 700 - - - 400	~~$~~ ~~-~~ - - - - - - - - - - - - - - - -	~~$~~ ~~310~~ 457 38 40 21 5 4 18 24 - 3 21 - 42 31 32 12		~~None~~ 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃

According to Articles 32 and 33 of the Banking Act, no non-secured credit loans shall be granted to any party interested with the Bank’s staff, unless they are consumer loans and loans extended to the Government Apparatus; secured credit loans shall be granted under sufficient collateral and the terms of such credit extension shall not be more favorable than those offered to other customers in the same category.

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(3) Deposits

) Deposits
Taichung Bank Insurance Brokers Co., Ltd. Reliance Securities Investment Trust Co., Ltd. Taichung Commercial Bank Workers’ Welfare Commission Taichung Commercial Bank Lease Enterprise China Man-Made Fiber Co., Ltd. Reliance Consolidated Securities Co., Ltd. Taichung Commercial Bank Cultural and Educational Foundation Greenworld Food Co., Ltd. Pan Asia Chemical Corporation Chou Chin Corporation Chou Chang Co., Ltd. Formosa Imperial Wineseller Corp. TCCBL Co., Ltd. Others Taichung Bank Insurance Brokers Co., Ltd. Taichung Commercial Bank Workers’ Welfare Commission Reliance Securities Investment Trust Co., Ltd. Reliance Consolidated Securities Co., Ltd. Chou Chin Corporation Pan Asia Chemical Corporation Others		2012
	Balance,ending $ 291,365 161,041 130,530 60,532 39,280 15,172 8,138 990 648 782 424 52 49 180,451 $ 889,454	Interest rate collars % 0.13~1.09 0.00～1.35 0.02～2.38 0.00～0.66 0.13 0.13～1.09 0.02～1.37 0.13 0.02～0.13 0.13 0.02 0.13 0.05～0.50 0.00～0.38 2011	Interest expenditure
				$ 932 1,510 3,101 1,089 44 165 110 1 1 - - 4 165 1,708 $ 8,830
	Balance,ending $ 140,981 130,904 133,057 15,269 312 224 158,928 $ 579,675	Interest rate collars % 0.06~1.09 0.06~2.38 0.00~1.35 0.06~1.09 0.06~0.13 0.06~0.13 0.00~2.38		Interest expenses
				$ 628 3,044 1,073 144 - 2 1,504 $ 6,395

With the exception of the interest rate for bank clerks’ deposits on Dec. 31, 2012 and 2011, both 2.38%, the other interest rates are not materially different from those offered to general customers.

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(4) Deposits received

Deposits received
Taichung Bank Insurance Brokers Co., Ltd. Taichung Commercial Bank Lease Enterprise		December 31,2012 Amount % $ 58 - 120 - $ 178 -			December 31,2011
		Amount $ 58 120 $ 178			Amount $ 58 - $ 58		%
							- - -

(5) Service Fee

Service Fee
Taichung Bank Insurance Brokers Co., Ltd. Reliance Securities Investment Trust Co., Ltd.		2012		% 30 - 30	2011
		Amount $ 368,287 5,082 $ 373,369			Amount $ 231,355 4,319 $ 235,674		%
							24 - 24

Said amount refers to the revenue from promotion and sale of insurance products and channels. The trading price between the Bank and stakeholders is similar to that between the Bank and non-stakeholders.

• (6) Asset trade

The Company has sold its fixed assets and other assets to Taichung Commercial Bank Lease Enterprise at book value off NTD214 thousand at sale price of NTD231 thousand , which resulted in capital gain of NTD17 thousand.

• (7) Other business expenses

Other business expenses
Greenworld Food Co., Ltd.		2012		% -		2011
		Amount $ 537				Amount $ 103		%
								-

The aforementioned amount is recognized as other business expenses. The transaction prices between the Company and its related parties are the same as with unrelated parties.

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• (8) Information about salary and remuneration of directors, supervisors and primary management

management
Salaries Reward Special subsidies, et al. (Note 1) Remuneration and bonus to directors (Note 2)	2012 $ 44,204 2,450 2,107 117	2011
		$ 41,237 2,408 2,042 216

• Note 1: The special subsidies, et al. include special subsidies and various allowances.

• Note 2: The information regarding salaries and remuneration for 2011 includes the remuneration to directors/supervisors and bonuses to the primary management according to the motion for earnings allocation resolved by the shareholders’ meetings in 2012. Further, the remuneration to directors/supervisors and employee bonuses to be appropriated for 2012 have not yet been resolved by the shareholders’ meetings. The relevant information may be viewed at MOPS of TSEC.

31. Pledged assets

The pledged assets are stated as follows:

Available-for-sale Financial Assets-overseas bond Held-to-maturity financial assets-government bond Held-to-maturity financial assets-overseas bond	December 31,2012 $ 777,640 999,700 3,850,800 $ 5,628,140	December 31,2011	December 31,2011
			$ 1,039,060 915,100 4,213,930 $ 6,168,090

The Overseas bonds were provided to secure funds borrowed from banks. The Government bonds were deposited as security bonds for provisional seizure at court and for trust business guarantee, which are stated as follows:

Security bond for provisional seizure at court Securities Brokerage business security bond Reserve for trust funds compensation	December 31,2012 $ 794,700 155,000 50,000 $999,700	December 31,2011	December 31,2011
			$ 735,100 130,000 50,000 $ 915,100

32. Significant undertaking or contingent liabilities

In addition to the undertaking for financial products specified in Notes 6 and 18, the Bank has had the following undertakings or contingent liabilities until December 31, 2012 and 2011:

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• (1) Undertaking:

Undertaking:
Undisbursed credit committee (exclusive of credit cards) Credit card committee Guarantee payments Trust liabilities Balance of application for L/C	December 31,2012 $ 102,506,899 10,231,356 7,365,571 41,863,441 4,223,231	December 31,2011
		$ 88,760,384 8,005,108 4,378,115 38,646,037 2,859,121

• (2) The Bank engaged in investing in the structured notes issued and secured by Lehman Brothers Holdings Inc. through the special monetary trustee accounts upon investors’ request. However, Lehman Brothers Holdings Inc. petitioned for bankruptcy with U.S. courts on September 15, 2008. The quotation and redemption of the structured notes issued and secured by it were suspended. Afterwards, it petitioned for an extension and submitted a reorganization plan with a U.S. courts for approval in December 2008, and further petitioned for an extension and submitted two motions in the duration of debt clearance. The U.S. court approved its petition later.

The Bank defined the “Regulations for Settlement of Dispute over Lehman Brothers Structured Notes” and policy for settlement according to the resolution made by the temporary directors’ meeting on May 6, 2009, and indemnified investors at the ratio assessed by the “Banking Dispute Review Board” of the Bankers Association of the Republic of China. Upon evaluation, the Bank has provided the loss from indemnity, NTD161,668 thousand, NTD44,199 thousand, NTD5,050 thousand and NTD10,400 thousand in 2009, 2010, 2011 and 2012, respectively, which were stated as other deposits. As of December 31, 2012, the Bank has paid investors NTD214,221 thousand, and the outstanding indemnity of NTD7,096 thousand was stated as payables.

• (3) The Bank engaged in investing in the structured notes issued by Private Equity Management Group (PEM Group), USD70,617 thousand, through the special monetary trustee accounts upon investors’ request. The SEC alleged that PEM Group was suspected of fraud on April 27, 2009, and petitioned U.S. courts to freeze PEM Group’s assets and conducted a site investigation. The U.S. court has sent a dedicated person to assume the execution of PEM Group’s assets temporarily.

The Bank defined the “PEM Group structured note clients’ interests and rights protection policy” upon the resolution made by the temporary directors’ meeting on May 6, 2009. It resolved to repurchase PEM Group structured notes from investors in whole at the initial selling price of USD70,617 thousand less the accumulated dividends of USD1,090 thousand, namely USD69,527 thousand, in the manner that investors undertake the one-year term deposit in USD of the Bank, of which the interest is accrued at the fixed rate, 1.50%. Upon evaluation, the Bank has provided the loss from indemnity, NTD1,155,969 thousand (approx. USD36,090 thousand) and NTD439,135 thousand (approx. USD15,075 thousand) in 2009 and 2010, which were stated as other deposits. As of December 31 2010, the Company has compensated the investors in full amount of USD69,527 thousand (approximately NTD2,226,621 thousand). In 2011, the Company has incrementally recovered PEM compensation totaled USD11,900 thousand. In February 2011, the Company accepted its assets in the form of insurance policy as compensation at USD17,110

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thousand at transfer pricing. The Company has already retained lawyers in related judicial proceeding for remedial actions for protecting its rights and privileges.

• (4) The balance sheet and trust property catalogue of the trust account is disclosed pursuant to Article 17 of the “Enforcement Rules of Trust Enterprise Act” as follows:

Balance Sheet of Trust Accounts December 31, 2012

Trust assets Bank deposits Fund investment Structured product investment Real estate Land Buildings and structures Securities in custody Total trust assets		Amount $ 1,130,363 37,576,041 658,870 1,019,434 12,648 1,466,085 $ 41,863,441	Trust liabilities Payable securities in custody Trust capital Money trust Real estate trust Net income Deferred carry-over Total trust liabilities		Amount
					$ 1,466,085 39,365,274 1,032,082 658,938 ( 658,938 ) $41,863,441

Property Catalogue of Trust Accounts December 31, 2012 Investment Bank deposits Fund investment Structured product investment Real estate Land Buildings and structures Securities in custody		Amount
		$ 1,130,363 37,476,041 658,870 1,019,434 12,648 1,466,085 $ 41,863,441

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Income Statement of Trust Accounts 2012

Income Statement of Trust Accounts 2012
Trust income Interest revenue Trust expenses Administration expenses Taxation Income before taxation Income tax expenses Income after taxation	Amount
	$ 977,059 ( 317,692) ( 429 ) 658,938 - $ 658,938

Balance Sheet of Trust Accounts December 31, 2011

Trust assets Bank deposits Fund investment Structured product investment Real estate Land Buildings and structures Total trust assets		Amount $ 1,105,335 36,186,339 663,484 677,871 13,008 $ 38,646,037	Trust liabilities Trust capital Money trust Real estate trust Net income Deferred carry-over Total trust liabilities		Amount
					$37,955,158 690,879 656,242 ( 656,242 ) $38,646,037

Property Catalogue of Trust Accounts December 31, 2011

Property Catalogue of Trust Accounts December 31, 2011
Investment Bank deposits Fund investment Structured product investment Real estate Land Buildings and structures		Amount
		$ 1,105,335 36,186,339 663,484 677,871 13,008 $ 38,646,037

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Income Statement of Trust Accounts 2011

Income Statement of Trust Accounts 2011
Trust income Interest revenue Trust expenses Administration expenses Taxation Income before taxation Income tax expenses Income after taxation	Amount
	$ 907,730 ( 251,163) ( 325 ) 656,242 - $ 656,242

(5) The Company leased some of its office space from its leasing operation with lease term ranging from 1 to 10 years. Related refundable security deposits amounted to NTD15,558 thousand. Rent is paid on a monthly basis and the lease agreements will expire in 2013 to 2017.

The payable rent of the Company in 5 years ahead is shown below:

Term: 1~~st~~year (January 1, 2013~December 31, 2013) 2ndyear (January 1, 2014~December 31, 2014) 3rdyear (January 1, 2015~December 31, 2015) 4thyear (January 1, 2016~December 31, 2016) 5thyear (January 1, 2017~December 31, 2017)		Amount
		$ 61,959 42,970 29,064 12,800 9,493 $ 156,286

33. Other important notes

The General Meeting of shareholders of the Company passed by motion of assigning related business run by the Securities Department (including assets, liabilities, and business value) to Taichung Commercial Bank Consolidated Securities Co., Ltd. through split up with business value at NTD850,000 thousand while the latter shall issue 85,000 thousand share at NTD10/share totaled NTD850,000 thousand as the transaction price. The split up date was originally made on January 2 2013, but was postponed to March 1 2012 when applying with Financial Supervisory Commission (FSA) later. FSA approved the application in Letter Jin-Guan-Zheng-Quan-Zi No. 1010059030 with the split up date set at May 2 2013. After the split up, Taichung Commercial Bank Consolidated Securities Co., Ltd. shall be a wholly-owned subsidiary of the Company.

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34. Disclosure of information about financial instruments

• (1) Information about fair value

Information about fair	value
Financial assets Financial assets at fair value equivalent to Book Value Financial assets at fair value through profit or loss Available-for-Sale Financial Assets Discounts and loans, net Held to maturity investments, net Stocks- equity method Other financial assets - net Financial liabilities Financial liabilities at fair value equivalent to Book Value Financial liabilities at fair value through profit or loss Customer deposits and remittances Financial bonds payable Other financial liabilities	December 31,2012 Book Value Fair value $ 79,098,981 $ 79,098,981 6,545,279 6,545,279 18,519,719 18,519,719 324,029,419 324,029,419 8,782,945 8,765,282 1,295,662 1,295,662 905,934 905,934 15,936,683 15,936,683 91,591 91,591 385,862,841 385,862,841 13,548,277 13,514,121 17,208 17,208	December 31,2011
	Book Value $ 79,098,981 6,545,279 18,519,719 324,029,419 8,782,945 1,295,662 905,934 15,936,683 91,591 385,862,841 13,548,277 17,208	Book Value $ 85,268,809 1,096,769 4,211,580 277,756,366 9,439,040 216,970 850,396 14,023,570 51,804 333,832,631 10,512,559 22,521	Fair value
			$ 85,268,809 1,090,769 4,211,580 277,756,366 9,420,022 216,970 850,396 14,023,570 51,804 333,832,631 10,575,231 22,521

• (2) The following methods and hypotheses for the valuation of fair value of financial instruments are applied:

• The Book Value of short-term financial instruments stated in the balance sheet shall be the fair value of such instruments. The reason is that the maturity date of these instruments is close and it would be reasonable to use the Book Value in the valuation of fair value. This method is applied to the valuation of cash and cash equivalents, due from Central Bank of the Republic of China (Taiwan) and lend to banks, receivable accounts (excluding Receivable Refundable Tax), Deposits of Central Bank of the Republic of China (Taiwan) and other banks, Bills & Bonds Sold under Repurchase Agreements, payables (excluding income tax payable) and remittances.

• The open market price of financial instruments at fair value through profit or loss, available-for sale financial assets, held-to-maturity financial assets and financial bonds payable, if any, shall be the fair value of such assets. Where there is no such active market price available, the fair value shall be estimated under the evaluation method. The estimation and hypotheses used in the evaluation method adopted by the Bank are identical to information about the estimation and hypotheses applied by the market participants in setting the price of the financial instruments, and such information is available to the Bank. Where there is no open market price of financial derivatives available for reference, the fair value of the various contracts shall be estimated at the cash flow discounting method according to the foreign exchange rate displayed in the Reuters’ quotation system.

• The equity investment under equity method refers to the equity of unlisted (non-OTC) companies and no open market price thereof is available. Besides, the verifiable fair value thereof may be perceived with the cost exceeding the reasonable cost. Therefore, the fair value of such investment shall be the book value thereof.

‐ 239 -239

1. Discounts and loans, funds borrowed from CBC and banks, and deposits, are all financial instruments with interest accruing thereon. Therefore, their Book Value is similar to the current fair value. The Book Value of Delinquent loans refers to the projected collected amount less allowance for bad debt. Therefore, the Book Value is also the fair value.

2. The financial assets at cost which are unlisted (non-OTC) stocks without significant influence will have no public market price available, and the fair value thereof can be sought only at the price exceeding the reasonable cost. Therefore, the fair value thereof shall be the Book Value.

3. (3) The fair value of financial assets and financial liabilities is determined by the open market quotation and evaluated under the evaluation method:

Financial assets Financial assets at fair value through profit or loss Available-for-Sale Financial Assets Held-to-maturity financial assets Stocks- equity method Financial assets at cost Financial liabilities Financial liabilities at fair value through profit or loss Financial bonds payable	Determined by open market quotation December 31,2012 December 31,2011 $6,545,279 $1,096,769 18,519,719 4,211,580 1,672,227 1,784,634 - - - - 91,591 51,804 13,514,121 10,575,231	Evaluated under evaluation method	Evaluated under evaluation method
	December 31,2012 $6,545,279 18,519,719 1,672,227 - - 91,591 13,514,121	December 31,2012 $ - - 7,093,055 1,295,662 143,486 - -	December 31,2011
			$ - - 7,635,388 216,970 143,486 - -

• (4) The financial assets recognized in December 31, 2012 and 2011 based on the changes in fair value estimated under interest rate changes were NTD130,771,493 thousand and NTD117,500,842 thousand, and the financial liabilities NTD153,379,817 thousand and NTD108,194,680 thousand. The financial assets recognized based on changes in cash flow estimated under interest rate changes were NTD287,017,572 thousand and NTD243,034,446 thousand, and the financial liabilities NTD245,721,592 thousand and NTD235,565,260 thousand.

• (5) The Bank’s total interest revenue of financial assets or financial liabilities other than those at fair value, and those at fair value through profit or loss, in 2012 and 2011 were NTD8,596,368 thousand and NTD7,415,600 thousand. The total interest expenses thereof were NTD3,148,129 thousand and NTD2,472,427 thousand. Unrealized gains (losses) on available-for-sale financial assets stated as adjustment items of shareholders’ equity were NTD66,639 thousand and NTD(43,781) thousand and deduction from adjustment items of shareholders' equity recognized as

‐ 240 -240

impairment loss amounted to NTD14,266 thousand and NTD63,833 thousand, respectively.

• (6) Information about financial risk

1. Market Risk

The fair value of the bonds, notes and loans at fixed interest rate, and similar financial instruments held by the Bank will vary depending on the changes in the market interest rate on the balance sheet date. The analysis regarding sensitivity of fair value of such financial instruments per increase of 0.01% in the market interest rate is specified as follows:

Currency			December 31,2012	December 31,2012	December 31,2012
	Less than one month	More than one month and less than three months	More than three months and less than six months	More than six months and less than oneyear	More than one year and less than sevenyears	More than sevenyears	Total
NTD USD Others	$ 18,838 134 ( 46 )	$ 223 322 ( 6 )	( $ 18,750 ) ( 488 ) ( 71 )	( $ 3,867 ) ( 258 ) ( 39 )	$ 4,003 549 349	$ 942 - -	$ 1,389 259 187

The Bank adopted the Standard Method to evaluate the market risk of financial products to estimate the potential risk for loss on-balance sheet and off-balance sheet due to uncertain changes in the market price value of financial instruments within some periods. The Bank’s market risk evaluation covered interest rate risk, equity securities risk and foreign exchange risk. The following indicates the risk value subject to the various types of market risk of the Bank’s financial instruments, including the yearly maximum and minimum means adopted from the means of the total risk values of the year preceding to December 31, 2012 and 2011 respectively.

Market Risk Type Interest rate risk Equity risk Foreign exchange risk	December 31,2012 Yearlymean Maximum Minimum $ 21,245 $ 37,583 $ 3,079 74,489 99,923 48,845 13,772 29,440 3,038	December 31,2012 Yearlymean Maximum Minimum $ 21,245 $ 37,583 $ 3,079 74,489 99,923 48,845 13,772 29,440 3,038	December 31,2011	December 31,2011	December 31,2011
	Yearlymean $ 21,245 74,489 13,772	Maximum $ 37,583 99,923 29,440	Yearlymean $ 23,129 101,493 7,288	Maximum $ 36,683 165,112 17,544	Minimum
					$ 9,700 33,491 2,314

2. Credit Risk

The financial instruments held or issued by the Bank might suffer loss due to the trading counterpart’s or the other party’s failure to perform contractual obligations. The Bank will evaluate credit carefully to grant loans, loan commitments and guarantees. The loans secured by collateral accounted for about 75% of the total credit loans on December 31, 2012. The proportion of financing guarantee and collateral held by commercial L/C was approximately 12%, because the collateral required by loans, loaning commitments or guarantees usually referred to cash, inventory, marketable securities or other property. In the event of the trading counterpart’s or the other party’s default, the Bank was entitled to perform compulsory execution against the collateral or other guarantees to effectively reduce the credit risk, provided that the fair value of collateral would not be taken into consideration when the maximum credit exposure was disclosed. The Bank evaluated the contract bearing

‐ 241 -241

positive fair value on the balance sheet date as the counterpart. The maximum credit exposures on December 31, 2012 and 2011 were NTD297,177,443 thousand and NTD244,298,087 thousand. Further, the maximum exposures of undertakings and contracts based on credit risk on the off-balance sheet are specified as following:

specified as following:
Credit commitment (exclusive of credit cards) Credit card committee	December 31,2012 $ 102,506,899 10,231,356	December 31,2011
		$ 88,760,384 8,005,108

Where financial instrument transactions are apparently concentrated on one person, or most of the multiple trading counterparts of financial instruments are engaged in similar business activities and possess similar economic characteristics and thereby the effects of economic or other conditions to their ability to perform the contracts are similar, the concentration of credit risk arises accordingly. The characteristics of credit risk concentration include the nature of business activities conducted by debtors. The Bank did not concentrate any transactions on one single customer or trading counterpart, other than similar counterparts, industrial type, and regions. The amount of contract based on concentrated credit risk:

Counterpart Private enterprise Natural person Others Industrial type Private party Manufacturer Commerce Real estate Warehousing and information Commercial and industrial service business Others Region Domestic Territory of America Territory of Asia Other territories	December 31,2012 $ 185,813,684 148,770,569 817,718 $ 335,401,971 December 31,2012 $ 148,770,569 72,980,979 51,852,976 25,355,573 8,567,530 8,311,811 19,562,533 $ 335,401,971 December 31,2012 $ 323,648,675 3,740,586 6,545,377 1,467,333 $ 335,401,971	December 31,2011	December 31,2011
		$ 149,856,760 134,411,891 1,407,760 $ 285,676,411 December 31,2011
		$ 134,411,891 59,069,525 42,290,413 22,486,309 7,079,389 6,266,412 14,072,472 $ 285,676,411 December 31,2011
			$ 277,567,134 5,302,656 2,476,460 330,161 $ 285,674,411

‐ 242 -242

3. Liquidity Risk

The Bank’s Liquidity Ratios on December 31, 2012 and 2011 were both 20%. The Bank’s capital and working funds are sufficient to perform all contractual obligations. Therefore, there is no liquidity risk arising from the failure to raise funds to perform contractual obligations. It is very unlikely that the financial derivatives held by the Bank could not be sold at a reasonable price on the market. Therefore, there is low liquidity risk for realization.

The Bank’s basic management policy is to coordinate the maturity date of assets and liabilities and interest rates and to control gaps. Due to the uncertainty in trading terms and different types, usually it is impossible to coordinate the maturity date of assets and liabilities and interest rates perfectly. The gaps might generate potential gain or loss. The Bank applied the appropriate approach to conduct maturity analysis to evaluate the liquidity by nature of assets and liabilities. The maturity analysis is specified as follows:

Unit: NTD thousand

Assets			D	ecember 31, 201	2
	Less than one month	More than one month and less than three months	More than three months and less than six months	More than six months and less than one year	More than one year and less than sevenyears	More than seven years	Total
	$9,848,878 56,625,658 3,456,540 1,429,547 17,700,583 49,998 116,335 - 1,791	$ - 1,184,690 2,928,348 447,551 24,669,961 - - - 1,791	$ - 1,919,501 11,286 545,924 36,292,659 - - - -	$ - 3,154,139 1,005 98,819 51,980,295 500,048 - - -	$ - 3,869,361 148,100 142,409 97,298,704 9,960,724 18,403,384 - 2,580	$ - - - - 99,350,281 - - 1,295,662 903,560	$ 9,848,878 66,753,349 6,545,279 2,664,250 327,292,483 10,510,770 18,519,719 1,295,662 909,722
Cash and cash equivalents Due from CBC and lend to Banks Financial assets at fair value through profit or loss Accounts receivable Discounts and loans Held-to-maturity financial assets Available-for-Sale Financial Assets Long-term equity investment under equity method Other financial assets Total assets Liabilities
	89,229,330	29,232,341	38,769,370	55,734,306	129,825,262	101,549,503	444,340,112
	2,429,232 871,200 25,226 264,045 7,202,711 36,783,646 - 17,208	1,233,337 1,016,400 33,414 - 697,597 40,641,589 - -	167,380 - 10,096 - 764,668 74,047,031 2,400,000 -	1,321,599 - 1,005 - 86,027 107,584,610 - -	- - 21,850 - 145,765 126,805,965 11,148,277 -	- - - - - - - -	5,151,548 1,887,600 91,591 264,045 8,896,768 385,862,841 13,548,277 17,208
Due to CBC and banks Funds borrowed from CBC and other banks Financial liabilities at fair value through profit or loss Bills and bonds sold under repurchase agreements Payables Customer deposits and remittances Financial bonds payable Other financial liabilities Total liabilities Net liquidity gap
	47,593,268	43,622,337	77,389,175	108,993,241	138,121,857	-	415,719,878
	$41,636,062	($14,389,996)	($38,619,805)	($53,258,935)	($8,296,595)	$101,549,503	$28,620,234

‐ 243 -243

Unit: NTD thousand

Assets			D	ecember 31, 201	1
	Less than one month	More than one month and less than three months	More than three months and less than six months	More than six months and less than one year	More than one year and less than sevenyears	More than sevenyears	Total
	$ 8,349,890 44,598,749 1,038,016 1,687,226 12,499,135 37,928 - - 680	$ - 18,585,232 48,490 442,828 21,833,148 - 451,078 - 679	$ - 4,790,052 10,263 475,203 30,530,731 - - - -	$ - 2,823,518 - 63,941 48,965,788 243,169 49,973 - -	$ - 3,470,173 - 330,683 83,042,260 3,930,483 10,662,531 - -	$ - - - - 83,822,111 - - 216,970 850,396	$ 8,349,890 74,267,724 1,096,769 2,999,881 280,693,173 4,211,580 11,163,582 216,970 851,755
Cash and cash equivalents Due from CBC and lend to Banks Financial assets at fair value through profit or loss Accounts receivable Discounts and loans Available-for-Sale Financial Assets Held-to-maturity financial assets Long-term equity investment under equity method Other financial assets Total assets Liabilities
	68,211,624	41,361,455	35,806,249	52,146,389	101,436,130	84,889,477	383,851,324
	1,588,587 454,350 3,043 6,709,333 31,000,300 - -	229,257 1,665,950 6,029 259,915 34,690,648 - 22,521	29,797 454,350 642 340,494 55,059,784 - -	1,592,357 302,900 - 151,222 96,822,028 - -	- - 42,090 222,537 116,259,871 10,512,559 -	- - - - - - -	3,439,998 2,877,550 51,804 7,683,501 333,832,631 10,512,559 22,521
Due to CBC and banks Funds borrowed from CBC and other banks Financial liabilities at fair value through profit or loss Payables Customer deposits and remittances Financial bonds payable Other financial liabilities Total liabilities Net liquidity gap
	39,755,613	36,874,320	55,885,067	98,868,507	127,037,057	-	358,420,564
	$28,456,011	$4,487,135	($20,078,818)	($46,722,118)	($25,600,927)	$84,889,477	$25,430,760

4. Cash flow risk estimated under interest rate changes

The future cash flow of assets or liabilities estimated based on floating interest rates held or borne by the Bank might fluctuate and even generate risk due to market interest rate changes. However, upon evaluation, the Bank, in practice, tends to control the net liquidity gap to reduce cash flow risk resulting from interest rate changes.

(7) Information on levels of fair value of financial instruments

Financial instruments at fair value throughprofit or loss Non-financial derivatives Assets Financial assets at fair value through profit or loss Stock investment Others Available-for-Sale Financial Assets Stock investment Bond investment Financial derivatives Assets Financial assets at fair value through profit or loss		December	31,2012
	Total $ 1,131,755 5,216,376 50,294 18,469,425 197,148	Level 1 $ 1,131,755 5,216,376 50,294 18,469,425 -	Level 2 $ - - - - 197,148	Level 3
				$ - - - - -

‐ 244 -244

Liabilities Financial liabilities at fair value through profit or loss Total Financial instruments at fair value throughprofit or loss Non-financial derivatives Assets Financial assets at fair value through profit or loss Stock investment Others Available-for-Sale Financial Assets Stock investment Bond investment Others Financial derivatives Assets Financial assets at fair value through profit or loss Liabilities Financial liabilities at fair value through profit or loss Total	(	91,591 ) $ 24,883,407		- $ 24,867,850 December	( 91,591 ) $ 105,557 31,2011	( 91,591 ) $ 105,557 31,2011		- $ -
		Total $ 982,393 27,696 37,352 4,169,579 4,649 86,680 51,804 ) $ 5,256,545		Level 1 $ 982,393 27,696 37,352 4,169,579 4,649 - - $ 5,221,669		Level 2 $ - - - - - 86,680 51,804 ) $ 34,876		Level 3
	(				(			$ - - - - - - - $ -

35. Risk control and hedging strategies

The Bank has defined a risk management policy in writing, covering the entire operating strategies and risk management philosophy. The overall risk management plan is to minimize potential harmful effects to the Bank’s business performance. The Board of the Bank has approved the written overall risk management policy and the written policies towards specific risk (e.g. credit risk, market risk, operation risk, liquidity risk, and country risk, etc.). The Board of the Bank is the supreme risk management unit, and will review written policies and actual status to ensure that the risk management policies are executed precisely.

The Bank has established a Risk Management Commission and Risk Management Dept. responsible for granting risk authority and the relevant authorities to the relevant departments to ensure the successful operation of risk management. An Executive Vice President shall be appointed as the Secretary General of the Risk Management Committee by the President under the authorization of the Board. The Committee’s functions are specified as follows:

• (1) Review of risk management projects.

• (2) Measure various risk management scopes.

• (3) Review of motions for institutionalization of risk management.

• (4) Periodical report to the Board.

The commissioners of the Risk Management Committee shall set the various risk management indicators by nature of business and functions of departments and report them to the Risk Management Committee for high-ranking supervisors’ reference in decision making.

‐ 245 -245

36. Capital adequacy ratio

Unit: NTD thousand; %

			December 31,2012	December 31,2011
Self-owned Capital	Tier I Capital		26,404,873	24,318,987
	Tier II Capital		6,075,667	5,246,668
	Tier III Capital		-	-
	Self-owned Capital		32,480,540	29,565,655
Total risk-weighted assets	Credit Risk	Standardized Approach	297,177,443	244,298,087
		Internal Ratings-Based Approach	-	-
		Asset Securitization	-	-
	Operation risk	Basic Indicator Approach	9,572,388	9,243,025
		Standard method/ optional standard method	-	-
		Advanced Measurement Approach	-	-
	Market Risk	Standardized Approach	1,481,200	782,175
		Internal Models Approach	-	-
	Total risk-weighted assets		308,231,031	254,323,287
Capital adequacyratio			10.54	11.63
Proportion of Tier I capital to risk assets			8.57	9.56
Proportion of Tier II capital to risk assets			1.97	2.07
Proportion of Tier III capital to risk assets			-	-
Ratio of common stock to total assets			5.22	5.81
Leverage ratio			6.39	6.73

• Note 1: The Shares and dividends and the amount of weighed average risk assets shall be filled in as required in “Regulation for Banks in the Management of Capital Adequacy”, and “Explanation and Forms for the Calculation of Shares and dividends and Risk Assets by Banks”.

• Note 2: The annual financial statement shall specify the Capital adequacy ratios for the current period and the previous period. The semiannual financial statement shall also disclose the Capital adequacy ratio at the end of the previous year, in addition to those for the current period and previous period.

Note 3: Equations for financial analysis:

1. Total Self-owned Capital = Tier I Capital + Tier II Capital + Tier III Capital

2. Total amount of risk-weighed-assets = Credit risk-weighed assets + Capital charge of (operational risk + market risk) x 12.5.

3. Capital Adequacy ratio = Total self-owned capital / Total amount risk-weighed assets.

4. Proportion of Tier I capital to risk assets = Tier I Capital / Total risk-weighted asset

5. Proportion of Tier II capital to risk assets = Tier II Capital / Total risk-weighted asset

‐ 246 -246

1. Proportion of Tier III capital to risk assets = Tier III Capital / Total risk-weighted asset

2. Ratio of common stock to total assets = Common stock/ Total assets

3. Leverage ratio=Tier I Capital/Average assets upon adjustment(average assets less Tier I Capital “Good Will”, “Unamortized Loss from Sale of NPL” and the deduction from Tier I Capital referred to in the “Explanation and Forms for the Calculation of Shares and dividends and Risk Assets by Banks”)

37. Mean and average interest rate of assets and liabilities with interest

The mean shall be estimated based on the daily average value of the assets and liabilities with interest.

liabilities with interest.
Assets Deposits of CBC and other banks Due to the CBC Call loans to banks Financial assets-Trading Bonds and securities sold under repurchase agreements Receivable credit card loans Discounts and loans Available-for-Sale Financial Assets Held-to-maturity financial assets Liabilities Deposits of other banks Call loans to banks Funds borrowed from CBC and other banks Bonds sold under repurchase agreements Current deposits Current deposits and saving deposits Financial bonds payable	2012
	Mean $ 1,025,042 72,578,472 1,104,219 1,334,033 508,171 181,908 297,783,219 10,131,121 11,681,705 1,964,715 3,570,166 2,341,324 244,673 154,191,337 197,222,705 10,929,044	Average interest rate
		0.16% 0.77% 0.85% 0.88% 0.78% 13.85% 2.56% 1.64% 0.42% 1.37% 0.65% 1.16% 0.68% 0.20% 1.26% 2.46%

‐ 247 -247

Assets Deposits of CBC and other banks Due to the CBC Call loans to banks Financial assets-Trading Bonds and securities sold under repurchase agreements Receivable credit card loans Discounts and loans Available-for-Sale Financial Assets Held-to-maturity financial assets Liabilities Deposits of other banks Call loans to banks Bonds sold under repurchase agreements Funds borrowed from CBC and other banks Current deposits Current deposits and saving deposits Financial bonds payable	2011
	Mean $ 838,361 68,154,115 214,802 13,164 14,743 166,451 259,375,403 1,531,405 12,858,488 1,968,970 2,068,693 727,504 2,068,514 141,149,201 166,157,353 9,503,346	Average interest rate
		0.05% 0.76% 1.98% 0.93% 0.73% 14.42% 2.55% 3.29% 0.51% 1.31% 0.73% 0.54% 0.84% 0.18% 1.16% 2.45%

‐ 248 -248

Asset quality	December 31, 2011	Allowance for bad debt coverage rate (Note 3)	354.64%	718.84%	52.61%	8,528.34%	728.95%	56.10%	979.68%	348.52%		December 31, 2011	Allowance for bad debt coverage rate	816.52%	-	NPL or non-performing receivable accounts exempted from report	December 31, 2011	Total non-performing receivable accounts exempted from report	9,870	11,177	21,047
		Allowance for bad debt	751,310	1,725,895	75,522	26,182	105,589	123,598	134,706	2,942,802			Allowance for bad debt	21,989	-
		NPL rate (Note 2)	0.24%	0.42%	0.33%	0.96%	2.12%	0.26%	0.29%	0.30%			NPL rate	0.66%	-			Total NPL exempted from report in 2011	88,541	37,921	126,462
		Total amount	88,737,006	57,544,276	42,864,096	32,064	682,364	86,030,910	4,802,457	280,693,173			Balance of receivable accounts	409,446	-
		NPL amount (Note 1)	211,851	240,094	143,560	307	14,485	220,334	13,750	844,381			NPL amount	2,693	-		December 31, 2012	Total non-performing receivable accounts exempted from report	7,424	11,340	18,764
	December 31, 2012	Allowance for bad debt coverage rate (Note 3)	187.72%	531.55%	66.67%	5,924.10%	732.12%	71.40%	936.52%	275.39%		December 31, 2012	Allowance for bad debt coverage rate	410.72%	-
		Allowance for bad debt	973,393	1,942,816	79.073	18,187	64,939	129,554	110,659	3,318,621			Allowance for bad debt	27,329	-			Total NPL exempted from report	59,683	27,874	87,557
		NPL rate (Note 2)	0.49%	0.50%	0.25%	1.41%	1.55%	0.19%	0.22%	0.37%			NPL rate	1.42%	-
		Total amount	106,044,255	72,477,658	47,828,501	21,835	574,003	95,048,642	5,297,589	327,292,483			Balance of receivable accounts	470,102	-				Amount exempted from report upon debt negotiation and performance (Note 8)	Performance of debt clearance program and rehabilitation program (Note 9)	Total
		NPL amount (Note 1)	518,524	365,503	118,608	307	8,870	181,443	11,816	1,205,071			NPL amount	6,654	-
	Item Type		Secured	Non-secured	Residential mortgage loans (Note 4)	Cash card	Small credit loans (Note 5)	Secured	Non-secured	Total amount		Item Type		Credit card	Factoring without recourse (Note 7)
								Others (Note 6)
			Corporate banking		Personal banking

249

• Note 1: The NPL amount is recognized according to "Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing Non-accrual Loans". The credit card NPL is recognized based on that provided under the Letter Jin-Guan-Yin (4) Zi No. 0944000378 dated July 6, 2005.

• Note 2: NPL rate=NPL/Total amount; Credit card NPL rate=NPL/balance of receivable accounts.

• Note 3: Allowance for bad debt coverage rate=allowance for bad debt provided for loans/NPL amount; allowance for bad debt coverage rate for receivable accounts of credit cards=allowance for bad debt provided for receivable accounts of credit cards/NPL amount.

• Note 4: Borrowers apply for residential mortgage loans for the purpose of purchasing or building residences or decorating houses. The loans shall be secured by the residence purchased (owned) by the borrower himself/herself, or his/her spouse or minor children in full, and the mortgage shall be pledged to the financial institution.

• Note 5: Small credit loans mean those provided in the Letter under Jin-Guan-Yin (4) Zi No. 09440010950 dated December 19, 2005 and those other than small loans by credit cards/cash cards.

• Note 6: “Others” for Personal banking refer to the secured or non-secured consumer loans other than “residential mortgage loans”, “cash card loans” and “small credit loans”, exclusive of credit cards loans.

• Note 7: According to the Letter under Jin-Guan-Yin (5) Zi No. 094000494 dated July 19, 2005, factoring without recourse shall be recognized as NPL within three months after the factoring Consignee or insurance company confirms that no compensation should be granted.

• Note 8: Total NPL exempted from report upon debt negotiation and performance and the balance of total non-performing receivable accounts exempted from report upon debt negotiation and performance were disclosed pursuant to the Letter under Jin-Guan-Yin (1) Zi No. 09510001270 dated April 25, 2006.

• Note 9: The balance of total NPL exempted from report upon performance of debt clearance program and rehabilitation program and balance of total non-performing receivable accounts exempted from report upon performance of debt clearance program and rehabilitation program were disclosed pursuant to the Letter under Jin-Guan-Yin (1) Zi No. 09700318940 dated September 15, 2008.

‐ 250 -250

(2) Status of credit risk concentration

December 31, 2012

Unit: NTD thousand

Rank (Note 1)	Business type of company or group (Note 2)	Total balance of loan (Note 3)	Proportion to net worth in the Bank’s financial statement on Dec. 31,2012(%)
1	Group A 012612 Separable components manufacturing	$ 4,519,813	16.09%
2	Group B 015590 Other accommodation service	3,175,330	11.30%
3	Group C 012411 Iron and steel Manufacturing	2,352,980	8.38%
4	Group D 010892 Noodleproducts manufacturing	2,219,722	7.90%
5	Group E 012641 LCD andparts manufacturing	2,050,750	7.30%
6	Group F 015510 Short-term accommodation service	1,998,993	7.12%
7	Group G 016811 Real estate lease and sale	1,579,578	5.62%
8	Group H 015101 Civil air transportation	1,553,560	5.53%
9	Group I 015610 Restaurant industry	1,506,557	5.36%
10	Group J 014340 Renovation and construction contractor	1,475,454	5.25%

December 31, 2011

Unit: NTD thousand

Rank (Note 1)	Business type of company or group (Note 2)	Total balance of loan (Note 3)	Proportion to net worth in the Bank’s financial statement on Dec. 31,2011(%)
1	Group A 012612 Separable components manufacturing	$ 3,278,053	12.87%
2	Group E 012641 LCD andparts manufacturing	2,623,206	10.30%
3	Group B 015590 Other accommodation service	2,558,358	10.05%

(Continued on next page)

‐ 251 -251

(Continued from previous page)

Rank (Note 1)	Business type of company or group (Note 2)	Total balance of loan (Note 3)	Proportion to net worth in the Bank’s financial statement on Dec. 31,2011(%)
4	Group D 010892 Noodleproducts manufacturing	$ 2,504,646	9.84%
5	Group C 012411 Iron and steel Manufacturing	1,852,228	7.27%
6	Group F 015510 Short-term accommodation service	1,747,814	6.86%
7	Group K 015101 Civil air transportation	1,597,488	6.27%
8	Group I 015610 Restaurant industry	1,508,954	5.93%
9	Group L 016811 Real estate lease and sale	1,500,000	5.89%
10	Group H 015101 Civil air transportation	1,495,092	5.87%

• Note 1: The top ten enterprises other than public or state enterprises were identified according to rank of the total balance of loans to these enterprises. If the account refers to a group, the loan to the group should be identified and summed up, and disclosed in the form of “code” and “business type”. In the case of group, the business type of the group with the maximum exposure should be disclosed. The business type shall be specified in “detailed item” according to the business classification defined by Directorate General of Budget, Accounting and Statistics (e.g. Company (Group) A, LCD and parts manufacturing).

• Note 2: The enterprises mean those defined in Article 6 of “Supplementary Rules of TSEC’s Criteria for Reviewing Listing of Marketable Securities”.

• Note 3: The balance of total credit extension means the total balance of the various loans (including import negotiation, export negotiation, discount, overdraft, short-term loans, short-term secured loans, receivable securities financing, mid-term loans, mid-term secured loans, long-term loans, long-term secured loans, Delinquent loans), inward remittances, factoring without recourse, Acceptances receivable and guarantee payments.

‐ 252 -252

(3) Interest rate sensitivity information

Interest rate sensitivity assets and liabilities analysis data (NTD)

December 31, 2012

Unit: NTD thousand; %

Item	1 to 90 days (inclusive)	91 to 180 days (inclusive)	181 days to 1 year (inclusive)	Over 1 year	Total
Interest rate sensitivityassets	302,093,450	12,250,828	16,462,024	58,472,047	389,278,349
Interest rate sensitivityliabilities	111,117,375	199,719,452	55,135,259	8,702,696	374,674,782
Interest rate sensitivity gap	190,976,075	( 187,468,624 )	( 38,673,235 )	49,769,351	14,603,567
Net Value					28,081,100
Interest rate sensitivityassets and liabilities rate					103.90
Interest rate sensitivity gapand net worth rate					52.00

December 31, 2011

Unit: NTD thousand; %

Item	1 to 90 days (inclusive)	91 to 180 days (inclusive)	181 days to 1 year (inclusive)	Over 1 year	Total
Interest rate sensitivityassets	264,233,551	15,430,434	12,794,718	42,660,268	335,118,971
Interest rate sensitivityliabilities	108,052,057	167,868,673	43,355,443	5,171,346	324,447,519
Interest rate sensitivity gap	156,181,494	( 152,438,239)	( 30,560,725)	37,488,922	10,671,452
Net Value					25,461,054
Interest rate sensitivityassets and liabilities rate					103.29
Interest rate sensitivity gapand net worth rate					41.91

• Note 1: The table specifies the amount in NTD (exclusive of foreign currencies) of Head Office and local branches.

• Note 2: Interest rate sensitivity assets and liabilities mean the assets and liabilities with interest of which the income or cost varies depending on the interest rate.

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

• Note 4: Interest rate sensitivity assets and liabilities rate=Interest rate sensitivity assets ÷ interest rate sensitivity liabilities (i.e. interest rate sensitivity assets and interest rate sensitivity liabilities in NTD)

‐ 253 -253

Interest rate sensitivity assets and liabilities analysis data (USD)

December 31, 2012

Unit: USD thousand; %

Item	1 to 90 days (inclusive)	91 to 180 days (inclusive)	181 days to 1 year (inclusive)	Over 1 year	Total
Interest rate sensitivityassets	320,404	182,871	42,412	366,956	912,643
Interest rate sensitivityliabilities	249,587	350,674	131,326	-	731,587
Interest rate sensitivity gap	70,817	( 167,803 )	( 88,914 )	366,956	181,056
Net value					966,980
Interest rate sensitivityassets and liabilities rate					124.75
Interest rate sensitivity gapand net worth rate					18.72

December 31, 2011

Unit: USD thousand; %

Item	1 to 90 days (inclusive)	91 to 180 days (inclusive)	181 days to 1 year (inclusive)	Over 1 year	Total
Interest rate sensitivityassets	253,787	164,116	27,608	310,404	755,915
Interest rate sensitivityliabilities	146,352	326,751	81,526	-	554,629
Interest rate sensitivity gap	107,435	( 162,635 )	( 53,918 )	310,404	201,286
Net value					840,576
Interest rate sensitivityassets and liabilities rate					136.29
Interest rate sensitivity gapand net worth rate					23.95

• Note 1: The table specifies the total amount in USD of Head Office and local branches, International Banking Branch and offshore branches, exclusive of contingent assets or liabilities.

• Note 2: Interest rate sensitivity assets and liabilities mean the assets and liabilities with interest of which the income or cost varies depending on the interest rate.

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

• Note 4: Interest rate sensitivity assets and liabilities rate=Interest rate sensitivity assets ÷ interest rate sensitivity liabilities (i.e. interest rate sensitivity assets and interest rate sensitivity liabilities in USD)

‐ 254 -254

(4) Profitability

Unit: %

Profitability			Unit: %
Item		December 31,2012	December 31,2011
ROA	Before taxation	0.80	0.53
	After taxation	0.67	0.40
ROE	Before taxation	12.34	8.53
	After taxation	10.38	6.48
Netprofit rate		40.53	25.45

Note: 1. ROA = Income before (after) taxation/Average total assets

1. ROE=Income before (after) taxation / Average net worth

2. Profit rate = Income after taxation/income-net

3. Income before taxation means the income accumulated from January of the current year until the current quarter

4. (5) Analysis on maturity of assets and liabilities

Analysis of maturity structure of NTD

December 31, 2012

Unit: NTD thousand

	Total		Remainingbalance to maturity	Remainingbalance to maturity	Remainingbalance to maturity
		1 to 30 days	31 to 90 days	91 to 180 days	181 days to 1 year	More than 1 year
Main capital inflow upon maturity	420,818,471	87,942,911	27,937,317	37,720,849	61,345,405	205,871,989
Main capital outflow upon maturity	501,906,144	54,768,498	63,285,690	101,500,710	115,498,201	166,853,045
Gap	(81,087,673)	33,174,413	(35,348,373)	(63,779,861)	(54,152,796)	39,018,944

December 31, 2011

Unit: NTD thousand

	Total		Remainingbalance to maturity	Remainingbalance to maturity	Remainingbalance to maturity
		1 to 30 days	31 to 90 days	91 to 180 days	181 days to 1 year	More than 1 year
Main capital inflow upon maturity	380,570,251	68,295,275	42,934,392	35,470,700	59,250,520	174,619,364
Main capital outflow upon maturity	430,265,099	44,564,497	52,210,394	75,026,018	104,831,100	153,633,090
Gap	(49,694,848)	23,730,778	(9,276,002)	(39,555,318)	(45,580,580)	20,986,274

Note: The table only specifies the amount in NTD (exclusive of foreign currencies) of Head Office and local branches.

‐ 255 -255

Analysis of maturity structure of USD

December 31, 2012

Unit: USD thousand

			Unit	Unit	Unit	:USD thousand
	Total		Remainingbalance to maturity
		1 to 30 days	31 to 90 days	91 to 180 days	181 days to 1 year	More than 1 year
Main capital inflow upon maturity	1,096,567	189,831	231,917	195,528	42,447	436,844
Main capital outflow upon maturity	945,971	238,965	181,303	393,739	131,964	-
Gap	150,596	(49,134)	50,614	(198,211)	(89,517)	436,844

December 31, 2011

Unit: USD thousand

	Total		Remainingbalance to maturity	Remainingbalance to maturity	Remainingbalance to maturity
		1 to 30 days	31 to 90 days	91 to 180 days	181 days to 1 year	More than 1 year
Main capital inflow upon maturity	882,193	143,097	190,798	170,064	27,608	350,626
Main capital outflow upon maturity	772,397	203,858	228,592	273,325	66,622	-
Gap	109,796	(60,761)	(37,794)	(103,261)	(39,014)	350,626

• Note: 1. The table specifies the total amount in USD of Head Office, local branches and International Banking Branch. Unless otherwise provided, it shall be stated at the Book Value, and it is not necessary to include any accounts that are not stated in the table (e.g. negotiable certificates of deposit, bonds or stocks scheduled to be issued).

• Where offshore assets account for more than 10% of the Bank’s total assets, it is necessary to provide supplementary disclosure.

39. Information on exchange rates of financial assets and liabilities denominated in foreign currencies

The information regarding financial assets and liabilities dominated by foreign currency which might arouse material effect:

Financial assets Currency USD EUR JPY HKD GBP AUD CAD SGD CHF ZAR SEK NZD THB RMB	December 31,2012 Foreign currency Exchange rate NTD $ 894,030 29.04 $ 25,962,631 91,548 38.48 3,522,773 1,362,021 0.34 458,184 14,357 3.75 53,783 745 46.81 34,868 3,013 30.17 90,891 282 29.21 8,247 476 23.75 11,307 140 31.83 4,457 825 3.42 2,820 3,415 4.46 15,239 1,494 23.86 35,648 23 0.95 22 32,457 4.66 151,248	December 31,2012 Foreign currency Exchange rate NTD $ 894,030 29.04 $ 25,962,631 91,548 38.48 3,522,773 1,362,021 0.34 458,184 14,357 3.75 53,783 745 46.81 34,868 3,013 30.17 90,891 282 29.21 8,247 476 23.75 11,307 140 31.83 4,457 825 3.42 2,820 3,415 4.46 15,239 1,494 23.86 35,648 23 0.95 22 32,457 4.66 151,248	December 31,2011	December 31,2011	December 31,2011
	Foreign currency $ 894,030 91,548 1,362,021 14,357 745 3,013 282 476 140 825 3,415 1,494 23 32,457	Exchange rate 29.04 38.48 0.34 3.75 46.81 30.17 29.21 23.75 31.83 3.42 4.46 23.86 0.95 4.66	Foreign currency $ 744,438 94,060 1,466,020 21,212 647 2,498 587 1,364 415 2,810 243 1,277 23 5,316	Exchange rate 30.29 39.20 0.39 3.90 46.75 30.75 29.68 23.32 32.20 3.72 4.38 23.40 0.96 4.81	NTD
					$ 22,549,041 3,687,134 572,774 82,686 30,238 76,824 17,426 31,808 13,355 10,463 1,064 29,875 23 25,558

(Continued on next page)

‐ 256 -256

(Continued from previous page)

Non-Currency USD AUD Financial liabilities Currency USD EUR JPY HKD GBP AUD CAD SGD CHF ZAR SEK NZD THB RMB Non-Currency USD	December 31,2012 Foreign currency Exchange rate NTD $ 17,897 29.04 $ 519,723 20,348 30.17 613,911 766,388 29.04 22,255,904 30,028 38.48 1,155,465 481,425 0.34 161,951 46,863 3.75 175,549 2,236 46.81 104,689 25,470 30.17 768,430 1,960 29.21 57,255 3,028 23.75 71,919 139 31.83 4,411 66,185 3.42 226,211 7 4.46 29 8,998 23.86 214,690 5 0.95 5 54,356 4.66 253,299 85 29.04 2,455	December 31,2012 Foreign currency Exchange rate NTD $ 17,897 29.04 $ 519,723 20,348 30.17 613,911 766,388 29.04 22,255,904 30,028 38.48 1,155,465 481,425 0.34 161,951 46,863 3.75 175,549 2,236 46.81 104,689 25,470 30.17 768,430 1,960 29.21 57,255 3,028 23.75 71,919 139 31.83 4,411 66,185 3.42 226,211 7 4.46 29 8,998 23.86 214,690 5 0.95 5 54,356 4.66 253,299 85 29.04 2,455	December 31,2011	December 31,2011	December 31,2011
	Foreign currency $ 17,897 20,348 766,388 30,028 481,425 46,863 2,236 25,470 1,960 3,028 139 66,185 7 8,998 5 54,356 85	Exchange rate 29.04 30.17 29.04 38.48 0.34 3.75 46.81 30.17 29.21 23.75 31.83 3.42 4.46 23.86 0.95 4.66 29.04	Foreign currency $ 15,667 20,174 580,340 21,540 904,445 43,578 4,524 24,479 3,417 2,061 434 36,538 6 11,609 5 - -	Exchange rate 30.29 30.75 30.29 39.20 0.39 3.90 46.75 30.75 29.68 23.32 32.20 3.72 4.38 23.40 0.96 - -	NTD
					$ 474,562 620,344 17,578,488 844,358 353,367 169,868 211,496 752,737 101,420 48,072 13,976 136,031 28 271,660 5 - -

40. Financial information for operating segments

Financial information for operating segments is provided for main decision makers to allocate resources and evaluate the performance of each segment. Such information focuses on each delivered or offered product or service. In accordance with SFAS No.41 “Disclosure of Operating Segments”, segments that the Bank should report are as follows:

First District in Taichung

Second District in Taichung

North District

Changhua Area

Head Office and other

‐ 257 -257

(1) Revenues and operating results of segments

Revenues and operating results of the Bank’s continuing units are analyzed in accordance with segments to be reported, which are summarized as follows:

					Second
	First District				District in						Changhua		Head Office
	in Taichung				Taichung		North District				Area			and other				Total
2012
Interest revenue		$ 1,615,469			$1,221,408			$2,306,307			$2,233,495			$ 1,230,560				$8,607,239
Interest expenses	(	623,464 )		(	439,596 )		(	779,742 )		(	916,637 )		(	388,690	)		(	3,148,129 )
Net interest income		992,005			781,812			1,526,565			1,316,858			841,870				5,459,110
Net income (loss)
other than interest
income
Service Fee, Net		63,415			55,655			80,300			85,112			857,561				1,142,043
Other net profit (loss)		495,388			400,030			37,736			803,917		(	1,484,507	)			252,564
Bad debt expenses	(	34,036)			23,768		(	38,107)		(	1,846)		(	188,023	)		(	238,244)
Operating expenses	(	453,903 )		(	412,325 )		(	505,192 )		(	736,016 )		(	1,203,775	)		(	3,311,211 )
Income (loss) before taxation		$ 1,062,869			$ 848,940			$ 1,101,302			$ 1,468,025		(	$ 1,176,874	)			$ 3,304,262
2011
Interest revenue		$ 1,469,270			$1,087,301			$1,864,959			$2,053,436			$ 940,757				$7,415,723
Interest expenses	(	513,555 )		(	366,636 )		(	483,986 )		(	783,534 )		(	324,716	)		(	2,472,427 )
Net interest income		955,715			720,665			1,380,973			1,269,902			616,041				4,943,296
Net income (loss)
other than interest
income
Service Fee, Net		42,668			34,133			59,633			58,095			695,365				889,894
Other net profit (loss)		417,159			345,181		(	155,589	)		703,562		(	1,430,646	)		(	120,333	)
Bad debt expenses	(	33,368)			16,646		(	35,024)			11,671		(	624,873	)		(	664,948)
Operating expenses	(	453,171 )		(	401,517 )		(	479,681 )		(	727,059 )		(	1,072,305	)		(	3,133,733 )
Income (loss) before taxation		$ 929,003			$ 715,108			$ 770,312			$ 1,316,171		($ 1,816,418 )					$ 1,914,176

Revenues reported above are generated from transactions with external customers. There was no inter-department sale in 2012 and 2011.

The measured figures are provided for main decision makers to allocate resources to segments and evaluate the performance of each segment.

• (2) Assets and liabilities of segments

Assets and liabilities of segments
Segment assets First District in Taichung Second District in Taichung North District Changhua Area Head Office and other Total segment assets Segment liabilities First District in Taichung Second District in Taichung North District Changhua Area Head Office and other Total Liabilities of segments	December 31,2012 $ 68,036,499 57,070,252 115,467,753 91,251,274 112,546,290 $ 444,372,068 December 31,2012 $ 90,917,908 69,212,643 93,014,813 127,934,582 35,211,022 $ 416,290,968	December 30,2011
		$ 59,178,409 46,872,307 99,708,739 79,000,514 99,586,712 $ 384,346,681 December 30,2011
			$ 82,555,330 62,954,829 68,385,290 116,975,287 28,014,891 $ 358,885,627

‐ 258 -258

• (3) Main revenues from products and service

The Bank’s main business is interest revenue. There is no information by products and by service.

• (4) Information by areas

The Bank’s business covers the Taiwan area. There is no information by areas.

• (5) Information on key customers

Interest revenue from a single customer of the Bank does not exceed 10% of total interest revenues. Therefore, there is no information on key customers.

41. Notes of disclosure

• (1) Information about important transactions:

Information to be disclosed pursuant to Article 16 of the “Rules Governing the Preparation of Financial Statements of Public Issued Banks”:

No.	Item	Remark
1	Cumulative amount of the stock of the same investee purchased or sold reaching NTD300 million or more than 10% of the Paid-in shares capital.	Attached table 1
2	Acquisition amount of real estate reaching NTD300 million or more than 10% of the Paid-in shares capital.	None
3	Amount on disposal of real estate reaching NTD300 million or more than 10% of the Paid-in shares capital.	None
4	Discount of service charges in transaction with related party reachingmore than NTD5 million.	None
5	Accounts receivable-related party reaching NTD300 million or more than 10% of the Paid-in shares capital.	None
6	Information regardingsale of NPL.	None
7	Securitization of financial assets or real estate.	None
8	Other important transactions sufficient to affect the policy to use financial statements.	None

• (2) Information regarding investees:

No.	Item	Remark
1	Information regarding investees and total shareholdings.	Attached table 2
2	Loans to others.	None
3	Endorsements/guarantees to others.	None
4	Marketable securities – end.	None
5	Cumulative amount of the same marketable securities purchased or sold reaching NTD300 million or more than 10% of the Paid-in shares capital.	Attached table 1
6	Acquisition amount of real estate reaching NTD300 million or more than 10% of the Paid-in shares capital.	None

(Continued on next page)

‐ 259 -259

(Continued from previous page)

No.	Item	Remark
7	Amount on disposal of real estate reaching NTD300 million or more than 10% of the Paid-in shares capital.	None
8	Discount of service charges in transaction with related party reachingmore than NTD5 million.	None
9	Accounts receivable-related party reaching NTD300 million or more than 10% of the Paid-in shares capital.	None
10	Information regardingsale of NPL.	None
11	Securitization of financial assets or real estate.	None
12	Information regardingtransactions of derivativeproducts.	None
13	Other important transactions sufficient to affect the policy to use financial statements.	None

Note: No disclosure of such information is required, if the investee is a financial business, insurance business, and securities business.

• (3) Information regarding investment in the territory of mainland china

No.	Item	Remark
1	Names of investees in Mainland China, key business, and related information.	Attached table 3
2	Investment limits in Mainland China.	Attached table 3
3	Major transactions in a business entity located at a third country/territory directly or indirectly conducted between the Companyand the investees in Mainland China.	None
4	Endorsement, guarantee, or pledge of collaterals by the business entity located in a third country/territory directly or indirectly conducted between the Company and the investees in Mainland China.	None
5	Financing by a business entity located at a third country/ territory directly or indirectly conducted between the Company and the investees in Mainland China.	None
6	Other income or loss or significant transactions that affected the financialposition of the Company.	None

‐ 260 -260

At ending	Amount	$ 986,722 394,541 394,934
	Quantity	100,000 1,350 8,490
Sell	Capital gain/loss from disposition	$ - - -
	Cost in book	$ - - -
	Sale price	$ - - -
	Quantity	- - -
Buy	Amount	$ 986,722 394,541 394,934
	Quantity	100,000 1,350 8,490
At beginning	Amount	$ - - -
	Quantity	- - -
	Relation	Subsidiary of the Bank Subsidiary of the Bank Subsidiary of the Bank
	Counterparties	- - -
	Account titles in book	Long-term equity investment under equity method Long-term equity investment under equity method Long-term equity investment under equity method
	Types and names of securities	Taichung Commercial Bank Lease Enterprise TCCBL Co., Ltd. Taichung Commercial Bank Leasing (Suzhou) Co., Ltd.
	Buyer and sellers	Taichung Commercial Bank Co., Ltd. Taichung Commercial Bank Lease Enterprise TCCBL Co., Ltd.

261

Remarks	Remarks	Remarks		Note 1: Any current shares or scheduled shares held by the Bank, directors, supervisors, President, Executive Vice President, and investees that are defined as affiliated enterprises under Company Law shall be included. Note 2: (1) Scheduled shares mean swapped shares under the assumption that the equity securities purchased or derivative product contract as concluded (not yet converted into equity) are converted according to the agreed trading conditions and the bank’s intent to link with the equity of investee for the purpose of the reinvestment referred to in Article 74 of the Banking Act. (2) Said “equity securities” mean the marketable securities, convertible corporate bonds, and stock warrants provided in Paragraph 1 of Article 11 of the Enforcement Rules of Securities and Exchange Act. (3) Said “derivative product contract” means those defined in the Statement of Financial Accounting Standards No. 34, e.g. stock options. Note 3: This table may not be disclosed in the financial statements for Q1 and the previous three quarters.
Consolidated shareholding of the Bank and affiliated enterprises (note 1)	Total	Ratio of Shareholding %	100.00 46.40 100.00 100.00 100.00
		Quantity	8,236 14,477 100,000 1,350 8,490
	Scheduled quantity (Note 2)		- - - - -
	Quantity - current		8,236 14,477 100,000 1,350 8,490
Investment profit (loss) recognized in the current period			$ 93,847 ( 1,128 ) ( 13,705 ) ( 1,094 ) ( 702 )
Book value of investment			$ 182,207 126,683 986,772 394,541 394,934
Proportion of shareholding % - end			100.00 38.46 100.00 100.00 100.00
Principal business			Insurance agent Securities investment and trust Leasing Operation Financing Leasing and investments Financing Leasing
Location			Taichung City Taipei City Taipei City BVI Suzhou
Investee Name (Note 1)			Taichung Bank Insurance Brokers Co., Ltd. Reliance Securities Investment Trust Co., Ltd. Taichung Commercial Bank Lease Enterprise TCCBL Co., Ltd. Taichung Commercial Bank Leasing (Suzhou) Co., Ltd.
Investor			Taichung Commercial Bank Co., Ltd. Taichung Commercial Bank Co., Ltd. Taichung Commercial Bank Co., Ltd. Taichung Commercial Bank Lease Enterprise TCCBL Co., Ltd.

262

Names of investees in China Principal business Paid-in shares Captial Mode of investments Accumulated amount of investment remitted from Taiwan at beginning Amount of investment remitted or recovered in current period Accumulated amount of investment remitted from Taiwan at ending Ratio of shareholding of investment directly or indirectly made by the Company Investment loss recognized in current period (Note 1) Book value of investment at ending ROI remitted to Taiwan at ending Outward remittance Recover Taichung Commercial Bank Leasing (Suzhou) Co., Ltd. Financing Leasing $ 395,159 ( CNY 84,901 thousand) Investment in Mainland China via a company in existence in a third country/territory $ - $ 395,159 ( CNY 84,901 thousand) $ - $ 395,159 ( CNY 84,901 thousand) 100% ( $ 702 ) ( CNY 151 thousand) $ 394,934 ( CNY 84,750 thousand) $ -	Names of investees in China Principal business Paid-in shares Captial Mode of investments Accumulated amount of investment remitted from Taiwan at beginning Amount of investment remitted or recovered in current period Accumulated amount of investment remitted from Taiwan at ending Ratio of shareholding of investment directly or indirectly made by the Company Investment loss recognized in current period (Note 1) Book value of investment at ending ROI remitted to Taiwan at ending Outward remittance Recover Taichung Commercial Bank Leasing (Suzhou) Co., Ltd. Financing Leasing $ 395,159 ( CNY 84,901 thousand) Investment in Mainland China via a company in existence in a third country/territory $ - $ 395,159 ( CNY 84,901 thousand) $ - $ 395,159 ( CNY 84,901 thousand) 100% ( $ 702 ) ( CNY 151 thousand) $ 394,934 ( CNY 84,750 thousand) $ -	Names of investees in China Principal business Paid-in shares Captial Mode of investments Accumulated amount of investment remitted from Taiwan at beginning Amount of investment remitted or recovered in current period Accumulated amount of investment remitted from Taiwan at ending Ratio of shareholding of investment directly or indirectly made by the Company Investment loss recognized in current period (Note 1) Book value of investment at ending ROI remitted to Taiwan at ending Outward remittance Recover Taichung Commercial Bank Leasing (Suzhou) Co., Ltd. Financing Leasing $ 395,159 ( CNY 84,901 thousand) Investment in Mainland China via a company in existence in a third country/territory $ - $ 395,159 ( CNY 84,901 thousand) $ - $ 395,159 ( CNY 84,901 thousand) 100% ( $ 702 ) ( CNY 151 thousand) $ 394,934 ( CNY 84,750 thousand) $ -	Accumulated investment from Taiwan to Mainland China at ending Amount of investment approved by Investment Commission of MOEA Compliance with the limit of investment in Mainland China set forth by Investment Commission of MOEA (Note 2) $ 395,159 $ 395,159 $ 592,063 Note 1: Investment return/loss has been recognized on the basis of the audited financial statements Note 2: It is the limit calculated by the applicant – Taichung Commercial Bank Lease Enterprise in accordance with requirements set forth in “Principle of Review of Investment or Technology Joint Venture in Mainland China” of Investment Commission of MOEA. Note 3: All foreign currencies involved were converted into NTD on the basis of the exchange rate applicable at the end of the period and the average exchange rate applicable in the period as of the financial reporting date (CNY1=NTD$4.66, CNY1=NTD4.66).	Accumulated investment from Taiwan to Mainland China at ending Amount of investment approved by Investment Commission of MOEA Compliance with the limit of investment in Mainland China set forth by Investment Commission of MOEA (Note 2) $ 395,159 $ 395,159 $ 592,063 Note 1: Investment return/loss has been recognized on the basis of the audited financial statements Note 2: It is the limit calculated by the applicant – Taichung Commercial Bank Lease Enterprise in accordance with requirements set forth in “Principle of Review of Investment or Technology Joint Venture in Mainland China” of Investment Commission of MOEA. Note 3: All foreign currencies involved were converted into NTD on the basis of the exchange rate applicable at the end of the period and the average exchange rate applicable in the period as of the financial reporting date (CNY1=NTD$4.66, CNY1=NTD4.66).
ROI remitted to Taiwan at ending		$ -	Compliance with the limit of investment in Mainland China set forth by Investment Commission of MOEA (Note 2)	$ 592,063
Book value of investment at ending		$ 394,934 ( CNY 84,750 thousand)
Investment loss recognized in current period (Note 1)		( $ 702 ) ( CNY 151 thousand)
Ratio of shareholding of investment directly or indirectly made by the Company		100%
Accumulated amount of investment remitted from Taiwan at ending		$ 395,159 ( CNY 84,901 thousand)
			Amount of investment approved by Investment Commission of MOEA	$ 395,159
Amount of investment remitted or recovered in current period	Recover	$ -
	Outward remittance	$ 395,159 ( CNY 84,901 thousand)
Accumulated amount of	investment remitted from Taiwan at beginning	$ -
	Mode of investments	Investment in Mainland China via a company in existence in a third country/territory
			Accumulated investment from Taiwan to Mainland China at ending	$ 395,159
	Paid-in shares Captial	$ 395,159 ( CNY 84,901 thousand)
	Principal business	Financing Leasing
	Names of investees in China	Taichung Commercial Bank Leasing (Suzhou) Co., Ltd.

263

Stock Code: 2812

Taichung Commercial Bank Co., Ltd.

Disclosures by securities dept.

2012

264 ‐ 264 -

	％		1		1		1			3					-		-			-		-			3				95				2			97												100
December 31, 2011	Amount		$ 5,778		6,382		9,018			21,178					-		1			1		-			21,179				800,000				20,711			820,711												$ 841,890
December 31, 2011 December 31, 2012	Amount ％ Code Liabilities and Shareholders’ Equity Amount ％	Current liabilities	$ 5,446 1 201310 Guarantee deposits received for $ 20,043 2	financing instruments (Note 2)	9,930 1 201320 Deposit payable for securities 21,773 3	financing (Note 2)	221,514 26 201670 Other payables (Note 12) 8,759 1			109 - 201000 Total current liabilities 50,575 6		236,999 28		Other liabilities	203010 Reserve for default loss (Notes 2 & - -	13)	203990 Other liabilities - other 487 -			324,540 39 203000 Total other liabilities 487 -		211000 Inter-branch transactions (Note 15) 31,318 3		22,335 3	( 6,056 ) ( 1 ) 906003 Total liabilities 82,380 9		16,279 2 Shareholders’ equity		301110 Appropriation working fund (Notes 800,000 92	1 and 2)	130,000 16 Retained earnings		26,128 3 304040 (Loss carried forward) Unpaid ( 12,925 ) ( 1 )		incomes	417 - 906004 Total shareholders’ equity 787,075 91		17,236 2	890 -		174,671 21		88,738 10			663 -		$841,890 100 906002 Total Liabilities and Shareholders’ $ 869,455 100		Equity	The notes attached shall constitute an integral part of this financial statement.	(Refer to Auditor’s Report presented by Deloitte & Touche dated March 13, 2013)	Chief accountant: Yi-Ying Chung
December 31, 2012	Amount ％		$ 62,952 7		12,107 1		325,878 38			3,531 -		404,468 46								248,140 29				33,732 4	( 11,044 ) ( 1 )		22,688 3				155,000 18		12,021 1			5,463 1		15,287 2	5,184 -		192,955 22		- -			1,204 -		$869,455 100					President: Chun-Sheng Lee
	Code Assets	Current assets	101010 Cash and cash equivalents (Note 2 &	4)	101630 Accounts receivable (Notes 2 & 5)		101310 Securities receivable financing (Note		2)	101330 Refinancing deposit receivable		101000 Total current assets			Fund and investment		102500 Held-to-maturity financial assets		(Notes 2 & 6)			Fixed assets (Notes 2 & 7)		103030 Equipment	103XX9 Less: accumulated depreciation		103000 Fixed assets – net		Other assets		105010 Business security bond (Notes 8 &	16)	105020 Settlement payment fund (Note 9)			105030 Refundable deposits		105040 Deferred charges (Notes 2 & 10)	105990 Other assets - others		105000 Total other assets		111000 Inter-branch transactions (Note 15)		121000 Brokerage trading – net (Notes 2 & 11)			906001 Total assets					Chairman: Jin-Fong Soo
																									265

Taichung Commercial Bank Co., Ltd. Income Statements of Securities Department

Years Ended December 31, 2012 and 2011

Unit: NTD thousand

Code Revenue (Note 2) 401000 Brokerage fee revenue 421200 Interest revenue 440000 Non-operating revenue and gain 400000 Total revenue Expenses 501000 Brokerage fee expenses 538000 Other service fee expenses 521200 Interest expenditure 530000 Operating expenses (Note 14) 540000 Non-operating expenses and loss 500000 Total expenses 902001 Net (loss) profit before taxation 551000 Income tax expenses (Notes 2) 902005 Net (loss) profit of current period		2012	% 71 29 - 100 4 2 - 102 8 116 ( 16 ) - (16 )		2011
					Amount $ 58,243 25,115 109 83,467 2,924 2,035 10 46,463 7,082 58,514 24,953 4,242 ) $ 20,711	%
				(		70 30 - 100 4 2 - 56 8 70 30 ( 5 ) 25

The notes attached shall constitute an integral part of this financial statement. (Refer to Auditor’s Report presented by Deloitte & Touche dated March 13, 2013)

Chairman: Jin-Fong Soo President: Chun-Sheng Lee Chief accountant: Yi-Ying Chung

‐ 266 266 -

Taichung Commercial Bank Co., Ltd.

Notes to financial statements of securities dept.

2012 and 2011

(In Thousands of New Taiwan Dollars, unless otherwise specified)

1. Organization, Functions and Operations

The Bank’s Securities Department obtained the securities brokerage license issued by the competent authority on July 31, 1989 and formally started operation on August 12, 1989. Furthermore, Yuanlin Securities Branch, Taipei Securities Branch, and Zhongli Securities Branch were established in 2011 upon approval of the competent authority. Principal business: Processing orders for the trading of securities in TWSE or GTSM and the margin trade and short sales of securities, futures introducing brokerage, and any other securities business approved by the competent authority. As of Dec. 31, 2012, its appropriation working fund has been NTD800,000 thousand.

As of December 31, 2012 and 2011, numbers of employees of the Securities Dept. were 75 persons and 72 persons, respectively.

2. Summary of significant accounting policies

The financial statements of Securities Dept. have been prepared in conformity with the “Rules Governing the Preparation of Financial Statements of Securities Firms”, “Business Entity Accounting Act”, “Regulation on Business Entity Accounting Handling”, and accounting principles generally accepted. The Bank’s significant accounting policies are summarized as follows:

(1) Accounting estimates

It is necessary to apply reasonable estimates to provide financial asset valuation, allowance for bad debt, depreciation and amortization, and employee bonus when preparing financial statements in accordance with said guidelines, rules and principles. Since the estimates are subject to individual judgment, the actual result may vary.

• (2) Standards in differentiating current and non-current assets and liabilities

Current assets include cash and cash equivalents, assets held for trading, and assets estimated to be realized within 12 months as of the balance sheet date. Fixed assets, intangible assets, and any assets other than current assets are included in non-current items. Current liabilities are debts incurred for trading and to be paid off within 12 months as of the balance sheet. Any liabilities other than current liabilities are classified as non-current items.

• (3) Cash equivalents

Cash equivalents are commercial paper cashable and matured upon expiration of three months as of the investment date, bank acceptance, and RP investment at book value similar to fair value.

• (4) Allowance for bad debt

The Company assesses possible impairment of the account receivables on each balance sheet day. If objective indicating the occurrence of isolated or

‐ 267 267 -

series of events after the account receivables have been initially recognized, to the extent that the estimated cash flows of the account receivables in the future will be influenced, such account receivables shall be subject to recognition for impairment. Objective evidence for impairment may include:

1. The debtor encounters significant financial difficulties; or

2. Accounts receivable are overdue; or

3. High probability of debtor declaring bankruptcy or undertaking of other financial restructuring.

After certain accounts receivable are individually evaluated and indicate no sign of impairment, the entire credit portfolio is evaluated for impairment. Objective evidence of impairment for the accounts receivable may include the historical collection experience of the Bank, increase of delayed payment of the portfolio, and changes in observable national or regional economic situations relating to default on accounts receivable.

Impairment loss to be recognized is the difference between the carrying value of the asset and the estimated future cash flow (has reflected the effect of collateral or guarantee) discounted at the original effective interest rate of accounts receivable. The carrying value of accounts receivable is reduced through a valuation allowance item. When accounts receivable are unrecoverable, the relevant allowance account should be written off. Subsequent recovery of any account written off is credited to the valuation allowance item. A change in the carrying value of the valuation allowance item is recognized as bad debt loss.

• (5) Securities receivable financing

Financing to investors who buy stock and securities shall be stated as securities receivable financing in the transaction of securities financing. Stock bought by investors upon the financing shall be provided as collateral in whole recorded in memorandum entries, and be returned to the investors after the investors’ repayment of the financing.

• (6) Held-to-maturity financial assets

Held-to-maturity financial assets shall be stated at cost upon amortization. When recognizing the held-to-maturity financial assets initially, such assets shall be evaluated based on fair value, plus the acquisition or issue price. The purchase or sale of financial assets in customary transactions shall be subject to accounting on the date of transaction.

Where there is evidence showing impairment, it shall be stated as the loss of impairment. Where the decrease in impairment is obviously related to the events subsequent to recognition of impairment, it shall be reversed and stated as income for the current period, provided that the book value upon reverse shall be no more than the cost after amortization if the impairment is not recognized.

• (7)

• Fixed assets

Fixed assets are stated at acquisition or at construction costs less cumulative depreciation. Major updates and improvements were treated as capital spending. Routine repair and maintenance expenditures were expensed

‐ 268 268 -

during the year of incursion. Depreciation thereof is provided using the average method and in accordance with the useful life provided in the “Table of Service Life of Fixed assets” promulgated by the Executive Yuan.

Upon the scrapping or sale of fixed assets, the related cost and cumulative depreciation shall be written off, and any related income is charged to non-operating revenue in the year and any related loss is charged to non-operating expenses in the year.

• (8) Deferred charges

Deferred charges and computer softwares are stated at cost and amortized on a straight-line basis over five years.

(9) Impairment of Assets

According to the Statement of Financial Accounting Standards No. 35 on Accounting Principles on Asset Impairment, it is necessary to evaluate the balance sheet date for whether there is any sign showing that assets (including individual assets or cash generation units) might suffer material impairment. If there is, it is necessary to evaluate the collectable amount of the assets. If their book value exceeds the collectable amount, a loss on asset impairment shall be recognized. Where a loss on asset impairment does not exist, or is decreased, the gain reversed from asset impairment shall be recognized insofar as it does not exceed the originally recognized impairment loss, provided that the book value upon reversal shall not exceed the book value of the assets less depreciation or amortization to be provisioned when no impairment losses of the assets are recognized.

• (10) Debit (credit) items for trade brokerage

The relevant titles for brokerage trading include debit items for trade brokerage (bank deposits-settlement accounts receivable price of securities purchased for customers, receivable accounts for settlement and margin trading) and credit items for trade brokerage (payable price of securities sold for customers, payable settlement accounts and settlement price). The balance after offsetting debit items against credit items shall be recorded.

• (11) Guarantee deposits received for financing instruments and deposit payable for securities financing

The guarantee received for financing instruments shall be stated as the guarantee deposits received for financing instruments in the transactions of financing instruments of marketable securities. The proceeds collected from sale of financing instruments (less securities exchange tax, brokerage fee and service fee for financing instruments) shall be provided as collateral and stated as deposit payable for securities financing. Stock loaned to customers for financing instruments shall be recorded in memorandum entries. Guarantee deposits received for financing instruments and deposit payable for securities financing shall be returned upon customer’s repayment and settlement of the marketable securities.

• (12) Reserve for default loss

Securities firms engaging in brokerage trading of marketable securities are required to provide 0.0028% of the monthly transaction volume as the default

‐ 269 269 -

loss provision until the balance of this provision reaches NTD200,000 thousand.

In accordance with Directive Jin-Guan-Yin-Fa-Zi No. 10010000440 and Directive Jin-Guan-Zheng-Quan-Zi No. 09900738571, effective January 1, 2011, “Reserve for trading loss” and “Reserve for default loss” should be transferred as special reserve.

(13) Recognition of revenue

1. Brokerage fee revenue shall be recognized on the trading date of brokerage trading.

2. The interest revenue from financing instrument of marketable securities shall be recognized on an accrual basis in the duration of financing.

3. (14) Corporate Income Tax

Intra-period tax allocation is made for corporate income tax based on the department’s income.

• (15) Significant undertaking or contingency

If assets are very likely to have already impaired or generated liabilities on the balance sheet date and it is possible to estimate the reasonable loss, it shall be recognized as a loss for the current period. If the loss is very likely to have already been caused but it is impossible to estimate the loss, it shall be disclosed in the notes to the financial statement.

• (16) Appropriation working fund

The working fund appropriated to Securities Dept. if the Bank assumes securities brokerage concurrently.

3. Reasons and effects of changes in accounting principles

Accounting for financial instruments

Effective January 1, 2011, the Bank adopted revised SFAS No. 34 “Accounting for Financial Instruments”. Main revisions include: (1) the application of SFAS No. 34 to original loans and receivables; (2) a new regulation concerning impairment of financial assets measured at amortized cost when related terms are revised at financial difficulties; and (3) the debtor’s accounting treatment when debt terms are revised. This accounting change had no significant impact on 2011 net income.

4. Cash and cash equivalents

4.	impact on 2011 net income. Cash and cash equivalents
5.	Current deposits Accounts receivable Interests receivable Other receivables Less: allowance for bad debt	December 31,2012 $ 62,952 December 31,2012 $ 11,043 1,064 12,107 - $ 12,107	December 31,2011
			$ 5,446 December 31,2011
				$ 9,260 670 9,930 - $ 9,930

‐ 270 -270

6. Held-to-maturity financial assets

Held-to-maturity financial assets
Government bonds	December 31,2012 $248,140	December 31,2011
			$ 324,540

7. Fixed assets

Fixed assets
Cost			2012						2011
	Transportation and communicatio n equipment		Miscellaneous equipment			Total	Transportation and communicatio n equipment		Miscellaneous equipment			Total
		$ 1,033 2 - 1,035 185 171 - 356 $ 679	( (	$ 21,302 11,524 129 ) 32,697 5,871 4,866 49 ) 10,688 $ 22,009	( (	$ 22,335 11,526 129 ) 33,732 6,056 5,037 49 ) 11,044 $ 22,688		$ 238 795 - 1,033 115 70 - 185 $ 848	( (	$ 9,764 12,305 767 ) 21,302 4,682 1,946 757 ) 5,871 $ 15,431	( (	$ 10,002 13,100 767 ) 22,335 4,797 2,016 757 ) 6,056 $ 16,279
Balance, beginning Increase Decrease Balance, ending Accumulated depreciation
Balance, beginning Increase Decrease Balance, ending Net, ending

1. Business guarantee

Business guarantee
Securities Brokerage business security bond Financing and financing instrument security bond The margin of Futures IB Operation	December 31,2012 $ 80,000 50,000 25,000 $155,000	December 31,2011
			$ 80,000 50,000 - $ 130,000

• (1) According to the Regulations Governing Securities Firms, a securities firm, upon incorporation, shall lodge an operation bond of NTD50,000 thousand for the headquarters and of NTD10,000 thousand for each branch with the designated bank in cash, government bonds, or bank debentures.

• (2) According to Regulations Governing the Conduct of Securities Trading Margin Purchase and Short Sale Operations by Securities Firms, a securities firm shall lodge an operation bond NTD50,000 thousand for securities trading margin purchase and short sale operations.

• (3) According to the “Regulations Governing Futures Introducing Broker Business by Securities Firms”, for securities firms running futures introducing broker business, the head office of the firm shall deposit NTD10,000 thousand while each branch shall deposit NTD5,000 thousand as margins. As of December 31 2012, the Company had 3 branches engaging in futures introducing broker operation.

‐ 271 -271

9. Settlement security bond

Settlement security bond
TSEC settlement payment fund GreTai Securities Market settlement fund	December 31,2012 $ 7,892 4,129 $ 12,021	December 31,2011
			$ 17,621 8,507 $ 26,128

• (1) According to the “Regulations Governing Securities Firms”, securities firms shall allocate funds for clearing and settlement specified as follows:

• Securities brokerage firms shall, before starting their operation, make an initial deposit amounting to NTD15,000 thousand, and shall deposit at specific percentage of the net payment and net collection from the transactions of trade orders in the trading of securities listed in TWSE after the operation within 10 days after the end of each quarter to the end of the fiscal year. After the first anniversary of operation, securities brokerage firms may reduced the initial deposit to NTD3,500 thousand, and shall base on the net payment and net collection from the transactions of trade orders in the trading of securities listed in TWSE in the aforementioned proportions to make additional payment to TWSE if the total is falling short of the initial deposit or get a refund if the total is in excess of the initial deposit from TWSE by the end of January of each year.

• Whenever adding a domestic branch, the securities firm shall lodge the settlement fund NTD3,000 thousand to TSEC prior to starting business. Notwithstanding, after the year following business start, the amount to be lodged shall be reduced to NTD500 thousand.

• (2) According to the “Regulations Governing Joint-Responsibility Settlement Fund of GTSM”, securities firms shall deposit fund for clearing as follows:

• Securities firms shall, before starting their operation, make an initial deposit amounting to NTD6,000 thousand, and shall deposit at specific percentage of the net payment and net collection from the transactions of trade orders in the trading of securities listed in GTSM after the operation within 10 days after the end of each quarter to the end of the fiscal year. The aforementioned proportions shall be set by GTSM at the approval of the competent authority. After the first anniversary of operation, securities brokerage firms may reduced the initial deposit to NTD1,500 thousand, and shall base on the net payment and net collection from the transactions of trade orders in the trading of securities listed in GTSM in the aforementioned proportions to make additional payment to GTSM f the total is falling short of the initial deposit or get a refund if the total is in excess of the initial deposit from GTSM by the end of January of each year.

• Securities shall, before establishing a new branch location, make an initial deposit of NTD1,500 thousand in lump sum to GTSM and reduce the initial deposit to NTD250 thousand after the first anniversary of the operation at the new branch location.

‐ 272 -272

• (3) According to the “GTSM Regulations Governing the Electronic Bond Trading System Bond Payment and Settlement Reserve”, the head office of the securities firm engaged in trading of bonds in Electronic Bond Trading System (EBTS) shall pay the minimum reserve in full in cash.

• Deferred charges

Deferred charges
Balance, beginning Increase Amortization in the current period Balance, ending		2012 $ 17,236 3,153 5,102 ) $ 15,287		2011
	(		(	$ 6,497 13,393 2,654 ) $ 17,236

11. Debit (credit) items for trade brokerage - net

12. 13.	Debit items for trade brokerage: Receivable price of securities purchased for customers Receivable accounts of sale for customers Credit items for trade brokerage: Payable price of securities sold for customers Payable accounts of purchase for customers Debit items for trade brokerage - net Other payables Payable income tax Accrued expenses Others Reserve for default loss Balance, beginning Deposit in the current period Write off in the current period Balance, ending	December 31,2012 $ 196,593 206,160 402,753 December 31,2012 ( $ 205,235 ) (196,314 ) ( 401,549 ) $ 1,204 December 31,2012 $ - 8,118 641 $ 8,759 2012 $ - - - $ -	December 31,2011	December 31,2011
			$ 120,829 108,849 229,678 December 31,2011
			( $ 108,357 ) (120,658 ) (229,015 ) $ 663 December 31,2011
				$ 4,242 4,433 343 $ 9,018 2011
			(	$ 23,507 - 23,507 ) $ -

‐ 273 -273

In accordance with Directive Jin-Guan-Yin-Fa-Zi No. 10010000440 and Directive Jin-Guan-zheng-Quan-Zi No. 09900738571, effective January 1, 2011, reserve for default loss is transferred as special reserve. However, the Securities Department is the concurrently operating securities firm of the Bank, therefore, internal transaction is written off.

14. Employee expenses, depreciation, depletion, and amortization

Employee expenses Salaries and wages Labor insurance and national health insurance Pension expenses Other employee expenses Depreciation expenses Amortization expenses	2012 $ 42,253 3,663 1,970 1,890 5,037 5,102	2011
		$ 22,979 1,932 895 868 2,016 2,654

15. Important transactions with stakeholders

Name	Title Internal transaction debit (credit ) balance	December 31, 2012 ($ 31,318 )	December 31, 2011	December 31, 2011
Taichung Commercial Bank Co., Ltd.		(		$ 88,738

Brokerage fees generated from brokerage trading between Securities Dept. and Treasury Dept. is the adjustment of inter-branch transactions. The trading price thereof is not materially different from that offered to the general customers.

16. Pledged assets

The pledged assets of Securities Dept. are stated as follows:

Held-to-maturity financial assets-government bond		2012 $ 155,000		2011
				$ 130,000

Securities Brokerage business security bond

17. Significant undertaking or contingent liabilities: None

1. Significant disaster loss: None

2. Information regarding transactions of derivatives: None

3. Significant subsequent events: None

‐ 274 -274

21. Disclosure of financial instruments

• (1) Information about fair value

Non-financial derivatives Assets Financial assets at fair value equivalent to Book Value Held-to-maturity financial assets Liabilities Financial liabilities at fair value equivalent to Book Value	December	31,2012 Fair value $ 572,693 248,930 81,893	December	31,2011
	Book Value $ 572,693 248,140 81,893		Book Value $ 482,528 324,540 16,936	Fair value
				$ 482,528 326,853 16,936

• (2) Securities Dept. applies the following methods and hypotheses for the valuation of fair value of financial instruments:

• The Book Value of short-term financial instruments stated in the balance sheet shall be the fair value of such instruments. The reason is that the maturity date of these instruments is close and it would be reasonable to use the Book Value in the valuation of fair value. This method is applied to cash and cash equivalents, receivable accounts, securities receivable financing, refinancing deposit receivable, guarantee deposits received for financing instruments, deposit payable for securities financing, other payables (exclusive of payable income tax), and debit (credit) items for trade brokerage.

• The open market price of held-to-maturity financial assets, if any, shall be the fair value of such assets. Where there is no such market price available, the fair value shall be estimated using the evaluation method. The estimation and hypotheses used in the evaluation method adopted by the Bank’s Securities Dept. are identical to information regarding the estimation and hypotheses applied by market participants in setting the price of the financial instruments, and such information is available to the Bank’s Securities Dept.

• The book value of operation bond, settlement fund, and inter-branch transaction shall be the fair value thereof.

‐ 275 -275

(3) The fair value of financial assets and financial liabilities is determined by open market quotation and evaluated using the evaluation method:

Financial assets Held-to-maturity financial assets	Determined by open market quotation December 31,2012 December 31,2011 $ 248,930 $ 326,853	Evaluated under evaluation method	Evaluated under evaluation method
	December 31,2012 $ 248,930	December 31,2012 $ -	December 31,2011
			$ -

• (4) The financial assets recognized in December 31, 2012 and 2011 based on the changes in fair value estimated under interest rate changes were NTD248,140 thousand and NTD324,540 thousand.

• (5) Securities Dept.’s total interest revenues of financial instruments other than those at fair value, and those at fair value through income statement, in 2012 and 2011 were NTD23,762 thousand and NTD25,115 thousand. The total interest expenses thereof were NTD45 thousand and NTD10 thousand.

• (6) Information about financial risk:

• Market Risk

The equity securities and instruments contracts traded by Securities Dept. are evaluated based on fair value and increased/decreased subject to the variation in evaluation parameters, e.g. object market price, market interest rate and maturity date, and risk exposure reduced by hedging strategies.

2. Credit Risk

The source of credit risk is brokerage trading. Prior to the transaction, Securities Dept. will evaluate the trading counterpart’s credit and invoke the credit rating issued by an external organization. Meanwhile, Securities Dept. will set the trading limit with respect to the trading counterparts or customers of different credit ratings to control the default loss, if any.

1. Liquidity Risk

The transactions conducted by Securities Dept. are of specific liquidity in the market and, therefore, the liquidity risk is low. The Bank has set the limit of quantity for the trading objects of marketable securities.

1. Cash flow risk estimated under interest rate changes

The bond investment by Securities Dept. is investment at fixed interest rate. Therefore, the fluctuation in market interest rate will not vary the effective interest rate of bond investment or cause fluctuation in future cash flow.

• (7) Information regarding concentrated credit risk

Securities Dept. did not concentrate any transactions of marketable securities on any specific object or trading counterpart. In addition to

‐ 276 -276

regulations defined by the securities competent authority, it also defines its own management regulations providing that concentrated transactions shall exceed the specific ratio or limit.

• (8) Futures and options:

• Contract amount and credit risk

Credit risk as referred to is the risk deriving from the inability of the counterparties to perform the contracts under the agreed terms and conditions at maturity. The counterparties of the Company are futures commission merchants and the traders shall deposit a fund for clearing and settlement on the exposure as surety for performance. Credit risk is not anticipated.

1. Market risk

Market risk refers to the risks deriving from the fluctuation of the prices of stock price index futures and TWSE index warrants in market. Market risk of interest rate index futures refer to the risk deriving from the fluctuation of interest rate in market.

1. Liquidity risk, solvency risk, and the uncertainty of cash flow needs in the future.

The Company is engaged in the trading of stock price index futures and TWSE index warrants with its working capital. There is no risk deriving from financing.

1. The presentation of derivative trade in the financial statements

2. Unsettled futures contracts: none.

22. Others:

The General Meeting of shareholders of the Company passed by motion of assigning related business run by the Securities Department (including assets, liabilities, and business value) to Taichung Commercial Bank Consolidated Securities Co., Ltd. through split up with business value at NTD850,000 thousand while the latter shall issue 85,000 thousand share at NTD10/share totaled NTD850,000 thousand as the transaction price. The split up date was originally made on January 2 2013, but was postponed to March 1 2013 when applying with Financial Supervisory Commission (FSA) later. FSA approved the application in Letter Jin-Guan-zheng-Quan-Zi No. 1010059030 with the split up date set at May 2 2013. After the split up, Taichung Commercial Bank Consolidated Securities Co., Ltd. shall be a wholly-owned subsidiary of the Company.

23. Financial information for operating segments

The Bank's Securities Dept. primarily engages in brokerage trading. The income and identifiable assets account for more than 90% of the consolidated income and assets of Securities Dept. Therefore, it is not necessary to disclose the information by operating segments.

‐ 277 -277

24. Information about important transactions

No.	Item	Remark
1	Loans to others.	None
2	Endorsements/guarantees to others.	None
3	Acquisition amount of real estate reaching NTD100,000 thousand or more than 20% of the Paid-in shares capital.	None
4	Disposition amount of real estate reaching NTD100,000 thousand or more than 20% of the Paid-in shares capital.	None
5	Total discount of service charges in transaction with stakeholder reachingmore than NTD5,000 thousand.	None
6	Accounts receivable-related party reaching NTD100,000 thousand or more than 20% of the Paid-in shares capital.	None

25. Information regarding investees

No.	Item	Remark
1	Information regardinginvestee’s name and location,et al.	None
2	Loans to others byinvestee	None
3	Endorsement/guarantee to others byinvestee	None
4	Acquisition amount of real estate reaching NTD100,000 thousand or more than 20% of the Paid-in shares capital.	None
5	Disposition amount of real estate reaching NTD100,000 thousand or more than 20% of the Paid-in shares capital.	None
6	Total discount of service charges in transaction with stakeholder reachingmore than NTD5,000 thousand.	None
7	Accounts receivable-related party reaching NTD100,000 thousand or more than 20% of the Paid-in shares capital.	None

26. Information regarding investment in the territory of mainland china:

‐ 278 -278

Taichung Commercial Bank Co., Ltd. and Subsidiaries

Consolidated Financial Statements and External Auditor’s Audit Report 2012 and 2011

Address: No. 87, Min Chuan Road, West District, Taichung City, TEL.: (04) 22236021

279- 213 -

Statement of Declaration

The companies to be included by the Bank into the consolidated financial statements of affiliates, in accordance with the “Criteria Governing Preparation of Report on Affiliations, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” in 2012 (from Jan. 1 to Dec. 31, 2012) are identical to those to be included into the consolidated financial statements of Parent enterprise and subsidiaries prepared under Statement of Financial Accounting Standards No. 7 on “Consolidated Financial Statements”. As well, the information to be disclosed in the consolidated financial statements of affiliated enterprises has been disclosed in said consolidated financial statements of Parent enterprise and subsidiaries. Therefore, the Bank will not prepare the consolidated financial statements of affiliated enterprises separately. In witness thereof, the Declaration is hereby presented.

Company name: Taichung Commercial Bank Co., Ltd.

Responsible Person: Jin-Fong Soo

March 13, 2013

• 214 - 280

Auditor’s Report

To: Taichung Commercial Bank Co., Ltd.

We have audited the accompanying consolidated balance sheet of Taichung Commercial Bank Co., Ltd. and its subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of income, consolidated statement of changes in shareholders’ equity and consolidated statement of cash flows for the years then ended. Said financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on the consolidated financial statement based on our audits. We did not audit the financial statements and related disclosures of some of the subsidiaries included in the consolidated financial statements of the Company. The aforementioned financial statements were audited by third party auditors. As of December 31 2012, the total assets of the aforementioned subsidiaries amounted to NTD1, 489,516 thousand, which accounted for 0.33% of the consolidated financial statements. Total liabilities amounted to NTD563, 464 thousand, which accounted for 0.14% of the total liabilities. Net profit in 2012 amounted to NTD19, 665 thousand, which accounted for 0.28% of the consolidated net profit. Corporate earnings amounted to NTD13, 705 thousand, which amounted to (0.41%) of the total earnings before taxation. We also did not audit the financial statements of the investees recognized under the equity method. These financial statements were audited by third party auditors. As such, the amount of long-term equity investments and the investment return/loss recognized under the equity method as stated in the aforementioned consolidated financial statements are based on the reports of third part auditors. The long-term equity investments of the Company recognized under the equity method amounted to NTD126, 683 thousand and NTD 127,811 thousand as of December 31 2012 and December 31 2011, respectively, on the basis of the reports prepared by third party auditors. Each accounted for 0.03% of the consolidated total assets. The investment return/loss recognized in the periods of January 1 to December 31, 2012 and 2011 amounted to NTD1, 128 thousand and NTD10, 262 thousand, which accounted for (0.03%) and (0.53%) of the consolidated earnings before taxation of respective periods.

• 215 - 281

We conducted our audit in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants”, and generally accepted auditing standards in the Republic of China. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statement is free of material misstatement. An audit includes examining, through random sampling, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit and the other auditors' report may provide a reasonable basis for our opinion.

In our opinions, on the basis of our audit findings and the reports of third party auditors, the consolidated financial statements as stated in the 1[st] paragraph, in all material aspects, are prepared in conformity to the Regulations Governing the Preparation of Financial Statements by Public Banks, Regulations Governing the Preparation of Financial Statements by Securities Firms, and the accounting principle generally accepted in the Republic of China, which can fairly present the consolidated financial position of Taichung Commercial Bank Co., Ltd. and its subsidiaries, in the end of January 1 to December 31, 2012 and 2011, and the consolidated results of operation and consolidated cash flows in the periods of January 1 to December 31, 2012 and 2011.

As described in Note 3 to the financial statements, Taichung Commercial Bank Co., Ltd. and subsidiaries, since January 1, 2011, has adopted revised SFAS No. 34 “Accounting for Financial Instruments” and newly issued SFAS No. 41 “Disclosure of Operating Segments” and adopted early the provision concerning the grant date for capital increase by cash retained for subscription by employees stated in Letter (2012) Ji-Mi-Zi No. 038 issued by Accounting Research and Development Foundation.

Deloitte & Touche Wen-Ya Hsu, CPA Tzu-Chun Wang, CPA Securities and Futures Bureau Approval Securities and Futures Bureau Approval Document No. Document No. Tai-Cai-Jheng (6) No. 0920123784 Tai-Cai-Jheng (6) No. 0920123784

March 13, 2013

• 216 - 282

			Unit: NTD thousand	Percentage	December 31, 2011 of Variation	Amount (%)	$ 3,439,998 50		2,877,550 ( 16 )			51,804 77		- -		7,721,427 17		333,691,650 16		10,512,559 29			136,764 64			22,521 ( 24 )		328,241 14	358,782,514 16	358,782,514 16		22,338,576 4		569,058 -		106,479 -			723,937 60	32,599 157	1,455,841 91	283,744 -	- -					10,960 738			( 60,140 ) 212	25,461,054 10	25,461,054 10	$384,243,568 16	$384,243,568 16
					December 31, 2012	Amount	$ 5,151,548		2,414,205			91,591		264,045		8,997,553		385,510,895		13,548,277			223,704			17,208		372,812	416,591,838			23,187,442		569,058		106,479			1,160,137	83,647	2,785,992	283,744	477					91,865			( 187,741 )	28,081,100		$ 444,672,938
Taichung Commercial Bank Co., Ltd. and Subsidiaries	Consolidated Balance Sheets	December 31, 2012 and 2011		Percentage	December 31, 2012 December 31, 2011 of Variation	Amount Amount (%) Code Liabilities and Shareholders’ Equity	$ 10,264,038 $ 8,349,905 23 21000 Deposits of Central Bank of China and other banks (Note 16)	Funds borrowed from CBC and other banks (Notes 17 and	66,753,349 74,267,724 ( 10 ) 21500 31)		22000 Financial liabilities at fair value through profit or loss (Note 2	and Note 6) 6,545,279 1,096,769 497	Bills and bonds sold under repurchase agreements (Notes 2	22500 & 18)	3,564,983 2,868,589 24	23000 Payables (Note 19)	- 41,639 ( 100 )	23500 Deposits and remittances (Notes 20 and 30)	324,029,419 277,756,366 17	24000 Financial bonds payable (Note 2 & 21)		18,519,719 4,211,580 340	25000 Accruable pension liabilities (Notes 2 and 22)		8,782,945 9,439,040 ( 7 )	25500 Other financial liabilities (Note 23)		126,683 127,811 ( 1 ) 29500 Other liabilities (Notes 2 and 24)	905,934 850,396 7 20000 Total liabilities		Shareholders' equity of parent (Note 25)	31000 Capital stock	1,596,581 1,619,635 ( 1 ) Capital surplus	1,854,982 1,852,015 - 31501 Stock premiums		38,820 34,821 11 31599 Other capital surplus	1,054,635 1,074,996 ( 2 ) Retained earnings		4,545,018 4,581,467 ( 1 ) 32001 Legal reserve	605,170 605,170 - 32003 Special reserve	( 1,735,334 ) ( 1,858,980 ) ( 7 ) 32011 Accumulated earnings	( 77,000 ) ( 77,000 ) - 32501 Unrealized revaluation increment (Note 2)	12,087 88,550 ( 86 ) 32521 Adjustment of accumulated conversion		Unrealized gain on available-for-sale financial assets	3,349,941 3,339,207 - 32523 (Note 2)			1,830,648 1,894,542 ( 3 ) 32544 Net loss not recognized as pension cost (Note 22)			30000 Total shareholders’ equity		$444,672,938 $384,243,568 16 Total Liabilities and Shareholders’ Equity		The notes attached shall constitute an integral part of this consolidated financial statement.	(Refer to Auditor’s Report presented by Deloitte & Touche dated March 13, 2013)	Manager: Chun-Sheng Lee Chief accountant: Yi-Ying Chung
						Code Assets	11000 Cash and cash equivalents (Note 4)	11500 Due from Central Bank of China and lend to	banks (Note 5)	12000 Financial assets at fair value through profit or	loss (Notes 2 & 6)		13000	Receivables – net (Notes 2, 7, 9, 28, 30 & 31)			13400 Assets held for sale (Notes 2 & 8)		13500 Discounts and loans – net (Notes 2, 9 & 30)		14000 Available-for-sale financial assets (Notes 2, 10	and 31)		14500 Held-to-maturity financial assets - net (Notes 2,	11 & 31)		15000 Equity investment under equity method (Notes	2 & 12)	15500 Other financial assets, net (Notes 2, 9 & 13)		Fixed assets, net (Notes 2 & 14)	Cost	18501 Land	18521 Buildings and structures	18541 Transportation and communication	equipment	18551 Miscellaneous equipment		Total cost	Revaluation increment	Less: accumulated depreciation	Less: accumulated impairment	18575 Prepayments for equipment		18500	Net			19500 Other assets (Notes 2, 15, 28 & 31)					10000 Total assets				Chairman: Jin-Fong Soo
																											283

Taichung Commercial Bank Co., Ltd. and Subsidiaries Consolidated Statement of Income

Years Ended December 31, 2012 and 2011

Unit: NTD thousands, except Earnings Per Share (NTD)

								Percentage	Percentage
									of
								Variation
			2012			2011			(%)
Code			Amount			Amount
41000	Interest revenues (Notes 2
	and 30)		$ 8,626,915			$ 7,415,723			16
51000	Interest expenses (Notes 2
	and 30)	(	3,146,854	)	(	2,471,799	)		27
	Net interest income		5,480,061			4,943,924			11
	Net income (loss) other than
	interest income
49100	Net income from service
	fees (Notes 2, 26 and 30)		1,387,575			1,033,579			34
49200	Net (loss) gain on financial
	assets and liabilities at fair
	value through profit or loss
	(Notes 2 and 6)		265,023		(	503,030	)		153
49300	Realized net loss on
	available-for-sale financial
	assets (Note 2)		14,540			-			-
49500	Net loss from equity
	investment under equity
	method (Notes 2 and 12)	(	1,128	)	(	10,262	)	(	89 )
49600	Net gain (loss) on foreign
	exchange (Note 2)	(	136,487	)		323,494		(	142 )
48063	Net loss on disposal of
	Fixed assets (Note 2)	(	38,387	)	(	33,264	)		15
49700	Gain (loss) on recovery of
	asset impairment (Notes 2,
	8, 10, 11, 13 and 15)	(	1,837	)		10,741		(	117 )
49805	Net gain from financial
	assets carried at cost		19,157			24,861		(	23 )
58023	Net loss on disposal of
	collateral accepted	(	24,200	)	(	45,657	)	(	47 )
58089	Other provision (Note 32)	(	10,400	)	(	5,050	)		106
48099	Other non-interest net
	income (Note 2)		85,759			40,416			112
	Net revenue		7,039,676			5,779,752			22
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(Continued from previous page)

								Percentage	Percentage
									of
								Variation
			2012			2011			(%)
Code			Amount			Amount
51500	Bad debts expense (Notes 2
	and 9)	(	$ 248,661	)	(	$ 664,948	)	(	63 )
	Operating expenses (Note 27)
58500	Employee expenses	(	2,191,681	)	(	1,943,884	)		13
59000	Depreciation and
	amortization expenses	(	164,074	)	(	141,526	)		16
59500	Business and administrative
	expenses	(	1,110,573	)	(	1,096,107	)		1
	Total operating expenses	(	3,466,328	)	(	3,181,517	)		9
61001	Income before taxation		3,324,687			1,933,287			72
61003	Income tax expenses (Notes 2
	& 28)	(	546,729	)	(	479,287	)		14
69000	Net income of current period		$ 2,777,958			$ 1,454,000			91
	Attributable to:
69901	Shareholders of parent		$ 2,777,958			$ 1,454,000			91
69903	Minority equity		-			-			-
69900			$ 2,777,958			$ 1,454,000			91
Code		Before		After		Before			After
		taxation		taxation		taxation		taxation
	Consolidated EPS (Note 29)
69500	Basic earnings per share	$ 1.43		$ 1.20		$ 1.00			$ 0.76
69700	Diluted earnings per share	$ 1.32		$ 1.11		$ 0.95			$ 0.72

The notes attached shall constitute an integral part of this consolidated financial statement. (Refer to Auditor’s Report presented by Deloitte & Touche dated March 13, 2013)

Chairman: Jin-Fong Soo Manager: Chun-Sheng Lee Chief accountant: Yi-Ying Chung

• 219 - 285

			Unit: NTD thousand			Total	shareholders’	equity	$ 19,415,020		-	-	-	-	4,500,000	-		83,039		25,576		20,052		23,507	( 60,140 )	1,454,000	1,454,000	25,461,054		-	-	-	( 111,693 )	-			477		80,905	( 127,601 )	2,777,958	2,777,958	$ 28,081,100
				Other shareholders’ equity		Adjustment of Unrealized gain Net loss not	accumulated (loss) on financial recognized as	conversion instruments pension cost	$ - ( $ 9,092 ) $ -		- - -	- - -	- - -	- - -	- - -	- - -		- - -		- - -		- 20,052 -		- - -	- - ( 60,140 )	- - -		- 10,960 ( 60,140 )		- - -	- - -	- - -	- - -	- - -			477 - -		- 80,905 -	- - ( 127,601 )	- - -		$ 477 $ 91,865 ( $ 187,741 )
Taichung Commercial Bank Co., Ltd. and Subsidiaries	Statements of Changes in Shareholders’ Equity	Years Ended December 31, 2012 and 2011			Capital surplus Retained earnings	Unrealized	Other capital Accumulated revaluation	Stock premiums surplus Legal reserve Special reserve earnings increment	$ 775,256 $ 16,813 $ 600,350 $ 16,987 $ 411,956 $ 283,744		- - 123,587 - ( 123,587 ) -	- - - 9,092 ( 9,092 ) -	- - - ( 16,987 ) 16,987 -	- - - - ( 294,423 ) -	- - - - - -	( 225,147 ) - - - - -		- 83,039 - - - -		18,949 6,627 - - - -		- - - - - -		- - - 23,507 - -	- - - - - -	- - - - 1,454,000 -		569,058 106,479 723,937 32,599 1,455,841 283,744		- - 436,200 - ( 436,200 ) -	- - - 60,140 ( 60,140 ) -	- - - ( 9,092 ) 9,092 -	- - - - ( 111,693 ) -	- - - - ( 848,866 ) -			- - - - - -		- - - - - -	- - - - - -	- - - - 2,777,958 -		$ 569,058 $ 106,479 $ 1,160,137 $ 83,647 $ 2,785,992 $ 283,744	The notes attached shall constitute an integral part of this consolidated financial statement.	(Refer to Auditor’s Report presented by Deloitte & Touche dated March 13, 2013)	Manager: Chun-Sheng Lee Chief accountant: Yi-Ying Chung
					Capital stock		Common stock	capital	$ 17,319,006		-	-	-	294,423	4,500,000	225,147		-		-		-		-	-	-		22,338,576		-	-	-	-	848,866			-		-	-	-		$ 23,187,442
									Balance as of January 1, 2011	Allocation of earnings 2010	Legal reserve	Special reserve	Reversal of special reserve	Stock dividends	Issuance of common stock for cash	Capital surplus transferred to capital	Equity component of convertible financial	bonds	Recognition of employee stock option	compensation cost	Available-for-sale financial asset price	difference adjustment	Default loss reserve transferred as special	reserve (Note 24)	Net loss not recognized as pension cost	Consolidated Net income 2011		Balance as of December 31, 2011	Distribution of incomes in 2011	Legal reserve	Special reserve	Reversal of special reserve	Cash Dividends	Stock dividends	Adjustment of shareholders’ equity of	investees recognized under the equity	method	Available-for-sale financial asset price	difference adjustment	Net loss not recognized as pension cost	Consolidated Net income 2012		Balance as of December 31, 2012			Chairman: Jin-Fong Soo

286

Taichung Commercial Bank Co., Ltd. and Subsidiaries Consolidated Statement of Cash Flow Years Ended December 31, 2012 and 2011

Cash flow from operating activities Consolidated income-net Provision of allowance for bad debts Recovery of bad debts Write-off of non-performing loans Loss of investment under the equity method Cash dividends under equity method Available-for-sale financial asset premium amortization Capital gains from the disposition of financial assets available for sale. Gain from disposal of financial assets carried at cost Amortization of premium on held-to-maturity financial assets Amortization of discount on convertible financial bonds Depreciation and amortization (depreciation of assets not for business operation included) Net loss on disposal of fixed assets, available-for-sale assets and collateral accepted Asset impairment loss (reversal gain) Deferred income tax expenses Defined benefit pension fund Recognition of employee stock option compensation cost Unrealized exchange (gain) loss Decrease (increase) in operating assets Financial assets-Trading Accounts receivable Other assets Increase (decrease) in operating liabilities Financial assets-Trading Payables Other liabilities Net cash inflow (outflow) from operating activities Cash flow from investing activities Decrease (Increase) in Due From Central Bank of China and lend to Banks Increase in discounts and loans Proceeds from the disposition of financial assets available for sales and redemption at maturity Proceeds from disposal of financial assets carried at cost Proceeds from acquisition of available-for-sale financial assets Redemption of held-to-maturity financial assets Proceeds from acquisition of held-to-maturity financial assets (Continued on next page)		Unit: NTD thousand 2012 2011 $ 2,777,958 $ 1,454,000 248,661 664,948 244,606 230,394 83,387 ) ( 553,966 ) 1,128 10,262 - 6,000 7,308 2,599 14,540 ) - - ( 12,327 ) 33,748 64,910 35,718 19,518 164,177 141,634 62,587 78,921 1,837 ( 10,741 ) 190,512 455,370 11,274 5,284 - 25,576 265,404 ( 257,127 ) 5,448,510 ) 549,793 706,122 ) 250,908 54,238 ) 14,275 39,787 ( 82,185 ) 1,276,126 3,813,008 5,160 ) ( 19,188 ) 951,126 ) 6,851,866 7,514,375 ( 5,655,264 ) 46,648,872 ) ( 33,567,843 ) 8,325,936 - - 12,420 22,594,500 ) ( 3,119,816 ) 763,848 550,000 504,586 ) -
	( ( ( ( ( ( ( ( ( (

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		2012			2011
Increase in other financial assets	( $	115,104	)	( $	116,795	)
Proceeds from disposal of Fixed assets,
available-for-sale assets and collateral accepted		89,847			166,604
Purchase of Fixed assets and deferred expenses	(	191,045	)	(	210,872	)
Increase in refundable deposits	(	24,660	)	(	31,859	)
Net cash outflow from investing activities	(	53,384,761	)	(	41,973,425	)
Cash flow from financing activities
Issuance of common stock for cash		-			4,500,000
Cash dividend released	(	111,693	)		-
Increase in Deposits of Central Bank of China and
other banks		1,711,550			1,160,371
Increase (decrease) in Funds borrowed from CBC and
other banks	(	463,345	)		1,275,400
Increase (decrease) in Bills & Bonds Sold under
Repurchase Agreements		264,045		(	1,477,800	)
Increase in deposits and remittances		51,819,245			31,086,777
Issuance of financial bonds		3,000,000			2,300,000
Decrease in other financial liabilities	(	5,313	)	(	4,809	)
Increase (decrease) in deposits received		35,531		(	37,806	)
Net cash inflow from financing activities		56,250,020			38,802,133
Net increase in cash and cash equivalents		1,914,133			3,680,574
Balance of cash and cash equivalents, beginning of
period		8,349,905			4,669,331
Balance of cash and cash equivalent, end of period	$	10,264,038		$	8,349,905
Supplementary disclosures of cash flow
Interest payment	$	3,026,795		$	2,419,773
Income tax payment	$	82,121		$	97,512
Non-cash investing and financing cash flow
Undistributed earnings and capital surplus transferred
to capital increase	$	848,866		$	519,570

The notes attached shall constitute an integral part of this consolidated financial statement. (Refer to Auditor’s Report presented by Deloitte & Touche dated March 13, 2013)

Chairman: Jin-Fong Soo

Manager: Chun-Sheng Lee

Chief accountant: Yi-Ying Chung

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Taichung Commercial Bank

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Chairman : Jin-Fong Soo

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總行

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臺中市西區民權路8 7 號 電話：0 4 - 2 2 2 3 6 0 2 1 No.87, Min-Chuan Road, Taichung, Taiwan, R.O.C.

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