1. Spokesperson Name：Jerry Harn Title ：President Tel ：（886）2­2771­6699#62111 E­mail：jerry.harn@fubon.com

Acting Spokesperson Name：Jeff Chu Title ：Senior VP, Planning Dept. Tel ：（886）2­2771­6699#68760 E­mail：jeff.chu@fubon.com

2. Contact Information – Corporate Headquarters and Branches Please see page 29

3. Stock Registration Agent Name：Fubon Securities Co., Ltd. Address：2F, No.17, Hsuchang St.,Taipei, Taiwan, R.O.C. Website：www.fubon.com Tel：（886）2­2361­1300

4. Credit Rating Institution Name Address Tel

Taiwan Ratings Corporation 49F. Taipei 101 Tower, No.7, Sec. 5, Xinyi Rd., Taipei city 110, Taiwan (R.O.C.)

(886)­2­8722 5800

Moody’s Investors Service Room 2510, One International Finance Centre One Harbour View Street Central, Hong Kong

(886)­852­2509 0200

5. Certified Public Accountants for Fiscal Year 2012 CPAs：Jessie Wu, S. C. Huang Company：Deloitte & Touche Address：12F., No. 156, Sec. 3, Minsheng E. Rd., Taipei City 105, Taiwan (R.O.C.) Website：www.deloitte.com.tw Tel：（886）2­2545­9988

6. Exchange Houses where Overseas Securities are Listed：None

7. Website：www.fubon.com

CONTENTS

I. Message to Shareholders 1

II. Corporate Profile 5 1. Introduction 5 2. Organizational Structure 7

III. Business Operations 11 1. Business Information 11 2. Business Strategies and Business Plans for 2013 14 3. Research & Development Plans 19 4. Employees Profile 20

IV. Special Notes 21 1. Dividend Policy and Implementation Status 21 2.Implementation of the Internal Controls System 22

V. Headquarters and Branches 29

Appendix：Annual Financial Reports for 2012 and 2011

36

­ 1 ­

I.Message to Shareholders Looking back on 2012, the global economy still felt the adverse influence of the European

and the U.S. debt crisis and slowdown in the consumer markets of the U.S. and China, driving down Taiwan's economy. In the first half of the year, Taiwan's economy stagnated due to weak external demand and sluggish consumption, but it gradually stabilized in the second half as international economic indicators improved. According to the Directorate General of Budget, Accounting, and Statistics (DGBAS), the nation's economy grew by 1.13% in 2012, much lower than 2011's 4.07%.

Despite the lackluster overall economic environment, Taipei Fubon Commercial Bank managed to post a remarkable performance in 2012 supported by the abundant resources of the Fubon group and dedicated efforts to boost cross­selling and deepen ties with clients. In corporate banking, the bank achieved steady growth in various products and financial markets through strategies aimed at adjusting the bank's customer structure and putting priority on profit margins rather than business volume. In wealth management, the bank strengthened mechanisms for managing customer investment portfolio and planning optimal asset deployment and products for clients. Faced with the highly uncertain investment environment abroad, the bank focused on achieving financial stability for customers so as to lessen the impact of external factors. In consumer banking, the bank, in addition to consolidating existing assets, rolled out high interest­spread products to maintain asset quality amid the sluggish realty market due to government controls on housing loans. In the credit card business, the bank launched the A Money card and co­branded EasyCard, in addition to offering 10% bonus for card spending by new cardholders to build customer loyalty. Through deep cultivation of quality cardholders, salary­transfer customers, and association member customers, coupled with agile risk management and convenient payment channels, the bank has achieved phenomenal growth in total amount of outstanding unsecured loans.

As it pursues business growth and profits, the bank still cautiously controls asset quality. As a result, the bank's non­performing loan (NPL) ratio and NPL coverage rate reached 0.12% and 695.98%, respectively, underscoring the bank's strength and development potential. Taiwan Ratings recognized these strengths by giving the bank a long­term credit rating of 「twAA+」 and short­term credit rating of 「twA­1+」 on Dec. 28, 2012, highlighting the bank's industry­leading position in both profitability and asset quality.

Looking ahead to 2013, despite the persistently high uncertainty of Europe's sovereignty­debt crisis and the U.S. financial cliff, the fundamentals of the U.S. economy are expected to gradually improve. This, along with Japan's embrace of loose monetary policy and expansionary fiscal policy, is anticipated to contribute to the stable recovery of the global economy. In addition, the Taiwanese government is expected to push various economic stimulus measures and accelerate financial exchanges across the Taiwan Strait. The DGBAS predicts that the nation's economy will grow by 3.59% this year. In addition to further improving business flow and performance­oriented evaluation systems, the bank will actively push various businesses, develop new products, deepen customer relationship, upgrade service quality, expand business scale, strengthen international competitiveness, and join hands with various subsidiaries of the financial holding company to fully realize cross­selling and merger synergies and advance towards the goal of becoming a premier regional bank in Asia.

­ 2 ­

Summaries of the business report for 2012 and the business plan for 2013 are as follows:

1. Business Report for 2012

Outstanding deposits at the end of 2012 reached NT$1,246.9 billion, up 5.42% from a year earlier, and net loans amounted to NT$1,026.54 billion, up 7.75%. In 2012, the bank earned net interest income of NT$15.13 billion, up 8.47%, and net fee income of NT$7.99 billion, down 1.83%, with the total net revenues hitting NT$28.89 billion, up 13.5%. Operating expenses grew 3.46% to NT$14.3 billion in 2012, and after­tax profits for the year shot up 43.52% to NT$12.99 billion, equivalent to NT$2.26 per share.

2. Summary of Business Plan for 2013

(1). Institutional Banking Business

n With Taiwan's economic recovery expected to slacken in 2013, the bank's corporate banking operation will continue to provide various products and services to customers through the five platforms of Taiwan, Hong Kong, mainland China, Vietnam, and the U.S., as well as the joint marketing team of customer managers and marketing managers.

n In order to expand business scale, the bank will actively develop overseas customers and customers other than Taiwanese businesses in both the upstream and downstream sectors, establish regional and industrial networks, and consolidate and develop potential customer bases. In addition, the bank will develop small and medium enterprise customers to boost profits, and continue to expand product cross­selling to broaden income sources.

n In product planning and infrastructure development, the bank will continue pushing new cross­strait trade financing services and actively deploy in renminbi (RMB)­related businesses, accelerate the establishment of large­scale RMB­related operations to meet customers' needs, and grasp business opportunities associated with the development of cross­strait business. To facilitate the development of overseas businesses, the bank will set up an overseas core system and upgrade its financial trading system to boost operating efficiency and support regional development.

n With financial trading expected to continue fluctuating under the impact of the global economy, the bank will continue to roll out new financial products and adjust its product lineup to meet changing market and customer needs. In line with the overseas expansion of its corporate­banking operations, the bank will develop the greater­China market and strengthen the quality and size of its financial marketing team to better serve customers. In business planning, the bank aims to enhance the profitability of its financial trading operations.

n In order to increase profitability in financial trading, the bank will expand its range of products, grow market operations, and develop RMB­related product platforms at domestic banking units (DBUs). On the basis of franchise revenue, the bank will increase its risk­taking positions, flexibly utilize diversified trading strategies to enhance profit margins, actively develop new products for overseas branches to meet customers' investment and risk­hedging needs, and seize profitable opportunities in RMB­related forex swap and interest replacement services to establish Fubon's brand in the international market.

­ 3 ­

(2). Consumer Banking Business

n In 2013, the consumer­banking operations will continue to implement risk­management mechanisms and strictly conform to the regulatory environment. In addition to boosting operating efficiency through improved workflows, the bank will continue to cultivate close links with quality customers and improve customer satisfaction and interest.

n In the housing­loan business, the bank will consolidate existing mortgage assets and provide customers with a full spectrum of products. In terms of sales channels, the bank will strengthen cross­selling of products, such as increasing the credit­card application rate among housing­loan customers and offering mortgage customers credit­card incentives for home renovation and decorating. In addition, the bank will strengthen its online banking service and encourage customers to use the service for inquires related to interest payment and trial calculation for amortized repayment.

n In the credit­card business, the bank plans to roll out a digital life credit card and intensify digital marketing aimed at boosting card­spending volume. In credit­card management, the bank will actively cooperate with large­scale channels and expand market share among medium­scale chain stores. It will also strive to issue co­branded cards to develop new customer sources and expand market share. In addition, the bank will tap the high­end customer market and strengthen marketing to forge an image of "convenience" and "appeal" for Fubon credit cards.

n In the unsecured­loan segment, the bank will focus on quality customers and providing an optimal product line for customers to build market share and develop new business.

(3). Wealth Management Business

n Customer satisfaction is one of the most important factors in the wealth­management business. The bank will actively manage risk for customers and help them to steadily grow their wealth. The bank will also offer customers more innovative and comprehensive lifelong wealth­management planning to meet their needs. In addition, the bank will strengthen product and channel services to build value for customers and the society and hone its image among customers as the most trustworthy wealth­management bank.

n The bank's product development is customer­oriented and fully realizes the principle of "know your customer." The bank has an extensive understanding of the risk­taking limits of customers and how to meet their wealth­management needs at different life stages. It also uses risk­management mechanisms to further maximize customer benefits. The bank will continue to promote the wealth­management concept of diversified exposure (in currencies, risks, and assets). Core assets will consist mainly of conservative and steady products supplemented by more aggressive positions, so as to balance investment returns and risks. The bank will utilize structured notes to strengthen currency deployment and continue introducing overseas bonds and exchange traded funds (ETFs) to meet customers' diverse needs. In terms of asset deployment, the bank will focus on bonds and balanced­type mutual funds, savings, protection­type insurance, and semi­discretionary individually managed fund.

­ 4 ­

n In the area of physical channels, the bank will renovate branches to improving operations, enhance operational efficiency and service quality, and provide customers with a brand new image. As for virtual channels, the bank will conduct e­channel marketing through combination of physical and virtual channels, continue increasing membership, promote functions, and facilitate transactions to expand its customer base and build customer satisfaction. In terms of platform functions, the bank will continue to improve the functions of existing online and mobile banking platforms, launch apps for tablet PC­based mobile banking, and establish a new­generation online banking platform to provide customers with a range of innovative e­platform services.

3. Credit Rating

Rating Date Credit Rating Institution

Long­term Credit Ratings

Short­term Credit Ratings

Credit Worthiness

Outlook

2012/12/16 Moody’s A2 P­1 C­ Stable

2012/12/28 Taiwan Ratings Corporation

twAA+ twA­1+ ­­­ Negative

­ 5 ­

II. Corporate Profile 1.Introduction

（1）Establishment Date and Basis：

TAIPEI BANK was established on Apr. 21, 1969 by Ministry of Finance Order (57) Tsai

Tzu No. 7864.

（2）History

n The bank was founded on April 21, 1969, as "Taipei Bank" by the Taipei City

Government to coordinate municipal finance, support the city development, and

manage the city treasury. It was originally a financial business agency before its

transformation into a company limited by shares on July 1, 1984.

n On Jan. 1, 1993, the bank was renamed Taipei Bank Co., Ltd. In 1994, with the

government pushing financial liberalization, the bank extended its operations for the

first time beyond the scope of Taipei City by establishing a Kaohsiung branch. On Jan.

20, 1995, the bank was approved to become a national bank. In 1997, the bank carried

out cash capital increase of NT$2 billion by issuing new shares subscribed by

employees and the public. On July 23, 1997, the bank formally listed its shares on the

stock market. In line with the government's policy to privatize government enterprises,

the bank was transformed into a private bank on Jan. 30, 1999. Fubon FHC acquired

full ownership of the bank on Dec. 23, 2002, to support its long­term development,

and the bank was delisted on the same day.

n After incorporating Taipei Bank under the group on Feb. 23, 2002, Fubon FHC began

to integrate the information systems, operational flows, organizations, and staff of

Taipei Bank and Fubon Bank, another subsidiary of the group, to realize management

and brand asset synergies.

n After an ambitious two­year integration effort, Taipei Bank and Fubon Bank formally

merged on Jan. 1, 2005, under the name of "Taipei Fubon Bank." The bank augments

the profit potential of Fubon FHC and marks a milestone in the history of Taiwan's

financial industry as the first merger between a government bank and a private bank.

n Fubon Bills Finance was originally a 100%­owned subsidiary of Fubon Bank. In order

to integrate related businesses under the auspices of the financial holding company

­ 6 ­

and address business overlap between the bank and Fubon Bills Finance, the bank

completed acquisition of Fubon Bills Finance on Dec. 25, 2006. In June 2008, the

bank set up a branch in Ho Chi Minh City, Vietnam.

n After acquiring the Hanoi branch and the Ho Chi Minh sub­branch on March 6, 2010,

the bank now has three business bases in Vietnam: the Hanoi branch, Ho Chi Minh

sub­branch, and Binh Thanh branch (in Ho Chi Minh City).

n Fubon Insurance Agency, originally a 100%­owned subsidiary of the bank, was

liquidated on Aug. 31, 2010, a move confirmed by the board of directors on Sept. 21,

2010. Taipei Fubon Bank served as the custodian for its documents.

n The bank's board of directors resolved on Dec. 27, 2012 to acquire a 51% stake in

First Sino Bank in China.

n In 2012, the bank's management right didn't undergo change and there were no major

changes in management methods and business contents and no major cases capable of

affecting shareholders' interests.

­ 7 ­

2.Organizational Structure (1) organization

­ 8 ­

（2）Board Members and Supervisors Title Name Representing

Organization Background & Education Date

Elected Term

Chairman Daniel Tsai Fubon Financial Holding Co.

Chairman, Taipei Fubon Commercial Bank Chairman, Fubon Insurance Graduate School of Law, University of Georgetown

2011/06/ 24

3 yrs

Vice Chairman

Richard Tsai Fubon Financial Holding Co.

Vice Chairman, Taipei Fubon Commercial Bank Chairman, Fubon Life Graduate School of Finance, New York University

2011/06/ 24

3 yrs

Standing and independent director

Hong­Chang Chang Fubon Financial Holding Co.

Ph.D., Wharton School University of Pennsylvania

2011/06/ 24

3 yrs

Standing and independent director

Yuan­Chi Chao Fubon Financial Holding Co.

President, Da An Commercial Bank President, China Development Financial Holding Chairman and president, First Financial Holding Master of Finance, University of New York

2011/10/ 06

3 yrs

Standing Director

Jerry Harn Fubon Financial Holding Co.

President, Taipei Fubon Commercial Bank Senior Vice President, Chinatrust Commercial Bank MBA ,The Ohio State University

2011/06/ 24

3 yrs

Independent Director

Wei­Yi Lin Fubon Financial Holding Co.

Director, business department, Central Bank of the Republic of China (Taiwan) Chairman, Central Deposit Insurance Corporation, Chairman, Taiwan Depository & Clearing Corporation Doctor, Lincoln University

2011/06/ 24

3 yrs

Director Goethe Tsai Fubon Financial Holding Co.

Prosecutor, Taipei District Court Master of law, National Taiwan University

2011/10/ 06

3 yrs

Director Patrick Chang Fubon Financial Holding Co.

Chief risk­management officer, Taipei Fubon Bank (Executive V P) Senior vice president, Taiwan branch, HSBC MBA, University of Chicago

2011/06/ 24

3 yrs

Director Victor Kung Fubon Financial Holding Co.

CFO, Fubon Financial Holding Co. Executive Vice President, Walden International Investment Group MA－Economics Graduate School of Arts and Science, New York University MBA－Finance Stern School, New York University

2011/06/ 24

3 yrs

Director John Y. Kuang Fubon Financial Holding Co.

Senior Executive VP, Taipei Fubon Commercial Bank Co­Head of Wholesales Banking, Head of Global Markets in Standard Chartered Bank Taipei President of Fixed Income Group, Polaris Securities Co., Ltd.

2011/06/ 24

3 yrs

­ 9 ­

Title Name Representing Organization

Background & Education Date Elected

Term

B.S in International Trade from the Business Administration Dept., National Taiwan University

Director Morris Huang Fubon Financial Holding Co.

Senior Executive VP, Taipei Fubon Commercial Bank MBA ,The Ohio State University

2011/06/ 24

3 yrs

Director Benny Chen Fubon Financial Holding Co.

Senior Consultant, Fubon Financial Holding Co. Country Business Manager ­ Global Consumer Group, Citibank, China Citigroup Deputy President, Chinatrust Financial Holding Company Senior Vice President, McDonald’s Corporation in Taiwan. MBA, Southern Illinois University

2011/06/ 24

3 yrs

Director Chu­Min Hong Fubon Financial Holding Co.

Executive vice president, Taipei Fubon Bank MBA, Royal University, Canada

2011/06/ 24

3 yrs

Director Thomas Liang Fubon Financial Holding Co.

President, consumer­banking group, Fubon Financial Holding President, Personal Banking, Taipei Fubon Bank Managing director, Fubon Bank (Hong Kong) Master, Operations Research, Case Western Reserve University

2012/06/ 23

3 yrs

Director Yan­Kwong Chan Fubon Financial Holding Co.

Executive vice president, Taipei Fubon Bank MBA, Bath University

2011/06/ 24

3 yrs

Director Hsien­Long Chiu Fubon Financial Holding Co.

Executive vice president, Fubon Commercial Bank Master, business automation and management National Taipei University of Technology

2011/06/ 24

3 yrs

Director Chao­Yang Kao Fubon Financial Holding Co.

President, Personal Banking, Taipei Fubon Bank President, Wealth­management Group, Fubon Financial Holding President, Xiamen Bank Bachelor, Department of Law, National Taiwan University

2012/06/ 23

3 yrs

Supervisor Chia­Chen Lin Fubon Financial Holding Co.

President, Fubon Commercial Bank. B.S in Dept. of Economics, National Taiwan University

2011/06/ 24

3 yrs

Supervisor Bang­Ren Liu Fubon Financial Holding Co.

Executive Vice President, Fubon Commercial Bank B.S in Dept.of Accountancy & Statistics, National Cheng Kung University

2011/06/ 24

3 yrs

Supervisor Ruey­Chang Hu Fubon Financial Holding Co.

Senior Vice President, Fubon Commercial Bank. B.S in Dept. of Business, National Taiwan University

2011/06/ 24

3 yrs

Note 1：The tenure of the 11 th board of directors and supervisors of the company is June 24, 2011 ­ June 23, 2014. Note 2：Chu­Min Hong resigned the tenure of the 11 th board of directors on June 22, 2012. Note 3：Hsien­Long Chiu resigned the tenure of the 11 th board of directors on June 22, 2012.

­ 10 ­

（3）Major Shareholder of Major Institutional Shareholder

Institutional Shareholders Major Shareholder of Major Institutional Shareholder

Fubon Financial Holding Company Taipei City Government、Ming Tong Co.、Dao Ying Co.

­ 11 ­

III. Business Operations 1. Business Information （1） Breakdown of Total Revenues

Unit：﹪

25.95

29.21

48.05 46.51

6.15 7.12

19.85

17.16

0

10

20

30

40

50

2012 25.95 48.05 6.15 19.85

2011 29.21 46.51 7.12 17.16

WMB LB CCB OB

Note： WMB ：Wealth Management Business LB ：Loans Business CCB ：Credit Card Business OB ：Others Business

（2）Business Performance

Wealth Management (deposit, structured notes, mutual fund, custody, insurance)

♦ Deposits and remittances: Benefiting from the stable and positive image of the financial holding firm, the bank will continue taking advantage of its abundant marketing resources to keep interest rates at competitive levels to maintain continuous growth of the outstanding deposits of the wealth­management customers. As of December 2012, monthly average deposits topped NT$792.1 billion, up 2.6% over a year earlier. Following the launch of its DBU RMB­related businesses, the bank will endeavor to raise the share of foreign­currency deposits, thereby strengthening the deposit structure at a time when interest spread is still limited.

♦ Structured notes: In 2012, in line with the strategy of providing currency deployment to customers, the bank increased sales of dual­currency products. Additionally, in view of different risk features of professional investors and common investors, the bank offered combination products with various structures and in range of currencies, to satisfy customers' investment and wealth­management needs.

­ 12 ­

♦ Mutual fund: The bank's mutual­fund investment strategy focused on conservative products in the first half of the year. In the second half, as the market improved, the bank gradually increased investments in risk assets with promising potential, while still stressing balanced­type products and attention to both yields and risks. Additionally, the bank strengthened products with different currency denominations, such as Australian dollars and New Zealand dollars, to offer customers more options in the deployment of currency assets.

♦ Insurance products: In 2012, the bank actively promoted high­protection policies with installment payments. This strategy, coupled with termination of U.S. and short­term products based on interest reduction for reserve funds for insurance­policy value, substantially increased revenue of insurance products in 2012. In 2013, the bank will continue pushing high­protection products and develop investment­type insurance policies in line with an anticipated improvement in the investment climate.

♦ Custody: The scale of the bank's custody business remained largely unchanged at the end of 2012 from the level a year earlier as the bank focused on existing customers. Custody value for mutual funds dropped NT$6.4 billion, but custody value for investment­type insurance policies increased by NT$4.8 billion, with the total scale remaining at NT$267.9 billion. In the future, the bank will continue enhancing the efficiency and function of custody operating platform, to facilitate integration of business resources and enhance the overall business synergy of wealth management.

Consumer Banking

♦ The bank achieved a remarkable performance in consumer banking in 2012. In the housing­loan segment, the bank rolled out high interest­differential products to strengthen this business niche while maintaining mortgage asset quality. The bank extended NT$92 billion of new housing loans in 2012, lifting the amount of outstanding loans to over NT$330 billion.

♦ In the credit­card business, the bank rolled out the A Money card and co­branded EasyCard, as well as offered a 10% bonus for card spending by new cardholders. The bank issued 360,000 new credit cards in 2012, raising the total number of credit cards in circulation to 2.1 million.

♦ In the area of unsecured loans, the bank deeply cultivated quality cardholders, salary­transfer accounts, and group accounts. This strategy, coupled with a flexible marketing and risk­management policy, and convenient payment channels, raised the outstanding amount of unsecured loans by 23%, despite a slowdown in overall economic growth.

Institutional Banking lCorporate Banking

♦ Thanks to the solicitation of new customers and expansion of offshore loans and trade financing for Taiwanese­invested enterprises in China, the bank achieved steady growth for corporate loan assets and deposits.

♦ Despite the unstable global economy and Taiwan's economic slowdown, the bank still achieved double­digit growth in corporate banking business revenue in 2012. Effective control of operating expenses and provision expenses and a substantial impairment write­back contributed, the bank’s net income (after provisions) grew sharply.

­ 13 ­

♦ The major performance results in 2012, as follow:

a. Thanks to expansion of its customer base and trading financing, the bank steadily grew loan assets, with average corporate loans reaching NT$467.8 billion, up 6.89%, and loans for public and private enterprises topping NT$318.8 billion at the end of 2012, with a market share of 3.48%, remained the highest among private banks.

b. In 2012, Taiwan's import letter of credit (L/C) issued market shrank by 7.19% in 2012 but the bank's L/C volume dipped only 1.34%, thanks to the rollout of Usance L/C pay at sight (UPAS) targeting cross­strait trade financing. As a result, the bank's market share advanced to 2.99% and marketing ranking climbed to ninth place, up two notches. In 2012, Taiwan's export negotiation market tumbled 1.41%, due to plunge in demand to forfeiting on China's loosening of adjustment and control policy. With interest spread shrinking substantially in the second half and due to the emphasis on profits over business volume, the bank's export negotiation business dropped, with market share standing at 3.24%.

c. The European debt crisis, China's economic slowdown, and declining export volumes in the first half dragged Taiwan's factoring market 21.8% lower in 2012. Due to a plunge in demand by major customers, the bank's factoring business also declined, with market share standing at 16.42%, ranking third place.

d. Due to slackening global economy, deferred corporate investments, the sluggish outlook of electronics, flat panel displays, and solar energy, combined with weakness in the construction industry resulting from government curbs on the realty market, the value and volume of syndicated loans in Taiwan slumped in 2012. The bank's syndicated­loan business volume also dropped but its market share inched up to 8.27%, ranking fifth in the overall banking market and first among private banks.

lFinancial Market

♦ Treasury marketing: Backed by close partnership with customers, the bank has established solid customer basis in greater China in recent years and has continued designing various derivatives. These efforts have helped revenue to grow by over 20% annually in the past five years, the fastest growth rate among peers.

♦ Forex business: Due to lower fluctuation in forex rate and lower­than­expectation export and import growth, the bank's forex trading volume slipped but profits still grew in 2012. The bank continued to rank second place in outstanding value of nominal principal of forex derivatives. In addition, the bank drew on its expertise, technological advantages, and superior capability in option quotes to lead its peers in this segment.

♦ Transaction in interest derivatives and bonds: The bank was the market leader in the domestic bond market in 2012, with market share reaching 7.46%. As a major market maker, the bank has a firm grip on trade and market direction, helping it to formulate and flexibly deploy trading strategies to increase profits.

Trust

♦ In 2012, the bank focused on promoting designated single­management money trusts, with accumulated trust assets growing 25% to NT$3.31 billion. Products in the category stress disciplined investment and providing customers with tailor­made service combining trust and wealth management to meet their risk­hedging wealth­management needs amid market volatile market.

­ 14 ­

♦ In 2012, the bank generated NT$133.5 billion in bond­trustee business, ranking second place in the market.

Government Treasury Services

♦ The bank undertakes government­treasury business for Taipei City Government, taking care of payment, custody, and transfer of cash, negotiable instruments, and securities; and custody of property deeds for the city government, subordinate agencies, schools, and city government­owned business institutions.

♦ The bank has also opened plural payment channels to provide convenient and professional related financial services. In 2012, the bank launched a youth startup financing program, carried out various programs in cooperation with various Taipei City Government units, and conducted surrogate collection of fees for city government agencies and schools to provide a full range of financial services and establish a quality and comprehensive service network.

♦ In addition to providing various project loans in line with government policy, the bank offers loans for major city government development projects and actively takes part in bidding or negotiation for municipal government and central­government agency loans. In 2012, the bank provided NT$198.5 billion worth of government treasury­related loans.

Sports Lottery

♦ On Oct. 2, 2007, the Ministry of Finance designated the bank as the issuing institution for Taiwan's Sports Lotto. The bank continued to serve this function through the end of December 2013.

♦ The bank has entrusted Taiwan Sport Lottery－Corp., to undertake sports lotto­related affairs, including issuance, sales, marketing, dividends calculation, and management and other operations that the bank is not regulatorily required to perform itself.

2. Business Strategies and Business Plans for 2013

（1）Business Strategies

Institutional Banking l Corporate Banking

♦ Customer development and business expansion: The bank will actively develop overseas customers and customers other than Taiwanese businesses, tap customers in both upstream and downstream sectors, and establish regional and industrial networks to consolidate and develop potential customers.

♦ Product planning and operational efficacy: The bank will continue pushing new cross­strait trade financial businesses, actively deploy in RMB­related businesses, and accelerate growth of RMB businesses to grasp opportunities associated with the opening of cross­strait business ties. Additionally, the bank will further improve operational flow to build operating efficacy.

♦ Risk management and asset quality: The bank will continue enhancing industry study and credit investigation capabilities to realize risk­based pricing and customer grading, thereby effectively utilizing internal resources to cushion the impact of future economic fluctuations.

­ 15 ­

♦ Internal management and human resources: The bank will continue to improve risk models and materialize risk­based pricing to improve credit portfolio and enhance risk returns. To support the development of overseas business, the bank will establish overseas core systems and upgrade financial­trading systems. The bank will continue to recruit quality personnel and cultivate overseas­business talent to build the scale and quality of its human capital and establish a medium­ and long­term competitive edge.

l Financial Market

♦ Enhancing profitability of financial marketing: In view of market changes and customer needs, the bank will launch timely new products, adjust its product lineup, and seize opportunities from the opening of RMB­related businesses, so as boost franchise income and create stable income sources.

♦ Expanding profits from financial transactions: The bank will actively develop a variety of products meeting customer needs and establish RMB­denominated platforms at DBUs in line with the further opening of RMB­related businesses to diversify is product line. It will also take advantage of its advanced self­quote capability to serve more financial­peer customers and expand risk taking based on franchise revenue to boost profits.

♦ Risk management and talent cultivation: The bank will continue developing self­quote and risk­hedging models, strengthen the size and quality of its financial marketing team, and cultivate talent at the bank.

Consumer Banking

♦ Strengthening product competitiveness: The bank will plan a range of products and services meeting customer demands, features, and behavior.

♦ Improving product pricing: The bank will formulate pricing models based on customer­group risks.

♦ Sales channel: The bank will strengthen cross­selling of products and establish diversified sales channels to increase channels for business generation.

♦ Strengthen brand visibility: The bank will step up digital marketing and use lively visual designs to build market visibility.

Wealth Management

♦ In the area of risk management, the bank will fully realize the principle of "know your customer," deeply understand customers' risk­withstanding capability, and meet the wealth­management needs of customers at various life stages. This will be coupled with risk­management mechanism to keep customers' overall risk­exposure at a relatively low level.

♦ The bank will strengthen wealth­management information services for customers, discover the features of different customer groups through business intelligence, offer tailor­made products, regularly check changes in customers' risk­bearing limits, and expand wealth­management customer groups, and increase customer stickiness.

♦ In terms of physical channels, the bank will foster an image of friendly and seamless service at the brand new Taipei Fubon Bank and duplicate the successful experience of exemplary branches to strengthen customer­service quality deepen customer relationships.

­ 16 ­

♦ In consolidating excellent talent, the bank will expand wealth­management team and enhance the expertise of wealth­management staffers by reviewing the people process (manpower planning, recruitment, education and training, performance evaluation, career development, and talent retention).

♦ In virtual channel, the bank will continue increasing membership, conducting function expansion, and facilitating transactions via organizing e­channel marketing activities, in order to expand customer base and boost customer satisfaction.

（2）Business Plans

Wealth Management (deposit, structured notes, mutual fund, custody, insurance)

♦ The bank will continue integrating channel resources under the financial holding firm, actively developing payroll transfer customers and children accounts, increasing steady funding sources, and, through opening RMB­deposit business and preferential foreign­currency deposit interests, improve the bank's deposit structure.

♦ The bank will push combination foreign­currency products and add RMB­denominated products to provide customers with more choices for currency deployment and diversify fixed­income investment products.

♦ The bank will continue strengthening its wealth­management product line, providing overseas bonds and overseas ETFs, and establishing comprehensive and convenient investment platforms meeting the diverse wealth­management needs of customers.

♦ The bank will offer different investment mechanisms and fee discounts to encourage long­term investment, and irregularly provide different competitive fees for new and existing customers to attract customer investment.

♦ The bank will strengthen media and channels for customer communications and conduct event based marketing in line with festivals and specific themes to help customers find the optimal product line and investment strategy.

♦ The bank will utilize different currencies and medium­ and long­term insurance products to help customers with asset deployment and retirement planning, as well as actively develop investment­type insurance policies aimed at the improving investment climate.

Consumer Banking

♦ The bank will endeavor to raise housing­loan spread and consolidate mortgage profits. In terms of sales channels, the bank will strengthen cross­selling of products, raise overall contribution of customers, such as through sales of mortgage­related life insurance, increase of credit­card applications by mortgage customers, and offering of credit­card incentives for post­loan home decorating and appliance purchases. In addition, the bank will strengthen online banking functions and encourage customers to use the online system for inquiries on interest­payment status and trial calculation of amortized repayment.

♦ In the unsecured loan sector, the bank will continue embracing a business model centered on meeting customer needs and, through product design, marketing, packaging and contests, realize differentiated risk­based prices, improve operating flow, simplify application procedures, and diversify media exposure to deepen management of existing customer groups and tap the market for quality salaried customers.

­ 17 ­

♦ In the credit card business, the bank plans to roll out a digital life card combining the benefits of the Internet, telecommunications, and TV, in response to the advent of an e­era and booming development of mobile Internet. The bank will also develop new niche­oriented co­branded cards to rapidly tap new customer sources. Efforts to promote card spending will focus on offering consumers incentives in a range of theme areas, including dining, travel, shopping, and daily consumption, all backed by intensive promotion. Additionally, the bank will actively cooperate with department stores and boost market competitiveness through the rollout of products with exclusive graphic licensing or the offering of department­store gift vouchers. The bank will develop innovative products and plan special rewards programs, as well as organize attractive giveaway programs and large­scale card spending promotions through major channels. The bank will also increase its ChinaUnionPay card and online store merchant business, as well as cooperate with system­platform operators in acquiring­bank and cross­border payment businesses.

Institutional Banking lCorporate Banking

♦ Key strategies include expanding overseas investment and financing services to widen interest spreads and overcome Taiwan’s low interest spread environment, and further tapping into the SME client segment to increase rates of return. Efforts will also focus on expanding cross­selling and diversifying profit sources while better segmenting customers to effectively use the company’s resources in increasing customers’ contribution margin.

♦ Looking to expand its customer base, the Bank will more actively target overseas Taiwanese businesses and client segments in overseas markets along with companies in their respective supply chains to build regional and industrial client clusters and solidify the pool of potential customers.

♦ In terms of product planning, the emphasis will be on continuing to promote new types of trade financing across the Taiwan Strait and developing RMB­denominated services to accelerate the growth in scale of RMB operations and capitalize on the liberalization of the cross­strait financial sector.

♦ The Bank’s business development strategy will emphasize balance in both channel and product development. On the distribution side, SMEs have assumed growing importance in recent years and revenue from large companies is now less than 50% of the Bank’s total, and that trend will continue. On the product side, the Bank will use cross selling to expose clients to a greater variety of products and deepen client relationships, reflecting a commitment to the broader development of each product line to prevent the risk of concentrating too heavily on any single product.

♦ The Bank will continue to optimize risk models and put in place risk pricing to strengthen credit portfolio management and enhance returns on credit risk. To deal with business development abroad, a core back office system for overseas branches will be built to upgrade operating functions and develop support capabilities for regional banks.

­ 18 ­

lFinancial Market

♦ Treasury Marketing: Looking at the movements of major currencies, the U.S. dollar is expected to trend lower because of the United States’ gaping fiscal deficits, while the Japanese yen should continue to depreciate under the Bank of Japan’s unlimited quantitative easing program. The euro will debt problems in several European countries are exposed. To cope with these trends and client needs, the Treasury Marketing department plans to introduce new products and appropriately adjust product weights while also seizing opportunities created by the easing of legal restrictions on RMB services. Other priorities will be to aggressively expand into the Greater China market and strengthen both the caliber and depth of the treasury marketing team.

♦ FX: Taking a consumer­centric approach, the forex department plans to expand the range of products it quote s and develop a DBU RMB­services platform to create a product line unrivaled in its diversity. The division will build on its advantage in pricing to expand its inter­bank clientele and enhance its profit­generating capacity through added risk made possible by a strong franchise revenue foundation.

♦ Transaction in interest derivative and bonds: The widespread quantitative easing by the world’s major central banks will keep interest rates in check and limit volatility, making profit growth more of a challenge. But a franchise revenue foundation that is growing stronger by the day will allow for greater risk taking and more flexible trading strategies to create more profit opportunities. New products will be introduced at overseas branches to satisfy customers’ investment and hedging needs, and opportunities in RMB/FX swaps, RMB interest rate swaps and RMB denominated bonds will be explored to enhance international trading capabilities and generate stable profits.

Trust

♦ Through disciplined and quantitative investment methods, the bank will provide customers with proprietary pension­fund trust accounts in the form of semi­discretionary individually managed fund.

♦ According to customers' needs for assets deployment and trust services, the bank will formulate tailor­made money trust contracts to give customers the trust benefits of assets protection, property transfer, taxation planning, and professional investment.

♦ The bank will promote its securities lending trust business, helping principals to improve the utilization and benefits of long­term securities.

♦ The bank will promote the securities­management trust business to help principals issue stock dividends to designated beneficiaries, while reserving utilization decision rights and thereby achieve property transfer and tax saving benefits.

♦ The bank will offer employees of corporate customers the services of shareholding trusts and employee­benefit savings trusts, helping employees protect their future life through trust fund and wealth­management rooted in long­term investment.

♦ The bank will continue developing higher­yield businesses, such as escrow and benefit transfers for property trusts to raise input/output ratios.

♦ To take advantage of the business opportunities associated with performance guarantee systems for presold houses and voucher issuance, the bank will undertake trust business for advance collection, under the principle of manageable risk.

­ 19 ­

Government Treasury Services

♦ The bank will seek out government­treasury business from other government agencies, backed by its abundant experience serving as treasury for the Taipei City Government.

♦ The bank will actively develop its cash­management business, including collection services for government agencies, to increase fee income.

♦ The bank will simplify business flow and cut operating cost to boost added value in its government­treasury business.

3. Research ＆ Development Plans

♦ The bank has established an e­platform for loan­related deeds to enhance operating efficiency and management efficacy.

♦ In order to boost the operating efficacy of overseas branches, the bank is establishing a core system for overseas branches to facilitate and improve the efficiency of operations to support regional development.

♦ The bank continues to develop well­rounded financial services for housing­loan customers to enhance added value in the mortgage segment.

♦ The bank develops products to meet the funding needs of housing­loan customers and boost customer service and satisfaction.

♦ The bank hones its analysis and utilization of databases on unsecured­loan business to expand its customer base and enhance cross­selling efficiency.

♦ The bank is improving workflow in its unsecured­loan operations to increase customer applications and service efficiency.

♦ The bank plans to roll out a digital daily­life credit card to attract card applications by major customers of the Internet, telecommunications, and television and boost the competitiveness of the bank's products.

♦ The bank has led the industry in rolling out fortune­god poster promotions to attract customers and promote the bank's products.

♦ The bank actively studies the utilization of new technologies, such as the development of mobile­phone credit cards to grow its cardholder base and card spending balance.

♦ The bank utilizes credit­card database and conducts deep analysis and segmentation of customer groups to provide differentiated products and services, thereby enhancing customer contribution and loyalty.

♦ The bank strengthens intra­group cooperation to further boost the product­keeping rate of credit­card customers.

♦ Systemized evaluation of market, products, and sales risk and the establishment of flow management: Amid an increasingly complicated financial environment, the bank is developing risk­management mechanisms and procedures for risk identification, evaluation, monitoring, and reporting to help customers manage risks and improve service quality.

­ 20 ­

a. Market risk: The bank establishes market­risk monitoring indicators to monitor extreme risks and formulates "countermeasures for emergent market situations," providing customers with real­time information. The banks develops models to monitor the risk status of various assets, including stock prices, interest rates, exchange rates, credit price differentials, and product prices, giving clients advance warning of asset risks.

b. Product risks: The bank strengthens quality management of existing products through review of investment performance, credit status, and liquidity.

c. Sales risks: The bank institutes systems for evaluation of customer asset risk, differential analysis of holding positions and investment recommendations, and analysis of customer preferences, thereby offering customers tailor­made wealth­management planning services.

♦ Promoting e­services a. The bank has established a new customer­contact mode joining both human and

electronic services. Bank staff help customers learn new e­platforms to give them anytime, anywhere access to banking services and boost customer satisfaction.

b. In addition to continuously increasing the variety of online­banking and mobile­banking functions and the contents of wealth­management information, the bank plans to roll out tablet­PC app services and establish a new­generation online­banking platform to provide customers with differentiated e­platform services and more diverse and well­round services rooted in constant innovation and improvement.

4. Employees Profile

Year 2011 2012 As on February 28,2013

Staff 6,331 6,291 6,328

Workers 137 127 126 Number of employees

Total 6,468 6,418 6,454

Average age (years) 35.84 36.66 37.27

Average seniority（years） 8.17 9.01 9.34

Graduate or higher 13.36％ 14.73％ 15.12％

College/University 78.23％ 77.89％ 77.66％

Senior high school 8.18％ 7.21％ 7.07％ Education level

Below senior high 0.23％ 0.17％ 0.15％

Note：Overseas contract/temporary staff is excluded from the above table.

­ 21 ­

IV. Special Notes

1.Dividend Policy and Implementation Status （1）Dividend Policy

♦ After yearly budget settlements, after­tax profits, if they exist, will be first used to make up deficits from the previous year, with 30% of the balance being set aside for legal reserves. Of the remainder, 1%­5% will be appropriated as employee bonuses, while the remainder will be incorporated into the accumulated retained earnings of past years. The board of directors will then make a proposal for payout of dividends, which will be submitted to the shareholders’ meeting for final ratification. Should the Bank’s legally­required reserves consist of equivalent paid­in capital or reach levels according to acceptable financial standards set by the regulator as per item 2, article 50 of the Banking Law, including appropriation of earnings for legally­required reserves according to the Company Law, the company can be exempt from restrictions regarding appropriation of earnings for legally­required reserves and cash­dividend payout.

♦ Measures for the bonus payout will be formulated by the board of directors.

♦ Before legal reserves equal paid­in capital and when the capital/risk­based assets ratio meets the requirements of the Banking Law, the ceiling for the payout of cash earnings should comply with the stipulations of the Banking Law and the requirements of the regulator.

（2）Implementation Status

In 2013, the appropriation of the 2012 earnings and dividends per share was proposed by the board of directors as follows:

Dividends Dividend Per Share Stock dividends NTD＄9,095,942,700 NTD＄1.49

­ 22 ­

2. Implementation of the Internal Controls System

­ 23 ­

­ 24 ­

­ 25 ­

­ 26 ­

­ 27 ­

­ 28 ­

­ 29 ­

Headquarters and Branches

Headquarters Address and Telephone Number Headquarter No.169, Sec. 4, Ren’ai Rd., Da’an Dist., Taipei City 106, Taiwan (R.O.C.)

886(2)27716699

Business Department No.50, Sec. 2, Zhongshan N. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)

886(2)25425656

Lottery Department 10F, No.50, Sec. 2, Zhongshan N. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)

886(2)66085885

Government Banking Department B1, No.1, Shihfu Rd., Xinyi Dist., Taipei City, Taiwan 110, Taiwan (R.O.C.)

886(2)27209001

Trust Department 3F/4F, No.138, Sec. 3, Minsheng E. Rd., Songshan Dist., Taipei City 105, Taiwan (R.O.C.)

886(2)27186888

Securities Department（Dealer and Underwrite） 18F, No.169, Sec. 4, Ren’ai Rd., Da’an Dist., Taipei City 106, Taiwan (R.O.C.)

886(2)27716699

Branches Address and Telephone Number Code Branch Name Address Tel.

012­5608 Offshore Banking Branch

5F, No.169, Sec. 4, Ren’ai Rd., Da’an Dist., Taipei City 106, Taiwan (R.O.C.)

886(2)27716699

012­2032 Changan E. Road Branch

No.36, Sec. 1, Chang’an E. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)

886(2)25212481

012­2205 Chengdong Branch No.90, Sec. 2, Nanjing E. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)

886(2)25116388

012­2216 Nongan Branch No.369, Songjiang Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)

886(2)25031451

012­3006 Shilin Branch No.288, Zhongzheng Rd., Shilin Dist., Taipei City 111, Taiwan (R.O.C.)

886(2)28317444

012­3017 Shidong Branch No.360, Sec. 6, Zhongshan N. Rd., Shilin Dist., Taipei City 111, Taiwan (R.O.C.)

886(2)28735757

012­3028 Ruiguang Branch No.392, Ruiguang Rd., Neihu Dist., Taipei City 114, Taiwan (R.O.C.)

886(2)26562989

012­3039 Yucheng Branch No.126, Sec. 6, Zhongxiao E. Rd., Nangang Dist., Taipei City 115, Taiwan (R.O.C.)

886(2)26511212

012­3040 Fugang Branch No.310, Sec. 4, Chengde Rd., Shilin Dist., Taipei City 111, Taiwan (R.O.C.)

886(2)28836712

012­3051 Zhongxiao Branch No.107, Sec. 4, Zhongxiao E. Rd., Da’an Dist., Taipei City 106, Taiwan (R.O.C.)

886(2)27417880

012­3062 Chengde Branch No.142, Sec. 2, Chengde Rd., Datong Dist., Taipei City 103, Taiwan (R.O.C.)

886(2)25536553

012­3073 Longjiang Branch No.28, Sec. 3, Nanjing E. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)

886(2)25073817

­ 30 ­

Branches Address and Telephone Number Code Branch Name Address Tel.

012­3109 Yanping Branch No.69, Sec. 2, Yanping N. Rd., Datong Dist., Taipei City 103, Taiwan (R.O.C.)

886(2)25552170

012­3202 Muzha Branch No.92, Sec. 3, Muzha Rd., Wenshan Dist., Taipei City 116, Taiwan (R.O.C.)

886(2)29391035

012­3213 Muxin Branch No.236, Sec. 3, Muxin Rd., Wenshan Dist., Taipei City 116, Taiwan (R.O.C.)

886(2)29383791

012­3305 Longshan Branch No.161, Xining S. Rd., Wanhua Dist., Taipei City 108, Taiwan (R.O.C.)

886(2)23718720

012­3408 Bade Branch No.178, Sec. 3, Bade Rd., Songshan Dist., Taipei City 105, Taiwan (R.O.C.)

886(2)25776467

012­3419 Yongchun Branch No.655, Songshan Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.)

886(2)27592921

012­3420 Yongji Branch No.199, Yongji Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.)

886(2)27628700

012­3501 Zhongshan Branch No.162, Sec. 2, Zhongshan N. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)

886(2)25963171

012­3604 Beitou Branch No.2, Sec. 1, Zhongyang N. Rd., Beitou Dist., Taipei City 112, Taiwan (R.O.C.)

886(2)28915533

012­3615 Shipai Branch No.216, Wenlin N. Rd., Beitou Dist., Taipei City 112, Taiwan (R.O.C.)

886(2)28271616

012­3707 Daan Branch No.37, Sec. 4, Ren’ai Rd., Da’an Dist., Taipei City 106, Taiwan (R.O.C.)

886(2)27312333

012­3800 Datong Branch No.186, Sec. 3, Chongqing N. Rd., Datong Dist., Taipei City 103, Taiwan (R.O.C.)

886(2)25929282

012­3903 Guting Branch No.100, Sec. 3, Roosevelt Rd., Zhongzheng Dist., Taipei City 100, Taiwan (R.O.C.)

886(2)23650381

012­4003 Shuangyuan Branch No.19, Dongyuan St., Wanhua Dist., Taipei City 108, Taiwan (R.O.C.)

886(2)23030374

012­4014 Wanhua Branch No.482, Wanda Rd., Wanhua Dist., Taipei City 108, Taiwan (R.O.C.)

886(2)23325901

012­4106 Jiancheng Branch No.22, Nanjing W. Rd., Datong Dist., Taipei City 103, Taiwan (R.O.C.)

886(2)25554161

012­4117 Shifu Branch 1F., No.1, Shifu Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.)

886(2)27298999

012­4209 Nangang Branch No.19­5, Sanchong Rd., Nangang Dist., Taipei City 115, Taiwan (R.O.C.)

886(2)26551177

012­4302 Jingmei Branch No.64, Jingwen St., Wenshan Dist., Taipei City 116, Taiwan (R.O.C.)

886(2)29352636

012­4313 Xinglong Branch No.69, Sec. 3, Xinglong Rd., Wenshan Dist., Taipei City 116, Taiwan (R.O.C.)

886(2)86639889

012­4405 Neihu Branch No.6, Ln. 174, Sec. 3, Chenggong Rd., Neihu Dist., Taipei City 114, Taiwan (R.O.C.)

886(2)27961820

012­4427 Wende Branch No.42, Wende Rd., Neihu Dist., Taipei City 114, Taiwan (R.O.C.)

886(2)26582620

012­4508 Dunhua Branch No.201, Dunhua N. Rd., Songshan Dist., Taipei City 105, Taiwan (R.O.C.)

886(2)27131660

012­4542 Minsheng Branch No.163­1, Sec. 5, Minsheng E. Rd., Songshan Dist., Taipei City 105, Taiwan

886(2)27640853

­ 31 ­

Branches Address and Telephone Number Code Branch Name Address Tel.

(R.O.C.)

012­4601 Xinyi Branch No.299, Sec. 4, Xinyi Rd., Da’an Dist., Taipei City 106, Taiwan (R.O.C.)

886(2)27006381

012­4612 Zhuangjing Branch No.286, Zhuangjing Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.)

886(2)27226206

012­4623 Xinsheng Mini­ Branch

No.157, Sec. 2, Xinyi Rd., Zhongzheng Dist., Taipei City 100, Taiwan (R.O.C.)

886(2)23279908

012­4704 Songjiang Branch No.200, Songjiang Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)

886(2)25434282

012­4807 Heping Branch No.236, Sec. 2, Fuxing S. Rd., Da’an Dist., Taipei City 106, Taiwan (R.O.C.)

886(2)27022421

012­4900 Yanji Branch No.389, Sec. 4, Ren’ai Rd., Da’an Dist., Taipei City 106, Taiwan (R.O.C.)

886(2)27527600

012­5000 Chengzhong Branch No.7, Qingdao W. Rd., Zhongzheng Dist., Taipei City 100, Taiwan (R.O.C.)

886(2)23615481

012­5103 Nanmen Branch No.17, Jinhua St., Zhongzheng Dist., Taipei City 100, Taiwan (R.O.C.)

886(2)23971640

012­5206 Fuxing Branch No.234, Fuxing N. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)

886(2)25023530

012­5309 Xisong Branch No.75­1, Sec. 4, Nanjing E. Rd., Songshan Dist., Taipei City 105, Taiwan (R.O.C.)

886(2)27170037

012­5402 Zhangan Branch No.76, Songjiang Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)

886(2)25519797

012­5505 Guilin Branch No.52, Guilin Rd., Wanhua Dist., Taipei City 108, Taiwan (R.O.C.)

886(2)23026226

012­5701 Dunhe Branch No.77, Sec. 2, Dunhua S. Rd., Da’an Dist., Taipei City 106, Taiwan (R.O.C.)

886(2)27012409

012­5804 Dongmen Branch No.61, Sec. 2, Ren’ai Rd., Zhongzheng Dist., Taipei City 100, Taiwan (R.O.C.)

886(2)23512081

012­5907 Zhonglun Branch No.6, Fuxing N. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)

886(2)27418257

012­6007 Keelung Road Branch No.21, Sec. 2, Keelung Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.)

886(2)27373671

012­6100 Jinhua Branch No.178, Sec. 1, Heping E. Rd., Da’an Dist., Taipei City 106, Taiwan (R.O.C.)

886(2)23698566

012­6203 Songnan Branch No.412, Sec. 5, Zhongxiao E. Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.)

886(2)27255111

012­6214 Huaisheng Branch No.215, Sec. 3, Zhongxiao E. Rd., Da’an Dist., Taipei City 106, Taiwan (R.O.C.)

886(2)27818380

012­6306 Minquan Branch No.37, Sec. 3, Minquan E. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)

886(2)25166786

012­6409 Jilin Branch No.146, Jilin Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)

886(2)25681248

012­6502 Shezi Branch No.225, Sec. 5, Yanping N. Rd., Shilin Dist., Taipei City 111, Taiwan (R.O.C.)

886(2)28168585

012­6605 Gangdou Branch No.358, Zhongshan 2nd Rd., Lingya Dist., Kaohsiung City 802, Taiwan (R.O.C.)

886(7)3356226

012­6683 Xihu Branch No.240, Sec. 1, Neihu Rd., Neihu Dist., Taipei City 114, Taiwan (R.O.C.)

886(2)87511788

­ 32 ­

Branches Address and Telephone Number Code Branch Name Address Tel.

012­6694 Jincheng Branch No.46, Sec. 3, Jincheng Rd., Tucheng Dist., New Taipei City 236, Taiwan (R.O.C.)

886(2)22631678

012­6708 Wanlong Branch No.136, Sec. 6, Roosevelt Rd., Wenshan Dist., Taipei City 116, Taiwan (R.O.C.)

886(2)29339956

012­6719 Zhonggang Branch No.160, Sec. 1, Taichung Port Rd., Taichung City 403, Taiwan (R.O.C.)

886(4)23207711

012­6720 Xinzhuang Branch No.227, Xintai Rd., Xinzhuang Dist., New Taipei City 242, Taiwan (R.O.C.)

886(2)29903366

012­6731 Taoyuan Branch No.33, Zhonghua Rd., Taoyuan City, Taoyuan County 330, Taiwan (R.O.C.)

886(3)3367171

012­6742 Anping Branch No.279, Sec. 2, Minsheng Rd., West Central Dist., Tainan City 700, Taiwan (R.O.C.)

886(6)2265265

012­6764 Songlong Mini­Branch

No.176­1, Sec. 1, Keelung Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.)

886(2)27473399

012­6775 Puqian Branch No.143, Sec. 2, Zhongshan Rd., Banqiao Dist., New Taipei City 220, Taiwan (R.O.C.)

886(2)89535118

012­6786 Beizhongli Branch No.268, Yuanhua Rd., Zhongli City, Taoyuan County 320, Taiwan (R.O.C.)

886(3)4256699

012­6797 Sanchong Branch No.36, Sec. 2, Zhongxiao Rd., Sanchong Dist., New Taipei City 241, Taiwan (R.O.C.)

886(2)89836868

012­6801 Fengyuan Branch No.139, Xiangyang Rd., Fengyuan Dist., Taichung City 420, Taiwan (R.O.C.)

886(4)25220088

012­6812 Shuanghe Branch No.696, Jingping Rd., Zhonghe Dist., New Taipei City 235, Taiwan (R.O.C.)

886(2)22438877

012­6823 Gushan Branch No.387, Huarong Rd., Gushan Dist., Kaohsiung City 804, Taiwan (R.O.C.)

886(7)5523111

012­6845 Fengcheng Branch No.126, Minsheng Rd., East Dist., Hsinchu City 300, Taiwan (R.O.C.)

886(3)5343888

012­6856 Changhua Branch No.349, Sec. 2, Zhongshan Rd., Changhua City, Changhua County 500, Taiwan (R.O.C.)

886(4)7261333

012­6867 Donghu Branch No.69, Sec. 3, Kangning Rd., Neihu Dist., Taipei City 114, Taiwan (R.O.C.)

886(2)26336677

012­6878 Yonghe Branch No.407, Dehe Rd., Yonghe Dist., New Taipei City 234, Taiwan (R.O.C.)

886(2)86601616

012­6889 Gangshan Mini­Branch

No.178, Zhongshan N. Rd., Gangshan Dist., Kaohsiung City 820, Taiwan (R.O.C.)

886(7)6213969

012­6890 Taipei 101 Branch 1F., No.45, Shifu Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.)

886(2)81018585

012­7015 Shuanglian Branch No.13, Sec. 1, Minsheng E. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)

886(2)25115511

012­7026 Nanjing E. Road Branch

No.139, Sec. 2, Nanjing E. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)

886(2)25155518

012­7037 Dunbei Branch No.138, Sec. 3, Minsheng E. Rd., Songshan Dist., Taipei City 105, Taiwan (R.O.C.)

886(2)27185151

012­7048 Renai Branch No.237, Sec. 1, Jianguo S. Rd., Da’an Dist., Taipei City 106, Taiwan (R.O.C.)

886(2)23258878

012­7059 Kaohsiung Branch No.1, Liuhe 1st Rd., Xinxing Dist., 886(7)2391515

­ 33 ­

Branches Address and Telephone Number Code Branch Name Address Tel.

Kaohsiung City 800, Taiwan (R.O.C.)

012­7060 Zhongzheng Branch No.476, Zhongzheng Rd., Taoyuan City, Taoyuan County 330, Taiwan (R.O.C.)

886(3)3350335

012­7071 Taichung Branch No.196, Sec. 2, Liuchuan W. Rd., Taichung City 403, Taiwan (R.O.C.)

886(4)22221911

012­7093 Songshan Branch No.421, Songshan Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.)

886(2)27281199

012­7107 Tucheng Branch No.100, Sec. 1, Zhongyang Rd., Tucheng Dist., New Taipei City 236, Taiwan (R.O.C.)

886(2)22709898

012­7118 Tainan Branch No.166­6, Zhongshan Rd., West Central Dist., Tainan City 700, Taiwan (R.O.C.)

886(6)2290266

012­7129 Fengshan Branch No.223, Ziyou Rd., Fengshan Dist., Kaohsiung City 830, Taiwan (R.O.C.)

886(7)7482088

012­7130 Zhongli Branch No.119, Sec. 2, Zhongbei Rd., Zhongli City, Taoyuan County 320, Taiwan (R.O.C.)

886(3)4595766

012­7152 Anhe Branch B1F., No.169, Sec. 4, Ren’ai Rd., Da’an Dist., Taipei City 106, Taiwan (R.O.C.)

886(2)27787717

012­7163 Zhengyi Branch No.279, Zhengyi N. Rd., Sanchong Dist., New Taipei City 241, Taiwan (R.O.C.)

886(2)29806688

012­7174 Danan Branch No.968, Sec. 1, Jieshou Rd., Bade City, Taoyuan County 334, Taiwan (R.O.C.)

886(3)3616565

012­7185 Chiayi Branch No.395, Ren’ai Rd., West Dist., Chiayi City 600, Taiwan (R.O.C.)

886(5)2231688

012­7196 Lingya Branch No.39, Zhonghua 4th Rd., Lingya Dist., Kaohsiung City 802, Taiwan (R.O.C.)

886(7)3318822

012­7211 Banqiao Branch No.266, Sec. 1, Wenhua Rd., Banqiao Dist., New Taipei City 220, Taiwan (R.O.C.)

886(2)22549999

012­7222 Beitaichung Branch No.333, Sec. 4, Wenxin Rd., Beitun Dist., Taichung City 406, Taiwan (R.O.C.)

886(4)22426222

012­7233 Sanmin Branch No.530, Dashun 2nd Rd., Sanmin Dist., Kaohsiung City 807, Taiwan (R.O.C.)

886(7)3871299

012­7244 Jianguo Branch No.196, Sec. 2, Jianguo N. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)

886(2)25151775

012­7255 Hsinchu Branch No.141, Zhongzheng Rd., Hsinchu City 300, Taiwan (R.O.C.)

886(3)5278988

012­7266 Xindian Branch No.266, Sec. 2, Beixin Rd., Xindian Dist., New Taipei City 231, Taiwan (R.O.C.)

886(2)29129977

012­7277 Tianmu Branch No.36, Tianmu E. Rd., Shilin Dist., Taipei City 111, Taiwan (R.O.C.)

886(2)28763232

012­7288 Xizhi Branch No.175, Sec. 1, Datong Rd., Xizhi Dist., New Taipei City 221, Taiwan (R.O.C.)

886(2)26411689

012­7303 Yongkang Branch No.856, Dawan Rd., Yongkang Dist., Tainan City 710, Taiwan (R.O.C.)

886(6)2736099

012­7314 Xiangyang Branch No.9, Xiangyang Rd., Zhongzheng Dist., Taipei City 100, Taiwan (R.O.C.)

886(2)23885889

012­7336 Wugu Branch No.445, Huacheng Rd., Xinzhuang Dist., New Taipei City 242, Taiwan (R.O.C.)

886(2)85213399

012­7347 Xinying Branch No.301, Minzhi Rd., Xinying Dist., Tainan City 730, Taiwan (R.O.C.)

886(6)6569889

­ 34 ­

Branches Address and Telephone Number Code Branch Name Address Tel.

012­7358 Pingtung Branch No.459, Heping Rd., Pingtung City, Pingtung County 900, Taiwan (R.O.C.)

886(8)7336899

012­7369 Qianzhen Branch No.289, Baotai Rd., Qianzhen Dist., Kaohsiung City 806, Taiwan (R.O.C.)

886(7)7170055

012­7370 Dunnan Branch No.108, Sec. 1, Dunhua S. Rd., Songshan Dist., Taipei City 105, Taiwan (R.O.C.)

886(2)87719898

012­7381 Baosheng Branch No.3, Baosheng Rd., Yonghe Dist., New Taipei City 234, Taiwan (R.O.C.)

886(2)89230888

012­7392 Yuanlin Branch No.596, Juguang Rd., Yuanlin Township, Changhua County 510, Taiwan (R.O.C.)

886(4)8369189

012­7406 Luodong Branch 1F., No.286, Xingdong Rd., Luodong Township, Yilan County 265, Taiwan (R.O.C.)

886(3)9566611

012­7417 Ruihu Branch No.62, Ruihu St., Neihu Dist., Taipei City 114, Taiwan (R.O.C.)

886(2)26591088

012­7428 Jihe Mini­Branch No.172­1, Sec. 2, Keelung Rd., Da’ an Dist., Taipei City 106, Taiwan (R.O.C.)

886(2)66388988

012­7439 Nanchang Mini­Branch

No.65, Sec. 1, Heping W. Rd., Zhongzheng Dist., Taipei City 100, Taiwan (R.O.C.)

886(2)66305678

012­7451 Hualien Mini­Branch No.256, Linsen Rd., Hualien City, Hualien County 970, Taiwan (R.O.C.)

886(3)8353838

012­7462 Zhubei Branch No.263, Guangming 6th Rd., Zhubei City, Hsinchu County 302, Taiwan (R.O.C.)

886(3)5586199

012­7473 Nantaichung Branch No.272, Sec. 1, Wenxin Rd., Nantun Dist., Taichung City 408, Taiwan (R.O.C.)

886(4)36009868

012­7484 Boai Branch No.450, Bo’ai 2nd Rd., Kaohsiung City 813, Taiwan (R.O.C.)

886(7)8628668

012­7495 Luzhou Branch No.71, Sanmin Rd., Luzhou Dist., New Taipei City 247, Taiwan (R.O.C.)

886(2)82821799

012­7509 Huajiang Branch No.110, Sec. 2, Shuangshi Rd., Banqiao Dist., New Taipei City 220, Taiwan (R.O.C.)

886(2)22530598

012­7510 Dazhi Branch No.602, Mingshui Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.) 886(2)85093878

012­7521 Shulin Branch No.27, Wenhua St., Shulin Dist., New Taipei City 238, Taiwan (R.O.C.) 886(2)26838186

012­7532 Keelung Branch No.279, Ren 1st Rd., Ren’ai Dist., Keelung City 200, Taiwan (R.O.C.) 886(2)24292888

012­7543 Zhuke Branch No.186, Guanxin Rd., East Dist., Hsinchu City 300, Taiwan (R.O.C.) 886(3)6663328

­ Los Angeles Branch 17800 CASTLETON STREET, SUITE 588, CITY OF INDUSTRY, CA 91748, U.S.A

+1­626­363­18 66

­ Hong Kong Branch 18F CENTRAL TOEWR 28 QUEEN’S RD. CENTRAL H.K.

+852­2822­7700

­ Binh Thanh Branch 5F, 194 GOLDEN BUILDING, 473 DIEN BIEN PHU STREET, BINH THANH DIST., HCMC, VIETNAM

+84­8­6258­366 6

Hanoi Branch 22F, CHARMVIT TOWER +84­4­3772­221

­ 35 ­

Branches Address and Telephone Number Code Branch Name Address Tel.

BUILDING, NO. 117, TRAN DUY HUNG RD., CAU GIAY DIST., HANOI, VIETNAM

2

Ho Chi Minh City sub­branch

NO. 253 DIEN BIEN PHU STREET, DIST. 3, HCMC, VIETNAM

+84­8­3932­588 8

Suzhou Representative Office

Room 611, 6F, International Financial Centre, 23B, Time Square, Huachi Street, Suzhou Industrial Park, Suzhou, China

+86­512­6238­9 958

­ 36 ­

Appendix

Annual Financial Reports for 2012 and 2011

­ 37 ­

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholder TAIPEI FUBON COMMERCIAL BANK Co., Ltd.

We have audited the accompanying balance sheets of TAIPEI FUBON COMMERCIAL BANK Co., Ltd. (the “Bank”), as of December 31, 2012 and 2011, and the related statements of income, changes in stockholder’s equity and cash flows for the years then ended. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these statements based on our audits.

We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements of Financial Institutions by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TAIPEI FUBON COMMERCIAL BANK Co., Ltd. as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended, in conformity with the Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants, Regulations Governing the Preparation of Financial Reports by Securities Firms, requirements of the Business Accounting Law and Guidelines Governing Business Accounting relevant to financial accounting standards, certain other guidelines issued by the authorities and accounting principles generally accepted in the Republic of China.

As stated in Note 3 to the accompanying financial statements, TAIPEI FUBON COMMERCIAL BANK Co., Ltd. adopted the newly revised Statement of Financial Accounting Standards No. 34 ­ “Financial Instruments: Recognition and Measurement” effective January 1, 2011.

We have also audited the consolidated financial statements of the Bank and its subsidiaries as of and for the years ended December 31, 2012 and 2011, and have issued opinions thereon that were unqualified and modified unqualified, respectively, in our report dated March 15, 2013.

March 15, 2013 Notice to Readers

The accompanying financial statements are intended only to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese­language auditors’ report and financial statements shall prevail.

­ 38 ­

TAIPEI FUBON COMMERCIAL BANK

BALANCE SHEETS DECEMBER 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Par Value)

2012 2011 % Increase 2012 2011 % Increase ASSETS Amount Amount (Decrease) LIABILITIES AND STOCKHOLDER’S EQUITY Amount Amount (Decrease)

CASH AND CASH EQUIVALENTS (Notes 4 and 32) $ 31,820,002 $ 27,224,781 17 DUE TO THE CENTRAL BANK OF CHINA AND OTHER BANKS (Notes 19 and 32) $ 69,753,342 $ 56,759,776 23

DUE FROM THE CENTRAL BANK OF CHINA AND OTHER BANKS, NET (Notes 5, 15 and 32) 70,851,850 73,099,143 (3) FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR

LOSS (Notes 2, 6 and 32) 19,612,456 22,747,531 (14) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 2, 6, 32, 33 and 34) 84,266,003 59,091,943 43 SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

(Notes 2, 32 and 34) 26,360,932 28,503,088 (8) SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL (Notes 2 and 34) 16,343,491 200,000 8,072 PAYABLES (Notes 2, 20, 25, 28 and 32) 34,399,577 28,933,305 19

RECEIVABLES, NET (Notes 2, 3, 7, 15 and 32) 60,053,795 66,768,060 (10) DEPOSITS AND REMITTANCES (Notes 21 and 32) 1,247,784,908 1,183,409,166 5

DISCOUNTS AND LOANS, NET (Notes 2, 3, 8, 15 and 32) 1,026,535,634 952,718,962 8 BANK DEBENTURES (Note 22) 66,929,382 62,143,488 8

AVAILABLE­FOR­SALE FINANCIAL ASSETS (Notes 2, 9, 32, 33, OTHER FINANCIAL LIABILITIES (Notes 2, 23 and 32) 28,695,600 26,702,507 7 34 and 35) 66,010,253 49,387,099 34

OTHER LIABILITIES (Notes 2, 15, 16, 24, 28, 31 and 32) 3,152,685 3,572,170 (12) HELD­TO­MATURITY FINANCIAL ASSETS (Notes 2, 10, 33, 34 and 35) 227,013,136 256,826,642 (12) Total liabilities 1,496,688,882 1,412,771,031 6

INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD STOCKHOLDER'S EQUITY (Notes 2, 11, 16, 25 and 35) (Notes 2 and 11) 184,687 184,760 ­ Capital stock, NT$10 par value

Authorized 8,000,000 thousand shares, issued and outstanding OTHER FINANCIAL ASSETS, NET (Note 2) 5,743,077 thousand shares as of December 31, 2012; authorized, Financial assets carried at cost, net (Note 12) 1,004,887 1,010,950 (1) issued and outstanding 5,109,287 thousand shares as of Debt instruments with no active market, net (Note 13) 1,552,058 2,129,839 (27) December 31, 2011 57,430,769 51,092,871 12 Others, net (Notes 3, 14, 15, 32 and 34) 2,734,685 2,019,480 35 Capital surplus 13,613,508 13,613,508 ­

Retained earnings Other financial assets, net 5,291,630 5,160,269 3 Legal reserve 17,049,707 14,333,465 19

Special reserve 1,409,173 1,409,173 ­ PROPERTIES (Notes 2 and 16) Unappropriated earnings 12,994,204 9,054,140 44 Cost Total retained earnings 31,453,084 24,796,778 27 Land 5,639,472 5,633,640 ­ Others Buildings 4,491,084 4,515,139 (1) Unrealized revaluation increments 864,582 ­ ­ Machinery and computer equipment 2,076,527 2,512,120 (17) Cumulative translation adjustments (203,576) 20,055 (1,115) Transportation equipment 245,405 252,025 (3) Unrealized gains on financial instruments 3,579,861 2,565,348 40 Office and other equipment 1,527,543 1,947,470 (22) Total others 4,240,867 2,585,403 64 Leased assets 70,912 73,720 (4) Total cost 14,050,943 14,934,114 (6) Total stockholder's equity 106,738,228 92,088,560 16

Revaluation increments 1,135,049 ­ ­ Less: Accumulated depreciation 4,316,214 5,036,872 (14)

10,869,778 9,897,242 10 Construction in progress and prepayment for equipment 343,849 190,463 81

Net properties 11,213,627 10,087,705 11

INTANGIBLE ASSETS (Notes 2 and 17) 1,585,803 1,753,629 (10)

OTHER ASSETS (Notes 2, 18, 28 and 31) 2,257,199 2,356,598 (4)

TOTAL $ 1,603,427,110 $ 1,504,859,591 7 TOTAL $ 1,603,427,110 $ 1,504,859,591 7

The accompanying notes are an integral part of the financial statements.

(With Deloitte & Touche audit report dated March 15, 2013)

­ 39 ­

TAIPEI FUBON COMMERCIAL BANK

STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2012 2011 % Increase Amount Amount (Decrease)

NET INTEREST (Notes 2 and 32) Interest revenues $ 26,888,311 $ 23,525,559 14 Interest expenses 11,762,419 9,581,319 23

Total net interest 15,125,892 13,944,240 8

NET REVENUES OTHER THAN INTEREST (Note 2) Commission and fee revenues, net (Notes 26 and 32) 7,994,865 8,144,082 (2) Gains on financial assets and liabilities at fair value through profit or loss (Notes 6, 27 and 32) 3,439,061 2,759,794 25

Realized gains on available­for­sale financial assets (Note 35) 744,332 552,625 35

Investment income recognized under the equity method, net (Note 11) 21,256 41,169 (48)

Foreign exchange gains, net 1,139,902 15,165 7,417 Reversal of impairment loss (impairment loss) on assets (Notes 12, 13 and 18) 49,055 (181,871) 127

Losses due to shortfall of guaranteed sports lottery earnings (Note 34) (395,589) (376,970) 5

Other noninterest net revenues (Notes 29, 32 and 34) 773,354 557,692 39

Total net revenues other than interest 13,766,236 11,511,686 20

TOTAL NET REVENUES 28,892,128 25,455,926 13

(REVERSAL OF ALLOWANCE) ALLOWANCE FOR BAD DEBTS (Notes 2, 3 and 15) (542,317) 1,060,089 (151)

OPERATING EXPENSES (Notes 2, 25, 29, 31 and 32) Personnel expenses 8,551,258 7,932,446 8 Depreciation and amortization 752,331 836,722 (10) Others 5,068,172 5,121,486 (1)

Total operating expenses 14,371,761 13,890,654 3

INCOME BEFORE INCOME TAX 15,062,684 10,505,183 43

INCOME TAX EXPENSE (Notes 2 and 28) 2,068,480 1,451,043 43

NET INCOME $ 12,994,204 $ 9,054,140 44 (Continued)

­ 40 ­

TAIPEI FUBON COMMERCIAL BANK

STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2012 2011 Pretax After Tax Pretax After Tax

EARNINGS PER SHARE (NEW TAIWAN DOLLARS; Note 30) Basic $ 2.62 $ 2.26 $ 1.83 $ 1.58

The accompanying notes are an integral part of the financial statements.

(With Deloitte & Touche audit report dated March 15, 2013) (Concluded)

­ 41 ­

TAIPEI FUBON COMMERCIAL BANK

STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY YEARS ENDED DECEMBER 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Except Dividends Per Share)

Other Equity (Notes 2, 11, 16 and 35) Issued and Outstanding Unrealized Unrealized

Capital Stock Retained Earnings (Notes 2 and 25) Unrealized Cumulative Gains or Losses Gains or Losses Total Shares Capital Surplus Unappropriated Revaluation Translation on Financial on Cash­flow Stockholder's

(Thousands) Amount (Note 25) Legal Reserve Special Reserve Earnings Total Increments Adjustments Instruments Hedge Equity

BALANCE, JANUARY 1, 2011 4,899,287 $ 48,992,871 $ 13,613,508 $ 12,149,310 $ 1,285,676 $ 7,280,638 $ 20,715,624 $ ­ $ (324,755) $ 2,074,662 $ 2,197 $ 85,074,107

Appropriation of the 2010 earnings: Legal reserve ­ ­ ­ 2,184,155 ­ (2,184,155) ­ ­ ­ ­ ­ ­ Cash dividends ­ NT$0.61 per share ­ ­ ­ ­ ­ (2,996,483) (2,996,483) ­ ­ ­ ­ (2,996,483) Stock dividends ­ NT$0.43 per share 210,000 2,100,000 ­ ­ ­ (2,100,000) (2,100,000) ­ ­ ­ ­ ­

Trading losses reserve transferred to special reserve ­ ­ ­ ­ 123,497 ­ 123,497 ­ ­ ­ ­ 123,497

Changes in unrealized gains or losses on available­for­sale financial assets ­ ­ ­ ­ ­ ­ ­ ­ ­ 480,074 ­ 480,074

Change in unrealized gains or losses on available­for­sale financial assets of equity­method investees ­ ­ ­ ­ ­ ­ ­ ­ ­ 10,612 ­ 10,612

Changes in unrealized gains or losses on cash­flow hedge ­ ­ ­ ­ ­ ­ ­ ­ ­ ­ (2,197) (2,197)

Changes in cumulative translation adjustments ­ ­ ­ ­ ­ ­ ­ ­ 344,810 ­ ­ 344,810

Net income for the year ended December 31, 2011 ­ ­ ­ ­ ­ 9,054,140 9,054,140 ­ ­ ­ ­ 9,054,140

BALANCE, DECEMBER 31, 2011 5,109,287 51,092,871 13,613,508 14,333,465 1,409,173 9,054,140 24,796,778 ­ 20,055 2,565,348 ­ 92,088,560

Land revaluation increments ­ ­ ­ ­ ­ ­ ­ 864,582 ­ ­ ­ 864,582

Appropriation of the 2011 earnings: Legal reserve ­ ­ ­ 2,716,242 ­ (2,716,242) ­ ­ ­ ­ ­ ­ Stock dividends ­ NT$1.24 per share 633,790 6,337,898 ­ ­ ­ (6,337,898) (6,337,898) ­ ­ ­ ­ ­

Changes in unrealized gains or losses on available­for­sale financial assets ­ ­ ­ ­ ­ ­ ­ ­ ­ 998,958 ­ 998,958

Change in unrealized gains or losses on available­for­sale financial assets of equity­method investees ­ ­ ­ ­ ­ ­ ­ ­ ­ 15,555 ­ 15,555

Changes in cumulative translation adjustments ­ ­ ­ ­ ­ ­ ­ ­ (223,631) ­ ­ (223,631)

Net income for the year ended December 31, 2012 ­ ­ ­ ­ ­ 12,994,204 12,994,204 ­ ­ ­ ­ 12,994,204

BALANCE, DECEMBER 31, 2012 5,743,077 $ 57,430,769 $ 13,613,508 $ 17,049,707 $ 1,409,173 $ 12,994,204 $ 31,453,084 $ 864,582 $ (203,576) $ 3,579,861 $ ­ $ 106,738,228

The accompanying notes are an integral part of the financial statements.

(With Deloitte & Touche audit report dated March 15, 2013)

­ 42 ­

TAIPEI FUBON COMMERCIAL BANK

STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars)

2012 2011

CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 12,994,204 $ 9,054,140 Adjustments to reconcile net income to net cash provided by (used in) operating activities (Reversal of allowance) allowance for bad debts (542,317) 1,060,089 Collection of loans and receivables written off in prior years 1,627,778 1,867,296 Depreciation and amortization 764,220 851,611 Allowance for (reversal of) credit and trading losses 6,387 (18,344) Gains on disposal of financial assets and liabilities designated as at fair value through profit or loss (23,714) (43,173)

Valuation (gains) losses on financial assets and liabilities designated as at fair value through profit or loss (294,430) 159,799

Losses on disposal of nonperforming loans ­ 5,590 Losses on disposal and retirement of assets, net 22,062 11,381 (Reversal of impairment loss) impairment loss on assets (49,055) 181,871 Investment income recognized under the equity method, net (21,256) (41,169) Cash dividends received from equity method investees 36,884 245,295 Realized gains on disposal of available­for­sale financial assets (171,201) (64,126) Gains on early redemption of held­to­maturity financial assets (250) (1,564) Deferred income tax 60,957 (168,566) Amortization of premium and discount of financial assets 145,296 75,124 Losses on liquidation of financial assets carried at cost 396 ­ Prepaid pension 47,262 55,041 Accrued pension liabilities 6,696 ­ Net changes in operating assets and liabilities Financial assets held­for­trading (21,858,722) (20,300,234) Receivables 6,879,624 13,079,200 Payables 5,466,272 (10,682,812) Financial liabilities held­for­trading (3,135,075) (5,303,696)

Net cash provided by (used in) operating activities 1,962,018 (9,977,247)

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial assets designated as at fair value through profit or loss (3,831,945) (1,602,715)

Proceeds from disposal of financial assets designated as at fair value through profit or loss 803,927 1,128,430

(Increase) decrease in securities purchased under agreements to resell (16,143,491) 325,331 Acquisition of available­for­sale financial assets (75,856,291) (21,716,792) Proceeds from disposal of available­for­sale financial assets 48,156,120 32,418,343 Acquisition of held­to­maturity financial assets (665,679,599) (787,158,511) Proceeds received on the maturity of held­to­maturity investments 707,099,435 822,089,310 Net increase in discounts and loans (74,873,775) (100,113,544) Decrease in due from the Central Bank of China and other banks 2,241,550 24,058,210 Acquisition of properties (525,964) (559,801)

(Continued)

­ 43 ­

TAIPEI FUBON COMMERCIAL BANK

STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars)

2012 2011

Proceeds from disposal of properties $ 5,691 $ 1,823 Proceeds from sale of nonperforming loans 42,512 646,566 Proceeds from liquidation of equity­method investees ­ 4,659 Proceeds from capital reduction and liquidation of financial assets carried at cost 1,407 37,929

Acquisition of debt instruments with no active market (582,716) (4,425,258) Proceeds from disposal of debt instruments with no active market 1,180,736 6,626,987 (Increase) decrease in other financial assets (1,195,033) 441,887 Increase in intangible assets (52,198) (48,979) Increase in other assets (69,311) (287,635)

Net cash used in investing activities (79,278,945) (28,133,760)

CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in due to the Central Bank of China and other banks 12,993,566 (8,619,807)

(Decrease) increase in securities sold under agreements to repurchase (2,142,156) 6,771,982 Increase in deposits and remittances 64,375,742 24,318,907 Issuance of bank debentures 6,000,000 9,500,000 Repayment of bank debentures on maturity (1,000,000) (3,200,000) Increase in other financial liabilities, net 2,068,325 2,650,904 Decrease in other liabilities (673,039) (461,845) Cash dividends ­ (2,996,483)

Net cash provided by financing activities 81,622,438 27,963,658

EFFECTS OF EXCHANGE RATE CHANGES 289,710 (504,648)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,595,221 (10,651,997)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 27,224,781 37,876,778

CASH AND CASH EQUIVALENTS, END OF YEAR $ 31,820,002 $ 27,224,781

SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 11,501,037 $ 8,907,043 Income tax paid $ 1,334,925 $ 1,286,259

NONCASH INVESTING ACTIVITIES Reclassifications form available­for­sale financial assets to held­to­maturity financial assets $ 12,052,604 $ ­

The accompanying notes are an integral part of the financial statements.

(With Deloitte & Touche audit report dated March 15, 2013) (Concluded)

­ 44 ­

TAIPEI FUBON COMMERCIAL BANK

NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. ORGANIZATION AND OPERATIONS

TAIPEI FUBON COMMERCIAL BANK Co., Ltd. (the “Bank”) started as a financial institution under the Taipei City Government (TCG) in 1969. On July 1, 1984, it was reorganized into a limited liability corporation and was renamed City Bank of Taipei Co., Ltd. On January 1, 1993, the Bank was renamed TAIPEIBANK Co., Ltd. (“TAIPEIBANK”). On November 30, 1999, the Bank was privatized through the sale of its shares to the public, with TCG’s holdings reduced to less than 50% of the Bank’s outstanding capital stock. In their special meeting on October 4, 2002, the stockholders approved a share swap, which resulted in the Bank’s becoming a wholly owned subsidiary of the Fubon Financial Holdings Company (FFH). The board of directors designated December 23, 2002 as the effective date of the share swap and of the delisting of the Bank’s stock from the Taiwan Stock Exchange.

To fully harness the synergy of two diversified business operations and reduce operating costs, the boards of directors of the Bank and Fubon Bank Co., Ltd. (“Fubon Bank,” a wholly owned subsidiary of FFH) decided on January 1, 2005 to combine these two entities. On January 1, 2005, the Bank acquired the assets and liabilities of Fubon Bank through a share swap and had its name changed to Taipei Fubon Commercial Bank Co., Ltd.

On September 20, 2006, the boards of directors of the Bank and Fubon Bills Finance Co., Ltd. (FBFC) decided to merge the Bank and FBFC to strengthen their operating synergy and lower operating costs, with the Bank as the survivor entity. The Bank set December 25, 2006 as the effective merger date.

Pursuant to the terms and conditions set out in the “Sale and Assumption Agreement” signed by the Bank, Chinfon Commercial Bank Co., Ltd. (hereinafter referred to as “Chinfon Bank”), Central Deposit Insurance Corp. and the Executive Yuan’s Financial Reconstruction Trust Corporation on October 30, 2009, effective midnight, March 6, 2010, the Bank assumed the assets, liabilities and businesses of the Hanoi branch and Ho Chi Minh City subbranch of Chinfon Bank under the conditions that the acquirer has obtained the competent authority’s approval and completed the settlement procedure.

The Bank engages in the following: (a) act for the municipal treasures of Taipei City; (b) management of municipal treasury bills of Taipei City; (c) all commercial banking operations authorized under the Banking Law; (d) securities and trust operations; (e) lottery operations; (f) futures trading assistance; and (g) other authorized operations.

The Bank has its head office in Taipei City, and as of December 31, 2012, had 4 major operating departments ­ Banking, Trust, Public Treasury and Lottery departments ­ with 132 branches (including one offshore banking unit (OBU), 4 overseas branches and 1 overseas subbranch), and 1 overseas representative office.

The operations of the Bank’s Trust Department are (1) planning, managing and operating a trust business; and (2) custodianship of nondiscretionary trust funds in domestic and overseas securities and mutual funds. These operations are regulated under the Banking Law.

The Bank was granted the right to run the Taiwan Sports Lottery from 2008 to 2013 by the Ministry of Finance.

As of December 31, 2012 and 2011, the Bank had 6,631 and 6,658 employees, respectively.

­ 45 ­

2. SIGNIFICANT ACCOUNTING POLICIES

The Bank’s financial statements were prepared in conformity with the Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms, Regulations Governing the Preparation of Financial Reports by Futures Commission Merchants, Business Accounting Law, Guidelines Governing Business Accounting, the guideline issued by authority and accounting principles generally accepted in the Republic of China (ROC).

The Bank’s significant accounting policies are summarized as follows:

Basis of Financial Statement Preparation

The accompanying financial statements include the accounts of the head office, the OBU and all branches and representative offices. All interoffice balances and transactions have been eliminated. Since the operating cycle in the banking industry cannot be reasonably identified, accounts included in Bank’s financial statements were not classified as current or noncurrent. Nevertheless, accounts were properly categorized in accordance with the nature of each account and sequenced by their liquidity. Please refer to Note 35 for the maturity analysis of assets and liabilities.

Translation of Foreign­currency Financial Statements

The financial statements of foreign branches and the OBU are translated into New Taiwan dollars at the following exchange rates:

a. Assets and liabilities ­ at exchange rates prevailing on the balance sheet date;

b. Stockholder’s equity ­ at historical exchange rates;

c. Retained earnings at the beginning balance not yet remitted to the Bank ­ at the translated beginning balance; and

d. Income and expenses ­ at average exchange rates for the year.

Exchange differences arising from the translation of the financial statements of foreign operations are recognized as a separate component of stockholder’s equity.

Foreign­currency Transactions

Nonderivative foreign­currency transactions are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Exchange differences arising from the settlement of foreign­currency assets and liabilities are recognized as gain or loss.

At the balance sheet date, foreign­currency monetary assets and liabilities are revalued at prevailing exchange rates, and the exchange differences are recognized as gain or loss.

At the balance sheet date, foreign­currency nonmonetary assets (such as equity instruments) and liabilities that are measured at fair value are revalued at prevailing exchange rates, with the exchange differences treated as follows:

a. Recognized in stockholder’s equity if the changes in fair value are recognized in stockholder’s equity; b. Recognized as gain or loss if the changes in fair value are recognized as gain or loss.

Foreign­currency nonmonetary assets and liabilities that are carried at cost continue to be stated at the exchange rates of the trade dates.

­ 46 ­

Accounting Estimates

In determining allowance for credit losses, depreciation, amortization, pension, income tax, asset impairment, possible losses from lawsuits, provision for losses on guarantees, bonuses paid to employees, directors and supervisors and the valuation on certain financial instruments, the Bank needs to make estimates and assumptions based on judgment and available information. Actual results could differ from those estimates.

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 a financial instrument contract. A financial asset is derecognized when the Bank lose its contractual rights to the financial asset. A financial liability is derecognized when the obligation specified in the relevant contract is discharged or canceled or expires.

Financial instruments at FVTPL are initially measured at fair value. At each balance sheet date after initial recognition, financial assets or financial liabilities at FVTPL are remeasured at fair value, with changes in fair value recognized directly as gain or loss in the year in which they arise. On the derecognition of a financial asset or a financial liability, the difference between its carrying amount and the sum of the consideration received or receivable or consideration paid or payable is recognized as gain or loss. The Bank uses trade date accounting when recording related transactions, except for bond, for which settlement date accounting is used.

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.

Any financial asset and any financial liability may be designated as at fair value through profit or loss to eliminate measurement anomalies for items that provide a natural offset of each other. Applying the fair value option eliminates accounting measurement mismatch for items that naturally offset each other or eliminates the burden of separating embedded derivatives that are not considered to be closely related to the host contract pertaining to a hybrid instrument. If the Bank does not adopt hedge accounting and the hedged items are not designated as financial assets or liabilities at fair value through profit or loss, accounting measurement mismatches on these items will occur as a result of differences in measurement attributes. Thus, the Bank designated debt instruments financial assets as financial assets at fair value through profit or loss. Moreover, the Bank designated hybrid instruments as financial assets and liabilities at fair value through profit or loss because embedded derivatives are not separated from the host contract in a hybrid instrument. Besides, the set of financial assets, financial liabilities or the combination of both managed by the Bank’s risk management policies and investment strategies will be designated as financial instruments at fair value through profit or loss.

Fair values are determined as follows: (a) listed stocks and GreTai Securities Market (GTSM, the over­ the­counter securities exchange) stocks ­ closing prices as of the balance sheet date; (b) beneficiary certificates (open­end funds) ­ net asset values as of the balance sheet date; (c) bonds ­ period­end reference prices published by the GTSM or Bloomberg; (d) investments with no active market ­ based on information provided by the counterparties.

­ 47 ­

Available­for­sale Financial Assets

Available­for­sale financial assets are carried at fair value plus transaction costs that are directly attributed to the acquisition. Unrealized gains or losses on available­for­sale financial assets are reported in equity attributed to the Bank’s stockholder. On disposal of an available­for­sale financial asset, the accumulated, unrealized gain or loss in equity attributable to the Bank’s stockholder is transferred to net profit and loss for the period. The Bank uses trade date accounting when recording related transactions, except for bonds, for which settlement date accounting is used.

The recognition, derecognition and the fair value bases of available­for­sale financial assets are similar to those of financial assets designated as at fair value through profit or loss.

Cash dividend income from equity securities is recognized on ex­dividend dates. Cash dividends received within a year after investment acquisition are recognized as a reduction of the carrying value of the investments and are subsequently recognized as income. Stock dividends received are accounted for only as increases in the number of the shares and are not recognized as income.

The difference between the maturity amount of a debt instrument and its acquisition price is calculated and amortized. For amortization, the effective interest method and the straight­line method are used and compared. If there is no significant difference in the use of these two methods, the straight­line method is used; otherwise, the effective interest method is used.

If an available­for­sale financial asset is determined to be impaired, the accumulated unrealized loss previously recognized in equity attributable to the Bank’s stockholder is recognized as impairment loss and reported in the income statement. For equity investments, loss reversal is adjusted to the equity attributable to the Bank stockholder. For debt investments, loss reversal is credited to current income.

Fair values are determined as follows: (a) listed stocks and GreTai Securities Market (GTSM, the over­ the­counter securities exchange) stocks ­ closing prices as of the balance sheet date; (b) beneficiary certificates (open­end funds) ­ net asset values as of the balance sheet date; (c) bonds ­ period­end reference prices published by the GTSM or Bloomberg; and (d) investments with no active market ­ based on information provided by the counterparties.

Held­to­maturity Financial Assets

Held­to­maturity financial assets are carried at amortized cost, which are valued by the effective interest method. On initial recognition, the costs of the financial assets are valued at their fair value plus the acquisition costs. The net gain or loss on held­to­maturity financial assets is derecognized upon asset disposal, impairment or amortization. For debt commodities, the Bank uses settlement date accounting in recording related transactions.

If a held­to­maturity financial asset is determined to be impaired, an impairment loss is recognized and reported in the income statement. Loss reversal is credited to current income and should not be more than the carrying amount had the impairment loss not been recognized.

Hedge Accounting

To qualify as a hedge, a derivative must effectively reduce any risk that is inherent in the hedged item and may result from changes in interest rates, exchange rates and market values. Changes in the fair value of the derivative must be highly correlated with changes in the fair value of the hedged item over the life of the hedge contract. At the start of the hedge, there must be a formal designation and documentation of the hedging relationship, the Bank’s risk management objective and strategy for undertaking the hedge, the hedging instrument, the hedged items, overall risk management objectives and strategies and how the Bank will assess the hedging instrument’s effectiveness.

­ 48 ­

A fair value hedge that meets all hedge accounting criteria is accounted for as follows:

a. The gain or loss from remeasuring the hedging instrument at fair value (for a derivative hedging instrument) or the foreign­currency component of its carrying amount (for a nonderivative hedging instrument) is recognized immediately as gain or loss; and

b. The carrying amount of the hedged item is adjusted through profit or loss for the corresponding gain or loss attributable to the hedged risk.

A cash flow hedge that meets all hedge accounting criteria is accounted for as follows:

The unrealized gain or loss on a hedging instrument is recognized as equity when the hedge takes effect. If a hedge of a forecast transaction results in the recognition of a financial asset or a financial liability, the associated gains or losses that were recognized as equity should be reclassified to gain or loss.

The Bank uses the fair value hedge to hedge against the exposure to adverse changes in fair value of a recognized asset or liability. The cash flow hedge is a hedge against the exposure to adverse cash flow changes that are attributable to the floating interest rate associated with a recognized asset or liability.

Financial Assets Carried at Cost

Investments in equity instruments with no quoted market prices in an active market and with fair values that cannot be reliably measured, are measured at cost. If there is objective evidence that a financial asset is impaired, an impairment loss is recognized, but impairment loss reversal is prohibited.

Debt Instruments With No Active Market Value

Debt instruments with no quoted market prices in an active market and with fair values that cannot be reliably measured are carried at amortized cost. The accounting treatment for these instruments is similar to that for held­to­maturity financial assets, except for the absence of any prohibition on the sale these debt instruments.

Nonperforming Loans

Under the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Nonaccrual Loans” issued by the authority, the balances of loans and other credits extended by the Bank and the related accrued interest are classified as nonperforming when the loan is overdue, but this classification should have prior approval under a resolution passed by the board of directors.

Nonperforming loans reclassified from loans are recognized as discounts and loans, and other credits are reclassified as other financial assets.

Allowance for Possible Losses and Reserve for Losses on Guarantees

The Bank assesses the collectability on the balances of discounts and loans, accounts receivables, interest receivables, other receivables, and other financial assets, as well as guarantees and acceptances as of the balance sheet date.

­ 49 ­

The Bank adopted the third­time revised Statement of Financial Accounting Standards (SFAS) No. 34, “Financial Instruments: Recognition and Measurement.” One of the main revisions is that the impairment of loans and receivables originated by the Bank should be covered by SFAS No. 34. Loans and receivables are assessed for impairment at the end of each reporting period and considered impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the discounts and loans, accounts receivables, interest receivables, other receivables, and other financial assets, the estimated future cash flows of the asset have been affected. Objective evidence of impairment could include:

Significant financial difficulty of the debtor;

The discounts and loans, accounts receivables, interest receivables, other receivables, and other financial assets becoming overdue; or

It becoming probable that the debtor will enter into bankruptcy or undergo financial reorganization.

Discounts and loans, accounts receivables, interest receivables, other receivables, and other financial assets that are assessed not to be individually impaired are further assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of discounts and loans, accounts receivables, interest receivables, other receivables, and other financial assets could include the Bank’s past experience of collecting payments and an increase in the number of delayed payments, as well as observable changes in national or local economic conditions that correlate with defaults on loans and receivables.

The amount of the impairment loss recognized is the difference between the asset carrying amount and the present value of estimated future cash flows, after taking into account the related collateral and guarantees, discounted at the original effective interest rates. The carrying amount of the discounts and loans, accounts receivables, interest receivables, other receivables, and other financial assets is reduced through the use of an allowance account.

Pursuant to “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non­performing/Nonaccrual Loans” (the “Regulations”) issued by the authority, the Bank evaluates credit losses on the basis of the estimated collectability. In accordance with the Regulations stated above, the credit assets divided into different classes subject to normal assets, assets that require special mentioned, assets that are substandard, assets that are doubtful, and assets for which there is loss.

In accordance with the Regulations stated above, the minimum allowance for credit losses and provision for losses on guarantees for the assets that require special mentioned, assets that are substandard, assets that are doubtful, and assets for which there is loss should be 2%, 10%, 50% and 100% of outstanding credits before January 1, 2011, respectively.

However, effective January 1, 2011, the minimum provisions for possible losses should be the sum of 0.5% of the outstanding balance of normal on­ and off­balance sheet credit assets (excluding assets that represent claims against an ROC government agency) and the foregoing provisions for unsound credit assets. Further, under Financial Supervisory Commission guidelines No. 10010006830, the coverage ratio of loans is set to be more than 1%.

Certain loans as defined under Banking Bureau guidelines and approved by the board of directors for write­off are offset against the allowance for credit losses. The repayments of loans written off are recorded as a reversal of this allowance.

Repurchase and Resell Transactions

Securities purchased under resell agreements and securities sold under repurchase agreements are generally treated as collateralized financing transactions. Interest earned on resell agreements or interest incurred on repurchase agreements is recognized as interest income or interest expense over the life of each agreement.

­ 50 ­

Investments Accounted for by the Equity Method

Investments are accounted for by the equity method if the Bank has significant influence on the investees. Under this method, investments are stated at cost plus (or minus) a proportionate share in the investees’ net earnings (losses) or changes in net worth. Cash dividends received are accounted for as a reduction of the carrying values of the investments.

Stock dividends received are accounted for only as increases in the number of shares held and are not recognized as income.

Costs of investments sold are determined using the moving­average method.

Properties and Rental Properties

Properties and rental properties are stated at cost add revaluation less accumulated depreciation and accumulated impairment. Major renewals, additions and improvements are capitalized, while repairs and maintenance are expensed as incurred.

Depreciation is calculated using the straight­line method over service lives estimated as follows: buildings and improvements, 5 to 60 years; computers and peripheral equipment, 3 to 15 years; transportation and communications equipment, 3 to 10 years; and miscellaneous equipment, 3 to 20 years. For assets still in use beyond their original estimated service lives, further depreciation is calculated on the basis of newly estimated salvage value.

The cost (with revaluation), accumulated depreciation, accumulated impairment and unrealized ­ revaluation are removed from the accounts when property is disposed of, and any gain or loss is credited or charged to other noninterest net revenues.

Intangible Assets

a. Goodwill

Goodwill arose from winning the bid for the Hanoi branch and Ho Chi Minh City subbranch of Chinfon Bank from the Financial Restructuring Fund. Goodwill is not amortized; instead, it is tested for impairment at least once a year and whenever events or changes in circumstances indicate the need for impairment testing.

b. Customer relationships

Customer relationships arose from winning the bid for the Hanoi branch and Ho Chi Minh City subbranch of Chinfon Bank from the Financial Restructuring Fund. Customer relationships are amortized on a straight­line basis over 7 years.

c. License

License arose from winning the bid for the Hanoi branch and Ho Chi Minh City subbranch of Chinfon Bank from the Financial Restructuring Fund. License is amortized on a straight­line basis over 97 years.

d. Core deposit intangible

Core deposit intangible arose from wining the bid for the Hanoi branch and Ho Chi Minh City subbranch of Chinfon Bank from the Financial Restructuring Fund. Core deposit intangible is amortized on a straight­line basis over 10 years.

­ 51 ­

e. Computer software

Computer software is amortized on a straight­line basis over 5 years.

Pension

The Bank has two types of pension plans: Defined benefit and defined contribution.

Pension expense under the defined benefit pension plan is determined on the basis of actuarial calculations. Unrecognized net transition obligation is amortized over the average remaining service years of employees. Under the defined contribution pension plan, which is based on the Labor Pension Act, the Bank’s required monthly contributions to the employees’ individual pension accounts are expensed during the employees’ service periods.

Income Tax

Inter­period income tax allocation is applied, in which tax effects of deductible temporary differences unused loss carryforward and unused investment tax credits are recognized as deferred income tax assets, and those of taxable temporary differences are recognized as deferred income tax liabilities. Valuation allowance is provided for deferred tax assets that are not certain to be realized.

Income tax credits for certain acquisitions of equipment, personnel training expenditures and equity investments are recognized as reduction of current income.

The adjustment of prior year’s income tax is included in the current income tax.

An additional 10% income tax on unappropriated earnings is recorded as income tax in the year when the stockholder resolves to retain these earnings.

The Bank, FFH and its subsidiaries have used the linked­tax system for income tax filings since 2003. Under the related rules, the required accounting procedures should be applied systematically and consistently. The related contributions or payments are accrued as receivables or payables, respectively.

Interest Revenue and Service Fees

Interest revenue on loans is recorded by the accrual method. No interest revenue is recognized in the accompanying financial statements on loans and other credits extended by the Bank that are classified as nonperforming loans. The interest revenue on these loans/credits is recognized upon collection.

Under the Ministry of Finance’s regulations, the interest revenue on credits covered by agreements that extend their repayment periods is recorded as deferred revenue (included in other liabilities) and is recognized as revenue upon collection.

Service fees are recorded as revenue upon receipt and substantial completion of activities involved in the earnings process.

From January 1, 2011, in the calculation of the book value of loans and receivables, transaction costs and additional charges on loans and receivables should be considered, and the effective interest rate should be adjusted.

Operating Leases

The Bank has operating lease agreements on the office spaces used by its branches. The imputed interest on lease deposits (included in other financial assets), computed using the interest rate on one­year time deposits, is charged to business expenses ­ rent and credited to interest income.

­ 52 ­

Contingencies

A loss is recognized when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. If the amount of the loss cannot be reasonably estimated or the loss is possible, the related information is disclosed in the notes to the financial statements.

Unrealized Sale and Leaseback Gain or Loss

Sale and leaseback happens when the Bank sells an asset and then leases it back. The related unrealized gains or losses are deferred and amortized over the lease period.

Asset Impairment

The Statement of Financial Accounting Standards (SFAS) No. 35 ­ “Impairment of Assets” requires the impairment review on equity investments ­ equity method, properties, leased assets, intangible assets to be made on each balance sheet date. If an asset is deemed impaired, the Bank must calculate the recoverable amount of the asset or the cash­generating unit. An impairment loss should be recognized whenever the recoverable amount of the asset or the cash generating unit is below the carrying amount, and this impairment loss is charged to accumulated impairment. After the recognition of an impairment loss, the depreciation (amortization) charged to the asset should be adjusted in the future periods at the revised asset carrying amount (net of accumulated impairment), less its salvage value, on a systematic basis over its remaining service life. If asset impairment loss is reversed, the increase in the carrying amount resulting from reversal is credited to current income. However, loss reversal should not be more than the carrying amount (net of depreciation) had the impairment loss not been recognized.

Goodwill is tested for impairment annually or more frequently if events or changes in circumstance indicate goodwill impairment. Impairment is recorded if the book value exceeds value in use. The increase in the recoverable amount of goodwill in the period following the recognition of an impairment loss is likely to be an increase in internally generated goodwill rather than the reversal of the impairment loss recognized for the acquired goodwill. Thus, a reversal of an impairment loss on goodwill is disallowed.

Reclassifications

Certain accounts in the financial statements as of and for the year ended December 31, 2011 have been reclassified to conform to the presentation of the financial statements as of and for the year ended December 31, 2012.

3. ACCOUNTING CHANGES

Financial Instruments

On January 1, 2011, the Bank adopted the third­time revised Statement of Financial Accounting Standards (SFAS) No. 34 ­ “Financial Instruments: Recognition and Measurement.” The main revisions (1) impairment of finance lease receivables are now covered by SFAS No. 34; (2) the scope of the applicability of SFAS No. 34 to insurance contracts is amended; (3) loans and receivables originated by the Bank are now covered by SFAS No. 34; (4) additional guidelines on impairment testing of financial assets carried at amortized cost when a debtor has financial difficulties and the terms of obligations have been modified; and (5) accounting treatment by a debtor for modifications in the terms of obligations.

­ 53 ­

Operating Segments

On January 1, 2011, the Bank adopted the newly issued SFAS No. 41 ­ “Operating Segments.” The statement requires that segment information be disclosed on the basis of information on the components of the Bank that management uses to make operating decisions. SFAS No. 41 requires the identification of operating segments on the basis of internal reports that are regularly reviewed by the Bank’s chief operating decision maker in order to allocate resources to the segments and assess their performance. This statement supersedes SFAS No. 20 ­ “Segment Reporting.”

4. CASH AND CASH EQUIVALENTS

December 31 2012 2011

Cash on hand $ 6,489,072 $ 6,519,031 Due from other banks 19,653,700 15,788,153 Notes and checks for clearing 5,677,230 4,917,597

$ 31,820,002 $ 27,224,781

5. DUE FROM THE CENTRAL BANK OF CHINA AND OTHER BANKS, NET

December 31 2012 2011

Call loans to banks $ 25,992,501 $ 34,177,704 Deposit reserve ­ checking account 12,381,802 10,450,483 Required deposit reserve 29,084,112 27,345,650 Deposit reserve ­ foreign­currency deposits 2,141,639 516,782 Due from the Central Bank of China 2,747 2,563 Due from the Central Bank ­ interbank settlement funds 1,254,792 605,961

70,857,593 73,099,143 Allowance for credit loss (Note 15) 5,743 ­

$ 70,851,850 $ 73,099,143

Under a directive issued by the Central Bank of China, New Taiwan dollar (NTD)­denominated deposit reserves are determined monthly at prescribed rates based on the average balances of customers’ NTD­denominated deposits. These required deposit reserves are subject to withdrawal restrictions.

In addition, foreign­currency deposit reserves are determined at prescribed rates based on the balances of foreign­currency deposits. These reserves may be withdrawn anytime and are noninterest earning.

Allowance for credit loss is the general provision of Vietnam branches and accrued in accordance with Vietnam regulations.

­ 54 ­

6. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

December 31 2012 2011

Held­for­trading financial assets

Commercial paper $ 20,663,557 $ 11,594,415 Corporate bonds 16,737,342 6,167,509 Government bonds 16,283,490 11,085,322 Bank debentures 2,309,874 805,742 Treasury bills 1,734,939 2,385,669 Beneficiary securities 409,733 325,081 Listed stocks and beneficiary certificates 265,567 238,046 Convertible corporate bonds 33,280 63,520 Others 499 ­

58,438,281 32,665,304 Derivatives Currency swap contracts 8,910,689 7,862,375 Interest rate swap contracts 6,995,630 10,819,982 Forward contracts 1,347,389 1,274,795 Option contracts 1,255,133 2,193,632 Cross­currency swap contracts 1,228,063 1,503,988 Commodity swap contracts 15,298 19,865 Commodity forward contracts 7,795 9,613 Others 14,164 4,166

19,774,161 23,688,416 78,212,442 56,353,720

Financial assets designated as at fair value through profit or loss

Convertible corporate bonds 3,825,331 ­ Credit­linked notes 2,228,230 2,438,743 Bank debentures ­ 299,480

6,053,561 2,738,223

$ 84,266,003 $ 59,091,943

Held­for­trading financial liabilities

Derivatives Currency swap contracts $ 9,146,317 $ 6,157,272 Interest rate swap contracts 6,787,720 10,703,826 Option contracts 1,949,574 2,577,617 Forward contracts 1,012,595 1,687,223 Cross­currency swap contracts 679,394 1,592,074 Commodity swap contracts 15,027 19,595 Commodity forward contracts 8,030 9,323 Others 13,799 601

$ 19,612,456 $ 22,747,531

The Bank engages in derivative transactions mainly to accommodate customers’ needs, including the need for different currencies, and to manage its exposure positions.

­ 55 ­

For the Bank to offset most market and credit risks, bank debentures are designated as at fair value through profit or loss to eliminate measurement mismatches between these contracts and credit default swaps contracts.

The contract (notional) amounts of the Bank’s outstanding derivative financial instruments as of December 31, 2012 and 2011 are summarized as follows:

December 31 2012 2011

Currency swap contracts $ 1,817,653,177 $ 1,669,029,094 Interest rate swap contracts 1,291,614,959 1,491,718,210 Option contracts 386,707,327 447,145,392 Forward contracts 178,870,569 231,772,342 Cross­currency swap contracts 111,909,600 62,959,310 Futures contracts 6,118,518 1,817,382 Stock price swap contracts 1,861,306 21,534 Commodity swap contracts 847,693 861,020 Commodity forward contracts 419,028 630,834 Credit default swaps contracts ­ 302,897

Gains or losses on financial assets and liabilities at fair value through profit or loss for the years ended December 31, 2012 and 2011 were as follows:

Years Ended December 31 2012 2011

Net gain on held­for­trading financial assets and liabilities $ 3,120,917 $ 2,876,420 Net gain (loss) on financial assets designated as at fair value through profit or loss 318,144 (116,626)

$ 3,439,061 $ 2,759,794

7. RECEIVABLES, NET

December 31 2012 2011

Accounts receivable ­ factoring $ 26,766,297 $ 33,137,541 Credit card receivable 21,819,970 22,580,419 Interest receivable 3,871,239 3,106,847 Acceptances 3,025,267 3,330,505 Sports lottery related 2,659,450 2,164,233 Accrued income 899,259 773,397 Accounts receivable 641,531 668,730 Linked­tax receivable (Note 32) 509,226 1,092,483 Others 586,159 825,735

60,778,398 67,679,890 Less: Allowance for credit losses (Note 15) 724,603 911,830

$ 60,053,795 $ 66,768,060

­ 56 ­

8. DISCOUNTS AND LOANS, NET

December 31 2012 2011

Discount and overdraft $ 1,545,401 $ 1,827,420 Short­term loans 235,766,149 195,220,866 Short­term secured loans 37,357,978 48,696,578 Medium­term loans 189,249,345 178,266,816 Medium­term secured loans 99,047,096 105,442,820 Long­term loans 58,074,311 51,626,338 Long­term secured loans 409,193,074 374,147,654 Import and export negotiation 4,395,228 3,715,976 Nonperforming loans transferred from loans 1,231,922 2,373,039

1,035,860,504 961,317,507 Less: Allowance for credit losses (Note 15) 8,924,275 8,376,947 Less: Adjustments of premium and discount 400,595 221,598

$ 1,026,535,634 $ 952,718,962

The Bank did not accrue any interest on the entire balance of the nonperforming loans shown above. The unrecognized interest revenues on nonaccrual interest loans were $46,057 thousand for 2012 and $46,265 thousand for 2011, respectively. For 2012 and 2011, the Bank had not written off credits that had not been subjected to legal procedures.

9. AVAILABLE­FOR­SALE FINANCIAL ASSETS

December 31 2012 2011

Commercial papers $ 26,935,303 $ ­ Bank debentures 12,252,972 18,358,531 Government bonds 9,729,283 8,823,281 Listed stocks 9,162,456 8,792,143 Treasury bills 4,123,599 779,642 Corporate bonds 2,150,452 8,635,398 Beneficiary securities 1,011,606 3,466,044 Covered bonds 544,417 532,060 Negotiable certificate of deposits 100,165 ­

$ 66,010,253 $ 49,387,099

10. HELD­TO­MATURITY FINANCIAL ASSETS

December 31 2012 2011

Negotiable certificates of deposits $ 198,033,122 $ 240,111,637 Bank debentures 16,152,099 2,392,287 Corporate bonds 9,674,751 12,893,191 Beneficiary securities 1,785,399 ­ Government bonds 1,367,765 1,429,527

$ 227,013,136 $ 256,826,642

­ 57 ­

The Bank changed the purpose of some financial assets. Thus, beneficiary securities amounting to $2,567,568 thousand and bank debentures amounting to $9,485,036 thousand were reclassified from available­for­sale financial assets to held­to­maturity financial assets on January 1, 2012.

11. INVESTMENTS ACCOUNTED FOR BY THE EQUITY METHOD

December 31 2012 2011

Amount % Amount %

Fubon Real Estate Management Co., Ltd. $ 118,951 30.00 $ 96,239 30.00 Taipei Fubon Bank Life Insurance Agency Co., Ltd. 65,736 100.00 88,521 100.00

$ 184,687 $ 184,760

Investment income (loss) from equity investments for 2012 and 2011 is summarized as follows:

Years Ended December 31 2012 2011

Taipei Fubon Bank Life Insurance Agency Co., Ltd. $ 14,099 $ 36,884 Fubon Real Estate Management Co., Ltd. 7,157 5,761 Fubon Venture Capital Co., Ltd. ­ (1,476)

$ 21,256 $ 41,169

Fubon Venture Capital Co., Ltd. (FVCCL) was classified as an equity­method investment since the Bank, Fubon Life Insurance Co., Ltd. and Fubon Insurance Co., Ltd. had a combined 45% equity in FVCCL. On April 11, 2011, FVCCL’s liquidation process was completed.

As of December 31, 2012 and 2011, part of the unrealized gains on financial instruments (included in stockholder’s equity as adjustments), which amounted to $15,555 thousand and $10,612 thousand, respectively, resulted from the valuation of available­for­sale financial assets held by an equity­method investee.

The investees’ financial statements used as the basis for recognizing the investment income under the equity method had been audited.

12. FINANCIAL ASSETS CARRIED AT COST, NET

December 31 2012 2011

Unlisted common stocks Taiwan High Speed Rail Co., Ltd. $ 500,000 $ 500,000 Taiwan Asset Management Co., Ltd. 300,000 300,000 Visa Inc. 161,601 161,601 Taiwan Financial Asset Service Co., Ltd. 100,000 100,000 Financial Information Service Co., Ltd. 91,000 91,000 Others 226,079 228,546

1,378,680 1,381,147 Less: Accumulated impairment loss 373,793 370,197

$ 1,004,887 $ 1,010,950

­ 58 ­

Investments in equity instruments with no quoted market prices in an active market and with fair values that cannot be reliably measured were recognized at cost.

For the years ended December 31, 2012 and 2011, the Bank recognized an impairment loss of $4,260 thousand and $8,675 thousand, respectively, on certain unlisted common stocks because of objective evidence of asset impairment.

In 2012, the accumulated impairment loss of $664 thousand was reversed on the Bank’s receipt of the proceeds of the liquidation of financial assets carried at cost.

13. DEBT INVESTMENTS WITH NO ACTIVE MARKET, NET

December 31 2012 2011

Bank debentures $ 1,552,058 $ 1,833,616 Corporate bonds 91,705 107,895 Collateralized debt obligation ­ 296,223

1,643,763 2,237,734 Less: Accumulated impairment loss 91,705 107,895

$ 1,552,058 $ 2,129,839

An impairment loss on corporate bonds had been fully accrued. However, there were bond repayments of $12,120 thousand in 2012 and $26,321 thousand in 2011; thus, the Bank recognized gains on the reversal of impairment loss.

14. OTHER FINANCIAL ASSETS, NET

December 31 2012 2011

Guarantee deposits $ 2,250,692 $ 1,318,964 Hedged derivative financial assets 478,744 693,488 Nonperforming loans transferred from other than loans 21,992 24,553 Bills purchased 3,768 2,580 Others ­ 3,447

2,755,196 2,043,032 Less: Allowance for credit loss (Note 15) 20,511 23,552

$ 2,734,685 $ 2,019,480

15. ALLOWANCE FOR CREDIT LOSSES

Following are the statements of the allowances for possible losses on loans and receivables assessed for impairment.

­ 59 ­

Loans

December 31, 2012 December 31, 2011 Type of Impairment Assessment Discounts and

Loans Allowance for Credit Losses

Discounts and Loans

Allowance for Credit Losses

Individually assessed for impairment $ 23,214,194 $ 3,596,307 $ 11,889,211 $ 3,812,847 With objective

evidence of impairment Collectively assessed for

impairment 2,429,224 64,586 2,820,020 75,375

With no objective evidence of impairment

Collectively assessed for impairment 1,010,217,086 5,263,382 946,608,276 4,488,725

Receivables

December 31, 2012 December 31, 2011 Type of Impairment Assessment Receivables Allowance for

Credit Losses Receivables Allowance for Credit Losses

Individually assessed for impairment $ 114,525 $ 87,792 $ 2,174,597 $ 170,268 With objective

evidence of impairment Collectively assessed for

impairment 1,534,417 368,457 2,227,784 535,181

With no objective evidence of impairment

Collectively assessed for impairment 59,155,216 288,865 63,304,642 229,933

Note 1: The loans and receivables exclude the allowance for credit losses and adjustments for discount (premium).

Note 2: The receivables and allowances include nonperforming loans reclassified from other than loans and bills purchased.

The movements of allowance for credit losses and reserve for guarantee liabilities for 2012 and 2011 are summarized as follows:

Year Ended December 31, 2012 Due from the Central Bank of China and Discounts and Loans

Other Financial

Reserve for Guarantee

Other Banks Receivables General Risk Specific Risk Subtotal Assets Liabilities Total

Balance, January 1, 2012 $ ­ $ 911,830 $ 4,360,660 $ 4,016,287 $ 8,376,947 $ 23,552 $ 385,057 $ 9,697,386 Allowance (reversal of allowance) for bad debts 5,755 (159,693 ) 1,701,956 (1,654,562 ) 47,394 (358,547 ) (77,226 ) (542,317 )

Write­offs ­ (21,869 ) ­ (509,775 ) (509,775 ) (268,125 ) ­ (799,769 ) Recovery from written­off credits ­ ­ ­ 1,046,659 1,046,659 623,631 ­ 1,670,290 Effects of exchange rate changes (12 ) (5,665 ) ­ (36,950 ) (36,950 ) ­ (478 ) (43,105 )

Balance, December 31, 2012 $ 5,743 $ 724,603 $ 6,062,616 $ 2,861,659 $ 8,924,275 $ 20,511 $ 307,353 $ 9,982,485

Year Ended December 31, 2011

Discounts and Loans Other

Financial Reserve for Guarantee

Receivables General Risk Specific Risk Subtotal Assets Liabilities Total

Balance, January 1, 2011 $ 1,191,058 $ 3,722,784 $ 1,701,211 $ 5,423,995 $ 40,330 $ 467,676 $ 7,123,059 Allowance (reversal of allowance) for bad debts (284,284) 637,876 1,097,386 1,735,262 (303,604) (87,285) 1,060,089

Write­offs (2,716) ­ (354,237) (354,237) (354,855) ­ (711,808) Recovery from written­off credits ­ ­ 1,540,855 1,540,855 641,681 ­ 2,182,536 Effects of exchange rate changes 7,772 ­ 31,072 31,072 ­ 4,666 43,510

Balance, December 31, 2011 $ 911,830 $ 4,360,660 $ 4,016,287 $ 8,376,947 $ 23,552 $ 385,057 $ 9,697,386

­ 60 ­

16. PROPERTIES

December 31 2012 2011

Cost $ 14,050,943 $ 14,934,114 Revaluation increments 1,135,049 ­ Accumulated depreciation Buildings 1,457,548 1,384,185 Machinery and computer equipment 1,579,826 2,009,439 Transportation equipment 163,104 154,369 Office and other equipment 1,113,096 1,487,703 Lease assets 2,640 1,176

4,316,214 5,036,872 Construction in progress and prepayments for equipment 343,849 190,463

Net properties $ 11,213,627 $ 10,087,705

The Bank’s revaluation of its land based on related regulations resulted in a gross revaluation increment of $1,135,049 thousand. After the deduction of the reserve for land value increment tax of $270,467 thousand, the net revaluation amount of $864,582 thousand was credited to equity as unrealized revaluation increment.

17. INTANGIBLE ASSETS

December 31 2012 2011

License $ 555,328 $ 561,226 Core deposit intangibles 399,966 455,775 Goodwill 322,855 322,855 Computer software 307,377 413,430 Customer relationships 277 343

$ 1,585,803 $ 1,753,629

The above license, core deposit intangibles, customer relationships and goodwill were recognized from the acquisition of the Hanoi branch and Ho Chi Minh City subbranch of Chinfon Bank, which were monitored by Financial Restructuring Fund.

Based on Statement of Financial Accounting Standards No. 35 ­ “Impairment of Assets”, amortization of goodwill is no longer permitted; instead, goodwill is tested for impairment annually or if changes in circumstances indicate goodwill impairment.

For purposes of goodwill impairment tests, branches in Vietnam are deemed as a cash generating unit, and the recoverable amounts of these branches are based on net fair value. Estimates of net fair value are based on various assumptions such as the branches’ profitability, business cycle and outlook, the overall state of the Vietnamese economy, and the estimated salvage value of the Vietnam branches. After assessing the net fair value of the Vietnam branches, the Bank found no objective evidence that goodwill had been impaired as of December 31, 2012 and 2011.

­ 61 ­

18. OTHER ASSETS

December 31 2012 2011

Rental properties, net $ 1,775,982 $ 1,734,175 Prepaid expense 237,424 195,434 Deferred income tax assets (Note 28) 98,417 146,169 Deferred expense 77,210 113,352 Prepaid pension (Note 31) ­ 47,262 Others 68,166 120,206

$ 2,257,199 $ 2,356,598

Rental properties are valued at fair value less cost to sell. On these properties, the Bank recognized an impairment loss reversal of $41,195 thousand in 2012 and an impairment loss $199,517 thousand in 2011.

19. DUE TO THE CENTRAL BANK OF CHINA AND OTHER BANKS

December 31 2012 2011

Call loans $ 64,622,043 $ 51,065,074 Redeposit from the Directorate General of Postal Remittance 4,675,206 5,497,437 Due to the Central Bank of China 94,681 90,822 Due to other banks 361,412 71,773 Overdrafts of the Bank ­ 34,670

$ 69,753,342 $ 56,759,776

20. PAYABLES

December 31 2012 2011

Accounts payable ­ factoring $ 6,419,759 $ 7,434,117 Checks for clearing 5,677,230 4,917,597 Collections for others 4,978,496 212,386 Accrued expenses and taxes 4,569,592 4,297,660 Accrued interest 3,270,059 3,008,676 Acceptances 3,002,890 3,332,662 Sports lottery related 2,971,669 2,548,087 Linked­tax payable (Note 32) 1,188,567 730,417 Salaries payable to employees of the Bank’s depositors 475,668 396,153 Accounts and notes payable 309,665 263,079 Collection of bills 126,970 217,227 Others 1,409,012 1,575,244

$ 34,399,577 $ 28,933,305

­ 62 ­

21. DEPOSITS AND REMITTANCES

December 31 2012 2011

Deposits Checking $ 12,806,863 $ 14,242,325 Public treasury 24,255,272 19,423,914 Demand 199,815,048 200,842,344 Savings 632,907,754 606,288,155 Time 375,593,969 338,369,239

Negotiable certificates of deposit 1,522,700 3,582,800 Outward remittances 883,302 660,389

$ 1,247,784,908 $ 1,183,409,166

22. BANK DEBENTURES

To maintain its capital adequacy ratio and the medium­term to long­term capital supply, the former TAIPEIBANK, Fubon Bank and Fubon Bills Finance Co., Ltd. applied to the Financial Supervisory Commission for approval to issue bank debentures. The outstanding balances of bank debentures as of December 31, 2012 and 2011 are summarized as follows:

December 31 2012 2011

Financial liabilities ­ fair value hedge Former TAIPEIBANK First issue of dominant bank debentures in 2003; floating interest rate; maturity: July 2013 $ 5,000,000 $ 5,000,000

Taipei Fubon Bank Third issue of subordinated bank debentures in 2008; fixed 3.09%; maturity: May 2015 2,500,000 2,500,000

Forth issue of subordinated bank debentures in 2008; fixed 3.14%; maturity: June 2015 500,000 500,000

First issue of subordinated bank debentures in 2009; fixed 2.2%; maturity: November 2016 300,000 300,000

Second issue of subordinated bank debentures in 2009; fixed 2.2%; maturity: December 2016 600,000 600,000

First issue of subordinated bank debentures in 2010; fixed 2.2%; maturity: January 2017 600,000 600,000

Third issue of dominant bank debentures in 2010; fixed 1.6%; maturity: March 2015 600,000 600,000

Third issue of dominant bank debentures in 2010; fixed 1.8%; maturity: March 2017 600,000 600,000

Fifth issue of dominant bank debentures in 2010; fixed 1.6%; maturity: May 2015 3,800,000 3,800,000

Fifth issue of dominant bank debentures in 2010; fixed 1.7%; maturity: May 2017 500,000 500,000

Seventh issue of subordinated bank debentures in 2010; fixed 1.55%; maturity: October 2020 900,000 900,000

Eighth issue of subordinated bank debentures in 2010; fixed 1.5%; maturity: November 2017 2,550,000 2,550,000

(Continued)

­ 63 ­

December 31 2012 2011

First issue of subordinated bank debentures in 2011; fixed 1.65%; maturity: March 2018 $ 1,700,000 $ 1,700,000

Second issue of subordinated bank debentures in 2011; fixed 1.7%; maturity: August 2018 1,500,000 1,500,000

Third issue of subordinated bank debentures in 2011; fixed 1.65%; maturity: December 2018 2,500,000 1,900,000

First issue of subordinated bank debentures in 2012; fixed 1.48%; maturity: April 2019 1,300,000 ­

20,450,000 18,550,000 Valuation adjustments of bank debentures 479,382 693,488

25,929,382 24,243,488 Bank debentures ­ non­hedge Former Fubon Bills Finance Co., Ltd. First issue of dominant bank debentures in 2005; fixed 2.1%; maturity: July 2012 ­ 1,000,000

Taipei Fubon Bank First issue of subordinated bank debentures in 2007; fixed 2.9%; maturity: June 2013 550,000 550,000

First issue of subordinated bank debentures in 2008; fixed 3.05%; maturity: January 2014 4,250,000 4,250,000

First issue of subordinated bank debentures in 2008; floating interest rate; maturity: January 2015 100,000 100,000

Second issue of subordinated bank debentures in 2008; fixed 3.05%; maturity: March 2015 1,350,000 1,350,000

Second issue of subordinated bank debentures in 2008; floating interest rate; maturity: March 2015 1,200,000 1,200,000

Third issue of subordinated bank debentures in 2008; fixed 3.09%; maturity: May 2015 2,500,000 2,500,000

Forth issue of subordinated bank debentures in 2008; fixed 3.14%; maturity: June 2015 2,300,000 2,300,000

First issue of subordinated bank debentures in 2009; fixed 2.2%; maturity: November 2016 1,700,000 1,700,000

Second issue of subordinated bank debentures in 2009; fixed 2.2%; maturity: December 2016 1,450,000 1,450,000

First issue of subordinated bank debentures in 2010; fixed 2.2%; maturity: January 2017 1,650,000 1,650,000

First subordinated bank debentures issued in 2010; fixed 2.5%; maturity: January 2020 2,400,000 2,400,000

Second issue of subordinated bank debentures in 2010; fixed 2.3%; maturity: January 2017 600,000 600,000

Third issue of dominant bank debentures in 2010; fixed 1.6%; maturity: March 2015 1,450,000 1,450,000

Third issue of dominant bank debentures in 2010; fixed 1.8%; maturity: March 2017 900,000 900,000

Fourth issue of subordinated bank debentures in 2010; fixed 2.5%; maturity: March 2020 2,000,000 2,000,000

Fifth issue of dominant bank debentures in 2010; fixed 1.6%; maturity: May 2015 1,700,000 1,700,000

Sixth issue of subordinated bank debentures in 2010; fixed 1.95%; maturity: August 2017 4,500,000 4,500,000

(Continued)

­ 64 ­

December 31 2012 2011

Sixth issue of subordinated bank debentures in 2010; fixed 2.05%; maturity: August 2020 $ 1,900,000 $ 1,900,000

First issue of subordinated bank debentures in 2011; fixed 1.65%; maturity: March 2018 1,350,000 1,350,000

Second issue of subordinated bank debentures in 2011; fixed 1.7%; maturity: August 2018 950,000 950,000

Third issue of subordinated bank debentures in 2011; fixed 1.65%; maturity: December 2018 1,500,000 2,100,000

Second issue of subordinated bank debentures in 2012; fixed 1.68%; maturity: May 2022 4,700,000 ­

41,000,000 36,900,000 41,000,000 37,900,000

$ 66,929,382 $ 62,143,488 (Concluded)

23. OTHER FINANCIAL LIABILITIES

December 31 2012 2011

Principals of structured products $ 27,244,584 $ 24,876,563 Guarantee deposits received 697,894 772,292 Funds obtained from the government ­ intended for specific types of loans 400,000 625,500

Hedged derivative financial liabilities 352,920 428,152 Others 202 ­

$ 28,695,600 $ 26,702,507

24. OTHER LIABILITIES

December 31 2012 2011

Advance receipts $ 1,655,213 $ 2,496,059 Suspense and clearing payment 673,510 455,703 Reserve for guarantee liabilities (Note 15) 307,353 385,057 Reserve of land value increment tax (Note 16) 270,467 ­ Deferred income tax liabilities (Note 28) 146,389 95,715 Reserve for compensation 87,204 132,718 Accrued pension liabilities (Note 31) 6,696 ­ Others 5,853 6,918

$ 3,152,685 $ 3,572,170

­ 65 ­

25. STOCKHOLDER’S EQUITY

a. Capital stock

On June 27, 2012, the Bank’s board of directors, exercising the power and authority of the stockholder’s meeting, resolved to capitalize $6,337,898 thousand of retained earnings and to issue 633,790 thousand shares. After the issuance, the Bank’s authorized capital stock increased from $51,092,871 thousand to $57,430,769 thousand. The registration of the capitalization with Securities and Futures Bureau was effective on July 31, 2012. The bank set August 31, 2012 as the effective date of capitalization.

On December 19, 2012, the Bank’s board of directors, exercising the power and the authority of a stockholder’s meeting, resolved to increase authorized capital stock to $80,000,000 thousand. On December 27, 2012, the Bank’s board of directors resolved to raise capital through a private placement of 380,000 thousand shares and on January 28, 2013, the Bank’s board of directors set NT$18.33 as the issuance price and January 30, 2013 as the effective issuance date.

On May 24, 2011, the Bank’s board of directors, exercising the power and the authority of stockholder’s meeting, resolved to capitalize $2,100,000 thousand of retained earnings and to issue 210,000 thousand shares. After the issuance, the Bank’s authorized capital stock increased from $48,992,871 thousand to $51,092,871 thousand. The registration of the capitalization with the Securities and Futures Bureau was effective on August 19, 2011. The Bank set October 31, 2011 as the effective date of capitalization.

b. Capital surplus

The capital surplus from shares issued in excess of par (additional paid­in capital from issuance of common shares, conversion of bonds and treasury stock transactions) and donations may be used to offset a deficit; in addition, when the Bank has no deficit, such capital surplus may be distributed as cash dividends or transferred to capital (limited to a certain percentage of the Bank’s paid­in capital and once a year).

c. Special reserve

Under Financial Supervisory Commission (FSC) guidelines No. 10010000440, the trading loss reserve amounted to $123,497 thousand has been transferred to special reserve. The special reserve may be used to offset a deficit and may be appropriated when legal reserve reaches 50% of the Bank’s paid­in capital.

d. Earnings appropriation

Based on the Bank’s Articles of Incorporation, the following should be appropriated from annual net income (less any deficit) in the following order:

1) 30% as legal reserve;

2) 1%­5% as bonus to employees of all or part of the remainder and unappropriated earnings generated in prior years, as determined by the board of directors. When the accumulated legal reserve equals or exceeds the Bank’s paid­in capital or the Bank is sound in both its finance and business operations and has set aside legal reserve in compliance with the Company Law, the restrictions stipulated in the preceding paragraph shall not apply.

On November 12, 2009, the regulations governing the criteria of a capital adequacy ratio for sound finance and business operations, asset quality and compliance were prescribed by the FSC. On April 30, 2012, the regulations were amended.

­ 66 ­

Appropriations of earnings should be resolved by the stockholder in, and given effect to in the financial statements of, the year following the year of earnings generation. Under the Financial Holdings Company Law, the Bank’s board of directors is allowed to carry out the functions of stockholder’s meetings as defined by the Company Law.

Bonuses to employees were estimated and recorded at $90,959 thousand for 2012 and $63,379 thousand for 2011. The estimates of bonuses to employees were based on past experience. Bonuses were accrued at about 1% of net income after a 30% deduction of legal reserve from net income.

Material differences between such estimated amounts and the amounts proposed by the Board of Directors in the following year are adjusted for in the current year. If the actual amounts subsequently resolved by the stockholder differ from the proposed amounts, the differences are recorded in the year of stockholder’s resolution as a change in accounting estimate.

Under the Company Law, legal reserve should be appropriated until the reserve equals the Bank’s paid­in capital. This reserve may only be used to reduce or offset deficit. If the Bank has no deficit and the legal reserve has exceeded 25% of the Bank’s paid­in capital, the excess may be capitalized or distributed in cash. The Banking Law limits the appropriation of all cash dividends to 15% of the Bank’s paid­in capital if the legal reserve less than the Bank’s paid­in capital.

Under the Integrated Income Tax System, local resident and corporate stockholders are allowed tax credits calculated on the basis of the ratio of creditable tax to unappropriated earnings on the date of dividend distribution.

On June 27, 2012 and May 24, 2011, the board of directors exercised the power and authority of stockholder’s meeting and resolved the appropriation of the 2011 and 2010 earnings, respectively, as follows:

Appropriations of Earnings Per Share (NT$) 2011 2010 2011 2010

Legal reserve $ 2,716,242 $ 2,184,155 Cash dividends ­ 2,996,483 $ ­ $ 0.61 Stock dividends 6,337,898 2,100,000 1.24 0.43

$ 9,054,140 $ 7,280,638

The resolution passed on June 27, 2012 and May 24, 2011, respectively, on the payment of employee bonuses of $63,379 thousand and $50,963 thousand, respectively, were consistent with the bonus shown in the financial statements of 2011 and 2010.

Information on the appropriation of earnings is available on the Market Observation Post System website of the Taiwan Stock Exchange.

26. COMMISSION AND FEE REVENUES, NET

Years Ended December 31 2012 2011

Commission and fee revenue $ 10,255,236 $ 10,359,862 Commission and fee expense (2,260,371) (2,215,780)

$ 7,994,865 $ 8,144,082

­ 67 ­

27. GAINS ON FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Years Ended December 31 2012 2011

Disposal gain, net $ 2,963,774 $ 4,698,638 Revaluation gain (loss), net 463,471 (1,949,136) Dividend and bonus 11,816 10,292

$ 3,439,061 $ 2,759,794

28. INCOME TAX

Since 2003, Fubon Financial Holdings Co., Ltd. has been using the linked­tax system for income tax filing with its eligible subsidiaries, including the Bank.

Income tax information is as follows:

a. Reconciliation of tax on pretax income at statutory rate and current income tax payable

Years Ended December 31 2012 2011

Tax on pretax income at statutory rate (17%) $ 2,560,656 $ 1,785,881 Add (deduct) tax effects of: Tax­exempt income (664,640) (437,430) Permanent difference (5,725) 23,745 Temporary difference (191,904) 170,042

Current income tax payable $ 1,698,387 $ 1,542,238

b. Income tax expense

Years Ended December 31 2012 2011

Current income tax payable $ 1,698,387 $ 1,542,238 Income tax of overseas branches 171,008 29,159 Deferred income tax expense 60,957 (168,566) Adjustment of prior years’ tax 138,128 48,212

Income tax expense $ 2,068,480 $ 1,451,043

­ 68 ­

c. Components of deferred income tax assets (liabilities)

December 31 2012 2011

Deferred income tax assets Loss on available­for­sale financial assets $ 3,597 $ 37,393 Overseas tax benefit from net operating loss and allowance of loan losses 73,886 91,825

Others 20,934 16,951

$ 98,417 $ 146,169

Deferred income tax liabilities Pension $ 36,808 $ 36,808 Unrealized gain on financial instruments and foreign exchange (116,602) (94,517) Impairment loss 92,446 95,216 Amortization of intangible assets (55,815) (36,115) Others 7,443 12,837

(35,720) 14,229 Less: Valuation allowance 110,669 109,944

$ (146,389) $ (95,715)

Taxable income from all sources is subject to income tax. Foreign income taxes paid, to the extent of the domestic income tax applicable to the foreign­source income, are deductible against the domestic income tax liabilities.

d. The information on the integrated income tax system is as follows:

December 31 2012 2011

Balance of imputed tax credit account $ 115,970 $ 14,850

The expected creditable tax ratio of earnings in 2012 was 0.89%, and the actual creditable tax ratio of 2011 was 1.31%.

Under the integrated income tax system, stockholders (except those who are not residents of the ROC) are allowed a tax credit for the income tax paid by the Bank. The expected creditable ratio for the stock dividend of 2012 may be adjusted, depending on the ICA balance on the date of dividend distribution.

As of December 31, 2012 and 2011, the Bank had no unappropriated retained earnings generated before January 1, 1998.

e. Income tax returns of the TAIPEIBANK Co., Ltd. (the Bank’s former name) and the former Fubon Bank through 2006 and 2004 had been examined and cleared by the Taipei National Tax Administrative (TNTA). The Bank disagreed with the tax authorities’ assessment of the Bank’s financial assets amortization for 2003 to 2006; thus, the Bank applied for a reexamination of its return and filed an administrative appeal. Income tax returns of the former Fubon Bills Finance Co., Ltd. through 2006 had been examined and cleared by the TNTA. However, the Bank disagreed with a part of the tax authorities’ assessment on 2005 returns and thus filed an administrative appeal. TNTA decided to give a tax refund at 65% of tax paid on interest income earned by the Bank, and the Bank accepted this refund and accrued 35% of the withholding tax denied.

­ 69 ­

29. PERSONNEL EXPENSES, DEPRECIATION AND AMORTIZATION

Years Ended December 31 2012 2011

Included in Branch and Operating Department

Included in General and Adminis­ trative

Other Noninterest Net Revenues Total

Included in Branch and Operating Department

Included in General and Adminis­ trative

Other Noninterest Net Revenues Total

Personnel expenses Salaries and wages $ 3,714,142 $ 2,273,947 $ ­ $ 5,988,089 $ 3,609,650 $ 2,003,226 $ ­ $ 5,612,876 Pension 284,979 46,988 ­ 331,967 269,044 49,225 ­ 318,269 Labor insurance and national health insurance 315,708 133,783 ­ 449,491 300,235 117,776 ­ 418,011

Others 1,531,315 250,396 ­ 1,781,711 1,354,388 228,902 ­ 1,583,290

$ 5,846,144 $ 2,705,114 $ ­ $ 8,551,258 $ 5,533,317 $ 2,399,129 $ ­ $ 7,932,446

Depreciation $ 195,193 $ 260,386 $ 11,889 $ 467,468 $ 239,775 $ 252,190 $ 14,889 $ 506,854 Amortization 147,821 148,931 ­ 296,752 184,519 160,238 ­ 344,757

$ 343,014 $ 409,317 $ 11,889 $ 764,220 $ 424,294 $ 412,428 $ 14,889 $ 851,611

30. EARNINGS PER SHARE

The numerators and denominators used in computing earnings per shares (EPS) are summarized as follows:

Earnings Per Share (NT$) Amounts (Numerator) Shares Before After

Before After (Denominator) Income Income Income Tax Income Tax (In Thousands) Tax Tax

For the year ended December 31, 2012 $ 15,062,684 $ 12,994,204 5,743,077 $ 2.62 $ 2.26

For the year ended December 31, 2011 $ 10,505,183 $ 9,054,140 5,743,077 $ 1.83 $ 1.58

The weighted average number of shares outstanding for EPS calculation has been retroactively adjusted for the retained earnings transferred to common stock for the year ended December 31, 2011. This adjustment caused the before and after income tax EPS for the year ended December 31, 2011 to decrease from NT$2.06 to NT$1.83 and from NT$1.77 to NT$1.58, respectively.

31. PENSION PLANS

Under a defined benefit pension plan, the Bank makes monthly contributions to the employees’ pension fund. The fund is in the custody of the Pension Fund Supervising Committee and deposited in the Bank of Taiwan on behalf of the committee’s name.

The Bank also has a defined contribution plan based on the Labor Pension Act. Based on this Act, the Bank’s contributions to the employees’ individual pension accounts in the Labor Insurance Administration are at 6% of salaries and wages. The defined contribution pension expenses were $235,397 thousand in 2012 and $222,380 thousand in 2011. Pension costs under defined benefit plan were $96,570 thousand in 2012 and $95,889 thousand in 2011.

­ 70 ­

a. The components of the net pension cost are summarized below:

Years Ended December 31 2012 2011

Service cost $ 99,550 $ 98,791 Interest cost 39,278 41,504 Expected return on pension fund assets (41,526) (41,570) Net amortization and deferral (732) (2,836)

Net pension cost $ 96,570 $ 95,889

b. The reconciliation of the funded status of the plan and prepaid pension as of December 31, 2012 and 2011 was as follows:

December 31 2012 2011

Benefit obligation Vested benefit obligation $ (811,651) $ (644,631) Non­vested benefit obligation (1,128,529) (1,103,337) Accumulated benefit obligation (1,940,180) (1,747,968) Additional benefit based on future salaries (551,340) (524,760) Projected benefit obligation (2,491,520) (2,272,728)

Fair value of plan assets 2,086,157 2,084,577 Funded status (405,363) (188,151) Unrecognized prior service cost (22,692) (25,528) Unrecognized pension loss 421,359 260,941

Prepaid pension (accrued pension liabilities) $ (6,696) $ 47,262

Vested benefit $ 973,671 $ 794,240

c. Actuarial assumptions

December 31 2012 2011

Discount rate used in determining present value 1.60% 1.75% Future salary increase rate 2.25% 2.25% Expected rate of return on plan assets 1.875% 2.00%

32. RELATED­PARTY TRANSACTIONS

The Bank’s related parties were as follows:

a. Related parties

Related Party Relationship with the Bank

Fubon Financial Holdings Co., Ltd. (FFH) Parent company Fubon Insurance Co., Ltd. (“Fubon Insurance”) Subsidiary of FFH Fubon Life Insurance Co., Ltd. (“Fubon Life Insurance”)

Subsidiary of FFH

(Continued)

­ 71 ­

Related Party Relationship with the Bank

Fubon Securities Co., Ltd. (“Fubon Securities”) Subsidiary of FFH Fubon Bank (Hong Kong) Limited (“Fubon Bank (Hong Kong)”)

Subsidiary of FFH

Fubon Securities Investment Trust Co., Ltd. (“Fubon Securities Investment Trust”)

Subsidiary of FFH

Fubon Direct Marketing Consulting Co., Ltd. (“Fubon Direct Marketing Consulting”)

Subsidiary of FFH

Fubon Asset Management Co., Ltd. (“Fubon Asset Management”)

Subsidiary of FFH

Fubon Venture Capital Co., Ltd., had been cleared on June 30, 2011

Subsidiary of FFH

Fubon Financial Holding Venture Co., Ltd. Subsidiary of FFH Taiwan Sport Lottery Co., Ltd. (“Taiwan Sport Lottery”)

Subsidiary of FFH

Fubon Insurance (Vietnam) Co., Ltd. Equity­method investee of FFH’s subsidiary Taipei Fubon Bank Life Insurance Agency Co., Ltd.

Bank’s subsidiary

Fubon Real Estate Management Co., Ltd. Related party in substance Taipei City Government (TCG) and its departments

Major stockholder of parent company

Chung Hsing Land Development Co., Ltd. (CHLDC)

Major stockholder of parent company

Ming Tong Co., Ltd. Major stockholder of parent company Tao Yin Co., Ltd. Major stockholder of parent company Fu Sheng Travel Service Co., Ltd. Related party in substance Fubon Securities (BVI) Co., Ltd. Equity­method investee of FFH’s subsidiary Fubon Securities USA, Inc. Equity­method investee of FFH’s subsidiary Fubon Futures Co., Ltd. Equity­method investee of FFH’s subsidiary Fubon Venture Capital Co., Ltd. (Fubon Venture Capital Co., Ltd. had been cleared on April 11, 2011)

Equity­method investee

Fubon Securities Investment Consulting Co., Ltd. (“Fubon Investment”)

Equity­method investee of FFH’s subsidiary

Fu­Sheng Properties Insurance Agent Co., Ltd. Equity­method investee of FFH’s subsidiary Fu­Sheng Life Assurance Agent Co., Ltd. Equity­method investee of FFH’s subsidiary Fuly Properties Insurance Agent Co., Ltd. Related party in substance until fourth quarter, 2012 Fuly Life Assurance Agent Co., Ltd. Related party in substance until fourth quarter, 2012 Fubon Properties Insurance Equity­method investee of FFH’s subsidiary Fubon Life Insurance (Vietnam) Equity­method investee of FFH’s subsidiary Asian Crown International Co., Ltd. Related party in substance Fortune Kingdom Corporation Related party in substance Hong Kong Fubon Multimedia Technology Co., Ltd.

Related party in substance

Taipei Fubon Commercial Bank Charity Foundation

Related party in substance

Fubon Securities Investment’s affiliate funds Related party in substance Taiwan Mobile Co., Ltd. (“Taiwan Mobile”) Related party in substance TECO Electric & Machinery Co., Ltd. Related party in substance until second quarter, 2012 EasyCard Co., Ltd. Related party in substance Taiwan Fixed Network Co., Ltd. Related party in substance

(Continued)

­ 72 ­

Related Party Relationship with the Bank

Fubon Art Foundation Related party in substance Fubon Charity Foundation Related party in substance Fubon Culture and Education Foundation Related party in substance Fubon Building Management Maintain Co., Ltd. (“Fubon Building Management”)

Related party in substance

Fuji Management Consulting Co., Ltd. (formerly Fubon Securities Finance Co., Ltd.) (had been dissolved on July 12, 2011)

Related party in substance

Fubon Land Development Co., Ltd. (“Fubon Land Development”)

Related party in substance

Taiwan High Speed Rail Corporation Related party in substance Taiwan Customer Service Technology Co., Ltd. Related party in substance Win TV Broadcasting Co., Ltd. Related party in substance Shuttle Service Co., Ltd. Related party in substance until first quarter, 2012 Chia Hsin Cement Corporation Related party in substance until second quarter, 2011 Taiwan Cement Corporation Related party in substance until second quarter, 2011 Chia Hsin R.M.C Corporation Related party in substance until second quarter, 2011 Hong Kong Cement Co., Ltd. Related party in substance until second quarter, 2011 Taiwan Stock Exchange Corporation Related party in substance TCC International Holdings Limited Related party in substance until second quarter, 2011 Chinese National Association of Industry and Commerce, Taiwan (CNAIC)

Related party in substance until second quarter, 2011

Chinese Taipei Economic Cooperation Committee

Related party in substance until second quarter, 2011

Taipei International Community Culture Foundation

Related party in substance until second quarter, 2011

The Red Cross Society of The Republic of China

Related party in substance until second quarter, 2011

Taipei Culture Foundation Related party in substance until second quarter, 2011 GTECH Global Services Corporation Limited (GTECH Global)

Related party in substance until third quarter, 2011

HKJC Business Ventures Limited Related party in substance until third quarter, 2011 Gallup Market Research Corp., Taiwan. Related party in substance until fourth quarter, 2011 Gallup Investment Co., Ltd. Related party in substance until fourth quarter, 2011 Global Vision Co., Ltd. Related party in substance until fourth quarter, 2011 Fubon Construction Co., Ltd. Related party in substance Fubon Real Estate Co., Ltd. Related party in substance Taiwan Digital Communication Co., Ltd. Related party in substance Sinostar Investment Consulting Co., Ltd. Related party in substance Kuo Chi Investment Co., Ltd. Related party in substance Wealth Media Technology Co., Ltd. Related party in substance Tai Fu Media Technology Co., Ltd. (had been dissolved on March 21, 2012)

Related party in substance

MasterLink Securities Co., Ltd. (“MasterLink Securities”)

Related party in substance until fourth quarter, 2011

Common Life Publishing Co., Ltd. Related party in substance until fourth quarter, 2011 Yun Gang Investment Co., Ltd. Related party in substance until fourth quarter, 2011 Yuban & Co., Ltd. Related party in substance until third quarter, 2011 Inotera Memories, Inc. Related party in substance until third quarter, 2011 Youth Development Foundation Related party in substance

(Continued)

­ 73 ­

Related Party Relationship with the Bank

China University of Technology Related party in substance World Vision Taiwan Related party in substance The Chinese Commercial & Industrial Coordination Society

Related party in substance

Taiwan Technologies Corporation Related party in substance until third quarter, 2011 Taiwan Insurance Institute Related party in substance until first quarter, 2012 Taiwan Residential Earthquake Insurance Fund Related party in substance Taiwan Futures Exchange Corporation Related party in substance Taiwan Mobile Foundation Related party in substance Spirox Corporation Related party in substance until third quarter, 2011 Tai­Shin Investment Co., Ltd. Related party in substance Taiwan Integrated Shareholder Service Company

Related party in substance

Tai Shin Communication Co., Ltd. Related party in substance Safety and Health Technology Center Related party in substance Chien Kuo Construction Co., Ltd. Related party in substance Epoch Foundation Related party in substance until fourth quarter, 2011 Citibank Taiwan Ltd. Related party in substance until third quarter, 2012 Century Development Corporation Related party in substance Shih­Hua Development Corporation Related party in substance until third quarter, 2011 Motor Vehicle Accident Compensation Fund Related party in substance Eminence Medicare Consultant Co., Ltd. (had been dissolved on April 13, 2012)

Related party in substance

China Synthetic Rubber Corporation Related party in substance until second quarter, 2011 Taiwan Prosperity Chemical Corporation Related party in substance until second quarter, 2011 National Credit Card Center of R.O.C. Related party in substance until second quarter, 2012 Neoflex Technology Co., Ltd. Related party in substance until third quarter, 2011 Taiwan Fu­Shin Co., Ltd. (had been dissolved on March 21, 2012)

Related party in substance

Vision Venture Capital Corporation Related party in substance TFN Media Co., Ltd. Related party in substance Taiwan Depository & Clearing Corporation Related party in substance Hong Fu Investment Related party in substance DaFu Media Corporation Related party in substance Republic of China Centenary Foundation Related party in substance until third quarter, 2012 Young Women’s Christian Association Related party in substance TUC Technology Corporation Related party in substance until first quarter, 2012 Taiwan Mobile Basketball & Entertainment Related party in substance Taiwan Vision Media Technology Corporation Related party in substance until first quarter, 2012 R&R Technology Corporation Related party in substance Taiwan Modern Dyesuff & Pigments Co. Related party in substance until fourth quarter, 2012 Creative Sensor Inc. Related party in substance until third quarter, 2011 Hanns Touch Solution Inc. Related party in substance until third quarter, 2012 Kbro Co., Ltd. Related party in substance Mangrove Cable TV Inc. Related party in substance Taiwan Semiconductor Manufacturing Company Limited

Related party in substance until fourth quarter, 2011

Taiwan Cogeneration Corporation Related party in substance Silicon Power Computer & Communications

Inc. Related party in substance

Fubon Multimedia Technology Co., Ltd. Related party in substance (Continued)

­ 74 ­

Related Party Relationship with the Bank

Taipei Rapid Transit Corporation Related party in substance Han Cheng Financial Management Co., Ltd. Related party in substance Mercuries Data Systems Ltd. Related party in substance Key Ware Electronics Co., Ltd. Related party in substance Walsin Lihwa Corporation Related party in substance until fourth quarter, 2011 Motomax Electric Co., Ltd. Related party in substance Broadcasting Corporation of China Related party in substance FB Top Select Absolute Return Income Fund Related party in substance FB Top Select China Columbus Fund Related party in substance FB Top Select Series SPC Related party in substance Dayu Optoelectronics Co., Ltd. Related party in substance Ping An Insurance (Group) Company of China, Ltd.

Related party in substance until third quarter, 2012

Taiwan Corporate Governance Association Related party in substance General Chamber of Commerce of the Republic of China

Related party in substance

The Non­life Insurance Association of the Republic of China

Related party in substance

Chung­Hua Institution for Economic Research Related party in substance Taiwan Fixed Newly Created Investment Co., Ltd.

Related party in substance

Taiwan Units Networked Investment Co., Ltd. Related party in substance Taiwan Financial Assets Service Co., Ltd. Related party in substance Nice Co., Ltd. Related party in substance Good TV Broadcasting Corp., Ltd. Related party in substance Hontai Life Insurance Co., Ltd. Related party in substance until second quarter, 2012 Taiwan Financial Services Roundtable Co., Ltd. Related party in substance until second quarter, 2012 Foundation Taipei Jianguo High School Alumni Association Cultural and Educational Foundation

Related party in substance

Taiwan After­Care Association Related party in substance Straits Exchange Foundation (SEF) Related party in substance Commerce Development Research Institute Related party in substance Institute for National Policy Research Related party in substance until first quarter, 2012 Foundation following Yun Insurance Cultural and Educational Foundation

Related party in substance

Bo Yu Investment Consultants Limited Related party in substance Fu Hui Tong Corp., Ltd. (had been dissolved on June 22, 2012)

Related party in substance

Love to Speak Co., Ltd. Related party in substance Cheng Xin Technology Development Corporation, Ltd.

Related party in substance

Fubon Gehna (Beijing) Enterprise, Ltd. Related party in substance The Hsinchu Private Foundation Jianhui Social Cultural Foundation

Related party in substance

Fubon Insurance Brokers (Thailand) Co., Ltd. Related party in substance Warwick Century Venture Capital Shares, Ltd. Related party in substance Dengfeng Venture Capital Co., Ltd. Related party in substance Jung Shing Policy Foundation Related party in substance The Sound of Music the Broadcasting Foundation

Related party in substance

(Continued)

­ 75 ­

Related Party Relationship with the Bank

Da Ka Co., Ltd. Related party in substance Sheng Ting Co., Ltd. Related party in substance Sheng Hau Co., Ltd. Related party in substance Taiwan advanced materials Co., Ltd Related party in substance Tai Tung communication Co., Ltd. Related party in substance China Evangelical Seminary Related party in substance Strait Kingsway Industrial Investment Fund Management Company Limited

Related party in substance until third quarter, 2012

Fubon Taiwan Phoenix Fund LDC Related party in substance University of Southern California Related party in substance Chi Duen Consultant Co., Ltd. Related party in substance Han You Management Consultant Co., Ltd. Related party in substance Cheng Da Financial Management Consultant Co., Ltd.

Related party in substance

Yung Jia Financial Management Consultant Co., Ltd.

Related party in substance

Taiwan Sotheby’s International Realty Related party in substance Phycos International Co., Ltd. Related party in substance Asia Real Estate Management Co., Ltd. Related party in substance Xiamen Bank Co., Ltd. Related party in substance Founder Fubon Fund Related party in substance Fubon Shing Ji Investment Co., Ltd. Related party in substance Krob Entertainment Co., Ltd. Related party in substance NTU Law Foundation Related party in substance Taiwan Academy of Banking and Finance Related party in substance Taiwan Art & Business Interdisplinary Foundation

Related party in substance

Taiwan Telecommunication Industry Development Association

Related party in substance

Formosa Cancer Foundation Related party in substance One Production Film Co. Related party in substance Allied Industrial Corp. Ltd. Related party in substance Ruji Investment Co., Ltd. Related party in substance Founder Fubon Venture Co., Ltd. Related party in substance Stemcyte Taiwan Co., Ltd. Related party in substance Lidium Venture Management Co., Ltd. Related party in substance Hualu Venture Management Co., Ltd. Related party in substance Stem Cytle Inc. Related party in substance Zuan Shi Investment Corp., Ltd Related party in substance Standard Chartered PLC Related party in substance Others Directors, supervisors, managers and their relatives

up to the second degree of consanguinity(Concluded)

b. Significant related­party transactions are summarized as follows:

Year Ended December 31, 2012 Highest % of the

Ending Balance for Account Interest Balance the Period Balance Rate (%) Income

1) Loans $ 45,950,642 $ 72,711,322 4.48 0­19.98 $ 798,422

­ 76 ­

Year Ended December 31, 2012

Number of Accounts or Name of Related Highest Ending Type of

Is the Transaction at Arm’s Length

Commercial Category Party Balance Balance Normal Overdue Collaterals Term

Consumer loans for employees

75 $ 24,321 $ 23,787 ü $ ­ Unsecured Yes

Housing mortgage loans

342 2,538,516 2,481,784 ü ­ Properties Yes

Others: Department of Urban Development, TCG

1,639,388 1,399,386 ü ­ Public treasury guarantees

Yes

TCG 20,164,823 13,564,823 ü ­ Public treasury guarantees

Yes

Department of Rapid Transit Systems, TCG

46,986,507 27,986,507 ü ­ Public treasury guarantees

Yes

Taipei Municipal Secured Swan Loans Service

6,161 4,355 ü ­ Public treasury guarantees

Yes

Fubon Land Development

490,000 490,000 ü ­ Land and building Yes

Hanns Touch Solution, Inc.

861,606 ­ ü ­ Unsecured Yes

$ 72,711,322 $ 45,950,642

Year Ended December 31, 2011 Highest % of the

Ending Balance for Account Interest Balance the Period Balance Rate (%) Income

1) Loans $ 41,763,857 $ 62,904,187 4.38% 0­19.98 $ 379,015

Year Ended December 31, 2011

Number of Accounts or Name of Related Highest Ending Type of

Is the Transaction at Arm’s Length

Commercial Category Party Balance Balance Normal Overdue Collaterals Term

Consumer loans for employees

82 $ 27,041 $ 23,818 ü $ ­ Unsecured Yes

Housing mortgage loans

343 2,428,597 2,281,815 ü ­ Land and buildings

Yes

Others: Department of Urban Development, TCG

1,894,594 1,637,076 ü ­ Public treasury guarantees

Yes

Department of Finance, TCG

2,000,000 ­ ü ­ Unsecured Yes

China Synthetic Rubber Corporation

241,500 ­ ü ­ Unsecured Yes

TCG 26,764,823 14,164,823 ü ­ Public treasury guarantees

Yes

Taipei Public Transportation Office

4,913,600 ­ ü ­ Public treasury guarantees

Yes

Department of Rapid Transit Systems, TCG

22,986,507 22,986,507 ü ­ Public treasury guarantees

Yes

Taipei Municipal Secured Swan Loans Service

7,777 6,161 ü ­ Public treasury guarantees

Yes

Fubon Land Development

1,140,000 200,000 ü ­ Land and buildings

Yes

Hanns Touch Solution, Inc.

499,748 463,657 ü ­ Unsecured Yes

$ 62,904,187 $ 41,763,857

Years Ended December 31 2012 2011

% of the Interest % of the Interest Ending Account Income Ending Account Income Balance Balance Rate (%) (Expense) Balance Balance Rate (%) (Expense)

2) Deposits $ 79,447,556 6.36 0­6.395 $ (630,523) $ 91,985,573 7.77 0­6.395 $ (391,459)

3) Due from banks ­ call loans $ ­ ­ 1.3 $ 71 $ ­ ­ 0.015­1.05 $ 16,294

(Continued)

­ 77 ­

Years Ended December 31 2012 2011

% of the Interest % of the Interest Ending Account Income Ending Account Income Balance Balance Rate (%) (Expense) Balance Balance Rate (%) (Expense)

4) Due to banks ­ call loans $ ­ ­ 0.22­2.00 $ (20) $ ­ ­ 0.02­0.95 $ (10,618)

5) Due from banks ­ deposits $ 54,769 2.79 ­ $ ­ $ 62,821 0.4 ­ $ ­

6) Guarantees $ 1,165 ­ 1 $ 66 $ 9,000 ­ 1 $ 122

(Concluded)

Guarantees

December 31, 2012

Related Party

Highest Balance in

Current Period Ending Balance

Provision (Note) Rates

Type of Collaterals

TCG $ 1,165 $ 1,165 $ ­ 1% Public treasury guarantees

TFN Media Co., Ltd. $ 9,000 $ ­ $ ­ 1% Certificate of deposits

December 31, 2011

Related Party

Highest Balance in

Current Period Ending Balance

Provision (Note) Rates

Type of Collaterals

TFN Media Co., Ltd. $ 9,000 $ 9,000 $ ­ 1% Certificate of deposits

Department of Economic Development, TCG

$ 5,437 $ ­ $ ­ 1% Unsecured

Note: The provision for the above guarantees was covered by the Bank’s general reserve.

7) Securities

Years Ended December 31 Related Parties Type 2012 2011

Fubon Securities Bonds purchased $ 149,856 $ 798,917 Fubon Life Insurance Bonds purchased 5,375,251 3,925,219

Bonds sold 4,108,654 1,770,463 Fubon Insurance Bonds purchased 305,194 ­ Fuji Management Consulting Bonds purchased ­ 132,029 MasterLink Securities Bonds purchased ­ 863,044

Bonds sold ­ 750,770 Notes purchased ­ 9,043,946

Fu­sheng Properties Insurance Agent Bonds sold 2,044 ­ Fu­sheng Life Assurance Agent Bonds sold 3,066 ­ CitiBank Taiwan Bonds sold 1,103,268 705,663 Hantai Life Insurance Bonds purchased 708,270 ­

December 31 Related Parties Type 2012 2011

Taiwan High Speed Rail Corporation Bonds sold under agreements to repurchase $ ­ $ 391,000 Fubon Life Insurance Bonds sold under agreements to repurchase ­ 1,450,000 Taiwan Fixed Network Bonds sold under agreements to repurchase 339,156 407,459 Fuji Investment Co., Ltd. Bonds sold under agreements to repurchase 22,506 ­ Taiwan Sports Lottery Bonds sold under agreements to repurchase 22,000 ­ Tsai Ming Zhong Bonds sold under agreements to repurchase ­ 270,000 Tsai Cheng Dao Bonds sold under agreements to repurchase 228,334 129,600

(Continued)

­ 78 ­

December 31 Related Parties Type 2012 2011

Tsai Ming Sing Bonds sold under agreements to repurchase $ 15,058 $ 323,058 Tsai Yang Xiang Xun Bonds sold under agreements to repurchase 106,118 352,666 Tsai Ming Chuen Bonds sold under agreements to repurchase 74,924 ­ Tsai Chen Ai Ling Bonds sold under agreements to repurchase 54,091 ­ Cheng Ming Chian Bonds sold under agreements to repurchase 90,279 ­ Tsai Weng Mei Hui Bonds sold under agreements to repurchase 28,010 ­ Others Bonds sold under agreements to repurchase ­ 181,578

(Concluded)

8) Fund and stock transactions

Balance as of December 31 2012 2011

Fund Units (In

Thousands) Amount Units (In

Thousands) Amount

Fubon No. 1 REIT 57,680 $ 1,013,438 57,680 $ 804,059 Fubon No. 2 REIT 1,008 13,648 ­ ­ Fubon Fund 34,943 265,567 35,266 238,046

9) Derivative financial instruments

December 31, 2012 Contract (Notional) Gains (Losses) Balance Sheet

Related Party Derivative Instrument Contract Period Amount on Valuation Account Balance

Fubon Bank (Hong Kong) Interest rate swap contracts

2010.11.26­2020.03.19 $ 1,646,173 $ 22,386 Revaluation of held for trading financial assets

$ 289,625

Fubon Securities Interest rate swap contracts

2008.03.26­2013.03.28 300,000 (20,063 ) Revaluation of held for trading financial assets

1,180

Fubon Securities Interest rate swap contracts

2008.01.23­2013.06.10 1,500,000 40,166 Revaluation of held for trading financial liabilities

(12,243 )

Fubon Life Insurance Interest rate swap contracts

2007.09.27­2018.06.25 2,750,000 46,065 Revaluation of held for trading financial liabilities

(763,522 )

Department of Cultural Affairs, TCG

Forward contracts 2010.02.03­2014.03.03 41,948 (2,045 ) Revaluation of held for trading financial assets

5,262

Fubon Securities Investment Trust Currency swap contracts 2012.11.16­2013.03.11 785,850 754 Revaluation of held for trading financial assets

754

Fubon Securities Investment Trust Currency swap contracts 2012.10.03­2013.01.22 195,970 (1,158 ) Revaluation of held for trading financial liabilities

(1,158 )

December 31, 2011 Contract (Notional) Gains (Losses) Balance Sheet

Related Party Derivative Instrument Contract Period Amount on Valuation Account Balance

FFH Cross­currency swap contracts

2008.12.11­2014.02.11 $ 3,159,258 $ 14,622 Revaluation of held for trading financial liabilities

$ (211,692 )

Fubon Bank (Hong Kong) Interest rate swap contracts

2009.05.11­2020.03.19 1,711,368 4,617 Revaluation of held for trading financial assets

267,239

Fubon Securities Interest rate swap contracts

2007.04.25­2013.03.28 1,800,000 (59,052 ) Revaluation of held for trading financial assets

21,243

Fubon Securities Interest rate swap contracts

2007.05.23­2013.06.10 2,870,000 63,764 Revaluation of held for trading financial liabilities

(52,409 )

Fubon Life Insurance Interest rate swap contracts

2007.09.27­2018.06.25 2,750,000 (217,893 ) Revaluation of held for trading financial liabilities

(809,587 )

Fubon Bank (Hong Kong) Non­delivery forward contracts

2011.01.12­2012.08.31 967,487 20,243 Revaluation of held for trading financial assets

20,243

Fubon Bank (Hong Kong) Non­delivery forward contracts

2010.12.31­2012.07.31 510,241 (14,209 ) Revaluation of held for trading financial liabilities

(22,793 )

Department of Cultural Affairs, TCG

Forward contracts 2010.02.03­2014.03.03 61,118 (3,472 ) Revaluation of held for trading financial assets

7,307

­ 79 ­

10) Lease

Rental Revenue (Expense) for the Years Ended

December 31 Name Bank’s Role Payment Frequency Deposits Lease Term 2012 2011

TCG Lessee Rentals payable monthly $ 2,000 December 2014 $ (23,800) $ (23,382) Lessor Rentals received annually ­ December 2011 ­ 733

Fubon Securities Lessee Rentals payable monthly 1,863 July 2015 (6,804) (5,179) Lessor Rentals received monthly 6,455 May 2017 41,673 41,574

Fubon Insurance Lessee Rentals payable monthly 30,870 September 2016 (131,333) (138,546) Fubon Life Insurance Lessee Rentals payable monthly 1,051 September 2016 (6,332) (6,331) CHLDC Lessee Rentals payable monthly 28,278 December 2014 (176,599) (178,150) Ming Tong Co., Ltd. Lessee Rentals payable monthly 3,370 April 2016 (20,220) (20,220) Taiwan Mobile Lessee Rentals payable monthly 2,282 March 2017 (7,784) (7,784)

Lessor Rentals received monthly 444 July 2016 7,330 5,047 Fubon Asset Management Lessor Rentals received monthly 1,113 November 2014 7,014 7,939 Taiwan Sports Lottery Lessor Rentals received monthly 1,907 January 2014 11,442 11,442 Fubon Capital (HK) Lessor Rentals received monthly ­ December 2011 ­ 6,075 Taipei Fubon Bank Life Insurance Agency

Lessor Rentals received monthly 52 December 2014 325 325

Fubon Charity Foundation Lessee Rentals payable monthly 509 November 2015 (3,204) (3,204) Taiwan Fixed Network Lessor Rentals received annually 20 June 2016 126 126 Others Lessee Rentals payable monthly 70 March 2016 (420) (424)

11) Insurance

The Bank entered into several contracts with Fubon Insurance, as follows:

Insurance Insurance Insured Item/Insurance Type Insurance Period Amount Premium

For the year ended December 31, 2012

Cash on hand 2012.04.20­2013.04.20 $ 200,000 $ 409 Safe­deposit insurance 2012.04.20­2013.04.20 150,000 671 Computer equipment 2012.11.01­2013.11.01 2,302,230 4,720 Commercial fire insurance 2012.03.01­2013.03.01 6,284,377 10,879 Public accident 2012.04.20­2013.04.20 468,000 672 Car insurance 2012.12.31­2013.12.31 ­ 45 Combined insurance for the Bank 2012.04.20­2013.04.20 122,500 8,980 Motorcycle insurance 2012.06.04­2013.06.04 ­ 207 Fidelity insurance 2012.01.01­2013.01.01 Note 6,642

For the year ended December 31, 2011

Cash on hand 2011.04.20­2012.04.20 200,000 411 Safe­deposit insurance 2011.04.20­2012.04.20 150,000 666 Computer equipment 2011.11.01­2012.11.01 2,409,689 5,114 Commercial fire insurance 2011.03.31­2012.03.01 5,516,013 2,342 Public accident 2011.04.20­2012.04.20 468,000 1,064 Car insurance 2010.12.31­2011.12.31 ­ 27 Combined insurance for the Bank 2011.04.20­2012.04.20 122,500 9,188 Motorcycle insurance 2011.06.04­2012.06.04 ­ 224 Fidelity insurance 2011.01.01­2012.01.01 Note 6,218

Note: Employees’ individual insurance coverages were $1,000 thousand, $3,000 thousand and $5,000 thousand, depending on their respective job categories.

12) Cooperation

The Bank entered into a cooperation contract with Fubon Securities on brokerage services. Under this contract, the Bank paid allocation costs of $293,918 thousand and $277,284 thousand for the years ended December 31, 2012 and 2011, respectively.

­ 80 ­

13) Donation

Of the Lottery department’s net income, 30% goes to a public welfare foundation to carry out the Bank’s social welfare responsibilities, as required by relevant regulations. Thus, for 2012 and 2011, the Bank donated $16,500 thousand and $21,500 thousand, respectively, to TAIPEIFUBON Charitable Foundation, and $15,000 thousand for the each of these years to Fubon Cultural & Education Foundation.

14) Compensation of directors, supervisors and management personnel:

Years Ended December 31 2012 2011

Salaries $ 74,494 $ 76,099 Incentives and special disbursement 168,015 119,995 Special compensation 1,490 1,302

$ 243,999 $ 197,396

15) Linked­tax system

The Bank’s parent company Fubon Financial Holdings Company (FFH) uses the linked­tax system for filing income tax returns of FFH and eligible subsidiaries, which include the Bank.

As of December 31, 2012 and 2011, the estimated income tax refund of $509,226 thousand and $1,092,483 thousand, respectively, will be refunded by FFH to the Bank, and the Bank’s estimated income tax payment portions payable to FFH, were $1,188,567 thousand and $730,417 thousand, respectively.

16) Others December 31

2012 2011

Receivables ­ Taiwan Sports Lottery $ 2,429,382 $ 2,146,814 Receivables ­ Fubon Life Insurance 500,738 561,237 Receivables ­ others 64,176 42,317 Payables ­ Taiwan Sports Lottery 88,065 75,509 Payables ­ others 52,101 31,583 Refundable deposits ­ others 172,374 53,924 Guarantee deposits ­ others 10,029 8,918 Principals of structured products ­ Fubon Life Insurance 2,750,000 2,750,000

Years Ended December 31 2012 2011

Commission and fee revenue ­ Fubon Life Insurance $ 4,113,488 $ 3,422,731 Commission and fee revenue ­ others 354,075 291,324 Other revenue ­ Taiwan Sports Lottery 2,366,616 2,033,421 Other revenue ­ Fubon Asset Management 48,290 59,878 Other revenue ­ others 2,134 471 Commission and fee expense ­ Taiwan Sports Lottery 421,217 356,716 Commission and fee expense ­ others 118,919 95,698 Other expense ­ Taiwan Sports Lottery 588 91,887 Donation ­ others 32,471 34,420 Insurance expense ­ others 139,196 116,143 Other operating expense ­ others 219,379 194,656

­ 81 ­

Transactions between the Bank and related parties were at arm’s length commercial terms, except for the preferential interest rates offered to employees for savings and loans of up to certain amounts.

Under the Banking Law, except for consumer and government loans, credits extended by the Bank to any related party should be fully secured, and the credit terms for related parties should be similar to those for unrelated parties.

33. PLEDGED ASSETS

As of December 31, 2012 and 2011, the following assets had been provided as refundable deposits:

December 31 2012 2011

Government bonds (included in financial assets at fair value through profit or loss) $ 322,467 $ ­

Government bonds (included in available­for­sale financial assets) 413,231 773,503 Negotiable certificates of deposit of the Central Bank (included in held­to­maturity financial assets) 20,000,000 20,000,000

Negotiable certificates of deposit (included in held­to­maturity financial assets) 64,099 66,637

Government bonds (included in held­to­maturity financial assets) 1,357,865 1,420,659

$ 22,157,662 $ 22,260,799

The above negotiable certificates of deposit of the Central Bank of $10,000,000 thousand on December 31, 2012 and 2011 had been provided as collaterals for day­term overdraft to comply with the Central Bank’s clearing system requirement for real­time gross settlement (RTGS). The unused overdraft amount at the end of the day may also be treated as liquidity reserve.

Besides, negotiable certificates of deposit of the Central Bank of $10,000,000 thousand on December 31, 2012 were provided for the Central Bank as collaterals for call loans of foreign currency.

Other pledged assets had been placed with (a) courts of justice as part of the requirements for pursuing various collection cases on overdue loans, (b) the National Credit Card Center to secure the Bank’s potential obligations on credit card activities, (c) the Central Bank to secure the Bank’s potential obligations on its trust activities, and (d) foreign governments to secure the Bank’s potential obligations on its overseas operations.

34. CONTINGENCIES AND COMMITMENTS

Financial instruments, contingencies and commitments of the Bank as of December 31, 2012, in addition to those disclosed in Note 35, are summarized as follows:

a. Repurchase agreements

Securities sold under repurchase agreements before March 28, 2013 $ 26,396,701

As of December 31, 2012, the Bank’s investments in financial assets at fair value through profit or loss, available­for­sale financial assets and held­to­maturity financial assets, which amounted to $230,000 thousand, $14,224,356 thousand, and $13,260,664 thousand, respectively, had been sold under repurchase agreements.

­ 82 ­

b. Resell agreement

Securities purchased under resell agreements before January 28, 2013 $ 16,348,924

c. The Bank has several operating lease agreements with both related parties and third parties, which cover office spaces. As of December 31, 2012, the related refundable lease deposits aggregated $173,790 thousand (part of “other financial assets”), including refundable deposits of $4,000 thousand. Under agreements with the lessors, the interest on these deposits serves as the Bank’s rental payments. The minimum future rentals are as follows:

Fiscal Year

2013.01.01­2013.12.31 $ 941,119 2014.01.01­2014.12.31 808,395 2015.01.01­2015.12.31 349,408 2016.01.01­2016.12.31 137,499 2017.01.01­2017.12.31 34,540

d. As of December 31, 2012, construction and purchase contracts amounted to $202,608 thousand, of which $61,816 thousand had been unpaid.

e. The Bank sold its Fubon Nei­hu building to Taiwan Land Bank Co., Ltd., the trust company of Fubon No. 2 REIT, and then leased the building back. The disposal gain of $295,819 thousand will be recognized over the three­year lease period.

The Bank expected to extend the lease period from 3 years to 10 years. Therefore, the unearned profit on sale­leaseback should be amortized over 124 months since January 1, 2009.

f. The Bank was authorized to engage in sports lottery operation and was supposed to remit guaranteed earnings each year based on the proposal. In 2008 and 2009, the Bank remitted earnings of approximately $0.68 and $1.847 billion, respectively, to the Treasury. On September 7, 2010, the Sports Administration (known as the Sports Affair Council before its transformation on January 1, 2013,) under the Ministry of Education issued an order requiring the Bank to remit an additional $788 million to meet the shortfall on the 2008 and 2009 earnings.

In the Bank’s point of view, the shortfall was caused by factors beyond the Bank’s control such as the delay in the start of the dealers’ operation and the delay in setting up phone and Internet channels for bidding. The Bank considered it was under no obligation to remit an additional amount; thus, it filed an appeal with the Executive Yuan on October 5, 2010. On May 19, 2011, the Executive Yuan upheld the order of the Sports Administration and rejected the Bank’s appeal. On July 20, 2011, the Bank filed an administrative litigation to Taipei High Administrative Court (THAC). On December 5, 2012, THAC made an adjudication, which included the following points: For the 2008 earnings, the Sports Administration admitted that the delay in the start of dealers’ operations, set up of phone and Internet channels and Bank­managed stores should be considered when calculating earnings; however, the Sports Administration used only the delay in start of dealers’ operations as factor in its calculation. The Sports Administration’s manner of calculation was thus considered a breach of good faith. The Sports Administration was then ordered to recalculate the earnings on the basis of THAC’s ruling; hence the original administrative decision on the 2008 earnings should be deemed canceled. For the 2009 earnings, the Sports Administration should return $155 million to the Bank. However, on December 28, 2012, the Sports Administration filed an administrative litigation with the Supreme Administrative Court and the litigation was under reviewing.

­ 83 ­

In 2010, the Bank remitted $1.974 billion to the Treasury. On March 16, 2011, the Sports Administration issued an order requiring the Bank to remit an additional $1.587 billion based on the Sports Administration’s own calculation. The Bank claimed that the revenues and the target earnings of 2010 should be set lower because Bank­managed stores were not operated, and there were factors beyond the Banks’s control, such as the events of 2008 and 2009 and economic condition. On March 22, 2011, the Bank then filed an appeal with the Executive Yuan, but the Executive Yuan rejected the appeal on June 17, 2011. On August 17, 2011, the Bank filed an administrative litigation with THAC, which rejected the appeal on February 21, 2013. The Bank will file an appeal with a higher court.

The Bank remitted $1.66 billion to the Treasury in 2011. However, on January 20, 2012, the Sports Administration required the Bank to remit an additional $2.352 billion to the treasury. Claiming that the Bank had setbacks from 2008 to 2010 due to factors beyond its control and that the Bank could sell its sports lottery tickets only through physical sales channels, the Bank claimed the revenue and target earnings of 2011 should be calculated on the basis of physical sales channels only. So the Bank refused to pay any additional amount. To protect its rights and interests, the Bank filed an appeal with the Executive Yuan on February 13, 2012, but the Executive Yuan rejected the appeal on August 15, 2012. The Bank filed an administrative litigation to THAC on October 12, 2012, and the litigation was being reviewed.

From its 2012 earnings, the Bank remitted $1.965 billion to the Treasury in 2012. The Sports Administration was reviewing whether the Bank should remit the shortfall or not.

g. The Bank had sold to customers financial products linked to securities issued by Lehman Brothers Company (LEH), but LEH filed for bankruptcy in September 2008. The customers then filed a claim for settlement of losses on the LEH­linked financial products. The Bank had estimated a related loss of $420,000 thousand and appropriated the reserve. As of December 31, 2012, the Bank had compensated $329,652 thousand in cash.

h. Lehman Brothers Asia (“Lehman”) participated in the loan syndication of Taiwan High Speed Rail Co., Ltd. In October 2009, as the lead syndicator and custodian of the loan, the Bank collected interest of $198,356 thousand from Taiwan High Speed Rail Co., Ltd., which was payable to Lehman. Later, the Bank decided to cease interest payment due to Lehman’s default on a loan of US$10,000 thousand it borrowed from the Bank’s New York Branch as a result of Lehman’s Chapter 11 declaration. After a series of legal proceedings, the Bank filed an appeal with the Taiwan Supreme Court, which, in January 2013, ordered the Bank to pay $198,356 thousand plus interests at 5% from October 2009 to the date of the Bank’s actual payment to the Lehman.

i. Balance sheets and trust properties of trust accounts:

The items mentioned in the following trust­related financial statements were managed by the Bank’s Trust Department. However, these items were not included in the Bank’s financial statements.

Balance Sheets of Trust Accounts December 31, 2012 and 2011

2012 2011 Real Estate Trust Plan

Other Trust Business Total

Real Estate Trust Plan

Other Trust Business Total

Trust assets

Bank deposits $ ­ $ 2,063,968 $ 2,063,968 $ 16,277 $ 687,805 $ 704,082 Short­term investments Bonds ­ 6,965,851 6,965,851 ­ 11,484,982 11,484,982 Stocks ­ 23,031,615 23,031,615 ­ 24,704,023 24,704,023 Funds ­ 186,779,423 186,779,423 ­ 172,498,129 172,498,129

Borrowed stock ­ common stock ­ 805,517 805,517 ­ 3,373,185 3,373,185

(Continued)

­ 84 ­

2012 2011 Real Estate Trust Plan

Other Trust Business Total

Real Estate Trust Plan

Other Trust Business Total

Taiwan depositary receipts $ ­ $ ­ $ ­ $ ­ $ 293,951 $ 293,951 Real estate Construction in progress ­ 3,968,451 3,968,451 ­ 2,037,372 2,037,372

Land ­ 12,510,623 12,510,623 442,096 9,296,975 9,739,071 Buildings ­ 158,857 158,857 176,307 159,362 335,669

Securities investment trust fund custody ­ 72,627,187 72,627,187 ­ 82,047,713 82,047,713

Total trust assets $ ­ $ 308,911,492 $308,911,492 $ 634,680 $306,583,497 $307,218,177

Trust liabilities

Payables $ ­ $ 263 $ 263 $ 5,436 $ 828 $ 6,264 Other liabilities ­ ­ ­ 13,044 ­ 13,044 Trust capital ­ 240,195,082 240,195,082 515,000 228,774,639 229,289,639 Reserves and cumulative earnings

Cumulative earnings ­ (5,301,228) (5,301,228) 2,714 (7,540,458) (7,537,744) Reserve for asset revaluation ­ ­ ­ 98,510 ­ 98,510

Net income ­ 1,390,188 1,390,188 (24) 3,300,775 3,300,751 Securities investment trust fund custody ­ 72,627,187 72,627,187 ­ 82,047,713 82,047,713

Total trust liabilities $ ­ $ 308,911,492 $308,911,492 $ 634,680 $306,583,497 $307,218,177 (Concluded)

Trust Income Statement Years Ended December 31, 2012 and 2011

2012 2011 Real Estate Trust Plan

Other Trust Service Total

Real Estate Trust Plan

Other Trust Service Total

Trust income Interest income $ ­ $ 2,412 $ 2,412 $ 26 $ 1,873 $ 1,899 Rental income ­ ­ ­ 21,807 ­ 21,807 Borrowed stock income ­ 56,828 56,828 ­ 42,588 42,588 Others ­ 5,626 5,626 ­ 7,369 7,369 Cash dividends ­ 4,504,194 4,504,194 ­ 4,478,957 4,478,957 Realized capital income ­ common stock ­ 17,271 17,271 ­ 32,508 32,508

Realized capital income ­ mutual funds ­ 280,515 280,515 ­ 560,187 560,187

Gains from asset trading ­ 1,996,082 1,996,082 ­ 4,946,783 4,946,783

Distribution from beneficiary certificates ­ 12,560 12,560 ­ 21,825 21,825

Total trust income ­ 6,875,488 6,875,488 21,833 10,092,090 10,113,923 Trust expense Trust administrative expenses ­ 321,141 321,141 755 254,722 255,477

Supervision fee ­ 600 600 ­ 600 600 Tax expenses ­ ­ ­ 980 ­ 980 Commission and fees ­ 1,771 1,771 ­ 984 984 Income tax expenses ­ 276 276 ­ 288 288 Others ­ 976 976 699 49,484 50,183 Service fees on loans ­ 955 955 ­ 715 715 Realized capital loss ­ common stock ­ 246,123 246,123 ­ 263,774 263,774

Realized capital loss ­ mutual funds ­ 5,992 5,992 ­ 119,900 119,900

(Continued)

­ 85 ­

2012 2011 Real Estate Trust Plan

Other Trust Service Total

Real Estate Trust Plan

Other Trust Service Total

Losses from asset trading $ ­ $ 4,907,466 $ 4,907,466 $ ­ $ 6,098,025 $ 6,098,025

Distribution of beneficiary certificates ­ ­ ­ 19,423 ­ 19,423

Distribution of dividends ­ ­ ­ ­ 2,823 2,823

Total trust expenses ­ 5,485,300 5,485,300 21,857 6,791,315 6,813,172

Net income $ ­ $ 1,390,188 $ 1,390,188 $ (24) $ 3,300,775 $ 3,300,751 (Concluded)

Trust Property of Trust Accounts December 31, 2012 and 2011

Investment Portfolio 2012 2011

Bank deposits $ 2,063,968 $ 704,082 Short­term investments Funds 186,779,423 172,498,129 Bonds 6,965,851 11,484,982 Stocks 23,031,615 24,704,023 Borrowed stock ­ common stock 805,517 3,373,185 Taiwan depositary receipts ­ 293,951

217,582,406 212,354,270 Securities investment trust fund custody 72,627,187 82,047,713 Real estate Land 12,510,623 9,739,071 Buildings 158,857 335,669 Construction in progress 3,968,451 2,037,372

16,637,931 12,112,112

$ 308,911,492 $ 307,218,177

35. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments

December 31 2012 2011

Carrying Amount Fair Value Carrying Amount Fair Value

Financial assets

Other short­term financial assets $ 178,559,912 $ 178,559,912 $ 166,199,501 $ 166,199,501 Financial assets at fair value through profit or loss 84,266,003 84,266,003 59,091,943 59,091,943

Available­for­sale financial assets 66,010,253 66,010,253 49,387,099 49,387,099 Discounts and loans 1,026,535,634 1,026,535,634 952,718,962 952,718,962 Held­to­maturity investments 227,013,136 227,758,569 256,826,642 256,761,765 Investments accounted for by the equity method 184,687 184,687 184,760 184,760

Other financial assets 5,291,630 5,338,607 5,160,269 5,234,665 (Continued)

­ 86 ­

December 31 2012 2011

Carrying Amount Fair Value Carrying Amount Fair Value

Financial liabilities

Other short­term financial liabilities $ 128,822,396 $ 128,822,396 $ 113,023,947 $ 113,023,947 Financial liabilities at fair value through profit or loss 19,612,456 19,612,456 22,747,531 22,747,531

Deposit and remittance 1,247,784,908 1,247,784,908 1,183,409,166 1,183,409,166 Bank debentures 66,929,382 67,381,007 62,143,488 62,480,622 Other financial liabilities 28,695,600 28,695,600 26,702,507 26,702,507

(Concluded)

b. Methods and assumptions applied in estimating the fair values disclosures for financial instruments are as follows:

1) The carrying amounts approximate their fair values because of the short maturities of these instruments. However, due to the statutory right and obligation, amounts of tax receivables, linked­tax receivable, tax payable, and linked­tax payable have been excluded.

December 31 2012 2011

Cash and cash equivalents $ 31,820,002 $ 27,224,781 Due from the Central Bank of China and other banks 70,851,850 73,099,143 Securities purchased under agreements to resell 16,343,491 200,000 Receivables, net 60,053,795 66,768,060 Less: Linked­tax receivable 509,226 1,092,483

Other short­term financial assets $ 178,559,912 $ 166,199,501

Due to the Central Bank of China and other banks $ 69,753,342 $ 56,759,776 Securities sold under agreements to repurchase 26,360,932 28,503,088 Payables 34,399,577 28,933,305 Less: Linked­tax payable 1,188,567 730,417 Less: Tax payable 502,888 441,805

Other short­term financial liabilities $ 128,822,396 $ 113,023,947

2) For financial instruments at fair value through profit or loss, available­for­sale financial assets, held­to­maturity financial assets and hedging derivative financial instruments, fair value is best determined using quoted market prices. However, because the Bank has many other financial instruments with no quoted market prices, fair values are based on estimates using available indirect data and appropriate valuation methodologies.

Debt investments with no active market and bank debentures are valued using prescribed valuation methods.

3) Bills purchased, discounts and loans are interest­bearing assets; deposits and principals of structured products are interest­bearing liabilities. Thus, their carrying amounts represent fair values.

4) The fair value of the investments accounted for by the equity method and financial assets carried at cost are estimated at carrying amounts because they have no quoted prices in an active market.

­ 87 ­

5) If quoted prices for derivatives are not available, fair values of forward contracts and interest rate swap contracts are based on estimates using valuation techniques. For options, fair values are based on estimates using the Black­Scholes model.

6) Fair values of forward contracts are estimated using the forward rates provided by Reuters. Fair values of interest rate swap contracts and cross­currency swap contracts are estimated using the market quotations provided by Bloomberg, but the fair value of parts of these contracts are provided by the counter­parties.

7) Refundable deposits have no specified maturity dates and their market values are estimated on the basis of their carrying values in the balance sheet. Guarantee deposit received will be collected by depositor; the carrying values are paid price. The carrying value of the guarantee deposits received is the reasonable basis for estimating market value.

c. Financial assets and financial liabilities with fair values based on quoted market prices or on estimates made by using valuation methods are summarized as follows:

Quoted Market Prices Fair Values Based on Estimates December 31 December 31

2012 2011 2012 2011

Financial assets

Financial assets at fair value through profit or loss $ 1,273,437 $ 3,997,706 $ 82,992,566 $ 55,094,237

Available­for­sale financial assets 10,646,244 9,690,619 55,364,009 39,696,480 Held­to­maturity investments ­ ­ 227,758,569 256,761,765 Other financial assets ­ ­ 5,338,607 5,234,665

Financial liabilities

Financial liabilities at fair value through profit or loss ­ ­ 19,612,456 22,747,531

Bank debentures 65,101,625 59,987,134 2,279,382 2,493,488 Other financial liabilities ­ ­ 28,695,600 26,702,507

The fair value hierarchies of the Bank’s financial instruments as of December 31, 2012 and 2011 were as follows:

December 31, 2012 Item Total Level 1 Level 2 Level 3

Nonderivative financial instruments

Assets Financial assets at fair value through profit or loss Held­for­trading financial assets Investment in bonds $ 35,363,986 $ 597,771 $ 34,766,215 $ ­ Others 23,074,295 675,300 22,398,995 ­

Financial assets designated as at FVTPL 6,053,561 ­ 3,825,331 2,228,230

Available­for­sale financial assets Investment in stocks 9,162,456 9,162,456 ­ ­ Investment in bonds 24,677,124 472,182 24,204,942 ­ Others 32,170,673 1,011,606 31,159,067 ­

Other financial assets Debt instruments with no active market 1,552,058 ­ ­ 1,552,058

(Continued)

­ 88 ­

December 31, 2012 Item Total Level 1 Level 2 Level 3

Liabilities Financial liabilities at fair value through profit or loss Held for trading financial liabilities $ ­ $ ­ $ ­ $ ­

Derivative financial instruments

Assets Financial assets at fair value through profit or loss Held­for­trading financial assets 19,774,161 366 17,938,445 1,835,350

Other financial assets Hedged derivative financial assets 478,744 ­ 446,856 31,888

Liabilities Financial liabilities at fair value through profit or loss Held­for­trading financial liabilities 19,612,456 ­ 17,937,975 1,674,481

Other financial liabilities Hedged derivative financial liabilities 352,920 ­ 352,920 ­

(Concluded)

December 31, 2011 Item Total Level 1 Level 2 Level 3

Nonderivative financial instruments

Assets Financial assets at fair value through profit or loss Held for trading financial assets Investment in bonds $ 18,122,093 $ 3,433,815 $ 14,688,278 $ ­ Others 14,543,211 563,127 13,980,084 ­

Financial assets designated as FVTPL 2,738,223 ­ 299,480 2,438,743 Available­for­sale financial assets Investment in stocks 8,792,143 8,792,143 ­ ­ Investment in bonds 36,349,270 ­ 36,349,270 ­ Others 4,245,686 898,476 3,347,210 ­

Other financial assets Debt instruments with no active market 2,129,839 ­ ­ 2,129,839

Derivative financial instruments

Assets Financial assets at fair value through profit or loss Held­for­trading financial assets 23,688,416 764 22,313,856 1,373,796

Other financial assets Hedged derivative financial assets 693,488 ­ 625,707 67,781

Liabilities Financial liabilities at fair value through profit or loss Held­for­trading financial liabilities 22,747,531 ­ 21,385,375 1,362,156

Other financial liabilities Hedged derivative financial liabilities 428,152 ­ 428,152 ­

Note 1: The table aims to show the method that the Bank used to measure the fair value of the financial assets and liabilities. The table applies to financial assets and liabilities at fair value through profit or loss, available for sale financial assets, debt instruments with no active market, and hedged derivative financial assets and liabilities.

­ 89 ­

Note 2: Level 1 inputs are quoted prices in active markets for identical financial instruments. The definition of active markets is based on SFAS No. 34.

Note 3: Level 2 inputs are those other than quoted prices included within level 1 that are observable for the asset or liability, either directly (e.g. price) or indirectly (e.g. value derived from price), in the active markets.

Note 4: Level 3 valuation applies to fair value valuation based on inputs from non­public attainable data.

Level 3 Fair Value Classification of Financial Assets Year Ended December 31, 2012

(In Thousands of New Taiwan Dollars)

Increase Decrease

Name Beginning Balance

Valuation Gain/Loss Reflected on Income

Statement or in Stockholder’s

Equity

Purchase/ Issued

Transfer into Level 3

Disposed/ Sold

Transfer Out of Level 3

Ending Balance

Financial assets at fair value through profit or loss Held­for­trading financial assets $ 1,373,796 $ (316,959) $ 2,412,028 $ 249,374 $ 1,813,020 $ 69,869 $ 1,835,350 Financial assets designated as at FVTPL 2,438,743 81,895 ­ ­ 292,408 ­ 2,228,230

Other financial assets Derivative financial assets 67,781 (113,872) ­ 77,979 ­ ­ 31,888 Debt instruments with no active market 2,129,839 22,681 597,610 ­ 1,198,072 ­ 1,552,058

Note: Transfers to Level 3 were due to lack of observable valuation inputs for certain derivative products. Transfers out of Level 3 were due to valuation inputs for certain derivative products becoming observable.

Level 3 Fair Value Classification of Financial Assets Year Ended December 31, 2011

(In Thousands of New Taiwan Dollars)

Increase Decrease

Name Beginning Balance

Valuation Gain/Loss Reflected on Income

Statement or in Stockholder’s

Equity

Purchase/ Issued

Transfer into Level 3

Disposed/ Sold

Transfer Out of Level 3

Ending Balance

Financial assets at fair value through profit or loss Held­for­trading financial assets $ 1,361,582 $ (273,060) $ 1,460,800 $ ­ $ 1,175,526 $ ­ $ 1,373,796 Financial assets designated as at FVTPL 1,533,972 12,903 1,568,964 ­ 677,096 ­ 2,438,743

Other financial assets ­ Derivative financial assets 87,918 (20,137) ­ ­ ­ ­ 67,781 Debt instruments with no active market 4,110,883 30,028 4,321,533 ­ 6,332,605 ­ 2,129,839

Level 3 Fair Value Classification of Financial Liabilities Year Ended December 31, 2012

(In Thousands of New Taiwan Dollars)

Increase Decrease

Name Beginning Balance

Valuation Gain/Loss Reflected on Income

Statement or in Stockholder’s

Equity

Purchase/ Issued

Transfer into Level 3

Disposed/ Sold

Transfer Out of Level 3

Ending Balance

Financial liabilities at fair value through profit or loss Held­for­trading financial liabilities $ 1,362,156 $ (250,124) $ 2,019,650 $ 79,068 $ 1,466,400 $ 69,869 $ 1,674,481

­ 90 ­

Note: Transfers to Level 3 were due to lack of observable valuation inputs for certain derivative products. Transfers out of Level 3 were due to valuation inputs for certain derivative products becoming observable.

Level 3 Fair Value Classification of Financial Liabilities Year Ended December 31, 2011

(In Thousands of New Taiwan Dollars)

Increase Decrease

Name Beginning Balance

Valuation Gain/Loss Reflected on Income

Statement or in Stockholder’s

Equity

Purchase/ Issued

Transfer into Level 3

Disposed/ Sold

Transfer Out of Level 3

Ending Balance

Financial liabilities at fair value through profit or loss Held for trading financial liabilities $ 1,186,065 $ (80,316) $ 1,444,153 $ ­ $ 1,187,746 $ ­ $ 1,362,156

The valuation of financial assets and liabilities at fair value through profit or loss resulted in a gain of $101,625 thousand in 2012 and a loss of $1,794,480 thousand in 2011.

For 2012 and 2011, on financial assets and liabilities other than those at fair value through profit or loss, interest revenues were $26,299,212 thousand and $23,270,705 thousand, respectively, and interest expenses were $11,508,636 thousand and $9,482,326 thousand, respectively.

The movements of unrealized gains or losses on financial instruments for 2012 and 2011 are summarized as follows:

Years Ended December 31 2012 2011

Balance, beginning of year $ 2,565,348 $ 2,074,662 Recognized in stockholder’s equity 1,170,159 544,200 Transferred to profit or loss (171,201) (64,126) Unrealized valuation gains or losses on investees’ financial instruments from investments accounted for by the equity method 15,555 10,612

Balance, end of year $ 3,579,861 $ 2,565,348

d. Financial risk information

1) Market risk

The Bank engages in bond, bills, loan and similar financial instrument transactions. As of the balance sheet date, the values of these instruments will show fluctuations because of market interest rate changes. The interest rate sensitivity information is described in Note 38.

2) Credit risk

The Bank is exposed to credit risk due to default on contracts by counter­parties. To control this risk, the Bank makes credit commitments and issues financial guarantees and standby letters of credit only after careful evaluation of customers’ creditworthiness. On the basis of the result of the credit evaluation, the Bank may require collaterals before drawings are made on the credit facilities. As of December 31, 2012 and 2011, the ratios of secured loans to total loans were 52.89% and 55.27%, respectively. The ratios of secured financial guarantees and standby letters of credits were from 0% to 100%, and the averages for the years ended December 31, 2012 and 2011 were about 28.45% and 39.03%, respectively. Collaterals held vary but may include cash, inventories,

­ 91 ­

marketable securities, and other properties. When the customers default, the Bank will, as required by circumstances, foreclose the collaterals or execute other rights arising out of the guarantees given. Since most of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash demands. The maximum potential amount of future payments represents the notional amounts that could be lost under the guarantees if there is a total default by the guaranteed parties, without consideration of possible recoveries under recourse provisions or from collaterals held or pledged.

The maximum credit exposures of the off­balance sheet financial instruments are summarized as follows:

December 31 2012 2011

Credit card commitments $ 216,064,464 $ 211,533,727 Financial guarantees and standby letters of credit 69,499,847 86,023,832 Undrawn loan commitments 45,008,084 50,882,470

The credit risk amounts of counterparties presented above were off­balance sheet credit risk contracts with positive amounts on the balance sheet. Concentrations of credit risk exist when changes in economic, industry or geographic factors similarly affect groups of counterparties whose aggregate credit exposure is material in relation to the Bank’s total credit exposure.

The Bank maintains a diversified portfolio, limits its exposure to any one geographic region, country or individual creditor and monitors the exposure on a continuous basis. The Bank’s most significant concentrations of credit risk are summarized as follows:

December 31 Credit Risk Profile by Counter­party 2012 2011

Manufacturing industry $ 178,158,270 $ 162,894,315 Real estate industry 39,577,613 39,124,444 Wholesale trade and retail business 23,235,429 21,631,145

$ 240,971,312 $ 223,649,904

3) Liquidity risk

As of December 31, 2012 and 2011, the liquidity reserve ratios were 29.85% and 28.15%, respectively. The Bank has sufficient capital and working capital to execute all contract obligations of contract and has no liquidity risk.

The management policy of the Bank is to match the contractual maturity profile of its assets and liabilities to the related interest rates. Because of uncertainties, however, the maturities and interest rates usually do not match, resulting in gain or loss.

­ 92 ­

The Bank used appropriate ways to group assets and liabilities. The maturity analysis of assets and liabilities was as follows:

December 31, 2012

Due in One Month

Due after One Month Up to Three Months

Due after Three Months Up to Six Months

Due after Six Months Up to One Year

Due after One Year Up to

Seven Years Due After Seven Years Total

Assets

Cash and cash equivalents $ 31,820,002 $ ­ $ ­ $ ­ $ ­ $ ­ $ 31,820,002 Due from the Central Bank of China and

other banks 52,310,080 6,192,525 3,020,950 3,020,950 6,307,345 ­ 70,851,850 Financial assets at fair value through

profit or loss 32,287,988 7,878,605 946,424 2,285,982 38,678,931 2,188,073 84,266,003 Securities purchased under agreements to

resell 16,343,491 ­ ­ ­ ­ ­ 16,343,491 Receivables 53,238,759 442,753 2,579,247 449,029 4,068,610 ­ 60,778,398 Discounts and loans 85,603,251 89,220,938 88,787,132 100,513,534 272,153,001 399,582,648 1,035,860,504 Available­for­sale financial assets 27,787,511 9,739,336 2,637,247 3,835,577 21,294,459 716,123 66,010,253 Held­to­maturity financial assets 137,512,409 22,320,648 23,919,581 19,442,290 22,042,760 1,775,448 227,013,136 Debt investments with no active market ­ ­ ­ ­ 264,814 1,287,244 1,552,058 Hedged derivative financial assets ­ ­ ­ 31,888 424,180 22,676 478,744

$ 436,903,491 $ 135,794,805 $ 121,890,581 $ 129,579,250 $ 365,234,100 $ 405,572,212 $ 1,594,974,439

Liabilities

Due to the Central Bank of China and other banks $ 58,281,820 $ 7,476,829 $ 3,202,221 $ 527,797 $ 264,675 $ ­ $ 69,753,342

Financial liabilities at fair value through profit or loss 19,612,456 ­ ­ ­ ­ ­ 19,612,456

Securities sold under agreements to repurchase 15,867,313 223,570 407,377 269,768 9,592,904 ­ 26,360,932

Payables 25,578,421 1,024,718 6,198,241 749,177 849,020 ­ 34,399,577 Deposits and remittances 686,386,896 164,202,195 124,515,391 247,743,605 24,936,821 ­ 1,247,784,908 Bank debentures ­ ­ 550,000 5,000,000 49,479,382 11,900,000 66,929,382 Hedged derivative financial liabilities ­ 1,911 4,048 3,802 343,159 ­ 352,920 Principals of structured products 4,033,893 235,485 596,265 1,331,565 8,952,577 12,094,799 27,244,584

$ 809,760,799 $ 173,164,708 $ 135,473,543 $ 255,625,714 $ 94,418,538 $ 23,994,799 $ 1,492,438,101

December 31, 2011

Due in One Month

Due after One Month Up to Three Months

Due after Three Months Up to Six Months

Due after Six Months Up to One Year

Due after One Year Up to

Seven Years Due After Seven Years Total

Assets

Cash and cash equivalents $ 27,224,781 $ ­ $ ­ $ ­ $ ­ $ ­ $ 27,224,781 Due from the Central Bank of China and

other banks 40,961,413 11,549,512 4,097,130 4,947,292 11,543,796 ­ 73,099,143 Financial assets at fair value through

profit or loss 31,798,448 2,554,212 3,638,030 1,534,189 16,211,240 3,355,824 59,091,943 Securities purchased under agreements to

resell 200,000 ­ ­ ­ ­ ­ 200,000 Receivables 60,830,882 411,148 2,171,753 170,761 4,095,346 ­ 67,679,890 Discounts and loans 58,984,076 100,381,018 69,867,654 92,377,901 259,426,604 380,280,254 961,317,507 Available­for­sale financial assets 10,241,911 2,201,518 1,058,979 2,133,355 30,555,823 3,195,513 49,387,099 Held­to­maturity financial assets 162,500,001 39,657,257 15,500,251 24,590,003 14,579,130 ­ 256,826,642 Debt investments with no active market ­ 296,223 ­ ­ 275,301 1,558,315 2,129,839 Hedged derivative financial assets ­ ­ ­ ­ 669,689 23,799 693,488

$ 392,741,512 $ 157,050,888 $ 96,333,797 $ 125,753,501 $ 337,356,929 $ 388,413,705 $ 1,497,650,332

Liabilities

Due to the Central Bank of China and other banks $ 31,700,206 $ 20,982,189 $ 3,147,858 $ 640,700 $ 288,823 $ ­ $ 56,759,776

Financial liabilities at fair value through profit or loss 22,747,531 ­ ­ ­ ­ ­ 22,747,531

Securities sold under agreement to repurchase 25,054,599 3,380,494 67,995 ­ ­ ­ 28,503,088

Payables 25,761,016 1,054,789 803,890 501,784 811,826 ­ 28,933,305 Deposits and remittances 660,985,949 158,349,672 143,532,478 199,649,986 20,891,081 ­ 1,183,409,166 Bank debentures ­ ­ ­ 1,000,000 53,943,488 7,200,000 62,143,488 Hedged derivative financial liabilities 310 1,158 4,367 1,565 420,752 ­ 428,152 Principals of structured products 2,259,115 1,015,027 432,908 2,176,581 5,515,754 13,477,178 24,876,563

$ 768,508,726 $ 184,783,329 $ 147,989,496 $ 203,970,616 $ 81,871,724 $ 20,677,178 $ 1,407,801,069

4) Cash flow risk and fair value risk arising from interest rate fluctuations

Interest rate risk refers to a decline in the earnings and value of financial instruments due to adverse fluctuations of interest rates. Since this risk is considered material, the Bank enters into interest rate swap contracts to manage this risk.

­ 93 ­

5) Foreign exchange risk

The Bank engages in foreign exchange business mainly to accommodate customers’ needs and to manage its exposure positions. Significant assets and liabilities denoted in foreign currencies are disclosed as follows:

December 31 2012 2011

Foreign Currencies

Exchange Rate

New Taiwan Dollars

Foreign Currencies

Exchange Rate

New Taiwan Dollars

Assets

Due from the Central Bank of China and other banks USD $ 361,108 29.1358 $ 10,521,158 $ 469,693 30.2897 $ 14,226,872 EUR 65,000 38.5349 2,504,769 81,800 39.1243 3,200,368 HKD 102,600 3.7585 385,622 380,000 3.8993 1,481,734

Financial assets at fair value through profit or loss USD 332,911 29.1358 9,699,619 317,303 30.2897 9,610,999

Receivables, net USD 1,000,229 29.1358 29,142,481 1,219,754 30.2897 36,945,997

Discounts and loans, net USD 5,246,383 29.1358 152,857,555 4,221,533 30.2897 127,868,974 HKD 1,239,150 3.7585 4,657,347 603,774 3.8993 2,354,296 EUR 65,529 38.5349 2,525,139 41,451 39.1243 1,621,751

Available­for­sale financial assets USD 323,765 29.1358 9,433,147 367,584 30.2897 11,134,020 EUR 17,629 38.5349 679,333 78,463 39.1243 3,069,821

Held­to­maturity financial assets USD 483,268 29.1358 14,080,389 328,234 30.2897 9,942,123 EUR 65,619 38.5349 2,528,621 14,194 39.1243 555,337

Debt instruments with no active market, net USD 53,270 29.1358 1,552,058 60,536 30.2897 1,833,616

Liabilities

Due to the Central Bank of China and other banks USD 1,127,348 29.1358 32,846,183 1,290,014 30.2897 39,074,152 HKD 550,220 3.7585 2,068,000 644,053 3.8993 2,511,354

Financial liabilities at fair value through profit or loss USD 134,231 29.1358 3,910,936 219,476 30.2897 6,647,865

Securities sold under agreements to repurchase USD 352,489 29.1358 10,270,060 293,810 30.2897 8,899,423 EUR 65,003 38.5349 2,504,898 52,392 39.1243 2,049,810

Payables USD 309,850 29.1358 9,027,713 330,521 30.2897 10,011,387

Deposits and remittances USD 6,724,601 29.1358 195,926,632 6,551,502 30.2897 198,443,036 EUR 212,138 38.5349 8,174,702 258,501 39.1243 10,113,664 HKD 1,838,130 3.7585 6,908,611 1,046,161 3.8993 4,079,297

­ 94 ­

e. Fair value hedge and cash flow hedge

1) Fair value hedge

The risk of adverse interest rate fluctuations on available­for­sale financial assets and bank debentures is considered to be material to the Bank. Therefore, the Bank enters into interest rate swap contracts to hedge against this risk. Related information is as follows:

December 31, 2012 Nominal

Hedged Items Hedging Instruments Amount Fair Value

Bank debentures Interest rate swap contract $ 25,450,000 $ 478,744 Available­for­sale financial assets ­ corporate bonds

Interest rate swap contract 728,332 (20,862)

Available­for­sale financial assets ­ bank debentures

Interest rate swap contract 6,987,437 (302,406)

Available­for­sale financial assets ­ covered bonds

Interest rate swap contract 524,075 (29,652)

December 31, 2011 Nominal

Hedged Items Hedging Instruments Amount Fair Value

Bank debentures Interest rate swap contract $ 23,550,000 $ 693,488 Available­for­sale financial assets ­ corporate bonds

Interest rate swap contract 861,441 (53,890)

Available­for­sale financial assets ­ bank debentures

Interest rate swap contract 6,614,814 (347,362)

Available­for­sale financial assets ­ covered bonds

Interest rate swap contract 532,090 (26,900)

2) Cash flow hedge

The future cash flows on the floating rate debts of the Bank may fluctuate and lead to risk because of market interest rate changes. The risk is considered to be material to the Bank; thus, the Bank entered into interest rate swap contracts for hedging purposes.

The movements of unrealized gains or losses on cash­flow hedge for the years ended December 31, 2012 and 2011 are summarized as follows:

Years Ended December 31 2012 2011

Balance, beginning of year $ ­ $ 2,197 Transfer from stockholder’s equity to current gain or loss ­ (2,197) Debit to stockholder’s equity in the current period ­ ­

Balance, end of year $ ­ $ ­

­ 95 ­

f. Reclassifications

On January 1, 2012, the Bank reclassified its financial assets in accordance with the newly amended Statement of Financial Accounting Standards No. 34 ­ “Financial Instruments: Recognition and Measurement”. The fair values at the reclassification date were as follows:

Before Reclassifications

After Reclassifications

Available­for­sale financial assets $ 12,052,604 $ ­ Held­to­maturity financial assets ­ 12,052,604

$ 12,052,604 $ 12,052,604

The effective interest rates for the available­for­sale financial assets that have been reclassified to held­to­maturity financial assets ranged from 0.52% to 9.95%. The estimated recoverable cash flows amounted to $13,966,953 thousand as of January 1, 2012.

The carrying amounts and fair values of the reclassified financial assets (excluding those that had been derecognized) as of December 31, 2012 were as follows:

December 31, 2012 Carrying Amount

Fair Value

Held­to­maturity financial assets $ 8,330,944 $ 8,564,177

The gains or losses recognized for the reclassified financial assets (excluding those that had been derecognized before December 31, 2012) in 2012 and the pro forma adjustment recognized in stockholder’s equity assuming no reclassifications had been made were as follows:

Year Ended December 31, 2012

Gains Recognized

Pro Forma Adjustment Recognized In Stockholder’s

Equity

Held­to­maturity financial assets $ 384,004 $ 361,419

36. RISK MANAGEMENT

a. Risk management framework

Taipei Fubon Bank has constructed a robust risk governance framework with a disciplined risk management culture and environment in support of solid business growth and optimization of stockholders’ value through optimizing risk and return. The Board of Directors takes responsibility of overseeing the Bank’s overall risk management and internal control effectiveness. Major risk policies and limits are subject to approval by the Board. Through comprehensive risk management systems, the Bank is well equipped to identify, measure, monitor and manage risks covering every aspect of activities.

­ 96 ­

Taipei Fubon Bank adopts the best practice of three lines of defense in structuring risk management framework. Business units undertake the first line of defense role in compliance with control requirements while performing daily business operation. Risk Management units assume an independent role in enacting the second line of defense, measuring the Bank’s risk exposures, monitoring risk limits and validating risk models. Risk Management submits comprehensive risk management reports including both qualitative and quantitative risk information to the Board of Directors and senior management on a regular basis. Audit department, which is under the supervision of Board of Directors, conducts the third defense line examining the effectiveness of internal control functions independently.

The Assets/Liability & Risk Management Committee supervises major risks in the Bank including interest rate risk, liquidity risk, market risk, credit risk, operational risk and capital adequacy. The Committee is composed of senior management and chaired by the Bank Chairman. Under the Committee, there are three sub­committees, i.e. Credit Risk Management Sub­committee, Financial Market Risk Management Sub­committee, and Operational Risk Management Sub­committee respectively, chaired by the Bank President or his designated senior executive manager.

Furthermore, the Bank has established Corporate Credit Review Committee and Corporate Credit Department in Corporate Banking, and Consumer Credit Review Committee and Consumer Risk Management Department in Consumer Banking respectively. Funding Management Department in Financial Markets and Planning Department in Administration Management are responsible for monitoring the Bank’s liquidity risk and capital adequacy.

b. Credit risk management and regulatory capital requirement

1) Strategy/objectives/policies and procedures

The Bank has established solid credit risk policies and procedures. A robust credit risk strategy taking into account of the status and outlook of economic environment, industry sector and financial sector as well as corporate business plan is in place. Comprehensive credit risk management systems and tools have been deployed effectively to measure, evaluate, monitor and report credit risks including default risk, counter­party risk and concentration risk.

2) Risk report and evaluation system

The Bank has established various credit risk management systems for underwriting, scoring, risk rating, limits control, account maintenance, and remedial management respectively, which enable the Bank to manage credit portfolio effectively. Concentration limits for single account, group exposure, industry segment, and foreign countries based on assessment of risk level are in place. Comprehensive credit review process and control procedures assure the Bank to undertake proper courses of actions on credit risk management.

3) Mitigation or hedging of risk

The Bank has established sophisticated limits in controlling concentration risks on credit, investment and counter­parties pre­settlement exposures. Risk rating is assessed for each borrower based on stringent evaluation of obligor risk and facility risk. Early warning system is in place to identify deterioration of creditworthiness of borrowers in a timely manner. Furthermore, the Bank has set centralized approval process with documented guidelines and dual authorizations. Appropriate collaterals are required based on borrowers’ financials and debt service capabilities to mitigate credit risk.

4) Methodology of the regulatory capital requirement

The Bank presently adopts the standardized approach for credit risk capital charge.

­ 97 ­

c. Market risk and regulatory capital requirement

1) Strategy/objectives/policy and procedure

The Bank has implemented extensive market risk management systems and policies to govern front, middle and back office operation. The middle office reports to Market Risk Management Department directly. The market risk management strategy is aligned with the corporate financial market businesses plan and corporate risk management objectives. Trading book is categorized by four risk factors, i.e. interest rate risk, foreign exchange risk, equity risk and commodity risk. Robust risk policies, procedures and risk limits have been well deployed to manage the aforementioned risks. Through comprehensive risk management systems, risk measurement tools and control procedures, the Bank’s market risk is managed effectively.

2) Risk report and evaluation system

Market Risk Management Department performs daily risk limits monitoring through risk factor sensitivity measurements such as Delta, Vega and DV01 and VaR assessment. Market Risk Management Department monitors and reports market risk position, profit and loss, and limit utilization. Exceptional control mechanism of excess limits is in place and executed appropriately.

The Bank has established the value at risk (VaR) management system. Back testing is duly conducted to validate the effectiveness of VaR and Benchmark. Moreover, the Bank has rolled out online risk control mechanism over the trading system platform to enhance risk management efficiency and effectiveness.

In addition to stress test, scenario and sensitivity analysis, stressed VaR has been calculated and reported to senior management on a regular basis.

3) Mitigation or hedging of risk

Strict rules and control procedures are implemented in governing front, middle and back office operation. Consistent treatment for hedging trading and non­hedging trading is abided. In addition, following generally accepted accounting principles on the hedging requirement, all hedging documents and assessments are completed before transactions done. Periodic review of hedging effectiveness is conducted thereafter.

4) Methodology on regulatory capital requirement

The Bank presently adopts the standardized approach for market risk capital charge, and applies delta­plus method for foreign exchange options capital charge per FSC’s approval.

d. Operational risk and regulatory capital requirement

1) Strategy/objectives/policy and procedure

The Bank’s operational risk management strategy is to proactively identify, assess, monitor and effectively control/mitigate operational risks in association with products, services, processes and systems. The Bank has implemented a robust operational risk management framework and control process, under which all units have established their key risk indicators and risk assessment process reflecting their operation’s risk characteristics, and conducted regular review with prompt corrective course of action for identified risks. Operational risk policy and key risk indicators are reviewed and updated periodically.

­ 98 ­

2) Risk report and evaluation system

To effectively identify and control operational risks bank­wide, each unit reviews key risk indicators and conducts risk and control self­assessment, control self­assessment via operational risk management system periodically to manage operational risk. Loss events are further evaluated and measured through risk matrix based on the frequency and severity of the operational risk. The medium and high risk events will be rectified with priority. Operational Risk Management Department submits reports containing operational risk events, loss exposure, risk mitigation, trend analysis and corrective actions follow­up to senior management on a regular basis.

The Bank has implemented operational risk management system modules, which include risk and control self­assessment, control self­assessment, key risk indicators, compliance self­assessment, operational loss data base and risk report.

3) Mitigation or hedging of risk

The Bank undertakes a series of mitigation initiatives to reduce or transfer operational risk, which include adopting rigorous internal control procedures, close follow­up of corrective action, enhancing staff training, insurance and outsourcing management.

4) Methodology of regulatory capital requirement

The Bank presently adopts the standardized approach for operational risk capital charge.

37. AVERAGE AMOUNTS AND AVERAGE INTEREST RATES OF INTEREST­EARNING ASSETS AND INTEREST­BEARING LIABILITIES

Average balances were calculated at the daily average balance of interest­earning assets and interest­bearing liabilities.

For the Years Ended December 31 2012 2011

Average Average Average Average Balance Rate (%) Balance Rate (%)

Interest­earning assets

Cash and cash equivalents ­ due from other banks ­ deposits $ 16,514,988 0.44 $ 17,970,770 0.29

Due from the Central Bank of China and other banks 102,990,342 0.88 98,928,272 0.71

Financial assets at fair value through profit or loss 48,389,749 1.21 23,194,061 1.09

Securities purchased under agreements to resell 4,212,302 0.75 215,180 0.44

Credit card receivables ­ revolving 7,906,166 13.86 8,759,563 14.03 Accounts receivable ­ factoring 11,626,818 1.35 18,408,616 1.24 Discounts and loans 1,027,603,527 1.97 921,667,198 1.87 Available­for­sale financial assets 41,046,605 1.39 38,611,291 2.66 Held­to­maturity investments 262,272,208 1.14 282,575,170 0.90 Debt instruments with no active market 1,856,187 4.85 5,030,243 3.23

(Continued)

­ 99 ­

For the Years Ended December 31 2012 2011

Average Average Average Average Balance Rate (%) Balance Rate (%)

Interest­bearing liabilities

Due to the Central Bank of China and other banks $ 76,110,057 0.98 $ 79,699,269 1.04

Securities sold under agreements to repurchase 33,739,090 1.20 30,504,752 1.04

Demand deposits 193,367,787 0.11 196,494,190 0.10 Savings deposits 366,930,020 0.34 363,315,721 0.32 Time deposits 405,325,057 1.02 332,841,250 0.90 Time­savings deposits 257,652,701 1.33 233,851,571 1.26 Negotiable certificates of deposit 4,052,375 0.82 5,849,232 0.74 Public treasury savings 17,700,253 0.22 18,471,515 0.18 Bank debentures 64,760,109 1.78 56,283,973 1.79

(Concluded)

38. ASSET QUALITY, CONCENTRATION OF CREDIT EXTENSIONS, INTEREST RATE SENSITIVITY, PROFITABILITY AND MATURITY ANALYSIS OF ASSETS AND LIABILITIES

a. Asset quality

See Table 5.

b. Concentration of credit extensions

December 31, 2012

(In Thousands of New Taiwan Dollars, %)

Rank (Note 1) Group Name (Note 2)

Credit Extensions Balance (Note 3)

% of Net Asset Value

1 A Group (LCD and its component manufacturing industry) $ 12,362,933 11.58 2 B Group (iron and steel smelting industry) 12,176,822 11.41 3 C Group (LCD and its component manufacturing industry) 11,407,350 10.69 4 D Group (unclassified other electronic component industry) 8,021,559 7.52 5 E Group (real estate industry) 6,942,000 6.50 6 F Group (artificial fiber manufacturing industry) 6,481,182 6.07 7 G Group (wire and cable manufacturing industry) 6,031,928 5.65 8 H Group (electronic component industry) 5,795,046 5.43 9 I Group (textile industry) 5,658,850 5.30 10 J Group (petrochemical raw materials manufacturing

industry) 5,646,400 5.29

­ 100 ­

December 31, 2011

(In Thousands of New Taiwan Dollars, %)

Rank (Note 1) Group Name (Note 2)

Credit Extensions Balance (Note 3)

% of Net Asset Value

1 A Group (LCD and its component manufacturing) $ 14,548,498 15.80 2 B Group (LCD and its component manufacturing) 14,068,590 15.28 3 C Group (iron and steel smelting industry) 13,609,856 14.78 4 D Group (wire and cable manufacturing) 9,814,280 10.66 5 E Group (unclassified other electronic components) 8,774,598 9.53 6 F Group (petrochemical raw material manufacturing

industry) 8,243,929 8.95

7 G Group (real estate and manufacturing industry) 7,442,310 8.08 8 H Group (artificial fiber manufacturing industry) 6,595,769 7.16 9 I Group (real estate industry) 6,742,945 7.32 10 J Group (food industry) 6,120,406 6.65

Note 1: The list shows ranking by total amounts of credit, endorsement or other transactions (excluding those of government­owned or state­run enterprises). If the borrower is a member of a group enterprise, the total amount of credit, endorsement or other transactions of the entire group enterprise must be listed and disclosed by code and line of industry. The industry of the group enterprise should be presented as the industry of the member firm with the highest risk exposure. The lines of industry should be described in accordance with the Standard Industrial Classification System of the Republic of China published by the Directorate­General of Budget, Accounting and Statistics under the Executive Yuan.

Note 2: Group enterprise refers to a group of corporate entities as defined by Article 6 of the Supplementary Provisions to the Taiwan Stock Exchange Corporation Criteria for Review of Securities Listings.

Note 3: The total amount of credits, endorsements or other transactions is the sum of various loans (including import and export negotiations, discounted, overdrafts, unsecured and secured short­term loans, margin loans receivable, unsecured and secured medium­term loans, unsecured and secured long­term loans and overdue loans), exchange bills negotiated, accounts receivable factored without recourse, acceptances and guarantees.

c. Interest rate sensitivity information

Interest Rate Sensitivity December 31, 2012

(In Thousands of New Taiwan Dollars, %)

Items 1 to 90 Days 91 to 180 Days 181 Days to One Year Over One Year Total

Interest rate­sensitive assets $ 1,032,445,032 $ 85,738,834 $ 42,979,644 $ 61,690,192 $ 1,222,853,702 Interest rate­sensitive liabilities 396,600,808 504,042,331 103,978,232 82,535,155 1,087,156,526 Interest rate sensitivity gap 635,844,224 (418,303,497) (60,998,588) (20,844,963) 135,697,176 Net worth 98,821,821 Ratio of interest rate­sensitive assets to liabilities 112.48% Ratio of the interest rate sensitivity gap to net worth 137.31%

­ 101 ­

Interest Rate Sensitivity December 31, 2011

(In Thousands of New Taiwan Dollars, %)

Items 1 to 90 Days 91 to 180 Days 181 Days to One Year Over One Year Total

Interest rate­sensitive assets $ 1,009,491,572 $ 58,297,789 $ 36,646,798 $ 49,000,045 $ 1,153,436,204 Interest rate­sensitive liabilities 412,218,368 498,303,753 45,736,313 71,577,973 1,027,836,407 Interest rate sensitivity gap 597,273,204 (440,005,964) (9,089,515) (22,577,928) 125,599,797 Net worth 88,791,233 Ratio of interest rate­sensitive assets to liabilities 112.22% Ratio of the interest rate sensitivity gap to net worth 141.46%

Note 1: The above amounts included only New Taiwan dollar amounts held by the onshore branches of the Bank (i.e., excluding foreign currency). In compliance with the Central Bank’s supervision policies, the above data are prepared for off­site monitoring by the 15th of the next month.

Note 2: Interest­rate sensitive assets and liabilities mean the revenues or costs of interest­earning assets and interest­bearing liabilities affected by interest­rate changes.

Note 3: Interest rate sensitivity gap = Interest rate­sensitive assets ­ Interest rate­sensitive liabilities.

Note 4: Ratio of interest­rate sensitive assets to liabilities = Interest­rate sensitive assets/Interest­rate sensitive liabilities.

Interest Rate Sensitivity December 31, 2012

(In Thousands of U.S. Dollars, %)

Items 1 to 90 Days 91 to 180 Days 181 Days to One Year Over One Year Total

Interest rate­sensitive assets $ 5,613,964 $ 462,836 $ 368,224 $ 285,534 $ 6,730,558 Interest rate­sensitive liabilities 7,575,522 400,245 598,548 120,119 8,694,434 Interest rate sensitivity gap (1,961,558) 62,591 (230,324) 165,415 (1,963,876) Net worth 200,575 Ratio of interest rate­sensitive assets to liabilities 77.41% Ratio of the interest rate sensitivity gap to net worth (979.12%)

Interest Rate Sensitivity December 31, 2011

(In Thousands of U.S. Dollars, %)

Items 1 to 90 Days 91 to 180 Days 181 Days to One Year Over One Year Total

Interest rate­sensitive assets $ 4,964,129 $ 673,360 $ 305,982 $ 270,989 $ 6,214,460 Interest rate­sensitive liabilities 7,686,477 424,369 452,855 183,153 8,746,854 Interest rate sensitivity gap (2,722,348) 248,991 (146,873) 87,836 (2,532,394) Net worth 136,299 Ratio of interest rate­sensitive assets to liabilities 71.05% Ratio of the interest rate sensitivity gap to net worth (1,857.97%)

Note 1: The above amounts include only USD amounts held by the onshore branches, OBU and offshore branches of the Bank, and exclude contingent assets and contingent liabilities. In compliance with the Central Bank’s supervision policies, the above data are prepared for off­site monitoring by 15th of next month.

Note 2: Interest­rate sensitive assets and liabilities mean the revenues or costs of interest­earning assets and interest­bearing liabilities affected by interest­rate changes.

Note 3: Interest­rate sensitive gap = Interest­rate sensitive assets ­ Interest­rate sensitive liabilities.

­ 102 ­

Note 4: Ratio of interest­rate sensitive assets to liabilities = Interest­rate sensitive assets/Interest­rate sensitive liabilities.

d. Profitability (%)

Items 2012 2011 Before income tax 0.97 0.70 Return on total assets After income tax 0.84 0.61 Before income tax 15.15 11.86 Return on net worth After income tax 13.07 10.22

Profit margin 44.97 35.57

Note 1: Return on total assets = Income before (after) income tax/Average total assets

Note 2: Return on net worth = Income before (after) income tax/Average net worth

Note 3: Profit margin = Income after income tax/Total operating revenues

Note 4: Income before (after) income tax represents income for the years ended December 31, 2012 and 2011.

e. Maturity analysis of assets and liabilities

Maturity Analysis of Assets and Liabilities December 31, 2012

(In Thousands of New Taiwan Dollars)

The Amount for the Remaining Period to Maturity Total 1­30 Days 31­90 Days 91­180 Days 181­365 Days Over 1 Year Main capital inflow on maturity $ 1,611,809,768 $ 471,011,544 $ 179,256,536 $ 159,655,075 $ 158,864,445 $ 643,022,168

Main capital outflow on maturity 1,835,187,420 276,934,997 304,449,853 220,725,760 363,639,327 669,437,483

Gap (223,377,652) 194,076,547 (125,193,317) (61,070,685) (204,774,882) (26,415,315)

Maturity Analysis of Assets and Liabilities December 31, 2011

(In Thousands of New Taiwan Dollars)

The Amount for the Remaining Period to Maturity Total 1­30 Days 31­90 Days 91­180 Days 181­365 Days Over 1 Year

Main capital inflow on maturity $ 1,562,548,781 $ 416,814,348 $ 266,222,381 $ 128,197,185 $ 135,909,640 $ 615,405,227

Main capital outflow on maturity 1,789,624,010 299,665,211 305,701,293 246,032,205 302,647,145 635,578,156

Gap (227,075,229) 117,149,137 (39,478,912) (117,835,020) (166,737,505) (20,172,929)

Note: The above amounts included only New Taiwan dollar amounts held in the onshore branches of the Bank (i.e., excluding foreign currency).

Maturity Analysis of Assets and Liabilities December 31, 2012

(In Thousands of U.S. Dollars)

The Amount for the Remaining Period to Maturity Total 1­30 Days 31­90 Days 91­180 Days 181­365 Days Over 1 Year

Capital inflow on maturity $ 21,755,389 $ 6,892,800 $ 6,097,215 $ 3,177,972 $ 2,224,960 $ 3,362,442

Capital outflow on maturity 22,120,635 7,836,811 4,995,649 3,083,640 2,488,032 3,716,503

Gap (365,246) (944,011) 1,101,566 94,332 (263,072) (354,061)

­ 103 ­

Maturity Analysis of Assets and Liabilities December 31, 2011

(In Thousands of U.S. Dollars)

The Amount for the Remaining Period to Maturity Total 1­30 Days 31­90 Days 91­180 Days 181­365 Days Over 1 Year Capital inflow on maturity $ 20,273,813 $ 7,170,220 $ 6,334,348 $ 3,126,590 $ 1,726,530 $ 1,916,125

Capital outflow on maturity 20,308,544 7,369,345 6,113,193 2,681,646 1,944,550 2,199,810

Gap (34,731) (199,125) 221,155 444,944 (218,020) (283,685)

Note 1: The above amounts are book value held by the onshore branches and offshore banking unit of the Bank in U.S. dollars, without off­balance amounts (for example, the issuance of negotiable certificate of deposits, bonds or stocks).

Note 2: If the overseas assets are at least 10% of the total assets, there should be additional disclosures.

39. STATEMENT OF CAPITAL ADEQUACY

Statement of Capital Adequacy

(In Thousands of New Taiwan Dollars, %)

December 31, 2012 December 31, 2011 Year (Note 2) Analysis Consolidation Standalone Consolidation Standalone

Tier 1 capital $ 99,531,072 $ 99,498,204 $ 86,376,303 $ 86,332,043 Tier 2 capital 40,309,498 40,276,630 38,956,135 38,911,875 Tier 3 capital ­ ­ ­ ­

Eligible capital

Eligible capital 139,840,570 139,774,834 125,332,438 125,243,918 Standardized approach 892,026,552 892,021,138 826,878,444 826,872,794 Internal rating ­ based approach ­ ­ ­ ­ Credit risk

Securitization 3,121,321 3,121,321 2,415,295 2,415,295 Basic indicator approach ­ ­ ­ ­ Standardized approach/alternative standardized approach

46,832,138 46,836,188 42,505,300 42,454,263 Operational risk

Advanced measurement approach ­ ­ ­ ­

Standardized approach 63,593,913 63,593,913 57,193,000 57,193,000 Market risk Internal models approach ­ ­ ­ ­

Risk­weighted assets

Total risk­weighted assets 1,005,573,924 1,005,572,560 928,992,039 928,935,352 Capital adequacy rate 13.91% 13.90% 13.49% 13.48% Tier 1 risk ­ based capital ratio 9.90% 9.89% 9.30% 9.29% Tier 2 risk ­ based capital ratio 4.01% 4.01% 4.19% 4.19% Tier 3 risk ­ based capital ratio ­ ­ ­ ­ Ratios of common stockholders’ equity to total assets 3.58% 3.58% 3.40% 3.40% Leverage ratio 6.41% 6.41% 5.79% 5.79%

Note 1: The above table was prepared in accordance with the “Regulations Governing the Capital Adequacy Ratio of Banks” and related calculation tables.

Note 2: The formula:

1) Eligible capital = Tier 1 capital + Tier 2 capital + Tier 3 capital.

2) Total risk­weighted asset = Risk­weighted assets for credit risk + (Capital requirements for operational risk + Capital requirement for market risk) × 12.5.

3) Ratio of capital adequacy = Eligible capital/Total risk­weighted assets.

4) Tier 1 risk­based capital ratio = Tier 1 capital/Total risk­weighted assets.

­ 104 ­

5) Tier 2 risk­based capital ratio = Tier 2 capital/Total risk­weighted assets.

6) Tier 3 risk­based capital ratio = Tier 3 capital/Total risk­weighted assets.

7) Ratios of common stockholder’s equity to total assets = Common stock/Total assets.

8) Leverage ratio = Tier 1 capital/Adjusted average assets (Average assets minus goodwill, unamortized losses on sale of nonperforming loans and the amount deducted from Tier 1 capital according to “Regulations Governing the Capital Adequacy Ratio of Banks”)

40. OPERATING SEGMENT INFORMATION

a. Operating segment information

The segment information reported to chief of decision maker for the purposes of resource allocation and assessment of segment performance focuses on the nature of business operations and pretax profit or loss.

The accounting standards and policies mentioned in Note 2 to the financial statements apply to all the business segments. Under Statement of Financial Accounting Standard No. 41­ “operating segments,” the Bank reports the following:

1) Wealth Management Group: Responsible for wealth management and trust business, etc.

2) Consumer Finance Group: Responsible for consumer finance and lottery operations, etc.

3) Corporate Banking Group: Responsible for corporate and investment banking, foreign exchange, loan management and public treasury, etc.

4) Financial Markets Group: Responsible for financial markets, etc.

Information on business segment revenue, operating results and assets is as follows:

Year ended December 31, 2012 (In Thousands of New Taiwan Dollars)

Segment Item

Wealth Management

Consumer Finance

Corporate Banking

Financial Markets Others Total

Net interest $ 1,027,804 $ 5,515,469 $ 7,551,398 $ 883,188 $ 148,033 $ 15,125,892 External net interest (5,832,795) 9,344,128 9,759,458 1,433,594 421,507 15,125,892 Internal net interest 6,860,599 (3,828,659) (2,208,060) (550,406) (273,474) ­

Commission and fee revenues, net 6,046,025 827,802 1,208,294 (81,339) (5,917) 7,994,865

Other noninterest net revenues 562,283 86,270 2,169,769 3,167,383 (214,334) 5,771,371

Net revenues 7,636,112 6,429,541 10,929,461 3,969,232 (72,218) 28,892,128 Reversal of allowance (allowance) for bad debts 98 567,377 (19,403) (5,755) ­ 542,317

Operating expense (5,125,928) (2,771,240) (3,521,770) (819,535) (2,133,288) (14,371,761) Income before income tax 2,510,282 4,225,678 7,388,288 3,143,942 (2,205,506) 15,062,684

­ 105 ­

Segment

Item

Wealth Management

Consumer Finance

Corporate Banking

Financial Markets Others Total

Asset (Note) $ ­ $ ­ $ ­ $ ­ $ ­ $ ­

Note: The chief operating decision makers of the Bank rely mainly on the average amounts of loans and deposits during the period to assess the performance of the operating segments and make decisions. Thus, under an explanation issued by the Accounting Research and Development Foundation of the ROC, the measure of segment assets is zero.

Year Ended December 31, 2011

(In Thousands of New Taiwan Dollars)

Segment Item

Wealth Management

Consumer Finance

Corporate Banking

Financial Markets Others Total

Net interest $ 1,115,701 $ 5,128,742 $ 5,878,403 $ 683,571 $ 1,137,823 $ 13,944,240 External net interest (5,100,858) 8,655,411 8,021,132 1,076,555 1,292,000 13,944,240 Internal net interest 6,216,559 (3,526,669) (2,142,729) (392,984) (154,177) ­

Commission and fee revenues, net 5,960,581 861,371 1,405,379 (65,572) (17,677) 8,144,082

Other noninterest net revenues 529,851 (345,036) 1,479,885 1,754,240 (51,336) 3,367,604

Net revenues 7,606,133 5,645,077 8,763,667 2,372,239 1,068,810 25,455,926 Reversal of allowance (allowance) for bad debts 675 454,806 (1,515,902) 332 ­ (1,060,089)

Operating expense (5,005,626) (2,776,937) (3,293,720) (718,545) (2,095,826) (13,890,654) Income before income tax 2,601,182 3,322,946 3,954,045 1,654,026 (1,027,016) 10,505,183

Segment

Item

Wealth Management

Consumer Finance

Corporate Banking

Financial Markets Others Total

Asset (Note) $ ­ $ ­ $ ­ $ ­ $ ­ $ ­

Note: The chief operating decision makers of the Bank rely mainly on the average amounts of loans and deposits during the period to assess the performance of the operating segments and make decisions. Thus, under an explanation issued by the Accounting Research and Development Foundation of the ROC, the measure of segment assets is zero.

b. Geographical information

The Bank does not disclose geographical information since operating revenues generated from overseas branches are not 10% or more of the operating revenues of the head office.

­ 106 ­

41. PRE­DISCLOSURE FOR ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS

Under Rule No. 100000073410 issued by the Financial Supervisory Commission (FSC) on April 7, 2011, the Bank pre­discloses the following information on the adoption of International Financial Reporting Standards (IFRSs):

a. To comply with the Rule No. 100000073410 issued by FSC, the Bank has set up a project team and made a plan to adopt the IFRSs. Leading the implementation of this plan is the president of the Bank. The main contents of the plan, responsible departments and status of execution as of December 31, 2012 were as follows:

Contents of Plan Responsible Department

Status of Execution

1) Set up an interdepartmental IFRSs project team Project team Completed

2) Set up an IFRSs implementation plan Project team Completed

3) Identify the differences between ROC GAAP and IFRSs Project team Completed

4) Identify the consolidated entities under IFRSs Project team Completed

5) Evaluate impacts related to optional exemptions under IFRS based on IFRS 1 ­ “First­time Adoption of International Financial Reporting Standards

Project team Completed

6) Evaluate the possible impact of IFRSs on the information systems

Project team Completed

7) Consider the possible modification of internal control systems Project team Completed

8) Determine the IFRSs accounting policies to apply Project team Completed

9) Select from optional exemptions under IFRS 1 Project team Completed

10) Prepare the opening balance sheet in conformity with the IFRSs Project team Completed

11) Prepare comparative 2012 financial information based on IFRSs Project team In progress

12) Modify the related internal control system (including financial reporting process and information systems)

Project team Completed

b. As of December 31, 2012, the Bank and its subsidiary had assessed the significant differences, shown below, between the existing accounting policies and the accounting policies to be adopted under IFRSs (the assessments of related differences and effects are based on the consolidated financial statements of the Bank and Taipei Fubon Bank Life Insurance Agency Co., Ltd.).

­ 107 ­

1) Reconciliation of the consolidated balance sheet as of January 1, 2012

R.O.C. GAAP Affecting IFRSs Item Amount Amounts Amount Item Note

Assets Assets

Cash and cash equivalents $ 27,224,781 $ ­ $ 27,224,781 Cash and cash equivalents Due from the Central Bank of China and other banks

73,099,143 ­ 73,099,143 Due from the Central Bank of China and other banks

Financial assets at fair value through profit or loss; securities purchased under agreements to resell; available­for­sale financial assets; and held­to­maturity financial assets

365,505,684 1,453,552 366,959,236 Financial assets at fair value through profit or loss; securities purchased under agreements to resell; available­for­sale financial assets; and held­to­maturity financial assets

6) a), 6) b)

Receivables, net; discounts and loans, net 1,019,558,365 555,809 1,020,114,174 Receivables, net; current tax assets; discounts and loans, net

6) b)

Investments accounted for by the equity method

96,239 ­ 96,239 Investments accounted for by the equity method

Other financial assets, net 5,163,269 (357,346 ) 4,805,923 Other financial assets, net; hedged derivative financial assets

6) a)

Properties, net 11,222,754 1,789,575 13,012,329 Property and equipment, net; investment properties, net

6) c)

Intangible assets and other assets, net 4,110,227 (1,687,529 ) 2,422,698 Intangible assets; deferred income tax assets; other assets, net

6) c)

Total $ 1,505,980,462 $ 1,754,061 $ 1,507,734,523 Total

Liabilities Liabilities

Due to the Central Bank of China and other banks; and securities sold under agreements to repurchase

$ 85,262,864 $ ­ $ 85,262,864 Due to the Central Bank of China and other banks; and securities sold under agreements to repurchase

Financial liabilities at fair value through profit or loss

22,747,531 ­ 22,747,531 Financial liabilities at fair value through profit or loss

Payables 28,935,835 573,384 29,509,219 Payables and current tax liabilities 6) b), 6) f), 6) h) Deposits and remittances 1,183,392,509 ­ 1,183,392,509 Deposits and remittances Bank debentures 62,143,488 ­ 62,143,488 Bank debentures Other financial liabilities 26,702,456 ­ 26,702,456 Other financial liabilities and hedged

derivative financial liabilities Other liabilities 3,842,637 1,403,611 5,246,248 Provisions; deferred income tax liabilities;

other liabilities 6) a), 6) d), 6) e), 6) g), 6) h)

Total liabilities 1,413,027,320 1,976,995 1,415,004,315 Total liabilities

Stockholder’s equity Equity

Capital stock 51,092,871 ­ 51,092,871 Capital stock Capital surplus 13,613,508 ­ 13,613,508 Capital surplus Retained earnings 24,796,778 126,526 24,923,304 Retained earnings 6) i) Other stockholder’s equity 3,449,985 (349,460 ) 3,100,525 Other equity 6) a), 6) i) Total stockholder’s equity 92,953,142 (222,934 ) 92,730,208 Total equity

Total $ 1,505,980,462 $ 1,754,061 $ 1,507,734,523 Total

2) Reconciliation of the consolidated balance sheet as of December 31, 2012

R.O.C. GAAP Affecting IFRSs Item Amount Amounts Amount Item Note

Assets Assets

Cash and cash equivalents $ 31,820,002 $ ­ $ 31,820,002 Cash and cash equivalents Due from the Central Bank of China and other banks

70,851,850 ­ 70,851,850 Due from the Central Bank of China and other banks

Financial assets at fair value through profit or loss; securities purchased under agreements to resell; available­for­sale financial assets; and held­to­maturity financial assets

393,632,883 1,518,974 395,151,857 Financial assets at fair value through profit or loss; securities purchased under agreements to resell; available­for­sale financial assets; and held­to­maturity financial assets

6) a), 6) b)

Receivables, net; discounts and loans, net 1,086,610,328 105,273 1,086,715,601 Receivables, net; current tax assets; and discounts and loans, net

6) b)

Investments accounted for by the equity method

118,951 ­ 118,951 Investments accounted for by the equity method

Other financial assets, net 5,294,630 (357,346 ) 4,937,284 Other financial assets, net; and hedged derivative financial assets

6) a), 6) b)

Properties, net 11,213,627 1,825,001 13,038,628 Property and equipment, net; and investment properties, net

6) c)

Intangible assets and other assets, net 3,843,002 (1,531,854 ) 2,311,148 Intangible assets; deferred income tax assets; and other assets, net

6) c)

Total $ 1,603,385,273 $ 1,560,048 $ 1,604,945,321 Total

Liabilities Liabilities

Due to the Central Bank of China and other banks; and securities sold under agreements to repurchase

$ 96,114,274 $ ­ $ 96,114,274 Due to the Central Bank of China and other banks; and securities sold under agreements to repurchase

Financial liabilities at fair value through profit or loss

19,612,456 ­ 19,612,456 Financial liabilities at fair value through profit or loss

6) b)

Payables 34,401,302 124,426 34,525,728 Payables and current tax liabilities 6) b), 6) f), 6) h) Deposits and remittances 1,247,741,397 ­ 1,247,741,397 Deposits and remittances Bank debentures 66,929,382 ­ 66,929,382 Bank debentures Other financial liabilities 28,695,549 ­ 28,695,549 Other financial liabilities and hedged

derivative financial liabilities Other liabilities 3,152,685 1,740,927 4,893,612 Provisions; deferred income tax liabilities;

and other liabilities 6) a), 6) d), 6) e), 6) g), 6) h)

Total liabilities 1,496,647,045 1,865,353 1,498,512,398 Total liabilities

(Continued)

­ 108 ­

R.O.C. GAAP Affecting IFRSs Item Amount Amounts Amount Item Note

Stockholder’s equity Equity

Capital stock $ 57,430,769 $ ­ $ 57,430,769 Capital stock Capital surplus 13,613,508 ­ 13,613,508 Capital surplus Retained earnings 31,453,084 (162,919 ) 31,290,165 Retained earnings 6) i) Other stockholder’s equity 4,240,867 (142,386 ) 4,098,481 Other equity 6) a), 6) i) Total stockholder’s equity 106,738,228 (305,305 ) 106,432,923 Total equity

Total $ 1,603,385,273 $ 1,560,048 $ 1,604,945,321 Total

(Concluded)

3) Reconciliation of the consolidated statement of comprehensive income for the year ended December 31, 2012

R.O.C. GAAP Affecting IFRSs Item Amount Amounts Amount Item Note

Net revenues $ 28,899,334 $ 93,149 $ 28,992,483 Net revenues 6) e) Reversal of allowance for bad debts 542,317 ­ 542,317 Reversal of allowance for bad debts and

reserve for guarantee liabilities 6) e), 6) f), 6) g)

Operating expenses (14,376,079 ) (118,296 ) (14,494,375 ) Operating expenses Operating income before tax 15,065,572 (25,147 ) 15,040,425 Operating income before tax Income tax expense (2,071,368 ) 4,237 (2,067,131 ) Income tax expense Consolidated net income $ 12,994,204 $ (20,910 ) 12,973,294 Consolidated net income

729,421 Other comprehensive income (net of tax) 6) d), 6) e)

$ 13,702,715 Consolidated comprehensive income

4) Special reserve at the date of transition

Under Rule No. 1010012865 issued by the FSC on April 6, 2012 and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs,” on the first­time adoption of IFRSs, a company should appropriate to a special reserve an amount that was the same as these of unrealized revaluation increment and cumulative translation differences (gains) transferred to retained earnings as a result of the company’s use of exemptions under IFRS 1. However, at the date of transitions to IFRSs, if the increase in retained earnings that resulted from all IFRSs adjustments is not enough for this appropriation, only the increase in retained earnings that resulted from all IFRSs adjustments will be appropriated to special reserve. The special reserve appropriated may be reversed to retained earnings in proportion to the usage, disposal or reclassification of the related assets and thereafter distributed. The special reserve appropriated on the first­time adoption of IFRSs may be used to offset deficits in subsequent years. No appropriation of earnings shall be made until the special reserve is appropriated in subsequent years if the company has earnings and the original need to appropriate a special reserve is eliminated.

The increase in retained earnings that resulted from all IFRSs adjustments was not enough for this appropriation; therefore, the Bank and its subsidiary appropriated to the special reserve the amounted of $126,526 thousand, the increase in retained earnings that resulted from all IFRSs adjustments on transition to IFRSs.

5) IFRS 1 optional exemptions

IFRS 1 “First­time Adoption of International Financial Reporting Standards” states the procedures for an entity’s first­time adoption of IFRSs. Under IFRS 1, the Bank and its subsidiary should establish IFRSs accounting policies, which should be applied retrospectively to the opening balance sheet on the IFRS transition date (January 1, 2012), except for optional exemptions and mandatory exceptions to such retrospective application provided under IFRS 1. The main exemptions the Bank and its subsidiary adopted are summarized as follows:

­ 109 ­

Business combinations

The Bank and its subsidiary elected not to apply IFRS 3 “ Business Combination” retrospectively to business combinations that occurred before the date of transition to IFRSs. Thus, in the opening balance sheet on January 1, 2012, the amounts of goodwill generated from past business combinations and the related assets and liabilities and noncontrolling interest in the balance sheet remain the same as those as of December 31, 2011 under ROC GAAP.

The above exemptions also applied to the Bank and its subsidiary’s investment in their associates before the IFRS transition date.

Decommissioning liabilities included in the cost of property and equipment

The Bank and its subsidiary discounted the current estimate of decommissioning liabilities back to the date when they first arose, in accordance with International Accounting Standards (IAS) 37 “Provisions, Contingent Liabilities and Contingent Assets.” The resulting amount is then added to the asset cost, and the sum is used as the basis for calculating asset depreciation accumulated until the IFRS transition date.

Employee benefits

On the IFRS transition date, the Bank and its subsidiary recognized in retained earnings all unrecognized cumulative actuarial gain and loss related to employee benefit plans.

Designation of the recognized financial assets and liabilities

The Bank and its subsidiary designated a part of equity investments carried at cost as available­for­sale financial assets on the IFRS transition date.

Deemed cost

The Bank and its subsidiary elected to use ROC GAAP revaluations of the certain landholdings as deemed cost on the transition date of IFRSs.

6) Reconciliation of transition to IFRSs

The Bank and its subsidiary identified significant differences between the accounting policy under ROC GAAP and IFRS, which are summarized as follows:

a) Financial assets carried at cost under IFRSs

Under the amended Regulations Governing the Preparation of Financial Reports by Public Banks, a financial asset is considered as measured at cost if it meets the following two conditions: (i) It is an investment in an equity instrument with no quoted price in an active market or in a derivative instrument that is linked to this equity instrument, and the investment transaction is settled by the delivery of the financial instrument. (ii) It is a financial asset with a fair value that cannot be reliably measured.

As of December 31, 2012 and January 1, 2012, the financial assets carried at cost (included in other financial assets) and not meeting the above conditions amounted to $357,346 thousand and were reclassified to available­for­sale financial assets at the fair values of $1,209,219 thousand and $959,837 thousand, respectively, and also recognized were deferred income tax liabilities of $129,678 thousand and $87,369 thousand, respectively, and unrealized gains of $722,195 thousand and $515,122 thousand, respectively (net of tax, included in other items under stockholder’s equity) on financial instruments.

­ 110 ­

b) Regular way transactions

Under ROC GAAP, the Bank and its subsidiary uses settlement date accounting for bond transactions. Under IFRSs, bond transactions should be recorded using trade date accounting. Under IAS 39 “Financial Instruments: Recognition and Measurement”, as of December 31, 2012, financial assets at fair value through profit or loss and available­for­sale financial assets increased by $257,291 thousand, and $52,464 thousand, respectively, and receivables, and payables increased by $99,610 thousand, and $409,365 thousand, respectively. Under IAS No. 39, as of January 1, 2012, financial assets at fair value through profit or loss, receivables, and payables increased by $493,715 thousand; $457,892 thousand; and $951,607 thousand, respectively.

c) Investment properties

Under ROC GAAP, rental assets are recognized as other assets. Under IFRSs, assets held for earning rental income, or for capital appreciation, or for both purposes, are reclassified to investment properties. Thus, assets with the above purposes will be reclassified to investment properties.

Under IAS 40 “Investment Property,” the Bank and its subsidiary reclassified the assets as of December 31, 2012 and January 1, 2012, which amounted to $1,775,982 thousand and $1,734,175 thousand, respectively, from other assets to investment properties.

d) Employment benefit ­ actuarial gain and loss on the defined benefit plan

Under ROC GAAP, actuarial gains and losses are recognized under the corridor approach. These actuarial gains and losses are amortized on a straight line basis over average service years of the participating employees. However, under IAS No. 19 “Employee Benefits,” the Bank and its subsidiary elected to recognize actuarial gains and losses on defined benefit obligations immediately as other comprehensive income. The subsequent reclassification to earnings is not permitted.

The Bank and its subsidiary applied IAS 19 to reevaluate its defined benefit plan. The Company also adjusted the related accounts as of December 31, 2012 and January 1, 2012 in accordance with IFRS 1, which resulted in increases of $428,054 thousand and $213,680 thousand, respectively, in employee benefit liabilities, and a decrease of $134,894 thousand in comprehensive income for 2012 due to actuarial valuation loss.

e) Employment benefit ­ preferential interest on employees’ deposits

Based on Article 28 of the amended Regulations Governing the Preparation of Financial Reports by Public Banks (the “Regulations”), if the preferential deposit interest rate that the Bank has offered to employees as stated in the employment contract exceeds the market interest rate, the excess will be subject to IAS 19 “Employee Benefits” upon the employees’ retirement.

As of December 31, 2012 and January 1, 2012, the Bank and its subsidiary applied actuarial valuation to preferential interest on retired employees’ deposits in conformity with IAS 19 and the Regulations, and the employee benefits liability was thus adjusted for increases of $548,328 thousand and $396,377 thousand, respectively. For 2012, employment benefit expense was adjusted for a decrease of $9,061 thousand, and the interest expense of $94,527 thousand for employees’ deposits (including active and retired employees) was reclassified to employment benefit expense. Also, comprehensive income for 2012 decreased by $133,640 thousand because of actuarial valuation loss.

­ 111 ­

f) Employee benefits ­ short­term cumulative compensated absences

There is no definite accounting treatment under ROC GAAP for short­term cumulative compensated absences. The obligations on these absences are usually recognized when employees actually take their leaves. Under IFRSs, the Bank and its subsidiary should recognize the expected cost of compensated absences as the employees render services that increase their entitlement to these compensated absences.

As of December 31, 2012 and January 1, 2012, payables due to short­term cumulative compensated absences were adjusted for increases of $171,428 thousand and $134,386 thousand, respectively. For 2012, the employee benefit expense increased by $37,042 thousand.

g) Employee benefits ­ consolation payment

There are no provisions for consolation payment under ROC GAAP. Under IAS 19, the Bank should use actuarial reports to recognize employee benefits expense and liability.

As of December 31, 2012 and January 1, 2012, the liability due to consolation payment was adjusted for increases of $60,345 thousand and $69,398 thousand, respectively, and the employee benefits expense for 2012 decreased by $9,053 thousand.

h) Customer loyalty programs

The Bank and its subsidiary have a reward points program for credit card users. Under ROC GAAP, the liability from the bonus points earned by customers on the use of credit cards is estimated and then recorded as selling expenses as bonus points are granted. Under IFRIC (International Financial Reporting Interpretations Committee) 13 “Customer Loyalty Programmes,” the commission and fee revenues on the reward points in transaction should be deferred, and the deferred amounts should recognized as income when the reward points are actually exchanged or expire.

As of December 31, 2012 and January 1, 2012, the liabilities arising from the reward points (included in payables), which amounted to $456,367 thousand and $512,608 thousand, respectively, were reclassified to deferred income (included in other liabilities).

i) Reconciliation of retained earnings

The differences as of January 1, 2012 between the retained earnings under ROC GAAP and those under IFRSs are mostly due to the adoption of IFRS 1, which requires the making of certain adjustments on the IFRS transition date. Thus, retained earnings were adjusted for (a) an increase of $864,582 thousand due to unrealized revaluation increment of land, (b) a decrease of $610,289 thousand due to the effects of preferential interest on retired employees’ deposits, defined benefit plan, and consolation payment, and (c) a decrease of $111,540 thousand due to the effect of accrued compensated absence expenses based on the Labor Standards Law.

c. The Bank and its subsidiary has prepared the above assessments in compliance with (a) the 2010 version of the IFRSs translated by the ARDF and issued by the FSC and (b) the Regulations Governing the Preparation of Financial Reports by Public Banks amended and issued by the FSC on December 26, 2011. These assessments may be changed as the International Accounting Statements Board continues to issue or amend standards and as the FSC may issue new rules governing the adoption of IFRSs by domestic banks, bills finance companies, and financial holding companies. Actual accounting policies adopted under IFRSs in the future may differ from those contemplated during the assessments.

­ 112 ­

42. ADDITIONAL DISCLOSURES

Following are the additional disclosures on significant transactions and investees required by the Securities and Futures Bureau:

a. Financing provided: Not applicable

b. Endorsement/guarantee provided: Not applicable

c. Marketable securities held: Table 1 (attached)

d. Acquired and disposed of marketable securities at costs or prices of at least NT$300 million or 10% of the issued capital: Not applicable

e. Acquired and disposed of investee investment at costs or prices of at least NT$300 million or 10% of the issued capital: None

f. Acquisition of individual real estates at costs of at least NT$300 million or 10% of the issued capital: None

g. Disposal of individual real estates at prices of at least NT$300 million or 10% of the issued capital: None

h. Allowance for service fee to related parties amounting to at least NT$5 million: None

i. Receivables from related parties amounting to at least NT$300 million or 10% of the issued capital: Table 2 (attached)

j. Sale of non­performing loans: Table 3 (attached)

k. Financial asset securitization: None.

l. Other significant transactions which may affect the decision of financial statements users: None

m. The information of investees: Table 4 (attached)

n. Derivative financial transactions: Please refer to Notes 6 and 35.

Information related investment in Mainland China:

In order to extend their scope of services to Taiwanese enterprises and construct an integrated service platform for Greater China, a high­growth market, the Bank and its parent company, Fubon Financial Holdings (FFH), bought 51% and 29% equity, respectively, of First Sino Bank, one of the national banks of China. The price the 80% equity is approximately CNY5.65 billion. Shanghai Pudong Development Bank, the original stockholder, will continue holding the remaining 20% equity in First Sino Bank. The Bank and FFH will further strengthen cooperation with Shanghai Pudong Development Bank to promote the stable and rapid development of First Sino Bank. The resolution on this investment was approved by the meetings of the board of directors of the Bank. The application for the approval of this investment had been submitted to the Investment Commission of the Ministry of Economic Affairs and is now being reviewed by the Commission. In addition, the Bank, FFH and the Shanghai Pudong Development Bank will inject cash capital into First Sino Bank in accordance with the percentages of their respective shareholdings; thus, the Bank and FFH are going to invest a total of CNY0.8 billion. With the purchase price and cash capital injection, the Bank and FFH will jointly invest in First Sino Bank a total of CNY6.45 billion. This investment is subject to further approval by authorities of both sides of the Taiwan Strait.

­ 113 ­

TABLE 1

TAIPEI FUBON COMMERCIAL BANK CO., LTD. AND INVESTEES

MARKETABLE SECURITIES HELD DECEMBER 31, 2012 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

December 31, 2012

Holding Company Type and Issuer/Name of Marketable Securities Relationship with Holding Company

Financial Statement Account Shares/Units/ Par Value

(In Thousands) Carrying Value Percentage of

Ownership (%) Market Value or Net Asset Value

Note

Fubon Real Estate Beneficiary certificate Management Co., Ltd. Cathay No. 1 REIT ­ Available­for­sale financial assets 15,504 $ 267,599 ­ $ 267,599 Note

Fubon Chi­Hsiang ­ Available­for­sale financial assets 1,318 20,091 ­ 20,091 Note Cathay No. 2 REIT ­ Available­for­sale financial assets 800 12,528 ­ 12,528 Note

Note: Market prices were based on the net asset values as of December 31, 2012.

­ 114 ­

TABLE 2

TAIPEI FUBON COMMERCIAL BANK CO., LTD. AND INVESTEES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$300 MILLION OR 10% OF THE ISSUED CAPITAL DECEMBER 31, 2012 (In Thousands of New Taiwan Dollars)

Overdue Company Name Related Party Relationship Receivable

Ending Balance Turnover Rate Amount Action Taken

Amounts Received in Subsequent

Period

Allowance for Bad Debts

TAIPEI FUBON COMMERCIAL BANK Co., Ltd.

Fubon Financial Holdings Co., Ltd.

Parent company $ 509,226 (Note)

Not applicable None Not applicable None None

Taiwan Sport Lottery Co., Ltd.

Subsidiary of FHH 2,429,382 Not applicable None Not applicable None None

Fubon Insurance Co., Ltd.

Subsidiary of FHH 500,738 Not applicable None Not applicable None None

Note: The receivable resulted from linked­tax receivable.

­ 115 ­

TABLE 3

TAIPEI FUBON COMMERCIAL BANK CO., LTD. AND INVESTEES

SALE OF NONPERFORMING LOANS DECEMBER 31, 2012 (In Thousands of New Taiwan Dollars)

Transaction Date Counter Parties Loans Carrying Value Selling Price Gain or Loss on Disposal Attachment Relationship

May 15, 2012 Mega Asset Management Corporation Secured corporate loan $ ­ $ 42,512 $42,512 (Note) ­ ­

Note: The selling price in excess of the carrying value is recognized as the increase in allowance for credit losses.

­ 116 ­

TABLE 4

TAIPEI FUBON COMMERCIAL BANK CO., LTD.

INFORMATION ON INVESTEES DECEMBER 31, 2012 (In Thousands of New Taiwan Dollars)

Consolidated Investment Investment as of December 31, 2012 Total Investor Company Investee Company Location Main Businesses and Products Shares (Thousand)

Percentage of Ownership

Carrying Amount

Investment Gain (Loss) Shares

(Thousand) Imitated Shares Shares

(Thousand) Percentage of Ownership

Note

TAIPEI FUBON Financial­related COMMERCIAL BANK Co., Ltd.

TAIPEIFUBON BANK Life Insurance Agent Co., Ltd.

Taipei Life insurance agency 2,000 100.00 $ 65,736 $ 14,099 2,000 ­ 2,000 100.00 Note 1

Taipei Foreign Exchange Inc. Taipei Foreign exchange market maker 780 3.94 7,800 2,496 780 ­ 780 3.94 Note 2 Taiwan Futures Exchange Corporation Taipei Futures exchange and settlement 3,517 1.26 25,250 7,721 7,877 ­ 7,877 2.83 Note 2 Taiwan Asset Management Corporation Taipei Evaluating, auctioning, and managing for financial

institutions’ loan 30,000 1.70 300,000 22,782 30,000 ­ 30,000 1.70 Note 2

Taiwan Financial Asset Service Co., Ltd. Taipei Auction 10,000 5.88 100,000 1,000 10,000 ­ 10,000 5.88 Note 2 Mondex Taiwan Inc. Taipei Information process services ­ ­ ­ (396) ­ ­ ­ ­ Note 3 Financial Information Service Co., Ltd. Taipei Planning and developing the information system of

across banking institution and managing the information web system

10,238 2.28 91,000 26,618 10,238 ­ 10,238 2.28 Note 2

Sunny Asset Management Corporation Taipei Purchasing for financial institutions’ loan assets 503 8.39 5,031 906 503 ­ 503 8.39 Note 2 VISA Inc. USA Credit card agency 115 ­ 161,601 2,995 115 ­ 115 ­ Note 2 MasterCard Inc. USA Credit card agency 31 ­ 31,339 676 31 ­ 31 ­ Note 2

Non­financial related Fubon Real Estate Management Co., Ltd. Taipei Investigation, consultation, management and real estate

evaluation of construction plans 6,964 30.00 118,951 7,157 6,964 ­ 6,964 30.00 Note 1

Taipei Rapid Transit Corporation Taipei Public transportation 13 ­ 100 5 13 ­ 13 ­ Note 2 Taiwan Power Company Taipei Management of power facilities 374 ­ 3,252 ­ 374 ­ 374 ­ Easy Card Investment Holding Co., Ltd. Taipei Issue and research of IC card 3,927 4.91 47,500 8,821 3,927 ­ 3,927 4.91 Note 2 Taiwan High Speed Rail Corporation Taipei Management of high speed rail 50,694 0.48 164,406 ­ 382,659 ­ 382,659 3.63 Note 4 Taiwan Aerospace Corp. Taipei Aerospace industry 1,700 1.25 17,000 1,190 3,400 ­ 3,400 2.50 Note 2 E­Hsin International Corp. Miaoli Import and export trade business 7,200 2.40 ­ ­ 7,200 ­ 7,200 2.40 Synvision Technology Service Co. Taipei Operating steam power paint symbiotic 814 0.33 ­ ­ 814 ­ 814 0.33 Fuji Management Consulting Co., Ltd. Taipei Investment consulting and management consulting 113 5.67 ­ ­ 488 ­ 488 24.38 Ascentek Venture Capital Corp. Kaohsiung Venture capital investment 1,568 4.28 15,680 459 1,568 ­ 1,568 4.28 Note 2 P.K. Venture Capital Investment Corp. Taipei Venture capital investment 5,000 5.00 24,736 ­ 5,000 ­ 5,000 5.00 Apex Venture Capital Co., Ltd. Taipei Venture capital investment 2,009 4.67 7,159 (4,260) 4,018 ­ 4,018 9.34 Note 5 Pacific Venture Capital Co., Ltd. Taipei Venture capital investment 259 5.12 3,033 361 518 ­ 518 10.24 Note 2 Information Technology Total Service Corp.

Taipei Import and export trade business, domestic marketing 34 0.17 ­ 10 34 ­ 34 0.17 Note 2

Note 1: The investment gain (loss) was based on the investee’s audited financial statements for the year ended December 31, 2012.

Note 2: The investment gain (loss) was the cash dividends recognized for the year ended December 31, 2012.

Note 3: The liquidation process was completed in June of 2012 and liquidation loss was recognized.

Note 4: The percentage of ownership is based on the issued capital $105,322,243 thousand, which Taiwan High Speed Rail Corporation registered at Commercial Industrial Services Ministry of Economic Affairs.

Note 5: The investment gain (loss) was the impairment loss recognized for the year ended December 31, 2012.

­ 117 ­

TABLE 5

TAIPEI FUBON COMMERCIAL BANK CO., LTD.

OVERDUE LOANS AND RECEIVABLE DECEMBER 31, 2012 AND 2011 (In Thousands of New Taiwan Dollars, %)

December 31, 2012 December 31, 2011

Items Nonperforming Loan (NPL) (Note 1)

Total Loans NPL Ratio (Note 2)

Loan Loss Reserves (LLR)

Coverage Ratio (Note 3)

Nonperforming Loan (NPL) Total Loans NPL Ratio Loan Loss Reserves

(LLR) Coverage Ratio

Secured $ 721,657 $ 210,663,361 0.34% $ 3,537,604 490.21% $ 984,371 $ 216,262,029 0.46% $ 3,139,895 318.97% Corporate loan Unsecured 387,306 442,514,363 0.09% 2,834,859 731.94% 1,369,071 388,851,686 0.35% 2,950,070 215.48% Mortgage (Note 4) 106,568 336,467,164 0.03% 2,243,673 2,105.39% 111,329 315,006,418 0.04% 2,022,408 1,816.60% Cash card 13 25,571 0.05% 482 3,707.69% ­ 38,388 ­ 719 ­ Micro credit (Note 5) 23,353 18,614,445 0.13% 124,127 531.52% 8,103 15,144,720 0.05% 97,232 1,199.90%

Secured 93 270,837 0.03% 1,452 1,561.29% 49 284,456 0.02% 1,432 2,922.98% Consumer loan

Other (Note 6) Unsecured 43,270 27,304,763 0.16% 182,078 420.80% 23,569 25,729,810 0.09% 165,191 700.88% Total 1,282,260 1,035,860,504 0.12% 8,924,275 695.98% 2,496,492 961,317,507 0.26% 8,376,947 335.55%

Overdue Receivable Account Receivable Delinquency Ratio Allowance for Credit Losses Coverage Ratio Overdue Receivable Account Receivable Delinquency Ratio Allowance for Credit

Losses Coverage Ratio

Credit card 21,284 21,835,640 0.10% 459,978 2,161.14% 17,541 22,595,181 0.08% 589,816 3,362.50% Accounts receivable ­ factoring with no recourse (Note 7) ­ 26,766,297 ­ 136,666 ­ ­ 33,137,541 ­ 168,513 ­ Excluded NPL as a result of debt consultation and loan agreements (Note 8) 591,963 850,218

Excluded overdue receivables as a result of debt consultation and loan agreements (Note 8) 663,038 900,902

Excluded NPL as a result of consumer debt clearance (Note 9) 204,624 159,075 Excluded overdue receivables as a result of consumer debt clearance (Note 9) 643,085 672,870

Note 1: For loans, overdue loans represent the amounts of reported overdue loans as defined in the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Nonperforming/Non­accrual Loans” issued by the Ministry of Finance. For credit cards, overdue receivables are under the Banking Bureau’s regulations dated July 6, 2005 (Ref. No. 0944000378).

Note 2: For loan, NPL ratio = NPL/Total loans. For credit cards, delinquency ratio = Overdue receivable/Account receivable.

Note 3: For loans, coverage ratio = LLR/NPL For credit cards, coverage ratio = Allowance for credit losses/Overdue receivables.

Note 4: Household mortgage refers to loans granted for the purchase, construction or repair of the residence owned by the borrower or the borrower’s spouse or children and the residence is used to secure the loan fully.

Note 5: Micro credits are under the Banking Bureau’s regulations dated December 19, 2005 (Ref. No. 09440010950).

Note 6: Other consumer loans refer to secured or unsecured loans excluding mortgages, cash cards, micro credits, and credit cards.

Note 7: Under the Banking Bureau’s requirements in its letter dated July 19, 2005 (Ref. No. 094000494), an allowance for bad debts should be recognized once no compensation is obtained from a factoring or insurance company for accounts receivable­factoring with no recourse.

Note 8: The disclosure of excluded NPLs and excluded overdue receivables resulting from debt consultation and loan agreement is based on the Banking Bureau’s requirement dated April 25, 2006 (Ref. No. 09510001270).

Note 9: The disclosure of excluded NPLs and excluded overdue receivables resulting from consumer debt clearance is based on the Banking Bureau’s requirement dated September 15, 2008 (Ref. No. 09700318940).