ANNUAL REPORT 2016 E.SUN FHC 2884 www.esunfhc.com.tw mops.twse.com.tw Printing Date: 2017.3.30 WorldReginfo - 2cb0bccc-ccf8-4b71-987d-e33fbd562ab7 E.SUN Spokesman Deputy Spokesman Name: Joseph N. C. Huang Name: Magi Chen Position: President Position: CFO Telephone: +886 2 2175 1313 Telephone: +886 2 2175 1313 email: [email protected] email: [email protected] E.SUN Financial Holding Company, Ltd and subsidiaries Name Address Telephone Website E.SUN Financial Holding Company, Ltd. 14F, No.117 & 1F, No.115, Sec.3, Minsheng E. Rd., Songshan District, Taipei, Taiwan +886 2 2175 1313 www.esunfhc.com.tw E.SUN Commercial Bank, Ltd. No.115 & No.117, Sec. 3, Minsheng E. Rd., Songshan District, Taipei, Taiwan +886 2 2175 1313 www.esunbank.com.tw E.SUN Securities Co., Ltd. 6F, No.158, Sec. 3, Minsheng E. Rd., Songshan District, Taipei, Taiwan +886 2 5556 1313 www.esunsec.com.tw E.SUN Venture Capital Co., Ltd. 6F, No.115, Sec. 3, Minsheng E. Rd., Songshan District, Taipei, Taiwan +886 2 2719 6613 Stock Transfer and Service Contact Name: Stock Service Department, General Affairs Division, E.SUN FHC Address: 1F, No.115, Sec. 3, Minsheng E. Rd., Songshan District Taipei , Taiwan, R.O.C. Website: www.esunfhc.com.tw Telephone: +886 2 2719 1313 Rating Agency Name: Moody's Investors Service Inc. Address: 7 World Trade Center 250 Greenwich Street, New York, NY 10007, U.S.A. Telehone: 1 212 553 0300 Auditing Certified Public Accountant Information of Overseas Depositary Receipt Certified Public Accountant:Lai Kwan-Chung, Huang Jui-chan Global Depositary Recipt Accounting Firm: Deloitte Taiwan Place of Trading: Luxembourg Stock Exchange Address: 12th FL., No. 156, Sec. 3, MinSheng East Road, Songshan District, Website: http://www.bourse.lu Taipei, Taiwan, R.O. C. Website: www.deloitte.com.tw Telephone: +886 2 2545 9988 WorldReginfo - 2cb0bccc-ccf8-4b71-987d-e33fbd562ab7 E.SUN FHC 15th WorldReginfo - 2cb0bccc-ccf8-4b71-987d-e33fbd562ab7 E.SUN FHC ANNUAL REPORT 201 REPORT ANNUAL E.SUN FHC 6 Taiwan scenery-Yushan Kuroki Kuniaki Possession of E.SUN WorldReginfo - 2cb0bccc-ccf8-4b71-987d-e33fbd562ab7 CONTENTS I. Letter to the Shareholders 1 II. Company Profile 5 1. Introduction 6 2. E.SUN's Glory 9 III. Corporate Governance 11 1. Organization Chart 12 2. Corporate Structure of E.SUN Financial Holding Company, Ltd. 12 3. Directors, Independent Directors and Excutive Officers 13 4. Implement of Corporate Governance 18 5. Information on Fees for CPAs 32 6. Information on Changing CPAs 32 7. Where the Company’s chairman, president, and managers responsible for financial or accounting affairs have within the last year held office in the 201 REPORT ANNUAL E.SUN FHC Company’s CPA firm or any of its affiliated enterprises 32 IV. Capital Overview 33 1. Capital and Dividend 34 2. Global Depository Receipt 37 3. Merger and Acquisition 38 4. Capital Utilization Plans 38 V. Business Operation 39 1. Business Scope 40 2. Business Plan 42 3. Industry overview 45 6 4. Research and Development 47 5. Cross Selling Synergy 50 6. Market & Business Overview 50 7. Human Resources 51 8. Information Equipment 53 9. Corporate responsibility and ethical conduct 55 10. Environmental protection expenditure information 56 VI. Financial Information 57 VII. Risk Management 67 1.Risk Management 68 2. Crisis Handling Mechanism 74 3. Disclosure of Evaluation for Financial Products 74 4. Other Important Issues 74 Appendix 75 WorldReginfo - 2cb0bccc-ccf8-4b71-987d-e33fbd562ab7 I. Letter to the Shareholders Dear Shareholders: The year 2016 saw many challenges and changes across the world’s political and economic landscapes: the U.S. presidential election, the U.K.’s referendum on leaving the European Union, protectionism on the rise, and clashes between forces in favor of and against globalization. All these not only impacted the strategic deployment of countries and their competition and cooperation in regional economies but also brought financial markets more uncertainties. Meanwhile, such pressing issues as Fintech, information security, and cross-border control of E.SUN FHC ANNUAL REPORT 201 REPORT ANNUAL E.SUN FHC money laundering put financial institutions to test; they were called upon to prove themselves capable of securing an equilibrium in financial innovation and in recognition of its long-time dedication to sustainable risk management while staying on the growth track. development and sound business. We are keenly aware that such a time of challenges In terms of financial gauges, net income set another and changes is no less than a critical juncture for record high of NT$13.135 billion, EPS was NT$1.50 businesses to build on their core value and secure their per share. The ROE and ROA came in at 10.35% and place in the future. 0.71% respectively while the capital adequacy ratio at E.SUN Bank, E.SUN Financial Holding Co., Ltd.’s 137.29%. Meanwhile, E.SUN Bank was able to keep up 6 major subsidiary, was established in 1992. Since its its asset quality as well. The NPL ratio of 0.19% was inception, E.SUN Bank has overcome many daunting supplemented by a 629.84% loan loss coverage ratio. challenges over a quarter century. During this time, we When it comes to credit ratings, Moody’s continued to have never strayed away from our vision and beliefs. assign E.SUN FHC its long/short-term foreign-currency Named after Taiwan’s highest peak Yushan, or Mt. Yu, deposit ratings of Baa1/P-2 while keeping intact those E.SUN Bank is committed to standing by the for E.SUN Bank at A3/P-2. Both were assigned a stable principles of integrity and honesty while striving for a outlook. fresh, professional brand image, thereby making the At the end of 2016, E.SUN FHC’s total assets best bank in Taiwan. amounted to NT$1.88 trillion; outstanding balance of 2016—A Solid Overall Performance loans, NT$1.13 trillion; and outstanding balance of all E.SUN FHC delivered further growth across all deposits, NT$1.56 trillion, including NT$705.8 billion business lines in 2016. This performance did not go in demand deposits and NT$413.5 billion in foreign unnoticed. While the Company made its way into the currency deposits. Net interest income and fee income Dow Jones Sustainability Index (DJSI) for a third also grew steadily, by 6.36% to NT$18.585 billion and straight year, three international financial magazines— by 12.04% to NT$15.549 billion respectively. Likewise, Asiamoney, The Asset, and The Banker— wealth management and credit card businesses kept up unanimously rated E.SUN Bank as Taiwan’s best bank growth momentum. Fee income from wealth 1 WorldReginfo - 2cb0bccc-ccf8-4b71-987d-e33fbd562ab7 management and credit card services increased by wider range of Bank 3.0 services: e-Click Loan 12.4% and 20.8% to NT$8.219 billion and NT$4.244 Application, online mortgages, online forex services, billion respectively. Separately, the Bank saw its and digital wealth management. As far as channel cardholder spending expand by 18.9% to NT$300.1 consolidation is concerned, the Bank took the lead to billion, recording the highest growth rate among combine digital technology and the arts as it set up Taiwan’s top 10 card issuers for a second straight year. digital flagship branches in northern, central, and In terms of SME loans, E.SUN Bank not only remained southern parts of Taiwan to provide customers with the biggest lender among Taiwan’s privately run banks O2O financial services that come with a distinctly but also emerged as a recipient of the SME Credit human touch and integrate the physical and virtual. Guarantee Partner Awards for the 11th consecutive E.SUN’s accomplishments were recognized and year, a record unparalleled by any other local peer. received the Digital Champion in Asiapac Award for Fintech has progressed rapidly. To stay ahead of the two consecutive years in Gartner’s innovation award. game, E.SUN has continued investing in financial When it comes to expanding across Asia, E.SUN innovation in the form of payment services, smart Bank now operates 24 outlets in eight countries and 2016 REPORT ANNUAL E.SUN FHC banking, and channel consolidation so that it can regions, including the Yangon Branch in Myanmar— provide customers with personalized services and make the only one established by any Taiwanese bank to digital banking and the good life it brings readily date; the China subsidiary—the first instance of any accessible to everyone. In terms of payment banking, Taiwanese bank branch securing subsidiary status on E.SUN Bank took the lead to introduce E.SUN Wallet, the mainland; and the Sydney Branch in Australia. Taiwan’s only cellular credit card with both Host Card All these go a long way toward building a well- Emulation (HCE) and QR code capabilities. When it rounded financial platform in Asia that promises to comes to smart banking, E.SUN Bank draws on big provide customers with a full spectrum of cross- data and digital platforms as its core for developing a border services. Key Gauges for E.SUN FHC Unit: NT$ millions Indicator Item 2016/12 2015/12 E.SUN FHC 1,884,300 1,775,284 E.SUN Bank (consolidated) 1,870,131 1,760,401 Total Assets E.SUN Securities 11,504 11,254 E.SUN Insurance Broker - 1,281 E.SUN Venture Capital 3,657 3,839 E.SUN FHC Book Value Per Share (NT$) 14.66 15.21 Key Financial Ratios Double Leverage Ratio 104.80% 104.29% E.SUN FHC CAR 137.29% 141.73% E.SUN Bank’s Domestic Branches 137 136 Subsidiaries: E.SUN(China), UCB, Cambodian Physical Channels Branches: Los Angeles, Hong Kong, Singapore, Vietnam, Australia, Myanmar E.SUN Bank’s Overseas Outlets Representative