WorldReginfo - be29c781-e83a-4b2c-9c44-7312ba52e711 I. Names, titles, phone numbers, and e-mail III. Name, address, website, and phone number of the addresses of spokesman and acting spokesman institution for handling stock register Spokesman: Welch Lin Name: Stock Affairs Agency Department of Taishin International Title: Chief Financial Officer and Senior Vice President Commercial Bank Tel: 886-2- 5576-1888 Address: B1, No. 96, Sec. 1, Jianguo N. Rd., Jhongshan Dist., E-mail address: [email protected] Taipei City 104, Taiwan (R.O.C.) Tel: 886-2-2504-8125 Acting spokesman: David Lee Website: http://www.taishinbank.com.tw Title: Vice President Tel: 886-2-5576-2112 IV. Names, addresses, and phone numbers of credit E-mail address: [email protected] rating institutions Name: Fitch Ratings II. Addresses and phone number of Taishin Financial Address: Rm. 1306, 13F, No.205, Dunhua N. Rd., Songshan Holding Company and Subsidiaries Dist., Taipei City 105, Taiwan (R.O.C.) ■ Taishin Financial Holding Co., Ltd. Website: http://www.fitchratings.com.tw Address: 9F, 12F, 13F, 16F, 20F~23F, No.118, Sec. 4, Ren’ai Tel: 886-2-8175-7600 Rd., Da’an Dist., Taipei City 106, Taiwan (R.O.C.) Tel: 886-2-2326-8888 Name: Taiwan Ratings Website: http://www.taishinholdings.com.tw Address: 49F, Taipei, No.7, Sec. 5, Xinyi Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.) ■ Taishin International Bank Co., Ltd. Tel: 886-2-8722-5800 Address: B1&1F, No.44, Sec. 2, Jhongshan N. Rd., Jhongshan Website: http://www.taiwanratings.com Dist., Taipei City 104, Taiwan (R.O.C.) Tel: 886-2-2568-3988 V. Name, address, website, and phone number of Website: http://www.taishinbank.com.tw certified public accountant and accounting firm for ■ Taishin Securities Co., Ltd. the financial statement in the recent year Address: 2F, No.44, Sec. 2, Jhongshan N. Rd., Jhongshan CPAs: Tza Li Gung, Kwan-Chung Lai Dist., Taipei City 104, Taiwan (R.O.C.) Name of accounting firm: Deloitte & Touche Tel: 886-2-2181-5888 Address: 12F, No. 156, Sec. 3, Minsheng E. Rd., Songshan Dist., Website: http://www.tssco.com.tw Taipei City 105, Taiwan (R.O.C.) Tel: 886-2-2545-9988 ■ Taishin Asset Management Co., Ltd. Website: http://www.deloitte.com.tw Address: 2F-3, No.9, Dehui St., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.) Tel: 886-2-2596-9388 VI. Names of Exchanges Where Overseas Securities Website: None. Are Listed and Methods of Inquiry: None. ■ Taishin Venture Capital Investment Co., Ltd. Address: 18F, No.118, Sec. 4, Ren’ai Rd., Da-an Dist., Taipei City 106, Taiwan (R.O.C.) Tel: 886-2-2706-6919 Website: None. ■ Taishin Securities Investment Trust Co., Ltd. Address: 13F, No.96, Sec. 1, Jianguo N. Rd., Jhongshan Dist., Taipei City 104, Taiwan (R.O.C.) Tel: 886-2-2501-1000 Website: http://www.tsit.com.tw ■ Taishin Securities Investment Advisory Co., Ltd. Address: 16F, No.118, Sec. 4, Ren’ai Rd., Da-an Dist., Taipei City 106, Taiwan (R.O.C.) Tel: 886-2-5589-9558 Website: http://www.tss-c.com.tw WorldReginfo - be29c781-e83a-4b2c-9c44-7312ba52e711 CONTENTS 01 Message to Shareholders 4 02 Brief Introduction to the Financial Holding Company 10 03 Corporate Governance 15 04 Fund-Raising Activities 72 05 Operating Status 89 06 Financial Status 136 07 Financial Status, Review of Business Performance, 310 and Risk Management 08 Special Notes 329 09 Items with major effect on shareholders’ benefits or 336 securities prices in 2016 and as of the date for the publication of the annual report WorldReginfo - be29c781-e83a-4b2c-9c44-7312ba52e711 WorldReginfo - be29c781-e83a-4b2c-9c44-7312ba52e711 01 Message to Shareholders WorldReginfo - be29c781-e83a-4b2c-9c44-7312ba52e711 I. Message to Shareholders Dear Shareholders, The global economy showed signs of a turnaround in 2016. Economic growth in the first half of 2016 was hampered by slowing international trade and diminishing effects of QE programs in major economies. Fortunately, the global economy showed positive signs in the second half of the year when the U.S. economy recovered, global commodity prices rose, and economic conditions improved in the eurozone. The annual GDP growth was 1.6% in the United States, 1.7% in the eurozone, and 1% in Japan. The annual GDP growth in China was 6.7%. Most countries had underperformed compared to last year. Recovery is slowly taking place around the world while many challenges remain. Since the U.S. Federal Reserve started raising interest rates in late 2015, there has not been as many rate increases as expected. The market is watching closely to see if the Fed will pick up the pace. Meanwhile, China’s gentle push for economic transformation with an emphasis on deleveraging and risk prevention continues with unabated momentum. Furthermore, the United Kingdom’s Brexit vote and Trump winning the U.S. presidential election are sending shock waves through the political establishments. International markets reacted with short term shocks but managed to recover. However, everyone is still cautiously waiting to see the impact of rising anti-globalization sentiments and whether Asia exports would continue to grow in the face of China-U.S. trade issues. Taiwan, also following the ups and downs of the global economy, appeared to be improving from the worst in 2016 with the second half of the year outperforming the first half. As of December 2016, the domestic economy flashed the 6th straight green light, signaling a recovery. The economic growth for the year was 1.5%. The latest in the string of rate cuts by the central bank in an attempt to stimulate the economy took place in June 2016. There had not been more since the effects started to show. The stock market, in response to the economic factors, fell before rising again, and closed at 9,254 at the end of the year, 11% up from 8,338 in the previous year. Regarding the financial sector in Taiwan, RMB depreciation and penalties imposed by the U.S. government on one of Taiwan’s state owned banks led to smaller profits for all overseas branches of Taiwan’s state owned banks and OBUs in 2016. The earnings before tax of domestic fell to NT$300.1 billion, a decrease of 6% compared to the previous year, while the return on assets (ROA) and the return on equity (ROE) were 0.68% and 9.24%, respectively. While domestic banks kept asset quality at the same level, the overall average nonperforming loan ratio at the end of 2016 was 0.27%, and the coverage ratio was 503%. We followed our operating budgets closely in 2016. The core business grew at a steady pace, leading to consistent profit growth. The net profit after tax totaled NT$11.4 billion. This represented an EPS of NT$1.14, an ROE of 9.58%, and net worth per ordinary share of NT$12.21. To build up the working capital and strengthen the capital structure, we raised NT$25.0 billion by issuing Class E preferred shares in December 2016. The capital adequacy ratio was 128.5% and the double leverage ratio 110.9% at the end of 2016, reflecting a healthy capital structure. In October 2016, we were granted global long- and short-term credit ratings of BBB and F3, respectively, in a report of the international credit rating agency Fitch Rating. The national long- and short-term credit ratings were A+(twn) and F1(twn), respectively, and the outlook was “Stable”. In November 2016, we were granted international long- and short- term ratings of BBB- and A-3, respectively, and domestic long- and short-term ratings of twA and twA-1, respectively, in a report of the credit rating agency Taiwan Ratings. 4 WorldReginfo - be29c781-e83a-4b2c-9c44-7312ba52e711 Message to Shareholders 01 With respect to overseas expansion, the Tokyo Branch in Japan of our subsidiary Taishin Bank celebrated its grand opening in October 2016. It is the first branch in an OECD member country. It is also Taishin Bank’s third overseas branch after the Hong Kong Branch and the Singapore Branch. Looking forward, the Brisbane Branch in Australia is expected to open in 2017, and the application for the Long An Branch in Vietnam has been submitted to the local authorities. With respect to local offices, besides the Ho Chi Minh City office in Vietnam, the Yangon office in Myanmar was established in January 2016. Furthermore, we have established financial leasing companies in Nanjing and Tianjin to provide leasing, trade, and insurance agency services across China. In the future, we will continue to expand our overseas presence, offering more comprehensive and higher quality international financial services to customers. With respect to securities services, our subsidiary Taishin Securities has finalized a contract with Ta Chong Securities. The two parties have announced together their upcoming merger in March 2017. Overall performance of the securities markets in Taiwan has not been favorable to securities dealers in the last few years. In particular, low volume forces brokers to try to increase their market shares in order to achieve economies of scale. While Taishin Securities has increased its market share in brokerage services from 0.02% to 0.5% or higher over the last few years, it is still a long way from becoming a largest securities dealer. Once it completes the acquisition of Ta Chong Securities, Taishin Securities may be able to increase its market share in brokerage services to more than 1% and the net value to more than NT$7.0 billion. The scale will make it a competitive medium sized securities dealer able to provide futures services and sub-brokerage services.