Ⅰ . Names, titles, phone numbers, and e-mail addresses of spokesman and acting spokesman Name of spokesman : Spike Wu Title : Chief Executive Officer, Retail Banking Group Tel : 886-2- 5576-3701 E-mail address : [email protected] Acting spokesman : Wilson Chou Title : Senior Vice President Tel : 886-2-5576-2559 E-mail address : [email protected] Ⅱ . Addresses and phone number of headquarters and branches Headquarters : 1F, and B1, No. 44, Jhongshan N. Rd., Sec. 2, Jhongshan District, Taipei, Taiwan Tel : 886-2-2568-3988 Addresses and telephones of branches : see the "domestic and overseas business points" section of the annual report. Ⅲ . Name, address, website, and phone number of the institution for handling stock register Name : Stock Affairs Agency Department of Taishin International Commercial Bank Address : B1, No. 96, Jianguo N. Rd., Sec. 1, Jhongshan Dist., Taipei, Taiwan Website : http://www.taishinbank.com.tw Tel : 886-2-2504-8125 Ⅳ . Names, addresses, and phone numbers of credit rating institutions Name : Fitch Ratings Address : Room 1306, 13F, No. 205, Dunhua N. Rd., Songshan Dist., Taipei, Taiwan Tel : 886-2-8175-7600 Name : Taiwan Ratings Address : 49F, Taipei 101 Tower, No. 7, Xinyi Rd., Sec. 5, Taipei, Taiwan Tel : 886-2-8722-5800 Ⅴ . Name, address, website, and phone number of certified public accountant and accounting firm for the financial statement in the recent year CPAs : Peter Tsai, Yang Qinzhen Name of accounting firm: Deloitte & Touche Tax Consulting Co., Ltd. Address : 12F, No. 156, Minsheng E. Rd., Sec. 3, Taipei, Taiwan Website : http://www.deloitte.com.tw Tel : 886-2-2545-9988 Ⅵ . Name of exchange for trading in overseas listed securities and information inquiry for the securities : None. Ⅶ . Company website : http: //www.taishinbank.com.tw Contents Rating Date Ratings Agency I. Letter to Shareholders 2 II. Brief Introduction of The Bank 5 Issuer L-Term BBB+ Issuer S-Term F2 III. Corporate Governance Report 7 Fitch Outlook Stable 2013/10/08 IV. Fund Raising Activities 56 Ratings Support 3 National L-Term AA- (twn) V. Business Status 67 National S-Term F1+ (twn) VI. Financial Status 87 VII. Review and Analysis of Financial Status and 101 Issuer L-Term BBB Business Performance and Risk-Management Items Issuer S-Term A-2 Taiwan VIII.Special Notes 114 2013/11/19 Outlook Stable Ratings National L-Term twA+ IX. Directory of Head Office & Branches 122 National S-Term twA-1 X. Notes To Financial Statements 127 I. Letter to Shareholders Although the global economy did not perform to expectations in 2013, the effects of the recent financial crisis finally began to abate. As economic activity recovered in the U.S. and EU, demand for imported goods increased, allowing Taiwan, South Korea and Singapore to enjoy export volume growth of yoy+ 1.4%, 2.1% and 0.6%, respectively. However, after the U.S. announced its intention to scale back QE in mid-2013, there has been a rearrangement of capital that has posed a challenge to stock market and currency performance in emerging Asian economies. This, coupled with falling capital expenditure, has caused uncertainty in the growth of Asian economies. In recent years, the Chinese economy has undergone transformations characterized by slower export and production growth, rising wages, and diminishing GDP growth of around 7%-8%. This has led to calls for structural reforms to break through the prevailing bottlenecks. During the Third Plenary Session of the 18th Central Committee, it was announced that China will adopt a more liberal financial system and shift its focus towards the service industry with the creation of the Shanghai Pilot Free Trade Zone, while in the meantime introduce greater flexibility into its currency system and relax controls on its capital accounts for more rapid integration with regional economies. In an attempt to promote RMB as a major currency, China has also agreed for offshore RMB business centers to be established in Taiwan, Singapore, Frankfurt, London and other locations. Taiwan is an integral part of the global economy; while it is benefiting from the world-wide recovery, it is also prone to the uncertainties of the QE scale back in the U.S. and the overall slowdown of Asian economies. In 2013, Taiwan produced marginal growth of 2.11% that was slightly higher than the 1.48% registered in 2012. In order to strengthen the nation's economic foundations, the government has been actively negotiating a service trade agreement with China and exploring opportunities to collaborate with regional economies. Meanwhile, Free Economic Pilot Zones (FEPZ) are being planned as a means of attracting foreign investment. Taiwan's stock market index (TAIEX) closed at 8,612 at the end of 2013, representing a gain of 11.9%, partly due to optimism towards the government's policies. With further cross-strait banking deregulation underway and outstanding asset quality in support, local banks have seen their profits grow in general. In 2013, local banks as a whole produced cumulative pre-tax earnings of NTD257.6 billion, and average ROA of 0.68% with 10.26% ROE. Average overdue loan ratio at the end of 2013 was a mere 0.38% with a coverage ratio of 319.2%. In response to government calls for the expansion of banking services into Asian and global markets, local banks have taken greater initiatives in the exploration of overseas business as well as merger opportunities. In terms of business performance, the bank delivered after-tax earnings totaling NT$12.181 billion in 2013, representing 40.3% YoY growth, and after-tax EPS of NT$2.52. Meanwhile, the bank has maintained a healthy capital structure with a capital adequacy ratio of 10.94% at the end of 2013. With regards to credit rating, Fitch Ratings gave Taishin Bank an international long-term rating of BBB+, a domestic long-term rating of AA-(twn), and a "Stable" outlook in October 2013, while Taiwan Ratings awarded Taishin Bank an international long-term rating of BBB, a domestic long-term rating of twA+, and a "Stable" outlook in November 2013. 2 Letter to Shareholders ｜ 2013 ANNUAL REPORT 01 In terms of global presence, the bank currently plans to base its operations mainly in China and the Pan Pacific region. In addition to the existing Hong Kong Branch and Vietnam Office, the bank is also applying to set up branches in Brisbane and Singapore, and will broaden its service coverage even further in the years to come. The bank's businesses comprise mainly of a retail banking segment and a wholesale banking segment. Below is a summary of how the two segments performed over the past year: 1. Retail Banking Services As at the end of 2013, the size of Taishin Bank's mortgage portfolio stood at NT$312.3 billion, representing 5.3% market share; its auto loan balance amounted to NT$24.5 billion, ranking first in the market with a share of 23.5%; it had 3.45 million credit cards outstanding, ranking 4th with a 9.6% market share; total credit card purchases amounted to NT$166.2 billion for the year, ranking 5th with an 8.7% market share; lastly, Taishin Bank acquired credit card transactions for 67,000 merchants nationwide, ranking 2nd with a 20.9% market share. Payment services: Viewing with optimism E-commerce opportunities, Taishin Bank announced on March 28, 2013, a collaboration with third party payment institutions PChomePay and AllPay as a milestone solution between consumers, sellers, third party payment service providers and processing banks. In an attempt to satisfy a broader range of customer needs, Taishin Bank became the first issuer to include a Shinkong Mitsukoshi co-branded card as one of its customizable credit cards, and in the meantime introduced the ETC co-branded card ahead of the competition for driver convenience. To provide luxury car owners with more privileged services, Taishin Bank had also joined with Mercedes-Benz in launching a new co-branded Infinite Card in November 2013. With regards to mobile banking, Taishin Bank was named "2013 Best in Mobile Banking" in Asia by Global Finance magazine, and was granted permission in September 2013 to conduct trial operations of the NFC Mobile Credit Card - Micro SD, NFC Mobile Credit Card - SIM (over-the-air), and QR Code Mobile Credit Card Payment services. This makes Taishin the only bank to be granted permission to proceed with all three services since the implementation of the Mobile Credit Card Service Security Guidelines. To broaden services for customers, Taishin Bank made Visa Money Transfer, a Visa-enabled service that began from 2012, available at all 2,600 Taishin Bank ATMs nationwide in November 2013, giving customers the freedom to remit small sums of money overseas at any ATM. 2. Wholesale Banking Services With regards to corporate lending: loan balances owed from state-owned and private institutions totaled NT$179.2 billion at the end of 2013, 17th among the 39 local banks. In support of the government's credit extension policy for small and medium enterprises, Taishin Bank's lending to SMEs grew by 6% to NT$70.5 billion by the end of 2013 from the NT$66.6 billion a year ago. As for other wholesale banking services: Taishin Bank ranked third in factoring services, with volume totaling NT$238.6 billion in 2013; financial derivatives amounted to US$101.4 billion in terms of notional principal, ranking third among local banks; lastly, Taishin Bank provided share administration services to a total of 189 companies traded on the TSEC, GTSM and the Emerging Stock Market, which ranked 4th among peers. 3 Since the opening up of RMB services at domestic banking units (DBU) on February 6, 2013, customers have been able to perform cross-border remittance, import and export transactions with mainland China counterparties through any DBU in Taiwan.