Stock Code:2812 2017 Annual Report Annual Report 2017 We Do Our Best For You 總行 臺中市西區民權路87號 電話：04-22236021 Date of publication:March 2018 Website:http://www.tcbbank.com.tw M.O.P.S:http://mops.twse.com.tw No.87, Min-Chuan Road, Taichung, Taiwan, R.O.C. Taichung Commercial Bank Company Limited Address:No. 87, Min Chuan Road, Taichung, Taiwan, R.O.C. Tel.:(04)2223-6021 Website: http://www.tcbbank.com.tw Company Spokesman Name: Cheng-Yuan Chen Taichung Commercial Bank Job title: Executive Vice President Tel.:(04)2223-6021 Email:[email protected] Acting Spokesman Name: Kai-Yu Lin Job title: Executive Vice President Tel.:(04)2223-6021 Eamil:[email protected] Shares Registrar Name: by internal function Address: 11F., NO. 50, Sec. 1, XinSheng South Road, ZhongZheng District, Taipei, Taiwan, R.O.C. Website：http://www.tcbbank.com.tw Tel.：(02)2395-7388 Credit Rating Agency Chairman : Name: Fitch Australia Pty Ltd, Taiwan Branch Address: Suite 1306, 13F., No. 205, Tun Hwa N. Road, Taipei, Taiwan, R.O.C. Tel.:(02)8175-7600 External Auditors in the Most Recent Year Name of CPA firm: Deloitte & Touche Name of CPA: Kuan-Chung Lai & Wen-Ya Hsu Address: 12F., No. 156, MinSheng East Road, Sec. 3, Song Shan District, Taipei, Chin-Yuan Lai Taiwan, R.O.C. Wesbsite:http://www.deloitte.com.tw Tel.:(02)2545-9988 Name of any exchanges where the Company’s securities are traded overseas, and the method by which to access information on said offshore securities: None. CONTENTS I. MESSAGE TO THE SHAREHOLDERS .......................................................................................................... 1 II. A PROFILE OF TAICHUNG BANK ................................................................................................................ 5 III. CORPORATE GOVERNANCE REPORT ....................................................................................................... 6 1. ORGANIZATION ........................................................................................................................................................... 6 2. PROFILES OF DIRECTORS, PRESIDENT, EXECUTIVE VICE PRESIDENTS, ASST. VP, AND SUPERVISORS OF THE VARIOUS DEPARTMENTS AND BRANCHES ................................................................................................................................... 9 3. REMUNERATION TO DIRECTORS, PRESIDENT AND EXECUTIVE VICE PRESIDENTS, AND ALLOCATION OF REMUNERATION TO EMPLOYEES ................................................................................................................................ 22 4. STATUS OF CORPORATE GOVERNANCE ..................................................................................................................... 28 5. DISCLOSURE OF THE ACCOUNTANT’S FEE .................................................................................................................. 49 6. CHANGES OF ACCOUNTANTS ..................................................................................................................................... 49 7. THE CHAIRMAN, PRESIDENT, CHIEF FINANCIAL OR ACCOUNTING MANAGER OF THE BANK WHO HOLDS POSITION IN THE BUSINESS UNDER THE COMMISSIONED CPA FIRM OR ITS AFFILIATES IN 1 YEAR ......................................................... 49 9. INFORMATION ON SHAREHOLDERS AMONG THE TOP 10 BY PROPORTION OF SHAREHOLDING WHO ARE STAKEHOLDERS TO ONE ANOTHER OR SPOUSE, KINDRED WITHIN THE 2ND TIER UNDER THE CIVIL CODE .............................................. 54 10. QUANTITY OF SHAREHOLDINGS OF THE SAME INVESTEE BY THE BANK AND DIRECTORS, PRESIDENTS, EXECUTIVE VICE PRESIDENTS, ASST. EXECUTIVE VICE PRESIDENTS, SUPERVISORS OF THE VARIOUS DEPARTMENTS AND BRANCHES, AND DIRECT OR INDIRECT SUBSIDIARIES IN PROPORTION TO THE COMBINED HOLDINGS OF ALL ................................. 55 IV. STATUS OF CAPITAL PLANNING .............................................................................................................. 56 1. SHARES AND DIVIDENDS ........................................................................................................................................... 56 2. ISSUANCE OF FINANCIAL BONDS ............................................................................................................................... 60 3. NO PREFERRED SHARE, OVERSEAS DEPOSITORY RECEIPT, EMPLOYEE STOCK OPTIONS, AND MERGERS AND ACQUISITIONS OR ACCEPTANCE OF THE ASSIGNED INSTRUMENTS FROM OTHER FINANCIAL INSTITUTIONS ................ 65 4. IMPLEMENTATION OF FUND UTILIZATION PLAN ......................................................................................................... 65 V. OPERATION PROFILE ................................................................................................................................. 66 1. BUSINESS CONTENTS................................................................................................................................................. 66 2. EMPLOYEES ............................................................................................................................................................... 82 3. ENTERPRISE RESPONSIBILITIES AND ETHICAL BEHAVIOR ......................................................................................... 84 4. NUMBER OF NON-EXECUTIVE BANKING STAFF, AVERAGE FRINGE BENEFIT OF EMPLOYEE IN THE YEAR AND THE DIFFERENCE FROM THE PREVIOUS YEAR .................................................................................................................... 84 5. IT EQUIPMENT ........................................................................................................................................................... 84 6. LABOR-MANAGEMENT RELATIONS ........................................................................................................................... 87 7. IMPORTANT CONTRACTS ........................................................................................................................................... 89 8. SECURITIZED PRODUCTS AND RELATED INFORMATION .............................................................................................. 89 VI. FINANCIAL STATUS ..................................................................................................................................... 90 1. BALANCE SHEET AND COMPREHENSIVE INCOME STATEMENT IN THE LAST FIVE YEARS ............................................. 90 2. FINANCIAL ANALYSIS FOR THE MOST RECENT FIVE YEARS ........................................................................................ 94 3. AUDIT COMMITTEE’ REVIEW REPORT ON THE FINANCIAL STATEMENT OF 2017 ...................................................... 99 4. CONSOLIDATED FINANCIAL STATEMENTS 2017 ......................................................................................................... 99 5. FINANCIAL STATEMENTS 2017 .................................................................................................................................. 99 6. IN THE CASE OF ANY INSOLVENCY OF THE BANK AND ITS AFFILIATES ....................................................................... 99 VII. REVIEW AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS, AND RISK MANAGEMENT MATTERS ............................................................................................................................................................. 100 1. FINANCIAL ANALYSIS ............................................................................................................................................. 100 2. FINANCIAL PERFORMANCE ANALYSIS ..................................................................................................................... 101 3. CASH FLOWS ........................................................................................................................................................... 101 4. THE MATERIAL EFFECT ON FINANCIAL STRUCTURE FROM SUBSTANTIAL CAPITAL EXPENDITURE IN THE LAST FEW YEARS...................................................................................................................................................................... 102 5. DIRECT INVESTMENT POLICY, THE MAIN REASONS FOR PROFIT OR LOSS, AND CORRECTIVE ACTION PLAN IN THE MOST RECENT YEAR, AND INVESTMENT PLAN IN THE NEXT YEAR ...................................................................................... 105 6. RISK MANAGEMENT ................................................................................................................................................ 106 7. CRISIS MANAGEMENT MECHANISM .......................................................................................................................... 112 8. OTHER IMPORTANT NOTES ....................................................................................................................................... 112 VIII. SPECIAL NOTES ....................................................................................................................................... 113 1. INFORMATION REGARDING THE BANK’S SUBSIDIARIES ............................................................................................ 113 2. IN THE MOST RECENT YEAR TO THE DATE THIS REPORT WAS PRINTED, PRIVATE PLACEMENT OF SECURITIES AND BANK DEBENTURES ........................................................................................................................................................... 118 3. IN THE MOST RECENT YEAR TO THE DATE