Stock Code:2880 2015 Annual Report CONTENTS 003 Ⅰ | Letter to The Shareholders 013 Ⅱ | Company Profile 015 Ⅲ | Corporate Governance 024 Ⅳ | Capital Overview 032 Ⅴ | Corporate Social Responsibility 040 Ⅵ | Operational Highlights 068 Ⅶ | Risk Management Summary 079 Ⅷ | Financial Information HONESTY. EFFICIENCY. ACTIVENESS. RESPONSIBILITY. TEAMWORK H onesty E fficiency A ctiveness R esponsibility T eamwork 002 LETTER TO THE SHAREHOLDERS I | Letter to the Shareholders CHAIRMAN Operation Results in 2015 main reason of the decline is less-than-expected global economic growth, especially when China’s economy 1. Financial environments in Taiwan and other still facing downward pressure, global oil prices fall countries for 2015 sharply, lackluster international trading activities and Looking back in 2015, factors including the slowdown China is devoted to enhancing its self-supply chain. As in emerging markets , sharp drop in oil prices, a result, Taiwan’s exports have continued to decline. divergence of monetary policies in the US, Europe and To compound the matters worse, Taiwan’s tourist Japan, Greece’s debt crisis and geopolitical tensions growth has also slowed and its service exports also contributed to the global financial market’s drastic significantly reduced. All of these factors have dragged volatility. Global economic growth rate was lower down Taiwan’s economic performance. compared to the year before, as one of the world’s major economies-the US economy displayed modest 2. Changes to the Company’s organization recovery, weak economic recovery of the Europe Since Hua Nan Financial Holdings Co., Ltd. (hereafter and Japan , and the continued slowdown of China’s “the Company” or “HNFHC”) establishment in economy, thus the global economy still remain in December 19, 2001, we have expanded our financial an era of “new mediocre”. According to the estimate services into multiple professional sectors that include by Directorate-General of Budget, Accounting banks, securities, insurances, investments and trusts, and Statistics, Executive Yuan, R.O.C., Taiwan’s assets management, and venture capital. In order 2015 economic growth rate was merely at 0.75%, to reduce operational costs and effectively improve significantly lower from the previous year’s 3.92%. The our business performance, Hua Nan Venture Capital 2015 ANNUAL REPORT 003 HONESTY. EFFICIENCY. ACTIVENESS. RESPONSIBILITY. TEAMWORK VICE CHAIRMAN Co., Ltd. has formally absorbed Hua Nan Management sources, the Company continued to improve its asset Consulting on December 25, 2013. By the end of quality, strengthen cross selling efforts integrate local 2015, the Company exercises 100% ownership over 6 and foreign investments and deployment, promote the subsidiaries. digital financial environment 3.0 and take on its share of corporate social responsibility as business strategies 3. Business plan and results of business strategies in 2015. The concrete results are explained as follows: Even though the sluggish economic performance (1) Improved its operating quality throughout the world along with drastic volatility A. Asset quality: As of the end of 2015, the Non in global financial markets, the Company has still Performing Loan ratio and coverage ratio stably and pragmatically promoted it business, strictly were 0.21% and 537.90% respectively, which controlled a variety of risks, continued adjust its loan demonstrated that the Company’s asset quality has book ,maintained benign asset quality and diversify its remained in a good condition. income sources from fees and investments. Although a B. Capital adequacy ratio: As of the end of 2015, the decline in the TAIEX and a downturn in the real estate Company’s capital adequacy ratio was 141.78%, market, HNFHC’s overall business operation is still in a whereas Hua Nan Commercial Bank’s capital trend of growth, and continues to achieve a record high adequacy ratio was 13.28%, tier-1 capital ratio was profits. In 2015, its after-tax net profit was NT$14.097 9.88% and common stock equity ratio was 9.69%. billion, represented an increase of NT$900 million or 7% Other than complying with statutory laws and from the previous year, whereas the EPS was NT$1.42 regulations, the preceding ratios show a more solid and return on shareholders’ equity was 9.49%. The status compared with those of the previous year. growth was still mainly driven by the subsidiary Hua C. Corporate governance: Set up the corporate Nan Commercial Bank (HNCB). Other than reinforcing governance Best Practice Principles, held the the business performance and diversified income 004 LETTER TO THE SHAREHOLDERS PRESIDENT institutional investor meeting, carried out the law facilitate the business relationship between compliance system and risk control mechanism customers and the Company both in depth and in and reinforced the information system and its width. safety. (3) Integrated local and foreign investments and (2) Strengthened cross-selling deployment A. HNFHC’s cross-selling efforts: Integrated the A. Merged independent securities firms and invested Company’s marketing resources, adopted the in local major infrastructure customer relationship management system and (a) In order to elevate the Company’s share in the galvanized coherence throughout the Company, securities market and increase the profit of its in which the above efforts can realize cross-selling non-bank subsidiaries, Yunlin Fuxing Securities benefits. In 2015, the Company’s cross-selling ratio Co., Ltd. merged with Hua Nan Securities Co., topped 26.42%, which contributed a cross-selling Ltd. on Nov. 2, 2015. income of NT$951 million. (b) In order to have long-term and stable income B. IE Life Reward Points Redemption Platform: and support national major infrastructure Integrated the resources of the HNFHC’s and landmarks, the Company increased its subsidiaries, including the bank, securities firms investment in Taipei Financial Center Corp. by and property & casualty insurance company, to NT$369 million and in Taiwan High Speed Rail launch the platform of the “IE Life Reward Points Corp. by NT$533 million on July 7, and Nov. 26, Redemption”, with which, customers may redeem 2015 respectively. their reward points collected from their purchases B. Continued to expand HNFHC’s business in the of specified financial products or completion of Greater China region specific transactions on the platform. It could 2015 ANNUAL REPORT 005 HONESTY. EFFICIENCY. ACTIVENESS. RESPONSIBILITY. TEAMWORK (a). Hua Nan Commercial Bank opened its Shanghai D. Inspected and adjusted the process of a variety Branch and Fuzhou Branch in China on Jan. 20 of online businesses: Inspected the processes and May 13, 2015 respectively, and increased of the online businesses (e.g. account opening, the capital of its Shenzhen Branch by RMB500 application for credit cards and insurance million. With which, the Company will be able purchase) approved by the Financial Supervisory to expand its services to the China market and Commission and completed the online operation. reinforce its development momentum in the E. Set up varying channels for product sale: Greater China region. Completed the planning operation for the products (b). For the case of South China Insurance’s equity suitable for varying sales channels. participation in Shen Zhou Auto Insurance Co., (5) Commitments to corporate social responsibility Ltd., HNFHC is waiting for the approval of China A. Caring for the underprivileged: We are committed Insurance Regulatory Commission, and will to giving back our society and have led volunteers continue to track the progress. from our Company in a number of social and C. Grasped Asian’s rise to prominence and planned charity events for senior citizens such as the “Hua strategical deployment Nan, Live On!” campaign held in Kaohsiung, (a). After being approved by the Financial Changhua, Taoyuan and Taichung. These events Supervisory Commission on April 7, 2015 for have been passionately received and brought wide Hua Nan Commercial Bank’s establishment of recognition for our Company. its Myanmar Branch Office, HNCB is applying B. Supporting grass-roots baseball and athleticism: to Myanmar’s competent authorities for the We have promoted baseball and supported youth branch office establishment. baseball team training programs in Taiwan, (b). The Company will be on the lookout for ASEAN providing sponsorship for the “2015 Hua Nan emerging nations’ development trends, and Financial Holdings National Youth Baseball discreetly evaluate the feasibility of branch Championships” as well as the 3rd WBSC Youth establishment, merger or equity participation. Baseball World Cup. We have also held Dream (4) Promoted the digital financial environment 3.0 Baseball Camps in Tainan Municipal Baseball Stadium. In addition to promoting our corporate The Company set up the “Hua Nan Financial Group image, our efforts have also been publicly Digital Financial Promotion Panel” in August recognized, winning us a sponsorship award in the 2015 to configure the 21 items required to build a Sports Promotional Award organized by the Sports digital financial environment 3.0 covering the five Administration of the Ministry of Education. dimensions of channel integration, mobile payment services, digital marketing, big data utilization and C. Supporting sports, academic, and cultural events: talent cultivation, so as to uplift the Group’s digital We have planned and sponsored sports, academic, marketing effect and satisfy customers’ requirements and cultural events