Ⅰ . Names, titles, phone numbers, and e-mail addresses of spokesman and acting Spokesman Spokesman: Welch Lin Title: Chief Financial Officer from Taishin Financial Holding Company, Senior Vice President Tel: 886-2-5576-1888 E-mail address : [email protected] Acting spokesman: David Lee Title: Vice President Tel: 886-2-5576-2112 E-mail address: [email protected] Ⅱ . Addresses and phone number of head office and branches Head office: 1F, and B1, No. 44, Sec. 2, Jhongshan N. Rd., Taipei City 104, Taiwan (R.O.C) Tel: 886-2-2568-3988 Addresses and phone numbers of branches: see the chapter 9 of the annual report. Ⅲ . Name, address, website, and phone number of the institution for handling stock register Name: Affairs Stock Agency Department of Taishin International Commercial Bank Address: B1, No. 96, Sec.1, Jianguo N. Rd., Jhonghsan Dist.,Taipei City 104, Taiwan (R.O.C) 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: Rm 1306, 13F, No.205, Dunhua N. Rd., Songshan Dist., Taipei City 105, Taiwan (R.O.C) Website: http://www.fitchratings.com.tw Tel: 886-2-8175-7600 Name: Taiwan Ratings Address: 49F, No. 7, Sec. 5, Xinyi Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C) Website: http://www.taiwanratings.com.tw 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: Tza Li Gung / Qinzhen Yang Name of accounting firm: Deloitte & Touche Address: 12F, No. 156, Sec. 3, Minsheng E. Rd., Songshan Dist., Taipei City 105, Taiwan (R.O.C) 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. Contents Rating Agency Date Ratings I. Message to Shareholders 2 II. Brief Introduction to The Bank 6 Issuer L-Term BBB+ III. Corporate Governance 8 Issuer S-Term F2 IV. Fund-Raising Activities 72 Outlook Stable Fitch Ratings 2016.10.12 Support 3 V. Operating Status 84 National L-Term AA- (twn) VI. Financial Status 112 National S-Term F1+ (twn) VII. Financial Status, Review of Business Performance, 126 and Risk Management VIII. Special Notes 142 Issuer L-Term BBB IX. Directory of Head Office & Branches 151 Issuer S-Term A-2 Appendix I. Financial Statements and Independent 156 Taiwan Ratings 2016.11.21 Outlook Stable Auditors' Report National L-Term twA+ Appendix II. Consolidated Financial Statements and 260 National S-Term twA-1 Independent Auditors' Report 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 domestic banks and OBUs in 2016. The earnings before tax of domestic banks 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 after-tax earnings totaled NT$9.5 billion in the year, and the after-tax EPS was NT$1.64. Asset quality was good. The nonperforming loan ratio was 0.26% and the coverage ratio 549% at the end of 2016. In terms of capital structure, we were able to improve the capital adequacy ratio from 12.49% at the end of 2015 to 14.21% at the end of 2016. The Tier 1 capital ratio was a healthy 10.64% at the end of 2016. In October 2016, we were granted global long- and short-term credit ratings of BBB+ and F2, respectively, in a report of the international credit rating agency Fitch Ratings. The national long- and short-term credit ratings were AA-(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-2, respectively, and domestic long-and short-term ratings of twA+ and twA-1, respectively, in a report of the credit rating agency Taiwan Ratings. The outlook was also "Stable". 2 Message to Shareholders 01 With respect to overseas expansion, the Tokyo Branch in Japan celebrated its grand opening in October 2016. It is the first time that we opened a branch in an OECD member country. It is also our 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. In the future, we will continue to expand our overseas presence, offering more comprehensive and higher quality international financial services to customers. Our businesses mainly comprise 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 As of the end of 2016, the size of our mortgage portfolio stood at NT$418.7 billion, representing more than 7% in YOY growth; the auto loan balance amounted to NT$37.5 billion, representing a 10% YOY growth, placing us again on top of the financial industry; we had 3.78 million credit cards outstanding, ranking 4th with a 9% market share; lastly, Taishin Bank had 103,000 card accepting merchants nationwide, ranking first with a 21% market share. In response to the rise of fintech, Taishin Bank had four new utility model patents granted for its innovative services. 01 We were also the first bank to launch a new digital banking brand, Richart, to offer a range of friendly online financial services. The brand held a 60% market share in digital accounts in less than six months since its launch. Meanwhile, internet banking and mobile banking are advancing rapidly. The number of customers is growing at 13% per year given the range of services and the number of promotional campaigns. The transaction volume is also growing every year. Regarding the investment in mobile payment services, Taishin Bank was first to be approved by the competent authority to support international mobile payment tools such as Apple Pay, Android Pay, and Samsung Pay. We were first to launch the service on March 29, 2017. Customers are now able to make payments with Taishin credit cards and Apple Pay. In addition, we offer SIM credit cards supported by host card emulation (HCE) technology that enable customers to use their mobile phones to quickly pay for their shopping. We have designed an app exclusively for Taishin cardholders. With the new CARDaily app (for credit cards), customers are able to check their credit card accounts in real time. Furthermore, Taishin Bank is going to introduce e-Payments that will offer a payment experience combining social media and payments. In addition to targeting micro or proprietary businesses, we will also team up with large merchants to promote the services.