Chinatrust Commercial Bank Address: No.3, Songshou Road, Xinyi Dist., Taipei City 110, Taiwan (R.O.C.) Tel: (02) 2722-2002 Website: http://www.chinatrust.com.tw Spokesman Name: Daniel I.K. Wu Position: Senior Executive Vice President Tel: (02) 2722-2002 Email address: [email protected] Acting Spokesman Name: Roger Kao Position: Senior Executive Vice President Tel: (02) 2722-2002 Email address: [email protected] Stock transfer agency Agency: Corporate Trust Operation and Service Department, Chinatrust Commercial Bank Address: 5F., No.83, Sec. 1, Chongqing S. Rd., Zhongzheng Dist., Taipei City 100, Taiwan (R.O.C.) Tel: (02) 2181-1911 Website: http://www.chinatrust.com.tw The notarization CPA of last few years Name: Leoufong Yang / Charles Chen Business office: KPMG Certified Public Accountants Address: 68F., No. 7, Sec. 5, Xinyi Road, Taipei City 110, Taiwan (R.O.C.) Tel: (02) 8101-6666 Website: http://www.kpmg.com.tw Credit rating institution Titles: Taiwan Ratings Co., Ltd. Address: 49F., No. 7, Sec. 5, Xinyi Road, Taipei City 110, Taiwan (R.O.C.) Tel: (02) 8722-5800 Website: http://www.taiwanratings.com/tw/ Contents I. Letter to Shareholders……………………………………………………………………….. 2 II. Company Profile A. Company Overview……………………………………………………………………… 5 B. Organization……………………………………………………………………………… 8 III. Business Review A. Business Performance……………………………………………………………………. 11 B. Employees………………………………………………………………………………... 16 C. Corporate Responsibility & Code of Ethics……………………………………………... 16 IV. Dividend Policy and Earnings Distribution A. Dividend policy and status of execution…………………………………………………. 21 B. The influence of dividend allocation this time to the operation performance, earnings per share and investment return rate for the stockholders……………………………….. 22 C. Information relating to employee bonuses and remuneration to directors and supervisors of the Board…………………………………………………………………. 22 V. Internal Control Representation……………………………………………….………….… 24 VI. Audit Committee's Report of the financial statements of the last year……………………... 26 VII. Head Office and Domestic Branches………………………………………………………. 27 ІAppendix 1ЇAnnual Financial Reports for 2010 ІAppendix 2ЇConsolidated Financial Reports for 2010 IJ I. Letter to Shareholders Distinguished Shareholders of Chinatrust Bank In 2010, the world returned to economic growth following the global crisis and financial turmoil from the past 2 years. That said, the global recovery in 2010 has been distinctly uneven and inconsistent across regions and economic sectors – with continuing pessimism, debt crises and sluggish growth in the West set against robust growth and new wealth creation throughout much of Asia. Asian growth seems set to continue for some time ahead and represent a profound change to the economic landscape. More importantly, Asian leadership is creating decisively different financial dynamics within our markets. We see this change as great opportunities for Asian banks, to grow and lead into the decade ahead. For Chinatrust, our unique position as an “international greater Chinese” bank (operating throughout Greater China, S/SE Asia and North America) – makes us particularly well-placed to lead in the emerging financial landscape – and through out 2010 we enlisted our entire organization in a large scale new growth strategy to espouse this exciting new world. We are committed to build the first truly international Chinese bank – to take on and take the lead at the center of growth, and to tap into the rapidly growing regional trade benefits, small businesses, wealth management and the likes. At home, Taiwan’s 2010 local economy grew robustly, boosted in part by the enacting of the cross-strait MOU. In response, Chinatust have been driving multiple strategies to accelerate our development in China as well as to sustain our domestic position resulting from increased competition at home. We have further integrated our international platforms and enhanced customer relationship management across the board. Overall, we are seeing significant growth in the regional markets in which we service. The small and medium enterprises (SME) and high net worth (HNW) sectors, for examples, are both growing above 15% per annum across Asia. In view of this, the Bank established a new SME Division to provide small and medium business customers with comprehensive financial solutions. We have started to build our private banking offering and platform for Taiwan, Hong Kong & Singapore - leveraging on our market leadership in wealth management and our existing HNW customer base. 2010 was also a very strong year for Chinatrust financially - with consolidated pre-tax income amounting to NTD 16.26 billion, after-tax income of NTD 13.18 billion, pre-tax ROE at 13.08%, and after-tax ROE at 10.61%. Compared to last year, the net revenue increased by 14%, reaching NTD50.3 billion and the pretax net income increased by 595%. Going forward, we will continue to strengthen our leading position in the Taiwan market whilst increasing revenue from overseas operations. ij Latest credit ratings and evaluation dates Credit Rating Rating Type Rating Facility Outlook Other Effective Date Long-term Short-term Moody’s A2 Prime-1 Stable BFSR: C- 2010.10.14 International Standard & Poor’s A- A-2 Stable BFSR: C+ 2010.11.01 Rating Individual: B/C Fitch A F1 Stable 2011.03.23 Support: 3 Taiwan rating twAA twA-1+ Stable - 2010.10.15 Local Rating Individual: B/C Fitch AA+(twn) F1+(twn) Stable 2011.03.23 Support: 3 2011 outlook In 2011, we will continue to uphold our core values of caring, professional and trustworthy, and continue striving to become the first truly international Chinese bank. Based on this vision, our future strategies will focus on opportunities in three areas: new business development, geographic expansion and deeper customer integration. A. New business development: 1. SME banking business and Private Banking: we will be extending our SME banking later on this year, and establishing a SME business and service model for potential overseas markets. We are also preparing to launch our new Private Bank by early 2012 both in Taiwan and offshore in Hong Kong and Singapore. SME business and Private Banking represent key sources of business growth – in addition to providing end-to-end services to our customers; these businesses leverage our wealth management and private banking advantages and give us a significant step up in our presence at major international banking centers of Singapore and Hong Kong. 2. Mobile Banking: Chinatrust has long been a leader in adopting new innovative and technology in banking; and we see another major upheaval ahead with the wide spread consumer appreciation of mobile banking. In 2010, we launched our award winning consumer banking application – and have already become the market leader in the field. But this is an area we are striving for future leadership as consumer tastes mature and deepen in the years ahead. Ĵ B. Geographic expansion: 1. As we look to deepen and leverage our distinctive Pan-Pacific footprint, we will continue to build our capabilities and presence across our international network. In 2010, a key focus for us was to address the short term challenges at our US subsidiary – CTBUSA – and as businesses gain momentum, we are looking in 2011 to accelerate growth in a number of other key markets - particularly in Hong Kong, and Vietnam. 2. China is a long-term priority for us and we are looking to invest as rapidly as possible into China. This includes building our capabilities to serve the growing international demands of our customer base in China. C. Customer Integration: In 2010, we integrated our Retail and Consumer Finance businesses into a “one bank” retail group. This provides end-to-end banking services to our 6 million retail customers in Taiwan. This year, Chinatrust will further deepen the integration of these businesses and shift our focus to a truly distinctive customer-centric approach. Our leading industry customer databases provide us unparalleled opportunities to understand and better serve our customers across the board including wealth management, payments and loans. As we look ahead, Chinatrust is confident that we are uniquely placed to assume the business opportunities in a new global market. We are optimistic we will exceed our growth targets from 2010 to 2011 and we commit to building from Chinatrust the first truly international Chinese Bank. Jeffrey L. S. Koo Chairman ĵ II. Company Profile A. Company Overview 1. Date of Establishment: March 14, 1966 2. History Formerly known as China Securities Investment Corp., Chinatrust Commercial Bank (hereinafter referred to as the “Bank”) was established 45 years ago in 1966. It has undergone two major reforms. In 1971, it was restructured and renamed the Chinal Trust and Investment Company. In 1992, it was christened Chinatrust Commercial Bank. These changes were performed during milestones in Taiwan’s economy, including the launch, growth, and transformation of the island’s financial market. To increase its scope of operations, the Bank merged with Grand Commercial Bank in December of 2003, acquired the Fengshan Credit Cooperative in July 2004, and won the bid to purchase the Enterprise Bank of Hualien in May 2007. In addition, to make our team more effective, the Bank formally merged with the Chinatrust Bills Finance Corporation in April 2008. By the end of 2010, we had 146 domestic branches, NT$1.36 trillion in consolidated deposits, and NT$1.79 trillion in consolidated total assets