TBB — AGM Information 2017

Jul 17, 2017

Minutes for the 2017 Annual Meeting of Shareholders

Taiwan Business Bank

Date: June 16, 2017, Friday, at 9:00 a.m. Venue: 17[th] Floor, No. 30, Ta-Cheng Street, Taipei Auditorium of the Headquarter, Taiwan Business Bank Attendees: (Refer to the register of attendance) Chair: Robert Rueen-Fong Chu, Chairman of the Board of Directors, Taiwan Business Bank

Meeting Procedure

I. Welcome/ Introduction

Meeting is to be commenced as the shareholding of shareholders present has met the regulatory requirement.

II. Opening Remarks by Chairman

III.Report Matter

• (1) Report the business operation of the Bank in 2016.

• (2) Audit Committee’s Review Report on 2016 financial statements.

• (3) Report the allocation of remuneration to employees and directors in 2016.

• (4) Report the promotion of Article 25 of Banking Act.

IV. Recognition Matter

• (1) 2016 financial statements are presented.

• (2) 2016 Statement of Surplus Allocation is presented.

V.Discussion Matter

• (1) Issue new shares through capitalization of 2016 earnings.

• (2) Amendment to the Operational procedures for Acquisition and Disposal of Assets by Taiwan Business Bank.

• (3) Amendment to the Company's Corporate Charter (Articles of

Incorporation)

• (4) Release the Prohibition on Directors from Participation in Competitive Business.

• VI. Special Motions

VII. Adjournment

Report Matter

• I. Report the business operation of the Bank in 2016.

Explanation:

Please refer to the Meeting Handbook.

Shareholder Number 10973 expressed his opinion on the representation of the Non-Performing Loans Ratio and Coverage Ratio, and suggested that the collection function of the Overdue Loan & Control Dept. should be enhanced.

The Chairman and related personnel have made explanations on the above statement.

Resolution: Acknowledged.

• II.Audit Committee’s Review Report on 2016 financial statements.

• Explanation:

Please refer to the Meeting Handbook.

Shareholder 10973 expressed his opinion on the issue of making office space on

2F of Ta An Branch available to non-interested parties which caused a loss to the Bank.

The Chairmen and the designated personnel have made explanations on the above statement.

Resolution: Acknowledged.

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• III. Report the allocation of remuneration to employees and directors in 2016. Explanation:

• Rules of Article 235-1 of the incorporation law were followed and related allocation measures were approved by the 11th meeting of the 3rd

• Remuneration Committee and the 13th meeting of the 14th Board of Directors.

• Remuneration to employees and directors in 2016 were both distributed in cash as follows:

• (1) Remuneration to employees (5.112%): NT$342,837,068

• (2) Remuneration to directors (0.6%): NT$40,239,092

The above proposed remuneration to employees and directors had been recognized as expenses of current year in accordance with regulations.

Resolution: Acknowledged.

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• IV. Report the promotion of Article 25 of Banking Act. Explanation:

• Under the Ruling No. 10060005191 issued on January 31, 2012 by the Financial Supervisory Commission, to fulfill the regulations of Article 25 of Banking Act, the relevant report matter should be covered in the shareholders’ meeting prior to the year of election to serve as a reminder to shareholders.

• 2.Promotion content:

• (1) In accordance with Paragraph 2 of Article 25 of Banking Act, the same person or same concerned party who singly, jointly or collectively acquires more than five percent (5%) of a Bank's outstanding voting shares shall report such fact to the Competent Authority within ten (10) days from the day of acquisition; the preceding provision applies to each cumulative increase or decrease in the shares of the same person or same concerned party by more than one percent (1%) thereafter.

• (2) In accordance with Paragraph 3 of Article 25 of Banking Act, the same person or same concerned party who intends to singly, jointly or collectively acquire more than ten percent (10%), twenty-five percent (25%) or fifty percent (50%) of a Bank's outstanding voting shares shall apply for prior approval of the Competent Authority.

• (3) In accordance with Paragraph 4 of Article 25 of Banking Act, a third party who holds shares of the Bank on behalf of the same person or same concerned party in trust, by mandate or through other types of contract, agreement or authorization shall fall within the purview of a concerned party.

• (4) In accordance with Paragraph 5 of Article 25 of Banking Act, the same person or same concerned party who singly, jointly or collectively holds shares of the Bank representing more than five percent (5%) but less than fifteen percent (15%) of a Bank's outstanding voting shares prior to the implementation of the amendment to the Act on December 9, 2008 shall report such fact to the Competent Authority within six (6) months from the implementation date of the said amendment. Those who report to the Competent Authority within the said prescribed period may maintain their shareholding at the time of reporting. However, those whose original shareholding exceeds ten percent (10%) shall apply for the prior approval of the Competent Authority when they intend to increase their shareholding for the first time thereafter.

• (5) In accordance with Paragraph 8 of Article 25 of Banking Act, if the total number of a Bank's shares held by the same person or by the principal, his/her spouse and children under twenty (20) years of age exceeds one percent (1%) of the Bank's outstanding voting shares, such principal shall

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notify the Bank thereof.

• (6) In accordance with Article 25-1 of Banking Act, the term "same person" as used in Article 25 of the Act shall mean the same natural or juristic person. Parties related to the same natural person include: the principal, his/her spouse and relatives by blood within the second degree of kinship; an enterprise in which the abovementioned persons hold more than one third (1/3) of its outstanding voting shares or more than one third of its capital; an enterprise or a foundation in which the abovementioned persons act as its chairman, president or directors representing the majority of directors. Parties related to the same juristic person include: the same juristic person and its chairman and president as well as the spouse and relatives by blood within second degree of kinship of the chairman and president; enterprises in which the same juristic person hold more than one third (1/3) of their outstanding voting shares or more than one third of their capital, or enterprises or foundations in which the same juristic person act as their chairman, president or directors representing the majority of directors; the affiliates of the same juristic person.

• (7) Where the same person or same concerned party who holds voting shares issued by a Bank without filing a report with the Competent Authority or obtaining approval from the Competent Authority in accordance with the provisions set forth in Paragraphs 2, 3 or 5 of Article 25, the excess shares held by such shareholder shall not have voting rights and shall be disposed of within the given period prescribed by the Competent Authority. In accordance with Paragraph 3 of Article 128 of the Act, such shareholder shall be imposed of an administrative fine of not less than Two Million New Taiwan Dollars (NT$2,000,000) and not more than Ten Million New Taiwan Dollars (NT$10,000,000). Moreover, if such shareholder were elected as a director or other responsible person of the Bank, Financial Supervisory Commission will consider such shareholder as the person who has engaged in, or been involved in, other dishonest or improper activities which indicate that she/he is unfit to serve as a responsible person of a bank pursuant to Section 13 of Article 3 of “Regulations Governing Qualification Requirements and Concurrent Serving Restrictions and Matters for Compliance by the Responsible Persons of Banks”.

Resolution: Acknowledged.

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Recognition Matter

• I. 2016 financial statements are presented and respectfully submitted for recognition. Explanation:

The Bank’s financial statements, including Reports on Business Operations, Balance Sheets, Statements of Comprehensive Income, Statements of Equity Change, and Statements of Cash Flows, had been submitted to the 13th Board of Directors Meeting of the 14th Board of Directors.

Please refer to the Meeting Handbook.

The result of the vote:

Votes represented by shareholders in session	Affirmative	Affirmative	Negative	Invalid	Abstention /Non-voting
	Counts	Ratio (%)	Counts	Counts	Counts
4,008,469,131	3,687,204,250 (2,127,797,121 voted electronically)	91.98	991,105 (971,382 voted electronically)	0	320,273,776 (313,995,486 voted electronically)

Resolution: The matter was approved as submitted.

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Taiwan Business Bank Business Operation Report in 2016

With the turmoil caused by America’s disappointing economic growth in the first half of the year, the Brexit referendum, the American presidential election, and the timetable for the hiking of American interest rates, plus the weakness of the Japanese economy, slow recovery in the euro zone, the slowdown in Chinese economic growth, and turbulence in worldwide financial markets, global economic growth in 2016 did not match the optimistic expectations at the start of the year and the pace of recovery slackened. According to data released by Global Insight Inc. (GII) in January 2017, the global economy grew by 2.5% for the year as a whole, 0.3 percentage points below the January forecast and less than the 2.8% growth rate recorded the year before. This indicates that while the global economy continued to recover, performance was sluggish.

Statistics compiled by the Directorate General of Budget, Accounting and Statistics put Taiwan’s economic growth for 2016 at 1.35%. In the first quarter of 2016, the growth of Taiwan’s merchandise exports continued at a negative rate because of the weak growth of the global economy and slow demand for electronic end-consumer products, plus the crowding-out effect caused by the localization of Chinese supply chains and the drop in crude oil and other raw materials prices. The government’s implementation of consumption-boosting measures bore fruit, however, stimulating private consumption and reducing the extent of economic decline. Taiwan’s economy growth rate only slightly decreased by 0.23%. In the second quarter, private consumption grew moderately, the semiconductor market warmed up, the fall in raw materials prices slowed down, and the reduction in Taiwan’s commodity exports (calculated in US dollars) diminished appreciably. Figured in New Taiwan dollars on an inflation-adjusted basis, and with exports of services added, the growth in the real value of Taiwan’s exports of goods and services turned positive and the rate of economic growth switched from negative to a positive 1.13%. In the third quarter, the global economy grew at a moderate pace. Taiwan’s merchandise exports grew only slightly; in the field of domestic demand, however, sales in the auto market continued strong and demand in the retail industry heated up, boosting growth in private consumption. Furthermore, government spending increased due to the budget execution, the semiconductor industry increased the investment in advanced production processes, and the domestic airline industry expanded its fleet, bringing growth in private investment. The economic growth rate for the quarter rose to 2.12%. In the fourth quarter, raw materials prices bottomed out and began rising and semiconductor demand expanded strongly, heating up export performance; with the continued addition of advanced production processes by the semiconductor industry and the expansion of the airline fleet, private investment continued to expand and the

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economy growth rate rose to 2.88%.

In the field of interest rates, the domestic economic recovery remained sluggish in the first half of 2016 and inflation expectations stayed moderate. The Central Bank adjusted the policy interest rate downward by 0.125 percentage points in March and again in June, for a total reduction of 0.25 percentage points, with the aim of stimulating economic growth. In the field of exchange rates, despite the initiation of interest-rate hikes in America at the end of 2015, which caused an outflow of foreign currency and a weakening of the New Taiwan dollar relative to the U.S. dollar, after the U.S. slackened its rate increases, international capital flowed into emerging Asian markets and the NT dollar strengthened slightly relative to the U.S. dollar in the first half of the year. With American economic growth in the first half proving disappointing and the U.S. taking a cautious attitude toward interest rate hikes, plus the ongoing influx of foreign capital, the NT dollar continued strengthening in the third quarter; but with the election of Donald Trump and the accompanying interest rate increases in the U.S., the greenback strengthened and Asian currencies weakened. At the end of 2016, the NT dollar was trading at 32.279 to the U.S. dollar, a rise of 2.44% compared with a year earlier; the average exchange rate for the year as a whole was NT$32.318:US$1, down 1.30% from the previous year.

Looking ahead to 2017, following the weakness in economic growth in the first half of 2016, economic activity in numerous major economies strengthened in the second half of 2016. The IMF has predicted that global economic growth rate will rise to 3.4% in 2017. However, the world’s economic prospects are still facing many uncertainties, mainly because of concerns about the possibility that the economic and trade policies of the new American administration will spark a rise in trade protectionism that will suppress global trade and obstruct global economic growth. Forecasts by the Directorate General of Budget, Accounting and Statistics and other domestic institutions put Taiwan’s economic growth rate for 2017 in the range of 1.68% to 1.87%, indicating the possibility of an improvement over 2016. However, the domestic and international economies will be affected by uncertainties in the future. Among these are the influence on the global economy and financial markets of the economic and trade policies of the new American government. The localization of supply chains and economic restructuring in mainland China, and the direction taken by cross-strait relations, will affect Taiwan’s economic performance. In addition, the implementation and progress of the government’s innovation industry policy will have a further impact on domestic economic performance. Overall, the banking industry is expected to experience growth in its various items of business in 2017 and to work vigorously to develop the fintech market; given the narrow interest-rate spread, however, many variables will continue to exist in the overall environment, adding to

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the difficulty of operating in the domestic and overseas investment markets. Taiwan’s banking industry is predicted to maintain a slight profit growth in 2017. The TBB will continue its profit growth momentum of the past year with a focus on the development of key businesses having growth potential as our entire staff exerts its utmost concerted efforts toward the goal of upgrading overall operating performance, achieving profit growth targets, and realizing our four prime operating principles—pursuit of business performance, enhancement of employee value-added, emphasis on shareholder equity, and fulfillment of corporate social responsibility—as we progress toward joining the ranks of outstanding banks and creating an even better business performance.

Operating results of 2016 and Business plan of 2017 are as follow:

1. Operating results of 2016

• (1) Implementation of Business Plans and Operating Strategies

• A. Profitability

The Bank’s profitability and its various areas of business experienced stable growth in 2016, resulting in an after-tax net profit of NT$5.196 billion (and a before-tax net profit of NT$6.323 billion). It carried out a capital increase of NT$2.842 billion via transferred earnings, and issued stock and cash dividends of NT$0.50 and NT$0.10 per share, respectively, for the previous year (2015).

• B. Corporate Governance

• Reinforcement of information disclosure channels and upgrading of transparency in corporate governance

• (A) The Bank has long strived to enhance its corporate governance. It received the highest honors in the Securities & Futures Institute’s Information Disclosure Evaluation for seven years in a row, from the sixth to the twelfth evaluations, and ranked in the top 5% in both the First and Second Annual Corporate Governance Evaluation held by the Taiwan Stock Exchange.

• (B) Each investor has immediate access to information on the Market Observation Post System, and can obtain the same information simultaneously on the official TBB website. The Bank also issues press releases on an irregular basis, giving investors multiple channels for acquiring TBB information.

• C. Core Businesses

• (A) Corporate Banking

  • Outstanding awards affirm top performance in Credit Guarantee Fund business

  • a. The Bank received an outstanding award in the “Best Small and Medium Enterprise Banking” category at the Taiwan Academy of

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Banking and Finance’s Eighth Taiwan Banking and Finance Best Practice Awards, burnishing the Bank’s image as a specialized small and medium enterprise bank.

• b. In recognition of the Bank’s outstanding performance in small and medium enterprise financing, it was presented with four Outstanding Bank for small and Medium Enterprise Credit Guarantee Financing awards by the Ministry of Economic Affairs: the Credit Guarantee Partner Award, Direct Guarantee Performance Award, Young Entrepreneur Support Award, and Small and Medium Enterprise Innovation Development Support Award.

• c. The Bank won Outstanding awards from the Financial Supervisory Commission for the Program to Encourage Lending by Domestic Banks to Small and Medium Enterprises (Division A) and the Program to Encourage Lending by Domestic Banks to Creative Enterprises (Division A). It was also presented a Special Award for Balanced Regional Development.

• d. In the extension of small and medium enterprise loans, the Bank ranked No. 1 in Taiwan in both total amount and ratio of loans transferred for guarantees to the Small and Medium Enterprise Credit Guarantee Fund.

• (B) Foreign Exchange Operations

• Stable growth in the foreign exchange business and continued expansion of forex market share

• a. The Bank strengthened the absorption of foreign-currency deposit and expanded the scale of its deposits. The accumulated average balance of foreign-currency deposits in 2016 grew 9.72% over 2015.

• b. The export/import financing business was vigorously developed and share of the forex market was expanded. The Bank’s share of the export bills negotiation market rose from 1.6% in 2015 to 2.12% in 2016, and its share of the import LC issuance market climbed from 3.36% to 3.82%.

• (C) Wealth Management

Stable growth in wealth-management fee income

  - a. The Bank focused on strengthening its wealth-management business by vigorously expanding fee income from the insurance and fund businesses, thereby increasing bank-wide fee income, boosting revenue, and establishing income as the priority goal.

  - b. With vigorous promotion of a special program aimed at the marketing of designated products, fee income from the wealth-management business rose 8.97% in 2016.

• D. Innovative Products

• (A) Approval of five e-banking utility model patents and continuous

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development of innovative digital banking businesses so as to provide more convenient services

• a. The Bank submitted applications for new fintech invention and utility model patents, including two-factor credential, Hi-Bank digital banking, a medical care payment system, a cash-flow system for temples, smart branches, and multimedia digital content. The Bank has applied for 23 financial patents by the end of 2016, and the Intellectual Property Office has approved 5 utility model patents as of January 2017.

• b. Customers were provided with cross-strait e-commerce cash-flow services with the introduction of Cross-Border e-Remittance Service.

• c. Customers were offered a diversity of payment methods. They can use smart phones to scan the QR codes on their credit-card statements and make payment directly online.

• (B) Establishment of Smart Branches to Provide an Innovative Service Model

• a. A smart branch was set up at the Fu Hsin Branch on Aug. 4, 2016 to provide the public with five convenient services: pre-arranged number assignment, pre-arranged transactions, SmartTable, automatic check-deposit machines, and interbank ATM deposits.

• b. The SmartTable provides online pre-arranged form-filling and number assignment services, thereby simplifying teller operations and creating customer-centric digital financial services.

• c. The Digital Deposit Account (Type 2) business was inaugurated to enhance the Bank’s digitized services.

• (C) Provision of Diversified Services by Developing Products that Conform to Social Trends

• a. The Bank introduced long-term care products (under the Elderly Care Program) in combination with trust, home loans, and annuity insurance in March of 2016 in order to expand the long-term care trust business and satisfy the needs of customers for financial management trust services, and carried out island-wide employee training by regions for promoting these services.

• b. In line with the government’s policy of encouraging childbirth, the Bank introduced a Pregnancy Support consumer loan with the aim of increasing

• c. The Bank began offering escrow trust for third-party payments, allowing third-party payment businesses to turn payments for credit-card transactions that they take in via their web platform’s collection and payment service over to the Bank’s trust account, thereby assuring the security of payments for Internet transactions.

• d. A sales contract was signed with the Concord Capital Management

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Corp. in January of 2016 for the sale of Concord’s Income Partners funds as a means of expanding the OBU’s investment client group.

• E. Expansion of Scope of Channel Services

• Expansion of New York, Tokyo, and Philippine branches to expand overseas deployment and increase overseas revenue

• (A) The New York Branch opened for business on Feb. 27, 2017, expanding the Bank’s operating bases in the United States so as to increase its operating efficiency.

• (B) The Bank applied to open a branch in the world’s fifth-largest financial center, Tokyo, in order to expand its global deployment and increase its overseas revenue; the Financial Supervisory Commission granted approval on Jan. 4, 2016, and the Japanese Financial Services Agency began preparatory examination on Oct. 14, 2016. The new branch is expected to open for business before the end of September 2017.

• (C) In line with the New Southbound Policy and in consideration of the Philippines’ rapid economic growth in recent years as well as the advantage of its demographic dividend, the Bank evaluated the feasibility of establishing a branch in Manila and submitted the relevant materials to the Financial Supervisory Commission for review on July 15, 2016. In compliance with FSC instructions, the Bank provided materials on its prevention of money-laundering and financing of terrorism, and commissioned an accounting office to provide opinions on the anti-money laundering and compliance mechanism for the Manila branch. This material was submitted to the FSC on Feb. 2, 2017; once the FSC’s approval is received, the establishment of the branch will proceed so as to reinforce the Bank’s Southeast Asian deployment.

• F. Information Operations

• (A) Implementation of information upgrading to meet international standards and provide safer and more convenient transaction services

  • a. To comply with the safety guidelines for international organizations, the Bank carried out ATM EMV software upgrading and the replacement of old machines. EMV chip upgrading is projected for completion at the end of December 2017.

  • b. To meet the diverse demands of the Real-Time Gross Settlement system from the Financial Information Service Co., Ltd., the Bank added domestic Australian Dollar remittance services, greatly reducing the time required for such remittances and achieving the goal of same-day remittance.

  • c. To promote international cash withdrawal services, the Bank, in cooperation with the Financial Information Service Co., Ltd., completed the provision of services that allow customers to withdraw funds or check account balances at ATMs in Hong Kong and Macau

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using TBB bank cards.

  - d. In accordance with the Central Bank’s plan for renewal of the forex data processing system framework, the TBB completed the establishment of an online forex declaration system for teller and corporate Internet banking operations, and switched to real-time online forex balance enquiry and notification of block expenditures to the Central Bank’s billing servers. This improves transmission efficiency and simplifies the integration of teller operations.

• (B) Continued promotion of the e-banking business and broad development of customer groups

  • a. In recognition of outstanding performance in the promotion of e-banking business, the Bank received the Best Development Award for Electronic Payment Business from the Financial Information Service Co.

  • b. The Bank designed activities to increase interaction between fans and its Facebook Fans page and to boost customer loyalty, and effectively attracted the participation of mobile and Internet communities by different age groups via the smart bank and online Facebook.

• G. Realization of Anti-Money Laundering, Internal Control, Internal Auditing, and Legal Compliance Operations

• (A) Establishment of a dedicated unit and hiring of professional consultants to ensure full compliance of Anti-Money Laundering and Combatting the Financing of Terrorism.

  • a. The Compliance and Legal Department is the Bank’s dedicated unit charged with for the prevention of money laundering and terrorism financing. In 2016, the Bank also set up a Anti-Money Laundering and Combatting the Financing of Terrorism Committee.

  • b. Deloitte Taiwan was hired as consultant and an anti-money laundering and counter-terrorist financing system developed by SIORK Corporation was adopted to implement the Bank’s Anti-Money Laundering and Combatting the Financing of Terrorism and the domestic AML/CFT systems.

  • c. In conformity with the 2018 fourth-quarter evaluation operations of the Asia Pacific Group on Money Laundering (APG), and to meet the supervisory requirements of the competent authority in regard to the anti-money laundering and counter-terrorist financing mechanism, the TBB established an AML/CFT system in accordance with the Banking Association’s Directions Governing Anti-Money Laundering and Countering Terrorism Financing of Banking Sector.

  • d. A transaction monitoring system (TMS) was completed, providing for the monitoring of client transactions and warning of suspicious activities and abnormal transactions to facilitate follow-up verification

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and disposition by business units.

• (B) Holding of regular Compliance Officer Seminars and continued reinforcement of overseas compliance operations.

  • a. A Compliance Officer Seminar was held in each the first and second halves of 2016, with the content covering the propagation of the TBB’s compliance framework and major compliance regulations, explanations of compliance assessment, guidelines for handling self-assessments on compliance, and guidance on important recent laws and decrees. The aim is to assure the effective conveyance of laws and decrees and implementation of the compliance system by making sure that compliance officers have a continuing knowledge of laws and decrees related to their jobs and to compliance regulations.

  • b. In addition to strengthening liaison and supervision by headquarters with the handling of compliance by overseas branches, the Bank has also strengthened implementation of the principles of localization and professionalism, and the appointment of dedicated compliance or anti-money laundering personnel to assure compliance by the branch’s business and its personnel and its anti-money laundering operations. It has also reinforced the qualifications and the training of overseas branch personnel.

• (C) Building of three lines of defense for internal controls and strengthening of the control mechanism for follow-up on compliance cases

  • a. To reinforce and clearly define the roles and authority of the three lines of defense for the TBB’s internal controls, and to oversee the effective operation of the defense lines, the TBB established the Codes of Practice for the Three Lines of Defense for Internal Controls to clearly delineate the role and function of each line of defense. When the risk control is being carried out by each line of defense in accordance with its functions, there should be mutual sharing of know-how and information so that the roles of the different lines of defense can be performed more effectively.

  • b. Law-related documents received from external sources and self-collected information on changes in laws requiring action by the Bank are listed as “compliance follow-up cases” pursuant to the Control Mechanism for Compliance Follow-up Cases. A total of 42 cases were listed as compliance follow-up cases in 2016. The responsible units fill out monthly reports on the status of follow-up on these cases, and these reports are compiled and submitted to Chief Compliance Officer.

• H. Corporate Social Responsibility

• (A) Active implementation of corporate social responsibility and realization of the value of sustainable operation

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• a. For the 2015 CSR Report, the British Standards Institution (BSI) was entrusted for the first time to certify the report, which passed certification as complying with the Guideline Ver.4 of the Global Reporting Initiative. This indicates that the TBB’s CSR actions have won international professional recognition, and enable the public and stakeholders to understand clearly the Bank’s principles and actions in regard to social responsibility, further realizing the Bank’s corporate spirit of care and sharing.

• b. The exchange and interest rate enquiry webpage that the Bank has set up on its official website in order to provide friendly financial services was honored with the highest AAA barrier-free public information page rating by the NCC in 2016. The Bank’s Internet banking and mobile banking services have added credit-card activation and loss reporting functions for the disabled, fulfilling its corporate social responsibility and enhancing its public image.

• (B) Continued contribution to disadvantaged groups and active participation in social benefit activities

• c. The TBB has manifested its spirit of “sending warmth in the chill winter” for six years in a row, mobilizing branches throughout Taiwan to visit disadvantaged groups within their areas of operation. The Bank has made donations to 46 disadvantaged groups, and actively participated in social benefit activities.

• d. The TBB exerted efforts toward the propagation of financial know-how on campuses and in communities in order to promote correct financial management concepts and provide education about the prevention of financial fraud, laying down a solid foundation for financial education. In recognition of these efforts, the Bank was awarded by the Financial Supervisory Commission for the “Promotion of Financial Literacy on Campus and in the Community.”

• (C) Fulfilling responsibility for environmental protection and continued energy conservation and carbon reduction efforts

• a. The Environmental Protection Administration of the Executive Yuan and the Department of Environment Protection of the Taipei City Government cited the TBB five years in a row for outstanding performance in green procurement.

• b. The Taipei City Government publicly cited the TBB for receiving ISO 50001 Energy Management Systems certification and the designation of its headquarters as an energy-saving-label building.

• c. The New Taipei City Government awarded 11 TBB branches—Pu Chya, Lu Chow, Jim Ho, North San Chung, Tu Cheng, Hsin Tien, Shuang Ho, Hwa Cheng, Pan Chiao, Shu Lin, and Hsin Chuang—along with the Linkou Computer Room of the Information

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Technology Department for achievements in electricity-conservation activities.

     - d. Headquarters personnel were provided with automatic meal voucher management service, marking a simplification from the paper meal voucher process which involved monthly printing, issuance, and retrieval. The switch to the systematic automatic issuance of electronic meal vouchers allows for payment via the scanning of QR codes.

  - (D) Provision of a friendly working environment and upgrading of employee well-being

     - a. The TBB promotes occupational safety and health and a friendly working environment, and was awarded by the Department of Health, Taipei City Government with outstanding breast-feeding room certification.

     - b. In 2016, it provided free workplace influenza vaccinations and participated in community health promotional activities held by the Taipei City Government, and received an Outstanding Cancer Prevention Workplace Award and Best Cancer Prevention Partner Workplace Award.

• (2) Budget Implementation

• A. The annual average balance of deposits was NT$1,259.305 billion, for an achievement rate of 103.02%.

• B. The annual average balance of loans outstanding was NT$1,010.824 billion, for an achievement rate of 95.25%.

• C. Fee income from life insurance and property insurance was NT$1.922 billion, for an achievement rate of 115.46%.

• (3) Revenues, Expenditures, and Profitability

• A. Revenues and Expenditures

  • Net income in 2016 amounted to NT$20.409 billion, bad debt expenses and guarantee liability provisions were NT$2.464 billion, operating expenses were NT$11.622 billion, and net income before tax from continuing operations was NT$6.323 billion (a growth of 2.50% from 2015); net profit after-tax was NT$5.196 billion, giving a return on assets (after tax) of 0.35%, return on equity (after tax) of 7.50%, profit margin (after tax) of 25.46%, and after-tax earnings per share of NT$0.87.

• B. Profitability

  • (A) The various items of pre-provision, pre-tax net income totaled NT$8.787 billion, an increase of NT$291 million over 2015. To strengthen loan risk appetite, the Bank allocated NT$2.464 billion in reserves against bad debts. Before-tax profit in 2016 amounted to NT$6.323 billion, an increase of NT$154 million compared with 2015; this was due primarily to the expansion of the wealth management business, leading to an increase in net fee income.

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  - (B) Non-performing loan ratio in 2016 was 0.43%, a decrease of 0.05% compared with 2015, giving a coverage ratio of 277.63%, an increase of 46.41% over 2015.

• (4) Research and Development

• A. Establishment of an Exclusive Unit for Industry Research

  • (A) A total of 174 industry analysis reports were written and published in the Bank’s E-Library in 2016 for colleagues to peruse.

  • (B) Elite professionals from industry, government, and academe are invited to speak on an irregular basis to help the Bank’s employees understand the latest trends in industrial development.

• B. Encouragement of Innovation and Professionalism in Line with Business Development Needs

  • (A) Employees are encouraged to take the initiative in carrying out innovation and suggesting new financial products and methods of business improvement that will enhance the Bank’s business competitiveness. A total of 97 employee suggestions were accepted in 2016.

  • (B) Business lectures are held on a scheduled basis and a rich variety of digital learning courses are offered to encourage employees to engage in further on-the-job studies and absorb new knowledge that will strengthen their competitiveness and enhance their professional know-how.

2. Business Plan of 2017

• (1) Operating Directions and Policies

In response to such developmental trends as the internationalization of financial markets, the ageing population, and digitization, and in coordination with such key points of administration as the Financial Supervisory Commission’s promotion of support for the real economy by financial institutions, the development of fintech, the New Southbound Policy, green finance, and legal compliance, besides giving equal emphasis to financing and guidance in cultivating the specialized field of small and medium enterprise finance and continuously working to lay down a foundation of customer service, the TBB also strives to escape the bonds of traditional thinking and reinforce the development of digital banking.

• A. Augmentation of Equity Capital and Expansion of Business Capabilities

• (A) Reinforcement of investor relations and highlighting of the Bank’s reasonable share value.

• (B) Augmentation of capital and enhancement of business expansion capability.

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• B. Addition of Overseas Units and Integration of Channel Services

  • (A) Reinforcement of overseas deployment and the reinvestment business to upgrade profit contribution.

  • (B) Focus on niche markets and the cultivation of core customers to upgrade customer value.

• C. Optimization of Human Resources and Strengthening of Manpower Training

  • (A) Improvement of the manpower structure and optimization of human resources.

  • (B) Strengthened training of all types of personnel.

• D. Reinforcement of Technological Investment and Development of Digital Finance

  • (A) Strengthening of information infrastructure investment in line with business needs, and enhancement of overall operating performance of information systems.

  • (B) Simultaneous real/virtual integration for optimization of the customer experience.

  • (C) Renovation of old premises and remolding of the TBB’s brand image.

• E.Optimization of Internal Processes and Strengthening of Risk Management

  • (A) Reinforcement of operational and customer management processes.

  • (B) Strengthening of strategic alliances and introduction of innovation capacity.

  • (C) Implementation of various risk management mechanisms and enhancement of asset quality.

• F.Reinforcement of Corporate Governance and Fulfillment of Corporate

  • Social Responsibility

  • (A) Reinforcement of corporate governance and implementation of three lines of defense for internal control.

  • (B) Realization of care for society and fulfillment of corporate social responsibility.

• (2) Business Target

• To give equal weight to the protection of shareholder interests, improvement of the capital structure, and enhancement of asset quality, the Bank has set the following targets in consideration of the economic growth forecast of the Directorate General of Budget, Accounting and Statistics for 2017 and the reduction in the life insurance commission rate:

• A. Annual average deposit balance: NT$1,275.815 billion.

• B. Annual average balance of loans outstanding: NT$1,061.339 billion.

• C. Total foreign exchange transactions: US$65.845 billion.

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3. Result of Latest Credit Rating

Date of Rating	Rating Institution	Ratings	Ratings	Outlook
		Long-term Credit	Short-term Credit
Jan. 25, 2017	Taiwan Ratings	twAA-	twA-1+	Stable
Jan. 25, 2017	Standard & Poors	BBB+	A-2	Stable

Note: The TBB’s level of capital has been raised to and can be maintained at an appropriate level, and the Bank can obtain a certain amount of covert support from the Taiwan government. Taiwan Ratings and Standard & Poors have, therefore, adjusted the Bank’s ratings upward.

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• II.2016 report on surplus allocation is presented and respectfully submitted for recognition.

Explanation:

• 1.The undistributed earnings at the beginning of 2016 was NT$865,796.29, minus the “Defined benefit plans actuarial gains” of NT$259,591,630 in 2016, and plus NT$5,195,698,831.47 of the net income after tax in the fiscal year of 2016, the statement of which were audited by Dan-Dan Chung, CPA and Fung-Huei Lee, CPA of KPMG. The allocation of surplus is conducted in conformity with The Articles of Incorporation of Taiwan Business Bank and related laws as follows: (1) NT$1,481,091,899.32 is to be set aside to Legal Reserve.

• (2) NT$1,055,460,156.19 is to be set aside to Special Reserve.

• A. Under the Ruling No. 1010012865 issued on April 6, 2012 by the Financial Supervisory Commission, net amount of other equity deduction on book as of December 31, 2016 includes “exchange difference from translation of foreign operating departments’ financial statements”, NT$ -19,636,677.29 and “unrealized loss from available-for-sale financial assets”, NT$ -1,009,844,983.90.

• B. Under the Ruling No. 10510001510 issued on May 25, 2016 by the Financial Supervisory Commission, 0.5% of the net profit after-tax, which is NT$25,978,495, was set aside for the expense of employee job transfer or relocation.

A total of NT $1,055,460,156.19 is to be set aside to Special Reserve.

• (3) Shareholders’ bonus – cash dividend (0.102 dollar per share): NT$608,827,278. The cash dividend is rounded off to the whole dollar.

• (4) Shareholders’ bonus – stock dividend (0.3 dollar per share): NT$1,790,668,470.

• (5) NT$925,194.25 is to be set aside to end-of-period undistributed earnings.

• 2.Table of Year 2016 Surplus Allocation of Taiwan Business Bank is attached. Please refer to the Meeting Handbook.

Shareholder Number 10973 expressed his opinion on the purpose of funds and controlling methods of the 0.5% of the net profit after-tax setting aside for the expense of employee job transfer or relocation.

The Chairman and the designated personnel have made explanations to the above statement.

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The result of the vote:

Votes represented by shareholders in session	Affirmative	Affirmative	Negative	Invalid	Abstention /Non-voting
	Counts	Ratio (%)	Counts	Counts	Counts
4,008,469,131	3,706,050,213 (2,146,643,084 voted electronically)	92.45	1,121,939 (1,102,216 voted electronically)	0	301,296,979 (295,018,689 voted electronically)

Resolution: The matter was approved as submitted.

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Discussion Matter

• I. Issue new shares through capitalization of 2016 earnings.

Explanation:

1. Response to the requirement of common equity of Basel III to reinforce the capital structure and increase the profitability. In accordance with Article 240 of the Company Act, the management plans to withdraw earnings to issue dividends stocks of 179,066,847 shares.

2. The total amount of new shares and conditions of issuance for capital increase:

3. (1) It is proposed to inject capital by NT$1,790,668,470, and issue 179,066,847 shares with the face value per share of NT$10. They are all registered common shares.

4. (2) After approval of competent authority for this capital injection by earnings recapitalization submitted upon approval of shareholders meeting, the Board of Directors is authorized to determine ex-dividend date otherwise. The stock dividend is 30 shares over each thousand in accordance with shareholding ratio specified in the stock ledger as of the ex-dividend date. For share less than one, shareholders may apply to stock service agent for combining the fractional stock within five days from ex-dividend date. For failure to combine by deadline or there is still fractional stock after combination, the fractional stock will be distributed by cash (rounded to dollar). The cumulative number of fractional shares to authorize the chairman to contact specific people to subscribe at par.

5. (3) If the shareholders’ stock dividend ratio is altered due to buyback of shares or transfer, conversion and cancellation of treasury stocks or other circumstances, it is proposed to be authorized the Board of Directors by shareholders’ meeting for affairs regarding modification.

6. (4) The shareholders’ rights and obligations of the new shares are the same as those of existing shares.

7. The effect on performance and EPS of the stock dividends distribution: the EPS of 2016 is NT$0.87, the EPS after dividend distribution is NT$0.85, the difference is minor and there’s no effect on the performance.

8. The paid-in capital after this capital increase shall be NT$61,479,617,240, which is still under NT$80 billion, the total capital stated in “Articles of Incorporation of Taiwan Business Bank”.

9. For anything not mentioned in this proposal, the Board of Directors is duly authorized for management.

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The result of the vote:

Votes represented by shareholders in session	Affirmative	Affirmative	Negative	Invalid	Abstention /Non-voting
	Counts	Ratio (%)	Counts	Counts	Counts
4,008,471,473	3,704,716,721 (2,146,523,942 voted electronically)	92.42	1,342,416 (1,322,693 voted electronically)	0	302,412,336 (294,917,354 voted electronically)

Resolution: The matter was approved as submitted.

• II.Amend the Operational procedures for Acquisition and Disposal of Assets by Taiwan Business Bank.

• Explanation:

• In accordance with relevant regulations of Financial Supervisory Commission and Taiwan Stock Exchange, it is proposed to amend The Operational Procedures for Acquisition and Disposal of Assets by Taiwan Business Bank (hereinafter referred to as the Procedure).

• Key points of the amendment of the Procedure are briefly described below:

• (1) Pursuant to Article 9 and Article 11 of “Regulations Governing the Acquisition and Disposal of Assets by Public Companies”, rephrase the term of government agency (Article 5, Article 7).

• (2) Pursuant to Article 14 and Article 30 of “Regulations Governing the Acquisition and Disposal of Assets by Public Companies”, define the scope of repurchasing of domestic money market funds which need not be approved by an audit committee or the board of directors (Section 1 of Article 11, Item 1 & 6 of Section 1 in Article 33).

• (3) Pursuant to Article 22 of “Regulations Governing the Acquisition and Disposal of Assets by Public Companies”, amend Article 25 so that it is not necessary to acquire experts’ opinions on the reasonableness of the share exchange ratio when a parent company merges with its 100% owned subsidiary, or when a

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merger is conducted between its 100% owned subsidiaries (Article 25).

• (4) Pursuant to Article 30 of “Regulations Governing the Acquisition and Disposal of Assets by Public Companies”, lessen the restrictions on the publicly announcing and reporting of the trading of equipment/machinery for business use by an unrelated party. For certain securities trading by investment professionals or securities firms, it is no longer necessary to conduct public announcement and report. Also, regarding an item required by regulations to be publicly announced, define the deadlines for the Bank to correct a public announcement with an error or omission (Item 4 & Item 6 of Section 1 and Section 5 in Article 33).

• (5) In accordance with rules regarding reporting deadlines for public announcements in “Taiwan Stock Exchange Corporation Procedures for Verification and Disclosure of Material information of Companies with listed Securities”, amends reporting deadlines for public announcements of relevant transactions in the Procedure. (Section 4 of Article 27, Section 1 of Article 33, Article 34)

• Please refer to the comparison table in Meeting Handbook for details.

The result of the vote:

Votes represented by shareholders in session	Affirmative	Affirmative	Negative	Invalid	Abstention /Non-voting
	Counts	Ratio (%)	Counts	Counts	Counts
4,008,471,473	3,704,887,770 (2,146,694,991 voted electronically)	92.42	1,154,937 (1,135,214 voted electronically)	0	302,428,766 (294,933,784 voted electronically)

Resolution: The matter was approved as submitted.

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• III. Amendment to the Company's Corporate Charter (Articles of Incorporation) Explanation:

• In order to raise the common equity ratio to that of other banks, and strengthen the momentum of the overall business development, we propose to increase the overall capital size to NTD$100 billion so as to simplify the operational procedures for capital increase.

• Please refer to the comparison table in Meeting Handbook for details.

The result of the vote:

Votes represented by shareholders in session	Affirmative	Affirmative	Negative	Invalid	Abstention /Non-voting
	Counts	Ratio (%)	Counts	Counts	Counts
4,008,471,473	3,700,551,300 (2,142,358,521 voted electronically)	92.31	5,490,961 (5,471,238 voted electronically)	0	302,429,212 (294,934,230 voted electronically)

Resolution: The matter was approved as submitted.

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• IV. Release the Prohibition on Directors from Participation in Competitive Business Explanation

• Follow the regulations of Article 26-1 of “Securities and Exchange Act”, and Section 1 of Article 209 in “Company Act” - A director who does anything for himself or on behalf of another person that is within the scope of the company's business, shall explain to the meeting of shareholders the essential contents of such an act and secure its approval.

• A director who assumed the position after 2016 Annual Meeting of Shareholders, and does anything for himself or on behalf of another person that is within the scope of the company's business is attached in Meeting Handbook. To exempt the director from the disgorgement of the participation in competitive business, it is still necessary to seek the resolution of the meeting of shareholders to release the prohibition on directors from participation in competitive business

The result of the vote:

Votes represented by shareholders in session (Avoidance shares deducted)	Affirmative	Affirmative	Negative	Invalid	Abstention /Non-voting
	Counts	Ratio (%)	Counts	Counts	Counts
2,980,380,346	2,652,751,551 (1,094,558,772 voted electronically)	89	2,284,085 (2,264,362 voted electronically)	0	325,344,710 (317,849,728 voted electronically)

Resolution: The matter was approved as submitted.

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Questions and Motions

1. Shareholder Number 10973 expressed his opinion on common share operations and enquired about the net value change of the Bank after bad debts were all written-off.

2. Shareholder Number 81209 expressed his opinion on the fact that the stock price is lower than the net value, and the dividends distributed this year were less than that of last year.

The Chairman and accountants have made explanations to the above statements.

The Chairman announced the adjournment of the meeting.

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