TBB — AGM Information 2018

Jul 25, 2018

Minutes for the 2018 Annual Meeting of Shareholders

Taiwan Business Bank

Date: June 29, 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: Bor-Yi Huang, Chairman of the Board of Directors Taiwan Business Bank

Meeting Procedure

I. Welcome/ Introduction

Meeting commenced as the shareholding of shareholders present met the regulatory requirement.

II. Opening Remarks by Chairman

III.Report Matter

• (1) Report the business operation of the Bank in 2017.

• (2) Audit Committee’s Review Report on 2017 financial statements.

• (3) Report the allocation of remuneration to employees and directors in 2017.

• (4) Report the amendment to the rules of procedure for meetings of the board of directors.

• IV. Recognition Matter

• (1) 2017 financial statements are presented.

• (2) 2017 Statement of Surplus Allocation is presented.

V.Discussion and Election Matter

• (1) Issue new shares through capitalization of 2017 earnings.

• (2) Amendment to the Company's Corporate Charter (Articles of Incorporation).

• (3) Election of the 15th Board of Directors.

• (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 2017.

Explanation:

Please refer to the Meeting Handbook.

Shareholder Number 10973 expressed opinions on NPL Ratio and Coverage Ratio in annual comparison and in comparison with other banks, as well as opinions on the professional diversion and turnover rate of bank employees.

Shareholder Number 439357 expressed opinions on the financial operations, work specialization of bank employees, compliance and profitability of overseas branches in the U.S. and profit/loss of the TBB (Cambodia) Microfinance Institution PLC.

Shareholder Number 9193 expressed opinions on the meeting efficiency.

Shareholder Number 395792 expressed opinions on the internal control, available-for-sale financial assets and profit/loss.

Shareholder Number 439705 expressed opinions on product types and positions of financial operations, and the fact that the Bank’s stock price is lower than the face value.

Shareholder Number 439820 expressed opinions on the position and profit/loss of financial derivatives.

Shareholder Number 128151 expressed opinions on the risk control of financial operations and retention measures for outstanding bank employees.

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

Resolution: Acknowledged.

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• II.Audit Committee’s Review Report on 2017 financial statements.

Explanation:

Please refer to the Meeting Handbook.

Shareholder Number 439357 expressed opinions on the profit/loss of investment bonds and the change of shareholding of Mega Financial Holding Company.

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

Resolution: Acknowledged.

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• III. Report the allocation of remuneration to employees and directors in 2017. Explanation:

• Rules of Article 235-1 of the incorporation law were followed and related allocation measures were approved by the 18th meeting of the 3rd Remuneration Committee and the 20th meeting of the 14th Board of Directors.

• Remuneration to employees and directors in 2017 were both distributed in cash as follows:

• (1) Remuneration to employees (4.467%): NT$272,350,373

• (2) Remuneration to directors (0.6%): NT$36,581,648

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 amendment to the rules of procedure for meetings of the board of directors.

Explanation:

1. The Bank’s Rules of Procedure for the Board were amended in accordance with the amendment of the provisions of Article 7 of the Regulations Governing Procedure for Board of Directors Meetings of Public Companies as detailed in Taiwan Stock Exchange Tai Zheng Shang Yi Zi Document No. 1061803515, dated August 1, 2017.

2. 2.The key points of the present amendment are as follows:

3. (1) To clarify the authority of independent directors and further reinforce their participation in Board of Directors operations, a clear statement is made that, at least one independent director shall attend each meeting in person. In the case of a meeting concerning any matter required to be submitted for a resolution by the board of directors under paragraph 1, each independent director shall attend in person; if an independent director is unable to attend in person, he or she shall appoint another independent director to attend as his or her proxy (Article 6).

4. (2) The scope of meetings of managing directors is clearly defined in line with the provisions of Article 19 of the Regulations Governing Procedure for Board of Directors Meetings of Public Companies (Article 20).

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

Resolution: Acknowledged.

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Recognition Matter

• I. 2017 financial statements are presented and respectfully submitted for recognition. Explanation:

• The Bank’s 2017 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 20th Board of Directors Meeting of the 14th Board of Directors.

Please refer to the Meeting Handbook.

Voting Result:

Voting Result:
Votes represented by shareholders in session	Affirmative		Negative	Invalid	Abstention /Non-voting
	Counts	Ratio (%)	Counts	Counts	Counts
5,446,893,658	5,061,631,960 (1,045,961,174 voted electronically)	92.92	6,697,715 (6,685,073 voted electronically)	0	378,563,983 (358,716,595 voted electronically)

Resolution: The matter was approved as submitted by way of voting.

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Taiwan Business Bank Business Operation Report in 2017

In 2017, the American labor market was strong and corporate investment vigorous, leading to growth in the economy. The continuing monetary easing policy in the Eurozone boosted economic expansion and the unemployment rate dropped, bolstering consumer confidence, and both the U.K. and Germany registered growth. Structural adjustment continued in China, where the removal of excess production capacity and the imposition of controls in the housing market restrained the speed of economic growth. Information released by HIS Markit indicates that the global economy grew at a rate of 3.2% that year, and that global performance was continuing to warm up.

The steady recovery of the global economy in the first quarter of that year supported the momentum of domestic consumption, semiconductor demand continued strong, and the international prices of agricultural and industrial raw materials rose; these factors, plus a low base period, lead to an expansion of Taiwan’s goods exports. To maintain their advantage in production processes and intelligent applications, domestic semiconductor and related supply-chain companies continued to increase their investment in high-level processes and, with continued government strengthening of infrastructure construction, Taiwan’s economy grew 2.64% for the period. In the second quarter, domestic consumption increased, demand for basic metals and their products as well as machinery strengthened; commodity exports expanded, and the economy grew 2.28%. In the third quarter, with the pace of global recovery speeding up and the semiconductor market waxing strong, plus the effects of the peak buying season, deliveries of all kinds of consumer electronic products boomed; calculated in New Taiwan dollars and excluding price factors, and with service exports included, trade flourished and the economy grew by 3.18%. In the fourth quarter the economy benefited from stable global economic growth, the busy delivery season, and the rise in international prices of agricultural and industrial raw materials; trade momentum remained strong, stimulating exports. Further, an improvement in the domestic job market and lively trading on the stock market supported consumption momentum; domestic airlines continuously expanded their fleets, heightening investment in transportation equipment, and the third-quarter economy expanded 3.28%.

According to statistics compiled by the Directorate General of Budget, Accounting and Statistics, Taiwan’s economy grew by 2.86% in 2017. In the field of interest rates, with the recovery of the domestic economy, and the inflation expected to stay moderate, the Central Bank remained the current policy interest rate unchanged. In the field of exchange rates, starting from the beginning of 2017, due to the high

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uncertainty of the Trump government policy, and a weakening of the U.S. dollar because U.S. President Donald Trump tried to prevent strong U.S. dollar from affecting the competitiveness of enterprises, the NT dollar continued strengthening, and the stock market went strong with the ongoing influx of foreign capital. In 2017, the average exchange rate for the year as a whole was NT$30.439:US$1, up 5.81% from the average exchange rate of previous year (NT$32.318:US$1).

According to the latest “World Economic Outlook” report by the International Monetary Fund (IMF), following a period of weakness, the pace of global economic growth is expected to speed up in 2018 and 2019 in response to the strengthening of global growth momentum and the expected impact of the recently approved changes in U.S. tax policy. Because of these factors, global economic growth is expected to reach 3.9% in both 2018 and 2019. The IMF also indicates that the global economy is currently facing certain risks, including a possible turning inward of U.S. policy that would lead to a rising tide of protectionism; a potential tightening of financial conditions that exceeds expectations, causing weakness in the euro area and some emerging economies; and uncertainty about China’s economic performance. These factors call for continued attention. According to forecasts by the Directorate General of Budget, Accounting and Statistics, and other domestic institutions, Taiwan’s economy will grow at a rate of between 2.27% and 2.42% in 2018; the threats posted by the direction of American fiscal and monetary policy, and by its trade protectionism, continue to exist, however, and this will have an impact on global trade, economy, and financial markets, and the restructuring of China’s economy, and its localization of industry, will influence Taiwan’s domestic economic performance. In addition, the continued rise of geopolitical risk in Northeast Asia and other areas will have an impact on the global economy, and this too will influence Taiwan’s economic performance. Despite the existence of such unfavorable factors as the increased difficulty of operations in the domestic and overseas investment markets caused by macro-environmental variables, and the added cost burden brought on by the reinforcement of information security and legal compliance activities, in general we can look forward to an improvement of the banking industry’s performance and a small growth of profits in 2018.

In the future, the TBB will continue promoting businesses related to government policy and will continuously work vigorously to develop financial technology, and to reinforce information technology and the control of information security. We will establish a “learning and sharing” corporate culture so as to provide our customers with more professional financial consultation services, we will continuously strengthen loan-related risk controls, and we will promote a culture of legal compliance and carry through with internal controls by means of three lines of

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defense. In addition, we will constantly engage in charity and public-benefit activities to show our concern for disadvantaged groups, and we will fulfill our corporate social responsibility so as to establish the Bank’s brand as a leader in small and medium enterprise financing and open a new page as the TBB enters its second century of sustainable development.

Operating results of 2017 and Business plan of 2018 are as follow:

1. Operating results of 2017

• (1) Implementation of Business Plans and Operating Strategies

• A. Profitability

  • After-tax net profit for 2017 amounted to NT$5.040 billion (before-tax net profit was NT$5.788 billion). The Bank carried out a capital increase via transferred earnings of NT$1.791 billion, and issued stock and cash dividends of NT$0.30 and NT$0.102 per share, respectively, for the previous year (2016).

• B. Corporate Governance

  • (A) 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 6%~20% of the Listed Companies Group” in the Fourth 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.

  • (B) Understanding the shareholder structure, strengthened communication with foreign investors, and coming on track with international trends The ratio of foreign institutional shareholders in the Bank’s shareholding structure is increasing steadily. High-level operating officers of the Bank travel overseas personally to visit institutional investors; this boosts two-way communication with foreign institutional investors, and gives them confidence in the Bank’s corporate governance.

• C. Core Businesses

  • (A) Corporate Banking

    • a. The Bank received an Outstanding Award from the Financial Supervisory Commission for the Program to Encourage Lending by

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Domestic Banks to Creative Enterprises (Division A).

  - 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. 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

  • 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 2017 grew 8.27% over 2016.

  • b. The Bank worked vigorously to expand foreign-currency loans and boost interest margin income. Accumulated average loans outstanding in 2017 increased by 9.39% over 2016.

• (C) Wealth Management

  • a. The Bank focused on strengthening its wealth-management business by vigorously expanding fee income from the insurance and fund businesses, thereby 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 totaled 1.87 billion in 2017.

• D. Innovative Products

• (A) Continuous Development of Innovative Digital Banking Businesses and Provision of Convenient Services

  • a. The Bank applied for various financial technology and utility model patents. Applications had been approved for 20 utility model patents and two invention patents by the end of 2017, and 17 invention patents were under review in January of 2018.

  • b. Cross-border Cash Out bound collection and payment services were inaugurated, allowing clients to pay for Taobao online purchases with TBB bank cards.

  • c. Customers were provided with the facility to use mobile banking to make debit payments for consumption, purchases or taxes, and business units were helped to introduce Taiwan Pay collection services.

  • d. Contactless bank cards were introduced, adding a contactless-payment

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function to existing cards. The new-card model was also redesigned, allowing customers to make contactless payments with their cards at contract stores.

  - e. A cardless cash withdrawal function has been added to TBB ATMs. Customers can apply for this service and set their withdrawal code using the TBB Security service on their mobile devices; then, they can withdraw cash from the Bank’s automated service stations by setting up the withdrawal amount on their mobile devices.

  - f. The handling, through the Taiwan Clearing House, of electronic direct debit authorization (eDDA) and enhanced automated clearing house (eACH) functions of the automated clearing house (ACH) has been added.

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

  • a. Teller operations have been simplified, the operating time for hand-written customer application forms has been eliminated, and a pre-arranged outward foreign-currency remittance function has been opened up for customers at smart branches.

  • b. Digital savings account (Type 1) operations have been provided, offering a digital service function.

  • c. In response to the ageing society, the Bank is vigorously promoting long-term care trust to care for elderly and handicapped persons, satisfy the needs of the elderly, and take advantage of opportunities offered by senior citizens.

• E. Expansion of the Scope of Channel Services

• (A) The TBB New York Branch opened on Feb. 27, 2017, expanding the Bank’s U.S. network and providing for the enhancement of operating efficiency.

• (B) The TBB Tokyo Branch opened on Nov. 9, 2017. The Bank will promote the development of real estate financing, syndicated loans, and other businesses of the Tokyo Branch, thereby elevating the efficiency of operations in the Japan area.

• (C) In line with the New Southbound Policy, in the Southeast Asian area the Bank has established the Yangon Representative Office in Myanmar, the TBB (Cambodia) Microfinance Institution PLC, and, on Oct. 2, 2017, the Chamkar Mon (Cambodia) Microfinance Institution, expanding the Bank’s service network to seven countries on four continents.

• F. Information Operations

• (A) Reinforcement of the information system security control mechanism at overseas branches

  • a. In response to regulatory updating carried out by the Hong Kong Monetary Authority, the Bank completed adding time-based one-time password card and transaction monitoring mechanisms to its high-risk

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global e-banking operations in October of 2017.

  - b. Self-assessment was carried out in accordance with SWIFT Customer Security Programme (CSP) specifications, and was approved by SWIFT in December 2017.

  - c. A professional consultant was commissioned to help carry out the Part 500 compliance program in accordance with the network security regulations of the New York State Department of Financial Services (NYDFS), and the consultant confirmed the process completed in December 2017.

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

  • a. The Bank’s ATMs were upgraded to accept EMV chip cards, and EMV certification was received from such organizations as MasterCard, VISA, and China UnionPay.

  • b. The addition of an accessible website function was completed for new webATMs and for Internet banking in general, and application for AA+ certification for this new function has been submitted to the National Communications Commission (NCC).

  • c. The Bank’s Taiwan Pay QR Code acquiring and card-issuance services each received the Best Service Innovation Award for the Electronic Payment Flow Business from the Financial Information Service Company.

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

• (A) Full implementation of anti-money laundering and combatting the financing of terrorism in line with the regulations of the competent authority

  • a. The Anti-Money Laundering Section of the TBB’s Compliance and Legal Department constantly oversees the Bank’s implementation of matters regarding anti-money laundering and combatting the financing of terrorism.

  • b. In response to the upcoming fourth-quarter 2018 assessment by the Asia Pacific Group on Money Laundering (APG) and to the supervision needs of the competent authority in regard to anti-money laundering and combatting the financing of terrorism, the Bank completed the modification of its management mechanism for anti-money laundering and combatting of terrorism financing in accordance with the Money Laundering Control Act, Terrorism Financing Prevention Act, Regulations Governing Anti-Money Laundering of Financial Institutions, Guidance for Internal Control of Anti-Money Laundering and Counter Terrorism-Financing of Banks, Electronic Payment Institutions and Electronic Stored Value Card

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Issuers, Template of Directions Governing Anti-Money Laundering and Combating the Financing of Terrorism by Banks, and Guidelines Governing Money Laundering and Terrorist Financing Risks Assessment and Relevant Prevention Program Development by Banks.

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

  • a. A Compliance Officer Seminar was held in each the first and second halves of 2017, 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 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) Strengthening of the monitoring mechanism for compliance follow-up 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 43 cases were listed as compliance follow-up cases in 2017. 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.

• (D) Carrying out annual project audits for personal information protection and anti-money laundering and combatting the financing of terrorism by accountants in accordance with the Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries

  • An accounting firm was commissioned to carry out the “2016 Project Audit of the Internal Control System for Personal Information Protection” and “2017 First-half Project Audit of the Internal Control System for Anti-Money Laundering and Combatting the Financing of Terrorism”.

• H. Corporate Social Responsibility

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

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• a. The “2016 CSR Report” passed two stages of verification by the British Standards Institution (BSI), which issued the Bank an Independent Assurance Opinion Statement. This shows that the Bank’s CSR meets international standards and strengthens the credibility of its CSR Report.

• b. The TBB’s “2016 CSR Report” was entered for the first time in an external CSR report rating, and it won a bronze award in the banking and insurance industry report division of the Taiwan Corporate Sustainability Awards organized by the Taiwan Institute for Sustainable Energy, TAISE. This achievement helps upgrade the Bank’s visibility and its corporate image for CSR implementation.

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

• a. The TBB has manifested its spirit of “sending warmth in the chill winter” for 7 years in a row, mobilizing branches throughout Taiwan to visit disadvantaged groups within their areas of operation. The Bank has made donations to 39 disadvantaged groups, and actively participated in social benefit activities.

• b. 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 six 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 Bank implemented its “Energy Policies” and “Measures for Water and Electricity Conservation” with scheduled follow-up on the status of water and electricity conservation by different units and inclusion of the results in business performance assessments. Various energy conservation improvement programs were forcefully carried out in order to enhance the energy efficiency of equipment and save on electricity costs.

• (D) Provision of a friendly working environment and upgrading of employee

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well-being

The TBB promotes occupational safety and health management along with a friendly working environment. It carries out programs for the prevention of diseases caused by abnormal workloads, ergonomic risks, and illegal harassment in the workplace, as well as a maternal health protection program. In 2017 the Bank offered healthy weight management and free flu vaccinations. For these efforts, the Bank was awarded 2017 healthy workplace initiation certification by the Health Promotion Administration of the Ministry of Health and Welfare.

(2) Budget Implementation

• A. The annual average balance of deposits was NT$1,310.328 billion, for an achievement rate of 102.71%.

• B. The annual average balance of loans outstanding was NT$1,063.179 billion, for an achievement rate of 100.17%.

• C. The foreign exchange business amounted to US$70.845 billion, for an achievement rate of 107.59%.

• D. The securities brokerage business amounted to NT$255.495 billion, for an achievement rate of 115.61%.

• E. Domestic and overseas fund business undertaken amounted to NT$32.893 billion, for an achievement rate of 119.14%.

• (3) Revenues, Expenditures, and Profitability

• A. Net income for 2017 amounted to NT$20.583 billion; bad debt expenses and provision for guarantee liabilities totaled NT$3.009 billion; operating expenses were NT$11.786 billion; before-tax net income from continuing operations was NT$5.788 billion; net profit after tax was NT$5.040 billion; return on assets ratio (after tax) amounted to 0.33%; return on equity ratio (after tax) amounted to 6.87%; net profit margin (after tax) was 24.49%; and earnings per share (after tax) was NT$0.82.

• B. Net income before taxes (excluding provisions) in 2017 amounted to NT$8.797 billion, an increase of NT$10 million over 2016. NT$3.009 billion was allocated as allowance for bad debts in order to strengthen risk appetite. Before-tax net profit for 2017 totaled NT$5.788 billion; this was down NT$535 million from the previous year, primarily because of increased allowances for bad debts.

• C. The non-performing loan ratio at the end of 2017 stood at 0.33%, a reduction of 0.10% compared with the end of 2017; and the bad-debt coverage ratio was 327.57%, an increase of 49.94% over the end of 2016.

• (4) Research and Development

• A. Establishment of an Exclusive Unit for Industry Research

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• (A) A total of 174 industry analysis reports were written and published in the Bank’s E-Library in 2017 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 41 employee suggestions were accepted in 2017.

• (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 2018

• (1) Operating Directions and Policies

• A. Compliance with Government Policy in the Promotion of Related Businesses

  • (A) Fulfillment of the SME specialized bank function with equal emphasis on financing and guidance, and consolidation of the unique position of a specialized bank.

  • (B) Promotion of urban renewal, green energy financing, senior financing and culture/creation financing.

  • (C) Investment in venture capital companies so as to boost the Bank’s competitiveness and value through the nurturing of cultural/creative and start-up enterprises.

• B. Upgrading of Information System and Information Security Defensive Functions, and Promotion of Inclusive Financing

  • (A) Reinforcement of the IT infrastructure, improvement of the overall effectiveness of information systems, and deep implantation of the information base.

  • (B) Provision of customized electronic payment flow services to support various business development.

• C. Reinforcement of Profitability and Risk Control

  • (A) Deep cultivation of core small and medium enterprise businesses and improvement of the profit base under the precondition of equal emphasis on risk and profit.

  • (B) Strengthening of overseas channel management to diversify profit sources.

  • (C) Reinforcement of the quality of loan risk management and post-loan

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management.

• D. Promotion of a Compliance Culture and Implementation of Internal Control with Three Lines of Defense

  • (A) Strengthening of anti-money laundering and anti-terrorism financing management.

  • (B) Fine-tuning of the internal organization in compliance with the Financial Supervisory Commission’s oversight demands.

  • (C) Reinforcement of the overseas branch management mechanism.

• E. Emphasis on Employee Training and the Transfer of Work Experience

  • (A) Strengthening of professional training and implementation of the employee transition plan.

  • (B) Invigoration of organizational capability and optimization of human resources.

• F. Fulfillment of Corporate Social Responsibility and Manifestation of an Outstanding Corporate Image

  • (A) Reinforcement of corporate governance and upgrading of the Bank’s positive corporate image.

  • (B) Implementation of social care and fulfillment of social responsibility.

• (2) Business Targets

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 2018 and the reduction in the life insurance commission rate:

• A. Annual average deposit balance: NT$1,352.593 billion.

• B. Annual average balance of loans outstanding: NT$1,117.442 billion.

• C. Total foreign exchange transactions: US$73.004 billion.

3. Results of Latest Credit Rating

Date of Rating	Rating Institution	Ratings	Ratings	Outlook
		Long-term Credit	Short-term Credit
Jan. 17, 2018	Taiwan Ratings	twAA-	twA-1+	Stable
Jan. 17, 2018	Standard & Poors	BBB+	A-2	Stable

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• II.2017 report on surplus allocation is presented and respectfully submitted for recognition.

Explanation:

• 1.The undistributed earnings at the beginning of 2017 was NT$925,194.25, minus the “Defined benefit plans actuarial gains” of NT$207,018,600 in 2017, and plus NT$5,039,924,148.87 of the net income after tax in the fiscal year of 2017, 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$1,450,149,222.93 is to be set aside to Legal Reserve.

• (2) NT$724,033,311.88 is to be set aside to Special Reserve.

• A. Under the Ruling No. 1010012865 issued on April 6, 2012, and the Ruling No. 10510001510 issued on May 25, 2016 by the Financial Supervisory Commission.

• B. The net amount of other equity deduction on book as of December 31, 2017 includes “exchange difference from translation of foreign operating departments’ financial statements”, NT$ -835,340,098.95 and “unrealized loss from available-for-sale financial assets”, NT$ -529,112,875.64. In addition, 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$25,199,621, was set aside for the expense of employee job transfer or relocation. Since NT $1,055,460,156.19 has been set aside to Special Reserve in the previous year, therefore, the distributable earnings amount to 724,033,311.88.

• (3) Shareholders’ bonus – cash dividend (0.268 dollar per share): NT$1,647,653,743. The cash dividend is rounded off to the whole dollar.

• (4) Shareholders’ bonus – stock dividend (0.4 dollar per share): NT$2,459,184,690.

• (5) NT$876,399.07 is to be set aside to end-of-period undistributed earnings.

• 2.Table of Year 2017 Surplus Allocation of Taiwan Business Bank is attached. Please refer to the Meeting Handbook.

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Voting Result:

Voting Result:
Votes represented by shareholders in session	Affirmative		Negative	Invalid	Abstention /Non-voting
	Counts	Ratio (%)	Counts	Counts	Counts
5,446,893,658	5,087,229,400 (1,071,558,614 voted electronically)	93.39	1,257,677 (1,245,035 voted electronically)	0	358,406,581 (338,559,193 voted electronically)

Resolution: The matter was approved as submitted by way of voting.

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Discussion and Election Matter

• I. Issue new shares through capitalization of 2017 earnings.

Explanation:

1. In response to the requirement of common equity of Basel III to reinforce the capital structure and increase the profitability, the management plans to withdraw earnings to issue dividends stocks of 245,918,469 shares in accordance with Article 240 of the Company Act.

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

3. (1) It is proposed to inject capital by NT$2,459,184,690, and issue 245,918,469 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 40 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: According to the “Regulations Governing the Publication of Financial Forecasts of Public Companies” and Taiwan Stock Exchange Corporation Standards for Determining Whether a TWSE Listed Company Shall Publish Complete Financial Forecasts, the bank has not published its financial forecast of 2018; therefore, it is not able to disclose the effect of stock dividends distribution on the revenue, profit/loss and EPS of the Bank.

8. The paid-in capital after this capital increase shall be NT$63,938,801,930, 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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Shareholder Number 37413 enquired if the Bank would consider issuing preferred shares.

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

The voting method designated by the Chairman: Discussion and Election Matter I and II shall be discussed one by one and voted separately at the same time after discussion.

Voting Result:

Voting Result:
Votes represented by shareholders in session	Affirmative		Negative	Invalid	Abstention /Non-voting
	Counts	Ratio (%)	Counts	Counts	Counts
5,446,893,658	5,087,256,936 (1,071,567,767 voted electronically)	93.39	1,231,273 (1,231,273 voted electronically)	0	358,405,449 (338,563,802 voted electronically)

Resolution: The matter was approved as submitted by way of voting.

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

• To make the Bank’s name consistent with that on the English business license issued to the Bank by the Financial Supervisory Commission, and to fulfill the needs for submitting application documents to foreign governments in the establishment of overseas units, the word “, Ltd.” is to be added to the name of the Bank.

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

Voting Result:

Voting Result:
Votes represented by shareholders in session	Affirmative		Negative	Invalid	Abstention /Non-voting
	Counts	Ratio (%)	Counts	Counts	Counts
5,446,893,658	5,087,263,974 (1,071,516,756 voted electronically)	93.39	1,375,331 (1,375,319 voted electronically)	0	358,254,353 (338,470,767 voted electronically)

Resolution: The matter was approved as submitted by way of voting.

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III. Election of the 15th Board of Directors

1. The term of office of the Company’s 14th Board of Directors will expire on June 25 this year (2018). According to the provisions of Article 195 of the Company Act, in case no election of new directors is effected after expiration of the term of office of existing directors, the term of office of out-going directors shall be extended until the time new directors have been elected and assumed their office. Matters regarding the re-election of directors will be organized when this year’s (2018’s) shareholders’ meeting is held.

2. According to the provisions of Article 20 of the Company’s charter, no less than three of the Company’s 15 directors shall be independent directors nor shall independent directors make up less than one-fifth of the total number of directors. The term of office of directors is three years.

3. The election of 15 members of the 15th Board of Directors (including three independent directors) is for a term of three years, from June 29, 2018 to June 28, 2021. The candidate nomination system will be used for this election of directors. The list of candidates was reviewed and approved by the 21st meeting of the 14th Board of Directors on May 9, 2018. Please refer to Meeting Handbook for details.

Election Result:

Votes represented by shareholders in session: 5,446,943,046 shares (accounting for 88.59% of total number of shares issued)

No	Shareholder Number		Votes Received	Remarks
		Name
1	85515		7,595,528,627	Elected
		Bor-Yi Huang
2	85515		6,880,759,503	Elected
		Chien-An Shih
3	85515		4,638,822,304	Elected
		Shiu-Yen Lin
4	85515		4,660,574,462	Elected
		Wen-Chieh Wang
5	85515		6,596,843,367	Elected
		Hung-Sheng Yu
6	85515		6,641,142,145	Elected
		Lien-Wen Liang
7	85515	Representative of the Ministry of	1,080,384,039
		Finance
8	85515	Representative of the Ministry of	343,279,670
		Finance
9	1002		6,690,175,996,	Elected
		Li-Ling Lin

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10	1002		5,081,365,519	Elected
		Pei-Ming Huang
11	1002		4,584,831,401	Elected
		Cheng-Chuan Kang
12	10409		4,622,728,952	Elected
		Ying-Ming He
13	76436		6,506,275,335	Elected
		Feng-Yung Liu
14	146685		5,068,920,470	Elected
		Che-Nan Wang
15	Independent Director		1,626,803,091	Elected
		Xin-Wu Lin
16	Independent Director		1,353,765,913	Elected
		Jin-Long Liu
17	Independent Director		1,353,677,931	Elected
		Wei-Sheng Huang

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

• According to the provisions of Paragraph 1 and Paragraph 5 of Article 209 of the 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, and in violation of the provisions of Paragraph 1, the meeting of shareholders may, by a resolution, consider the earnings in such an act as earnings of the company.

• Members of the Bank’s 14th Board of Directors who were reappointed on May 23, 2018, and have done anything for themselves or on behalf of other persons that is within the scope of the company's business are attached in Meeting Handbook. To exempt the directors 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. In addition, in accordance with the provisions of Article 209 of the Company Act, approval is proposed for, abolishment of the non-competition restrictions for members of the 15th Board of Directors or the institutions they represent, who do something for themselves or on behalf of other persons that is within the scope of the Company’s business, under the precondition that such behavior does not harm the Company’s interests.

• To facilitate the exercise of shareholders’ voting rights electronically, candidates for election to the 15th Board of Directors who have done something for themselves or on behalf of other persons that is within the scope of the Company’s business are listed in the Abolishment of Non-Competition Restriction List attached to the Meeting Handbook. These who are subject to the abolishment, however, shall be persons who are actually elected as Company directors.

Shareholder Number 366939 enquired about the reasons for releasing the prohibition from participation in competitive business.

The Chairman and attorneys have made explanations to the above statement.

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Voting Results:

1. Release the Prohibition on Directors from Participation in Competitive Business – Ying-Ming He (the 14[th] and 15[th] BOD)

Votes represented by shareholders in session (Avoidance shares deducted)	Affirmative	Affirmative	Negative	Invalid	Abstention /Non-voting
	Counts	Ratio (%)	Counts	Counts	Counts
5,297,698,343	4,900,002,963 (1,034,786,663 voted electronically)	92.49	2,835,708 (2,835,708 voted electronically)	0	394,859,672 (373,740,471 voted electronically)

2. Release the Prohibition on Directors from Participation in Competitive Business – Ministry of Finance (the 15[th] BOD)

Votes represented by shareholders in session (Avoidance shares deducted)	Affirmative	Affirmative	Negative	Invalid	Abstention /Non-voting
	Counts	Ratio (%)	Counts	Counts	Counts
5,311,311,799	4,913,554,491 (1,034,782,784 voted electronically)	92.51	2,840,045 (2,840,045 voted electronically)	0	394,917,263 (373,740,013 voted electronically)

3. Release the Prohibition on Directors from Participation in Competitive Business – Bank of Taiwan (the 15[th] BOD)

Votes represented by shareholders in session (Avoidance shares deducted)	Affirmative	Affirmative	Negative	Invalid	Abstention /Non-voting
	Counts	Ratio (%)	Counts	Counts	Counts
4,388,009,186	3,990,208,891 (1,034,726,748 voted electronically)	90.93	2,845,087 (2,845,087 voted electronically)	0	394,955,208 (373,791,007 voted electronically)

4. Release the Prohibition on Directors from Participation in Competitive Business – Land Bank of Taiwan (the 15[th] BOD)

Business – Land	Bank of Taiwan (the 15t	Bank of Taiwan (the 15t	h BOD)
Votes represented by shareholders in session (Avoidance	Affirmative		Negative	Invalid	Abstention /Non-voting
	Counts	Ratio	Counts	Counts	Counts

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shares deducted)		(%)
5,297,698,343	4,899,888,135 (1,034,774,896 voted electronically)	92.49	2,843,427 (2,843,427 voted electronically)	0	394,966,781 (373,744,519 voted electronically)

5. Release the Prohibition on Directors from Participation in Competitive Business – Li-Ling Lin (the 15[th] BOD)

Votes represented by shareholders in session (Avoidance shares deducted)	Affirmative	Affirmative	Negative	Invalid	Abstention /Non-voting
	Counts	Ratio (%)	Counts	Counts	Counts
4,388,009,186	3,990,246,809 (1,034,777,727 voted electronically)	90.93	2,847,086 (2,847,074 voted electronically)	0	394,915,291 (373,738,041 voted electronically)

6. Release the Prohibition on Directors from Participation in Competitive Business – Pei-Ming Huang (the 15[th] BOD)

Votes represented by shareholders in session (Avoidance shares deducted)	Affirmative	Affirmative	Negative	Invalid	Abstention /Non-voting
	Counts	Ratio (%)	Counts	Counts	Counts
4,388,009,186	3,990,305,840 (1,034,778,685 voted electronically)	90.93	2,846,056 (2,846,056 voted electronically)	0	394,857,290 (373,738,101 voted electronically)

7. Release the Prohibition on Directors from Participation in Competitive Business – Cheng-Chuan Kang (the 15[th] BOD)

Votes represented by shareholders in session (Avoidance shares deducted)	Affirmative	Affirmative	Negative	Invalid	Abstention /Non-voting
	Counts	Ratio (%)	Counts	Counts	Counts
4,388,009,186	3,990,305,880 (1,034,778,737 voted electronically)	90.93	2,846,076 (2,846,064 voted electronically)	0	394,857,230 (373,738,041 voted electronically)

Resolution: The matter was approved as submitted by way of voting.

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Questions and Motions

1. Shareholder Number 338538 enquired about the strategic objectives of the Bank in the next 5 years and the plan to enter into the mobile payment market.

2. Shareholder Number 386270 expressed opinions on the management of domestic and overseas branches.

3. Shareholder Number 286071 expressed opinions on TransAsia Airways loan right and recovery.

4. Shareholder Number 257987 suggested to increase salary to avoid loss of talent, pay attention to the operational risks of overseas locations, increase the Bank’s own premises, and cooperate with the Small and Medium Enterprise Credit Guarantee Fund of Taiwan to provide strong support to SMEs.

The Chairman and relevant personnel have made explanations to the above statements.

The Chairman announced the adjournment of the meeting.

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