HSBC Taiwan Executive Forum

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TWSE Code 5871

May 24 , 2017

HSBC Taiwan Executive Forum

Disclaimer

This presentation contains forward-looking statements concerning the financial condition, results

of operations and businesses of Chailease Holding Company Limited (the "Company"). All

statements other than statements of historical fact are, or may be deemed to be, forward-looking

statements. Forward-looking statements are statements of future expectations that are based on

management’s current expectations and assumptions and involve known and unknown risks and

uncertainties that could cause actual results, performance or events to differ materially from those

expressed or implied in these statements. Forward-looking statements include, among other

things, statements concerning the potential exposure of the Company to market risks and

statements expressing management’s expectations, beliefs, estimates, forecasts, projections and

assumptions. These forward-looking statements are identified by their use of terms and phrases

such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘may’’, ‘‘plan’’,

‘‘objectives’’, ‘‘outlook’’, ‘‘probably’’, ‘‘project’’, ‘‘will’’, ‘‘seek’’, ‘‘target’’, ‘‘risks’’, ‘‘goals’’,

‘‘should’’ and similar terms and phrases. There are a number of factors that could affect the

future operations of the Company and could cause those results to differ materially from those

expressed in the forward-looking statements included in this document. All forward-looking

statements contained in this document are expressly qualified in their entirety by the cautionary

statements contained or referred to herein. Readers should not place undue reliance on forward-

looking statements. Each forward-looking statement speaks only as of the date of this

presentation. Neither the Company nor any of its subsidiaries undertake any obligation to publicly

update or revise any forward-looking statement as a result of new information, future events or

other information. In light of these risks, results could differ materially from those stated, implied

or inferred from the forward-looking statements contained in this presentation .

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Agenda

Business Review

1Q2017 Performance Review

Segment Review

Q&A

Appendix

Company Overview

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Chailease Holding Co., LTD.

■ Leading Taiwan-based Finance Company.

■Over 40 Years of Experience & In-depth Knowledge Of SME Financing.

■ Prudent Risk Management with Proved Track Records.

■ Positioned As a Multi Financing Service Provider To SMEs.

■ Taiwan Serves As a Product And HR Development Center.

■ Steadily Increases Sources Of Non-interest Income.

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Leading Taiwan-based SME Finance Company with Focus on Greater China and Emerging Asia

Commenced operations in 2005 with national

leasing license

Focus on capital leasing and expanding into

factoring and trade financing

~11,000 clients (90% are local enterprises)

37 offices nationwide and 690 sales personnel

PRC

Taiwan

40 years of operating track record since 1977

Leading market position in leasing and

installment sales

Full SME financing platform

Diversified SME-focused customer base with

over 20,000 corporate clients

13 offices and over 1,200 sales personnel

Thailand

Commenced operations in 1989

Focus on automobile installment

sales, equipment leasing and

factoring

10 offices in key commercial hubs

Vietnam

Commenced operations in 2007

Focus on capital leasing

3 offices in Hanoi, HCMC and Cantho

Notes

Unless otherwise indicated, all figures are as of Dec. 31, 2016

1. Others include assets from our U.S. and Vietnam operations as well as those of the holding companies; the Company is engaged in commercial real estate financing in the U.S. (Los Angeles) and focuses mainly on asset

management and risk control since the subprime crisis

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Agenda

Business Review

1Q 2017 Performance Review

Segment Review

Q&A

Appendix

Company Overview

6

Customized SME Financing Solutions and

New and Innovative Products

■Chailease has presence

in 13 locations in Taiwan

– Covers all the major

commercial centers

■More than 2,000

personnel as at Dec. 31,

2016

■45% of total contract

value of new leasing and

installment sales

contracts among TLA

members in 2015 in

Taiwan

Hsinchu

Kaohsiung

Tainan

Changhwa

Ilan

Taichung

Taipei Taoyuan

New Taipei

Hsinchung

Chungli

Chiayi

1977

1980

1986

1989

1995

2011

2012

Leasing Installment sales

International factoring

Automobile installment sales

Domestic factoring

Direct financing

Automobile leasing

Car rental

ESCO financing

Insurance brokerage

2006

Extensive Distribution Network

Market Leader in the Taiwan Leasing Industry

2003

Aircraft financing

2013

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Hualian

2014

Solar project

Well Positioned to Capture the Significant Growth Potential in the PRC

Extensive Footprint across Major

Industrial & Commercial Hubs in PRC(2)

Source Company

PRC Strategy

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Expand presence gradually from coastal

regions to inland cities

Broaden industry exposure

Expand product offerings and enter niche

financing businesses

1

2

3

4 Further strengthen risk and human resources

management

Newly added branches for 2017:

Taizhou and Dongguan

Strategic Alliances with major banks to

ensure sufficient funding to support growth

Offshore Funding

Medium-Term Note

Continue to diversify sources of funding

and lower funding cost

• Bank Loans

• Commercial Papers

• Corp Bonds

• TWSE Listing

• Securitization

Taiwan PRC

Adequate and Diverse Funding to Support Business Growth

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Effective Credit Risk Management System and Risk Pricing Mechanism

Credit Policy

■ Enforcement of the credit grading and scoring system

■ Performance review tied to asset quality

Effective Credit Review and Approval Process to Ensure Adequate Return Risk Exposure

1

Review Application Documents

• Whether the application has any element falling into the blacklist

• Whether all the required documents are in order

• Any need to request other documents

Credit Rating and Approval

• Proceed within the scope of authorisation

3 Confirmation and Approval

Initial Application 2

Discussion Between Business Department and Credit Department

Case Assignment

• The management of credit department assigns the application to a credit officer

• Discuss and clarify the structure of the application and identify issues

On-Site Visit

Analyse credit data

Decide the credit amount and financing terms

Appraisal

Prepare credit analysis reports

Credit rating and scoring, and applying the risk model

• On-site credit investigation to reduce the possibility of misjudgment

• Face-to-face credit investigation to verify the accuracy of information provided or to supplement information

Information Gathering and Analysis

Credit Approval Process

Credit Review and Decision Process

■ Standardized operating procedure of credit evaluation

■ Segregation of sales and credit appraisal functions

■ Streamlined credit approval process

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■ Develop various credit risk

management models based on the

use of credit rating system

■ Integrate qualitative and

quantitative client information to

quantify a client’s creditworthiness

and provide an early earning

mechanism with regard to its

overall risk exposure

■ The IRB approach consists of:

Comprehensive Credit Risk Model Increases the Accuracy of Assessment

Internal Rating Based (“IRB”) Approach Model Structure Model Application

Credit Risk

Management Model

(Quantification)

Credit Rating System

(Expertise/

Quantification)

■ Built according to actual SME

samples

■ Financial and non-financial factors

included

■ Constructed using diversified statistical

methods

■ Suitable for SME risk assessment

■ Periodical review to ensure adequacy

of the model

■ Estimate and quantify the risk

(EAD*PD)

■ Provide the basis for underwriting and

financing terms structuring (e.g. adjust

financing terms or make credit

enhancement)

■ Calculate the expected loss and

provide allowance for impairment

losses

Expected

Loss

Exposure

At

Default

Probabi-

lity of

Default

Loss

Given

Default = x x

The Company Calculates

Probability of Default for Each

Rating Level Based on the

Risk Assessment Model

Input Output

Scoring

Materials

■ Default assessment

■ Default point

■ Probability of

default

1 Enhance risk management capability with a standardized and tested methodology

2 Enhance accuracy of risk assessment and credit exposure

3 Reduce potential loss

Effective Credit Risk Management System and Risk Pricing Mechanism (Cont’d)

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Agenda

Business Review


Segment Review

Q&A

Appendix

Company Overview

12

Consolidated loan portfolio growth in line with the target, on

a local currency basis.

Operational efficiency further increased.

China asset quality remains on an improving trend.

1Q2017 YOY QOQ

Consolidated 6% -1%

Taiwan 10% 2%

China -4%(RMB7%) -5%(RMB0%)

ASEAN 10% 0%

Management Highlights

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Unit: NT$ million

Source: unaudited financial statements Excludes US securitization asset

QOQ -1%

Total Portfolio Consolidated

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Exclude sales revenue and service fee from securitization Source: unaudited financial statements

Loan Yield & COF Consolidated

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Unit: NT$ million

Source: unaudited financial statements Exclude US securitization asset, sales revenue and service fee from securitization

Fee Income Consolidated

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Source: unaudited financial statements

Revenue Consolidated

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Net Profit & EPS Consolidated

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Cost to Income Ratio=Opex excludes impairment losses on receivables / Gross profit from operation Source: unaudited financial statements

Cost to Income Asset to Equity

Cost to Income & Asset to Equity Consolidated

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ROA ROE


ROA & ROE Consolidated

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Delinquency Allowance

Definitions of delinquencies:

• Check payments: overdue more than 7 days

• Equipment leasing with non-check payments: overdue more than 30 days

• Automobile installment sales in Thailand: overdue more than 90 days

Source: unaudited financial statements Excludes US securitization asset

Asset Quality Consolidated

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Agenda

Segment Review


Business Review

Q&A

Appendix

Company Overview

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Unit: NT$ million


Total Loans & Receivables Taiwan

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Source: unaudited financial statements Excludes sales revenue and service fee from securitization

Loan Yield & COF Taiwan

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Unit: NT$ million

Source: unaudited financial statement Exclude sales revenue and service fee from securitization

Fee Income Taiwan

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Unit: NT$ million


Revenue Taiwan

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Unit: NT$ million


Net Profit Taiwan

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Delinquency Recovery & Write-Offs

Note: Definitions of delinquencies • Check payments: overdue more than 7 days

• Equipment leasing with non-check payments: overdue more than 30 days Source: unaudited financial statements

Asset Quality Taiwan

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Note: Definitions of delinquencies • Check payments: overdue more than 7 days

• Equipment leasing with non-check payments: overdue more than 30 days Source: unaudited financial statements

Asset Quality-Allowance

Taiwan

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Unit: NT$ million

YOY -4% (RMB 7%)


QOQ -5% (RMB 0%)

Total Loans & Receivables China

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Source: unaudited financial statements Loan yield excludes sales revenue

Loan Yield & COF China

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Unit: NT$ million

Source: unaudited financial statement

Fee Income China

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Unit: NT$ million


YOY 4%

Revenue China

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Unit: NT$ million


Revenue Breakdown China

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Net Profit China

Unit: NT$ million


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Asset Quality China

Delinquency Recovery & Write-Offs

Definitions of delinquencies • Check payments: overdue more than 7 days



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Definitions of delinquencies • Check payments: overdue more than 7 days



Asset Quality-Allowance

China

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Total Portfolio ASEAN (Thailand, Vietnam, Malaysia and

Cambodia) Unit: NT$ million


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Revenue ASEAN (Thailand, Vietnam, Malaysia and Cambodia)

Unit: NT$ million


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Net Profit ASEAN (Thailand, Vietnam, Malaysia and Cambodia)

Unit: NT$ million


QOQ -8%

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Q & A

Investor Relations: [email protected]

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Agenda

Management Highlight


Segment Review

Q&A

Company Overview

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Appendix


(NTD'000) 2017.3.31 2016.3.31 YOY(%) 2016.12.31 QOQ(%)

Cash and cash equivalents 12,836,133 11,910,953 8 12,936,615 (1)

Total fund and investments 9,386,127 13,158,534 (29) 9,640,059 (3)

Gross loans and receivables 273,557,933 256,925,654 6 273,045,833 0

Total unearned charges and interests (25,381,906) (21,862,312) 16 (23,361,043) 9

Total allowance (8,486,521) (7,526,838) 13 (8,502,229) 0

Loans and receivables-net 239,689,506 227,536,504 5 241,182,559 (1)

Other receivables 3,646,577 3,566,300 2 3,315,724 10

Property, plant and equipment 10,095,475 9,931,587 2 10,336,214 0

Other assets 7,638,541 7,623,651 0 8,672,287 (12)

Total Assets 283,292,359 273,727,529 3 286,083,458 (1)

Interest bearing loans and borrowings

188,165,067 181,385,845 4 190,940,836 (1)

Corporate bonds payable 14,658,780 14,707,717 0 14,950,708 (2)

Other Liabilities 37,791,653 36,051,166 5 38,683,686 (2)

Total liabilities 240,615,500 232,144,728 4 244,575,230 (2)

Common stock 11,392,300 11,392,300 0 11,392,300 0

Total equity attributable to equity holders

40,371,573 39,345,717 3 39,310,443 3

Minority interests 2,305,286 2,237,084 3 2,197,785 5

Total equity 42,676,859 41,582,801 3 41,508,228 3

Consolidated Balance Sheet Summary

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(NTD'000) 1Q 2017 1Q 2016 YOY(%) 1Q 2017 4Q 2016 QOQ(%)

Sales revenue 1,641,904 1,485,359 11 1,641,904 1,978,712 (17)

Interest income 5,655,922 5,422,624 4 5,655,922 5,634,480 0

Rental revenue 774,268 688,067 13 774,268 762,505 2

Fee and commission income 1,100,641 1,023,457 8 1,100,641 1,463,889 (25)

Other operating revenue 198,316 152,093 30 198,316 194,992 2

Total operating revenue 9,371,051 8,771,600 7 9,371,051 10,034,577 (7)

Cost of goods sold 1,425,289 1,328,761 7 1,425,289 1,662,746 (14)

Interest expense 1,163,172 1,220,137 (5) 1,163,172 1,153,817 1

Cost of rental revenue 612,209 475,835 29 612,209 541,363 13

Other operating costs 264,473 222,641 19 264,473 346,465 (24)

Total operating costs 3,465,143 3,247,374 7 3,465,143 3,704,391 (6)

Gross margin 5,905,908 5,524,226 7 5,905,908 6,330,186 (7)

Employee compensation and benefits

1,261,173 1,261,173 0 1,261,173 1,109,129 14

Impairment loss on loans, notes and receivables

1,220,072 1,189,590 3 1,220,072 1,769,962 (31)

Other operating expense 790,721 902,878 (12) 790,721 1,135,292 (30)

Total operating expenses 3,271,965 3,353,641 (2) 3,271,965 4,014,383 (18)

Other operating gain and loss 48,085 29,275 64 48,085 50,901 (6)

Total non-operationg revenue and expense

298,084 99,074 201 298,084 76,061 292

Profit before taxation 2,980,112 2,298,934 30 2,980,112 2,442,765 22

Income tax expense 741,613 595,317 25 741,613 568,497 30

Profit from continuing operations 2,238,499 1,703,617 31 2,238,499 1,874,268 19

Profit attributable to equity holders 2,156,444 1,621,126 33 2,156,444 1,792,477 20

Consolidated Income Statement Summary

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2015 Top 5 2016 Top 5

Wholesale Living Consumption Goods

Real Estate

Agriculture, Forestry, Fishing and Mining Wholesale Durables And Industrial Products

Wholesale Durables And Industrial Products

Construction Aviation and Shipping

Aviation and Shipping

Wholesale Living Consumption Goods

Source: Company, by Outstanding Principal

Real Estate

Industry Exposure

Taiwan

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Source: Company, by Outstanding Principal

2015 Top 5 2016 Top 5

Metalworking Activities And Manufacture of Other

Fabricated Metal Products

Manufacture of Plastics Products

Manufacture of Machinery and Equipment

Manufacture of Motor Vehicles and Parts

Manufacture of Food Products

Manufacture of Paper and Paper Products

Manufacture of Food Products

Metalworking Activities And Manufacture of Other

Fabricated Metal Products

Manufacture of Plastics Products

Manufacture of Motor Vehicles and Parts

Industry Exposure

China

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