Shin Kong Financial Holding Co., Ltd. 2020 Annual General … · 2020. 5. 13. · 1. The Company’s 2019 Business Reports ... accounting for 68.9% of the total. SKL trimmed its cost

Shin Kong Financial Holding Co., Ltd.

2020 Annual General Shareholders’ Meeting

Meeting Handbook

Date: 9 a.m., June 19, 2020

Location: 16F., No. 123, Section 2, Nanjing East Road, Taipei

Website: http://www.skfh.com.tw

Stock Code: 2888

http://www.skfh.com.tw/


2020 Annual General Shareholders’ Meeting Handbook

Table of Contents

I. Meeting Procedure

II. Items to Report

1. The Company’s 2019 Business Reports

2. Audit Committee’s Review of 2019 CPA Audited Financial Statements and Report on

Communications between Independent Directors and Internal Auditors

3. Report on Distribution of Employee’s Compensation in 2019

4. Report on Distribution of Director’s Remuneration in 2019

5. Report on Amendment to the Company’s Code of Ethics

6. Report on Amendment to the Company’s “Ethical Corporate Management Policy and Best

Practice Principles” and Establishment of the Company’s “Procedures for Ethical

Management and Guidelines for Conduct”

III. Items to Recognize

1. The Company’s 2019 CPA Audited Financial Statements

2. The Company’s 2019 Earnings Distribution

IV. Items to Discuss and Elect

1. Amendment to the Company’s Articles of Incorporation

2. Amendment to the Company’s Rules for Shareholders’ Meetings

3. The Company’s Long-term Capital Raising Plan in Accordance with the Company’s

Strategy and Growth

4. Election of the Company’s Directors (including Independent Directors) of the Seventh

Term

V. Extemporaneous Motions

VI. Appendices

1. The Company’s Rules for Shareholders’ Meetings

2. The Company’s Articles of Incorporation

3. The Company’s Code of Ethics

4. The Company’s Ethical Corporate Management Policy and Best Practice Principles

5. The Company’s Procedures for Ethical Management and Guidelines for Conduct

6. The Company’s Procedures for Elections of Directors

7. Individual and Collective Shareholdings of Directors as Specified on the Company’s

Shareholder Roster

- 1 -

I. Meeting Procedure

1. Call to Order

2. Chairman Takes Position

3. Chairman’s Remarks

4. Items to Report

5. Items to Recognize

6. Items to Discuss and Election Items

7. Extemporaneous Motions

8. Adjournment

- 2 -

II. Items to Report

1. Business Reports

(A) Impact of External Competition, Regulatory Environment, and Overall

Business Environment

In 2019, global trade and economic growth slowed as the impact of the US-China

trade war, Brexit, and other geopolitical factors dragged exports lower in major

countries. Three US interest rate cuts, falling market rates, and an influx of funds

buoyed stock markets and led to sharp swings in exchange rates. Taiwan felt the

impact of these developments as growth momentum slowed.

The political and economic outlook for 2020 is filled with uncertainties. Trade

wars will likely continue to pose headwinds for the global economy, supply chain

changes in store as the US-China trade confrontation becomes the new normal.

Economic competition and cooperation in the region complicate industry order

forecasting. Monetary loosening by major central banks has supported short-term

financial and investment gains, but this trend is difficult to capitalize on. The

COVID-19 outbreak has briefly rocked financial markets and is expected to hit

economic growth in mainland China. Fallout from the epidemic on the global

economy warrants close attention. Regulators have adjusted policies and

regulations to restore life insurance policies to their original protection function

and tightened rules on selling life insurance policies. Three domestic pure-play

online banks were approved and will bring healthy competition to the e-banking

sector with their market debut. Taiwan will roll out a continuous trading system

to further align the domestic stock market with international exchanges. The

move will improve transaction efficiency and increase information transparency.

Regulators also strengthened oversight on compliance, promoted stronger

corporate governance, and required abidance with fair customer treatment

principles to protect consumer rights. These factors have heightened the business

challenges facing Shin Kong Financial Holding (SKFH) and will need to be

handled prudently.

(B) 2019 Business Results

SKFH posted another strong year in 2019. Profits reached 224% of the target for

the year. Consolidated after-tax profit rose to a record high of NT$16.63 billion,

up 58.7% year-on-year (YoY), earnings per share posted at NT$1.34, and

consolidated total comprehensive income reached NT$46.881 billion.

Consolidated shareholders' equity rose to NT$195.297 billion, up 35.0% YoY,

and consolidated total assets reached NT$3.98 trillion, up 9.1% YoY, making

SKFH Taiwan's fifth-largest financial holding company.

Shin Kong Life Insurance (SKL) also had a stellar year. The company's

consolidated after-tax profit was NT$9.247 billion, up 75.7% YoY, as investment

income grew and cost of liabilities fell. Consolidated shareholders' equity rose

- 3 -

63.6% YoY to NT$114.819 billion and first year premium (FYP) reached

NT$116.856 billion. SKL focused marketing on foreign currency policies and

protection products to control hedging costs and increase value of new business

(VNB). FYP from foreign currency policies reached NT$80.535 billion, up

12.6% YoY, accounting for 68.9% of the total. SKL trimmed its cost of liabilities

by 11 bps (0.11%) to 3.97%, the company's first sub 4% figure, through new

policy sales and renewal premium stacking, reducing cost pressure.

Shin Kong Bank (SKB) posted consolidated after-tax profit of NT$5.523 billion

for the year. The 5.9% YoY gain was helped by a 10.3% increase in net fee

income and 11.4% reduction in provision expense. Wealth management income

rose by an especially impressive 17.7% YoY to NT$2.543 billion. SKB increased

its loan volume by 6.8% with equal attention to revenue and risk control. The

bank maintained sound asset quality, with non-performing loan (NPL) ratio and

coverage ratio closing the year at 0.20% and 636.00%, respectively.

MasterLink Securities also posted strong results as the new SKFH subsidiary

realized synergies with the group. Consolidated net profits rose by 85.7% YoY to

NT$ 1.542 billion, helped by prudent management in proprietary and bond

operations, positioning MasterLink as a third profit engine for SKFH. Despite the

growing presence of foreign brokerage firms in Taiwan's stock market,

MasterLink achieved a 3.70% share of the domestic brokerage market, ranking

sixth-place. In the corporate bond underwriting sector, the company ranked

second with business amounting to NT$53.17 billion. MasterLink has been

developing wealth management operations to expand and diversify profit sources.

The company increased trust assets in this segment to an average of NT$8.01

billion, up 40.9% YoY.

Other SKFH subsidiaries also grew steadily over the year. Shin Kong Investment

Trust (SKIT) increased assets under management and net income by 156.9% and

133.4% YoY, respectively. Shin Kong Property Insurance Agency (SKPIA)

raised premium income and net income by 8.7% and 3.7% YoY, respectively.

Shin Kong Venture Capital (SKVC) posted a net income drop YoY due to losses

on leasing company holdings in mainland China.

Through integrated marketing, SKFH provides a full range of financial products

and services over multiple channels, including life insurance, banking, securities,

investment trust and property and casualty insurance. Aided by its customer

relationship management (CRM) system, the company has expanded joint clients,

penetration, and contribution, strengthened internal resource, channel utilization,

and cooperation and mutual assistance among subsidiaries. It is also deeply

integrating resources to increase contribution from cross-selling, pushing revenue

in this segment to a record NT$2.37 billion in 2019, up 12.9% YoY. SKFH

supports mechanisms for cross-subsidiary cooperation and coordinates customer

referrals among subsidiaries to improve customer service. The company's

Integrated Marketing Committee coordinates subsidiaries to complete cooperation

- 4 -

tasks and set project target tracking metrics to support business promotion and

cross-selling contributions. Examples include a three-phase integration of

e-banking and securities accounts and collaborative corporate banking projects

between banking and securities subsidiaries, increased securities deposit balance

shares, ratio of subsidiary orders through MasterLink Securities, and active bank

and securities customers, and the Huo Li Ping An Promotional Contest.

SKFH has long been committed to sustainable business operations. The company

has drafted related procedures and methods referencing the Principles for

Responsible Investment (PRI) and Equator Principles to drive and promote green

finance and implement environment, society, and governance (ESG) credit

concepts. In line with the Principles for Sustainable Insurance (PSI), the company

duly integrates ESG into investment and lending decision-making and practices.

It also signed the Task Force on Climate-related Financial Disclosures (TCFD)

and formulated a corporate human rights policy in response to growing global

concern over climate change and human rights issues. In 2019, SKFH promoted

supplier sustainability management and used its influence in the value chain and

supplier negotiations to promote environmental sustainability and maintain basic

human rights. These initiatives highlight SKFH's goals and determination in

sustainability.

SKFH and its subsidiaries also won multiple awards in 2019 in recognition of

their continuous improvements and innovation. As industry-leader in product

innovation, SKL ranked first in the Most Popular Brand and Best Product

categories of the 16th National Brand Yushan Award. SKB won the "Wealth

Magazine 2019 Wealth Management Survey - Best E-Banking Award" for its

outstanding e-banking experience. MasterLink Securities, which has been

actively developing new products, won the Outstanding Financial Innovation

Award in the 15th Securities and Futures Golden Goblet Awards. SKFH and its

subsidiaries have gained accolades for their commitment to sustainable

development, earning the Taiwan Institute for Sustainable Energy's Taiwan Top

50 Corporate Sustainability Awards and CommonWealth Magazine's Corporate

Citizenship Award for the sixth consecutive year.

(C) Overview of 2020 Business Plan

In 2020, SKFH will continue to follow sound and prudent business principles as it

navigates an uncertain global political and economic terrain and evolving legal,

regulatory, and market environments. Development will be guided by six major

business plans aimed at continuously improving subsidiary business performance,

using capital more efficiently, and optimizing the integration of subsidiaries to

maximize value for shareholders, customers, and employees.

1. Boosting capital and stabilizing profits:

SKL will continue to reduce cost of liabilities and control its break-even point

with emphasis on profit stability. It will strengthen organizational and channel

- 5 -

productivity and a value-focused product strategy to accumulate VNB, stack

contractual service margin (CSM), and facilitate adoption of IFRS17. The

company aims to augment recurring income and capital gain, as well as increase

foreign currency policies to reduce hedging cost and raise investment return. SKB

will focus on expanding profit sources, markets, and business scale, actively

promote deposit and loan operations while considering risk management. The

bank is also optimizing its loan-to-deposit and demand deposit ratios to enhance

fund utilization, building non-interest income, increasing new funds, and

attracting new customers to grow wealth management income. SKB will

dynamically adjust its investment operations based on market trends to expand

returns in financial markets. In e-banking, SKB will develop proactive services

with a business-driven, customer-oriented strategy. MasterLink Securities will

cultivate specific customer groups and strengthen promotion of wealth

management services to expand business in line with market developments. The

company is improving the functionality of its trading platform to increase

customer transaction frequency. It is also restructuring investment earnings to

raise the weighting of stable income. Working with SKFH group resources, the

company is expanding underwriting and financial consulting operations. It is also

building on its successes in the bond sector with the launch of a Hong Kong bond

platform.

2. Focusing on customer value and strengthening product penetration:

Phase 2 of SKFH's CRM project puts customers first. With big data technology,

the company will analyze financial consumer behavior models and forecast

customer needs and marketing intent. SKFH has established a group-level

"Customer Management Information Tag Platform." This co-marketing

identification engine will, with customer approval and strict regulatory

compliance, provide business teams with customer management information

(CMI) to develop cross-selling business models centered on the customer

experience, enabling more accurate cross-selling and integrated marketing.

SKFH will also use CMI and the activities of specific customer groups to

understand the value of each customer group, generate returns from close

cooperation among subsidiaries. It will also focus on services to young,

high-potential value customers to increase business value, maintain customer

relationships, and build SKFH's value customer base, product holdings, and

penetration rate.

3. Expanding smart services and establishing a group ecosystem:

Shin Kong embraces the arrival of the fintech age with a spirit of innovation and a

commitment to improving customer experience. The company continuously

explores opportunities in different sectors and digital technology applications to

better meet the needs of Shin Kong customers through automation and other new

approaches, processes, products, and services. These initiatives include the

following:

- 6 -

(1) Improving processes through RPA human-robot collaboration: SKFH will use

robotic process automation (RPA) to optimize service processes, reduce

workload, improve operational accuracy, and lower risk. For example, the

company is using RPA to deploy smart anti-fraud solutions that reduce the

manpower and time needed to review suspected money-laundering cases.

(2) Expanding business with Open API: SKFH is using the Open Application

Program Interface (API) framework to authorize delivery of customer

information or services to third parties. Such collaboration aims to improve

better user experience in financial services, boost fee income, and expand

SKFH's customer base. For example, SKB established the SK Link platform

through a cross-industry partnership to provide real-name verification,

account debit authorization, and other services. SKL is also using Open API

to develop products and underwriting and claims APIs.

(3) Continuously optimizing apps to create a seamless customer experience:

Mobile apps are the main channels for attracting and serving customers.

SKFH is also using agile development to quickly respond to customer

feedback.

(4) Deepening AI and building on smart applications: SKFH is developing risk

and marketing prediction models to innovate new business approaches

supported by big data. It is also building a customer authentication platform

and promoting smart customer services and robo advisor services to optimize

customer experience and improve service efficiency.

4. Developing overseas markets through strategic cooperation and investment:

SKFH will seek overseas strategic partnerships to increase cooperation and

investment opportunities. It is helping subsidiaries to steadily develop overseas

markets, revenue sources, and business scope. SKB's Hong Kong branch will

develop its corporate finance, financial market, and wealth management

businesses to increase overall profits. It is also building cooperation with local

banks in Hong Kong in areas such as establishing borrowing lines to flexibly use

funds. The bank plans to strengthen business links with Vietnam, Myanmar, and

Southeast Asia and will apply to upgrade its branch status in these countries at an

appropriate time. MasterLink Securities (Hong Kong) served as the IPO

underwriter for Hong Kong-capitalized groups. The company plans to provide

bond sub-brokerage services in Hong Kong to increase profitability. SKB's Hong

Kong branch and MasterLink Securities (Hong Kong) will also strengthen

cooperation to develop markets and create win-win results.

5. Reaching corporate governance evaluation goals and aligning with international

CSR ratings:

SKFH will improve corporate governance measures, implement integrity

management policies and fair customer treatment principles, and strengthen

information disclosure to achieve its corporate governance evaluation goals. It

- 7 -

will also weight internal controls and internal audit performance highest among

its key performance indicators to create a culture of legal compliance and ensure

regulatory conformance. Corporate social responsibility (CSR) is an important

issue in modern corporate management. SKFH actively participates in

sustainability evaluations in Taiwan and abroad and is committed to bringing its

ESG performance to international standards. The company will focus on

sustainability initiatives and duly incorporate international standards and trends to

create sustainable business value.

6. Strengthening group synergies and building teams:

(1) SKFH's strengths encompass a spectrum of financial services through its

subsidiaries in the life insurance, banking, securities, investment trust,

insurance agency, venture capital, futures, and investment consulting sectors.

The company is developing mechanisms to link these capabilities to

complement strengths for common gain. In addition to resource integration

projects led and driven at the group level, SKFH is establishing mechanisms

for synergistic cross-subsidiary cooperation. For example, the company is

establishing a cross-subsidiary task force on return investment and capital

repatriation by the overseas operations of Taiwanese companies to tap new

opportunities in the financial sector.

(2) SKFH serves as a human-resource development platform to exchange and

cultivate talent across subsidiaries. The company can quickly foster an

organizational culture through management exchanges and rotations. It also

hopes to build a high-quality and well-rounded financial team through

professional talent exchanges and transfers.

(D) Future Development Strategy

Going forward, SKFH's will continue to leverage the strengths of company

subsidiaries, integrate resources, and develop cross-subsidiary synergies to

maximize shareholder equity. The company's future development strategy will be

guided by the following five main principles:

Stabilize profitability to increase shareholders’ equity

Integrate resources to deepen synergies

Optimize customer experience through digital transformation

Create profit sources and expand markets

Focus on compliance and risk control, implement corporate governance, and

promote sustainable operations

Chairman: Wu, Tung-Chin

Manager: Huang, Min-Yi

Accounting Manager: Lu, Vicky

- 8 -

2. Audit Committee’s Review of 2019 CPA Audited Financial

Statements and Report on Communications between

Independent Directors and Internal Auditors

(1) Audit Committee’s Review of 2019 CPA Audited Financial Statements

Audit Committee’s Review Report

The Board of Directors has prepared the Company’s 2019 Business Reports,

Consolidated Financial Statements and Earnings Distribution. Of these above reports,

the Consolidated Financial Statements have been audited and certified by Lin,

Wang-Sheng and Lai, Kwan-Chung, CPAs of Deloitte, and an audit report has been

properly issued. The abovementioned Business Reports, Consolidated Financial

Statements and Earnings Distribution have been reviewed by the Audit Committee

and have been found in compliance with requirements. This report is therefore issued

in accordance with Article 14-4 of the Securities and Exchange Act and Article 219 of

the Company Act.


Convener of Audit Committee: Li, Sheng-Yann

February 21, 2020

- 9 -

(2) Audit Committee’s Review of 2019 CPA Audited Financial Statements

and Communication among Audit Committee, Independent Directors and

Internal Audit Officer for 2019

Date Communicat

ion Method

Person with

whom

communicated

Communicated Matters Result of Communication

Jan.

22,

2019

Audit

Committee

Chief

Auditor and

audit

colleagues

2018 Q4 internal audit

business report

After requesting the

relevant division(s) to

handle in accordance with

the Audit Committee’s

opinions, it is approved to

be recognized and

reported to the Board of

Directors.

Status of continued

improvements in response to

Items 2(1) and 2(3) of

Examination Opinion of

Financial Supervisory

Commission’s 2017 General

Business Examination

Approved as proposed

and submitted for the

Board of Directors’

review.

Status of continued


Items 2(5)(i) and 3(4) of





Approved to be

recognized and reported

to the Board of Directors.

Status of continued


Item 3(3)(ii) of Examination

Opinion of Financial

Supervisory Commission’s

2017 General Business

Examination

Approved to be



Feb.

22,

2019

Audit

Committee

Chief

Auditor and

audit

colleagues

Status of continued


Items 2(1) and 2(3) of








review.

March

22,

2019

Audit

Committee

Chief

Auditor and

audit

colleagues

2018 “Assessment of the

Effectiveness of Internal

Control System” and

“Declaration of Internal

Control System”




review.

Status of continued


Item 2(3) of Examination




- 10 -

Date Communicat

ion Method

Person with

whom

communicated





Examination

review.

Status of continued






Examination

Approved to be



Apr.

26,

2019

Audit

Committee

Chief

Auditor and

audit

colleagues


business report

After requesting relevant

division(s) to handle in

accordance with the Audit

Committee’s opinions, it

is approved to be



Status of continued






Examination




review.

Status of continued


Item 2(5)(i) of Examination




Examination

Approved to be



June

21,

2019

Audit

Committee

Chief

Auditor and

audit

colleagues

Status of continued






Examination




review.

July

16,

2019

Audit

Committee

Chief

Auditor and

audit

colleagues


business report

Approved to be



Status of continued






Approved to be



- 11 -

Date Communicat

ion Method

Person with

whom

communicated


Examination

Aug.

23,

2019

Audit

Committee

Chief

Auditor and

audit

colleagues

Status of continued






Examination

Approved to be



Shin Kong Lease Audit

Report

Approved to be



Status of continued






Examination




review.

Oct.

25,

2019

Audit

Committee

Chief

Auditor and

audit

colleagues


business report

Approved to be



Status of continued






Examination

Approved to be



Nov.

22,

2019

Audit

Committee

Chief

Auditor and

audit

colleagues

Status of continued






Examination




review.

Nov.

26,

2019

Audit

Seminar

Chief

Auditor and

audit

colleagues

1. Tracking previously

resolved matters.

2. Discussion on the

Company’s 2020 internal

audit plan

3. Results of evaluation of

subsidiaries’ audit processes

After requesting relevant

division(s) to handle in

accordance with each

Independent Director’s

opinions, it is approved to

be recognized and

reported to the Board of

Directors.

Dec.

20,

2019

Audit

Committee

Chief

Auditor and

audit

colleagues

Proposal of the Company’s

2020 Internal Audit Plan




review.

- 12 -

3. Report on Distribution of Employee Compensation in 2019

Explanation:

(1) Article 32 of the Company’s Articles of Incorporation stipulates that “If the

Company recorded profit for the respective year, no less than 0.01% but no more

than 0.05% of the Company’s profit of such year shall be reserved for employees’

compensation. Employees of affiliated companies who meet certain qualifications

may also be included in the distribution. The proposal of distribution of employees’

compensation shall be reported in the shareholders’ meeting. Where the Company

has accumulated deficits, it shall first reserve the amount needed to make up the

losses before utilize the remaining amount of the profit for employees’

compensation at the ratio as provided in the preceding paragraph.”

(2) The Company’s 2019 pretax income is NT$15,992,587,213 and NT$5,000,000 is

proposed to be distributed via cash for employee compensation.

- 13 -

4. Report on Distribution of Director Remuneration in 2019

Explanation:

(1) Article 32 of the Company’s Articles of Incorporation stipulates that “If the

Company recorded profit for the respective year, the Company may reserve no more

than 1% of the amount of the abovementioned profit of the Company for directors’

remuneration by the resolution of the Board of Directors. Where the Company has

accumulated deficits, it shall first reserve the amount needed to make up the losses

before utilize the remaining amount of the profit for directors’ compensation at the

ratio as provided in the preceding paragraph.”

(2) The Company’s 2019 pretax income is NT$15,992,587,213 and NT$46,500,000 is

proposed to be distributed via cash for director compensation.

- 14 -

5. Report on Amendment to the Company’s Code of Ethics

Explanation: In conjunction with the Company’s participation in the Dow Jones

Sustainability Index (DJSJ), and in order to guide the Group’s

compliance with consistent ethical standards of conduct, the “Shin

Kong Financial Holding Co., Ltd. Code of Ethics” was amended. The

comparison table of the amended articles is attached as below.

(Attachment)

Shin Kong Financial Holding Co., Ltd. Code of Ethics

Comparison Table of Amendments

Amended Article Current Article Explanation

Article 1: (Purpose of for

adoption)

For the purpose of encouraging

the personnel of the Company to

act in line with ethical standards,

and to help other stakeholders

understand the ethical standards

adopted by the Company, the

Company here adopt this Code

of Ethics (hereinafter “the

Code”).

Article 1: (Purpose of and basis

for adoption)

For the purpose of encouraging

directors and managerial officers

(including general managers or

their equivalents, assistant

general managers or their

equivalents, deputy assistant

managers or their equivalents,

chief financial officers, chief

accounting officers and other

persons authorized to manage

company affairs and sign on

behalf of the company) of Shin

Kong Financial Holding Co.,

Ltd. (hereinafter “the

Company”) to act in line with

ethical standards, and to help

other stakeholders understand

the ethical standards adopted by

the Company, other than already

stipulated in relevant

regulations, the Company here

adopt this Code of Ethics

(hereinafter “the Code”).

Article 2 of the Code has newly

added the individuals whom the

Code applies to, therefore the

term in this article is hereby

amended to “the personnel of

the Company”.

Article 2: (Individuals Whom

the Code Applies To)

The individuals whom the Code

applies to include the directors,

supervisors, managerial officers

and staff of the Company and

the Company’s subsidiaries

(hereinafter collectively referred

to as the “Company Personnel”)

The “subsidiaries” referred to in

the Code means the entities

subject to Article 4(1)(iv) of the

(Newly added) Specified the individuals whom

the Code applies to.

- 15 -


Financial Holding Company

Act.

Article 3: (Conducts of honesty

and morality)

The Company Personnel shall

manage the Company’s affairs

with honesty and morality.

Conducts of honesty refer to

those conducts void of fraud,

deceit and concealment.

Conducts of morality refer to

conducts that abide by

professional standards, including

dealing with incidents of conflict

of interests in a fair manner.

Article 2: (Conducts of honesty

and morality)

The directors and managerial

officers shall manage the

Company’s affairs with honesty

and morality.

Conducts of honesty refer to

those conducts void of fraud,

deceit and concealment.

Conducts of morality refer to

conducts that abide by

professional standards, including

dealing with incidents of conflict

of interests in a fair manner.

1. Renumbered the article.

2. To accommodate the

“Individuals Whom the Code

Applies To” provided under

Article 2, the term “directors

and managerial officers” in

the Code are universally

amended to “Company

Personnel”. The same applies

for the following provisions

and thus will not be repeated.

Article 4: (Equality in hiring and

principle of non-discrimination)

Company Personnel shall

respect the diversity of the

workplace and shall not give

differential treatment or in any

way discriminate on the basis of

gender, sexual orientation, race,

socio-economic status, age,

marriage, family status,

language, religion, political

party affiliation, nationality,

physical appearance, facial

features, physical or mental

impairment, etc., in order to

create a work environment with

equality in hiring and which is

free of discrimination and

harassment.

(Newly added) In order to protect the rights and

interests of people of diverse

sexual orientations at work and

to promote the spirit of

substantive equality between the

sexes, provision regarding the

principles of equal hiring and

non-discrimination is hereby

added.

Article 5: (Healthy and safe

work environment)


communally maintain the health

and safety of the work

environment and shall not

engage in any sexual harassment

or other violence or threatening

actions.

(Newly added) It is the Company’s

responsibility to provide a

healthy and safe work

environment, and Company

Personnel shall communally

maintain it. This article is

hereby added.

Article 6: (Prevention of

conflicts of interests)

Company Personnel should

avoid any individual action or

Article 3: (Prevention of

conflicts of interests)


officers should avoid from


2. The Code is in principle.

Detailed matters provided in

the original Paragraph 1 of

- 16 -


monetary benefits which might

be in conflict with his/her duties

at the Company and allowing

his/her personal interest to

intervene, actually or potentially,

the overall interest of the

Company.

The director and managerial

officers should voluntarily

disclose and explain whether

there are potential conflicts of

interest between such person and

the Company.

allowing his/her personal

interest to intervene, actually or

potentially, the overall interest

of the company which may lead

to the following matters:

1. A director or managerial

officer is unable to perform

his/her duty in an objective and

efficient manner.

2. A director or managerial

officer takes advantage of

his/her position in the company

and obtains improper benefits

for either himself/herself or

his/her spouse, parents, children,

relatives within the second

degree of kinship, or entity

solely-owned by or partnership

of the aforementioned persons or

companies or organizations such

aforementioned person serve as

representative, in particular, in

matters involving the Company

in respect of provisions of loans,

transactions of substantial assets,

purchase (sale) of goods or

provisions of guarantees.

The director and managerial

officers should voluntarily

disclose and explain whether

there are potential conflicts of

interest between such person and

the Company.

the article are hereby deleted.

Article 7: (Anti-bribery and

anti-pursuit of personal gains)

Company Personnel should

safeguard the legitimate and

legal interests of the Company,

and avoid engaging in the

following matters:

1. Seeking personal gains or the

opportunities to pursue such

by using company property

or information or taking

advantage of their positions.

2. Directly or indirectly offering,

promising, demanding or

receiving money, gifts,

position, treats, services and

Article 4: (Minimizing

opportunities to pursue personal

gains)


officers should safeguard the

legitimate and legal interests of

the Company, and prevent from

engaging in the following

matters:

1. Seeking personal gains by

using company property or

information or taking

advantage of their positions.

2. Competing with the Company

and conducting business on

his/her own behalf or on


2. Referencing relevant

provisions under the “Shin

Kong Financial Holding Co.,

Ltd. Guideline for Ethical

Management and Conduct”,

amended the wordings in the

original Paragraph 1,

Subparagraph 1 and added

some wordings to

Subparagraph 2, and the

original Subparagraph 2 is

moved to Subparagraph 3

with wording amended.

3. The original Paragraph 2 is

too abstract and difficult to

- 17 -


other benefits of any kind or

name. However, normal

social etiquette or incidental

acts of a business nature that

are unlikely to affect the

Company’s rights and

obligations are exempt.

3. Competing with the

Company, except when the

shareholders’ meeting or the

board of directors has

approved a release from

his/her restrictions on

non-compete agreements.

others’ behalf, within the

company’s business scope.

When there are opportunities for

the Company to profit, directors

or managerial officers should

maximize the reasonable and

legitimate benefits that can be

obtained by the Company.

understand and thus is

deleted.

Article 8: (Confidentiality)

Company Personnel have the

obligation to maintain the

confidentiality of any

information of the Company or

its customers, except when

required by law as to its

disclosure, authorized by the

Company or otherwise agreed in

contracts; it is the same after

termination of employment.

(Paragraph 2 Omitted)



officers of the Company have

the obligation to maintain the

confidentiality of any

information of the Company or

its customers, except when

authorized or required by law as

to its disclosure.

(Paragraph 2 Omitted)


2. To protect the confidential

and sensitive information of

the Company and its

customers, the confidential

obligation is hereby

expanded to post-termination

of employment and the

wording amended.

Article 9: (Fair trade and

anti-insider trading)

Company Personnel should treat

all customers, dealers,

competitors and employees in a

fair manner, and should not

engage in the following matters

that are either illegal or

immoral:

1. Receiving or providing

commissions or other

inappropriate benefits from/to

the customers, dealers,

competitors of the Company

or any other parties having a

relationship with the

Company.

2. Spreading untruthful rumors

regarding the customers,

dealers and competitors of

the Company.

3. Misrepresentation on the

quality or contents of the

Article 6: (Fair trade)


officers should respect and treat

all customers, dealers,

competitors and employees in a

fair manner, and should not

engage in the following matters

that are either illegal or

immoral:

1. Receiving or providing

commissions or other

inappropriate benefits from/to

the customers, dealers,

competitors of the Company

or any other parties having a

relationship with the

Company.

2. Spreading untruthful rumors

regarding the customers,

dealers and competitors of

the Company.

3. Misrepresentation on the

quality or contents of the


2. Referencing Article 15 of the

“Shin Kong Financial

Holding Co., Ltd. Guideline

for Ethical Management and

Conduct” and Article 8 of the

“Shin Kong Financial

Holding Co., Ltd.

Employees’ Code of

Conduct”, anti-insider

trading provision in

Subparagraph 5 is hereby

added.

- 18 -


products or services of the

Company.

4. Other conducts by way of

manipulation, concealment,

or exploitation of information

acquired from its position,

misrepresentation on material

matters, or obtain of improper

benefits by unfair dealing.

5. Engaging in insider trading by

using, or leaking to others,

non-public company

information and any

information that may

materially affect the trading

price of securities that he/she

learned in the course of

his/her duties.

products or services of the

Company.

4. Other conducts by way of

manipulation, concealment,

or exploitation of information

acquired from its position,

misrepresentation on material

matters, or obtain of improper

benefits by unfair dealing.

Article 10: (Anti-money

laundering)

Company Personnel may not

advise, conceal or assist others

in converting illegal proceeds

into seemingly legitimate funds.

If suspect money laundering

transactions are discovered, they

should be reported immediately

to the relevant authorities and

should be reported in accordance

with the law, and the employee

should comply with subsequent

investigation procedures.

(Newly added) To reinforce the importance of

compliance with the anti-money

laundering regulations by

Company Personnel, this

provision of attention is hereby

added.

Article 11: (Safeguard and

proper use of company assets)

Company Personnel have the

responsibility to safeguard

company tangible and intangible

assets and to ensure that they

can be effectively and lawfully

used for business purpose of the

Company.

Article 7: (Safeguard and proper

use of company assets)

All directors and managerial

officers have the responsibility

to safeguard company assets and

to ensure that they can be

effectively and lawfully used for

business purpose of the

Company, in order not to

adversely impact the Company’s

profitability.


2. As Company assets are

divided into tangible and

intangible assets, it is thus

hereby specified and the

wording amended.

Article 12: (Legal compliance)


comply with relevant laws and

regulations and the policies of

the Company.


All directors and managerial

officers shall comply with

relevant laws and regulations

and the policies of the Company.

Renumbered the article.

- 19 -


Article 13: (Action taken in the

case of discovering the material

operation risks)

When directors or higher-level

officers discover the potential

for material losses to the

Company, they shall promptly

handle appropriately,

immediately inform the

independent directors of the

Audit Committee or supervisors,

report to the board of directors

and direct and supervise the

Company to report to the

competent authority in

accordance with the law.

Article 8-1: (Action taken in the

case of discovering the material

operation risks)

When directors discover the

potential for material losses to

the Company, they shall

promptly handle appropriately,

immediately inform the Audit

Committee or the independent

directors of the Audit

Committee, report to the board

of directors and direct and

supervise the Company to report

to the competent authority.


2. Added targets to whom this

provision applied and, in

consideration that some

subsidiaries have

supervisors, amended the

wording.

Article 14: (Encouraging

whistleblowing of any illegal

activities or activities violating

the Code)

Directors, managerial officers

and relevant department of the

Company should raise

awareness of ethics internally,

encourage Company Personnel

to, in accordance with the

regulations relating to the

whistleblowing system, report to

divisions responsible for

handling whistleblowing or

other appropriate individual

upon suspicion or discover of

any activity in violation of a law

or regulation or the Code.

The Company prohibits any

reprisals, threat or harassment

against any person

whistleblowing pursuant to the

preceding paragraph. In the

event of reprisals, threat or

harassment, the Company

should take the appropriate

action without delay.

Article 9: (Encouraging

reporting of any illegal or

unethical activities)

Directors, managerial officers

and relevant department of the

Company should raise

awareness of ethics internally,

encourage employees to report

to a company independent

director, manager, chief internal

auditor or other appropriate

individual upon suspicion or

discover of any activity in

violation of a law or regulation

or the Code.

Any person reporting in good

faith on the violation of a law or

regulation or this Code by any

director or managerial officer

should not incur reprisals, threat

or harassment in any form; If

such person is revenged on,

threatened or harassed due to the

above action, he/she should

immediately report to an

independent director, superior,

chief internal auditor or other

appropriate individual and the

Company should take the

appropriate action without delay.


2. Amended the wording.

Article 15: (Punitive measures)

When a Company Personnel

violates the Code, the Company

Article 10: (Actions taken in

case of violation of the Code)

When a director or managerial


2. Amended the wording.

- 20 -


shall handle in accordance with

personnel management

regulations and relevant laws

and regulations, and provide the

personnel with the opportunity

to express opinions or complain

about violations before making a

sanction decision.

The Company should, based on

the situation of violation, hold

the person in violation

accountable or appeal to other

legal measures.

If any director or managerial

officer violates the Code and is

convicted guilty, the Company

should, without delay, disclose

on the Market Observation Post

System (MOPS) the date of the

violation, reasons for the

violation, the provisions of the

Code violated, and the

disciplinary actions taken.

officer violates the Code, the

relevant department should

immediately report to the chief

internal auditor and to the

chairman of the Company for its

review. In case of serious

violation, such incident should

also be reported to the board of

directors; however the person

violating this Code may lodge

an appeal in accordance with

internal regulations.

The Company should, based on

the situation of violation, hold

such person accountable or

appeal to other legal measures.

The Company should also,

without delay, disclose on the

Market Observation Post System

(MOPS) the date of the


violation, the provisions of the

Code violated, and the

disciplinary actions taken.

(Deleted) Article 11: (Procedures for

exemption)

The exemption for a certain

director or managerial officer

from compliance with the Code

must be adopted by a resolution

of the board of directors with the

attendance of more than or equal

to two third of the board and

with the approval of more than

or equal to three fourth of the

directors attending. The

information on the date on

which the board of directors

adopted the resolution for

exemption, objections or

reservations of independent

directors, and the period of,

reasons for, and principles

behind the application of the

exemption should be disclosed

without delay on the MOPS, in

order that the shareholders may

evaluate the appropriateness of

the board resolution.

The procedures for exemption is

unnecessary, it is hereby

deleted.

- 21 -


Article 16: (Methods of

disclosure)

(Omitted below)

Article 12: (Methods of

disclosure)

(Omitted below)


Article 17: (Adoption of code of

ethics by the subsidiaries )

The subsidiaries of the Company

should thoroughly comply with

the Code and may, based on the

laws and regulations applicable

to their respective business,

independently adopt the code of

ethics.

When a Company Personnel of

the subsidiary violates such code

of ethics in a serious manner, the

subsidiary should without delay

report to the Company.

Article 13: (Adoption of code of

ethics by the subsidiaries )

The subsidiaries of the Company

should adopt and comply with

the code of ethics. When a

director, supervisor or

managerial officer of the

subsidiary violates such code of

ethics in a serious manner, the

subsidiary should without delay

report to the Company.

The subsidiaries may, in

addition to apply to the Code,

adopt their own code of ethics

based on the laws and

regulations applicable to their

respective business, Paragraph

1 is hereby amended, and the

latter part in the original article

is moved to Paragraph 2.

Amending the wordings.

Article 18: (Effect and

enforcement)

(Omitted below)

Article 14: (Effect and

enforcement)

(Omitted below)


- 22 -

6. Report on Amendment to the Company’s “Ethical Corporate

Management Policy and Best Practice Principles” and

Establishment of the Company’s “Procedures for Ethical

Management and Guidelines for Conduct”

Explanation:

(1) According to Article 5 of the “Ethical Corporate Management Best Practice

Principles for TWSE/GTSM Listed Companies” and relevant provisions, the name

of the Company’s “Guideline for Ethical Management and Conduct” is hereby

amended to “Ethical Corporate Management Policy and Best Practice Principles”;

the comparison table of the amended articles is attached as Attachment 1.

(2) According to Article 21 of “Ethical Corporate Management Best Practice Principles

for TWSE/GTSM Listed Companies” and the model template “XXX Corporation’s

Procedures for Ethical Management and Guidelines for Conduct” promulgated by

the Taiwan Stock Exchange Corporation in the Tai-Zheng-Zhi-Li-Zi No.

1090002299 letter, dated February 13, 2020, the Company’s “Procedures for Ethical

Management and Guidelines for Conduct” is hereby established and attached as

Attachment 2.

(Attachment 1)


Ethical Corporate Management Policy and Best Practice Principles

Comparison Table of Amendments

Amended Guideline Name Original Guideline Name Explanation

Ethical Corporate Management

Policy and Best Practice

Principles

Guideline for Ethical

Management and Conduct

As this guideline already

contain relevant ethical

management policies, the

name of this guideline is

hereby amended.


Article 1

(Paragraph 1 omitted)

This Guideline applies to the

subsidiaries of our Company

which do not adopt guidelines for

ethical management and conduct

of their own.

The subsidiaries mentioned in the

preceding paragraph are the

subjects to whom Article 4,

Article 1


This Guideline applies to the

subsidiaries of our Company and

other entities or legal foundations

that are directly or indirectly

controlled by our Company, if

such companies or entities do not

adopt guidelines for ethical

management and conduct of their

Specified the definition of the

subjects to whom the

Guideline applies.

- 23 -


Paragraph 1, Subparagraph 4 of

Financial Holding Company Act

applies.

own.

Article 2

When engaging in commercial

activities, representatives,

employees, consignees or any

persons having substantive

control over our Company

(hereinafter “Company

Personnel”) shall not directly or

indirectly offer, promise to offer,

request or accept any improper

benefits, nor commit any

unethical acts including breach of

ethics, illegal acts or breach of

fiduciary duty for purposes of

acquiring or maintaining benefits

(hereinafter “unethical conduct”).


Article 2

When engaging in commercial

activities, representatives,

employees, consignees or any

persons having substantive control

over our Company (hereinafter

“personnel of our Company”)

shall not directly or indirectly

offer, promise to offer, request or

accept any improper benefits, nor

commit any unethical acts

including breach of ethics, illegal

acts or breach of fiduciary duty

for purposes of acquiring or

maintaining benefits (hereinafter

“unethical conduct”).


Amended the wording.

Article 4

Our Company shall comply with

the Financial Holding Company

Act, Company Act, Securities and

Exchange Act, Business Entity

Accounting Act, Political

Donations Act, Anti-corruption

Statute, Government Procurement

Act, Act on recusal of Public

Servants due to Conflict of

Interests, regulations relating to

listing on the TWSE/GTSM or

other laws and regulations

relevant to business activities as

the underlying premises to

facilitate ethical corporate

management.

Article 4

Our Company shall comply with


Act, Company Act, Securities and

Exchange Act, Business Entity

Accounting Act, Political

Donations Act, Anti-corruption

Statute, Government Procurement

Act, Act on recusal of Public

Servants due to Conflict of

Interests and other relevant laws

and regulations as the underlying

premises to facilitate ethical

corporate management.

To accommodate Article 4 of

the “Ethical Corporate

Management Best Practice

Principles for TWSE/GTSM

Listed Companies” amended

and announced on May 23,

2019, the relevant laws and

regulations that shall be

complied with are hereby

added.

Article 5

Our Company shall abide by the

operational philosophies of

honesty, transparency and

accountability, set out policies

based on the principal of good

faith, and establish sound

Article 5

Our Company shall abide by the

operational philosophies of

honesty, transparency and

accountability, set out policies

based on the principal of good

faith, and establish sound

To accommodate Article 7,

Paragraph 1 of the “Ethical

Corporate Management Best

Practice Principles for

TWSE/GTSM Listed

Companies” amended and

announced on May 23, 2019,

- 24 -


corporate governance and risk

control mechanism so as to create

an operational environment

committed to sustainable

development.

Our Company shall establish an

assessment mechanism for risk of

unethical conduct, periodically

analyze and evaluate the business

activities with a higher risk of

unethical conduct which fall

within the scope of business, and

shall formulate prevention plans

based on such and periodically

review the appropriateness and

effectiveness of the prevention

plans.

corporate governance and risk

control mechanism so as to create

an operational environment

committed to sustainable

development.

(Newly added paragraph)

Paragraph 2 of the Article is

hereby added.

Article 6

Our Company shall request each

director and senior management

to issue a declaration, as in the

attached form, of his/her

compliance with the ethical

management and conduct policies

and shall request employees in

the terms and conditions of their

employment to comply with


policies.

The board of directors and the

senior management of our

Company vigorously implement

his/her commitment to the ethical


and to carry out such policies in

both internal management and

commercial activities.

Article 6


The board of directors and the

management of our Company

commit to implement the ethical


vigorously and to carry out such

policies in both internal

management and external

commercial activities.







2019, Paragraph 1 of the

Article is hereby added, the

original Paragraph 1 of the

Article is hereby moved to

Paragraph 2 and the wording

amended.

Article 7


Prior to any commercial

transactions, our Company shall

take into consideration the

Article 7


Prior to any commercial

transactions, our Company shall

take into consideration the






- 25 -


legalities of engaging with the

counterparties and if such

counterparties are involved in any

unethical conduct. Our Company

shall avoid dealings with any

persons involved in unethical

conduct.

When entering into contracts with

counterparties, clauses requesting

compliance with ethical


and entitling the Company to

terminate or rescind the contracts

at any time when such

counterparties are involved in

unethical conducts shall be

included in the contracts.

legalities of engaging with the

counterparties and if such

counterparties are involved in any


shall avoid dealings with any

persons involved in unethical

conduct.

When entering into contracts with

counterparties, it is advised that

clauses entitling the Company to

terminate or rescind the contracts

at any time when such

counterparties are involved in

unethical conducts to be included

in the contracts.


2019, the wordings of this

article are hereby amended.

Article 8

In the conduct of business, our

Company and Company

Personnel shall not directly or

indirectly offer, promise to offer,

request or accept improper

benefits in any form.

Article 8

In the conduct of business,

personnel of our Company shall

not directly or indirectly offer,

promise to offer, request or accept

improper benefits in any form.


Article 9

When directly or indirectly

offering a donation to political

parties or organizations or

individuals participating in

political activities, our Company

and Company Personnel shall

comply with the Political

Donations Act and relevant

internal operational procedures.

Such donations shall not be used

to exchanging for commercial

gains or business advantages.

Article 9

When directly or indirectly

offering a donation to political

parties or organizations or

individuals participating in

political activities, our Company

shall comply with the Political

Donations Act and relevant

internal operational procedures.

Such donations shall not be used

to exchanging for commercial

gains or business advantages.


Article 10

When making or offering

donations or sponsorship, our

Company and Company

Personnel should comply with

relevant laws and regulations as

well as internal operational

Article 10

When making or offering

donations or sponsorship, our

Company should comply with

relevant laws and regulations as

well as internal operational

procedures, and shall not provide


- 26 -


procedures, and shall not provide

bribes regardless of its form.

bribes regardless of its form.

Article 11

Our Company and Company

Personnel shall not, directly or

indirectly, offer or accept any

unreasonable gifts, hospitality or

any other improper benefits in the

hope of establishing business

relationships or influence

commercial transactions.

Article 11

Personnel of our Company shall

not, directly or indirectly, offer or

accept any unreasonable gifts,

hospitality or any other improper

benefits in the hope of

establishing business relationships

or influence commercial

transactions.


Article 12

Our Company and Company

Personnel shall comply with laws

and regulations, company’s

internal procedures and

contractual obligations

concerning intellectual property

rights. Without prior consent of

the owners of the intellectual

property rights, any usage,

disclosure, disposition, damage of

intellectual property or any other

acts of infringement on

intellectual property rights shall

not be allowed.

Article 12


comply with laws and regulations,

company’s internal procedures

and contractual obligations

concerning intellectual property

rights. Without prior consent of

the owners of the intellectual

property rights, any usage,

disclosure, disposition, damage of

intellectual property or any other

acts of infringement on

intellectual property rights shall

not be allowed.


Article 13

When conducting business,

Company Personnel shall comply

with laws and regulations and the

unethical conduct prevention

programs set by our company.

Article 13

When conducting business, our

Company personnel shall comply

with laws and regulations and the

unethical conduct prevention

programs set by our company.


Article 14

Company Personnel shall observe

all internal procedures concerning

preservation of confidentiality.

Such person shall not disclose

company trade secrets to any

third parties, and shall not seek or

collect any company trade secrets

unrelated to his/her scope of

work.

Article 14


observe all internal procedures

concerning preservation of

confidentiality. Such person shall

not disclose company trade

secrets to any third parties, and

shall not seek or collect any

company trade secrets unrelated

to his/her scope of work.


Article 15

Company Personnel shall comply

Article 15



- 27 -


with Securities and Exchange

Act. Such persons shall not utilize

undisclosed information known to

him/her for insider trading nor

disclose such information to any

other third parties so to prevent

third parties from trading on such

insider information that is not yet

published.

comply with Securities and

Exchange Act. Such persons shall

not utilize undisclosed

information known to him/her for

insider trading nor disclose such

information to any other third

parties so to prevent third parties

from trading on such insider

information that is not yet

published.

Article 16

When a board meeting matter

concerns the personal interest of a

director or the interest of the

juristic person represented by a

director, such director shall

explain at the given board

meeting the material aspects of

such conflict of interests. In the

case that the conflicts of interest

may prejudice interest of the

company, such director shall not

participate in discussion on as

well as voting of the proposal and

shall recues himself/herself from

the discussion and the vote.

Exercise of voting rights as proxy

for another director shall also be

prohibited. The directors shall

value self-discipline and shall not

support among themselves in an

improper manner.

Company Personnel shall not take

advantage of their positions or

influence in the companies to

obtain improper benefits for

themselves, their spouses,

parents, children or any other

persons.

Article 16

When a proposal at a given board

meeting concerns the personal

interest of a director or the interest

of the juristic person represented

by a director, such director shall

explain at the given board meeting

the material aspects of such

conflict of interests. In the case

that the conflicts of interest may

prejudice interest of the company,

such director shall not participate

in discussion on as well as voting

of the proposal and shall recues

himself/herself from the

discussion and the vote. Exercise

of voting rights as proxy for

another director shall also be

prohibited. The directors shall

value self-discipline and shall not

support among themselves in an

improper manner.


not take advantage of their

positions or influence in the

companies to obtain improper

benefits for themselves, their

spouses, parents, children or any

other persons.


Article 17

Company Personnel shall fulfill

its duty of care and to prevent the

company from engaging in any

unethical conduct.

Article 17


fulfill its duty of care and to

prevent the company from

engaging in any unethical

To accommodate Article 17,

Paragraph 2 of the “Ethical



TWSE/GTSM Listed

- 28 -


To ensure sound ethical

management, Corporate Social

Responsibility (CSR)

Committee under the command of

the Board of Directors shall be

responsible for establishing


policies of our Company,

designing programs to prevent

unethical conduct that are in

alliance with the relevant laws

and regulations of the jurisdiction

where our Company and related

entities within our group are

established, supervising the

implementation thereof, and shall

report annually to the Board of

Directors.

conduct.

To ensure sound ethical

management, there shall be a unit

under the board of directors

responsible for establishing


policies of our Company,

designing programs to prevent

unethical conduct that are in

alliance with the relevant laws and

regulations of the jurisdiction

where our Company and related

entities within our group are

established, and supervising the

implementation thereof.



the wordings of Paragraph 2

of this article are hereby

amended.

Article 18

Our Company shall establish

effective accounting systems and

internal control systems for

business activities that may be

exposed to higher risk of


shall not keep any off-the-book

accounts or retain any secret

accounts. Reviews on these

systems shall be regularly

conducted in order to ensure that

the design and enforcement of

such systems are showing results.

The internal audit unit of our

Company should, based on the

results of the assessment of

unethical conduct risk, draw up

relevant audit plans and review its

compliance, and may engage

accountants to perform reviews;

when necessary, it can engage

professionals for assistance.

The results of the aforementioned

reviews shall be made into audit

reports and any deficiencies shall

Article 18

Our Company shall establish

effective accounting systems and

internal control systems for

business activities that may be

exposed to higher risk of unethical

conduct. Our Company shall not

keep any off-the-book accounts or

retain any secret accounts.

Reviews on these systems shall be

regularly conducted in order to

ensure that the design and

enforcement of the systems are

showing results.

To foster sound ethical

management, the internal audit

unit of our Company should

regularly review compliance with

the systems stipulated in the

preceding paragraph, and shall

make an audit report and submit

to the board of directors regularly,

informing any weak links in the

systems and measures

implemented to address them as

well as subsequent results of the

To accommodate Article 20

of the “Ethical Corporate





2019, the wording of

Paragraph 2 of this article are

hereby amended and

Paragraph 3 added.

- 29 -


be reported to senior management

and the unit responsible for

ethical management, and

submitted to the board of

directors.

implementation.


Article 19

Our Company shall periodically

conduct education training and

publicity for Company Personnel,

so that they understand the

Company’s determination, policy

and precautionary plan for ethical

management and the

consequences of unethical

conduct.

Our Company shall establish a

clear and effective system of

rewards and punishments by

combining the policy of ethical

operation with the policy of

employee performance evaluation

and human resources.

(Newly added article) To accommodate Article 22

of the “Ethical Corporate





2019, this article is hereby

added.

Article 20

Our Company shall establish a

specific whistleblowing system

and shall enforce it in a firm

manner.

Upon confirmation that Company

Personnel’s activities are in

violation of ethical principles,

they shall be handled in

accordance with internal

disciplinary procedures of the

Company and the name of the

violator, his/her position, date of

the violation, reasons for the

violation, and the disciplinary

actions taken shall be promptly

disclosed on the Company’s

internal website.

Article 19


Upon discovering any activities in

violation of ethical principles,

personnel of the Company shall

immediately report to the board of

directors, audit committee or

internal audit unit. The Company

should ensure confidentiality of

the identity of the informants and

the content of the report.

The internal audit unit should

vigorously verify the matters

reported. If the internal audit unit

confirms the reported violation, it

should report and refer the matter

to the relevant department in

accordance with internal

disciplinary procedures of the

To accommodate Articles 23

and 24 of the “Ethical



TWSE/GTSM Listed



Paragraph 1 of this article is

hereby added, the original

Paragraphs 1 and 2 are

merged into Paragraph 2 of

this Article and the wording

amended.

- 30 -


Company. The audit unit

should also, without delay,

disclose on the company internal

website, the name of the violator,

his/her position, date of the


violation, and the disciplinary

actions taken.

Article 21

Our Company’s implementation

of the practice of ethical

management and conduct shall be

disclosed on the company

website, in the annual reports or

offering memorandums of the

company. The content of this

guideline should also be disclosed


System (MOPS).

Article 20

Our Company’s implementation

of the practice of ethical

management and conduct shall be

disclosed on the company

website, in the annual reports or

offering memorandums of the

company. The content of this

guideline should also be disclosed


System (MOPS).


Article 22

Our Company shall follow the

development of domestic and

international regulation

concerning ethical corporate

management and conduct. Our

Company should encourage

personnel of the company to raise

suggestions, based on which the

guideline for ethical management

and conduct adopted and the

measures taken by the Company

should be reviewed, with a view

to achieving better

implementation of ethical

management.

Article 21

Our Company shall follow the

development of domestic and

international regulation

concerning ethical corporate

management and conduct. The

Company should encourage

personnel of the company to raise

suggestions, based on which the

guideline for ethical management

and conduct adopted and the

measures taken by the Company

should be reviewed, with a view

to achieving better

implementation of ethical

management.

Renumbered the article and

the wording amended.

Article 23

This Guideline and amendment

thereto shall be in effect once

adopted by the board of directors.

The adoption is reported to the

shareholder meeting.

Article 5, Paragraph 2 and Article

18, Paragraphs 2 and 3, as

amended on March 27, 2020,

Article 22

This Guideline and amendment

thereto shall be in effect once

adopted by the board of directors.

The adoption is reported to the

shareholder meeting.

Renumbered the article. For

the newly added Article 5,

Paragraph 2 and Article 18,

Paragraphs 2 and 3,

considering the

implementation schedule of

the Company, it is advisable

to set the transition period for

implementation, the

- 31 -


shall come into force on

September 27, 2020.

implementation date is hereby

specified in the added

Paragraph 2.

(Attachment 2)


Procedures for Ethical Management and Guidelines for Conduct

Explanation of the Articles

Article Explanation

Article 1 (Purpose and Scope of Application)

The Company engages its commercial activities in accordance with

the principles of fairness, honesty, faithfulness and transparency,

and in order to fully implement a policy of ethical management and

actively prevent unethical conduct, the Company established the

“Procedures for Ethical Management and Guidelines for Conduct”

(these “Guidelines”) in accordance with the “Ethical Corporate

Management Best Practice Principles for TWSE/GTSM Listed

Companies”, the Company’s “Ethical Corporate Management

Policy and Best Practice Principles” and the relevant laws and

regulations of the locations where the Company and group entities

operate, specifying the matters that Company Personnel should pay

attention to when conducting business.

If a subsidiary of the Company does not have its own “Procedures

for Ethical Management and Guidelines for Conduct”, the

provisions of the Guidelines shall apply.

These Procedures for Ethical

Management and Guidelines for

Conduct are formulated in

accordance with Article 21 of

“Ethical Corporate Management

Best Practice Principles for

TWSE/GTSM Listed

Companies” and Article 17 of

“Ethical Corporate Management

Policy and Best Practice

Principles” and in reference to

the model template “XXX Co.,

Ltd. Procedures for Ethical

Management and Guidelines for

Conduct”.

Article 2 (Applicable Subjects)

For the purposes of these Guidelines, the term “Company

Personnel” refers to the Company’s responsible persons, employees

and appointees and any person having substantial control of the

Company.

Any provision, promise, demand or acceptance of improper benefits

by any Company Personnel through a third party is presumed to be

an act of the Company Personnel.

Specified the individuals whom

these Guidelines apply.

Article 3 (Unethical Conduct)

For the purposes of these Guidelines, “unethical conduct” means

that any Company Personnel, in the course of his/her duties, for

purposes of obtaining or maintaining a benefit, directly or indirectly

provides, promises, demands or accepts improper benefits, or

engages in other conduct that is unethical, unlawful or in breach of

fiduciary duty.

The counterparties of the conduct of the preceding paragraph

include public officials, political candidates, party or party officials

Specified what are unethical

conduct and the counterparties

of these Guidelines.

- 32 -

Article Explanation

and any government-owned or private-owned enterprises or

institutions and its directors, supervisors, managerial officers,

employees, persons with substantial control or other interested

parties.

Article 4 (Types of Benefits)

For the purposes of these Guidelines, the term “benefits” means any

money, gratuity, gift, commission, position, service, preferential

treatment, rebate, facilitating payment, entertainment, dining and

other things of value, in whatever form or name.

Specified the benefits of these

Guidelines.

Article 5 (Responsible Unit)

The Company has designated the Corporate Social Responsibility

Committee as the responsible unit (the “Responsible Unit”) under

the command of the Board of Directors and responsible for

promoting the Company’s ethical management policy and

overseeing the effectiveness of the implementation of the

managerial department. The responsible unit has primary

responsibility for the following matters and shall report annually to

the Board of Directors:

A. Assist in integrating ethical and moral values into the

Company’s management strategy, and, in accordance with laws

and regulations, adopting appropriate malfeasance prevention

measures relating to ethical management.

B. Periodically analyze and evaluate the business activities in the

scope of business with a high risk of unethical conduct and on

such basis formulating prevention plans and regularly reviewing

the appropriateness and effectiveness of such prevention plans.

C. Oversee the managerial department’s planning for internal

organization, staffing and responsibilities, and establish

checks-and-balance mechanism for mutual supervision of

business activities within the business scope with a higher risk

of unethical conduct.

D. Oversee the promotion and coordination of ethical policy

advocacy training.

E. Establish whistleblowing system and ensure the effectiveness of

its implementation.

F. Assist the Board of Directors and management in auditing and

evaluating the effective operation of the preventive measures

established for the implementation of ethical management, and

regularly produce reports regarding assessment of the

compliance with respect to relevant business processes.

If the duties of any department or division involved the matters

mentioned in each subparagraph in the preceding paragraph, such

department or division shall assist in the handling thereof.

In order to supervise the

Company’s prevention of

unethical conduct and ensure the

implementation of policies,

specified the Company’s

responsible unit and the matters

which the unit is responsible for.

- 33 -

Article Explanation

Article 6 (Prohibition Against Providing or Accepting Improper

Benefits)

Except under the following circumstances, Company Personnel

shall comply with the provisions of the Company’s “Ethical

Corporate Management Policy and Best Practice Principles” and the

Guidelines when directly or indirectly providing, receiving,

promising or requesting the benefits provided in Article 4 and shall

follow relevant procedures before doing so:

A. Conduct taken for business needs and in accordance with local

courtesy, convention or custom during domestic (or foreign)

visits, reception of guests, promotion of business and

communication and coordination.

B. Participation in or inviting others to an ordinary social activity

based on accepted social customs, commercial purposes or

developing relationships.

C. Inviting customers or being invited to attend specific business

events, factory visits, etc. for business purposes, in accordance

with the Company's relevant regulations.

D. Participating in folk festivals held in public and to which the

general public is invited.

E. Award, relief, condolence or consolation, etc., from officers.

F. For social customs or other conduct which are in compliance

with company regulations.

Specified that the directly or

indirectly provision, receipt,

promise or demand of money,

gifts, services, preferential

treatments, entertainment,

gratuities and other benefits by

Company Personnel shall be in

accordance with the ethical rules

and relevant procedures.

Article 7 (Procedures for Handling the Acceptance of Improper

Benefits)

Except under the circumstance set forth in the preceding article, in

the event Company Personnel are directly or indirectly provided

with or are promised any of the benefits specified in Article 4, they

shall return or refuse such benefits and shall report to their

immediate supervisor and the human resources unit. In the event

that they are unable to return the benefits, they shall deliver them to

the human resources unit within one (1) week of the date of receipt.

The human resources unit shall, depending on the nature and value

of the benefits provided in Paragraph 1, make a proposal for refund,

accepted on payment, given to the public, donated to charity or give

other appropriate advice, which shall be reported to the general

manager and implemented upon approval.

Specified the procedures for

handling money, gifts, services,

preferential treatments,

entertainment, gratuities and

other benefits directly or

indirectly offered or promised to

Company Personnel.

Article 8 (Prohibition of and handling procedure for facilitating

payments)

The Company and Company Personnel shall neither provide nor

promise any facilitating payment.

If any Company Personnel provides or promises a facilitating

payment under threat or intimidation, he/she shall submit a report to

their immediate supervisor stating the facts and shall subsequently

Specified the prohibition against

provision of or commitment to

facilitating payments and the

relevant subsequent procedures.

- 34 -

Article Explanation

notify and handle in accordance with the Company’s internal rules.

Upon receipt of a report under the preceding paragraph, the

responsible unit shall take immediate action and examine relevant

matters in order to minimize the risk of recurrence. If any

wrongdoing is found to be involved, the judicial unit should be

notified immediately.

Article 9 (Handling Procedures for Political Contributions and

Charitable Donations or Sponsorships)

The Company’s political contributions and charitable donations or

sponsorships shall be made in accordance with the Company's

“Donation Management Regulations” and relevant laws and

regulations.

Specified the handling

procedures for the Company’s

provision of political

contributions and charitable

donations or sponsorships.

Article 10 (Recusal)

Where a director of the Company, or the juristic person he/she

represents, has a conflict of interest with a Board of Directors

meeting proposal, such director shall explain the material aspects of

his/her interest at such meeting and, where there is a likelihood that

the interests of the Company would be prejudiced, may not

participate in the discussion or vote, shall recuse him/herself from

any discussion and voting and may not exercise voting rights as

proxy on behalf of another director. The directors shall exercise

discipline among themselves and may not support each other in an

inappropriate manner.

A director’s spouse or relative within the second degree, or an

affiliated company controlled by a director, having a conflict of

interest with a meeting proposal aforementioned in the preceding

paragraph shall be deemed as such director having a personal

conflict of interest.

If, in the course of the Company’s business, any Company

Personnel discovers a conflict of interest involving himself/herself

or the juristic person he/she represents, or a situation that may cause

him/herself, his/her spouse, parents, children or an interested party

to gain an improper benefit, he/she shall concurrently report the

matter to his/her immediate supervisor and the relevant responsible

unit and the immediate supervisor shall provide appropriate

guidance.

Company Personnel shall not use the Company’s resources for

commercial activities outside the Company and shall not have their

performance affected by their participation in commercial activities

outside the Company.

Specified that Company

Personnel, when conducting

business, shall comply with

recusal-related rules.

Article 11 (Protection of Intellectual Property Rights and Duty

of Confidentiality)

The Company has internal rules for the management, maintenance

and preservation of trademarks, patents, copyrights and other

Specified the protection of

intellectual property rights and

duty of confidentiality of the

Company.

- 35 -

Article Explanation

intellectual property to ensure that the Company’s Personnel

conduct their business in accordance with them and to ensure their

continued effectiveness.

The Company manages, preserves and maintains the confidentiality

of its trade secrets through the relevant responsible units and

should, in case of outsourced business, enter into confidentiality

agreements to protect the interests of the Company.

When conducting business, Company Personnel shall comply with

all laws and regulations, Company’s internal rules and contracts

relating to intellectual property and shall not disclose to others any

intellectual property, such as trade secrets, trademarks, patents and

copyrights, known to the Company and shall not inquire about or

collect any intellectual property not related to their duties, including

trade secrets, trademarks, patents and copyrights.

Article 12 (Prohibition of Unfair Competition)

When engaging in business activities, the Company shall comply

with the Fair Trade Act and relevant competition laws and

regulations and may not fix prices, rig bids, limit output or quotas,

or share or divide the market by allocating customers, suppliers,

operating areas or types of businesses.

Specified the provision for

prohibiting unfair competition.

Article 13 (Prohibition of Insider Trading and Confidentiality

Agreement)

Company Personnel shall comply with the Securities and Exchange

Act and may not engage in insider trading by using any undisclosed

information of which they have knowledge, nor may they disclose

such information to others in order to prevent such others from

engaging in insider trading by using such undisclosed information.

Other entities or personnel involved in mergers, spin-offs,

acquisitions and transfers of shares, material memoranda, strategic

alliances, other business partnerships or material contracts with the

Company shall enter into a confidentiality agreement with the

Company undertaking not to disclose to others any trade secrets or

other material information of the Company of which they have

knowledge and not to use such information without the Company's

consent.

Specified that Company

Personnel are prohibited from

engaging in insider trading, nor

may they disclose the

Company’s non-public

information, and that the

Company shall enter into

confidentiality agreements with

external entities or individuals to

prevent disclosure of the

Company’s secrets as a result of

their involvement in important

Company business activities.

Article 14 (Announcement of Ethical Management Policy to

Outside Parties)

The Company shall disclose its ethical management rules and

regulations in its annual reports and on its website and make

announcements at institutional investor conferences or other

external events so that the suppliers, customers or other

business-related organizations and personnel can have a clear

understanding of the principles and regulations with respect to the

Company's ethical management.

Specified that the Company

shall announce its ethical

management policy to outside

parties.

- 36 -

Article Explanation

Article 15 (Ethical Management Evaluation Prior to

Development of Commercial Relationships)

Before the Company establishes a commercial relationship with

another party, the Company shall evaluate the eligibility of the

counterparty in accordance with the Company’s relevant internal

regulations and check whether such vendor has been blacklisted or

suspended.

Specified that, prior to

establishing a commercial

relationship, Company

Personnel should assess the

legality and ethical management

situation of the commercial

counterparty.

Article 16 (Statement of Ethical Management Policy to Business

Counterparties)

In the course of engaging in business activities, Company Personnel

shall explain to transaction counterparties the Company’s ethical

management policy and related regulations, and shall expressly

refuse to directly or indirectly offer, promise, request or receive

improper benefits of any form or name.


Personnel shall, in the course of

conducting business activities,

explain to transaction

counterparties the Company’s

ethical management policy and

related regulations.

Article 17 (Avoidance of Commercial Dealings with Unethical

Operators)

Company Personnel shall refrain from engaging in business

dealings with agents, suppliers, customers or other commercial

transaction counterparties who have engaged in unethical conduct

and shall immediately cease business dealings with business or

cooperation counterparties who are found to have engaged in

unethical conduct and blacklist such counterparties, in order to

comply with the Company’s regulations relating to ethical

management.


shall refrain from engaging in

business dealings with suppliers,

customers or other commercial

transaction counterparties who

have engaged in unethical

conduct.

Article 18 (Stipulation of Ethical Management Terms in

Contracts)

When the Company enters into a contract with another party, the

Company shall fully understand the other party’s ethical

management situation and shall include in the contract terms

compliance with the Company’s “Policy and Guideline of Ethical

Management” and the following matters:

A. Any party who becomes aware of a breach of a contractual

provision prohibiting the receipt of commissions, kickbacks or

other improper benefits shall promptly and truthfully notify the

other party of the identity of such person(s), the manner in

which the provision, promise, request or acceptance was made

and the monetary amount or other improper benefits provided,

and provide evidence thereof and cooperate with the other

party's investigation. If a party suffers damage as a result, such

party may seek damages from the other party.

B. When a party commercial activities involves unethical conduct,

the other party may unconditionally terminate or rescind the

contract at any time.

C. Set specific and reasonable payment terms, including the place

Specified that when the

Company enters into a contract

with another party, the contract

shall contain provisions for

prevention of unethical conduct.

- 37 -

Article Explanation

and method of payment and the requirement for compliance

with related tax laws and regulations.

Article 19 (Handling of Unethical Conduct by Company

Personnel)

The Company encourages internal and external personnel to report

unethical conduct or misconduct, and the relevant reporting

channels and handling procedures shall be in accordance with the

Company’s “Procedures for Handling Reports of Internal and

External Personnel”.

Specified the procedures for

handling reports received by the

Company.

Article 20 (Handling of Unethical Conduct by Others Towards

the Company)

When any Company Personnel encounters another person engaged

in unethical conduct against the Company, if such conduct involves

illegality, the Company shall notify the judicial and prosecutorial

authorities of the relevant facts. Where any public office or public

employee is involved, the Company shall notify the governmental

anti-corruption authorities.

Specified the measures to be

taken when others engage in

unethical conduct against the

Company.

Article 21 (Internal Advocacy, Establishment of System for

Rewards, Penalties and Complaints, and Related Disciplinary

Measures)

The Company shall conduct internal advocacy at least once a year

to convey the importance of integrity to Company Personnel.

The Company shall incorporate ethical management in its employee

performance appraisal and human resources policies and establish a

clear and effective system of rewards, penalties and complaints.

Where a Company Personnel seriously violates his/her integrity, the

Company shall handle it in accordance with the Company’s “Work

Rules” and relevant laws and regulations.

The Company shall disclose the title and name of the violator, the

date of violation, the violation details and the actions taken in

response on its intranet.

The Company shall conduct

internal advocacy, incorporate

ethical management in its

employee performance appraisal

and human resources policies

and establish a clear and

effective system of rewards,

penalties and complaints.

Article 22 (Enforcement)

These Guidelines, and any amendments hereto, shall be

implemented after adoption by resolution of the Board of Directors,

and shall be delivered to each independent director (or supervisor)

and reported to the shareholders’ meeting.

Specified the enforcement and

amendment procedures of the

Guidelines.

- 38 -

III. Items to Recognize

Matter 1: The Company’s 2019 CPA Audited Financial Statements

are hereby submitted for recognition.

(Proposed by the Board of Directors)

Explanation:

1. The consolidated financial statements of the Company for the year of 2019 have

been prepared by the Board of Directors and duly audited and certified by

Wang-Seng Lin and Kwan-Chung Lai, CPAs of Deloitte, who have produced the

audit report. The above statements and the business report have been duly

submitted for review by the Audit Committee.

2. Attachments:

(1) Business Reports

(2) Consolidated Balance Sheet

(3) Consolidated Statement of Comprehensive Income

(4) Consolidated Statement of Changes in Equity

(5) Consolidated Statement of Cash Flows

(6) Independent Auditors’ Report

Resolution:

- 39 -

SHIN KONG FINANCIAL HOLDING CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2019 AND 2018

(In Thousands of New Taiwan Dollars)

2019 2018

ASSETS Amount % Amount %

CASH AND CASH EQUIVALENTS (Notes 4 and 6) $ 201,897,933 5 $ 51,679,250 1

DUE FROM CENTRAL BANK AND OTHER BANKS (Note 7) 51,801,518 1 38,818,698 1

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4, 8 and 50) 476,321,145 12 388,623,506 11

FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME (Notes 4, 9 and 50) 349,069,530 9 394,108,421 11

FINANCIAL ASSETS AT AMORTIZED COST (Notes 4, 10 and 50) 1,802,686,194 45 1,714,648,273 47

BONDS PURCHASED UNDER RESALE AGREEMENTS (Notes 4, 12 and 39) 10,736,713 - 9,657,198 -

ACCOUNTS RECEIVABLE (Notes 4, 13 and 15) 72,698,862 2 76,657,778 2

CURRENT TAX ASSETS (Notes 4 and 38) 1,296,063 - 2,299,374 -

NONCURRENT ASSETS CLASSIFIED AS HELD FOR SALE (Notes 4 and 14) - - 37,976 -

LOANS, NET (Notes 4, 15 and 39) 754,966,218 19 725,435,818 20

INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD (Notes 4 and 17) 422,990 - 511,677 -

ASSETS ON INSURANCE PRODUCTS - SEPARATE ACCOUNTS (Notes 4 and 29) 41,833,811 1 41,300,877 1

MISCELLANEOUS FINANCIAL ASSETS 6,484,770 - 7,467,229 -

INVESTMENT PROPERTIES (Notes 4, 19 and 50) 128,028,117 3 110,484,998 3

PROPERTY AND EQUIPMENT (Notes 4, 19 and 50) 31,850,554 1 31,854,369 1

RIGHT-OF-USE ASSETS, NET (Notes 4 and 20) 5,168,346 - - -

INTANGIBLE ASSETS, NET (Notes 4 and 21) 3,019,275 - 2,935,570 -

DEFERRED TAX ASSETS (Notes 4 and 38) 17,203,608 1 18,954,916 1

OTHER ASSETS (Notes 4, 22, 43 and 50) 25,648,172 1 32,991,324 1

TOTAL $ 3,981,133,819 100 $ 3,648,467,252 100

LIABILITIES AND EQUITY

DUE TO CENTRAL BANK AND OTHER BANKS (Note 23) $ 8,493,819 - $ 8,705,068 -

FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4 and 8) 5,503,637 - 8,552,203 -

NOTES AND BONDS ISSUED UNDER REPURCHASE AGREEMENTS (Notes 4, 24 and 39) 40,823,365 1 42,654,744 1

ACCRUED EXPENSES 7,823,258 - 7,472,618 -

BONDS PAYABLE - CURRENT PORTION (Note 26) 6,000,000 - 3,500,000 -

OTHER PAYABLES (Note 30) 28,112,050 1 38,191,793 1

CURRENT TAX LIABILITIES (Notes 4 and 38) 142,762 - 211,241 -

DEPOSITS AND REMITTANCES (Notes 25 and 39) 772,279,330 19 707,967,035 19

BONDS PAYABLE (Notes 4 and 26) 54,762,248 1 56,197,196 2

OTHER LOANS (Note 27) 1,176,770 - 592,771 -

PROVISIONS

Insurance liability reserve (Notes 4 and 31) 2,766,723,787 70 2,544,893,193 70

Reserve for employee benefits (Notes 4 and 28) 657,265 - 1,172,923 -

Other reserves 279,068 - 274,984 -

LIABILITIES ON INSURANCE PRODUCTS - SEPARATE ACCOUNTS (Notes 4 and 29) 41,833,811 1 41,300,877 1

MISCELLANEOUS FINANCIAL LIABILITIES 16,734,605 1 19,226,324 1

LEASE LIABILITIES (Notes 4 and 20) 7,036,559 - - -

DEFERRED TAX LIABILITIES (Notes 4 and 38) 5,146,890 - 3,708,157 -

OTHER ADVANCE RECEIPTS 4,247,060 - 4,438,814 -

OTHER LIABILITIES 18,060,675 1 14,791,591 1

Total liabilities 3,785,836,959 95 3,503,851,532 96

EQUITY ATTRIBUTABLE TO THE OWNER OF THE COMPANY (Notes 4 and 32)

Share capital

Common stock 126,003,941 3 121,855,057 3

Preferred stock 750,000 - - -

Capital collected in advance - - 748,884 -

Capital surplus 13,655,226 1 13,935,322 -

Retained earnings

Legal reserve 4,845,115 - 5,517,796 -

Special reserve 21,154,359 1 21,154,359 1

Unappropriated retained earnings 16,852,797 - (672,681 ) -

Other equity

Exchange differences on translating foreign operations (38,013 ) - 77,887 -

Unrealized gain on investments in equity instruments designated as at fair value through other comprehensive income 7,252,609 - 108,835 -

Unrealized gain on investments in debt instruments at fair value through other comprehensive income 2,070,714 - (3,060,523 ) -

Reclassified to other comprehensive income based on the overlay approach 2,750,206 - (15,056,530 ) -

Treasury shares (401,846 ) - (401,846 ) -

Total equity attributable to the owner of the Company 194,895,108 5 144,206,560 4

NON-CONTROLLING INTERESTS (Notes 16 and 32) 401,752 - 409,160 -

Total equity 195,296,860 5 144,615,720 4

TOTAL $ 3,981,133,819 100 $ 3,648,467,252 100

The accompanying notes are an integral part of the consolidated financial statements.

- 40 -


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Percentage

Increase

2019 2018 (Decrease)

Amount % Amount % %

INTEREST INCOME (Notes 36 and 39) $ 112,980,638 41 $ 103,772,439 41 9

INTEREST EXPENSE (Note 39) (7,778,867) (3) (6,319,374) (2) 23

NET INTEREST INCOME 105,201,771 38 97,453,065 39 8

NET INCOME AND GAINS OTHER

THAN INTEREST INCOME

Net processing fee and commission fee

(Notes 4, 29, 34 and 39) (6,531,904) (2) (6,062,642) (2) 8

Net income on life insurance operation

(Notes 31 and 35) 156,621,148 57 142,910,915 56 10

Gain on financial assets and liabilities

at fair value through profit or loss

(Notes 8 and 36) 48,274,487 17 (71,167,140) (28) 168

Realized gain on financial assets at fair

value through other comprehensive

income (Note 36) 11,670,234 4 25,677,857 10 (55)

Net loss on derecognition of financial

assets at amortized cost (Note 36) 9,889,007 4 63,396 - 15,499

Share of loss of associates accounted

for using the equity method

(Note 17) (127,647) - (331,643) - (62)

Gain on reclassification based on

overlay approach (Note 36) (21,438,812) (8) 24,518,512 10 (187)

Gain on investment properties

(Notes 36 and 39) 3,861,956 1 3,582,906 1 8

Foreign exchange gain or loss (Note 8) (31,569,805) (11) 35,989,210 14 (188)

Impairment loss recognized on assets

(Note 36) 308,019 - (2,206,352) (1) 114

Gain on other investments, net

(Notes 17 and 36) - - 1,688,029 1 (100)

Other miscellaneous income, net

(Note 39) 881,827 - 743,578 - 19

PROFIT FROM OPERATIONS 277,040,281 100 252,859,691 100 10

NET CHANGES IN INSURANCE

LIABILITY RESERVE (Note 31) (234,264,063) (84) (214,575,601) (85) 9

(Continued)

- 41 -





Percentage

Increase


Amount % Amount % %

PROVISION FOR BAD DEBT

EXPENSES (Note 15) $ (476,752) - $ (1,552,000) (1) (69)

OPERATING EXPENSES (Notes 37

and 39)

Employee benefit expenses (15,824,929) (6) (15,161,889) (6) 4

Depreciation and amortization

expenses (2,987,134) (1) (2,071,152) (1) 44

Other selling and administrative

expenses (8,196,967) (3) (8,464,333) (3) (3)

Total operating expenses (27,009,030) (10) (25,697,374) (10) 5

CONSOLIDATED INCOME BEFORE

INCOME TAX 15,290,436 6 11,034,716 4 39

INCOME TAX BENEFIT (Notes 4

and 38) 1,339,858 - (556,121) - 341

CONSOLIDATED NET INCOME 16,630,294 6 10,478,595 4 59

OTHER COMPREHENSIVE INCOME

(LOSS)

Items that will not be reclassified

subsequently to profit or loss:

Loss on remeasurement of defined

benefit plans 194,414 - (383,055) - 151

Unrealized gain on investments in

equity instruments designated as

at fair value through other

comprehensive income 8,245,796 3 2,155,236 1 283

Income tax relating to items that

will not be reclassified

subsequently to profit or loss (1,011,377) - (1,398,035) (1) (28)

Items that may be reclassified

subsequently to profit or loss:

(Continued)

- 42 -





Percentage

Increase


Amount % Amount % %

Exchange differences on translating

foreign operations $ (115,900) - $ 52,972 - (319)

Unrealized loss on investments in

debt instruments at fair value

through other comprehensive

income 6,261,295 2 (30,561,563) (12) 120

Reclassification to other

comprehensive loss based on

overlay approach 21,438,812 8 (24,518,512) (10) 187

Share of the other comprehensive

loss of associates and joint

ventures accounted for using the

equity method 8,449 - (12,545) - 167

Income tax relating to items that

may be reclassified subsequently

to profit or loss (Note 38) (4,770,583) (2) 8,885,548 4 (154)

Total other comprehensive (loss)

income, net of income tax 30,250,906 11 (45,779,954) (18) 166

TOTAL COMPREHENSIVE INCOME

(LOSS) $ 46,881,200 17 $ (35,301,359) (14) 233

INCOME ATTRIBUTABLE TO:

Owner of the Company $ 16,562,137 6 $ 9,753,791 4 70

Non-controlling interests 68,157 - 724,804 - (91)

$ 16,630,294 6 $ 10,478,595 4 59

TOTAL COMPREHENSIVE INCOME

(LOSS) ATTRIBUTABLE TO:

Owner of the Company $ 46,818,644 17 $ (36,268,297) (14) 229

Non-controlling interests 62,556 - 966,938 - (94)

$ 46,881,200 17 $ (35,301,359) (14) 233

EARNINGS PER SHARE (Note 33)

Basic $1.34 $0.89

Diluted $1.28 $0.85

The accompanying notes are an integral part of the consolidated financial statements. (Concluded)

- 43 -


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



Equity Attributable to Owner of the Company

Other Equity

Exchange

Differences on Unrealized

Unrealized Gain

on Financial

Assets at Fair

Value Through

Other

Comprehensive Total Equity

Share Capital Retained Earnings Translating Losses on Other Equity Related to Income on Attributable to

Capital Collected Unappropriated Foreign Available-for-sale Comprehensive Assets Classified Reclassification of Owner of the Non-controlling

Common Stock Preferred Stock in Advance Capital Surplus Legal Reserve Special Reserve Earnings Operations Financial Assets Income as Held for Sale Overlay Approach Treasury Shares Company Interests Total

BALANCE, DECEMBER 31, 2017 $ 102,281,441 $ - $ 137,586 $ 10,033,789 $ 4,464,679 $ 27,217,124 $ 10,441,856 $ 69,907 $ (12,852,496 ) $ - $ - $ - $ (483,387 ) $ 141,310,499 $ 14,660,102 $ 155,970,601

Effect of retrospective application on IFRS 9 - - - - - - (4,550,099 ) - 12,852,496 5,878,655 - 5,400,103 - 19,581,155 526,622 20,107,777

BALANCE, JANUARY 1, 2018 AS RESTATED 102,281,441 - 137,586 10,033,789 4,464,679 27,217,124 5,891,757 69,907 - 5,878,655 - 5,400,103 (483,387 ) 160,891,654 15,186,724 176,078,378

Special reserve reversed under Rule No. 1010012865 issued by the FSC - - - - - (6,062,765 ) 6,062,765 - - - - - - - - -

Buy-back of treasury shares and transferred to employees - - - (19,921 ) - - - - - - - - 483,387 463,466 - 463,466

Equity component of convertible bonds issued by the Company - - - 221,000 - - - - - - - - - 221,000 - 221,000

Convertible bonds converted to ordinary shares 7,359,280 - 611,298 (851,658 ) - - - - - - - - - 7,118,920 - 7,118,920

Appropriation of 2017 earnings

Legal reserve - - - - 1,053,117 - (1,053,117 ) - - - - - - - - -

Cash dividends distributed by the Company - - - - - - (3,679,429 ) - - - - - - (3,679,429 ) - (3,679,429 )

Share dividends distributed by the Company 1,576,898 - - - - - (1,576,898 ) - - - - - - - - -

Changes in non-controlling interests - - - (31,251 ) - - - 164 - (1,797 ) - - - (32,884 ) (143,142 ) (176,026 )

Buy-back of treasury shares by the Company - - - - - - - - - - - - (174,053 ) (174,053 ) - (174,053 )

Changes in percentage of ownership interests in subsidiaries 10,637,438 - - 4,583,363 - - - (43,446 ) - 651,798 - - (227,793 ) 15,601,360 (15,601,360 ) -

Net income for the year ended December 31, 2018 - - - - - - 9,753,791 - - - - - - 9,753,791 724,804 10,478,595

Other comprehensive income (loss) for the year ended December 31, 2018,

net of income tax - - - - - - (82,715 ) 55,839 - (25,538,579 ) - (20,456,633 ) - (46,022,088 ) 242,134 (45,779,954 )

Total comprehensive income (loss) for the year ended December 31, 2018 - - - - - - 9,671,076 55,839 - (25,538,579 ) - (20,456,633 ) - (36,268,297 ) 966,938 (35,301,359 )

Loss on disposal of investments in equity instruments designated as at fair

value through other comprehensive income - - - - - - (16,059,788 ) - - 16,059,788 - - - - - -

Gain on disposal of investments in equity instruments designated as at fair

value through other comprehensive income from participating policy

transfer in special reserve - - - - - - 70,953 - - - - - - 70,953 - 70,953

Joint ventures accounted for using the equity method reclassified to equity

related to financial assets classified as held for sale - - - - - - - (4,577 ) - (1,553 ) 6,130 - - - - -

Loss on disposal of investments accounted for using the equity method - - - - - - - - - - (6,130 ) - - (6,130 ) - (6,130 )

BALANCE, DECEMBER 31, 2018 121,855,057 - 748,884 13,935,322 5,517,796 21,154,359 (672,681 ) 77,887 - (2,951,688 ) - (15,056,530 ) (401,846 ) 144,206,560 409,160 144,615,720

Appropriation of 2018 earnings

Legal reserve used to offset deficits - - - - (672,681 ) - 672,681 - - - - - - - - -

Cash dividends from capital surplus - - - (2,445,185 ) - - - - - - - - - (2,445,185 ) - (2,445,185 )

Changes in non-controlling interests - cash dividends - - - - - - - - - - - - - - (69,964 ) (69,964 )

Issue of shares 3,400,000 750,000 - 2,126,862 - - - - - - - - - 6,276,862 - 6,276,862

Convertible bonds converted to ordinary shares 748,884 - (748,884 ) - - - - - - - - - - - - -

Share-based payments - - - 38,227 - - - - - - - - - 38,227 - 38,227

Net income for the year ended December 31, 2019 - - - - - - 16,562,137 - - - - - - 16,562,137 68,157 16,630,294

Other comprehensive (loss) income for the year ended December 31, 2019 - - - - - - 155,059 (115,900 ) - 12,410,612 - 17,806,736 - 30,256,507 (5,601 ) 30,250,906

Total comprehensive (loss) income for the year ended December 31, 2019 - - - - - - 16,717,196 (115,900 ) - 12,410,612 - 17,806,736 - 46,818,644 62,556 46,881,200

Gain on disposal of investments in equity instruments designated as at fair

value through other comprehensive income - - - - - - 135,601 - - (135,601 ) - - - - - -

BALANCE, DECEMBER 31, 2019 $ 126,003,941 $ 750,000 $ - $ 13,655,226 $ 4,845,115 $ 21,154,359 $ 16,852,797 $ (38,013 ) $ - $ 9,323,323 $ - $ 2,750,206 $ (401,846 ) $ 194,895,108 $ 401,752 $ 195,296,860

The accompanying notes are an integral part of the consolidated financial statements.

- 44 -


CONSOLIDATED STATEMENTS OF CASH FLOWS



2019 2018

CASH FLOWS FROM OPERATING ACTIVITIES

Consolidated income before income tax $ 15,290,436 $ 11,034,716

Adjustments for:

Depreciation expenses 2,554,722 1,667,813

Amortization expenses 432,412 403,339

Provision for doubtful accounts 476,752 1,552,000

(Gain) loss on financial assets and liabilities at fair value through

profit or loss (48,274,487) 71,167,140

Interest expense 7,778,867 6,319,374

Interest income (112,980,638) (103,772,439)

Dividend income (17,290,841) (14,730,071)

Changes in insurance liability reserve 221,813,666 221,051,538

Compensation cost of share-based payments 38,227 10,272

Loss of associates and joint ventures accounted for using the equity

method 127,647 331,643

Loss (gain) on reclassification based on overlay approach 21,438,812 (24,518,512)

Loss (gain) on disposal of property and equipment 1,258 (2,977)

Gain on sale of investments (11,245,568) (15,578,856)

Gain on disposal of investments accounted for using the equity

method - (1,688,029)

(Reversal of) impairment loss recognized on financial assets (308,019) 385,421

Loss on reversal of impairment on non-financial assets - 1,820,931

Loss on lease modifications 4,799 -

Net changes in operating assets and liabilities

Increase in due from the Central Bank and other banks (1,173,848) (1,261,838)

Increase in financial assets at fair value through profit or loss (5,561,919) (63,235,204)

Decrease in financial assets at fair value through other

comprehensive income 54,888,448 226,647,613

Increase in investments in debt instruments at amortized cost (55,802,040) (403,945,166)

Increase in notes and bonds purchased under resale agreements (1,079,515) (156,923)

Decrease (increase) in receivables 2,920,835 (5,639,809)

Increase in loans (29,499,217) (29,180,424)

Decrease (increase) in other financial assets 525,448 (2,539,439)

Increase in other assets (1,628,739) (725,937)

(Decrease) increase in due to Central Bank and other banks (211,249) 4,833,878

Decrease in financial liabilities at fair value through profit or loss (36,909,419) (66,926,380)

(Decrease) increase in payables (9,476,531) 14,732,509

(Decrease) increase in other financial liabilities (2,491,719) 2,492,801

(Decrease) increase in other liabilities (1,800,867) 4,255,321

Increase in deposits and remittances 64,312,295 21,444,008

Decrease in reserve for employee benefits (321,243) (897,261)

Cash generated from (used in) operations 56,548,765 (144,648,948)

Interest received 92,504,240 84,687,972

Dividends received 16,858,767 14,549,311

(Continued)

- 45 -





2019 2018

Interest paid $ (7,828,164) $ (6,165,816)

Income tax paid (319,528) (570,710)

Net cash generated from (used in) operating activities 157,764,080 (52,148,191)

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of investments accounted for using the equity method (45,000) (838,125)

Acquisition of property and equipment (2,014,019) (1,255,217)

Proceeds from disposal of property and equipment 7,607 9,074

Decrease (increase) in guarantee deposits paid 4,240,163 (3,487,010)

Acquisition of intangible assets (311,792) (205,107)

Acquisition of investment properties (5,049,145) (3,634,055)

Increase in other assets (350,988) (1,976,029)

Net cash used in investing activities (3,523,174) (11,386,469)

CASH FLOWS FROM FINANCING ACTIVITIES

Decrease in commercial paper payable - (1,499,936)

Proceeds from issue of corporate bonds - 11,000,000

Repayments of corporate bonds - (3,500,000)

Proceeds from the issue of financial debentures 4,500,000 5,000,000

Repayments of bank notes payable (3,500,000) -

Increase in other borrowings 583,999 -

Decrease in other loans - (995,561)

(Decrease) increase in notes and bonds issued under repurchase

agreements (1,831,379) 6,281,705

Increase (decrease) in guarantee deposits received 4,882,043 (1,219,283)

Payments of lease liabilities (794,206) -

Cash dividends paid - -

Proceeds from issuing shares 6,276,862 -

Purchase of treasury shares by employees - 463,466

Cost of treasury shares buyback - (174,053)

Dividends paid (2,445,185) (3,679,429)

Changes in non-controlling interests - 68,016

Net cash generated from financing activities 7,672,134 11,744,925

EFFECT OF EXCHANGE RATE CHANGES 114,615 (392,591)

NET INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS 162,027,655 (52,182,326)

CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR 71,625,647 123,807,973

CASH AND CASH EQUIVALENTS, END OF THE YEAR $ 233,653,302 $ 71,625,647

(Continued)

- 46 -





Reconciliation of the amounts in the consolidated statements of cash flows with the equivalent items reported in the

consolidated balance sheets at December 31, 2019 and 2018:

December 31

2019 2018

Cash and cash equivalents reported in the consolidated balance sheets $ 201,897,933 $ 51,679,250

Due from Central Bank and other banks qualified for cash and cash

equivalents under the definition of IAS 7 31,755,369 19,946,397

Cash and cash equivalents at the end of the year $ 233,653,302 $ 71,625,647

The accompanying notes are an integral part of the consolidated financial statements. (Concluded)

- 47 -

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders


Opinion

We have audited the accompanying consolidated financial statements of Shin Kong Financial Holding Co., Ltd.

and its subsidiaries (the Group), which comprise the consolidated balance sheets as of December 31, 2019 and

2018, the consolidated statements of comprehensive income, changes in equity and cash flows for the years ended

December 31, 2019 and 2018, and the notes to the consolidated financial statements, including a summary of

significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the

consolidated financial position of the Group as of December 31, 2019 and 2018, and its consolidated financial

performance, and its consolidated cash flows for the years ended December 31, 2019 and 2018, in accordance

with the Regulations Governing the Preparation of Financial Statements by Financial Holding Companies,

Regulations Governing the Preparation of Financial Statements by Insurance Companies, Guidelines Governing

the Preparation of Financial Statements by Securities Firms, Regulations Governing the Preparation of Financial

Reports by Futures Commission Merchants, Guidelines Governing the Preparation of Financial Reports by Public

Banks and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC

Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial

Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial

Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China.

Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of

the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with

The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled

our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we

have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of

the consolidated financial statements for the year ended December 31, 2019. These matters were addressed in the

context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and

we do not provide a separate opinion on these matters.

- 48 -

Key audit matters for the Group’s consolidated financial statements for the year ended December 31, 2019 are

stated as follows:

Valuation of Reserve for Life Insurance Liability and Liability Adequacy Test

The description of the key audit matter:

As described in Note 31a(3) to the accompanying consolidated financial statements, the reserve for life insurance

liability amounted to NT$2,740,280,802 thousand, 72% of the total consolidated liabilities. Note 31a(6) also

describes the exemption from a reserve for liability adequacy after testing and valuation by management.

Shin Kong Life Insurance Co., Ltd. subsidiary of Shin Kong Financial Holding Co., Ltd. which management

adopts actuarial models and several significant assumptions for estimating the reserve for life insurance liability

and the reserve for liability adequacy. Judging the reserve for life insurance liability involves significant

assumptions, which include the mortality rate, discount rate, lapse rate, morbidity rate, etc. The setup of

assumptions is based on legislation, regulations, knowledge of the Group’s actual experience and

industry-specific experience. The tests performed in respect of the reserve for liability adequacy on insurance

contracts are in accordance with regulations enacted by the Actuarial Institute of the Republic of China, and the

setup of future test discount rates accounts for the Group’s best estimate scenario as well as the rate of the

portfolio return under the current information.

Refer to Notes 4p(3), 4p(6), 5a and 31 to the accompanying consolidated financial statements for the details on

the related information, accounting policies, accounting estimate and assumption uncertainty for the reserve for

life insurance liability and the reserve for the liability adequacy test.

Since any changes in the actuarial models and important assumptions may lead to significant impacts on the

results of the reserves for life insurance liability and for the liability adequacy test estimations, the reserves for

life insurance liability and for liability adequacy test were identified as a key audit matter.

Corresponding audit procedures:

1. We understand the internal controls related to management’s estimation of the reserves for life insurance

liability and for the liability adequacy test as well as evaluate the operating effectiveness of these internal

controls.

2. We obtain actuarial reports regarding management’s estimations of the reserves for life insurance liability

and for liability adequacy test as well as evaluate the Group’s contracted actuarial specialist’s professional

ability and competence.

3. Our actuarial specialist performs the following procedures, and we compare the results with the actuarial

report published by the Group’s contracted actuary in order to evaluate the rationality of the actuarial models

and significant assumptions regarding the recognition of the reserve for life insurance liability applied by

management. The main audit procedures are described as follows:

a. Our actuarial specialist randomly samples the insurance products of Shin Kong Life Insurance Co., Ltd.

to examine whether the calculations of the reserve for life insurance liability were made in accordance

with the regulations.

- 49 -

b. Our actuarial specialist focuses on the actuarial models and important assumptions of selected insurance

policies and verifies the recognized amount of the reserve for life insurance liability.

c. Our actuarial specialist performs profiling tests focused on long term insurance policies to identify any

abnormal situations with recognized amounts of reserve of life insurance liability on single insurance

policies for the year ended December 31, 2019.

d. Our actuarial specialist uses the previously recognized amounts of the reserve for life insurance liability

taking into consideration the business development for this year and performs a ratio analysis of the

reasonableness of the reserve for life insurance liability to estimate the overall recognized amount of

reserve for life insurance liability.

4. Our actuarial specialist performs the following procedures, and we compare the results with the actuarial

report published by the Group’s contracted actuary in order to evaluate the rationality of the actuarial models

and significant assumptions regarding the recognition of the reserve for liability adequacy test applied by

management. The main audit procedures are described as follows:

a. Our actuarial specialist focuses on the tests of selected insurance policies provided by Shin Kong Life

Insurance Co., Ltd. for our audit in order to examine whether the assumptions were consistent with

regulations and the important built-in assumptions with the actuarial tools.

b. Our actuarial specialist focuses on the tests of selected insurance policies in order to evaluate the discount

rates for the future years applied by Shin Kong Life Insurance Co., Ltd. for the reserve for liability

adequacy test, and we perform individual recalculations.

c. Our actuarial specialist performs a comparative analysis of the prior year’s results takin g into

consideration the impact of the current business development in order to evaluate the rationality of the

calculation of the reserve for liability adequacy test.

Valuation of non-derivative Financial Instruments at Fair Value through Profit or Loss or

Other Comprehensive Income by Valuation Models with No Quoted Price in Active Markets

The description of the key audit matter is as follows:

In 2019, Shin Kong Life Insurance Co., Ltd. held non-derivative financial instruments at fair value through profit

or loss or other comprehensive income by valuation models with no quoted price in active markets. The amount

of the financial instruments that were classified as Level 2 and Level 3 financial assets, amounted to

NT$36,237,025 thousand, 4% of the total financial assets at fair value through profit or loss or other

comprehensive income. The financial instruments at fair value through profit or loss or other comprehensive

income by valuation models with no quoted price in active markets were mainly stocks and bond investments. For

the above financial instruments, the management of Shin Kong Life Insurance Co., Ltd. applied valuation models

to determine the fair values.

Refer to Notes 4m, 5b, 8, 9, and 50b to the accompanying consolidated financial statements for details on the

relevant information, accounting policies, accounting estimate, and assumption uncertainty for the valuation of

non-derivative financial instruments at fair value through profit or loss or other comprehensive income by

valuation models with no quoted price in active markets.

- 50 -

The valuation models of the non-derivative financial instruments at fair value through profit or loss or other

comprehensive income is selected based on the rules and practical experience of IFRS 13 and Evaluation

Standards 12 “Evaluation of Financial Instruments” by Accounting Research and Development Foundation,

included the adjusted observable and unobservable inputs. The selection of the valuation models, as mentioned,

and the inputs were involved in the critical judgments and estimations from management. Therefore, the valuation

of the above-mentioned financial instruments was considered to be a key audit matter.


1. We understand the internal controls related to management’s valuation of the non-derivative financial

instruments at fair value through profit or loss or other comprehensive income by valuation models with no

quoted price in active markets as well as evaluate the design of the internal controls.

2. With sampling the investment targets of the Level 2 and Level 3 non-derivative financial instruments at fair

value through profit or loss or other comprehensive income by valuation models, we evaluate whether the

valuation model and inputs adopted by management were reasonable, and recalculate the results to evaluate

whether the carrying amount are reasonable.

Expected Credit Loss Valuation of Discountings and Loans

The description of the key audit matter:

Shin Kong Commercial Bank Co., Ltd., the subsidiary company of Shin Kong Financial Holding Co., Ltd., which

had discountings and loans amounted to $597,428,365 thousand, representing 15% of the consolidated total assets

at December 31, 2019. The expected credit losses of discountings and loans from January 1, 2019 to December 31,

2019 amounted to $1,300,159 thousand. As the expected credit losses of discounting’s and loans is material to the

financial statements of Shin Kong Commercial Bank Co., Ltd. as a whole, and also as described in Note 5c, the

measurement of expected credit losses of loans and overdue loans involves various financial factors, such as the

probability of default and loss given default; therefore, the expected credit losses of discountings and loans was

deemed as a key audit matter.

Refer to Notes 4m, 5c and 15 to the accompanying consolidated financial statements for details on the related

information, accounting policies, accounting estimates, and assumption uncertainty for the estimations of the

expected credit losses of discounting’s and loans.


1. We understand and test the internal controls related to the expected credit losses of discountings and loans of

Shin Kong Commercial Bank Co., Ltd.

2. We sample discountings and loans of Shin Kong Commercial Bank Co., Ltd. with significant expected credit

losses and evaluate whether the value of collateral used for the expected credit loss estimations was

reasonable for the individual expected credit loss assessment.

3. We focus on the expected credit loss of discountings and loans of Shin Kong Commercial Bank Co., Ltd. as a

whole, understanding and testing the classification of loans and the important inputs of impairment models

(risk of default and expected loss rate) in order to evaluate the rationality of the expected credit loss used to

conform with the current experience and economic situation.

- 51 -

Responsibilities of Management and Those Charged with Governance for the Consolidated

Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in

accordance with the Regulations Governing the Preparation of Financial Statements by Financial Holding

Companies, Regulations Governing the Preparation of Financial Statements by Insurance Companies, Guidelines

Governing the Preparation of Financial Statements by Securities Firms, Regulations Governing the Preparation of

Financial Reports by Futures Commission Merchants, and Guidelines Governing the Preparation of Financial

Reports by Public Banks and International Financial Reporting Standards (IFRS), International Accounting

Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by

the Financial Supervisory Commission of the Republic of China, and for such internal control as management

determines is necessary to enable the preparation of consolidated financial statements that are free form material

misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to

continue as a going concern, disclosing, as applicable, matters related to going concern and using the going

concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or

has no realistic alternative but to do so.

Those charged with governance, including the audit committee, are responsible for overseeing the Group’s

financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole

are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes

our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in

accordance with the auditing standards generally accepted in the Republic of China will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,

individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users

taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the auditing standards generally accepted in the Republic of China, we

exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to

fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that

is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material

misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,

forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control (including the financial reporting process), relevant to the audit in

order to design audit procedures that are appropriate in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the Group’s internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and

related disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based

on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may

cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material

uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the

consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our

conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future

events or conditions may cause the Group to cease to continue as a going concern.

- 52 -

5. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the

disclosures, and whether the consolidated financial statements represent the underlying transactions and

events in a manner that achieves fair presentation.

6. Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business

activities within the Group to express an opinion on the consolidated financial statements. We are responsible

for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit

opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and

timing of the audit and significant audit findings, including any significant deficiencies in internal control that we

identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical

requirements regarding independence, and to communicate with them all relationships and other matters that may

reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of

most significance in the audit of the consolidated financial statements for the year ended December 31, 2019 and

are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation

precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter

should not be communicated in our report because the adverse consequences of doing so would reasonably be

expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Wang-Seng Lin and

Kwan-Chung Lai.

Deloitte & Touche

Taipei, Taiwan

Republic of China

February 25, 2020

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial

position, financial performance and cash flows in accordance with accounting principles and practices generally

accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and

practices to audit such consolidated financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial

statements have been translated into English from the original Chinese version prepared and used in the Republic

of China. If there is any conflict between the English version and the original Chinese version or any difference in

the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated

financial statements shall prevail.

- 53 -

Matter 2: The Company’s 2019 Earnings Distribution is hereby

submitted for recognition.


Explanation: The Company’s earnings distribution for the year 2019 is as set out in the

following earnings distribution table.

Resolution:

Earnings Distribution Table

2019 Unit: NT$

Item Amount Remarks

Undistributed earnings at the beginning of the

period 0

Recognizing remeasurement of defined

benefit plan in retained earnings 155,059,026

Disposing equity instrument investment at

fair value through other comprehensive

income, transferring accumulated profit and

loss to retained earnings 135,599,611

Adjusted undistributed earnings 290,658,637

Net profit in current period 16,562,136,626

Set aside for statutory surplus reserves (1,685,279,526) (Note 1)

Set aside for special surplus reserves (18,669,851) (Note 2)

Reversal of unrealized losses on

financial instruments special surplus

reserves 12,852,496,532

Earnings that can be distributed in current

period 28,001,342,418

Distribution Items (Note 3)

Preferred stock dividends (33,731,507)

Distributed in

accordance with

the Company’s

Articles of

Incorporation

Common stock dividends (5,040,158,000)

Approximately

NT$0.4 cash

per share (Note

4)

Undistributed earnings at the end of the period 22,927,452,911

- 54 -

Notes:

1. Pursuant to the Ministry of Economic Affairs’ Jing-Shang-Zi No.10802432410 letter, dated January 9, 2020,

when a company sets aside statutory surplus reserves in accordance with Article 237 of the Company Act, it

should be done with “After-tax net income for the current period” as the basis. Beginning from the

Company’s earnings distribution for its 2019 financial statements, the basis for setting aside statutory surplus

reserves shall be “Net income after tax plus for the current period other items adjusted to the current period’s

undistributed earnings other than after-tax net income”.

2. After a company is listed on a stock market, over-the-counter market or emerging stock market adopts IFRSs,

it shall, pursuant to regulations in the Jin-Guan-Zheng-Fa-Zi No.1010047490 order, dated November 21,

2012, calculate and set aside an amount of special surplus reserves based on the ratio of shareholding. If the

market prices subsequently increases, then such increase portion can reversed from special surplus reserves

based on the ratio of shareholding.

3. Distributed pursuant to net profits for the current period.

4. If, after the aforementioned earnings distribution resolution is approved, common shares of the Company are

repurchased, transferred, converted or cancelled pursuant to Article 28-2 of the Securities and Exchange Act,

or if the number of issued and outstanding shares on the ex-dividend date increases or decreases as a result of

issuance of overseas deposit receipts or new shares for other reasons, shareholders’ dividend rate shall be

adjusted according to the total amount of cash common share dividends resolved for this earnings distribution

and the actual number of issued and outstanding shares on the ex-dividend date.

Chairman: Wu, Tung-Chin Manager: Huang, Min-Yi Accounting Manager: Lu, Vicky

- 55 -

IV. Items to Discuss

Matter 1: The amendment to the Company’s Articles of

Incorporation is hereby submitted for discussion.


Explanation:

In response to business needs, and in accordance with the amendment to Article 162 of

the Company Act, it is proposed to amend the Company’s Articles of Incorporation. The

amendment comparison chart is as the attachment and the amendments are as follows:

(1) In response to long-term capital planning and business needs, the Company’s

total authorized capital in the Articles of Incorporation is increased from

NT$145 billion to NT$165 billion. (To amend Article 4)

(2) In accordance with the amendment to Article 162 of the Company Act, the

requirement that shares be signed or stamped by three or more directors is

amended to just require one director representing the Company. (To amend

Article 5, Paragraph 1)

Resolution:

- 56 -

(Attachment)


Articles of Incorporation

Comparison Table of Selected Articles to be Amended


Article 4

The total capital amount of the

Company shall be NT$165 billion,

divided into 16,500,000,000 shares,

divided into common shares and

preferred shares, at a par value of

NT$10 per share. The Board of

Directors shall be authorized to issue

the capital in lots as circumstances

require.

Article 4

The total capital amount of the

Company shall be NT$145 billion,

divided into 14,500,000,000 shares,

divided into common shares and

preferred shares, at a par value of

NT$10 per share. The Board of

Directors shall be authorized to issue

the capital in lots as circumstances

require.

Due to business needs, it

is proposed that the total

capital amount be

increased from NT$145

billion to NT$165

billion, divided into

16,500,000,000 shares.

Article 5

All share certificates of the

Company shall be issued after being

signed or stamped by a director

representing the Company and

authenticated by a bank that can

legally act as a share issuer and

authenticator. The Company may

issue registered stock or other

negotiable securities without

printing share certificates, provided

that any shares shall be recorded by

a centralized securities custodian.

Article 5

All share certificates of the Company

shall be issued in registered form

after being signed or stamped by at

least three directors and affixed with

the Company seal and authenticated

by an authentication institution

approved by the competent authority.

The Company may issue registered

stock or other negotiable securities

without printing share certificates,

provided that any shares shall be

recorded by a centralized securities

custodian.

1. As the provisions for

unregistered shares

have been deleted

from Company Act,

there is no further

need to distinguish

between registered

and unregistered

shares and thus “in

registered form” is

deleted.

2. In accordance with

the amendment to

Article 162 of the

Company Act, the

original requirement

that shares be signed

or stamped by three

or more directors is

relaxed to just

require one director

representing the

Company, and thus

the first paragraph of

this Article is

amended.

- 57 -


Article 34

These Articles of Incorporation were

made on December 14, 2001. The

first amendment was made on June

6, 2003. The second amendment was

made on June 10, 2005. The third

amendment was made on June 9,

2006. The fourth amendment was

made on June 15, 2007. The fifth


2009. The sixth amendment was

made on June 10, 2011. The seventh


2012. The eighth amendment was

made on June 14, 2013. The ninth


2014. The tenth amendment was

made on June 8, 2016. The eleventh


2018. The twelfth amendment was

made on June 14, 2019. The

thirteenth amendment was made on

June 19, 2020.

Article 34

These Articles of Incorporation were

made on December 14, 2001. The

first amendment was made on June

6, 2003. The second amendment was

made on June 10, 2005. The third


2006. The fourth amendment was

made on June 15, 2007. The fifth


2009. The sixth amendment was

made on June 10, 2011. The seventh


2012. The eighth amendment was

made on June 14, 2013. The ninth


2014. The tenth amendment was

made on June 8, 2016. The eleventh


2018. The twelfth amendment was

made on June 14, 2019.

Added the date of the

thirteenth amendment.

- 58 -

Matter 2: The amendment of the Company’s Rules for Shareholders’

Meetings is hereby submitted for discussion.


Explanation:

In reference to the model “XXX Co., Ltd. Rules for Shareholders’ Meetings” amended

and promulgated by the Taiwan Stock Exchange on January 2, 2020, it is proposed to

amend selected articles of the “Shin Kong Financial Holding Co., Ltd.’s Rules for

Shareholders’ Meetings”. The amendment comparison chart is as the attachment.

Resolution:

- 59 -

(Attachment)


Rules for Shareholders’ Meetings

Comparison Table of Selected Articles to be Amended


Article 1 (Basis of

Determination)

In order to establish a strong

governance system and sound

supervisory capabilities for the

Company’s shareholders’

meetings, and to strengthen

management capabilities, these

Rules are adopted pursuant to

Article 182-1, Paragraph 2 of the

Company Act, Article 11 of the

Corporate Governance

Best-Practice Principles for

Financial Holding Companies

and Article 12 of the Company’s

“Corporate Governance

Best-Practice Principles”.

(Newly added) 1. These Rules are

amended and its in

reference to the model

“XXX Co., Ltd. Rules

for Shareholders’

Meetings” amended and

promulgated by the

Taiwan Stock Exchange

on January 2, 2020 (the

“Model”).

2. In reference to Article 1

of the Model, added the

legal basis and moved

the original article to

Article 2.

Article 2 (Applicability of

Law)

The rules of procedure for

shareholders’ meetings of the

Company, except as otherwise

provided by law, shall be in

accordance with these Rules

Article 1

Shareholders’ meetings of the

Company shall be held in

accordance with these Rules.

Amended pursuant to

Article 2 of the Model.

Article 3 (Convening

Shareholders’ Meetings and

Shareholders’ Meeting

Notices)

Unless otherwise provided by

law or regulation, the


meetings shall be convened by

the board of directors.

The convening of the


meeting shall be notified to each

shareholder according to the

(Paragraphs 1 to 3 are newly

added)

1. In consideration of

changes in laws and

regulations that require

frequent amendments,

and in reference to

Article 172, Paragraph 5

of the Company Act,

Article 3 of the Model

and the

Ri-Jing-Shang-Zi No.

10702417500 letter,

dated August 8, 2018,

added Paragraphs 1 to

- 60 -


time periods stipulated by law.

For shareholders registered as

holding less than 1,000 shares,

notification can be through an

entry in the Market Observation

Post System (MOPS).

The reasons for convening a

shareholders’ meeting shall be

specified in the meeting notice

and public announcement. With

the consent of the addressee, the

meeting notice may be given in

electronic form.

Election or dismissal of

directors, amendments to the

articles of incorporation, capital

reduction, application for ,

waiver of non-compete for

directors, capital increase by

earnings, capital increase by

capital surplus, the dissolution,

merger or spin-off of the

company or any matter under

Article 185 shall be set out in the

notice of the reasons for

convening the shareholders’

meeting, with an explanation of

the main contents. None of the

above matters may be raised by

an extempore motion. The main

contents can be posted on the

competent securities authority’s

website or one designated by the

Company, and the website

address shall be stated in the

notice.

Where the reasons for convening

a shareholders’ meeting has

specified the full election of the

directors and supervisors and the

term commencement date,

following the election at such

shareholders’ meeting, the term

commencement date cannot be

changed by an extempore

motion or any other method.

A shareholder holding one

percent (1%) or more of the total

Article 9:

Election or dismissal of

directors, amendments to the

articles of incorporation, the

dissolution, merger or spin-off

of the company or any matter

under Article 185, paragraph 1

of the Company Act, Articles

26-1 and 43-6 of the Securities

and Exchange Act, or Articles

56-1 and 60-2 of the

Regulations Governing the

Offering and Issuance of

Securities by Securities Issuers

shall be set out in the notice of

the reasons for convening the

shareholders’ meeting. None of

the above matters may be

raised by an extempore motion.

Paragraphs 5 to 9 are newly

added)

3.

2. The original Article 9 is

moved to this Article 4

and wording is partially

amended.

3. Added paragraphs 5 to 9

in accordance with

Article 3, Paragraphs 5

to 9 of the Model.

- 61 -


number of issued shares may

submit to the Company a written

proposal for discussion at a

general shareholders’ meeting

containing a maximum of one

(1) item. No proposal containing

more than one item shall be

included in the meeting agenda.

However, if a shareholder

proposal is to urge the Company

to promote public interest or

fulfill its social responsibilities,

the board of directors must

include it into the agenda. In

addition, when the

circumstances of any

subparagraph of Article 172-1,

Paragraph 4 of the Company Act

apply to a proposal put forward

by a shareholder, the board of

directors may exclude it from

the agenda.

Prior to the book closure date

before a general shareholders’

meeting is held, the Company

shall publicly announce that it

will receive shareholder

proposals, and the location and

time period for their submission;

the period for submission of

shareholder proposals may not

be less than 10 days.

Shareholder-submitted proposals

are limited to 300 words, and no

proposal containing more than

300 words will be included in

the meeting agenda. The

shareholder making the proposal

shall be present in person or by

proxy at the regular shareholders

meeting and take part in

discussion of the proposal.

Prior to the date for issuance of

notice of a shareholders meeting,

the Company shall inform the

shareholders who submitted

proposals of the proposal

screening results, and shall list

- 62 -


in the meeting notice the

proposals that conform to the

provisions of this article. At the

shareholders meeting the board

of directors shall explain the

reasons for exclusion of any

shareholder proposals not

included in the agenda.

Article 4

For each shareholders’ meeting,

a shareholder may appoint a

proxy to attend the meeting by

providing the proxy form issued

by the Company and stating the

scope of the proxy’s

authorization.

A shareholder may issue only

one (1) proxy form and appoint

only one (1) proxy for any given

shareholders meeting, and shall

deliver the proxy form to the

Company before five (5) days

before the date of the

shareholders meeting. When

duplicate proxy forms are

delivered, the one received

earliest shall prevail unless a

declaration is made to cancel the

previous proxy appointment.

After a proxy form has been

delivered to the Company, if the

shareholder intends to attend the

meeting in person or to exercise

voting rights by correspondence

or electronically, a written notice

of proxy cancellation shall be

submitted to the company at

least two (2) days prior to the

meeting date. If the cancellation

notice is submitted after that

time, votes cast at the meeting

by the proxy shall prevail.

(Newly added) Added this Article in

accordance with Article 4

of the Model.

Article 5 (Principles for

Location and Time for

Article 4 Revised the wording of

this article in accordance

- 63 -


Convening Shareholders’

Meetings)

The place for convention of a

shareholders’ meeting shall be at

the place where the Company is

located, or a place convenient

for attendance by shareholders

and appropriate for convention

of shareholders’ meetings. The

time for commencement of a

meeting may not be earlier than

9:00AM or later than 3:00PM.

Full consideration shall be given

to the opinions of the

independent directors with

respect to the place and time of

the meeting.

(Paragraph 1)

The place for convention of a


at the place where the

Company is located, or a place

convenient for attendance by

shareholders and appropriate

for convention of shareholders’

meetings. The time for

commencement of a meeting

may not be earlier than

9:00AM or later than 3:00PM.

with Article 5 of the

Model. The original

Article 4, Paragraphs 2 to

4 is moved to Article 6.

Article 6 (Preparation of

Attendance Book and Other

Documents)

The Company’s procedures The

Company shall specify in its

shareholders meeting notices the

time during which shareholder

attendance registrations will be

accepted, the place to register

for attendance, and other matters

for attention.

The time during which

shareholder attendance

registrations will be accepted, as

stated in the preceding

paragraph, shall be at least 30

minutes prior to the time the

meeting commences. The place

at which attendance registrations

are accepted shall be clearly

marked and there shall be a

sufficient number of suitable

personnel assigned to handle the

registrations.

Shareholders themselves or their

proxies (collectively,

“shareholders”) shall attend

shareholders’ meeting with their

attendance cards, sign-in cards,

Article 4 (Paragraphs 2 to 4)

The Company’s procedures

The Company shall specify in

its shareholders meeting

notices the time during which


registrations will be accepted,

the place to register for

attendance, and other matters

for attention.

The time during which


registrations will be accepted,

as stated in the preceding

paragraph, shall be at least 30

minutes prior to the time the

meeting commences. The place

at which attendance

registrations are accepted shall

be clearly marked and there

shall be a sufficient number of

suitable personnel assigned to

handle the registrations.

Shareholders themselves or

their proxies (collectively,

“shareholders”) shall attend

shareholders’ meeting with

their attendance cards, sign-in

cards, or other certificates

1. Amended this article in

accordance with Article

6 of the Model.

2. Combined the original


to 4, Article 2 and

Article 12 into this

article.

- 64 -


or other certificates required for

attendance. The Company shall

not arbitrarily request provision

of other additional documents

for shareholder attendance.

Solicitors soliciting proxy forms

shall also bring identification

documents for verification

purpose.

The Company shall make

available an attendance register

for signing by attending

shareholders (or proxies), or the

attending shareholders (or

proxies) shall submit their

attendance cards in substitution

for signing of attendance.

Attending shareholders shall

wear attendance badges.

The Company shall furnish the

attending shareholders with the

meeting agenda book, annual

report, attendance card,

speaker’s slips, voting slips and

other meeting materials; when

there is a directors election,

pre-printed ballot shall also be

furnished.

When the government or a

juristic person is a shareholder,

it may be represented by more

than one representative at a

shareholders’ meeting. Where a

juristic person is appointed to

attend a shareholders’ meeting

as proxy, it may only assign one

representative to attend.

required for attendance.

Solicitors soliciting proxy

forms shall also bring

identification documents for

verification purpose.

Article 2

The shareholders’ meeting

shall make available an

attendance register for signing

by attending shareholders (or

proxies), or the attending

shareholders (or proxies) shall

submit their attendance cards

in substitution for signing of

attendance. Attending

shareholders shall wear

attendance badges.

The Company shall furnish the

attending shareholders with the

meeting agenda book, annual

report, attendance card,

speaker’s slips, voting slips

and other meeting materials;

when there is a directors

election, pre-printed ballot

shall also be furnished.

Article 12

Where a juristic person is

appointed to attend a

shareholders’ meeting as

proxy, such juristic person may

only assign one representative

to attend.

Article 7 (Chairman of the

Meeting and Absent Members)

Where the shareholders’ meeting

is convened by the board of

directors, the chairman of the

board of directors shall serve as

chairman of the meeting.

Where the chairman of the board

of directors is on leave or is

unable to exercise his/her

Article 5

Where the shareholders’

meeting is convened by the

board of directors, the

chairman of the board of

directors shall serve as


Where the chairman of the

board of directors is on leave

or is unable to exercise his/her

1. Amended this article in

accordance with Article

7 of the Model.


Article 5 and 6 into this

article.

- 65 -


powers for any reason, the

chairman shall designate the

vice chairman to serve as

deputy. Where the vice chairman

of the board of directors is also

on leave or is unable to exercise

his/her powers for any reason,

the chairman shall designate one

director to serve as deputy.

Where the chairman has not

designated a deputy, the

directors shall nominate one

from amongst themselves to so

serve.

(Paragraphs 2 and 3 omitted)


is convened by any person other

than the board of directors who

has the right to convene

meeting, such convener shall

serve as chairman of the

meeting. Where there are two

or more persons with the right to

convene the meeting, they shall

nominate one from amongst

themselves to serve as chairman.

The Company may appoint its

attorney, accountant or other

relevant personnel to attend a

shareholders’ meeting.


chairman shall designate the

vice chairman to serve as

deputy. Where the vice

chairman of the board of

directors is also on leave or is

unable to exercise his/her


chairman shall designate one

director to serve as deputy.

Where the chairman has not

designated a deputy, the

directors shall nominate one

from amongst themselves to so

serve.

(Paragraphs 2 and 3 omitted)


meeting is convened by any

person other than the board of

directors who has the right to

convene meeting, such

convener shall serve as


Where there are two or more

persons with the right to

convene the meeting, they shall

nominate one from amongst

themselves to serve as

chairman.

Article 6

The Company may appoint its

attorney, accountant or other

relevant personnel to attend a

shareholders’ meeting.

Article 8 (Retention of Audio

and Video Recordings of

Shareholder Meeting

Proceedings)

The Company, beginning from

the time it accepts shareholder

attendance registrations, shall

make an uninterrupted audio and

video recording of the

registration procedure, the

proceedings of the shareholders’

Article 7

The Company shall make a full

audio or video recording of the

procedure of the shareholders’

meeting, which shall be

preserved for at least one (1)

year.

If a shareholder files a lawsuit

pursuant to Article 189 of the

Company Act, the recorded

materials listed in the

Renumbered the article

and amended the article in

accordance with Article 8

of the Model.

- 66 -


meeting and the voting and vote

counting procedures.

The aforementioned audio and

video recordings shall be

preserved for at least one (1)

year. However, if a shareholder

files a lawsuit pursuant to

Article 189 of the Company Act,

the recordings shall be retained

until the conclusion of the

litigation

preceding paragraph shall be

retained until the conclusion of

the litigation.

Article 9 (Calculation of

Shares Attending

Shareholders’ Meetings and

Commencement of Meetings)

Attendance of shareholders’

meetings shall be calculated on

the basis of shares. The number

of attending shares shall be

calculated on the basis of the

attendance register or the

attendance cards submitted,

adding the number of shares

whose voting rights are

exercised in writing or

electronically.

The chairman shall immediately

announce the opening of a

meeting when the starting time

for the meeting arrives.

However, where fewer than the

number of shareholders

representing more than half of

issued shares of the Company

are in attendance, the chairman

may announce that the meeting

is postponed, and such

postponement may not exceed

two (2) times; the total time of

postponement/s may not exceed

one (1) hour. Where the quorum

is still not met after two (2)

postponements, but the meeting

is attended by shareholders

representing more than one-third

of issued shares of the

Article 3

Attendance of and voting at

shareholders’ meetings shall be

calculated on the basis of

shares.

Article 2

The number of attending shares

shall be calculated on the basis

of the attendance register or the

attendance cards submitted,

adding the number of shares

whose voting rights are

exercised in writing or

electronically.

Article 8

The chairman shall

immediately announce the

opening of a meeting when the

starting time for the meeting

arrives. However, where

fewer than the number of

shareholders representing more

than half of issued shares of the

Company are in attendance, the

chairman may announce that

the meeting is postponed, and

such postponement may not

exceed two (2) times; the total

time of postponement/s may

not exceed one (1) hour.

Where the quorum is still not

met after two (2)

postponements, but the

meeting is attended by

1. Amended in accordance


Model.


Articles 2, 3 and 8 into

this article.

- 67 -


Company, the chairman shall

announce a failure of the

meeting to be convened for lack

of a quorum.

In the aforementioned case

where the quorum is still not met

after two (2) postponements, but

the meeting is attended by


than one-third of issued shares

of the Company, provisional

resolutions may be passed in

accordance with Article 175,

Paragraph 1 of the Company

Act, and each shareholder shall

be notified of the provisional

resolutions and that a


again convened within one (1)

month.

In the event that the number of


than half of issued shares is in

attendance before the end of said

meeting, the chairman may

submit the provisional

resolutions made for re-voting

by the meeting in accordance

with Article 174 of the Company

Act.


than one-third of issued shares

of the Company, provisional

resolutions may be passed in

accordance with Article 175,

Paragraph 1 of the Company

Act.

In the event that the number of


than half of issued shares is in

attendance before the end of

said meeting, the chairman

may submit the provisional

resolutions made for re-voting

by the meeting in accordance


Company Act.

Article 10 (Discussion of

Proposals)


is convened by the board of

directors, the agenda shall be set

by the board of directors.

Related motions (including

extempore motions and

amendments to the original

proposals) shall be voted on

one-by-one. A meeting shall

proceed in accordance with the

determined agenda, which may

not be altered except by

resolution of the shareholders’

meeting.

Article 9


meeting is convened by the

board of directors, the agenda

shall be set by the board of

directors. A meeting shall

proceed in accordance with the

determined agenda, which may

not be altered except by

resolution of the shareholders’

meeting.

The preceding paragraph apply

mutatis mutandis to a

shareholders meeting convened

by a party with the power to

convene, other than the board



Model.



to 3 and Article 14 into

this article.

- 68 -


The preceding paragraph apply

mutatis mutandis to a

shareholders meeting convened

by a party with the power to

convene, other than the board of

directors.

The chair may not declare the

meeting adjourned prior to

completion of deliberation on all

items in the meeting agenda of

the preceding two paragraphs

(including extempore motion),

except by a resolution of the

shareholders meeting; where the

chairman announces an

adjournment contrary to the

rules of procedure, the other

directors of the board shall

promptly assist the attending

shareholders, in accordance with

statutory procedures, in electing

a new chairman by agreement of

a majority of the votes

represented by the attending

shareholders to continue the

meeting.

The chairman shall allow ample

opportunity during the meeting

for explanation and discussion

of proposals and of amendments

or extempore motions put

forward by the shareholders.

When the chairman believes that

discussion of a discussion item

is sufficient for voting purposes,

he/she may announce that the

discussion is concluded, submit

the matter for voting and arrange

for sufficient time to vote.

of directors.

The chair may not declare the

meeting adjourned prior to

completion of deliberation on

all items in the meeting agenda

of the preceding two

paragraphs (including

extempore motion), except by

a resolution of the shareholders

meeting.

Once the meeting has been

adjourned, the shareholders

may not appoint another

chairman to continue the

meeting at the same location or

a different location. However,

where the chairman announces

an adjournment contrary to the

rules of procedure, a new

chairman may be elected by

agreement of a majority of the

votes represented by the

attending shareholders to

continue the meeting.

Article 14

When the chairman believes

that discussion of a discussion

item is sufficient for voting

purposes, he/she may announce

that the discussion is concluded

and submit the matter for

voting.

Article 11 (Shareholder

Speeches)

Before making a comment, an

attending shareholder must first

complete a comments slip

stating the outline of the

comment, the shareholder

Article 10

Before making a comment, an

attending shareholder must

first complete a comments slip

stating the outline of the

comment, the shareholder

number (or attendance form



Model.


Articles 10 to 13 into

this article.

- 69 -


number (or attendance form

number) and name of

shareholder; the chairman shall

then determine the order in

which shareholders will speak.

Where an attending shareholder

has submitted a comments slip

but does not speak, it shall be

deemed not to have spoken.

Where the actual comments

made are inconsistent with that

stated in the comments slip, the

actual comments made shall

prevail.

A shareholder may not speak

more than twice in respect of the

same discussion item except

with the consent of the

chairman, and each speech may

not exceed five (5) minutes,

except where an attending

shareholder speaks in violation

of the preceding paragraph or

speaks outside the scope of the

discussion item, the chairman

may stop such shareholder from

speaking.

When one shareholder is

speaking, no other shareholder

may speak or interrupt except

with the consent of the chairman

and the speaking shareholder.

The chairman may stop any

violating shareholders from

speaking.

Where a juristic person

shareholder appoints more than

two (2) representatives to attend

a shareholders’ meeting, only

one (1) representative may speak

in respect of the same discussion

item.

After an attending shareholder

has spoken, the chairman may

personally respond or instruct

the relevant personnel to

respond..

number) and name of

shareholder; the chairman shall

then determine the order in

which shareholders will speak.

Where an attending

shareholder has submitted a

comments slip but does not

speak, it shall be deemed not to

have spoken. Where the

actual comments made are

inconsistent with that stated in

the comments slip, the actual

comments made shall prevail.

Article 11

A shareholder may not speak

more than twice in respect of

the same discussion item

except with the consent of the

chairman, and each speech

may not exceed five (5)

minutes.

Where an attending

shareholder speaks in violation

of the preceding paragraph or

speaks outside the scope of the


may stop such shareholder

from speaking.

Article 10

When one shareholder is

speaking, no other shareholder

may speak or interrupt except

with the consent of the

chairman and the speaking

shareholder. The chairman

may stop any violating

shareholders from speaking.

Article 12

Where a juristic person

shareholder appoints more than

two (2) representatives to

attend a shareholders’ meeting,

only one (1) representative

may speak in respect of the

same discussion item.

- 70 -


Article 13

After an attending shareholder

has spoken, the chairman may

personally respond or instruct

the relevant personnel to

respond.

Article 12

Voting at shareholders’ meetings

shall be calculated on the basis

of shares.

With respect to resolutions of

shareholders meetings, the

number of shares held by a

shareholder with no voting

rights shall not be calculated as

part of the total number of

issued shares.

When a shareholder is an

interested party in relation to an

agenda item, and there is the

likelihood that such a

relationship would prejudice the

interests of the Company, that

shareholder may not vote on that

item, and may not exercise

voting rights as proxy for any

other shareholder.

The number of shares for which

voting rights may not be

exercised under the preceding

paragraph shall not be calculated

as part of the voting rights

represented by attending

shareholders.

With the exception of a trust

enterprise or a shareholder

services agent approved by the

competent securities authority,

when one person is concurrently

appointed as proxy by two or

more shareholders, the voting

rights represented by that proxy

may not exceed three percent

(3%) of the voting rights

represented by the total number

of issued shares. If that

Article 3

Attendance of and voting at

shareholders’ meetings shall be

calculated on the basis of

shares.


added)


and, by referencing Article

12 of the Model, amended

Paragraph 1 and added

Paragraphs 2 to 5.

- 71 -


percentage is exceeded, the

voting rights in excess of that

percentage shall not be included

in the calculation.

Article 13 (Voting on Matters,

Vote Monitoring and Vote

Counting)

A shareholder shall be entitled to

one (1) vote for each share held,

except when the shares are

restricted shares or are deemed

non-voting shares under Article

179, Paragraph 2 of the

Company Act.

When the Company holds a

shareholders meeting, it may

allow the shareholders to

exercise voting rights by

correspondence or electronic

means. When voting rights are

exercised by correspondence or

electronic means, the method of

exercise shall be specified in the

shareholders’ meeting notice. A

shareholder exercising voting

rights by correspondence or

electronic means will be deemed

to have attended the meeting in

person, but to have waived

his/her rights with respect to the

extempore motions and

amendments to original

proposals of that meeting; it is

therefore advisable that the

Company avoid the submission

of extraordinary motions and

amendments to original

proposals.

A shareholder intending to

exercise voting rights by


means under the preceding

paragraph shall deliver a written

declaration of intent to the

Company at least two (2) days

prior to the date of the

shareholders’ meeting. When

duplicate declarations of intent


added)

1. Added Paragraphs 1 to

4 in accordance with



Articles 15, 17 and 18

into Paragraphs 5 to 8

of this article.

- 72 -


are delivered, the one received

earliest shall prevail, except

when a declaration is made to

cancel the earlier declaration of

intent.

After a shareholder has

exercised voting rights by


means, in the event the

shareholder intends to attend the

shareholders meeting in person,

a written declaration of intent to

retract the voting rights already

exercised under the preceding

paragraph shall be made known

to the Company, by the same

means by which the voting

rights were exercised, at least

two (2) days before the date of

the shareholders meeting. If the

notice of retraction is submitted

after that time, the voting rights

already exercised by


means shall prevail. When a

shareholder has exercised voting

rights both by correspondence or

electronic means and by

appointing a proxy to attend a

shareholders meeting, the voting

rights exercised by the proxy in

the meeting shall prevail.

Except as otherwise provided in


Act, the Company Act and the

Articles of Incorporation of the

Company, the passage of a

proposal shall require an

affirmative vote a majority of

the voting rights represented by

the attending shareholders. At

the time of a vote, for each

proposal, the chair or the person

designated by the chair shall first

announce the total number of

voting rights represented by the

attending shareholders, followed

by a poll of the shareholders.

Article 17

Except as otherwise provided

in the Financial Holding

Company Act, the Company

Act and other laws and

regulations, the passage of a

proposal shall require an

affirmative vote a majority of

the voting rights represented by

the attending shareholders. At

the time of a vote, for each

proposal, the chair or the

person designated by the chair

shall first announce the total

number of voting rights

represented by the attending

- 73 -


After the conclusion of the

meeting, the results for each

proposal including the numbers

of votes for, against and

abstentions shall be entered in

the Market Observation Post

System (MOPS).

Where there is an amendment or

substitutive proposal for one


shall determine the order that

such proposals will be put to

voting. Where one proposal is

already passed, the other

proposals shall be deemed

denied and need not be put to

voting.

The vote monitoring and vote

counting staff for voting of

discussion items shall be

appointed by the chairman,

provided that the vote

monitoring staff shall also be

shareholders.

Vote counting for shareholders

meeting proposals or elections

shall be conducted in public at

the place of the shareholders

meeting. Immediately after vote

counting has been completed,

the results of the voting,

including the statistical tallies of

the numbers of votes, shall be

announced on-site immediately

and recorded.

shareholders, followed by a

poll of the shareholders. After

the conclusion of the meeting,

the results for each proposal

including the numbers of votes

for, against and abstentions

shall be entered in the Market

Observation Post System

(MOPS).

Article 18

Where there is an amendment

or substitutive proposal for one


shall determine the order that

such proposals will be put to

voting. Where one proposal is

already passed, the other

proposals shall be deemed

denied and need not be put to

voting.

Article 15

The vote monitoring and vote

counting staff for voting of

discussion items shall be

appointed by the chairman,

provided that the vote

monitoring staff shall also be

shareholders. The results of the

voting shall be announced

immediately and recorded.

Article 14 (Election Matters)

The election of directors or

supervisors at a shareholders

meeting shall be held in

accordance with the applicable

election and appointment rules

adopted by the Company, and

the voting results shall be

announced on-site immediately,

including the names of those

elected as directors and

supervisors and the numbers of

(Newly added) Added in accordance with


- 74 -


votes with which they were

elected.

The ballots for the election

referred to in the preceding

paragraph shall be sealed with

the signatures of the monitoring

personnel and kept in proper

custody for at least 1 year. If,

however, a shareholder files a

lawsuit pursuant to Article 189

of the Company Act, the ballots

shall be retained until the

conclusion of the litigation.

Article 15 (Meeting Minutes

and Signing Matters)

Matters relating to the

resolutions of a shareholders

meeting shall be recorded in the

meeting minutes. The meeting

minutes shall be signed or sealed

by the chairman of the meeting

and a copy distributed to each

shareholder within 20 days after

the conclusion of the meeting.

The meeting minutes may be

produced and distributed in

electronic form.

The Company may distribute the

meeting minutes of the

preceding paragraph by means

of a public announcement made

through the MOPS.

The meeting minutes shall

accurately record the year,

month, day, and place of the

meeting, the chairman’s full

name, the methods by which

resolutions were adopted, and a

summary of the deliberations

and their results, and shall be

retained for the duration of the

existence of the Company.

(Newly added) Added in accordance with


Article 16 (Public

Announcements)

The Company shall compile in

the prescribed format a

Article 2

The Company shall compile in

the prescribed format a

statistical statement of the



16 of the Model, added

Paragraph 2.

- 75 -


statistical statement of the

number of shares obtained by

solicitors through solicitation

and the number of shares

represented by proxies, and shall

make an express disclosure of

the same at the place of the

shareholders meeting.

If matters put to a resolution at a

shareholders meeting constitute

material information under

applicable laws or regulations or

under Taiwan Stock Exchange

Corporation regulations, this

Corporation shall upload the

content of such resolution to the

MOPS within the prescribed

time period.

number of shares obtained by

solicitors through solicitation

and the number of shares

represented by proxies, and

shall make an express

disclosure of the same at the

place of the shareholders

meeting.

(Paragraph newly added)

Article 17 (Maintenance of

Order of Meeting Venue)

Staff handling administrative

affairs of a shareholders meeting

shall wear identification cards or

armbands.

The chairman may direct the

proctors or security personnel to

maintain order at the

shareholders’ meeting. Where

order keeping (or security)

personnel are on site to assist

with maintenance of order, they

shall wear armbands or

identification cards bearing the

word “Proctor”.

At the place of a shareholders’

meeting, if a shareholder

attempts to speak through any

device other than the public

address equipment set up by the

Company, the chairman may

prevent the shareholder from so

doing.

When a shareholder violates the

rules of procedure and defies the

chairman’s correction,

obstructing the proceedings and

refusing to heed calls to stop, the

(Paragraph newly added)

Article 19

The chairman may direct the

proctors (or security) personnel

to maintain order at the

shareholders’ meeting. Where

proctors (or security) personnel

are on site to assist with

maintenance of order, they

shall wear armbands bearing

the word “Proctor”.

(Paragraphs 3 and 4 newly

added)



17 of the Model, added

Paragraphs 1, 3 and 4.

- 76 -


chairman may direct the proctors

or security personnel to escort

the shareholder from the

meeting.

Article 18 (Recess and

Resumption of Shareholders’

Meetings)

The chairman may determine an

appropriate time for a recess

during the meeting. If a force

majeure event occurs, the

chairman may rule the meeting

temporarily suspended and

announce a time when, in view

of the circumstances, the

meeting will be resumed.

If the meeting venue is no longer

available for continued use and

not all of the items (including

extempore motions) on the

meeting agenda have been

addressed, the shareholders’

meeting may adopt a resolution

to resume the meeting at another

venue.

A resolution may be adopted at a

shareholders’ meeting to defer

or resume the meeting within

five (5) days in accordance with

Article 182 of the Company Act.

Article 16

The chairman may determine

an appropriate time for a recess

during the meeting.



18 of the Model, amended

Paragraph 1 and added

Paragraphs 2 to 3.

Article 19 (Unspecified

Matters)

Matters not fully provided in

these Rules shall be in

accordance with the provisions

of the Financial Holding

Company Act, Company Act,

the Company’s Articles of

Incorporation and other relevant

laws and regulations

Article 20

Matters not fully provided in

these Rules shall be in

accordance with the provisions

of the Financial Holding

Company Act, Company Act,

the Company’s Articles of

Incorporation and other

relevant laws and regulations


Article 20 (Amendment and

Implementation)

These Rules shall be enforced by

resolution of the promoters’

meeting or shareholders’

meeting of the Company; the

Article 21

These Rules shall be enforced

by resolution of the promoters’

meeting or shareholders’

meeting of the Company; the

same applies to any


and added the amendment

date.

- 77 -


same applies to any

amendments. The first

amendment took place on June

6, 2003; the second amendment

took place on June 10, 2005; the

third amendment took place on

June 15, 2007; the fourth


15, 2012. The fifth amendment

was made on June 12, 2015. The

sixth amendment was made on

June 19, 2020.

amendments. The first


6, 2003; the second


10, 2005; the third amendment

took place on June 15, 2007;

the fourth amendment took

place on June 15, 2012. The

fifth amendment was made on

June 12, 2015.

- 78 -

Matter 3: The Company’s Long-term Capital Raising Plan in

Accordance with the Company’s Strategy and Growth is

hereby submitted for discussion.


Explanation:

1. In response to the one or more funding requirements of the Company to support

long-term strategic development, operational growth and maintenance of long-term

capital raising channels, the Company requests the shareholders to authorize the

Board of Directors to, at an appropriate time and pursuant to the Company’s

Articles of Incorporation and relevant rules and regulations, conduct long-term

capital raising by implementing a cash capital increase through the issuance of

common shares or preferred shares domestically, a cash capital increase through the

issuance of common shares to sponsor an overseas issuance of depositary receipts

and/or a cash capital increase through the issuance of common shares or preferred

shares in a private placement, or any combination of the above.

2. The total number of shares authorized under this long-term capital raising shall not

in principle exceed two billion shares.

3. It is requested that the shareholders authorize the Board of Directors and/or the

Chairman to adjust, decide and implement, contingent on prevailing market

conditions, the content of the cash capital increase plan (including but not limiting

to the actual issuance price, issuance terms, plan items, target amount, timetable

and estimated benefits, etc.). It is also requested that the Board of Directors and/or

the Chairman be authorized to handle relevant matters in accordance with laws and

regulations if the capital raising plan needs revision by reason of instructions from

competent authorities, operation evaluation or objective circumstances.

4. Please refer to the attachment for the issuing methods and contents of the

Long-term Capital Raising Plan.

Resolution:

- 79 -

(Attachment)

The Issuing Methods and Content of the Long-term Capital Raising Plan

In response to the one or more funding requirements of the Company to support long-term strategic

development, operational growth and maintenance of long-term capital raising channels, the

Company requests the shareholders to authorize the Board of Directors to, at an appropriate time and

pursuant to the Company’s Articles of Incorporation and relevant rules and regulations, conduct

long-term capital raising by implementing a cash capital increase through the issuance of common

shares or preferred shares domestically, a cash capital increase through the issuance of common

shares to sponsor an overseas issuance of depositary receipts and/or a cash capital increase through

the issuance of common shares or preferred shares in a private placement, or any combination of the

above.

1. Conducting Cash Capital Increase through Issuance of Common Shares or Preferred Shares

Domestically

(1) This cash capital increase through issuance of common shares or preferred shares shall adopt

the book-building process and/or the public subscription process.

(2) Adopt Book-Building Process

i. Allotment of the Issuance Shares: If the book-building process is adopted, except for

10%-15% of the total issued new shares that shall be reserved for subscription by the

Company’s employees (including employees of subsidiaries as stipulated in Article 30 of

the Financial Holding Company Act) pursuant to Article 267 of the Company Act, it is

proposed that the then shareholders waive their pre-emptive rights to the remaining

85%-90% pursuant to Article 28-1 of the Securities and Exchange Act, with all shares

publically underwritten by the book-building process. As for shares not subscribed to by

employees, the Chairman is hereby authorized to select specific person(s) to fully

subscribe at the issuance price.

ii. Determination of Issuance Price of Common Shares: Pursuant to Article 7 of the “Taiwan

Securities Association Self-regulatory Rules Governing the Provision of Advisory Services

by Underwriter Members to Issuing Companies Offering and Issuing Securities”, the price

shall in principle be no less than 90% of the average of the simple arithmetic mean of the

Company’s common share closing prices for the one, three or five business days before the

price determination date, after factoring out ex-rights trading in connection with issuances

of stock dividends (or ex-rights trading in connection with capital reduction) and

ex-dividend trading. It is proposed that the Chairman be authorized to negotiate and

determine the actual issuance price according to the aforementioned principle together with

the lead underwriter, in consideration of the book-building and allocation situation, market

conditions and in compliance with relevant laws and regulations.

iii. Determination of Issuance Price of Preferred Shares: Pursuant to Article 12 of the “Taiwan


by Underwriter Members to Issuing Companies Offering and Issuing Securities”, the actual

issuance price shall fall within a 10% range of the theoretical price. It is proposed that the

Chairman be authorized to negotiate and determine the actual issuance price according to

the aforementioned principle together with the lead underwriter, in consideration of the

book-building and allocation situation, market conditions and in compliance with relevant

laws and regulations.

(3) Adopt Public Subscription Process

- 80 -

i. Allotment of the Issuance Shares: If the public subscription process is adopted, except for

10%-15% of the total issued new shares that shall be reserved for subscription by the

Company employees (including employees of subsidiaries as stipulated in Article 30 of the

Financial Holding Company Act) and 10% that shall be reserved for public underwriting in

accordance with Article 28-1 of the Securities and Exchange Act, the remained shares shall

be offered to the Company’s shareholders on the target subscription date for pro rata

subscription. As for shares not subscribed to by the Company’s then shareholders or

employees, the Chairman is hereby authorized to select specific person(s) to fully

subscribe at the issuance price.

ii. Determination of Issuance Price of Common Shares: Pursuant to Article 6 of the “Taiwan


by Underwriter Members to Issuing Companies Offering and Issuing Securities”, the price

shall in principle be no less than 70% of the average of the simple arithmetic mean of the

Company’s closing common share prices for the one, three or five business days before the

price determination date, after factoring out ex-rights trading in connection with issuances

of stock dividends (or ex-rights trading in connection with capital reduction) and

ex-dividend trading. It is proposed that the Chairman be authorized to, within the scope of

the aforementioned provisions and in consideration of the market conditions, negotiate and

determine the actual issuance price together with the lead underwriter.

iii. Determination of Issuance Price of Preferred Shares: Pursuant to Article 12 of the “Taiwan


by Underwriter Members to Issuing Companies Offering and Issuing Securities”, the actual

issuance price shall fall within a 10% range of the theoretical price. It is proposed that the

Chairman be authorized to negotiate and determine the actual issuance price according to

the aforementioned principle together with the lead underwriter, in consideration of the

market conditions and in compliance with relevant laws and regulations.

(4) Funds from this cash capital increase are expected to be used for single or multiple purposes,

including to enrich working capital, stabilize financial structure, increase capital adequacy ratio,

repay loans or support the Company’s long-term strategic development. It is expected that the

capital increase will strengthen the Company’s competitiveness and enhance its operational

efficiency, and subsequently will positively benefit shareholders’ equity.

(5) Rationale and Reasonableness for Not Adopting Other Fundraising Measures: The funds are to

be used for single or multiple purposes, including stabilizing financial structure, enriching the

eligible working capital of subsidiaries so they can expand their business scales and supporting

future domestic or foreign financial institutions investments. After consideration of domestic

laws and regulations as well as the Company’s financial structure, it is necessary to fund via a

cash capital increase through new shares issuance. Therefore, it is reasonable to adopt this cash

fundraising measure.

(6) Impact on Shareholders’ Equity: It is expected that the capital increase will strengthen the

Company’s competitiveness and enhance its operational efficiency. Additionally, the cash

capital increase will add to the Company’s shareholders’ equity, which helps improve the

financial structure and the capital adequacy of the group. Thus, it is overall beneficial to

shareholders’ equity.

(7) It is requested that the shareholders authorize the Board of Directors and/or the Chairman to

adjust, decide and execute, contingent on the prevailing market conditions, the content of plan

of the cash capital increase (including but not limiting to the actual issuing price, issuing terms,

plan content, target amount, time table and estimated benefits, etc.) It is also requested that the

Board of Directors and/or the Chairman should be authorized to handle relevant matters in

- 81 -

accordance with laws and regulations if the capital raising plan needs revision by reason of

instructions from competent authorities, operation evaluation or objective circumstances.

(8) The Board of Directors and/or the Chairman are hereby fully authorized to handle any other

matters not aforementioned in compliance with relevant laws and regulations.

2. Conducting Cash Capital Increase through Issuing Common Shares to Sponsor Issuance of Overseas

Depositary Receipts

(1) Allotment of the Issuance Shares: Except for 10%-15% of the new shares reserved for

subscription by the employees of the Company (including employees of subsidiaries as defined

in Article 30 of the Financial Holding Company Act) as prescribed in Article 267 of the

Company Act, shareholders are requested to waive the pre-emptive right for subscription of the

remaining 85%-90% of the new shares pursuant to Article 28-1 under the Securities and

Exchange Act. These shares will be used in full for public offering to sponsor the issuance of

overseas depositary receipt. The Chairman is authorized to place the unsubscribed shares by

employees with specific parties at the issuing price or include them in overseas depositary

receipt offering.

(2) Basis and Reasonableness for the Price: Pursuant to the “Taiwan Securities Association

Self-regulatory Rules Governing the Provision of Advisory Services by Underwriter Members

to Issuing Companies Offering and Issuing Securities”, the price shall in principle be no less

than the closing price on the price determination date or 90% of the average of the simple

arithmetic mean of the Company’s common share closing prices for the one, three or five

business days before the price determination date, after factoring out ex-rights trading in

connection with issuances of stock dividends (or ex-rights trading in connection with capital

reduction) and ex-dividend trading. However, if there is any change in relevant domestic laws

or regulations, the price may be adjusted accordingly. The Board of Directors and/or the

Chairman is authorized to negotiate and determine the actual issuance price with the securities

underwriter(s), in consideration of the market conditions, relevant domestic laws and

regulations and market practices. The aforementioned pricing method is handled in accordance

with relevant domestic laws and regulations as well as the market practices, therefore the price

basis is reasonable.

(3) Funds from this cash capital increase funds raising plan are expected to be used for single or

multiple purposes, including to enrich working capital, stabilize financial structure, increase

capital adequacy ratio, repay loans or support the Company’s long-term strategic development.

It is expected that the capital increase will strengthen the Company’s competitiveness and

enhance its operating efficiency, and subsequently will positively benefit shareholders’ equity.

(4) Impact on Shareholders’ Equity: Pricing for the cash capital increase through issuing common

shares to sponsor issuance of overseas depositary receipts is based on fair market prices of

common shares of the Company executed in the domestic market. Shareholders are able to

purchase common shares from the domestic market in a price close to the issuing price of the

overseas depositary receipts, without bearing foreign exchange rate and liquidity risks.

Therefore, the impact to the shareholders’ equity should be deemed as non-material. In addition,

it is expected that the capital increase will strengthen the competitiveness of the Company and

enhance its operational efficiency. Furthermore, the cash capital increase entails a positive

impact on the shareholders’ equity, improves the financial structure and increases the capital

adequacy of the Group. Therefore, the plan benefits the shareholders’ equity as a whole.

(5) Rationale and Reasonableness for Not Adopting Other Fundraising Measures: The funds are to

be used for one or multiple purposes, including stabilizing financial structure, enriching the

eligible working capital of subsidiaries so they can expand their business scales and supporting

future domestic or foreign financial institutions investments. After consideration of domestic

- 82 -

laws and regulations as well as the Company’s financial structure, it is necessary to fund via a

cash capital increase through new shares issuance. Further, in consideration of issuance price

discounts and the domestic market appetite, in order to prevent adverse impact to share price

driven by oversupply of new shares, it is therefore deemed appropriate to conduct this cash

capital increase through issuing new shares to sponsor issuance of overseas depositary receipt.

(6) It is requested that the shareholders authorize the Board of Directors and/or the Chairman to

adjust, decide and execute, contingent on the prevailing market conditions, the content of plan

of the cash capital increase (including but not limiting to the actual issuing price, issuing terms,

plan content, target amount, time table and estimated benefits, etc.) It is also requested that the

Board of Directors and/or the Chairman should be authorized to handle relevant matters in

accordance with laws and regulations if the capital raising plan needs revision by reason of

instructions from competent authorities, operation evaluation or objective circumstances.

(7) In order to complete the cash capital increase through issuing common shares to sponsor

issuance of overseas depositary receipts, it is proposed that the shareholders should authorize

the Chairman or his designated person to approve and represent the Company to sign off any

documents to participate in offering offshore depositary certificates and other related matters.



3. Cash Capital Increase through Issuing Common Shares or Preferred Shares in a Private Placement

According to Article 43-6 of Securities and Exchange Act and the “Directions for Public Companies

Conducting Private Placements of Securities”, the matters to be stated in connection with a private

placement of common or preferred shares are as follows:

(1) Basis and reasonableness of private placement pricing

i. It is proposed that the price of the private placement of common shares shall be, in

accordance with the relevant laws and regulations, not be less than 80% of the higher of

the following reference prices:

1. The simple average closing price of the common shares for either the one, three or

five business days before the price determination date, after adjustment for any

distribution of stock dividends, cash dividends or capital reduction.

2. The simple average closing price of the common shares for the 30 business days

before the price determination date, after adjustment for any distribution of stock

dividends, cash dividends, or capital reduction.

ii. It is proposed that the private placement price of preferred shares shall be, in accordance

with relevant laws and regulations and the Company’s Articles of Incorporation, not be less

than 90% of the theoretical price. The conditions of the issuance for this private placement

are as follows.

1. The dividend rate (rate per annum) for Class C Preferred Shares shall be the 7-year

IRS rate on the pricing date + fixed margin rate, calculated based on the issuance

price per share; the Chairman is authorized to approve within the actual fixed

margin rate in the range of [2.2%~4.2%]. The 7-year IRS rate shall reset on the first

business day following the seventh anniversary of the Issuance Date and every

seven years thereafter. The pricing benchmark date shall be one Taipei financial

industry business day prior to the pricing date. The interest rate reset pricing

benchmark date shall be two Taipei financial industry business days prior to the

interest rate reset date. The 7-year IRS rate indicator shall be the arithmetic average

of the 7-year interest rate swap quotations of Reuters’ “TAIFXIRS” and

- 83 -

“COSMOS3” reported at 11:00 a.m. on the pricing benchmark date and the interest

rate reset benchmark date of the Taipei financial industry business day, based on the.

If the above quotations are not available on the pricing benchmark date and the

interest rate reset pricing benchmark date, they will be determined by the Company

in good faith and in accordance with reasonable market conditions.

2. Except in cases where dividends are not distributed in accordance with

subparagraph 4, dividends shall be paid in cash once a year. After the annual general

meeting of shareholders has recognized the financial statements, the Board of

Directors shall determine the record date to pay out the distributable dividends of

the preceding year. The dividends distributable in the year of issuance and year of

redemption shall be based on the actual number of days the shares were issued and

outstanding in such year.

3. If the Company posts earnings in its final accounts, in accordance with applicable

laws, it shall first be used for payment of tax obligations and making up of losses,

then allocated to the statutory reserve fund and allocated or reversed to the special

reserve fund. The remaining earnings, if any, may first be used to distribute

preferred share dividends of the year.

4. The Company has discretion over the distribution of dividends for Class C Preferred

Shares. If the Company may resolve not to distribute dividends for Class C

Preferred Shares if there are no earnings posted in its final accounts or the posted

earnings are insufficient, if the distribution of dividends for Class C Preferred

Shares would cause the Company’s capital adequacy ratio to fall below the

minimum requirements set by law or by the competent authority or if there are other

necessary considerations. The Company’s resolution not to distribute dividends for

Class C Preferred Shares shall not constitute an event of default, and the

undistributed or insufficient dividends shall not be accrued for distribution in

subsequent years with earnings.

5. Except for the dividends prescribed in subparagraph 1, holders of Class C Preferred

Shares may not participate in the distribution of cash and stock dividends for

common shares derived from earnings or capital reserves.

6. Holders of Class C Preferred Shares have priority over common shareholders for

distribution of the Company’s residual property. All preferred shareholders rank pari

passu for repayment, but such is capped at the issuance price.

7. Holders of Class C Preferred Shares have no right to vote or elect at shareholders’

meeting, but are entitled to be elected as directors. Holders of Class C Preferred

Shares have the right to vote at Class C Preferred Shares shareholders’ meeting and

at shareholders’ meeting where items on the agenda would affect rights and

obligations of holders of Class C Preferred Shares.

8. Class C Preferred Shares may not be converted to common shares. Holders of Class

C Preferred Shares have no right to request the Company to redeem the preferred

shares they hold.

9. Class C Preferred Shares have no maturity date, though the Company may redeem

all or a part of the outstanding issued preferred shares at the original actual issue

price at any time after the seventh anniversary of the issuance date. Unredeemed

Class C Preferred Shares continue to carry rights and obligations of the issuance

conditions set forth in the foregoing paragraphs. In the year of a redemption of Class

C Preferred Shares, if the Company resolves to distribute dividends, dividends to be

- 84 -

distributed up to the redemption date shall be calculated by the actual number of

days the preferred shares were issued and outstanding in such year.

10. When the Company issues new shares in a cash capital increase, holders of Class C

Preferred Shares and common shareholders have the same preemptive rights for

subscribing to the new shares.

11. Distributions of Class C Preferred Shares dividends shall be in the order in which

the preferred shares are issued.

iii. The price of this private placement was determined in accordance with laws and

regulations and with reference to recent market prices. Also, the terms and conditions of

the preferred share private placement are in accordance with the Company’s Articles of

Incorporation and are comparable to the terms of outstanding listed preferred shares.

Therefore, the price and terms and conditions of the preferred share private placement

should be reasonable.

iv. The Board of Directors is hereby authorized to determine the actual price of the private

placement based on market conditions and in compliance with relevant laws and

regulations.

(2) Method for selecting the specific persons:

In accordance with Article 43-6 of the Securities and Exchange Act and the “Directions for

Public Companies Conducting Private Placements of Securities”, as the Company had a net

profit after tax in its most recent year and no accumulated losses, this private placement is

limited to the introduction of strategic investors. The method, objective, necessity and expected

benefits of the selection are explained as follows:

i. Method and objective of the selection:

The qualifications of specific persons must meet the requirements of Article 43-6 of the

Securities and Exchange Act, with priority given to major domestic or foreign institutions,

with the goal of the introduced institutions becoming stable long-term strategic investors

and the Company’s market competitiveness enhanced through capital participation,

business cooperation and experience exchange.

ii. Necessity:

Taiwan’s financial industry is highly competitive. In order to increase the Company’s and

its subsidiaries’ financial products, financial technology services and international financial

services, to enhance the operating performance and market competitiveness of the

Company and its subsidiaries, it is necessary to introduce strategic investors with large

asset scale and profitability.

iii. Expected benefits:

In addition to strengthening the capital structure, private placement funds can also enhance

the risk tolerance for business expansion. Additionally, through mutual cooperation, the

Company and its subsidiaries will be able to expand the scales and scopes of services of

their domestic and foreign operations to enhance market competitiveness.

(3) Reasons for the necessity of conducting a private placement:

i. Reasons for not conducting a public offering: In order to enable strategic partners to

acquire the Company’s shares in one transaction as well as to provide assistance in terms

of funds, skills, experience, and channels. Given that the securities acquired through

private placement are not freely transferable for three years, the long-term partnership

- 85 -

between the Company and the strategic investors is further ensured. Moreover, conducting

a private placement can maintain the stability of the Company’s share price.

ii. Private placement quota: In principle, the number of shares to be issued will not exceed

two billion.

iii. Use of funds and expected benefits to be achieved: The funds from the private placement

are expected to be used for one or more of the following purposes: to increase working

capital, to stabilize the financial structure, to increase capital adequacy, to repay loans or to

meet the Company’s long-term strategic development needs. It is expected that the capital

increase will strengthen the Company’s competitiveness and enhance its operational

efficiency, and subsequently will positively benefit shareholders’ equity.

(4) Reasons for and reasonability of the price of common shares in this private placement being

lower than par value: Due to changes in the domestic and foreign economic environments,

which have caused fluctuations in the stock market, the Company’s share price has fallen below

par value. However, considering that capital market transaction prices are based on market

prices and that the reference price of a private placement of common shares is based on the

average of the closing prices of the common shares for one, three, five or 30 business days

before the pricing date, whichever is higher, as well as that securities acquired through private

placement are not freely transferable for three years, share price is thus unlikely to be affected.

Therefore, if the price of the common shares in this private placement shares is lower than the

par value, the reason should be reasonable.

(5) Impact on shareholders’ rights: It is expected that the capital increase will strengthen the

Company’s competitiveness and enhance its operational efficiency. Additionally, the cash

capital increase will enhance the Company's shareholders’ rights, which will help improve the

financial structure and capital adequacy of the Group. Therefore, overall, shareholders’ equity

will positively benefit.

(6) The securities of this private placement may not be sold for a period of three years from the

date of delivery, except for those securities transferred in accordance with Article 43-8 of the

Securities and Exchange Act. Three years following the date of delivery of the shares of the

Company’s private placement, it is proposed that the shareholders’ meeting authorize the Board

of Directors to determine, depending on the situation at that time, whether or not to obtain the

consent letter of listing standards to be issued by the Taiwan Stock Exchange Corporation in

accordance with the relevant regulations, and to apply to the FSC for supplemental public

offering process and for listing and trading of the shares.

(7) It is proposed that the shareholders’ meeting authorize the Board of Directors and/or the

Chairman to adjust, decide and execute, contingent on the prevailing market conditions, the

contents of the securities private placement plan (including but not limiting to the actual

issuance price, number of shares, issuing terms, plan contents, fundraising amount, projected

progress and estimated benefits, etc.). It is also proposed that the Board of Directors and/or the

Chairman be fully authorized to handle relevant matters in accordance with laws and

regulations if there is necessity for change due to a change in law, revision in instructions from

competent authorities, operational evaluation or objective circumstances.

(8) In order to accommodate the subsequent procedures for this securities private placement, it is

proposed that the shareholders’ meeting authorize the Chairman or his designated person to

approve and represent the Company to sign off relevant documents and handle related matters.



- 86 -

Matter 4: Election of the Company’s Directors (including

Independent Directors) of the Seventh Term


(Proposed by the board of directors)

Explanation:

1. In accordance with the Company’s Articles of Incorporation, please elect 15

directors, including three independent directors, for the directors of the seventh

term. The term of office is for three years, starting from June 19, 2020 and ending

on June 18, 2023.

2. The list of candidate directors and independent directors is as the attachment, and

was examined and approved at the Company’s 43rd

board meeting of the sixth

term on April 28, 2020.

Voting Result:

- 87 -

(Attachment)

The List of Candidate Directors and Independent Directors

Category Director Director Director

Name Wu, Tung Chin Lee, Jih-Chu Wu, Min Wei

Education Department of Commerce,

Waseda University, Japan

Ph.D. in Economics, National

Taiwan University

Tamkang College of Arts and

Sciences

E

x

p

e

r

i

e

n

c

e

Current Chairman, Shin Kong Financial

Holding Co., Ltd.

Chairman, Shin Kong Life Insurance

Co., Ltd.

Chairman, Shin Kong Wu Ho-Su

Memorial Hospital

Chairman, Shin Kong Life Scholarship

Foundation

Chairman, Shin Kong Life Foundation

Chairman, Shin Kong Wu Ho-Su

Culture and Education Foundation,

Director, Great Taipei Broadband Co.,

Ltd.

Director, the Bankers Association of

Taipei

Vice Chairman, Shin Kong Financial

Holding Co., Ltd.

Vice Chairman, Shin Kong Life

Insurance Co., Ltd.

Vice Chairman, MasterLink Securities

Corp.

Chairman, Global Monte Jade Science

& Technology Association

Chairman, Monte Jade Science &

Technology Association of Taiwan

Chairman, Taiwan Fulbright Alumni

Association

Consultant of the Bankers Association

of the Republic of China

Supervisor, Cross-Strait CEO Summit

Director, Chinese Management

Association

Chairman, Chongwei Management

Consulting Co., Ltd.

Director, Taishin Leasing & Financing

Co., Ltd.

Director, Jin Guangfu Cultural and

Educational Foundation

Director, Juwei Investment Ltd.

Supervisor, Shinkong Materials

Technology Co., Ltd.

Director, Shin Kong Financial Holding

Co., Ltd.

Pervious Chairman, Shin Kong Financial

Holding Co., Ltd. and Chairman, Shin

Kong Life Insurance Co., Ltd.

Chairman, the Bankers Association of

the Republic of China

Chairman, Taiwan Financial Holdings

Co., Ltd.

Chairman, Bank of Taiwan

Chairman, Chunghwa Post Co., Ltd.

Vice Chairperson of Financial

Supervisory Commission (Cabinet

level) of the Republic of China

Chairperson (Minister), National Youth

Commission, Executive Yuan (the

Cabinet), the Republic of China

Professor, Department of Economics,

National Chengchi University

Director, Taiwan Stock Exchange

Director, Taiwan Futures Exchange

Director, Mega Financial Holding

Company Limited

Director, Joint Credit Information

Center

Director, Chunghwa Telecom Co., Ltd.

Standing Supervisor, Taiwan

Cooperative Bank, Minister of the

Management Committee of Insurance

Business Development Fund, Financial

Supervisory Commission, the Republic

of China

Visiting Scholar, Harvard University

and Stanford University

Director, Taiwan External Trade

Development Council

Commissioner, Mainland Affairs

Council, the Republic of China

Committee Member, Industrial

Supervisor, Shin Kong Life Insurance

Co., Ltd.

- 88 -

Development Advisory Council,

Ministry of Economic Affairs, the

Republic of China

President, Shin Kong Financial Holding

Co., Ltd.

Shares in possession

(unit: share) 104,876 969,887 104,876

Name of representing

organization or

governmental agency

Shin Kong Wu Ho-Su Culture and

Education Foundation Shin Kong Wu Tung Ching Foundation

Shin Kong Wu Ho-Su Culture and

Education Foundation

- 89 -


Name Shin Cheng Investment Co.,

Ltd.

Wu, Hsin-Ta Yeh, Yun-Wan

Education N/A MBA, UCLA Department of Accounting, Soochow

University

E

x

p

e

r

i

e

n

c

e

Current N/A Director, Shin Kong Financial Holding

Co., Ltd.

Chairman, Shin Kong Mitsukoshi

Development Corp. Ltd.

Director, The Great Taipei Gas

Corporation

Director, Fayaque Company Limited

Director, Hong yue International Co.,

Ltd.

Director, Yueyang Industrial Co., Ltd.

Director, Xingli Enterprise Co., Ltd.

Director, Hong Da Management

Consulting Co., Ltd.

Director, Xinghong Industrial Co., Ltd.

Director, Payeasy Digital Integration

Co., Ltd.

Vice President, Shin Kong Mitsukoshi

Department Store Co., Ltd.

Director, Fayaque Co., Ltd.

Director, Shin Kong Mitsukoshi

Cultural and Educational Foundation


Development Corp., Ltd.

Director, Shinway International

Marketing Co., Ltd.

Director, Shin Kong Life Insurance Co.,

Ltd.

Director, Shin Kong Financial Holding

Co., Ltd.

Chairman, Taroko Development

Corporation

Pervious N/A President, Shin Kong Mitsukoshi

Development Corp. Ltd.

President, Fayaque Company Limited

Planning and Financial Department of

Shin Kong Life Insurance Co., Ltd.

Financial Department of Shin Kong

Recreation Co., Ltd.


(unit: share) 2,072,709 507,003,826 507,003,826


organization or

governmental agency

N/A Shin Kong Mitsukoshi Development

Corp. Ltd.

Shin Kong Mitsukoshi Department

Store Co., Ltd.

- 90 -


Name Wu, Tung Ming Lin, Po Han Hung, Shih Chi

Education Master of Accounting, West

Illinois University

Master of Business

Administration, Meiji

University, Japan

MBA, Chaminade University of

Honolulu

E

x

p

e

r

i

e

n

c

e

Current Director, Shin Kong Financial Holding

Co.

Chairman, Fuhbic International Corp.,

Vice Chairman, Shin Kong Synthetic

Fibers Corp.

Chairman, Shin Pet Co., Ltd.

Director, Shin Kong Life Insurance Co.,

Ltd.

Independent Director, San Fu Chemical

Co., Ltd.

Independent Director, Tairoun Products

Co, .Ltd.

Director, Beitou Hotel

Director, Shin Kong Ocean Enterprise

Co., Ltd.

Supervisor, Shin Kong Chao Feng Co.,

Ltd.

Director, Wang Tien Woolen Textile

Co., Ltd.

Supervisor, Shin Kong Recreation Co.,

Ltd.

Supervisor, Yong Guang Co., Ltd.

Director, Swiss Hotel Co., Ltd.

Supervisor, Hsin Yun Industrial Co.,

Ltd.

Supervisor, Shin Pei Corp.

Director, Prosoon Intelligent

Automation Corp.

Director, Shinkong Co., Ltd.

Chairman, WeMo Corp.

Chairman, Eos Packaging Enterprise

Co., Ltd.

Chairman, Shin Ming Company

Director, Shin Kong Financial

Holding Co.

Director, Shin Kong Life

Insurance Co., Ltd.


Chairman, Shin Kong Lohas Life Co.,

Ltd.


Co., Ltd.

Chairman, Shin Kong International

Development Co., Ltd.

Chairman, Shin Kong International

Investment Co., Ltd.

Director, Shin Kong Chao Feng Co.,

Ltd.

Director, Yong Guang Co., Ltd.

Chairman, Taiwan Shin Kong Real

Estate Development Co., Ltd.

Chairman, Toyozawa International Co.,

Ltd.

Director, Shin Kong Bank Co., Ltd.

Chairman, Fung Chieh Investment

Co.,Ltd.


Holding Co.


Director, Shin Sheng Company Ltd.


Co., Ltd.

Director, Shin Kong Chao Feng

Co., Ltd.

Chairman, Ruifang Agricultural

Co., Ltd.

Supervisor, Shin Kong Asset

Management Co., Ltd.

Director, Yuan Qingye Catering

Co., Ltd.

Chairman, WS Management

Co.

Chairman, Hung Family

Enterprise Co., Ltd.

Director, Shin Kong Lohas Life Co.,

Ltd.

Supervisor, Yong Guang Co.,

Ltd.

Pervious Director, Shin Meng Industrial

Co., Ltd.

Chairman, Materials Analysis

Technology Inc.

Chairman, Shin Kong Real

Estate Management Co., Ltd.

Chairman, Shin Kong Real

Estate Development Co., Ltd.

Chairman, Shin Bao

Development Co., Ltd.

Chairman, Shin Yi Construction

Co., Ltd.

Director, Shin Sheng Company

Ltd.

Supervisor, Shinkong Textile

Co., Ltd.

Supervisor, Shin Kong Asset

Management Co., Ltd.

Director, Shinkong Insurance Co., Ltd.

Supervisor, Shinkong Textile

Co., Ltd.


Insurance Co., Ltd.

Chairman, Shin Po Co., Ltd.

Shares in possession 1,000,000 1,000,000 1,000,000

- 91 -

(unit: share)


organization or

governmental agency

Shin Po Co., Ltd.

Shin Po Co., Ltd

Shin Po Co., Ltd.

- 92 -

Category Director Director Director Director

Name Tsai, Hung-Hsiang Wu, Benson Su, Chi Ming Pan, Po Tseng

Education Master of Finance,

National Taiwan

University

MBA, University of Southern

California, U.S.A.

Taipei Commercial

Vocational Senior

High School

National Taiwan

University, College of

Law

E

x

p

e

r

i

e

n

c

e

Current Supervisor, Taishin Financial

Leasing (Tianjin) Co., Ltd.

Supervisor, Taishin D.A.

Finance Co., Ltd.

Chairman, Shin Kong

Chao Feng Co., Ltd.

Chairman, Beitou Hotel

Chairman, Wu Chia Lu Insurance

Culture and Education

Foundation


Department Store Co., Ltd.


Holding Co.


Insurance Co., Ltd.

Director, Shin Kong Recreation

Co., Ltd.

Resident Director, Shin Kong

Life Insurance Co., Ltd.


Insurance Co., Ltd.


Holding Co.


Foundation,


Scholarship Foundation,

Director, Wu Chia Lu Insurance

Culture and Education

Foundation

Director, Shin Kong Wu

Foundation

Pervious Certified Public Accountant,

Deloitte & Touche (June 1996

– February 2016)

Director, Taiwan Shin Kong

Security Co., Ltd

Director, Great Taipei Gas

Corporation

Director, Shin Kong Skyscraper

Tourism Co., Ltd.

President, Shin Kong Life

Insurance Co., Ltd. ( May

1994 – May 1999)

President, Shin Kong Life

Insurance Co., Ltd. ( November

2002– July 2010)

Resident Director, Shin Kong


Managing Director, Chinese

Insurance Service Association

Managing Director, Life

Insurance Association of the

Republic of China

Chairman, Shin-Kong Life Real

Estate Service Co., Ltd.

Shares in

possession

(unit:

share)

30,470,628 8,798,316 958,186 772,926

Name of

representing

organization or

government

al agency

Chin Shan Investment

Co., Ltd.

Wu Chia Lu Insurance Culture

and Education Foundation

None

None

- 93 -

Category Independent Director Independent Director Independent Director

Name Shiu, Yung-Ming Wu, Chi-Ming Lin, Mei-Hwa

Education Ph.D., University of Edinburgh,

UK

Ph.D. in Finance, Mississippi

State University, USA

Ph.D. in Accounting, Drexel

University, U.S.A.

E

x

p

e

r

i

e

n

c

e

Current Independent Director, Shin Kong Life

Insurance Co., Ltd.

Professor, Department of Risk

Management and Insurance, National

ChengChi University

Independent Director, MasterLink

Securities Corp.

Independent Director, Tatung Co.

Independent Director, Tsc Auto ID

Technology Co., Ltd.

Associate Professor, Dept. of Finance,

National ChengChi University

Independent Director, Shin Kong

Financial Holding Co.

Pervious Independent Director, Taiwan Financial

Holdings Co., Ltd.

Independent Director, Bank of Taiwan

Independent Director, Bank Taiwan


Director, Bank Taiwan Life Insurance

Co., Ltd. (Appointed by Ministry of

Finance of the Republic of China)

Editor in Chief, Journal of Risk

Management

Director of Public Welfare, Securities

Investment Trust & Consulting

Association of the Republic of China

Professor, Department of Accounting,

National ChengChi University

Chairperson, IMBA Program, National

ChengChi University

Visiting Scholar, New York University,

U.S.A.

Chairperson, Department of

Accounting, National ChengChi

University

Assistant Professor, University of

Massachusetts, Boston, U.S.A.

Assistant Professor, Temple University,

U.S.A.

Senior Auditor, Deloitte


(unit: share) 0 0 34,259


organization or

governmental agency

None None None

- 94 -

V. Extemporaneous Motions:

- 95 -

VI. Appendices Appendix 1


Rules for Shareholders’ Meeting

Article 1:

Meetings of shareholders’ meeting of the Company shall be in accordance with these Rules.

Article 2:

The shareholders’ meeting shall make available an attendance register for signing by attending

shareholders (or proxies), or the attending shareholders (or proxies) shall submit their attendance cards

in substitution for signing of attendance. Attending shareholders shall wear attendance badges.

The number of attending shares shall be calculated on the basis of the attendance register or the

attendance cards submitted, adding the number of shares whose voting rights are exercised in writing or

electronically.

The Company shall compile in the prescribed format a statistical statement of the number of shares

obtained by solicitors through solicitation and the number of shares represented by proxies, and shall

make an express disclosure of the same at the place of the shareholders meeting.

Article 3:

Attendance and voting of shareholders’ meetings shall be calculated on the basis of shares.

Article 4:

The place for convention of a shareholders’ meeting shall be at the place where the Company is located,

or a place convenient for attendance by shareholders and appropriate for convention of shareholders’

meetings. The time for commencement of a meeting may not be earlier than 9:00AM or later than

3:00PM.

The Company shall specify in its shareholders meeting notices the time during which shareholder

attendance registrations will be accepted, the place to register for attendance, and other matters for

attention.

The time during which shareholder attendance registrations will be accepted, as stated in the preceding

paragraph, shall be at least 30 minutes prior to the time the meeting commences. The place at which

attendance registrations are accepted shall be clearly marked and there shall be a sufficient number of

suitable personnel assigned to handle the registrations.

Shareholders themselves or their proxies (collectively, “shareholders”) shall attend shareholders meeting

with their attendance cards, sign-in cards, or other certificates required for attendance. Solicitors

soliciting proxy forms shall also bring identification documents for verification purpose.

The Company shall furnish the attending shareholders with the meeting agenda book, annual report,

attendance card, speaker’s slips, voting slips and other meeting materials; when there is a directors

election, pre-printed ballot shall also be furnished.

Article 5:

Where the shareholders’ meeting is convened by the board of directors, the chairman of the board of

directors shall serve as chairman of the meeting. Where the chairman of the board of directors is on

leave or is unable to exercise his/her powers for any reason, the chairman shall designate the vice

chairman to serve as deputy. Where the vice chairman of the board of directors is also on leave or is

unable to exercise his/her powers for any reason, the chairman shall designate one director to serve as

- 96 -

deputy. Where the chairman has not designated a deputy, the directors shall nominate one from

amongst themselves to so serve.

When a director serves as chair as referred to in the preceding paragraph, such director shall be the

director who has held such position for six months or more and who understands the financial and

business conditions of the company. The same shall apply to a representative of a juristic person director

that serves as chair.

It is advisable that shareholders’ meeting convened by the board of directors be chaired by the chairman

of the board in person. It is also advisable that a majority of the directors attend the meeting and at least

one member from each of the functional committees such as an audit committee or compensation

committee attend the meeting on behalf of the committee. The attendance shall be recorded in the

meeting minutes.

Where the shareholders’ meeting is convened by any person other than the board of directors who has

the right to convene meeting, such convener shall serve as chairman of the meeting. Where there are

two or more persons with the right to convene the meeting, they shall nominate one from amongst

themselves to serve as chairman.

Article 6:

The Company may appoint its attorney, accountant or other relevant personnel to attend a shareholders’

meeting.

Administrative staff in charge of organizing the shareholders’ meeting shall wear identification badges.

Article 7:

The Company shall make a full audio or video recording of the procedure of the shareholders’ meeting,

which shall be preserved for at least one (1) year.

If a shareholder files a lawsuit pursuant to Article 189 of the Company Act, the recorded materials listed

in the preceding paragraph shall be retained until the conclusion of the litigation.

Article 8:

The chairman shall immediately announce the opening of a meeting when the starting time for the

meeting arrives. However, where fewer than the number of shareholders representing more than half

of issued shares of the Company are in attendance, the chairman may announce that the meeting is

postponed, and such postponement may not exceed two (2) times; the total time of postponement/s may

not exceed one (1) hour. Where the quorum is still not met after two (2) postponements, but the

meeting is attended by shareholders representing more than one-third of issued shares of the Company,

provisional resolutions may be passed in accordance with Article 175, Paragraph 1 of the Company Act.

In the event that the number of shareholders representing more than half of issued shares is in

attendance before the end of said meeting, the chairman may submit the provisional resolutions made

for re-voting by the meeting in accordance with Article 174 of the Company Act.

Article 9:

Where the shareholders’ meeting is convened by the board of directors, the agenda shall be set by the

board of directors. A meeting shall proceed in accordance with the determined agenda, which may not

be altered except by resolution of the shareholders’ meeting.

The preceding paragraph apply mutatis mutandis to a shareholders meeting convened by a party with the

power to convene, other than the board of directors.

The chair may not declare the meeting adjourned prior to completion of deliberation on all items in the

meeting agenda of the preceding two paragraphs (including extempore motion), except by a resolution

of the shareholders meeting.

- 97 -

Election or dismissal of directors, amendments to the articles of incorporation, the dissolution, merger or

spin-off of the company or any matter under Article 185, paragraph 1 of the Company Act, Articles 26-1

and 43-6 of the Securities and Exchange Act, or Articles 56-1 and 60-2 of the Regulations Governing

the Offering and Issuance of Securities by Securities Issuers shall be set out in the notice of the reasons

for convening the shareholders meeting. None of the above matters may be raised by an extempore

motion.

Once the meeting has been adjourned, the shareholders may not appoint another chairman to continue

the meeting at the same location or a different location. However, where the chairman announces an

adjournment contrary to the Rules of the Shareholders’ Meeting, a new chairman may be elected by

agreement of a majority of the votes represented by the attending shareholders to continue the meeting.

Article 10:

Before making a comment, an attending shareholder must first complete a comments slip stating the

outline of the comment, the shareholder number (or attendance form number) and name of shareholder;

the chairman shall then determine the order in which shareholders will speak.

Where an attending shareholder has submitted a comments slip but does not speak, it shall be deemed

not to have spoken. Where the actual comments made are inconsistent with that stated in the

comments slip, the actual comments made shall prevail.

When one shareholder is speaking, no other shareholder may speak or interrupt except with the consent

of the chairman and the speaking shareholder. The chairman may stop any violating shareholders from

speaking.

Article 11:

A shareholder may not speak more than twice in respect of the same discussion item except with the

consent of the chairman, and each speech may not exceed five (5) minutes.

Where an attending shareholder speaks in violation of the preceding paragraph or speaks outside the

scope of the discussion item, the chairman may stop such shareholder from speaking.

Article 12:

Where a juristic person is appointed to attend a shareholders’ meeting as proxy, such juristic person may

only assign one representative to attend.

Where a juristic person shareholder appoints more than two (2) representatives to attend a shareholders’

meeting, only one (1) representative may speak in respect of the same discussion item.

Article 13:

After an attending shareholder has spoken, the chairman may personally respond or instruct the relevant

personnel to respond.

Article 14:

When the chairman believes that discussion of a discussion item is sufficient for voting purposes, he/she

may announce that the discussion is concluded and submit the matter for voting.

Article 15:

The vote monitoring and vote counting staff for voting of discussion items shall be appointed by the

chairman, provided that the vote monitoring staff shall also be shareholders. The results of the voting

shall be announced immediately and recorded in the minutes.

Article 16:

The chairman may determine an appropriate time for a recess during the meeting.

- 98 -

Article 17:

Except as otherwise provided in the Financial Holding Company Act, the Company Act and other laws

and regulations, the passage of a proposal shall require an affirmative vote a majority of the voting

rights represented by the attending shareholders. At the time of a vote, for each proposal, the chair or the

person designated by the chair shall first announce the total number of voting rights represented by the

attending shareholders, followed by a poll of the shareholders. After the conclusion of the meeting, the

results for each proposal including the numbers of votes for, against and abstentions shall be entered in

the Market Observation Post System (MOPS).

Article 18:

Where there is an amendment or substitutive proposal for one discussion item, the chairman shall

determine the order that such proposals will be put to voting. Where one proposal is already passed,

the other proposals shall be deemed denied and need not be put to voting.

Article 19:

The chairman may direct the proctors (or security) personnel to maintain order at the shareholders’

meeting. Where proctors (or security) personnel are on site to assist with maintenance of order, they

shall wear armbands bearing the word “Proctor”.

Article 20:

Matters not fully provided in these Rules shall be in accordance with the provisions of the Financial

Holding Company Act, Company Act, the Company’s Articles of Incorporation and other relevant laws

and regulations.

Article 21:

These Rules shall be enforced by resolution of the promoters’ meeting or shareholders’ meeting of the

Company; the same applies to any amendments. The first amendment took place on June 6, 2003; the

second amendment took place on June 10, 2005; the third amendment took place on June 15, 2007; the

fourth amendment took place on June 15, 2012. The fifth amendment was made on June 12, 2015.

- 99 -

Appendix 2


Articles of Incorporation

Section I: General Provisions

Article 1

The Company shall be incorporated as a company limited by shares under the Financial Holding

Company Act, Company Act and related laws and regulations and its name shall be "Shin Kong

Financial Holding Co., Ltd."

Article 2

The Company shall have its head office in Taipei City and, if necessary for business operation, may set

up branches in suitable sites within and outside the country.

Article 3

Public notices of the Company shall be made in accordance with Article 28 of the Company Act.

Section II: Shares

Article 4

The total capital amount of the Company shall be NT$145 billion divided into 14,500,000,000 shares,

divided into common shares and preferred shares, at a par value of NT$10 per share. The Board of

Directors shall be authorized to issue the capital in lots as circumstances require.

Article 5

All share certificates of the Company shall be issued in registered form after being signed or stamped by

at least three directors and affixed with the Company seal and authenticated by an authentication

institution approved by the competent authority. The Company may issue registered stock or other

negotiable securities without printing share certificates, provided that any shares shall be recorded by a

centralized securities custodian.

Article 5-1

The rights and obligations and other substantial issuance conditions of the Company’s preferred shares

are as below:

1. If the Company posts earnings in its final accounts, in accordance with applicable laws, it shall first

be used for payment of tax obligations and making up of losses, then allocated to the statutory

reserve fund and allocated or reversed to the special reserve fund. The remaining earnings, if any,

may first be used to distribute preferred share dividends of the year.

2. The preferred share dividend rate is capped at 8% per annum, calculated by the issuance price per

share, with dividends to be distributed in cash per year. Once the Company’s audited financial

statements have been recognized at the annual general meeting of the shareholders, the Board of

Directors shall be authorized to set the payment date for the distribution of the payable preferred

share dividends for the previous year. Dividend distributions in issuance and redemption years shall

- 100 -

be calculated based on the actual number of days the preferred shares remained outstanding in that

year.

3. The Company has sole discretion on the distribution of preferred share dividends. If no earnings are

posted in the final accounts or earnings posted are insufficient to distribute preferred share dividends,

or if a preferred share dividend distribution will cause the Company’s capital adequacy ratio to fall

below the minimum requirement stipulated by the law or the competent authorities, or based on

other necessary considerations, the Company may resolve not to distribute preferred share dividends

without it being deemed as an event of default. The undistributed dividends or the deficit of

dividends will not be accumulated for deferred payment in the subsequent years where there are

earnings.

4. Except for the dividends prescribed in Subparagraph 2 of this paragraph, shareholders of preferred

shares may not participate in the distribution of cash and stock dividends of the common shares

derived from earnings or capital reserves.

5. Preferred shareholders have priority over common shareholders for distribution of the Company’s

residual property. All preferred shareholders rank pari passu for repayment, but such is capped at the

issuance price.

6. Preferred shareholders have no right to vote or elect, but are entitled to be elected as directors at

shareholders’ meeting. Preferred shareholders have the right to vote at preferred shareholders’

meeting and at shareholders’ meeting where items on the agenda would affect rights and obligations

of preferred shareholders.

7. Preferred shares may not be converted to common shares. Preferred shareholders have no right to

request the Company to redeem the preferred shares they hold.

8. Preferred shares have no maturity date, though the Company may redeem all or a part of the

outstanding issued preferred shares at any time after seventh anniversary of the preferred shares

issuance date. Unredeemed preferred shares continue to carry rights and obligations of the issuance

conditions set forth under this article. In the year of a redemption of preferred shares, if the

Company resolves to distribute dividends, dividends to be distributed up to the redemption date shall

be calculated by the actual number of days of the year issued and outstanding.

9. Distributions of preferred share dividends shall be in the order in which the preferred shares are

issued.

The Board of Directors is authorized to determine, based on consideration of capital market conditions

and willingness of investors and in accordance with the Company’s Articles of Incorporation and

relevant laws and regulations, the name, issuance date and specific issuance conditions of preferred

shares upon their actual issuance.

Article 6

The matters concerning the Company shares shall be handled in accordance with the "Rules Governing

the Stock Affairs of Public Companies" as promulgated by the competent authorities.

Section III: Operations

Article 7

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The operations of the Company fall within the scope of: H801011 financial holding company industry.

Article 7-1

The Company’s business scope is as follows:

1. Invest in businesses as provided in the Financial Holding Company Act.

2. The Company may manage an invested business listed in the preceding paragraph.

Article 8

The Company is an investment business and the amount of its investments in other businesses shall not

be subject to the restriction of Article 13 of the Company Act, which provides that the total amount of

such investment shall not exceed forty percent (40%) of the Company's paid-in capital.

Section IV: Shareholders’ meetings

Article 9

Shareholders’ meetings may be annual meetings or special meetings. Annual meetings shall be

convened annually by the Board of Directors within six (6) months after the end of each fiscal year, and

special meetings may be convened when necessary in accordance with the Company Act.

When necessary, preferred shareholders’ meeting may be commenced in accordance with relevant laws

and regulations.

Article 10

Notice to convene an annual meeting shall be given to shareholders no later than thirty (30) days prior to

the scheduled meeting date; while notice to convene a special meeting shall be given to the shareholders

no later than fifteen (15) days prior to the scheduled meeting date.

Such notices may, with approval of the related parties, be made electronically and by public

announcement to shareholders holding less than one thousand (1,000) registered shares.

Article 11

Unless otherwise specified in relevant laws, each shareholder shall be entitled to one vote for each share

owned.

Article 12

A shareholder may appoint a proxy to attend a shareholders' meeting in his/her/its behalf by executing a

power of attorney printed by the Company stating therein the scope of power authorized to the proxy

and affixed with the shareholder's signature or seal.

Except for trust businesses or stock agencies approved by the competent authorities, when a person acts

as proxy for two or more shareholders, the number of voting power represented by him/her shall not

exceed three percent (3%) of the total number of voting shares of the Company, otherwise, the portion

of excessive voting power shall not be counted.

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A shareholder may only execute one power of attorney and appoint one proxy only, and shall serve such

written proxy to the Company no later than five (5) days prior to the meeting date of the shareholders'

meeting.

In case two or more written proxies are received from one shareholder, the first one received by the

Company shall prevail; unless an explicit statement to supersede the previous written proxy is made in

the proxy which comes later.

In case a shareholder, having submitted a written proxy to the Company, wishes to attend the

shareholders’ meeting in person or intends to exercise the voting right in writing or electronically,

request for withdrawal of the written proxy must be made in writing and served to the Company two (2)

days prior to the meeting date. If a request for withdrawal is not received by the stipulated deadline, the

proxy shall exercise voting rights.

Article 13

Shareholders’ meetings shall be convened by the Board of Directors and chaired by the Chairman of the

Company. In the event that the Chairman is on leave or is unable to exercise his or her powers and

authority for any reason, the proxy will be carried out pursuant to the Article 208 of the Company Act.

If a person outside the Board of the Directors convenes the shareholders' meeting, he or she would be

Chairman of the meeting. If there are two conveners, a Chairman of the shareholders' meeting should be

elected between.

Article 14

Unless otherwise provided by law, a resolution of shareholders shall be adopted by a majority of the

votes held by shareholders present at the meeting provided that the meeting is attended by shareholders

representing a majority of the total issued and outstanding shares.

If the quorum of shareholders stipulated in the preceding paragraph is not present, but the attending

shareholders represent more than one third of the total shares issued, tentative resolution(s) may be

passed by a majority of those present. The Company shall then notify all shareholders of the tentative

resolutions, and another shareholders’ meeting shall be convened within one month.

If the tentative resolution indicated in the preceding paragraph is approved by a majority of the

shareholders present at a meeting attended by shareholders representing over one-third of the voting

rights, the tentative resolution shall be treated as a resolution as indicated in paragraph 1.

Article 15

A summary of agenda and results of the shareholders’ meeting shall be affixed with the signature or seal

of the directors in accordance with Article 183 of the Company Act.

Section V: Directors and the Board of Directors

Article 16

The Company shall have a Board of Directors to be composed of between fifteen (15) and twenty one

(21) directors and adopt a candidates nomination system. The Directors will be elected by the

shareholders’ meeting from the nominees listed in the roster in accordance with relevant stipulations in

the Financial Holding Company Act. The amount of shares held by all directors shall accord with the

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relevant stipulations in the "Rules and Review Procedures for Director and Supervisor Share Ownership

Ratios at Public Companies."

Independent directors of the Company shall not be less than three (3) in number and not less than

one-fifth of the total number of directors stated above. The number of independent directors to be

elected would be decided by the Board of Directors.

The professional qualifications, restrictions on shareholdings and concurrent positions held, method of

nomination and appointment, and other matters of compliance with respect to independent directors

shall be handled in accordance with relevant laws and regulations.

The Company Board of Directors will establish an Audit Committee, constituted of all Independent

Directors. The Audit Committee shall have no less than three (3) members, one of who is the Chairman,

and at least one has accounting or finance background. The responsibility of Audit Committee, charters,

enforcement of duties and other obligations shall follow the relevant laws or guidelines of the Company.

The Company’s Board of Directors will establish a Salary Compensation Committee in which its

members are nominated by the Chairman of the Board of Directors and mandated by the resolution of

the Board of Directors. The Salary Compensation Committee shall have no less than three (3) members,

and at least one of its members shall be an independent director. The Salary Compensation Committee’s

responsibility, charters, enforcement of duties and other obligations shall follow the relevant laws or

guidelines of the Company.

To strengthen the Company's management mechanism, the Board of Directors may establish other

functional committees for specific purpose, with the rules of exercise of functions governing such

committee to be separately established by the Board of Directors.

Article 17

The term of office of each director shall be three (3) years. The directors are eligible for re-election after

the expiry of their term of office. In the event that no new directors can be elected immediately after the

expiration of a term of office, the current directors shall continue to perform their duties until new

directors are elected and assume their term of office.

Article 18

When the posts of one-third or more of the directors have been vacated, a special meeting of

shareholders shall be convened to elect directors to fill the vacancies within sixty (60) days. If, due to

the removal of independent directors, the number of independent directors is less than required by law

or Company regulations, replacement of independent directors shall be elected at the soonest upcoming

shareholders’ meeting. The term of office of the new directors shall be the same as the term of the

original directors.

Article 19

The Board of Directors shall be organized by the directors. The Chairman of the Board of Directors

shall be elected by a majority of the directors present at a meeting attended by two-thirds of the directors.

The Chairman of the Board of Directors shall chair the Company shareholders’ meetings and Board

meetings and represent the Company externally.

The Company may appoint one (1) Vice Chairman to be selected from among the directors according to

the above stated procedures.

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Article 20

The Board of Directors shall have the following authority:

1. Approval of the Company's operational policies and plans

2. Examination of the Company's major business rules and organizational by-laws

3. Examination of the Company budget and audited financial statements

4. Formulation of the Company's earnings distribution

5. Drafting of the Company's capital increase/decrease plans

6. Approval of the Company's major real estate asset acquisitions and disposal

7. Approval of the Company's major investments

8. Approval of the Company's stock buy-back plans

9. Appointment and discharge of Company managerial officers (including the chief internal auditor)

10. Assignment of directors and supervisors at subsidiaries in which the Company holds all outstanding

shares or capital amount

11. Other matters authorized by laws or regulations or shareholders’ meetings

Article 21

The Board of Directors shall be convened by the Chairman of the Board at least once every three (3)

months.

Unless otherwise provided by law, a resolution of the Board of Directors shall be adopted, if passed, by

a majority of the directors present at a meeting attended by more than half of the directors.

In the event that the Chairman is on leave or is unable to exercise his or her powers and authority for

any reason, the proxy will be carried out pursuant to Article 208 of the Company Act.

Where a director is unable to attend the Board of Directors meeting, he or she may appoint another

director to attend the Board of Directors meeting by proxy. In such cases a proxy form shall be provided

specifying the scope of authority entrusted to the proxy.

Each director may act as a proxy for one other director only.

A notice to convene a Board of Directors meeting shall specify the reason for which such meeting is to

be held, and shall be individually sent to each director in writing, by email or fax not later than seven (7)

days before the meeting date; provided, however, that a meeting may be called at any time in the above

manner in case of an emergency.

Article 22 (Deleted)

Article 23

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Remuneration for all directors shall be decided by the authorized Board of Directors according to

involvement and contributions to the Company's operation and at the normal rate adopted by other firms

of the same industry.

Independent directors shall receive remuneration determined by the Board of Directors, with a

maximum level not exceeding the salary level of Company managers. Independent directors may not

participate in the distribution of Company earnings.

Article 24

A director of the Company may concurrently serve as a director or supervisor of a subsidiary of the

Company.

Section VI: Supervisors (Deleted)




Section VII: Managers and Chief Auditor

Article 28

The Company may have several managers, all of whom shall be appointed or discharged by decision of

a majority of the directors present at a meeting attended by more than half of the directors. The president

shall assist the Chairman in all affairs concerning the Company.

The Company shall have one (1) chief auditor in charge of supervising all auditing work of the

Company by resolution of the Board of Directors.

Article 29

The appointment and discharge of managerial officers such as Company president, senior vice

presidents, vice presidents, chief auditor, senior assistant vice presidents and department managers shall

be handled according to the Financial Holding Company Act, Company Act and other related laws and

regulations.

Section VIII: Accounting

Article 30

The fiscal year of the Company is from January 1 to December 31.

Article 31

After the end of each fiscal year, the Board of Directors shall submit the following reports and

statements, following statutory procedures, to the shareholders at the annual meeting of shareholders for

recognition:

1. Business reports

2. Financial statements; and

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3. Proposal for distributing earnings or making up of losses.

The reports and statements in the preceding subparagraphs shall be prepared in accordance with the

regulations stipulated by the central competent authority.

Article 32

If the Company recorded profit for the respective year, no less than 0.01% but no more than 0.05% of

the Company’s profit of such year shall be reserved for employees’ compensation. Employees of

affiliated companies who meet certain qualifications may also be included in the distribution. The

Company may reserve no more than 1% of the amount of the abovementioned profit of the Company for

directors’ remuneration by the resolution of the Board of Directors.

The proposal of distribution of employees’ compensation and directors’ remuneration shall be reported

in the shareholders’ meeting.

Where the Company has accumulated deficits, it shall first reserve the amount needed to make up the

losses before utilize the remaining amount of the profit for employees’ compensation and directors’

remuneration at the ratio as provided in the preceding paragraph.

Article 32-1

If earnings are posted on the Company’s final accounts, it shall first be used, in accordance with

applicable laws, for payment of tax obligations, making up of losses, and then allocations to the

statutory reserve fund. Where the statutory reserve fund has reached the amount of the Company’s

paid-in capital, such earnings may be used for purpose other than allocations to statutory reserve fund.

Such earnings shall then be used for allocation or reversal of special reserve funds as required by

applicable laws and regulations, and may be distributed as preferred share dividends. The remaining

earnings, if any, along with the undivided profit accumulated, will then be used as the distributable

earnings for common share dividends. The Board of Directors shall prepare a proposal for the

distribution and present the proposal to the shareholders’ meeting for resolution.

In order to continue to expand in scale, increase profitability, and achieve sustainable development, the

Company has adopted a residual policy in line with its capital needs and long-term financial planning.

However, the common share dividend distribution shall not be less than 20% of the distributable

earnings of the year, and the cash portion of dividend payments shall not be less than 10% of the total

dividend distribution for the year.

The distributable earnings of the year stipulated in the preceding paragraph mean the distributable

earnings stated in paragraph 1 but precluding the undistributed earnings of the previous year and the

reversed portions of the special reserve in accordance with laws and regulations.

Section IX: Supplementary Articles

Article 33

Any matters not provided for in these Articles of Incorporation shall be governed by the Financial

Holding Company Act, Company Act and other relevant laws and regulations.

Article 34

These Articles of Incorporation were made on December 14, 2001.

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The first amendment was made on June 6, 2003.

The second amendment was made on June 10, 2005.

The third amendment was made on June 9, 2006.

The fourth amendment was made on June 15, 2007.

The fifth amendment was made on June 19, 2009.

The sixth amendment was made on June 10, 2011.

The seventh amendment was made on June 15, 2012.

The eighth amendment was made on June 14, 2013.

The ninth amendment was made on June 6, 2014.

The tenth amendment was made on June 8, 2016.

The eleventh amendment was made on June 8, 2018.

The twelfth amendment was made on June 14, 2019.

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Appendix 3


Code of Ethics

Adopted by the board of directors on April 19, 2005

First Amendment made by the board of directors on March 24, 2015

Second Amendment made by the board of directors on April 28, 2017

Third Amendment made by the board of directors on March 27, 2020

Article 1: (Purpose of and basis for adoption)

For the purpose of encouraging the personnel of the Company to act in line with ethical standards, and

to help other stakeholders understand the ethical standards adopted by the Company, the Company here

adopt this Code of Ethics (hereinafter “the Code”).

Article 2: (Individuals Whom the Code Applies To)

The individuals whom the Code applies to include the directors, supervisors, managerial officers and

staff of the Company and the Company’s subsidiaries (hereinafter collectively referred to as the

“Company Personnel”)

The “subsidiaries” referred to in the Code means the entities subject to Article 4(1)(iv) of the Financial

Holding Company Act.

Article 3: (Conducts of honesty and morality)

The Company Personnel shall manage the Company’s affairs with honesty and morality.

Conducts of honesty refer to those conducts void of fraud, deceit and concealment.

Conducts of morality refer to conducts that abide by professional standards, including dealing with

incidents of conflict of interests in a fair manner.

Article 4: (Equality in hiring and principle of non-discrimination)

Company Personnel shall respect the diversity of the workplace and shall not give differential treatment

or in any way discriminate on the basis of gender, sexual orientation, race, socio-economic status, age,

marriage, family status, language, religion, political party affiliation, nationality, physical appearance,

facial features, physical or mental impairment, etc., in order to create a work environment with equality

in hiring and which is free of discrimination and harassment.

Article 5: (Healthy and safe work environment)

Company Personnel shall communally maintain the health and safety of the work environment and shall

not engage in any sexual harassment or other violence or threatening actions.

Article 6: (Prevention of conflicts of interests)

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Company Personnel should avoid any individual action or monetary benefits which might be in conflict

with his/her duties at the Company and allowing his/her personal interest to intervene, actually or

potentially, the overall interest of the Company.

The director and managerial officers should voluntarily disclose and explain whether there are potential

conflicts of interest between such person and the Company.

Article 7: (Anti-bribery and anti-pursuit of personal gains)

Company Personnel should safeguard the legitimate and legal interests of the Company, and avoid

engaging in the following matters:

1. Seeking personal gains or the opportunities to pursue such by using company property or information

or taking advantage of their positions.

2. Directly or indirectly offering, promising, demanding or receiving money, gifts, position, treats,

services and other benefits of any kind or name. However, normal social etiquette or incidental acts

of a business nature that are unlikely to affect the Company’s rights and obligations are exempt.

3. Competing with the Company, except when the shareholders’ meeting or the board of directors has

approved a release from his/her restrictions on non-compete agreements.


Company Personnel have the obligation to maintain the confidentiality of any information of the

Company or its customers, except when required by law as to its disclosure, authorized by the Company

or otherwise agreed in contracts; it is the same after termination of employment.

Confidential information includes any undisclosed information that, if exploited by a competitor or if

leaked could result in damage to the company or customers.

Article 9: (Fair trade and anti-insider trading)

Company Personnel should treat all customers, dealers, competitors and employees in a fair manner, and

should not engage in the following matters that are either illegal or immoral:

1. Receiving or providing commissions or other inappropriate benefits from/to the customers, dealers,

competitors of the Company or any other parties having a relationship with the Company.

2. Spreading untruthful rumors regarding the customers, dealers and competitors of the Company.

3. Misrepresentation on the quality or contents of the products or services of the Company.

4. Other conducts by way of manipulation, concealment, or exploitation of information acquired from

its position, misrepresentation on material matters, or obtain of improper benefits by unfair dealing.

5. Engaging in insider trading by using, or leaking to others, non-public company information and any

information that may materially affect the trading price of securities that he/she learned in the course

of his/her duties.

Article 10: (Anti-money laundering)

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Company Personnel may not advise, conceal or assist others in converting illegal proceeds into

seemingly legitimate funds. If suspect money laundering transactions are discovered, they should be

reported immediately to the relevant authorities and should be reported in accordance with the law, and

the employee should comply with subsequent investigation procedures.

Article 11: (Safeguard and proper use of company assets)

Company Personnel have the responsibility to safeguard company tangible and intangible assets and to

ensure that they can be effectively and lawfully used for business purpose of the Company.


Company Personnel shall comply with relevant laws and regulations and the policies of the Company.

Article 13: (Action taken in the case of discovering the material operation risks)

When directors or higher-level officers discover the potential for material losses to the Company, they

shall promptly handle appropriately, immediately inform the independent directors of the Audit

Committee or supervisors, report to the board of directors and direct and supervise the Company to

report to the competent authority in accordance with the law.

Article 14: (Encouraging whistleblowing of any illegal activities or activities violating the Code)

Directors, managerial officers and relevant department of the Company should raise awareness of ethics

internally, encourage Company Personnel to, in accordance with the regulations relating to the

whistleblowing system, report to divisions responsible for handling whistleblowing or other appropriate

individual upon suspicion or discover of any activity in violation of a law or regulation or the Code.

The Company prohibits any reprisals, threat or harassment against any person whistleblowing pursuant

to the preceding paragraph. In the event of reprisals, threat or harassment, the Company should take the

appropriate action without delay.

Article 15: (Punitive measures)

When a Company Personnel violates the Code, the Company shall handle in accordance with personnel

management regulations and relevant laws and regulations, and provide the personnel with the

opportunity to express opinions or complain about violations before making a sanction decision.

The Company should, based on the situation of violation, hold the person in violation accountable or

appeal to other legal measures.

If any director or managerial officer violates the Code and is convicted guilty, the Company should,

without delay, disclose on the Market Observation Post System (MOPS) the date of the violation,

reasons for the violation, the provisions of the Code violated, and the disciplinary actions taken.

Article 16: (Methods of disclosure)

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The Code, and any amendments thereto, should be disclosed internally as well as on the company

website, in the annual reports or the offering memorandums of the Company and on the MOPS.

Article 17: (Adoption of code of ethics by the subsidiaries )

The subsidiaries of the Company should thoroughly comply with the Code and may, based on the laws

and regulations applicable to their respective business, independently adopt the code of ethics.

When a Company Personnel of the subsidiary violates such code of ethics in a serious manner, the

subsidiary should without delay report to the Company.

Article 18: (Effect and enforcement)

The Code only serves as an internal regulation for the Company, and does not confer any rights to the

customers, dealers, competitors, shareholders of the Company or any other individual or groups and

does not constitute any legal commitment or recognition.

The Code, or any amendment thereto, is in effect once adopted by the board of director. The adoption is

reported to the shareholder meeting.

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Appendix 4


Ethical Corporate Management Policy and Best Practice Principles

Adopted by the board of directors on April 24, 2015

First Amendment made by the board of directors on March 27, 2020

Article 1 In order to foster a corporate culture of ethical management and sound development, this

Guideline as stipulated in accordance with “Guidelines for ethical management and conduct of

TWSE/GTSM listed companies” should be complied with.

This Guideline applies to the subsidiaries of our Company which do not adopt guidelines for

ethical management and conduct of their own.

The subsidiaries mentioned in the preceding paragraph are the subjects to whom Article 4,

Paragraph 1, Subparagraph 4 of Financial Holding Company Act applies.

Article 2 When engaging in commercial activities, representatives, employees, consignees or any persons

having substantive control over our Company (hereinafter “Company Personnel”) shall not

directly or indirectly offer, promise to offer, request or accept any improper benefits, nor

commit any unethical acts including breach of ethics, illegal acts or breach of fiduciary duty for

purposes of acquiring or maintaining benefits (hereinafter “unethical conduct”).

Counterparties in the preceding paragraph include civil servants, political candidates, political

parties or members of political parties, state-run or private-owned businesses or institutions, and

their directors, supervisors, managers, employees or persons with substantive control over such

business or institutions or other interested persons.

Article 3 Benefits referred to in this Guideline mean things of value, including for example, money,

endowments, commissions, positions, services, preferential treatment or rebates. Benefits

received or given occasionally in accordance with social customs which do not have an

influence on any specific rights or obligations shall be excluded.

Article 4 Our Company shall comply with the Financial Holding Company Act, Company Act, Securities

and Exchange Act, Business Entity Accounting Act, Political Donations Act, Anti-corruption

Statute, Government Procurement Act, Act on recusal of Public Servants due to Conflict of

Interests, regulations relating to listing on the TWSE/GTSM or other laws and regulations

relevant to business activities as the underlying premises to facilitate ethical corporate

management.

Article 5 Our Company shall abide by the operational philosophies of honesty, transparency and

accountability, set out policies based on the principal of good faith, and establish sound

corporate governance and risk control mechanism so as to create an operational environment

committed to sustainable development.

Our Company shall establish an assessment mechanism for risk of unethical conduct,

periodically analyze and evaluate the business activities with a higher risk of unethical conduct

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which fall within the scope of business, and shall formulate prevention plans based on such and

periodically review the appropriateness and effectiveness of the prevention plans.

Article 6 Our Company shall request each director and senior management to issue a declaration, as in the

attached form, of his/her compliance with the ethical management and conduct policies and shall

request employees in the terms and conditions of their employment to comply with ethical

management and conduct policies.

The board of directors and the senior management of our Company vigorously implement

his/her commitment to the ethical management and conduct policies and to carry out such

policies in both internal management and commercial activities.

Article 7 Our Company shall conduct commercial activities in a fair manner and with good faith.

Prior to any commercial transactions, our Company shall take into consideration the legalities of

engaging with the counterparties and if such counterparties are involved in any unethical

conduct. Our Company shall avoid dealings with any persons involved in unethical conduct.

When entering into contracts with counterparties, clauses requesting compliance with ethical

management and conduct policies and entitling the Company to terminate or rescind the

contracts at any time when such counterparties are involved in unethical conducts shall be

included in the contracts.

Article 8 In the conduct of business, our Company and Company Personnel shall not directly or indirectly

offer, promise to offer, request or accept improper benefits in any form.

Article 9 When directly or indirectly offering a donation to political parties or organizations or individuals

participating in political activities, our Company and Company Personnel shall comply with the

Political Donations Act and relevant internal operational procedures. Such donations shall not be

used to exchanging for commercial gains or business advantages.

Article 10 When making or offering donations or sponsorship, our Company and Company Personnel

should comply with relevant laws and regulations as well as internal operational procedures, and

shall not provide bribes regardless of its form.

Article 11 Our Company and Company Personnel shall not, directly or indirectly, offer or accept any

unreasonable gifts, hospitality or any other improper benefits in the hope of establishing

business relationships or influence commercial transactions.

Article 12 Our Company and Company Personnel shall comply with laws and regulations, company’s

internal procedures and contractual obligations concerning intellectual property rights. Without

prior consent of the owners of the intellectual property rights, any usage, disclosure, disposition,

damage of intellectual property or any other acts of infringement on intellectual property rights

shall not be allowed.

Article 13 When conducting business, Company Personnel shall comply with laws and regulations and the

unethical conduct prevention programs set by our company.

Article 14 Company Personnel shall observe all internal procedures concerning preservation of

confidentiality. Such person shall not disclose company trade secrets to any third parties, and

shall not seek or collect any company trade secrets unrelated to his/her scope of work.

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Article 15 Company Personnel shall comply with Securities and Exchange Act. Such persons shall not

utilize undisclosed information known to him/her for insider trading nor disclose such

information to any other third parties so to prevent third parties from trading on such insider

information that is not yet published.

Article 16 When a board meeting matter concerns the personal interest of a director or the interest of the

juristic person represented by a director, such director shall explain at the given board meeting

the material aspects of such conflict of interests. In the case that the conflicts of interest may

prejudice interest of the company, such director shall not participate in discussion on as well as

voting of the proposal and shall recues himself/herself from the discussion and the vote.

Exercise of voting rights as proxy for another director shall also be prohibited. The directors

shall value self-discipline and shall not support among themselves in an improper manner.

Company Personnel shall not take advantage of their positions or influence in the companies to

obtain improper benefits for themselves, their spouses, parents, children or any other persons.

Article 17 Company Personnel shall fulfill its duty of care and to prevent the company from engaging in

any unethical conduct.

To ensure sound ethical management, Corporate Social Responsibility (CSR) Committee under

the command of the Board of Directors shall be responsible for establishing ethical management

and conduct policies of our Company, designing programs to prevent unethical conduct that are

in alliance with the relevant laws and regulations of the jurisdiction where our Company and

related entities within our group are established, supervising the implementation thereof, and

shall report annually to the Board of Directors.

Article 18 Our Company shall establish effective accounting systems and internal control systems for

business activities that may be exposed to higher risk of unethical conduct. Our Company shall

not keep any off-the-book accounts or retain any secret accounts. Reviews on these systems

shall be regularly conducted in order to ensure that the design and enforcement of such systems

are showing results.

The internal audit unit of our Company should, based on the results of the assessment of

unethical conduct risk, draw up relevant audit plans and review its compliance, and may

engage accountants to perform reviews; when necessary, it can engage professionals for

assistance.

The results of the aforementioned reviews shall be made into audit reports and any deficiencies

shall be reported to senior management and the unit responsible for ethical management, and

submitted to the board of directors.

Article 19 Our Company shall periodically conduct education training and publicity for Company

Personnel, so that they understand the Company’s determination, policy and precautionary

plan for ethical management and the consequences of unethical conduct.

Our Company shall establish a clear and effective system of rewards and punishments by

combining the policy of ethical operation with the policy of employee performance evaluation

and human resources.

Article 20 Our Company shall establish a specific whistleblowing system and shall enforce it in a firm

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manner.

Upon confirmation that Company Personnel’s activities are in violation of ethical

principles, they shall be handled in accordance with internal disciplinary procedures of the

Company and the name of the violator, his/her position, date of the violation, reasons for the

violation, and the disciplinary actions taken shall be promptly disclosed on the Company’s

internal website.

Article 21 Our Company’s implementation of the practice of ethical management and conduct shall be

disclosed on the company website, in the annual reports or offering memorandums of the

company. The content of this guideline should also be disclosed on the Market Observation Post

System (MOPS).

Article 22 Our Company shall follow the development of domestic and international regulation concerning

ethical corporate management and conduct. Our Company should encourage personnel of the

company to raise suggestions, based on which the guideline for ethical management and conduct

adopted and the measures taken by the Company should be reviewed, with a view to achieving

better implementation of ethical management.

Article 23 This Guideline and amendment thereto shall be in effect once adopted by the board of

directors.The adoption is reported to the shareholder meeting.

Article 5, Paragraph 2 and Article 18, Paragraphs 2 and 3, as amended on March 27, 2020,

shall come into force on September 27, 2020.

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Appendix 5


Procedures for Ethical Management and Guidelines for Conduct

Adopted by the board of directors on March 27, 2020

Article 1 (Purpose and Scope of Application)

The Company engages its commercial activities in accordance with the principles of fairness, honesty,

faithfulness and transparency, and in order to fully implement a policy of ethical management and

actively prevent unethical conduct, the Company established the “Procedures for Ethical Management

and Guidelines for Conduct” (these “Guidelines”) in accordance with the “Ethical Corporate

Management Best Practice Principles for TWSE/GTSM Listed Companies”, the Company’s “Ethical

Corporate Management Policy and Best Practice Principles” and the relevant laws and regulations of the

locations where the Company and group entities operate, specifying the matters that Company

Personnel should pay attention to when conducting business.

If a subsidiary of the Company does not have its own “Procedures for Ethical Management and

Guidelines for Conduct”, the provisions of the Guidelines shall apply.

Article 2 (Applicable Subjects)

For the purposes of these Guidelines, the term “Company Personnel” refers to the Company’s

responsible persons, employees and appointees and any person having substantial control of the

Company.

Any provision, promise, demand or acceptance of improper benefits by any Company Personnel through

a third party is presumed to be an act of the Company Personnel.

Article 3 (Unethical Conduct)

For the purposes of these Guidelines, “unethical conduct” means that any Company Personnel, in the

course of his/her duties, for purposes of obtaining or maintaining a benefit, directly or indirectly

provides, promises, demands or accepts improper benefits, or engages in other conduct that is unethical,

unlawful or in breach of fiduciary duty.

The counterparties of the conduct of the preceding paragraph include public officials, political

candidates, party or party officials and any government-owned or private-owned enterprises or

institutions and its directors, supervisors, managerial officers, employees, persons with substantial

control or other interested parties.

Article 4 (Types of Benefits)

For the purposes of these Guidelines, the term “benefits” means any money, gratuity, gift, commission,

position, service, preferential treatment, rebate, facilitating payment, entertainment, dining and other

things of value, in whatever form or name.

Article 5 (Responsible Unit)

The Company has designated the Corporate Social Responsibility Committee as the responsible unit

(the “Responsible Unit”) under the command of the Board of Directors and responsible for promoting

the Company’s ethical management policy and overseeing the effectiveness of the implementation of

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the managerial department. The responsible unit has primary responsibility for the following matters and

shall report annually to the Board of Directors:

Assist in integrating ethical and moral values into the Company’s management strategy, and, in

accordance with laws and regulations, adopting appropriate malfeasance prevention measures relating to

ethical management.

Periodically analyze and evaluate the business activities in the scope of business with a high risk of

unethical conduct and on such basis formulating prevention plans and regularly reviewing the

appropriateness and effectiveness of such prevention plans.

Oversee the managerial department’s planning for internal organization, staffing and responsibilities,

and establish checks-and-balance mechanism for mutual supervision of business activities within the

business scope with a higher risk of unethical conduct.

Oversee the promotion and coordination of ethical policy advocacy training.

Establish whistleblowing system and ensure the effectiveness of its implementation.

Assist the Board of Directors and management in auditing and evaluating the effective operation of the

preventive measures established for the implementation of ethical management, and regularly produce

reports regarding assessment of the compliance with respect to relevant business processes.

If the duties of any department or division involved the matters mentioned in each subparagraph in the

preceding paragraph, such department or division shall assist in the handling thereof.

Article 6 (Prohibition Against Providing or Accepting Improper Benefits)

Except under the following circumstances, Company Personnel shall comply with the provisions of the

Company’s “Ethical Corporate Management Policy and Best Practice Principles” and the Guidelines

when directly or indirectly providing, receiving, promising or requesting the benefits provided in Article

4 and shall follow relevant procedures before doing so:

Conduct taken for business needs and in accordance with local courtesy, convention or custom during

domestic (or foreign) visits, reception of guests, promotion of business and communication and

coordination.

Participation in or inviting others to an ordinary social activity based on accepted social customs,

commercial purposes or developing relationships.

Inviting customers or being invited to attend specific business events, factory visits, etc. for business

purposes, in accordance with the Company's relevant regulations.

Participating in folk festivals held in public and to which the general public is invited.

Award, relief, condolence or consolation, etc., from officers.

For social customs or other conduct which are in compliance with company regulations.

Article 7 (Procedures for Handling the Acceptance of Improper Benefits)

Except under the circumstance set forth in the preceding article, in the event Company Personnel are

directly or indirectly provided with or are promised any of the benefits specified in Article 4, they shall

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return or refuse such benefits and shall report to their immediate supervisor and the human resources

unit. In the event that they are unable to return the benefits, they shall deliver them to the human

resources unit within one (1) week of the date of receipt.

The human resources unit shall, depending on the nature and value of the benefits provided in Paragraph

1, make a proposal for refund, accepted on payment, given to the public, donated to charity or give other

appropriate advice, which shall be reported to the general manager and implemented upon approval.

Article 8 (Prohibition of and handling procedure for facilitating payments)

The Company and Company Personnel shall neither provide nor promise any facilitating payment.

If any Company Personnel provides or promises a facilitating payment under threat or intimidation,

he/she shall submit a report to their immediate supervisor stating the facts and shall subsequently notify

and handle in accordance with the Company’s internal rules.

Upon receipt of a report under the preceding paragraph, the responsible unit shall take immediate action

and examine relevant matters in order to minimize the risk of recurrence. If any wrongdoing is found to

be involved, the judicial unit should be notified immediately.

Article 9 (Handling Procedures for Political Contributions and Charitable Donations or

Sponsorships)

The Company’s political contributions and charitable donations or sponsorships shall be made in

accordance with the Company's “Donation Management Regulations” and relevant laws and

regulations.

Article 10 (Recusal)

Where a director of the Company, or the juristic person he/she represents, has a conflict of interest with

a Board of Directors meeting proposal, such director shall explain the material aspects of his/her interest

at such meeting and, where there is a likelihood that the interests of the Company would be prejudiced,

may not participate in the discussion or vote, shall recuse him/herself from any discussion and voting

and may not exercise voting rights as proxy on behalf of another director. The directors shall exercise

discipline among themselves and may not support each other in an inappropriate manner.

A director’s spouse or relative within the second degree, or an affiliated company controlled by a

director, having a conflict of interest with a meeting proposal aforementioned in the preceding

paragraph shall be deemed as such director having a personal conflict of interest.

If, in the course of the Company’s business, any Company Personnel discovers a conflict of interest

involving himself/herself or the juristic person he/she represents, or a situation that may cause

him/herself, his/her spouse, parents, children or an interested party to gain an improper benefit, he/she

shall concurrently report the matter to his/her immediate supervisor and the relevant responsible unit and

the immediate supervisor shall provide appropriate guidance.

Company Personnel shall not use the Company’s resources for commercial activities outside the

Company and shall not have their performance affected by their participation in commercial activities

outside the Company.

Article 11 (Protection of Intellectual Property Rights and Duty of Confidentiality)

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The Company has internal rules for the management, maintenance and preservation of trademarks,

patents, copyrights and other intellectual property to ensure that the Company’s Personnel conduct their

business in accordance with them and to ensure their continued effectiveness.

The Company manages, preserves and maintains the confidentiality of its trade secrets through the

relevant responsible units and should, in case of outsourced business, enter into confidentiality

agreements to protect the interests of the Company.

When conducting business, Company Personnel shall comply with all laws and regulations, Company’s

internal rules and contracts relating to intellectual property and shall not disclose to others any

intellectual property, such as trade secrets, trademarks, patents and copyrights, known to the Company

and shall not inquire about or collect any intellectual property not related to their duties, including trade

secrets, trademarks, patents and copyrights.

Article 12 (Prohibition of Unfair Competition)

When engaging in business activities, the Company shall comply with the Fair Trade Act and relevant

competition laws and regulations and may not fix prices, rig bids, limit output or quotas, or share or

divide the market by allocating customers, suppliers, operating areas or types of businesses.

Article 13 (Prohibition of Insider Trading and Confidentiality Agreement)

Company Personnel shall comply with the Securities and Exchange Act and may not engage in insider

trading by using any undisclosed information of which they have knowledge, nor may they disclose

such information to others in order to prevent such others from engaging in insider trading by using such

undisclosed information.

Other entities or personnel involved in mergers, spin-offs, acquisitions and transfers of shares, material

memoranda, strategic alliances, other business partnerships or material contracts with the Company shall

enter into a confidentiality agreement with the Company undertaking not to disclose to others any trade

secrets or other material information of the Company of which they have knowledge and not to use such

information without the Company's consent.

Article 14 (Announcement of Ethical Management Policy to Outside Parties)

The Company shall disclose its ethical management rules and regulations in its annual reports and on its

website and make announcements at institutional investor conferences or other external events so that

the suppliers, customers or other business-related organizations and personnel can have a clear

understanding of the principles and regulations with respect to the Company's ethical management.

Article 15 (Ethical Management Evaluation Prior to Development of Commercial Relationships)

Before the Company establishes a commercial relationship with another party, the Company shall

evaluate the eligibility of the counterparty in accordance with the Company’s relevant internal

regulations and check whether such vendor has been blacklisted or suspended.

Article 16 (Statement of Ethical Management Policy to Business Counterparties)

In the course of engaging in business activities, Company Personnel shall explain to transaction

counterparties the Company’s ethical management policy and related regulations, and shall expressly

refuse to directly or indirectly offer, promise, request or receive improper benefits of any form or name.

Article 17 (Avoidance of Commercial Dealings with Unethical Operators)

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Company Personnel shall refrain from engaging in business dealings with agents, suppliers, customers

or other commercial transaction counterparties who have engaged in unethical conduct and shall

immediately cease business dealings with business or cooperation counterparties who are found to have

engaged in unethical conduct and blacklist such counterparties, in order to comply with the Company’s

regulations relating to ethical management.

Article 18 (Stipulation of Ethical Management Terms in Contracts)

When the Company enters into a contract with another party, the Company shall fully understand the

other party’s ethical management situation and shall include in the contract terms compliance with the

Company’s “Policy and Guideline of Ethical Management” and the following matters:

Any party who becomes aware of a breach of a contractual provision prohibiting the receipt of

commissions, kickbacks or other improper benefits shall promptly and truthfully notify the other party

of the identity of such person(s), the manner in which the provision, promise, request or acceptance was

made and the monetary amount or other improper benefits provided, and provide evidence thereof and

cooperate with the other party's investigation. If a party suffers damage as a result, such party may seek

damages from the other party.

When a party commercial activities involves unethical conduct, the other party may unconditionally

terminate or rescind the contract at any time.

Set specific and reasonable payment terms, including the place and method of payment and the

requirement for compliance with related tax laws and regulations.

Article 19 (Handling of Unethical Conduct by Company Personnel)

The Company encourages internal and external personnel to report unethical conduct or misconduct, and

the relevant reporting channels and handling procedures shall be in accordance with the Company’s

“Procedures for Handling Reports of Internal and External Personnel”.

Article 20 (Handling of Unethical Conduct by Others Towards the Company)

When any Company Personnel encounters another person engaged in unethical conduct against the

Company, if such conduct involves illegality, the Company shall notify the judicial and prosecutorial

authorities of the relevant facts. Where any public office or public employee is involved, the Company

shall notify the governmental anti-corruption authorities.

Article 21 (Internal Advocacy, Establishment of System for Rewards, Penalties and Complaints,

and Related Disciplinary Measures)

The Company shall conduct internal advocacy at least once a year to convey the importance of integrity

to Company Personnel.

The Company shall incorporate ethical management in its employee performance appraisal and human

resources policies and establish a clear and effective system of rewards, penalties and complaints.

Where a Company Personnel seriously violates his/her integrity, the Company shall handle it in

accordance with the Company’s “Work Rules” and relevant laws and regulations.

The Company shall disclose the title and name of the violator, the date of violation, the violation details

and the actions taken in response on its intranet.

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Article 22 (Enforcement)

These Guidelines, and any amendments hereto, shall be implemented after adoption by resolution of the

Board of Directors, and shall be delivered to each independent director (or supervisor) and reported to

the shareholders’ meeting.

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Appendix 6


Procedures for Election of Directors of Shin Kong Financial Holding Co., Ltd

Article 1

Except as otherwise provided by Financial Holding Company Act, Company Act, relevant laws and

regulations and Articles of Incorporation of Shin Kong Financial Holding Co., Ltd. (hereinafter “the

Company”), elections of directors shall be conducted in accordance with the Procedures.

Article 2

The cumulative voting method shall be used for election of the directors of the Company. Each share

will have voting rights in number equal to the number of directors to be elected, and may be cast for a

single candidate or split among multiple candidates. Attendance card numbers printed on the ballots

shall be used instead of recording the names of voting shareholders.

Elections for independent directors and non-independent directors of the Company are conducted

together, with number of the elected calculated separately.

Article 2-1

The Company shall make public disclosure the period for submitting the candidates nomination of the

Directors and Independent Directors, number of seats to be elected, place for submission of nomination,

and other necessary information before the book closure date for the shareholder’s meeting. The period

for such submission shall be no less than ten (10) days.

Candidates for Directors and Independent Directors should be nominated pursuant to the following

procedures, and are confirmed by Board of Directors to be qualified according to related rules and

regulations. The roster then will be submitted to Shareholders meeting for election:

1. Shareholder who holds more than 1% of outstanding shares is eligible to nominate candidates for

Directors and Independent Directors by writing. The number of candidates cannot exceed the number

of seated to be elected.

2. The Board of Directors nominates the candidates for Directors and Independent Directors. The

number of candidates cannot exceed the number of seated to be elected.

3. Other methods as rules stipulated by competent authority.

The shareholder or Board of Directors shall provide the name of the nominee, history of education,

working experience, commitment letter for being a Director or an Independent Director, Declaration of

Non-violation to Article 30 of the Company Act, and other required documents in such nomination.

The Board of Directors or the person who is authorized to call a shareholder meeting shall review the

eligibilities of candidates for Directors and Independent Directors, and should include in the roster of

candidates for Directors and Independent Directors, except for any of the following reason:

1. Nominating shareholder makes such nomination outside the period of nomination as announced.

2. Nominating shareholder does not hold more than 1% of outstanding shares on the book closure date

pursuant to the Article 165, paragraph 2 or 3 of the Company Act.

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3. The nomination exceeds the number of seats to be elected for Directors and Independent Directors.

4. The candidate is not able to provide documents required as set forth in the preceding paragraph.

Article 3

Before the election begins, the chairman shall appoint a number of persons with shareholder status to

perform the respective duties of vote monitoring and counting personnel. The chairman shall appoint

monitoring personnel if no participating shareholders volunteer.

Article 4

The number of directors to be elected is based on the number specified in the Articles of Incorporation

of the Company. Those receiving ballots representing the highest numbers of voting rights will be

elected sequentially according to their respective numbers of votes. When two or more persons receive

the same number of votes, thus exceeding the number of positions specified in the Articles of

Incorporation of the Company, they shall draw lots to determine the person being elected. If any such

persons are not in attendance, the chair will draw lost on their behalf.

Article 5

The Board of Directors shall prepare ballots for directors. The number of voting rights associated with

each ballot shall be specified on the ballots.

Article 6

If a candidate is a shareholder, a voter must enter the candidate’s account name and shareholder account

number in the “candidate” column of the ballot; for a non-shareholder (natural person only), the voter

shall enter the candidate's full name and identity card number.

When the candidate is a governmental organization or juristic-person shareholder, the name of the

governmental organization or juristic-person shareholder shall be entered in the column for the

candidate’s account name in the ballot. Both the name of the governmental organization or

juristic-person shareholder and the name of its representative shall be entered, if representatives are

listed as candidates. When there are multiple representatives, the names of each respective

representative shall be entered.

Article 7

Ballot will be deemed void in any of the following situations:

1. Ballot not prepared by the Board of Directors.

2. Blank ballot not complete by the voter.

3. The number of candidates filled in the ballot exceeding the number of the seats to be elected.

4. Ballot with other written characters or symbols, etc., in addition to candidate's name and candidate’s

number.

5. Ballot with writing unclear and indecipherable.

6. Ballot filled with candidate’s account (name or title), or the candidate’s number that is different from

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the roster of nomination.

7. Ballot filled only candidate’s account (name or title) but not the candidate’s number, or ballot filled

only candidate’s number but not the candidate’s account (name or title).

8. Ballot with any erasion or change to either candidate’s account (name or title) or candidate’s number.

9. Other violation to the Laws, Article of Incorporation and other related rules and regulations.

Article 8

The ballots shall be calculated on site immediately once the poll ends. The results of the calculation,

including the list of persons elected as directors or independent directors and the numbers of votes with

which they were elected, shall be announced by the chair on site.

The ballots for the election referred to in the preceding paragraph shall be sealed with the signatures of

the monitoring personnel and kept in proper custody for at least one year. If, however, a shareholder

files a lawsuit pursuant to Article 189 of the Company Act, the ballots shall be retained until the

conclusion of the litigation.

Article 9 (deleted)

Article 10 (deleted)

Article 11

Matters not encompassed by the Procedures shall be conducted in accordance with the Financial

Company Act, Company Act, Civil Law and other relevant laws and regulations.

Article 12

These procedures, and the amendment thereto, are force upon adoption by the founder meeting or the

shareholders meeting of the Company. The first amendment was made on June 10, 2005. The second

amendment was made on June 15, 2007.

The third amendment was made on June 12, 2013.

The fourth amendment was made on June 12, 2015.

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Appendix 7

Individual and Collective Shareholding of Directors

Specified on the Company’s Shareholder Roster

Shareholding of Directors

Book Closure Date: April 21, 2020

Shares Held at Time of

Appointment (see Note 1)

Shares Registered in the Shareholder Roster as of the

Book Closure Date

(see Note 2) Title Name

Date of Appointment

Tenure (Years)

Number of

Shares Shareholding

Number of

Shares Shareholding

Chairman

Shin Kong Wu Ho Su Culture and Education

Foundation Representative: Wu, Tung Chin

June 16, 2017 3 101,276 0.00% 104,876 0.00%

Vice

Chairman

Shin Kong Wu Tung Chin Foundation

Representative: Lee, Jih-Chu June 16, 2017 3 956,118 0.00% 969,887 0.01%

Director

Wu Chia Lu Insurance Culture and

Education Foundation Representative: Wu, Benson

June 16, 2017 3 8,673,409 0.08% 8,798,316 0.07%

Director

Shin Kong Mitsukoshi Department Store Co.,

Ltd.

Representative: Yeh, Yun-Wan

June 16, 2017 3 487,397,776 4.77% 507,003,826 4.00%

Director Shin Sheng Company Ltd.

Representative: Lin, Po Han June 16, 2017 3 422,030,844 4.13% 439,007,446 3.46%

Director Shin Sheng Company Ltd.

Representative: Hung, Shih Chi June 16, 2017 3 422,030,844 4.13% 439,007,446 3.46%

Director Shin Sheng Company Ltd. Representative: Wu, Tung Ming

June 16, 2017 3 422,030,844 4.13% 439,007,446 3.46%

Director Tung Shing Investment Co., Ltd.

Representative: Wu, Hsin-Ta (see Note 3) June 16, 2017 3 45,729,877 0.45% 62,569,404 0.49%

Director Hui Feng Investment Co., Ltd.

Representative: Su, Chi Ming June 16, 2017 3 43,195,794 0.42% 44,731,786 0.35%

Director Chin Shan Investment Co., Ltd. Representative: (see Note 4)

June 16, 2017 3 29,292,317 0.29% 30,470,628 0.24%

Director Shin Cheng Investment Co., Ltd.

Representative: Wu, Olivia (see Note 5) June 16, 2017 3 263,346 0.00% 2,072,709 0.02%

Director

Shin Kong Wu Ho Su Culture and Education

Foundation Representative: Wu, Min Wei

June 16, 2017 3 101,276 0.00% 104,876 0.00%

Independent Director

Lee, Jeng-Yih June 16, 2017 3 0 0.00% 0 0.00%

Independent

Director Li, Sheng-Yann June 16, 2017 3 0 0.00% 2,050 0.00%

Independent

Director Lin, Mei-Hwa June 16, 2017 3 33,773 0.00% 34,259 0.00%

Subtotal for all Directors 1,037,674,530 10.14% 1,095,765,187 8.64%

Notes:

1. The number of shares issued at the time of the Directors’ appointments was 10,228,144,081 shares. 2. As of the book closure date of April 21, 2020, the Company has issued 12,675,394,063 shares (including 75,000,000 preferred shares).

According to Article 26 of the Securities and Exchange Act and Article 2 of the “Rules and Review Procedures for Director and Supervisor

Share Ownership Ratios at Public Companies”, the minimum shares held by all directors shall be 160,000,000. As of such day, excluding those held by the independent directors, the number of shares held by all our directors was 1,095,765,187 shares (including 4,594,575

preferred shares).

3. Mr. Wu, Hsin-Ta was appointed as the replacement representative on August 27, 2019. 4. Ms. Peng, Hsueh Fen, the original representative, resigned from her position on May 1, 2019.

5. This director was elected as a juristic-person director, and Ms. Wu, Olivia was appointed to perform its rights and obligations.

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Shareholder No.: Shareholder Name:

Speaking Points:

June 19, 2020

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Speaking Points:

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Speaking Points:

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Speaking Points:

June 19, 2020