The 2019 Annual Meeting of Shareholders Annual meeting ... · 3. Management Presentation (Company Reports): (1) The 2018 Business Reports (2) Audit Committee’s Review Report on

Taichung Commercial Bank Co., Ltd.

The 2019 Annual Meeting of

Shareholders

Annual meeting handbook

Time: 9:00 a.m. on June 28, 2019

Address: 10F, No. 87, Minquan Rd., W. District,

Taichung City

Stock No: 2812

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Contents

I. Shareholders Agenda ........................................................................ 2

II. Management Presentation (Company Reports) ............................... .4

III. Proposals ....................................................................................... 28

IV. Discussions ................................................................................... 32

V. Questions and Motions

VI. Appendix

1. Independent Auditor’s Report and financial statements .... 132

2. Rules of Procedure for Shareholder Meetings .................... 1583. Company Corporate Charter (Articles of Incorporation) ... 1644. Shareholdings of Directors ................................................. 174

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Taichung Commercial Bank Co., Ltd. The 2019 Annual Meeting of Shareholders Agenda

1. Report the number of shares represented by the attending shareholders

and call the Meeting to Order

2. Chairperson Remarks

3. Management Presentation (Company Reports):

(1) The 2018 Business Reports

(2) Audit Committee’s Review Report on the 2018 Financial

Statements

(3) The 2018 distribution of remuneration to employees and directors

(4) The 2018 authorized offering and issuance of perpetual non-

cumulative subordinated financial debentures

(5) Report on the issuance of new shares of cash capital increase in

2018.

(6) Report on the advocacy for Article 25 of the Bank Act of The

Republic of China.

4. Proposals:

(1) The proposal of the 2018 Business Report and financial statements

(2) The 2018 proposed Earnings Distribution

5. Discussions:

(1) The issuance of new shares for capitalization for earnings in 2018.

(2) Amendments to partial provisions of Procedure for Handling

Acquisition or Disposal of Assets.

(3) Amendments to Company Corporate Charter

(4) Amendments to the Regulations Governing Selection of Directors.

(5) Amendments to the Rules of Procedure for Shareholders Meeting.

6. Questions and Motions:

7. Adjournment

3

(The above proposals were presented by the Company’s relevant units

to the Board for consideration)

4

Management Presentation

(Company Reports)

5

Management Presentation (Company Reports) No. 1

The 2018 Business Reports (Please refer to Page 6~10 of the

Annual Meeting Handbook)

6

The 2018 Business Report 1. 2018 Operation Performance

(1) Domestic and International Financial Environment

In 2018, the US consumer spending and corporate investment were strong, driving the

economy to grow and the US dollar to go up. This caused depreciation of major currencies against

the US dollar. Although the US economy was up, the economy of Europe and Japan was down due

to uncertainties of Brexit and trade conflicts. . In 2018, the global stock markets were down mostly,

mainly due to the US-China trade disputes, the US interest rate hikes, and financial turmoil in

emerging markets.

According to the data of the Directorate-General of Budget, Accounting and Statistics,

Executive Yuan, the annual economic growth rate of Taiwan in 2018 was 2.63% (3.08% in 2017),

the GDP per capita was USD25,004 (USD24,408 in 2017), and the annual growth rate of the

consumer price index was 1.35% (0.62% in 2017). According to the statistics of the National

Development Council, the total score of the economy monitoring indicator in December 2018 was

16 points, flashing a blue light (the total score of the economy monitoring indicator in December

2017 was 22 points, flashing a yellow-blue light). These results showed that the economy of Taiwan

in general has slowed down.

(2) Change of Organization

1. To ensure that loans are released according to the approved credit terms and relevant

regulations, and to reduce the risk of crediting operations, the “Credit Business Centralized

Loan Release Operation (Division)” was established under the regional center to handle

credit business centralized loan release operations.

2. To implement the “Principle for Financial Service Industries to Treat Clients Fairly” and protect

the right and interests of financial consumers, the "Complaint Resolution Team" was

established under the Consumer Finance Department to handle customer complaints.

3. To expand the consumer finance market of Taichung Commercial Bank, the “Taipei District

Consumer Finance Business Promotion Center”, the “Taoyuan-Hsinchu District Consumer

Finance Business Promotion Center”, the “Central District Consumer Finance Business

Promotion Center” and the “Southern District Consumer Finance Business Promotion

Center” were established under the Consumer Finance Department. These Centers are

responsible for handling the development of consumer finance credit business as well as

promoting the steady growth of consumer finance credit business, allowing the operation of

consumer finance credit business to be distributed evenly throughout all regions.

4. In order to meet the updated corporate governance blueprint of the Financial Supervisory

Commission and refer to the Corporate Governance Best Practice Principles for

TWSE/TPEx Listed Companies, the “Corporate Governance Section” was established under

the Board of Directors Office to take charge of corporate governance related affairs.

5. In order to expand the financial business of customers’ trading chain, the "Trade Receivable

Financing Section" under Corporate Finance Department was renamed the "Global Finance

Section" to provide customers with diverse and more comprehensive services.

(3) Operational Plan and Business Strategy Implementation Results

1. In terms of profit, net profit after tax reached NTD4.008 billion (NTD3.633 billion in 2017),

ROA was 0.59% (0.56% in 2017), and ROE was 8.79% (8.57% in 2017), all of which grew

comparing with those in 2017. In terms of the operational scale, total assets amounted to

NTD690.8 billion, an increase of NTD27.8 billion comparing with that in 2017. The overall

operation results have grown steadily.

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2. In terms of capital structure, in order to enrich the operation capital of Taichung

Commercial Bank in response to business development, capital increased by cash was

implemented in 2018 through the issuing of 150 million shares of common stock, reaching

a total of NTD1.53 billion, and the issuing of subordinated debenture with value of NTD2.5

billion to effectively increase the capital adequacy ratio. The capital adequacy ratio at the

end of 2018 was 13.01%.

3. With regards to operation quality, the non-performing loans ratio and the NPL coverage

ratio of Taichung Commercial Bank was 0.45% and 317.95%, respectively at the end of

2018. The overall capital level and asset quality remained stable.

4. In order to develop business opportunities in emerging countries in Southeast Asia and go

in line the government's New Southbound Policy, the first overseas branch in Malaysia-the

Labuan Branch, and the Service Office in Kuala Lumpur were officially opened in October

2018 to provide financial services and related consultations to Taiwan businesses,

strengthening the local financial market.

5. In response to the financial development trends in various regions, Xindian Branch was

established in Xindian District of New Taipei City and Zuoying Branch was established in

Zuoying District of Kaohsiung City to improve the operational efficiency of channels and

strengthen the competitiveness of regional development.

6. Since December 2018, Taichung Commercial Bank has collaborated with "JKOPAY" to

offer account-link payment service, providing diverse, convenient and safe mobile payment

services for our customers.

7. Two financial technology patents, the "Double Verification System for Financial Counter

Transaction" and the "Verification System for Bankbook-free Over-the-Counter

Transaction", were acquired to continue strengthening the competitive advantage in the field

of innovative finance and optimizing consumers’ financial service environment.

8. Awards

(1) Taichung Commercial Bank was awarded the Group B Excellent Bank for “Rewarding

Domestic Bank in Implementing Innovative Key Industry Project-Phase I” by the Financial

Supervisory Commission.

(2) Taichung Commercial Bank was awarded the "Golden Security Award" (for four consecutive

years from 2015 to 2018) for its outstanding performance in implementing credit information

security management in 2018 and the "Golden Inquiry Award" for the first time to excellent

credit information inquiry institute by the Joint Credit Information Center.

(3) Taichung Commercial Bank was awarded the 2018 wealth management big awards- the "Best

Digital Wealth Management" and the "Best Video Marketing" awards, from the Wealth

Magazine.

(4) Taichung Commercial Bank won the "Best Service Award" in the 2018 Excellent Banking

Survey.

(5) Taichung Commercial Bank won the "Corporate Sustainable Practice Award" at the BSI

International Sustainability Standards Management Conference.

(6) Taichung Commercial Bank won the "Silver Award" from the TCSA Taiwan Corporate

Sustainability Forum Report Award.

(4) 2018 Budget Performance

1. The average balance of deposits (including foreign currency) was NTD583.537 billion, and the

budget target achievement rate was 100.27%, an increase of NTD22.827 billion or 4.07%

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comparing with that in 2017.

2. The average balance of loan (including foreign currency, excluding guaranteed acceptance and non-

accrual loan) was NTD457.207 billion, and the budget target achievement rate was 100.33%, an

increase of NTD25.135 billion or 5.82% comparing with that in 2017.

3. The average balance of foreign exchange deposit was USD1.736 billion, an increase of USD17

million or 1.02% comparing with that in 2017.

4. The amount of foreign exchange business was USD18.137 billion, and the budget target

achievement rate was 112.65%, an increase of USD27 million or 0.15% comparing with that in

2017.

5. The wealth management fee income was NTD1.420 billion, and the budget target achievement rate

was 130.19%, an increase of NTD90 million or 6.77% comparing with that in 2017.

(5) Financial Income and Expenditure and Profitability Analysis

1. The net profit before taxation of 2018 was NTD4.76 billion. The net profit after tax was NTD4.008

billion, and the after-tax earnings per share (EPS) were NTD1.18. The EPS remained above NTD1

for seven consecutive years.

2. Key Performance Indicator (KPI)

Indicators 2018 (consolidated)

Capital adequacy ratio (BIS) 13.01%

Return on Assets (ROA) 0.59%

Return on Equity (ROE) 8.79%

Earnings Per Share (EPS) NTD1.18

NPL ratio 0.45%

NPL Coverage ratio 317.95%

3. Most Recent Credit Rating

Rating agency Date of rating Credit rating

Long-term Short-term Outlook

Fitch Rating Taiwan Company

Limited Branch in Taiwan 2018.6.5 A-(twn) F1(twn) Stable

(6) Status of Research and Development

In response to digital finance development, the "Financial Technology Development

Strategy Conference" was organized to propose short-, medium- and long-term strategies for the

financial technology development of Taichung Commercial Bank, providing customers with

innovative and diversified financial services.

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Goal Strategy

Short-term

goal

Offering convenient digital process, providing digitalized over-the-

counter operation, strengthening the features of mobile device APP,

adding mobile payment, and providing customers with new services.

Medium-

term plan

O2O real and virtual channel integration to create a digital financial

environment.

Long-term

development

Innovative customer experience, providing smart and legal-

compliance services.

2. Impact of external competitive environment, regulatory environment and overall business environment

(1) Actively Implement the Financial Supervision Requirements

In response to the changes in domestic and international financial situation and supervision

requirements in recent years, the competent authorities plan and promote various measures,

including carrying out international cooperation to fight against money laundering and financing

of terrorism, and implementing joint reporting, careful review and information exchange

mechanism on financial accounts, etc. While actively improving and strengthening risk control,

the banking industry also carries out internal organizational and personnel structure adjustment,

information system input and update, staff training reinforcement, identification system

adjustment for customer information and transaction classification to promote the development of

money laundering prevention, legal compliance and information safety, which in turn fulfills the

supervision requirements.

(2) To go in line with the development of financial technology, the policy will be based on gradually

opening up the establishment of pure online banking.

In recent years, the Financial Supervisory Commission actively promoted the "Building

Digital Financial Environment 3.0" Project. With the development of financial technology, the

Financial Supervisory Commission in 2018 has proposed policies for guiding the open up of pure

online banking in Taiwan. In response to the establishment of pure online banking, the Financial

Supervisory Commission also revised the "Standards Governing the Establishment of

Commercial Banks" and the "Regulations Governing Investments in Other Enterprises by

Commercial Banks". Considering the fact that the difference between pure online banking and

traditional banking is the channel for providing services, pure online banking is required to follow

the same regulatory and supervisory requirements as in traditional banking. Although no pure

online banking has officially entered the market in 2018, it is expected that the introduction of

such a new type of banking service will help banks to actively learn new business experiences,

improve industrial upgrading, and accelerate the development of financial innovation and

popularization, providing customers with better financial services.

3. Future Development Strategies

In the face of rapidly changing markets and fierce competition challenges, Taichung Commercial

Bank will continue to implement financial governance to comply with laws and regulations, and

improve capital efficiency. At the same time, we will continue to adjust our business structure, increase

interest rate spreads, strengthen digital financial competitiveness, and improve operation growth.

Moreover, we will improve our wealth management services, and increase our profit to promote our

businesses.

4. 2019 Operation Plan Summary

(1) In order to establish a legal compliance system that is in line with international standards, Taichung

Commercial Bank actively implements the laws and regulations in business management to improve

the internal control system, fully enhancing the money laundering prevention system of Taichung

Commercial Bank. We also implement the capital utilization management mechanism, and continue

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to include risk reduction efficiency in branch operation performance evaluation, strengthening the

capital structure and enhancing the overall return on capital.

(2) Ensuring a stable growth in operation scale, optimizing the quality of credit assets, adjusting the

structure of credit industry, monitoring the changes of credit risk, strictly control the non-performing

loan ratios, and accelerating the removal of non-performing loans to achieve above the average level

of asset quality for domestic banks, becoming the bank with excellent quality.

(3) Combining the advantages of local branch offices, focusing on the value of wealth management

customers, strengthening the services of high-asset customers, improving the competitiveness of

financial management products; strengthening the services of consumer finance business, forming

strategic alliances with other industries, expanding the scale of consumer loan market to increase the

scope of business and the depth of profitability.

(4) Expanding the territory of international financial business, increasing foreign exchange deposits, and

actively developing trading-based financing business to increase international financial business

demand; continue to strengthen the loans for small and medium businesses, making good use of the

guarantee mechanism of credit guarantee fund, and adjusting the pricing gain suitable for crediting,

to balance both risks and profits.

(5) Enhancing digital financial services, with customer experience as the core, optimizing the features of

online banking and mobile online banking; improving financial service efficiency and quality, and

promoting operation process simplification based on system upgrade, technology application,

process improvement and service integration to achieve the goal of "Convenient Digital Service,

Smart Operation Process".

(6) Expected Operational Goals

Scope of business Objective by the end of 2019

Deposits (including

foreign currencies) As of the end of December: NTD 540.5 billion

Lending (including

foreign currencies) As of the end of December: NTD 444.961 billion

Foreign Exchanges

Operations Annual amount USD17.00 billion

In 2019, the year full of opportunities and challenges, Taichung Commercial Bank will continue to

strive for growth in corporate revenue and benefits, and bring the greatest benefits to our shareholders

based on our business philosophy of “We Do Our Best For You” and in compliance with laws and

regulations, performance management, information safety and risk management. At the same time, we

are committed to make our contribution in corporate social responsibility, and give our achievements

back to the society, fulfilling the vision of “The Forefront of Taiwan’s Bank, The Most Expected Bank

In Society, The Most Trusted Bank By customers”.

Wishing all shareholders to continue enjoying your good health, success and happiness

President Chairman

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Audit Committee’s Review Report on the 2018 Financial

Statements (Please refer to Page 12 of the Annual Meeting

Handbook)

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Audit Committee’ Review Report

The financial statements of the individual and consolidated financial statements

in 2018 of the Bank have been audited by the certified public accountants of Deloitte

Taiwan with the issuance of auditors’ reports, which were released together with the

Business Report and proposal for Earnings Distribution. The Auditing Committee has

review the aforementioned reports and statements and determined that they are

presented fairly. Pursuant to Article 14-4 of the Securities and Exchange Act and

Article 219 of the Company Act, we hereby present the report for your reference.

To:

2019 Shareholders' annual meeting, Taichung Commercial Bank Co. Ltd.

Chairman of Audit Committee

Hsin-Chang Tsai

March 13, 2019

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The 2018 distribution of remuneration to employees and directors

Explanation:

I. According to the Article 35 of the Company’s Articles of

Incorporation, “If there is a profit, the Bank shall appropriate

0.5% to 3% as remuneration to the employees. The Board shall

determine if stock or cash shall be released for such purpose. In

addition, the Bank may allocate no more than 1.5% of the

aforementioned amount as remuneration to the Directors. The

distribution of remuneration to employees and directors should

be reported in the shareholders’ meeting. If the Bank has

accumulated deficit, an equivalent amount should be reserved

for making up such loss, then the remuneration to employees

and directors can be appropriated in accordance with the ratio

stated in the preceding paragraph thereafter”.

II. As audited, the Bank did not appropriate remuneration to the

employees and the Directors and income tax expense in 2018.

The earnings in this year amounted to NTD4,742,507,478. The

Bank planned to appropriate 0.7% and 1.5% of the

aforementioned amount as remuneration to the employees and

the Directors, which amounted to NTD33,197,552 and

NTD71,137,612, respectively. All payments were effected in

cash.

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The 2018 authorized offering and issuance of perpetual non-

cumulative subordinated financial debentures. (Please refer to Page

15~22 of the Annual Meeting Handbook)

15

Perpetual Non-Cumulative Unsecured Subordinated Financial

Debentures Issued of 2018

1. Reasons for issuance:

(1) To replenish working capital and make sound capital of the Bank, the first non-

cumulative perpetual subordinate financial bond of 2018 was issued on April 25,

2018 in the amount of NTD1 billion. It is also listed on Taipei Exchange

(TPEx). The amount of this issuance was approved by the Financial

Supervisory Commission on September 22, 2017 by the approval letter Jin-

Guan-Yin-Piao-Zi No. 10600229120.

(2) On December 18, 2018, the Bank also issued the second non-accumulative

perpetual subordinate financial bond of 2018 in the amount of NTD1.5 billion,

and is listed on Taipei Exchange (TPEx). The amount of this issuance was

approved by the Financial Supervisory Commission on August 23, 2018, by the

approval letter Jin-Guan-Yin-Piao-Zi No. 10702156550.

2. Bond Information:

2018

Bond issues 1st term 2018 2

nd term 2018

Bond code G13019 G13020

Issue Date 2018/4/25 2018/12/18

Duration No maturity date

Maturity date No maturity date

Placement Underwriters are not commissioned for public offering

Bond listing OTC

Listing / issuing location Taiwan R.O.C.

Issuing currency NTD

Total Issued NTD 1 billion NTD 1.5 billion

Listing Date 2018/4/25 2018/12/18

Bond abbreviation P07 Taichung Commercial Bank

1

P07 Taichung Commercial

Bank 2

Coupon rate Floating annual rate: 4.14%

Interest bearing and

payment method

Annual interest is accrued at a simple interest rate and paid

once a year.

The total annual interest

payment NTD41,400 thousand NTD62,100 thousand

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3. Subscription object:

The debenture is offered for the professional investors meeting the requirements of

the “Regulations Governing Offshore Structured Products”.

4. Fund utilization efficiency:

The Bank issued the 1st to the 2

nd terms of perpetual non-cumulative unsecured

subordinated financial debentures in 2018 and listed the debentures for trading at

TPEx. The purpose is to raise working capital and vitalize the capital structure, and

upgrade the capital adequacy ratio and tier I capital ratio and common stock equity

ratio, which will help to upgrade the capital structure of the Bank substantially.

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Regulations Governing the Offering of 1st term of the perpetual non-cumulative

unsecured subordinated financial debentures in 2018

Taichung Commercial Bank (hereinafter referred to as “the Bank”) acted in compliance with FSC Letter Jin-

Guan-Yin-Piao-Zi No. 10600229120 dated September 22, 2017 for the offering of perpetual non-cumulative

unsecured subordinated financial debentures specified as follows:

1. Bond Name:

Taichung Commercial Bank 1st term of perpetual non-cumulative unsecured subordinated financial

debentures in 2018 (hereinafter referred to as “the debenture”)

2. Credit rating on the issuer:

The Bank commissioned Fitch Ratings Taiwan as the credit rating institution to assess the credit

standing of the Bank on: September 20, 2017; Subject of rating: the issuer. Credit rating result: A-(twn)

for domestic long-term credit standing. The debenture will not be rated by other credit rating institutions.

3. Priority of creditor rights and investment risk:

(1) The priority (including principal and interest) of the bearers of the debenture in the entitlement of

compensation is senior to the shareholders and junior to the bearers of tier 2 capital instruments,

deposit account bearers and other creditors of the Bank. However, the priority of the bearers of the

debenture for compensation will be the same as the shareholders of common stock in the event of

the takeover of the Bank by the competent authority, order for discontinuation of operation and

liquidation.

(2) The Bank or its affiliates have not provided guarantees, collateral or other arrangements to enhance

the priority of compensation for the holders of this bond.

(3) The debenture is a form of unsecured debenture.

(4) The debenture is not a deposit and not protected by CDIC.

(5) The bearers of the debenture shall pay attention to the risk inherent to the underlying instrument.

4. Total Issued:

The debenture was offered at NTD1,000 million.

5. Book value:

The face value of each lot amounted to NTD10 million.

6. Issuing price:

The debenture is issued at par value as of the offering day.

7. Duration:

The debenture was offered on Apr. 25, 2018 with no maturity date.

8. Coupon rate:

Coupon rate is index interest rate plus 3.08%. The indicator rate is the adjustable interest rate posted by

Chunghua Post Co., Ltd offered for time deposit (not large sum) of 1-year term. The day for resetting of

the coupon rate shall be the second business day prior to each value date

9. Interest bearing and payment method:

(1) The debentures shall accrued simple interest on a daily basis (act/act) at the coupon rate by the

exact days of holding and payable annually on July 1 of each subsequent year. The calculation of

the interest amount by the Bank shall be final.

(2) The interest payment from the debenture will be rounded to the nearest NT Dollar for each lot. The

calculation of interest by the Bank shall prevail. If the day for principal repayment and interest

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payment is a day on which the Bank is not open for business, move forward to the next business

day for payment without additional interest accrued. Those who claim principal and interest beyond

the value date will receive no additional accrued interest.

(3) The Bank will withhold applicable income tax and supplementary premiums of the National Health

Insurance Administration on the interest of the debenture at the time of disbursement.

10. Condition of interest payment:

(1) No interest will be paid if the Bank has no earnings in the previous fiscal year and no payment of

dividends (including cash dividends and stock dividends).If the accumulated undistributed earnings

net of the unamortized loss from the disposal of non-performing loans exceeds the amount of

interest payments, and the payment does not cause a change to the original condition agreed on

interest payment, this provision will not be applicable. Interest not being paid due to the

aforementioned reasons cannot be accumulated or deferred.

(2) If the ratio between the equity capital and risk assets of the Bank on the interest payment day falls

below the minimum ratio set forth in Article 5, Paragraph 1 of the “Regulations Governing the

Capital Adequacy and Capital Category of Banks”, principal and interest payment shall be deferred.

The accrued interests from the debenture will not yield further interest.

11. Early redemption rights:

If the ratio of regulatory capital to risk-weighted assets of the Bank after being redeemed shall meet the

minimum rate stated of the competent authority after five years of issuance, and, at the approval of the

competent authority, the Bank may proceed to early redemption with 30 days of notice in advance.

Redemption will be made in whole at face value amount of the instruments plus all coupon yields.

12. Definitions

(1) “Ratio of regulatory capital to risk-weighted assets” as referred to in Paragraph 2, Article 10 and

Article 11 shall be based on the definition of Article 44 of The Banking Act of The Republic of

China and the “Regulations Governing the Capital Adequacy and Capital Category of Banks”

announced by the Financial Supervisory Commission, and the annual financial reports or the

interim reports audited by certified public accountants, as well as the ratio declared by the Bank by

the end of March and August of each year with the Financial Supervisory Commission after review

by certified public accountants.

(2) “Earnings” as referred to in Article 10 of These Regulations are the net profit after tax as stated in

the comprehensive income statement covering the most recent year recognized by the Annual

meeting of shareholders.

13. The form of debenture:

The debenture will be issued in digital form and registered with the Taiwan Depository and Clearing

Corporation.

14. Agent of principal and interest payment:

The Taipei Branch of the Bank will be responsible for handling principal and interest payment through

remittance to bearers of the debenture as stated in the roster available from TDCC.

15. Other requirements:

(1) The debenture can be circulated, freely transferred, pledged under lien or as collateral freely but

cannot be pledged as collateral for loans from the Bank.

(2) According to the Civil Code, any portion of principal not being claimed within a period of 15 years

and interest not being claimed within a period of 5 years from the first day of payment shall be not

be redeemed by the Bank.

(3) Subscribers of bearers of the debentures cannot claim for early redemption.

(4) In case the Bank proceeds to liquidation procedures or declaration of bankruptcy, no interest will

be accrued for calculation from the day on which liquidation procedure starts or the day of

bankruptcy declaration. Both the principal and interest shall be deemed immediately due. The

bearers or the creditors of the debenture should waive the right of set-off.

19

(5) The debenture may be subject to transferred, succession, donation, repayment of principal and

payment of interest and any other form of book transfer in accordance with the requirements of

TDCC and other applicable legal rules. The applicants shall bear the expenses incurred thereof.

(6) In the event of the extinction of prescriptions, the Civil Code or applicable laws of the Republic of

China effective at the time of offering shall be applicable.

16. Prospective investors of the debenture:

The debenture is offered for the professional investors meeting the requirements of the “Regulations

Governing Offshore Structured Products”.

17. Notification:

Notification to the bearers or creditors of the debenture shall be made by announcement through the

MOPS site of the Taiwan Stock Exchange Corporation.

18. Others not covered by These Regulations shall be governed by the “Regulations Governing Issuance of

Bank Debentures by Banks” and other applicable legal rules, or related requirements of the competent

authority.

20


Regulations Governing the Offering of 2nd

term of the perpetual non-cumulative

unsecured subordinated financial debentures in 2018

Taichung Commercial Bank (hereinafter referred to as “the Bank”) acted in compliance with FSC Letter Jin-

Guan-Yin-Piao-Zi No. 10702156550 dated August 23, 2018 for the offering of perpetual non-cumulative

unsecured subordinated financial debentures specified as follows:

1. Bond Name:

Taichung Commercial Bank 2nd

term of perpetual non-cumulative unsecured subordinated financial

debentures in 2018 (hereinafter referred to as “the debenture”)

2. Credit rating on the issuer:

The Bank commissioned Fitch Ratings Taiwan as the credit rating institution to assess the credit

standing of the Bank on: June 5, 2018; Subject of rating: the issuer. Credit rating result: A-(twn) for

domestic long-term credit standing. The debenture will not be rated by other credit rating institutions.

3. Priority of creditor rights and investment risk:

(1) The priority (including principal and interest) of the bearers of the debenture in the entitlement of

compensation is senior to the shareholders and junior to the bearers of tier 2 capital instruments,

deposit account bearers and other creditors of the Bank. However, the priority of the bearers of

the debenture for compensation will be the same as the shareholders of common stock in the

event of the takeover of the Bank by the competent authority, order for discontinuation of

operation and liquidation.

(2) The Bank or its affiliates have not provided guarantees, collateral or other arrangements to

enhance the priority of compensation for the holders of this bond.

(3) The debenture is a form of unsecured debenture.

(4) The debenture is not a deposit and not protected by CDIC.

(5) The bearers of the debenture shall pay attention to the risk inherent to the underlying instrument.

4. Total Issued:

The debenture was offered at NTD 1.5 billion.

5. Book value:

The face value of each lot amounted to NTD10 million.

6. Issuing price:

The debenture is issued at par value as of the offering day.

7. Duration:

The debenture was offered on December 18, 2018 with no maturity date.

8. Coupon rate:

Coupon rate is index interest rate plus 3.08%. The indicator rate is the adjustable interest rate posted by

Chunghua Post Co., Ltd offered for time deposit (not large sum) of 1-year term. The day for resetting of

the coupon rate shall be the second business day prior to each value date

9. Interest bearing and payment method:

(1) The debentures shall accrued simple interest on a daily basis (act/act) at the coupon rate by the

exact days of holding and payable annually. The calculation of the interest amount by the Bank

shall be final.

(2) The interest payment from the debenture will be rounded to the nearest NT Dollar for each lot. The

calculation of interest by the Bank shall prevail. If the day for principal repayment and interest

payment is a day on which the Bank is not open for business, move forward to the next business

day for payment without additional interest accrued. Those who claim principal and interest beyond

21

the value date will receive no additional accrued interest.

(3) The Bank will withhold applicable income tax and supplementary premiums of the National Health

Insurance Administration on the interest of the debenture at the time of disbursement.

10. Condition of interest payment:

(1) No interest will be paid if the Bank has no earnings in the previous fiscal year and no payment of

dividends (including cash dividends and stock dividends).If the accumulated undistributed earnings

net of the unamortized loss from the disposal of non-performing loans exceeds the amount of

interest payments, and the payment does not cause a change to the original condition agreed on

interest payment, this provision will not be applicable. Interest not being paid due to the

aforementioned reasons cannot be accumulated or deferred.

(2) If the ratio between the equity capital and risk assets of the Bank on the interest payment day falls

below the minimum ratio set forth in Article 5, Paragraph 1 of the “Regulations Governing the

Capital Adequacy and Capital Category of Banks”, principal and interest payment shall be deferred.

The accrued interests from the debenture will not yield further interest.

11. Early redemption rights:

If the ratio of regulatory capital to risk-weighted assets of the Bank after being redeemed shall meet the

minimum rate stated of the competent authority after five years of issuance, and, at the approval of the

competent authority, the Bank may proceed to early redemption with 30 days of notice in advance.

Redemption will be made in whole at face value amount of the instruments plus all coupon yields.

12. Definitions

(1) “Ratio of regulatory capital to risk-weighted assets” as referred to in Paragraph 2, Article 10 and

Article 11 shall be based on the definition of Article 44 of The Banking Act of The Republic of

China and the “Regulations Governing the Capital Adequacy and Capital Category of Banks”

announced by the Financial Supervisory Commission, and the annual financial reports or the

interim reports audited by certified public accountants, as well as the ratio declared by the Bank by

the end of March and August of each year with the Financial Supervisory Commission after review

by certified public accountants.

(2) “Earnings” as referred to in Article 10 of These Regulations are the net profit after tax as stated in

the comprehensive income statement covering the most recent year recognized by the Annual

meeting of shareholders.

13. The form of debenture:

The debenture will be issued in digital form and registered with the Taiwan Depository and Clearing

Corporation.

14. Agent of principal and interest payment:

The Taipei Branch of the Bank will be responsible for handling principal and interest payment through

remittance to bearers of the debenture as stated in the roster available from TDCC.

15. Other requirements:

(1) The debenture can be circulated, freely transferred, pledged under lien or as collateral freely but

cannot be pledged as collateral for loans from the Bank.

(2) According to the Civil Code, any portion of principal not being claimed within a period of 15 years

and interest not being claimed within a period of 5 years from the first day of payment shall be not

be redeemed by the Bank.

(3) Subscribers of bearers of the debentures cannot claim for early redemption.

(4) In case the Bank proceeds to liquidation procedures or declaration of bankruptcy, no interest will

be accrued for calculation from the day on which liquidation procedure starts or the day of

bankruptcy declaration. Both the principal and interest shall be deemed immediately due. The

bearers or the creditors of the debenture should waive the right of set-off.

(5) The debenture may be subject to transferred, succession, donation, repayment of principal and

payment of interest and any other form of book transfer in accordance with the requirements of

22

TDCC and other applicable legal rules. The applicants shall bear the expenses incurred thereof.

(6) The prescription of the debentures shall be governed by Civil Code and the law of the Republic of

China or applicable legal rules at the time of issuance.

16. Prospective investors of the debenture:

The debenture is offered for the professional investors meeting the requirements of the “Regulations

Governing Offshore Structured Products”.

17. Notification:

Notification to the bearers or creditors of the debenture shall be made by announcement through the

MOPS site of the Taiwan Stock Exchange Corporation.

18. Others not covered by These Regulations shall be governed by the “Regulations Governing Issuance of

Bank Debentures by Banks” and other applicable legal rules, or related requirements of the competent

authority.

23


Report on the issuance of new shares of cash capital increase

in 2018 (Please refer to Page 24~25 of the Annual Meeting Handbook)

24

Taichung Commercial Bank Co. Ltd.

Report on the issuance of new shares of cash capital increase in 2018

The Company issued 150,000,000 shares of common stock of cash capital increase in

2018, which was filed to the Financial Supervisory Commission and became effective

on September 21, 2018 by the official letter Jin-guan-zheng-fa No. 1070334491.

1. Share allocation:

According to the resolution of the 10th meeting of the 23rd Board of Directors on

July 12, 2018, a total of 150,000,000 shares of common stock to be issued for cash

capital increase. According to Article 267 of the Company Act, 15% of such shares,

namely 22,500,000 shares, is to be reserved for subscription by the employees of

the Company; Further according to Article 28-1 of the Securities and Exchange Act,

10% of the such shares, namely 15,000,000 shares, is to be offered to the public for

public subscription; the remaining 75% of such shares, namely 112,500,000 shares,

is to be offered to the original shareholders according to the shareholding ratio

recorded on the shareholders register on the base date for subscription. If the

original shareholder holds a proportion of shares that are not adequately recognized

as a new share, more than one of such subscriptions may be merged as joint

subscriptions or as one subscription of one person. In case of subscription with less

than one share and the portion whose priority subscription is waved by the original

shareholder and employees, the chairman is authorized to locate specified persons

for the subscription.

2. Pricing of new shares:

The pricing of this issue was determined according to the 12th meeting of the 23rd

Board of Directors on October 2, 2018, with the issue price per share set at

NTD10.2. According to Article 6 (1) of the “Self-Regulatory Rules Governing the

Offering and Issuance of Securities for underwriters by Taiwan Securities

Association”, the price of the new shares shall not be lower than 70% of the

average share price based on the closing price of the common stock of any of the

previous 1, 3 or 5 business days. The afore-mentioned closing price shall be

calculated with the simple arithmetic mean deducting the bonus share allotment, ex-

rights (or capital reduction, ex-rights) and after ex-dividend. The ex-rights trading

date of this case is October 18, 2018, which makes October 11, 2018 the base date

for the issue price (5 business days prior to the ex-rights date). According to such

regulations, the Bank set the issue price as NTD10.2 per share.

3. Subscription briefing:

The issuance was fully paid on November 30, 2018, and was listed on December 5,

2018.

Funding utilization plan and items, progress and benefits:

(1) Funding utilization plan and items:

This cash capital increase is to replenish the working capital so to support the

needs of various loans and to strengthen the financial structure of the Bank and

25

increase the capital adequacy ratio.

(2) Progress of the use of funds:

The offering was completed at the fourth quarter of 2018 and the funds are to

be used to replenish the working capital to meet the needs of various loans.

(3) Benefits of fund utilization:

This cash capital increase was for the purpose of replenishing the working

capital and improve the capital soundness, enhance the regulatory capital

adequacy ratio, the tier 1 capital ratio and the common equity ratio, and

substantially strengthen and enhance the capital structure of the Company.

26


Report on Propaganda for Article 25 of the Banking Act

Descriptions:

1. In order to effectively implement the enforcement of Article 25 of the Banking Act, and to enhance the propaganda for the relevant laws and regulations to the shareholders, the Financial Supervisory Commission issued an official letter Jin-guan-yin-kung No. 10060005191 on January 31, 2012 to urge the shareholders to pay attention to the relevant regulations.

2. In the event that bank shareholders hold shares in violation of Paragraph 2, 3 or 5 of Article 25 of the Banking Act and fail to file a report to or obtain approval from the Financial Supervisory Commission to hold the outstanding voting shares issued by a bank, the excess shares held by such shareholders shall have no voting rights and shall be disposed of within the given period prescribed by the Financial Supervisory Commission. And the Financial Supervisory Commission may further impose a fine of NTD2 million or more and less than NTD10 million in accordance with Paragraph 3, Article 128 of the Banking Law.

3. Articles 25 of the Banking Act (Please refer to Page 27 of the Annual Meeting Handbook)

27

Articles 25 of the Banking Act

I. The shares issued by a Bank shall be registered shares.

II. The same person or same concerned party who singly, jointly or collectively acquires more

than five percent (5%) of a Bank’s outstanding voting shares shall report such fact to the

Competent Authority within ten (10) days from the day of acquisition; the preceding

provision applies to each cumulative increase or decrease in the shares of the same person or

same concerned party by more than one percent (1%) thereafter.

III. The same person or same concerned party who intends to singly, jointly or collectively

acquire more than ten percent (10%), twenty-five percent (25%) or fifty percent (50%) of a

Bank’s outstanding voting shares shall apply for prior approval of the Competent Authority.

IV. A third party who holds shares of the Bank on behalf of the same person or same concerned

party in trust, by mandate or through other types of contract, agreement or authorization

shall fall within the purview of a concerned party.

V. The same person or same concerned party who singly, jointly or collectively holds shares of

the Bank representing more than five percent (5%) but less than fifteen percent (15%) of a

Bank’s outstanding voting shares prior to the implementation of the amendment to the Act

on December 9, 2008 shall report such fact to the Competent Authority within six (6)

months from the implementation date of the said amendment. Those who report to the

Competent Authority within the said prescribed period may maintain their shareholding at

the time of reporting. However, those whose original shareholding exceeds ten percent

(10%) shall apply for the prior approval of the Competent Authority when they intend to

increase their shareholding for the first time thereafter.

VI. The regulations governing the qualifications and requirements for the same person or same

concerned party who applies for approval pursuant to Paragraph 3 hereof or the proviso of

the preceding paragraph, required documentation, shares to be acquired, purpose of

acquisition, sources of funding, and other matters to be complied with shall be prescribed by

the Competent Authority.

VII. Where the same person or same concerned party who holds voting shares issued by a Bank

without filing a report with the Competent Authority or obtaining approval from the

Competent Authority in accordance with the provisions set forth in Paragraphs 2, 3 or 5

hereof, the excess shares held by such same person or same concerned party shall not have

voting rights and shall be disposed of within the given period prescribed by the Competent

Authority.

VIII. If the total number of a Bank’s shares held by the same person or by the principal, his/her

spouse and children under twenty (20) years of age exceeds one percent (1%) of the Bank’s

outstanding voting shares, such principal shall notify the Bank thereof.

28

Proposals

29

Proposals No. 1

Proposal: The 2018 Business Report and Financial Statements

are presented for adoption.

Explanation: The Board of Directors of the Bank has passed the

Business Report, Financial Statements of individual

and consolidated financial statements of the Bank

covering 2018 (refer to P.6 ~10 and 132~157 Annual

Meeting Handbook).

Resolutions:

30

Proposals No. 2

Proposal: The 2018 Earnings Distribution Proposal is presented

for adoption.

Explanation:

1. The corporate net profit after tax of the Bank in 2018 amounted to NTD4,008,369,568.56. With the addition of undistributed earnings at the beginning amounting to NTD199,907,627.29.The effect of retrospective application and retrospective restatement is negative at NTD 80,676,006, and the gain or loss on disposal of equity instruments measured at fair value through OCI or losses is negative at NTD 5,350,216.66, and the defined benefit plan reassessed value of negative NTD29,116,472 in 2018, the Bank shall appropriate 30% or NTD1,202,510,871 as legal reserve under law, and 1% of corporate earnings or NTD40,083,696 as special reserve under FSC Letter Jin-Guan-Yin-Fa No. 10510001512. The earnings that could be appropriated for distribution amounted to NTD2,850,539,934.19 and will be distributed as follows:

(I) Shareholder dividends – stock dividends (NTD0.52 per share): NTD1,833,264,400.

(II) Shareholder dividends – cash dividend (NTD0.28 per share): NTD987,142,368.

2. Taichung Commercial Bank 2018 Earnings Distribution Statement. Please refer to Page 31 of the Annual Meeting Handbook

Resolutions:

31


Earnings Distribution Statement

2018

Unit: NTD

Unappropriated earnings - beginning $ 199,907,627.29

Effect of retrospective application and

retrospective restatement

(80,676,006.00)

Adjusted unappropriated earnings -

beginning

119,231,621.29

Disposal of equity instrument investments

measured at fair value through OCI,

cumulative gains and losses transferred

directly to retained earnings

(5,350,216.66)

Defined benefit plan remeasurement

recognized to retained earnings

(29,116,472.00)

Adjusted unappropriated earnings 84,764,932.63

Net income 4,008,369,568.56

Legal reserve appropriated (1,202,510,871.00)

Special reserve as required by law (40,083,696.00)

Current distributable earnings 2,850,539,934.19

Distributions

Shareholder dividends – stock

(NTD0.52/share)

1,833,264,400

Shareholder dividends – cash

(NTD0.28/share)

987,142,368 2,820,406,768.00

Unappropriated earnings - ending $ 30,133,166.19

32

Discussions

33

Discussions No. 1

Proposal: Proposing to have new shares issued through

capitalization of earnings in 2018, please proceed to

discuss.

Explanation:

1. The Company for business needs plans to appropriate

stock dividends of NTD1,833,264,400 from the 2018

distributable earnings with 183,326,440 shares issued at

the ratio of 52 shares distributed per thousand shares at

NTD10 par.

2. The earnings distribution is calculated in accordance with

the shareholders and their respective shareholding ratio in

the register of shareholders. Fractional share distribution is

to be consolidated by shareholders and registered with the

Company’s Stock Department for stock consolidation

within five days from the record date. Fractional share that

is not consolidated or remains a fractional share after

consolidation should be paid with an equivalent cash

amount (rounded up to the dollar). Fractional shares will

be purchased by persons arranged by the Chairman as

authorized by the Board. In the event that the total number

of outstanding shares in circulation and the shareholders’

dividend ratio are affected as a result of the company’s

issuing new shares or financial bonds conversion through

capitalization, employee’s exercising warrants,

repurchasing shares of the Company or transferring

treasury shares to employees and canceling treasury shares,

it is proposed to authorize the Board of Directors in the

meeting of shareholders to arrange the necessary

adjustments.

34

3. The capitalization of retained earnings into new shares is

pending on the final approval of the Annual meeting of

shareholders and the approval of the competent authority.

Once approved, the Annual meeting of shareholders is

requested to authorize the Board of Directors to set the

dividend day.

4. The terms and conditions of the capitalization of retained

earnings into new shares may be subject to alteration at the

request of the competent authority. The Annual meeting of

shareholders is requested to authorize the Board of

Directors with full power of attorney to make such

alteration as per the request of the competent authority.

5. The shareholder’s rights and obligations for the new shares

are the same as those of the existing shares.

6. The new shares issued through capitalization in

accordance with Article 10 of the Regulations Governing

the Offering and Issuance of Securities by Securities

Issuers are without a delivered printed stock but by a

book-entry delivery.

Resolutions:

35

Discussions No. 2

Proposal: Amendments to partial provisions of Procedure for

Handling Acquisition or Disposal of Assets. It is

submitted for discussion.

Explanation:

1. The amendments are made to partial provisions of 《Procedure for Handling Acquisition or Disposal of Assets 》�in accordance with the new amendments to the “Regulations Governing the Acquisition or Disposal of Assets by Public Companies "with the official letter Jin-guan-zheng-fa No.10703410725 dated November 26, 2018 by Financial Supervisory Commission, and in accordance with the announcement format required by the official letter Jin-guan-

zheng-fa No.10703439303 dated December 4, 2018 from FSC.

2. The main points of the amendment are as follows:

(1) In accordance with the International Financial Reporting Standards No. 16 Lease, to expand the scope of

right-of-use assets.

(2) Considering that in conducting derivatives transactions, the bank has applied the provisions of “Regulations Governing Internal Operating Systems and Procedures for

Banks Conducting Financial Derivatives Business” following its industry, it is therefore specified that the financial laws and regulations shall prevail.

(3) To define the passive qualifications of external experts.

3. Table of comparison of amendments to provisions, draft amendments and announcement format are detailed in the annex. (Please refer to pages 36-96 in this handbook)

Resolutions:

36

The “Procedural Rules for Acquisition or Disposal of Assets

of Taichung Commercial Bank” amendment before and after

Clauses after the amendment Existing clauses Remark

Article 1 For the management of assets,

Taichung Commercial Bank Co.,

Ltd. (hereinafter referred to as the

“Company”) enacted the Procedure

for Handling Acquisition or

Disposal of Assets (hereinafter

referred to as the “Procedure”) in

accordance with the “Regulations

Governing the Acquisition or

Disposal of Assets by Public

Companies,” issued by the

competent authority.

Article 1 For the management of assets,

Taichung Commercial Bank Co.,

Ltd. (hereinafter referred to as the

“Company”) enacted the Procedure

for Handling Acquisition or

Disposal of Assets (hereinafter

referred to as the “Procedure”) in

accordance with the “Regulations

Governing the Acquisition or

Disposal of Assets by Public

Companies,” issued by the


This article has

not been

amended.

Article 2 For acquisition or disposal of assets

by the Company, it shall be subject

to the provisions of the Procedure.

However, if there are other

provisions of the financial related

laws and regulations stated

otherwise, such provisions shall

prevail.

For the Company to conduct the

business of derivatives or engage in

the derivatives trading, it shall by

subject to the relevant provisions

issued by the competent authority

and “Operational Strategy and

Procedural Guidelines for

Conducting Derivative Financial

Commodity” issued by the

Competent.

Article 2 For acquisition or disposal of assets

by the Company, it shall be subject

to the provisions of the Procedure.

However, if there are other laws

and regulations stated otherwise,

such provisions shall prevail.

In accordance the

“Regulations

Governing the

Acquisition or

Disposal of

Assets by Public

Companies”

issued with the

official letter No.

Jin-guan-zheng-

fa 10703410725

dated November

26, 2018 by the

Financial

Supervisory

Commission, it is

specified that the

financial laws

and regulations

shall prevail.

Article 3 The term "assets" as used in these

Regulations includes the following:

1. Investments in stocks, government

bonds, corporate bonds, financial

bonds, securities representing

interest in a fund, depositary

receipts, call (put) warrants,

beneficial interest securities, and

asset-backed securities.

2. Real property (including land,

houses and buildings, investment

property) and equipment.

3. Memberships.

Article 3 The term "assets" as used in these

Regulations includes the following:

1. Investments in stocks, government

bonds, corporate bonds, financial

bonds, securities representing

interest in a fund, depositary

receipts, call (put) warrants,

beneficial interest securities, and

asset-backed securities.

2. Real property (including land,

houses and buildings, investment

property and land use rights) and

equipment.

3. Memberships

1. To add the

right-of-use

assets in

paragraph 5

and to move

the right to use

land from

paragraph 2

and include in

paragraph 5, in

accordance

with the

“Regulations

Governing the

Acquisition or

Disposal of

37


4. Patents, copyrights, trademarks,

franchise rights, and other

intangible assets.

5. Right-of-use assets.

6. Claims of Taichung Commercial

Bank (including receivables, bills

purchased and discounted, loans,

and overdue receivables).

7. Derivatives.

8. Assets acquired or disposed of in

connection with mergers,

demergers, acquisitions, or transfer

of shares in accordance with law.

9. Other major assets.

4. Patents, copyrights, trademarks,

franchise rights, and other

intangible assets.

5. Claims of financial institutions

(including receivables, bills

purchased and discounted, loans,

and overdue receivables).

6. Derivatives.

7. Assets acquired or disposed of in

connection with mergers,

demergers, acquisitions, or transfer

of shares in accordance with law.


Assets by

Public

Companies”

with the

official letter

No. Jin-guan-

zheng-fa

10703410725

dated

November 26,

2018 issued by

Financial

Supervisory

Commission.

2. The

numbering of

the paragraph

is amended

accordingly

and the partial

description of

wording in

paragraph 6 is

amended.

Article 4 The terms used in the Procedure are

defined as follows:

1. Derivatives: Forward contracts,

options contracts, futures contracts,

leverage contracts, or swap

contracts, whose value is derived

from a specified interest rate,

financial instrument price,

commodity price, foreign exchange

rate, index of prices or rates, credit

rating or credit index, or other

variable; or hybrid contracts

combining the above contracts; or

hybrid contracts or structured

products containing embedded

derivatives. The term "forward

contracts" does not include

insurance contracts, performance

contracts, after-sales service

contracts, long-term leasing

contracts, or long-term purchase

(sales) contracts.

2. Assets acquired or disposed through

mergers, demergers, acquisitions, or

transfer of shares in accordance

with law: Refers to assets acquired

or disposed through mergers,

demergers, or acquisitions

conducted under the Business

Article 4 The terms used in the Procedure

are defined as follows:

1. Derivatives: Forward contracts,

options contracts, futures contracts,

leverage contracts, or swap

contracts, whose value is derived

from assets, interest rates, foreign

exchange rates, indexes or other

interests. The term "forward

contracts" does not include

insurance contracts, performance

contracts, after-sales service

contracts, long-term leasing

contracts, or long-term purchase

(sales) contracts.

2. Assets acquired or disposed

through mergers, demergers,

acquisitions, or transfer of shares in

accordance with law: Refers to

assets acquired or disposed through

mergers, demergers, or acquisitions

1. In accordance

the

“Regulations

Governing the

Acquisition or

Disposal of

Assets by

Public

Companies”

issued with the

official letter

Jin-guan-

zheng-fa No.

10703410725

dated

November 26,

2018 by the

Financial

Supervisory

Commission,

to amend the

scope of the

derivatives

under

paragraph 1,

and the

wording

accordingly.

2. To amend the

38


Mergers and Acquisitions Act,

Financial Holding Company Act,

Financial Institution Merger Act

and other acts, or to transfer of

shares from another company

through issuance of new shares of

its own as the consideration therefor

(hereinafter "transfer of shares")

under Article 156-3 of the Company

Act.

3. Related party or subsidiary: As

defined in the Regulations

Governing the Preparation of

Financial Reports by Securities

Issuers.

4. Professional appraiser: Refers to a

real property appraiser or other

person duly authorized by law to

engage in the value appraisal of real

property or equipment.

5. Date of occurrence: Refers to the

date of contract signing, date of

payment, date of consignment trade,

date of transfer, dates of boards of

directors resolutions, or other date

that can confirm the counterpart and

monetary amount of the transaction,

whichever date is earlier; provided,

for investment for which approval

of the competent authority is

required, the earlier of the above

date or the date of receipt of

approval by the competent authority

shall apply.

6. Mainland China area investment:

Refers to investments in the

mainland China area approved by

the Ministry of Economic Affairs

Investment Commission or

conducted in accordance with the

provisions of the Regulations

Governing Permission for

Investment or Technical

Cooperation in the Mainland Area.

conducted under the Business

Mergers and Acquisitions Act,

Financial Holding Company Act,

Financial Institution Merger Act

and other acts, or to transfer of

shares from another company

through issuance of new shares of

its own as the consideration

therefor (hereinafter "transfer of

shares") under Article 156-8 of the

Company Act.

3. Related party or subsidiary: As

defined in the Regulations

Governing the Preparation of

Financial Reports by Securities

Issuers.

4. Professional appraiser: Refers to a

real property appraiser or other

person duly authorized by law to

engage in the value appraisal of

real property or equipment.

5. Date of occurrence: Refers to the

date of contract signing, date of

payment, date of consignment

trade, date of transfer, dates of

boards of directors resolutions, or

other date that can confirm the

counterpart and monetary amount

of the transaction, whichever date

is earlier; provided, for investment

for which approval of the

competent authority is required, the

earlier of the above date or the date

of receipt of approval by the

competent authority shall apply.

6. Mainland China area investment:

Refers to investments in the

mainland China area approved by

the Ministry of Economic Affairs

Investment Commission or


provisions of the Regulations

Governing Permission for

Investment or Technical

Cooperation in the Mainland Area.

cited article of

the Procedure

in line with the

amendments to

the numbering

of the articles

in the

Company Act.

39

Article 5 Professional appraisers and their

officers, certified public accounts,

attorneys, and securities

underwriters that provide the

Company with appraisal reports,

certified public accountant's

opinions, attorney's opinions, or

underwriter's opinions shall meet

the following requirements:

1. May not have previously received a

final and unappealable sentence to

imprisonment for 1 year or longer

for a violation of the Act, the

Company Act, the Banking Act of

The Republic of China, the

Insurance Act, the Financial

Holding Company Act, or the

Business Entity Accounting Act, or

for fraud, breach of trust,

embezzlement, forgery of

documents, or occupational crime.

However, this provision does not

apply if 3 years have already passed

since completion of service of the

sentence, since expiration of the

period of a suspended sentence, or

since a pardon was received.

2. May not be a related party or de

facto related party of any party to

the transaction.

3. If the company is required to obtain

appraisal reports from two or more

professional appraisers, the different

professional appraisers or appraisal

officers may not be related parties

or de facto related parties of each

other. When the personnel of the

preceding paragraph issues the

appraisal report or opinion, it shall

be handled in accordance with the

following matters:

1. Prior to accepting a case, they

shall prudently assess their own

professional capabilities,

practical experience, and

independence.

2. When examining a case, they

shall appropriately plan and

execute adequate working

procedures, in order to produce

a conclusion and use the

conclusion as the basis for

Article 5 Professional appraisers and their

officers, certified public accounts,

attorneys, and securities

underwriters that provide the

Company with appraisal reports,

certified public accountant's

opinions, attorney's opinions, or

underwriter's opinions shall not be

the related party with the counter

party of the transaction.

1. To add

subparagraph

1-3 of

paragraph1 in

order to

specify the

passive

qualifications

of external

experts.

2. In order to

clarify the

responsibilities

of external

experts,

paragraph 2 is

added to

specify the

assessment,

examination

and statement

of the

appraisal

report or

opinion issued

by the relevant

experts.

40

issuing the report or

pinion. The related working

procedures, data collected, and

conclusion shall be fully and

accurately specified in the case

working papers.

3. They shall undertake an item-

by-item evaluation of the

comprehensiveness, accuracy,

and reasonableness of the

sources of data used, the

parameters, and the

information, as the basis for

issuance of the appraisal report

or the opinion.

4. They shall issue a statement

attesting to the professional

competence and independence

of the personnel who prepared

the report or opinion, and that

they have evaluated and found

that the information used is

reasonable and accurate, and

that they have complied with

applicable laws and regulations.

41

Article 6 The enactment of Procedure for

Handling Acquisition or Disposal of

the Company:

1. The enactment or amendment of

this Procedure shall be approved by

more than one-half of all members

of the Audit Committee and shall be

submitted to the Board of Directors

for a resolution.

2. If the preceding subparagraph is not

approved by more than one-half of

all members of the Audit

Committee, it may be agreed by

more than two-thirds of all

directors, and the resolution of the

Audit Committee shall be stated in

the minutes of the Board of

Directors.

3. All members of the Audit

Committee referred to in

subparagraph 1 and all directors

referred to in the preceding

subparagraph shall be calculated by

the actual incumbent.

Article 6 The assessment and operational

procedure of acquisition or

Disposal of the Company is as

follows:

1. The responsible department of the

Company shall, in handling

acquisition or disposal of the assets

by the Company, submit the

reasons for the intended acquisition

or disposal, the subject matter, the

counterparty, the transfer price, the

payment and collection terms and

the basis for the price, etc., for

approval in accordance with the

levels of responsibility chart of the

Company.

2. Under the condition that the

acquisition or disposal of assets by

the Company in accordance with

the Procedures or other laws shall

be approved by the Board of

Directors, if a director expresses

objection and has a record or

written statement, the Company

shall send such objection materials

by the Directors to the Audit

Committee.

3. When submitting the acquisition or

disposal of assets transactions to

the Board of Directors for

discussion in accordance with the

provisions of subparagraph 2, the

opinion of each of the independent

directors shall be fully considered.

If the independent director has

objections or reservations, such

objections or reservations shall be

stated in the minutes of the Board

of Directors.

4. The enactment or amendment of

acquisition or Disposal Assets

Procedure shall be approved by

more than one-half of all members

of the Audit Committee and shall

be submitted to the Board of

Directors for a resolution.

5. If the preceding subparagraph is

not approved by more than one-half

of all members of the Audit

Committee, it may be agreed by

more than two-thirds of all

directors, and the resolution of the

1. To adjust

accordingly

and move

paragraph 1,

subparagraph

1 and 7 of this

Article to

Article 7.

2. The Company

has established

Audit

Committee in

accordance

with the

regulations,

therefore

subparagraph

2 and 3 of

paragraph 1

are deleted.

3. The numbering

of

subparagraph

is amended

accordingly,

and the partial

wording

description of

subparagraph

1 is amended.

42

Audit Committee shall be stated in

the minutes of the Board of

Directors.

6. All members of the Audit

Committee referred to in

subparagraph 4 and all directors


subparagraph shall be calculated by

the actual incumbent.

7. The relevant operations for the

acquisition or disposal of assets

shall be handled in accordance with

the relevant provisions of the

internal control system of the

Company. If a major violation is

discovered, the relevant personnel

shall be disciplined depending on

the circumstances surrounding the

violation.

Article 7 The operating procedure for the

acquisition or disposal of assets of

the Company include the reference

basis, trading term, authorization

level and executive unit, etc., shall

be handled in accordance with the

law, the relevant regulations of the

competent authority, the levels of

responsibilities chart of the

Company, and the related

operational specifications:

1. Securities: they shall be subject to


Banking Act and the “investment

policy” of the Company.

2. Real property or its right-of-use

assets: they shall comply with the

Banking Act, the relevant

regulations of the competent

authority and the standards of the

“Management Rules for Real

Estate” of the Company.

Article 7 The decision procedure of the

trading term for the acquisition or

disposal of assets (including price

determination method, reference

basis, authorization level and

executive unit) by the Company:

1. Securities: they shall be subject to


Banking Act and the “investment

policy” of the Company, and the

investment business department of

the Company shall take into

account the market conditions and

set a reasonable price. The

investment scope and amount shall

be operated within the amount

authorized by the Managing

Director of the Board or Board of

Directors.

2. Real property: subject to the

Banking Act and the provisions of

the “Rules for Real Property

Management", it shall be

conducted by the General Affairs

Department to collect the

information on market condition, to

secure a target and to send it to the

Review Department for appraisal in

accordance with the “Guidelines

for Appraisal on Real Estate

Collaterals" of the Company, so to

1. The original

subparagraph

1 and 7,

paragraph 1 of

the previous

article to be

included into

this Article.

2. To be in line

with the

International

Financial

Reporting

Standards No.

16 on Lease,

the right of use

is included in

subparagraph

3 and 4 of

paragraph 1.

3. Subparagraph

1-3 and 5 are

amended to

avoid

repeating the

relevant

regulations.

4. Alteration of

numbering of

the

subparagraph.

43

3. Membership card, intangible assets,

equipment or its right-of-use assets:

the purchase matters shall be

handled based on the divisions of

responsibilities under the

“Operational Rules for Matters of

Construction and the Purchase,

Order of the Custom-made and Sale

of the Property” of the Company.

4. The acquisition or disposal of the

real estate and equipment shall be

based on one of the price

comparison, negotiation or bidding.

5. Derivatives: it is to be conducted by

the Derivatives Investment Trading

Department of the Company in

accordance with the relevant


authority and the “Management

Strategy for Operational Guidelines

for Conducting Derivative Financial

Commodity Business”.

6. The acquisition or disposal of other

assets shall be subject to the

relevant regulations of the

Company.

The relevant operation regarding the


shall be all subject to the relevant

provisions of the internal control

system of the Company. I n the

event of major violations

discovered, the related personnel

shall be disciplined depending on

the circumstances surrounding the

violation.

set up a reference price to be

submitted to the Board of Directors

for approval.

3. Equipment: the market conditions

shall be considered to set a

reference price and the purchasing

matter to be conducted subject to

the divisions of responsibilities

under “Operational Guidelines for

Construction and the Purchase,

Order of the Custom-made and

Sale of Property" of the Company.

4. The acquisition or disposal of the

real estate and equipment shall be

based on one of the price

comparison, negotiation or bidding.

5. Derivatives: it is to be conducted

by the derivatives investment

trading department of the Company

to set a reasonable price based on

the market conditions and proceed

with the investment trading within

the investment scope and amount

authorized by the Board of

Directors.

6. The acquisition or disposal of other

assets shall be subject to the

relevant regulations of the

Company.

Article 8 The total amount of the real estate

not for business use and its right-of-

use assets or the securities acquired

by the Company and each of its

subsidiaries, and the limits of

individual securities shall be subject

to the Banking Act and the


authority.

Article 8 The total amount of the real estate

not for business use or the

securities acquired by the Company

and each of its subsidiaries, and the

limits of individual securities shall

be subject to the Banking Act and

the regulations of the competent

authority.

To be in line with

the International

Financial

Reporting

Standards No. 16

on Lease, the

right-of-use is

included in the

article.

Article 9 The control procedure for the


the subsidiary company:

1. The subsidiary company shall, in


Article 9 The control procedure for the


the subsidiary company:

1. The subsidiary company shall, in


The partial

wording of

subparagraph 3 is

slightly amended,

and the citing of

44

regulations and the provisions of the

competent authority, enact and

implement the procedure for the

acquisition or disposition of assets.

2. For the acquisition or disposal of

assets by the subsidiary company, it

shall be subject to the business

competency rules of each subsidiary

company.

3. The subsidiary company shall

ensure that the procedure for the


enacted is in compliance with the

relevant laws and regulations and

check precisely whether the relevant

matters are conducted in accordance

with the procedure. The internal

audit of the Company shall review

the audit report or self-inspection

report and other related matters of

the subsidiary company .

4. The Company shall handle the

relevant matters concerning the

regulatory filing for the public

announcement on behalf of the

subsidiary company, in accordance

with the provisions of Article 31.

regulations and the provisions of

the competent authority, enact and

implement the procedure for the



assets by the subsidiary company,

it shall be subject to the business

competency rules of each

subsidiary company.

3. The subsidiary company shall

ensure that the procedure for the


enacted is in compliance with the


check precisely whether the

relevant matters are conducted in

accordance with the procedure.

The internal audit of the Company

shall review the audit report or

self-inspection report and other

related matters of the subsidiary

company.

4. The Company shall handle the

relevant matters concerning the

regulatory filing for the public

announcement on behalf of the

subsidiary company, in accordance

with the provisions of Article 34.

paragraph 4 is

adjusted

accordingly.

Article 10 In acquiring or disposing of real

property, equipment, or right-of-use

assets thereof where the transaction

amount reaches 20 percent of the

Company's paid-in capital or

NTD300 million or more, the

Company, unless transacting with a

domestic government agency,

engaging others to build on its own

land, engaging others to build on

rented land, or acquiring or

disposing of equipment or right-of-

use assets thereof held for business

use, shall obtain an appraisal report

prior to the date of occurrence of the

event from a professional appraiser

and shall further comply withthe

following provisions:

1. Where due to special circumstances

it is necessary to give a limited

price, specified price, or special

price as a reference basis for the

transaction price, the transaction

shall be submitted for approval in

advance by the board of directors;

the same procedure shall also be

Article 10 In acquiring or disposing of real

property or equipment, or where

the transaction amount reaches 20

percent of the Company's paid-in

capital or NTD300 million or more,

the Company, unless transacting

with a government agency,

engaging others to build on its own

land, engaging others to build on

rented land, or acquiring or

disposing of equipment held for

business use, shall obtain an

appraisal report prior to the date of

occurrence of the event from a

professional appraiser and shall

further comply with the following

provisions:

1. Where due to special circumstances

it is necessary to give a limited

price, specified price, or special

price as a reference basis for the

transaction price, the transaction

shall be submitted for approval in

advance by the board of directors;

if the trading condition in the future

1. To be in line

with the

International

Financial

Reporting

Standard No.

16 on Lease,

the right-of-

use assets is

included in

this article,

and paragraph

1 is amended.

2. The scope of

exemption

from

transactions

with

government

agencies is

defined to be

limited to

domestic

government

agencies only.

3. The partial

45

followed whenever there is any

subsequent change to the terms and

conditions of the transaction.

2. Where the transaction amount is

NTD1 billion or more, appraisals

from two or more professional

appraisers shall be obtained.

3. Where any one of the following

circumstances applies with respect

to the professional appraiser's

appraisal results, unless all the

appraisal results for the assets to be

acquired are higher than the

transaction amount, or all the


disposed of are lower than the

transaction amount, a certified

public accountant shall be engaged

to perform the appraisal in

accordance with the provisions of

Statement of Auditing Standards

No. 20 published by the ROC

Accounting Research and

Development Foundation (ARDF)

and render a specific opinion

regarding the reason for the

discrepancy and the appropriateness

of the transaction price:

(1) The discrepancy between the

appraisal result and the transaction

amount is 20 percent or more of the

transaction amount.


appraisal results of two or more

professional appraisers is 10 percent

or more of the transaction amount.

4. No more than 3 months may elapse

between the date of the appraisal

report issued by a professional

appraiser and the contract execution

date; provided, where the publicly

announced current value for the

same period is used and not more

than 6 months have elapsed, an

opinion may still be issued by the

original professional appraiser.

changes, it shall also follow the

above procedure accordingly.

2. Where the transaction amount is

NTD1 billion or more, appraisals

from two or more professional

appraisers shall be obtained.

3. Where any one of the following

circumstances applies with respect

to the professional appraiser's

appraisal results, unless all the


acquired are higher than the

transaction amount, or all the


disposed of are lower than the

transaction amount, a certified

public accountant shall be engaged

to perform the appraisal in



No. 20 published by the ROC

Accounting Research and

Development Foundation (ARDF)

and render a specific opinion

regarding the reason for the

discrepancy and the

appropriateness of the transaction

price:


appraisal result and the transaction

amount is 20 percent or more of the

transaction amount.


appraisal results of two or more

professional appraisers is 10

percent or more of the transaction

amount.

4. No more than 3 months may elapse

between the date of the appraisal

report issued by a professional

appraiser and the contract

execution date; provided, where the

publicly announced current value

for the same period is used and not

more than 6 months have elapsed,

an opinion may still be issued by

the original professional appraiser.

wording in

subparagraph

1 of paragraph

1 is amended.

Article 11 The Company acquiring or

disposing of securities shall, prior to

the date of occurrence of the event,

obtain financial statements of the

issuing company for the most recent

Article 11 The Company acquiring or

disposing of securities shall, prior

to the date of occurrence of the

event, obtain financial statements

of the issuing company for the

The wording is

slightly amended.

46

period, certified or reviewed by a

certified public accountant (CPA),

for reference in appraising the

transaction price, and if the dollar

amount of the transaction is 20

percent of the Company's paid-in

capital or NTD300 million or more,

the Company shall additionally

engage a certified public accountant

prior to the date of occurrence of the

event to provide an opinion

regarding the reasonableness of the

transaction price. If the CPA needs

to use the report of an expert as

evidence, the CPA shall do so in



No. 20 published by the ARDF.

This requirement does not apply,

however, to publicly quoted prices

of securities that have an active

market, or where otherwise

provided by regulations of the

Financial Supervisory Commission

(FSC).

most recent period, certified or

reviewed by a certified public

accountant (CPA), for reference in

appraising the transaction price,

and if the dollar amount of the

transaction is 20 percent of the

Company's paid-in capital or

NTD300 million or more, the

Company shall additionally engage

a certified public accountant prior


event to provide an opinion

regarding the reasonableness of the

transaction price. If the CPA needs

to use the report of an expert as

evidence, the CPA shall do so in




This requirement does not apply,

however, to publicly quoted prices

of securities that have an active

market, or where otherwise

provided by regulations of the

Financial Supervisory Commission

(FSC).

Article 12 Where the Company acquires or

disposes of intangible assets or

right-of-use assets thereof or

memberships and the transaction

amount reaches 20 percent or more

of paid-in capital or NTD300

million or more, except in

transactions with a domestic

government agency, the Company

shall engage a certified public

accountant prior to the date of

occurrence of the event to render an

opinion on the reasonableness of the

transaction price; the CPA shall

comply with the provisions of



Article 12 Where the Company acquires or

disposes of memberships and

intangible assets transaction


of paid-in capital or NTD300

million or more, except in

transactions with a government

agency, the Company shall engage

a certified public accountant prior


event to render an opinion on the

reasonableness of the transaction

price; the CPA shall comply with

the provisions of Statement of

Auditing Standards No. 20

published by the ARDF.

1. To be in line

with the

International

Financial

Reporting

Standards No.

16 on Lease,

the right-of-

use assets is

included in

this article,

and some

wordings are

amended.

2. The scope of

exemption

from

transactions

with

government

agencies is

defined to be

limited to

domestic

government

agencies only.

47

Article 13 The calculation of the transaction

amounts referred to in the preceding

3 articles shall be done in

accordance with Article 28,

paragraph 2 herein, and "within the

preceding year" as used herein

refers to the year preceding the date

of occurrence of the current

transaction. Items for which an

appraisal report from a professional

appraiser or a CPA's opinion has

been obtained need not be counted

toward the transaction amount.

Article 12-1 The calculation of the

transaction amounts referred to in

the preceding 3 articles shall be

done in accordance with Article 31,





transaction. Items for which an

appraisal report from a professional

appraiser or a CPA's opinion has

been obtained need not be counted


The numbering of

the paragraph is

changed and the

citing of the

paragraph is

adjusted

accordingly.

Article 14 Where a public company acquires

or disposes of assets through court

auction procedures, the evidentiary

documentation issued by the court

may be substituted for the appraisal

report or CPA opinion.

Article 13 Where a public company

acquires or disposes of assets

through court auction procedures,

the evidentiary documentation

issued by the court may be

substituted for the appraisal report

or CPA opinion.

The numbering of

the paragraph is

changed.

Article 15 When the Company engages in

any acquisition or disposal of assets

from or to a related party, in

addition to ensuring that the

necessary resolutions are adopted

and the reasonableness of the

transaction terms is appraised, if the

transaction amount reaches 10

percent or more of the Company's

total assets, the Company shall also

obtain an appraisal report from a

professional appraiser or a CPA's

opinion in compliance with the

provisions of the preceding Section

and this Section.

The calculation of the transaction

amount referred to in the preceding

paragraph shall be made in

accordance with Article 13 herein.

When judging whether a transaction

counterparty is a related party, in

addition to legal formalities, the

substance of the relationship shall

also be considered.

Article 14 When the Company engages in

any acquisition or disposal of assets

from or to a related party, in

addition to ensuring that the

necessary resolutions are adopted

and the reasonableness of the

transaction terms is appraised, if

the transaction amount reaches 10

percent or more of the Company's

total assets, the Company shall also

obtain an appraisal report from a


opinion in compliance with the

provisions of the preceding Section

and this Section.


amount referred to in the preceding


accordance with Article 12-1

herein.

When judging whether a

transaction counterparty is a related

party, in addition to legal

formalities, the substance of the

relationship shall also be

considered.

1. The

numbering of

the paragraph

is amended

and the

wording is

slightly

modified.

2. The citing of

the article in

paragraph 2 is

adjusted.

48

Article 16 When the Company intends to

acquire or dispose of real property

or right-of-use assets thereof from

or to a related party, or when it

intends to acquire or dispose of

assets other than real property or

right-of-use assets thereof from or

to a related party and the transaction


of paid-in capital, 10 percent or

more of the Company's total assets,

or NTD300 million or more, except

in trading of domestic government

bonds or bonds and separate and

resale agreements, or subscription

or redemption of money market

funds issued by domestic securities

investment trust enterprises, the

company may not proceed to enter

into a transaction contract or make a

payment until the following matters

have been approved by the board of

directors and recognized by the

supervisors:

1. The purpose, necessity and

anticipated benefit of the acquisition

or disposal of assets.

2. The reason for choosing the related

party as a transaction counterparty.

3. With respect to the acquisition of

real property or right-of-use assets

thereof from a related party,

information regarding appraisal of

the reasonableness of the

preliminary transaction terms in

accordance with Article 17 and

Article 18.

4. The date and price at which the

related party originally acquired the

real property, the original

transaction counterparty, and that

transaction counterparty's

relationship to the company and the

related party.

5. Monthly cash flow forecasts for the

year commencing from the

anticipated month of signing of the

contract, and evaluation of the

necessity of the transaction, and

reasonableness of the fund

utilization.

Article 15 When the Company intends to

acquire or dispose of real property

thereof from or to a related party,

or when it intends to acquire or

dispose of assets other than real

property thereof from or to a

related party and the transaction




or NTD300 million or more, except

in trading of government bonds or

bonds and separate and resale

agreements, or subscription or

redemption of money market funds

issued by domestic securities

investment trust enterprises, the

company may not proceed to enter

into a transaction contract or make

a payment until the following

matters have been approved by the

board of directors and recognized

by the supervisors:

1. The purpose, necessity and

anticipated benefit of the

acquisition or disposal of assets.

2. The reason for choosing the related

party as a transaction counterparty.

3. With respect to the acquisition of

real property thereof from a related

party, information regarding

appraisal of the reasonableness of

the preliminary transaction terms in

accordance with Article 16and

Article 17.

4. The date and price at which the

related party originally acquired the

real property, the original

transaction counterparty, and that

transaction counterparty's

relationship to the company and the

related party.

5. Monthly cash flow forecasts for the

year commencing from the

anticipated month of signing of the

contract, and evaluation of the

necessity of the transaction, and

reasonableness of the fund

utilization.

1. The numbering

of the article is

amended and

the citing of

paragraph1,

subparagraph 3

and paragraph

2 are adjusted.

2. To be in line

with the

International

Financial

Reporting

Standard No.

16 on Lease,

the right-of-

use assets is

include ding

the provisions

of this article,

so this article

is amended

accordingly.

3. In paragraph 1,

the

government

bond is

defined as the

domestic

government

bond, which

may be

exempted from

the procedure

of being

submitted to

the board of

directors for

approval and

to the

supervisors for

recognition.

4. Considering

that the

provisions

regarding to

related party

transactions

have been

included in the

“Real Estate

Management

Rules” and

“Operational

49

6. An appraisal report from a


opinion obtained in compliance

with the preceding article.

7. Restrictive covenants and other

important stipulations associated

with the transaction.


amounts referred to in the preceding







transaction. Items that have been

approved by the board of directors

and recognized by the supervisors

need not be counted toward the

transaction amount.

When a matter is submitted for

discussion by the board of directors

pursuant to paragraph 1, the board

of directors shall take into full

consideration each independent

director's opinions. If an

independent director objects to or

expresses reservations about any

matter, it shall be recorded in the

minutes of the board of directors

meeting.

Where an audit committee has been

established in accordance with the

provisions of the Act, the matters

for which paragraph 1 requires

recognition by the supervisors shall

first be approved by one-half or

more of all audit committee

members and then submitted to the

board of directors for a resolution,

and shall be subject to mutatis

6. An appraisal report from a


opinion obtained in compliance

with the preceding article.

7. Restrictive covenants and other

important stipulations associated

with the transaction.


amounts referred to in the

preceding paragraph shall be made

in accordance with Article 31,

paragraph 2 herein, and "within

the preceding year" as used herein

refers to the year preceding the

date of occurrence of the current

transaction. Items that have been

approved by the board of directors

and recognized by the supervisors

need not be counted toward the

transaction amount.

For the acquisition or disposal of

the equipment for business use

between the Company and the

parent company or among the

subsidiaries, the board of directors

may authorize the chairman to

make a decision within a certain

amount according to the third

subparagraph of the first paragraph

of Article 7, and submit it

afterwards to the most recent

board of directors for recognition.

When a matter is submitted for

discussion by the board of

directors pursuant to paragraph 1,

the board of directors shall take

into full consideration each

independent director's opinions. If

an independent director objects to

or expresses reservations about

any matter, it shall be recorded in

the minutes of the board of

directors meeting.

Where an audit committee has

been established in accordance

with the provisions of the Act, the

matters for which paragraph 1

requires recognition by the

supervisors shall first be approved

by one-half or more of all audit

committee members and then

submitted to the board of directors

for a resolution, and shall be

Rules for

Matters of the

Purchase,

Ordering of

the Custom-

made, and sale

of Property” of

the Company,

paragraph 3 is

therefore

deleted to

simplify the

provisions of

administrative

procedure for

the acquisition

or disposal of

the equipment

for business

use among the

companies.

5. The

numbering of

the

paragraphs is

amended.

50

mutandis application of Article 6,

paragraphs 1, subparagraphs 2 and

3.

subject to mutatis mutandis

application of Article 6,

paragraphs 1, subparagraphs 5 and

6.

Article 17 The Company acquires real

property or right-of-use assets

thereof from a related party shall

evaluate the reasonableness of the

transaction costs by the following

means:

1. Based upon the related party's

transaction price plus necessary

interest on funding and the costs to

be duly borne by the buyer.

"Necessary interest on funding" is

imputed as the weighted average

interest rate on borrowing in the

year the Company purchases the

property; provided, it may not be

higher than the maximum non-

financial industry lending rate

announced by the Ministry of

Finance.

2. Total loan value appraisal from a

financial institution where the

related party has previously created

a mortgage on the property as

security for a loan; provided, the

actual cumulative amount loaned by

the financial institution shall have

been 70 percent or more of the

financial institution's appraised loan

value of the property and the period

of the loan shall have been 1 year or

more. However, this shall not apply

where the financial institution is a

related party of one of the

transaction counterparties.

Where land and structures

thereupon are combined as a single

property purchased or leased in one

transaction, the transaction costs for

the land and the structures may be

separately appraised in accordance

with either of the means listed in the

preceding paragraph.

The Company that acquires real


thereof from a related party and

appraises the cost of the real


thereof in accordance with the

preceding two paragraphs shall also

engage a CPA to check the

Article 16 The Company's transaction with

the related party shall evaluate the

reasonableness of the transaction

costs by the following means:

1. Based upon the related party's

transaction price plus necessary

interest on funding and the costs to

be duly borne by the buyer.

"Necessary interest on funding" is

imputed as the weighted average

interest rate on borrowing in the

year the Company purchases the

property; provided, it may not be

higher than the maximum non-

financial industry lending rate


Finance.

2. Total loan value appraisal from a

financial institution where the

related party has previously created

a mortgage on the property as

security for a loan; provided, the

actual cumulative amount loaned

by the financial institution shall

have been 70 percent or more of

the financial institution's appraised

loan value of the property and the

period of the loan shall have been 1

year or more. However, this shall

not apply where the financial

institution is a related party of one

of the transaction counterparties.

Where land and structures

thereupon are combined as a single

property purchased in one

transaction, the transaction costs

for the land and the structures may

be separately appraised in

accordance with either of the

means listed in the preceding

paragraph.

For the Company to trade with the

related party and to evaluate the

cost of real estate in accordance

with the provisions of Paragraph 1

and 2, it shall also retain an CPA to

review it and provide a substantive

opinion.

1. The numbering

of the article is

amended and

the wording is

slightly

modified.

2. To be in line

with the

International

Financial

Reporting

Standards,

No.16 on

Lease,

paragraph 1-4

are amended to

include in this

article the

right-of-use

assets of the

real estate

leased from

the related

party.

3. Considering

the fact that

between the

Company and

its

subsidiaries,

and the

subsidiaries

directly or

indirectly

100% held,

due to the

overall

planning of the

business, there

is a possibility

of collective

leasing of real

estate and sub-

lease

thereafter, and

the risk of

significant

trading

irregularity for

the previous

transaction is

51

appraisal and render a specific

opinion.

Where the Company acquires real


thereof from a related party and one

of the following circumstances

exists, the acquisition shall be


preceding article, and the preceding

three paragraphs do not apply:

1. The related party acquired the real


thereof through inheritance or as a

gift.

2. More than 5 years will have elapsed

from the time the related party

signed the contract to obtain the real


thereof to the signing date for the

current transaction.

3. The real property is acquired

through signing of a joint

development contract with the

related party, or through engaging a

related party to build real property,

either on the company's own land or

on rented land.

4. The real property right-of-use assets

for business use are acquired by the

public company with its parent or

subsidiaries, or by its subsidiaries in

which it directly or indirectly holds

100 percent of the issued shares or

authorized capital.

Where the Company's transaction

with the related party and one of

the following circumstances exists,

the acquisition shall be conducted in

accordance with Article 15, and the

preceding three paragraphs do not

apply:


property thereof through

inheritance or as a gift.


property thereof through


3. More than 5 years will have

elapsed from the time the related

party signed the contract to obtain

the real property or right-of-use

assets thereof to the signing date

for the current transaction.

lower,

paragraph 4,

subparagraph 4

is therefore

added to

exclude the

application for

assessing the

reasonableness

of the

transaction

cost according

to this article

(the price of

the real estate

transaction or

the price of the

leased real

estate).

52

Article 18 When the results of a public

company's appraisal conducted in

accordance with paragraph 1 and

paragraph 2 of the preceding Article

are uniformly lower than the

transaction price, the matter shall be

handled in compliance with Article

19. However, where the following

circumstances exist, objective

evidence has been submitted and

specific opinions on reasonableness

have been obtained from a

professional real property appraiser

and a CPA have been obtained, this

restriction shall not apply:

1. Where the related party acquired

undeveloped land or leased land for

development, it may submit proof

of compliance with one of the

following conditions:

(1) Where undeveloped land is

appraised in accordance with the

means in the preceding Article, and

structures according to the related

party's construction cost plus

reasonable construction profit are

valued in excess of the actual

transaction price. The "Reasonable

construction profit" shall be deemed

the average gross operating profit

margin of the related party's

construction division over the most

recent 3 years or the gross profit

margin for the construction industry

for the most recent period as


Finance, whichever is lower.

(2) Completed transactions by

unrelated parties within the

preceding year involving other

floors of the same property or

neighboring or closely valued

parcels of land, where the land area

and transaction terms are similar

after calculation of reasonable price

discrepancies in floor or area land

prices in accordance with standard

property market sale or leasing

practices.

Article 17 When the results of a public

company's appraisal conducted in

accordance with paragraph 1 and

paragraph 2 of the preceding

Article are uniformly lower than

the transaction price, the matter

shall be handled in compliance

with Article 18. However, where

the following circumstances exist,

objective evidence has been

submitted and specific opinions on

reasonableness have been obtained

from a professional real property

appraiser and a CPA have been

obtained, this restriction shall not

apply:

1. Where the related party acquired

undeveloped land or leased land for

development, it may submit proof

of compliance with one of the

following conditions:

(1) Where undeveloped land is

appraised in accordance with the

means in the preceding Article, and

structures according to the related

party's construction cost plus

reasonable construction profit are

valued in excess of the actual

transaction price. The "Reasonable

construction profit" shall be

deemed the average gross operating

profit margin of the related party's

construction division over the most

recent 3 years or the gross profit

margin for the construction

industry for the most recent period

as announced by the Ministry of

Finance, whichever is lower.




floors of the same property or


parcels of land, where the land area

and transaction terms are similar

after calculation of reasonable price

discrepancies in floor or area land

prices in accordance with standard

property market sale practices.




floors of the same property, where

transaction terms are similar after

1. The numbering

of the article is

amended and

the cited

article for

paragraph 1 is

adjusted

accordingly.

2. To be in line

with the actual

operation of

real estate

leasing, the

limit is

extended on

the acquisition

of real estate

use-of-right

assets from the

related party,

under which

circumstance,

the lease

transaction

between non-

related parties

in the adjacent

area within

one year as a

reference case

for calculating

and estimating

the

reasonableness

of the

transaction

price. The

current

paragraph1,

subparagraph

1, item 3 is

consolidated

into item 2;

and to add that

a rental case is

also served as

a transaction

case.

Therefore,

paragraph 1,

subparagraph

1, item 2 and

subparagraph

2, and

paragraph 2

are amended

53

2. Where the Company acquiring real

property, or obtaining real property

right-of-use assets through leasing,

from a related party provides

evidence that the terms of the

transaction are similar to the terms

of completed transactions involving


parcels of land of a similar size by


preceding year.

Completed transactions involving


parcels of land in the preceding

paragraph in principle refers to

parcels on the same or an adjacent

block and within a distance of no

more than 500 meters or parcels

close in publicly announced current

value; transactions involving

similarly sized parcels in principle

refers to transactions completed by

unrelated parties for parcels with a

land area of no less than 50 percent

of the property in the planned

transaction; within the preceding

year refers to the year preceding the

date of occurrence of the acquisition

of the real property or obtainment of

the right-of-use assets thereof.

calculation of reasonable price

discrepancies in floor land prices in

accordance with standard property

market leasing practices.

2. Where the Company acquiring real

property, from a related party

provides evidence that the terms of

the transaction are similar to the

terms of completed transactions

involving neighboring or closely

valued parcels of land of a similar

size by unrelated parties within the

preceding year.

Completed transactions involving


parcels of land in the preceding

paragraph in principle refers to

parcels on the same or an adjacent

block and within a distance of no

more than 500 meters or parcels

close in publicly announced current

value; transactions involving

similarly sized parcels in principle

refers to transactions completed by

unrelated parties for parcels with a

land area of no less than 50 percent

of the property in the planned

transaction; within the preceding

year refers to the year preceding the

date of occurrence of the acquisition

of the real property thereof.

accordingly.

Article 19 Where the Company acquires real


thereof from a related party and the

results of appraisals conducted in

accordance with the preceding two

articles are uniformly lower than the

transaction price, the following

steps shall be taken:

1. Special reserve shall be set aside in


paragraph 1 of the Securities and

Exchange Act against the difference

between the real property or right-

of-use assets thereof transaction

price and the appraised cost, and

may not be distributed or used for

capital increase or issuance of bonus

shares. Where a public company

uses the equity method to account

for its investment in another

Article 18 Where the Company's

transaction with related party and

the results of appraisals conducted

in accordance with the Articles 16

and 17 are uniformly lower than

the transaction price, the following

steps shall be taken:

1. Special reserve shall be set aside in



Exchange Act against the

difference between the real

property transaction price and the

appraised cost, and may not be

distributed or used for capital

increase or issuance of bonus

shares. Where a public company

uses the equity method to account

for its investment in another

company, then the special reserve

1. The numbering

of the article is

amended and

the wording is

slightly

modified.

2. To be in line

with the

International

Financial

Reporting

Standards, No.

16 on Lease,

the provision

for the process

required is

included when

the assessment

price of the

real estate use-

54

company, then the special reserve

called for under Article 41,


Exchange Act shall be set aside pro

rata in a proportion consistent with

the share of public company's

equity stake in the other company.

2. Independent directors of Audit

Committee shall comply with

Article 218 of the Company Act.

3. Actions taken pursuant to the

preceding two subparagraphs shall

be reported to a shareholders

meeting, and the details of the

transaction shall be disclosed in the

annual report and any investment

prospectus.

The Company, having set aside a

special reserve under the preceding

paragraph, may not utilize the

special reserve until it has

recognized a loss on decline in

market value of the assets it

purchased or leased at a premium,

or they have been disposed of, or the

leasing contract has been

terminated, or adequate

compensation has been made, or the

status quo ante has been restored, or

there is other evidence confirming

that there was nothing unreasonable

about the transaction, and the FSC

has given its consent.

For the company's acquisition of the

real estate or its right-of-use assets

from the related party, if there is

other evidence indicating that the

transaction has abnormal business

operations, it shall also be handled in

accordance with the preceding two

provisions.

called for under Article 41,


Exchange Act shall be set aside pro

rata in a proportion consistent with

the share of public company's

equity stake in the other company.

2. Audit Committee shall comply

with Article 218 of the Company

Act.

3. Actions taken pursuant to the

subparagraphs 1 and 2 shall be

reported to a shareholders meeting,

and the details of the transaction

shall be disclosed in the annual

report and any investment

prospectus.

The Company, having set aside a

special reserve under the preceding

paragraph, may not utilize the

special reserve until it has

recognized a loss on decline in

market value of the assets it

purchased at a premium, or they

have been disposed of, or adequate

compensation has been made, or

the status quo ante has been

restored, or there is other evidence

confirming that there was nothing

unreasonable about the transaction,

and the FSC has given its consent.

For the company's transaction with

the related parties, if there is other

evidence indicating that the

transaction has abnormal business

operations, it shall also be handled

in accordance with the preceding

two provisions.

of-right assets

leased from

the related

party is lower

than the

transaction

price.

Article 19 The Company engaging in

derivatives trading shall pay strict

attention to control of the following

important risk management and

auditing matters, and incorporate

them into their Procedures:

1. Trading principles and strategies:

Shall include the types of

derivatives that may be traded,

operating or hedging strategies,

segregation of duties, essentials of

performance evaluation, total

amount of derivatives contracts that

1. This article is

deleted.

2. The

“Regulations

Governing the

Acquisition or

Disposal of

Assets by

Public

Companies

"issued by the

Financial

Supervisory

55

maybe traded, and the maximum

loss limit on total trading and for

individual contracts.

2. Risk management measures.

3. Internal audit system.

4. Regular evaluation methods and

the handling of irregular

circumstances.

Commission

with the

official letter

Jin-guan-

zheng-fa No.

10703410725

dated

November 26,

2018, has

specified that

the related

financial laws

and

regulations

shall prevail.

In order to

prevent double

regulations,

the article is

deleted.

Article 20 The Company engaging in

derivatives trading shall adopt the

following risk management

measures:

1. Risk management shall address

credit, market, liquidity, cash flow,

operational, and legal risks.

2. Personnel engaged in derivatives

trading may not serve concurrently

in other operations such as

confirmation and settlement.

3. Risk measurement, monitoring, and

control personnel shall be assigned

to a different department that the

personnel in the preceding

subparagraph and shall report to the

board of directors or senior

management personnel with no

responsibility for trading or

position decision-making.

4. Derivatives trading positions held

shall be evaluated at least once per

week; however, positions for hedge

trades required by business shall be

evaluated at least twice per month.

Evaluation reports shall be

submitted to senior management

personnel authorized by the board

of directors.

5. Other important risk management

measures.

1. This article is

deleted.

2. The

"Regulations

Governing the

Acquisition or

Disposal of

Assets by

Public

Companies

"issued by the

Financial

Supervisory

Commission

with the

official letter

Jin-guan-

zheng-fa No.

10703410725

dated

November 26,

2018, has

specified that

the related

financial laws

and

regulations

shall prevail.

In order to

prevent double

regulations,

the article is

deleted.

56

Article 21 Internal audit of derivatives

transactions:

In addition to the internal audit

conducted by the Company's

derivatives trading department

itself , the internal auditors shall

make an audit report on the

suitableness and regulatory

compliance of the handling

procedure of the internal control

over the transactions conducted by

the derivatives transactions

department in accordance with the

“Internal Audit System

Implementation Measures” of the

Bank. If a major violation is

discovered, the audit committee

shall be notified in writing.

1. This article is

deleted.

2. The

“Regulations

Governing the

Acquisition or

Disposal of

Assets by

Public

Companies

"issued by the

Financial

Supervisory

Commission

with the

official letter

Jin-guan-

zheng-fa No.

10703410725

dated

November 26,

2018, has

specified that

the related

financial laws

and

regulations

shall prevail.

In order to

prevent double

regulations,

the article is

deleted.

Article 22 The principles for the

supervision and management of the

board of directors:

1. Designate senior management

personnel to monitor and control

the risk of derivatives trading.

2. Periodically evaluate whether

derivatives trading performance is

consistent with the established

operational strategy.

3. Periodically evaluate whether the

risk undertaken is within the

Company's permitted scope of

tolerance.

4. The Designated senior management

personnel shall periodically

evaluate the risk management

measures currently employed are

appropriate and are faithfully


1. This article is

deleted.

2. The

“Regulations

Governing the

Acquisition or

Disposal of

Assets by

Public

Companies”

issued by the

Financial

Supervisory

Commission

with the

official letter

Jin-guan-

zheng-fa No.

10703410725

dated

November 26,

2018, has

57

relevant regulations.

5. The designated senior management

personnel shall precisely supervise

the trading and profit-loss

circumstances. Appropriate

measures shall be adopted and a

report immediately made to the

board of directors if irregular

circumstances are found in the

course thereof. An independent

director shall be present at the

meeting and express an opinion.

The Company shall report to the

soonest meeting of the board of

directors after it authorizes the

relevant personnel to handle

derivates trading in accordance with

its Procedures for Engaging in

Derivatives Trading.

specified that

the related

financial laws

and

regulations

shall prevail.

In order to

prevent double

regulations,

this article is

deleted.

Article 20 The Company that conducts a

merger, demerger, acquisition, or

transfer of shares, prior to

convening the board of directors to

resolve on the matter, shall engage a

CPA, attorney, or securities

underwriter to give an opinion on

the reasonableness of the share

exchange ratio, acquisition price, or

distribution of cash or other

property to shareholders, and submit

it to the board of directors for

deliberation and passage. However,

the requirement of obtaining an

aforesaid opinion on reasonableness

issued by an expert may be

exempted in the case of a merger by

the Company of a subsidiary in

which it directly or indirectly holds

100 percent of the issued shares or

authorized capital, and in the case of

a merger between subsidiaries in

which the Company directly or

indirectly holds 100 percent of the

respective subsidiaries’ issued

shares or authorized capital.

Article 23 The Company that conducts a


transfer of shares, prior to

convening the board of directors to

resolve on the matter, shall engage

a CPA, attorney, or securities

underwriter to give an opinion on

the reasonableness of the share

exchange ratio, acquisition price, or

distribution of cash or other

property to shareholders, and

submit it to the board of directors

for deliberation and passage.

However, the requirement of

obtaining an aforesaid opinion on

reasonableness issued by an expert

may be exempted in the case of a

merger by the Company of a

subsidiary in which it directly or

indirectly holds 100 percent of the

issued shares or authorized capital,

and in the case of a merger between

subsidiaries in which the Company

directly or indirectly holds 100

percent of the respective

subsidiaries’ issued shares or

authorized capital.

The numbering of

the article is

amended.

Article 21 The Company shall prepare a

public report to shareholders

detailing important contractual

content and matters relevant to the

merger, demerger, or acquisition

prior to the shareholders meeting

and include it along with the expert

opinion referred to in paragraph 1 of

the preceding Article when sending

Article 24 The Company shall prepare a

public report to shareholders

detailing important contractual

content and matters relevant to the

merger, demerger, or acquisition

prior to the shareholders meeting

and include it along with the expert

opinion referred to in paragraph 1

of the preceding Article when

The numbering of

the article is

amended and the

partial wording

description in

paragraph 2 is

modified.

58

shareholders notification of the

shareholders meeting for reference

in deciding whether to approve the

merger, demerger, or acquisition.

Provided, where a provision of

another act exempts a company

from convening a shareholders

meeting to approve the merger,

demerger, or acquisition, this

restriction shall not apply.

Where the shareholders meeting

of the Company fails to convene or

pass a resolution due to lack of a

quorum, insufficient votes, or other

legal restriction, or the proposal is

rejected by the shareholders

meeting, the Company shall

immediately publicly explain the

reason, the follow-up measures, and

the preliminary date of the next

shareholders meeting.

sending shareholders notification of

the shareholders meeting for

reference in deciding whether to

approve the merger, demerger, or

acquisition. Provided, where a

provision of another act exempts a

company from convening a

shareholders meeting to approve

the merger, demerger, or

acquisition, this restriction shall not

apply.

For any party's shareholders

meeting from the companies

participating in a merger,

demerger, acquisition, fails to

convene or pass a resolution due to

lack of a quorum, insufficient

votes, or other legal restriction, or

the proposal is rejected by the

shareholders meeting, fails to

convene or pass a resolution due to

lack of a quorum, insufficient

votes, or other legal restriction, or

the proposal is rejected by the

shareholders meeting, the

companies participating in a


transfer of shares shall immediately

publicly explain the reason, the

follow-up measures, and the

preliminary date of the next


Article 22 The Company shall convene a

board of directors meeting and

shareholders meeting on the day of

the transaction to resolve matters

relevant to the merger, demerger, or

acquisition, unless another act

provides otherwise or the FSC is

notified in advance of extraordinary

circumstances and grants consent.

The Company participating in a

transfer of shares shall call a board

of directors meeting on the day of

the transaction, unless another act


notified in advance of extraordinary

circumstances and grants consent.

When participating in a merger,

demerger, acquisition, or transfer of

another company's shares, the

Company shall prepare a full written

record of the following information

Article 25 The Company shall convene a

board of directors meeting and

shareholders meeting on the day of

the transaction to resolve matters

relevant to the merger, demerger,

or acquisition, unless another act


notified in advance of

extraordinary circumstances and

grants consent.

Participating in a transfer of shares

shall call a board of directors

meeting on the day of the

transaction, unless another act


notified in advance of

extraordinary circumstances and

grants consent.

Participating in a merger,

demerger, acquisition, or transfer

of another company's shares, a

The numbering of

the article is

amended and the

partial wordings

in paragraph 1-5

are slightly

modified.

59

and retain it for 5 years for reference:

1. Basic identification data for

personnel: Including the

occupational titles, names, and

national ID numbers (or passport

numbers in the case of foreign

nationals) of all persons involved in

the planning or implementation of

any merger, demerger, acquisition,

or transfer of another company's

shares prior to disclosure of the

information.

2. Dates of material events: including

the signing of any letter of intent or

memorandum of understanding, the

hiring of a financial or legal advisor,

the execution of a contract, and the

convening of a board of directors

meeting.

3. Important documents and minutes:

Including merger, demerger,

acquisition, and share transfer plans,

any letter of intent or memorandum

of understanding, material contracts,

and minutes of board of directors'

meetings.

When participating in a merger,


another company's shares, the

Company shall, within 2 days

counting inclusively from the date of

passage of a resolution by the board

of directors, report (in the prescribed

format and via the Internet-based

information system) the information

set out in subparagraphs 1 and 2 of

the preceding paragraph to the FSC

for recordation.

Where any of the companies

participating in a merger, demerger,

acquisition, or transfer of another

company's shares is neither listed on

an exchange nor has its shares traded

on an OTC market, the company(s)

so listed or traded shall sign an

agreement with such company

whereby the latter is required to

abide by the provisions of the

company that is listed on an

exchange or has its shares traded

on an OTC market, shall prepare a

full written record of the following

information and retain it for 5 years

for reference:

1. Basic identification data for

personnel: Including the

occupational titles, names, and

national ID numbers (or passport

numbers in the case of foreign

nationals) of all persons involved in

the planning or implementation of

any merger, demerger, acquisition,

or transfer of another company's

shares prior to disclosure of the

information.

2. Dates of material events: including

the signing of any letter of intent or

memorandum of understanding, the

hiring of a financial or legal

advisor, the execution of a contract,

and the convening of a board of

directors meeting.

3. Important documents and minutes:

Including merger, demerger,

acquisition, and share transfer

plans, any letter of intent or

memorandum of understanding,

material contracts, and minutes of

board of directors' meetings.

Participating in a merger,


of another company's shares, a

company that is listed on an

exchange or has its shares traded

on an OTC market shall, within 2

days counting inclusively from the

date of passage of a resolution by

the board of directors, report (in the

prescribed format and via the

Internet-based information system)

the information set out in

subparagraphs 1 and 2 of the

preceding paragraph to the FSC for

recordation.

Where any of the companies


acquisition, or transfer of another

company's shares is neither listed on

an exchange nor has its shares

traded on an OTC market, the

company(s) so listed or traded shall

sign an agreement with such

60

preceding 2 paragraphs. company whereby the latter is

required to abide by the provisions

of the paragraphs 3 and 4.

Article 23 Every person participating in or

privy to the plan for merger,


shares shall issue a written

undertaking of confidentiality and

may not disclose the content of the

plan prior to public disclosure of the

information and may not trade, in

their own name or under the name

of another person, in any stock or

other equity security of any

company related to the plan for


transfer of shares.

Article 26 Every person participating in or

privy to the plan for merger,


of shares shall issue a written

undertaking of confidentiality and

may not disclose the content of the

plan prior to public disclosure of

the information and may not trade,

in their own name or under the

name of another person, in any

stock or other equity security of

any company related to the plan for


transfer of shares.

The numbering of

the article is

amended.

Article 24 The Company participating in a


transfer of shares may not arbitrarily

alter the share exchange ratio or

acquisition price unless under the

below-listed circumstances, and

shall stipulate the circumstances

permitting alteration in the contract

for the merger, demerger,

acquisition, or transfer of shares:

1. Cash capital increase, issuance of

convertible corporate bonds, or the

issuance of bonus shares, issuance

of corporate bonds with warrants,

preferred shares with warrants,

stock warrants, or other equity-

based securities.

2. An action, such as a disposal of

major assets that affects the

company's financial operations.

3. An event, such as a major disaster

or major change in technology, that

affects shareholder equity or share

price.

4. An adjustment where any of the

companies participating in the


transfer of shares from another

company, buys back treasury stock.

5. An increase or decrease in the

number of entities or companies

participating in the merger,


shares.

Article 27 The Company participating in a


transfer of shares may not

arbitrarily alter the share exchange

ratio or acquisition price unless

under the below-listed

circumstances, and shall stipulate

the circumstances permitting

alteration in the contract for the


transfer of shares:

1. Cash capital increase, issuance of

convertible corporate bonds, or the

issuance of bonus shares, issuance

of corporate bonds with warrants,

preferred shares with warrants,

stock warrants, or other equity-

based securities.

2. An action, such as a disposal of

major assets, that affects the

company's financial operations.

3. An event, such as a major disaster

or major change in technology, that

affects shareholder equity or share

price.

4. An adjustment where any of the

companies participating in the


transfer of shares from another

company, buys back treasury stock.

5. An increase or decrease in the

number of entities or companies



The numbering of

the article is

amended and the

wording is

modified slightly.

61

6. Other terms/conditions that the

contract stipulates may be altered

and that have been publicly

disclosed.

of shares.

6. Other terms/conditions that the

contract stipulates may be altered

and that have been publicly

disclosed.

Article 25 The contract for participation by

the Company in a merger,

demerger, acquisition, or of shares

shall record the rights and

obligations of the companies



shares, and shall also record the

following:

1. Handling of breach of contract.

2. Principles for the handling of

equity-type securities previously

issued or treasury stock previously

bought back by any company that is

extinguished in a merger or that is

demerged.

3. The amount of treasury stock

participating companies are

permitted under law to buy back

after the record date of calculation

of the share exchange ratio, and the

principles for handling thereof.

4. The manner of handling changes in

the number of participating entities

or companies.

5. Preliminary progress schedule for

plan execution, and anticipated

completion date.

6. Scheduled date for convening the

legally mandated shareholders

meeting if the plan exceeds the

deadline without completion, and

relevant procedures.

Article 28 The contract for participation by

the Company in a merger,

demerger, acquisition, or of shares

shall record the rights and

obligations of the companies



of shares, and shall also record the

following:


2. Principles for the handling of

equity-type securities previously

issued or treasury stock previously

bought back by any company that

is extinguished in a merger or that

is demerged.

3. The amount of treasury stock

participating companies are

permitted under law to buy back

after the record date of calculation

of the share exchange ratio, and

the principles for handling thereof.

4. The manner of handling changes

in the number of participating

entities or companies.

5. Preliminary progress schedule for

plan execution, and anticipated

completion date.

6. Scheduled date for convening the

legally mandated shareholders

meeting if the plan exceeds the

deadline without completion, and

relevant procedures.

The numbering of

the article is

amended.

Article 26 After public disclosure of the

information, if the Company


demerger, acquisition, or share

transfer intends further to carry out

a merger, demerger, acquisition, or

share transfer with another

company, all of the participating

companies shall carry out anew the

procedures or legal actions that had

originally been completed toward

the merger, demerger, acquisition,

or share transfer; except that where

the number of participating

Article 29 After public disclosure of the

information, if any party of the

Company participating in the


share transfer intends further to

carry out a merger, demerger,

acquisition, or share transfer with

another company, all of the

participating companies shall carry

out anew the procedures or legal

actions that had originally been

completed toward the merger,

demerger, acquisition, or share

transfer; except that where the

The numbering of

the article is

amended and the

some wordings

are modified

slightly.

62

companies is decreased and a

participating company's

shareholders meeting has adopted a

resolution authorizing the board of

directors to alter the limits of

authority, such participating

company may be exempted from

calling another shareholders

meeting to resolve on the matter

anew.

number of participating companies

is decreased and a participating

company's shareholders meeting

has adopted a resolution

authorizing the board of directors

to alter the limits of authority, such

participating company may be

exempted from calling another

shareholders meeting to resolve on

the matter anew.

Article 27 Where any of the companies


acquisition, or transfer of shares is

not a public company, the Company

shall sign an agreement with the

non-public company whereby the

latter is required to abide by the

provisions of Article 22, Article 23,

and the preceding article.

Article 30 Where any of the companies

participating in a merger,


of shares is not a public company,

the Company shall sign an

agreement with the non-public

company whereby the latter, and to

be subject to the provisions of the

date to convene a board of directors

meeting under Article

25,undertaking of confidentiality

prior to public disclosure under

Article 26 and changes in the

number of participating companies

in mergers, demergers, acquisition

or transfer of shares under Article

29.

1. The

numbering

the article is

amended.

2. To adjust the

cited articles

and modified

some articles

accordingly.

Article 28

Under any of the following

circumstances, the Company

acquiring or disposing of assets

shall publicly announce and report

the relevant information on the

FSC's designated website in the

appropriate format as prescribed by

regulations within 2 days counting

inclusively from the date of

occurrence of the event:

1. Acquisition or disposal of real


thereof from or to a related party, or


other than real property or right-of-

use assets thereof from or to a

related party where the transaction




or NTD300 million or more;

provided, this shall not apply to

trading of domestic government

bonds or bonds and separate and

resale agreements, or subscription

Article 31 The standards for making public

announcements and regulatory

filing

Under any of the following

circumstances, the Company

acquiring or disposing of assets

shall publicly announce and report

the relevant information on the

FSC's designated website in the

appropriate format as prescribed by

regulations within 2 days counting



1. Acquisition or disposal of real


related party, or acquisition or

disposal of assets other than real


related party where the transaction




or NTD300 million or more;

provided, this shall not apply to

trading of government bonds or

bonds and separate and resale

agreements, or subscription or

redemption of money market funds

1. The numbering

of the article is

amended and

the repeated

article title is

deleted.

2. To specify it is

limited to the

domestic

government

bonds in

paragraph 1,

subparagraph 1

and 6.

3. To be in line

with the

International

Financial

Reporting

Standards, No.

16 on Lease,

the right-of-

use assets is

included in the

provisions of

this Article.

4. Considering

63

or redemption of money market

funds issued by domestic securities

investment trust enterprises.

2. Merger, demerger, acquisition, or

transfer of shares.

3. Losses from derivatives trading

reaching the limits on aggregate

losses or losses on individual

contracts set out in the procedures

adopted by the Company.

4. Where equipment or right-of-use

assets thereof for business use are

acquired or disposed of, and

furthermore the transaction

counterparty is not a related party,

and the transaction amount meets

any of the following criteria:

(1) For a public company whose

paid-in capital is less than NTD10

billion, the transaction amount

reaches NTD500 million or more.


paid-in capital is NTD10 billion or

more, the transaction amount

reaches NTD1 billion or more.

5. Where land is acquired under an

arrangement on engaging others to

build on the company's own land,

engaging others to build on rented

land, joint construction and

allocation of housing units, joint

construction and allocation of

ownership percentages, or joint

construction and separate sale, and



and the amount the Company

expects to invest in the transaction

reaches NTD500 million.

6. Where an asset transaction other

than any of those referred to in the

preceding 5 subparagraphs, a

disposal of receivables by the

Company, or an investment in the

mainland China area reaches 20

percent or more of paid-in capital of

the Company or NTD300 million;

provided, this shall not apply to the

following circumstances:

(1) Trading of domestic government

bonds.

(2) The Company's securities

issued by domestic securities

investment trust enterprises.

2. Merger, demerger, acquisition, or

transfer of shares.

3. Losses from derivatives trading

reaching the limits on aggregate

losses or losses on individual

contracts set out in the procedures

adopted by the Company.

4. Where equipment thereof for

business use of assets categories

are acquired or disposed of, and



and the transaction amount meets

any of the following criteria:


paid-in capital is less than NTD10

billion, the transaction amount

reaches NTD500 million or more.


paid-in capital is NTD10 billion or

more, the transaction amount

reaches NTD1 billion or more.









construction and separate sale, and

the amount the Company expects to

invest in the transaction reaches

NTD500 million.

6. Where an asset transaction other

than any of those referred to in the

preceding 5 subparagraphs, a

disposal of receivables by financial

institution, or an investment in the

mainland China area reaches 20

percent or more of paid-in capital

of the Company or NTD300

million; provided, this shall not

apply to the following

circumstances:

(1) Trading of domestic

government bonds.

(2) Taking investment as a

profession, the Company's

that the

provisions

under

paragraph 1,

subparagraph 1

have specified

the

requirement

for

announcement

on the related

party

transactions,

subparagraph 5

of the same

paragraph is

amended to

specify its

application in

the non-related

party

transactions, in

order to

facilitate

compliance.

5. To be in line

with the

explanations in

the Criteria,

paragraph 1,

subparagraph 6

is amended：

(1) In order

to unify the

wordings in

the

provisions of

the Criteria,

since the

target or

institutions

referred in

the Criteria

are in

principle

referring to

the ones both

domestically

and overseas,

the wordings

of domestic

and overseas

are deleted.

(2) In order to

extend the

64

trading on securities exchanges or

OTC markets, or subscription of

ordinary corporate bonds or general

bank debentures without equity

characteristics (excluding

subordinated debt) that are offered

and issued in the primary market, or

subscription or redemption of

securities investment trust funds or

futures trust funds, or subscription

by a securities firm of securities as

necessitated by its undertaking

business or as an advisory

recommending securities firm for an

emerging stock company, in

accordance with the rules of the

Taipei Exchange.

(3) Trading of bonds under

repurchase and resale agreements,

or subscription or redemption of

money market funds issued by

domestic securities investment trust

enterprises.

The amount of transactions above

shall be calculated as follows:

1. The amount of any individual

transaction.

2. The cumulative transaction amount

of acquisitions and disposals of the

same type of underlying asset with

the same transaction counterparty

within the preceding year.


of acquisitions and disposals

(cumulative acquisitions and

disposals, respectively) of real


thereof within the same

development project within the

preceding year.




disposals, respectively) of the same

security within the preceding year.

"Within the preceding year" as used

in the preceding paragraph refers to

the year preceding the date of

occurrence of the current transaction.

Items duly announced in accordance

with these Regulations need not be

securities trading on securities

exchanges or OTC markets in

domestic or overseas, or

subscription of ordinary corporate

bonds or general bank debentures

without equity characteristics

(excluding subordinated debt) that

are offered and issued in the

domestic primary market, or

subscription or redemption of

securities investment trust funds or

futures trust funds, or subscription

by a securities firm of securities as

necessitated by its undertaking

business or as an advisory

recommending securities firm for

an emerging stock company, in

accordance with the rules of the

Taipei Exchange.

(3) Trading of bonds under

repurchase and resale agreements,

or subscription or redemption of

money market funds issued by

domestic securities investment

trust enterprises.

The amount of transactions above

shall be calculated as follows:

1. The amount of any individual

transaction.


of acquisitions and disposals of the

same type of underlying asset with

the same transaction counterparty

within the preceding year.




disposals, respectively) of real

property thereof within the same

development project within the

preceding year.




disposals, respectively) of the same

security within the preceding year.

"Within the preceding year" as

used in the preceding paragraph

refers to the year preceding the

date of occurrence of the current

transaction. Items duly announced

in accordance with these

limit on the

professional

investor who

trades the

securities

defined under

paragraph 1,

subparagraph

6, item 2 to

be exempted

from the

announcemen

t requirement.

And

considering

the higher

risk of the

subordinated

debt, it is also

specified that

the ordinary

corporate

bonds or

general bank

debentures

without

equity

characteristic

s to be

excluded

from the

subordinate

debt.

6. The partial

wordings in

Paragraph 1,

subparagraph 3

and 4, and 6

are modified

accordingly to

unify the use

of wordings.

65

counted toward the transaction

amount.

The Company shall compile monthly

reports on the status of derivatives

trading engaged in up to the end of

the preceding month by the

Company and any subsidiaries that

are not domestic public companies

and enter the information in the

prescribed format into the

information reporting website

designated by the FSC by the 10th

day of each month.

When the Company at the time of

public announcement makes an error

or omission in an item required by

regulations to be publicly announced

and so is required to correct it, all the

items shall be again publicly

announced and reported in their

entirety within two days counting

inclusively from the date of knowing

of such error or omission.

The Company acquiring or disposing

of assets shall keep all relevant

contracts, meeting minutes, log

books, appraisal reports and CPA,

attorney, and securities underwriter

opinions at the company, where they

shall be retained for 5 years except

where another act provides

otherwise.

Regulations need not be counted


The Company shall compile

monthly reports on the status of

derivatives trading engaged in up

to the end of the preceding month

by the Company and any

subsidiaries that are not domestic

public companies and enter the

information in the prescribed

format into the information

reporting website designated by

the FSC by the 10th day of each

month.

When the Company at the time of

public announcement makes an

error or omission in an item

required by regulations to be

publicly announced and so is

required to correct it, all the items

shall be again publicly announced

and reported in their entirety within

two days counting inclusively from

the date of knowing of such error or

omission.

The Company acquiring or

disposing of assets shall keep all

relevant contracts, meeting

minutes, log books, appraisal

reports and CPA, attorney, and

securities underwriter opinions at

the company, where they shall be

retained for 5 years except where

another act provides otherwise.

Article 29 Formats for public disclosure:

1. For the trading by the Company in

the securities of its parent company,

subsidiary company or its related

enterprise from the domestic or

overseas exchange markets or

OTCs, the format for items and

contents to be publicly disclosed is

set out as Appendix 2.









construction and separate sale, the

format for the items and contents to

be publicly disclosed is set out as


1. For the trading by the Company in

the securities of its parent

company, subsidiary company or

its related enterprise from the

domestic or overseas exchange

markets or OTCs, the format for

items and contents to be publicly

disclosed is set out as Appendix 2.




joint construction and allocation of

housing units, joint construction

and allocation of ownership

percentages, or joint construction

and separate sale, the format for

the items and contents to be

publicly disclosed is set out as

Appendix 3.

It is modified in

accordance with

the announced

format under the

“Regulations

Governing the

Acquisition or

Disposal of

Assets by Public

Companies"

issued by the

Financial

Supervisory

Commission with

the official letter

Jin-guan-zheng-

fa No.

10703439303

dated December

4, 2018.

66

Appendix 3.


real property, equipment or its right-

of-use assets, and the related party

transactions, the format for the

public disclosure is set out as

Appendix 4.

4. For the trading in securities,

intangible assets or right-of-use

assets thereof or memberships

which are neither listed on an

exchange nor has its shares traded

on an OTC market, and the

disposal of right of claim by the

Company, the format for the public

disclosure is set out as Appendix 5.

5. For the investment in the mainland

China area, the format for public


6. For the derivatives trading, the

format for the public disclosure of

information within 2 days counting


occurrence of the event is set out as

Appendix 7-1.


format for the public disclosure of

information by the tenth of each

month is set out as Appendix 7-2.

8. For the transaction in a merger,


shares, the announcement format is

set out as Appendix 8.


real property, other fixed assets,

and the related party transactions,

the format for the public disclosure

is set out as Appendix 4.

4. For the trading in securities,

memberships, intangible assets and

financial institutions which are

neither listed on an exchange nor

has its shares traded on an OTC

market, and the disposal of right of

claim by the Company, the format

for the public disclosure is set out

as Appendix 5.

5. For the investment in the mainland

China area, the format for public



format for the public disclosure

within 2 days counting inclusively

from the date of occurrence of the

event is set out as Appendix 7-1.


format for the public disclosure by

the tenth of each month is set out as

Appendix 7-2.

8. For the transaction in a merger,


of shares, the announcement format

is set out as Appendix 8.

Article 30

Where any of the following

circumstances occurs with respect

to a transaction that a public

company has already publicly

announced and reported in

accordance with Article 28, a public

report of relevant information shall

be made on the information

reporting website designated by the

FSC within 2 days counting



1. Change, termination, or rescission

of a contract signed in regard to the

original transaction.

2. The merger, demerger, acquisition,

or transfer of shares is not

completed by the scheduled date set

Article 33 Time limit for notification and

declaration

Where any of the following

circumstances occurs with respect

to a transaction that a public

company has already publicly

announced and reported in

accordance with Article 31, a

public report of relevant

information shall be made on the

information reporting website

designated by the FSC within 2

days counting inclusively from the

date of occurrence of the event:

1. Change, termination, or rescission

of a contract signed in regard to the

original transaction.

2. The merger, demerger, acquisition,

or transfer of shares is not

1. The

numbering of

the article is

amended and

to adjust the

cited article.

2. The title is

repeated with

the provision

and therefore

deleted.

67

forth in the contract.

3. Change to the originally publicly

announced and reported

information.

completed by the scheduled date

set forth in the contract.

3. Change to the originally publicly

announced and reported

information.

Article 31 Information required be publicly

announcing and reporting in


Article 28 and Article 30 on

acquisitions and disposals of assets

by a public company's subsidiary

that is not itself a public company in

Taiwan shall be reported by the

Company.

The paid-in capital or total assets of

the Company shall be the standard

applicable to a subsidiary referred to

in the preceding paragraph in

determining whether, relative to

paid-in capital or total assets, it

reaches a threshold requiring public

announcement and regulatory filing

under Article 28, paragraph 1.

Article 34 Information required be publicly

announcing and reporting in


Article 31 and Article 33on

acquisitions and disposals of assets

by a public company's subsidiary

that is not itself a public company

in Taiwan shall be reported by the

Company.

The paid-in capital or total assets of

the Company shall be the standard

applicable to a subsidiary referred

to in the preceding paragraph in

determining whether, relative to

20% of paid-in capital or 10% of

total assets, it reaches a threshold

requiring public announcement and

regulatory filing under Article 31,

paragraph 1.

1. The

numbering of

the article is

amended, and

to adjust the

cited article

and modify

some

wordings.

2. The subsidiary

is subject to

the provision

under Article

32, Paragraph

1, therefore the

partial

wording is

modified

accordingly.

Article 32 For the calculation of 10 percent

of total assets under the Procedure,

the total assets stated in the most

recent parent company only

financial report or individual

financial report prepared under the

Regulations Governing the

Preparation of Financial Reports by

Securities Issuers shall be used.

1. This article is

added.

2. To specify

the calculation

method

regarding total

assets.

Article 33 Where it is not specified in the

Procedure, it shall be subject to the


the competent authorities.

Article 35 Where it is not specified in the

Procedure, it shall be subject to the


the competent authorities.

The numbering of

the article is

amended.

Article 34 After the Procedure is approved

by the board of directors, it shall be

submitted to the shareholders'

meeting for approval. In the event

of amendments, the procedure shall

apply.

Article 36 After the Handling Procedure is

approved by the board of directors,

it shall be submitted to the

shareholders' meeting for approval.

In the event of amendments, the

procedure shall apply.

The numbering of

the article is

amended and to

modify some

wordings

accordingly.

68

The “Procedural Rules for Acquisition or Disposal of Assets

of Taichung Commercial Bank”(Draft)

Article 1 For the management of assets, Taichung Commercial Bank Co., Ltd. (hereinafter

referred to as the “Company”) enacted the Procedure for Handling Acquisition or

Disposal of Assets (hereinafter referred to as the “Procedure”) in accordance with the

“Regulations Governing the Acquisition or Disposal of Assets by Public Companies,”

issued by the competent authority.

Article 2 For acquisition or disposal of assets by the Company, it shall be subject to the provisions

of the Procedure. However, if there are other provisions of the financial related laws and

regulations stated otherwise, such provisions shall prevail.

For the Company to conduct the business of derivatives or engage in the derivatives

trading, it shall by subject to the relevant provisions issued by the competent authority

and “Operational Strategy and Procedural Guidelines for Conducting Derivative

Financial Commodity” issued by the Competent.

Article 3 The term "assets" as used in these Regulations includes the following:

1. Investments in stocks, government bonds, corporate bonds, financial bonds,

securities representing interest in a fund, depositary receipts, call (put) warrants,

beneficial interest securities, and asset-backed securities.

2. Real property (including land, houses and buildings, investment property) and

equipment.

3. Memberships.

4. Patents, copyrights, trademarks, franchise rights, and other intangible assets.

5. Right-of-use assets.

6. Claims of Taichung Commercial Bank (including receivables, bills purchased and

discounted, loans, and overdue receivables).

7. Derivatives.

8. Assets acquired or disposed of in connection with mergers, demergers, acquisitions,

or transfer of shares in accordance with law.


Article 4 The terms used in the Procedure are defined as follows:

1. Derivatives: Forward contracts, options contracts, futures contracts, leverage

contracts, or swap contracts, whose value is derived from a specified interest rate,

financial instrument price, commodity price, foreign exchange rate, index of prices

or rates, credit rating or credit index, or other variable; or hybrid contracts combining

the above contracts; or hybrid contracts or structured products containing embedded

derivatives. The term "forward contracts" does not include insurance contracts,

performance contracts, after-sales service contracts, long-term leasing contracts, or

long-term purchase (sales) contracts.

2. Assets acquired or disposed through mergers, demergers, acquisitions, or transfer of

shares in accordance with law: Refers to assets acquired or disposed through mergers,

demergers, or acquisitions conducted under the Business Mergers and Acquisitions

Act, Financial Holding Company Act, Financial Institution Merger Act and other

69

acts, or to transfer of shares from another company through issuance of new shares of

its own as the consideration therefor (hereinafter "transfer of shares") under Article

156-3 of the Company Act.

3. Related party or subsidiary: As defined in the Regulations Governing the Preparation

of Financial Reports by Securities Issuers.

4. Professional appraiser: Refers to a real property appraiser or other person duly

authorized by law to engage in the value appraisal of real property or equipment.

5. Date of occurrence: Refers to the date of contract signing, date of payment, date of

consignment trade, date of transfer, dates of boards of directors resolutions, or other

date that can confirm the counterpart and monetary amount of the transaction,

whichever date is earlier; provided, for investment for which approval of the

competent authority is required, the earlier of the above date or the date of receipt of

approval by the competent authority shall apply.

6. Mainland China area investment: Refers to investments in the mainland China area

approved by the Ministry of Economic Affairs Investment Commission or conducted

in accordance with the provisions of the Regulations Governing Permission for

Investment or Technical Cooperation in the Mainland Area.

Article 5 Professional appraisers and their officers, certified public accounts, attorneys, and

securities underwriters that provide the Company with appraisal reports, certified public

accountant's opinions, attorney's opinions, or underwriter's opinions shall meet the

following requirements:

1. May not have previously received a final and unappealable sentence to

imprisonment for 1 year or longer for a violation of the Act, the Company Act, the

Banking Act of The Republic of China, the Insurance Act, the Financial Holding

Company Act, or the Business Entity Accounting Act, or for fraud, breach of trust,

embezzlement, forgery of documents, or occupational crime. However, this

provision does not apply if 3 years have already passed since completion of service

of the sentence, since expiration of the period of a suspended sentence, or since a

pardon was received.

2. May not be a related party or de facto related party of any party to the transaction.

3. If the company is required to obtain appraisal reports from two or more professional

appraisers, the different professional appraisers or appraisal officers may not be

related parties or de facto related parties of each other.

When the personnel of the preceding paragraph issues the appraisal report or opinion, it

shall be handled in accordance with the following matters:

1. Prior to accepting a case, they shall prudently assess their own professional

capabilities, practical experience, and independence.

2. When examining a case, they shall appropriately plan and execute adequate working

procedures, in order to produce a conclusion and use the conclusion as the basis for

issuing the report our pinion. The related working procedures, data collected, and

conclusion shall be fully and accurately specified in the case working papers.

3. They shall undertake an item-by-item evaluation of the comprehensiveness,

accuracy, and reasonableness of the sources of data used, the parameters, and the

information, as the basis for issuance of the appraisal report or the opinion.

4. They shall issue a statement attesting to the professional competence and independence of

the personnel who prepared the report or opinion, and that they have evaluated and found

that the information used is reasonable and accurate, and that they have complied with

70

applicable laws and regulations.

Article 6 The enactment of Procedure for Handling Acquisition or Disposal of the Company:

1. The enactment or amendment of this Procedure shall be approved by more than one-

half of all members of the Audit Committee and shall be submitted to the Board of

Directors for a resolution.

2. If the preceding subparagraph is not approved by more than one-half of all members

of the Audit Committee, it may be agreed by more than two-thirds of all directors,

and the resolution of the Audit Committee shall be stated in the minutes of the Board

of Directors.

3. All members of the Audit Committee referred to in subparagraph 1 and all directors

referred to in the preceding subparagraph shall be calculated by the actual incumbent.

Article 7 The operating procedure for the acquisition or disposal of assets of the Company include

the reference basis, trading term, authorization level and executive unit, etc., shall be

handled in accordance with the law, the relevant regulations of the competent authority,

the levels of responsibilities chart of the Company, and the related operational

specifications:

1. Securities: they shall be subject to the relevant provisions of the Banking Act and the

“investment policy” of the Company.

2. Real property or its right-of-use assets: they shall comply with the Banking Act, the relevant

regulations of the competent authority and the standards of the “Management Rules for Real

Estate” of the Company.

3. Membership card, intangible assets, equipment or its right-of-use assets: the purchase

matters shall be handled based on the divisions of responsibilities under the “Operational

Rules for Matters of Construction and the Purchase, Order of the Custom-made and Sale of

the Property” of the Company.

4. The acquisition or disposal of the real estate and equipment shall be based on one of the

price comparison, negotiation or bidding.

5. Derivatives: it is to be conducted by the Derivatives Investment Trading Department of the

Company in accordance with the relevant regulations of the competent authority and the

“Management Strategy for Operational Guidelines for Conducting Derivative

Financial Commodity Business”.

6. The acquisition or disposal of other assets shall be subject to the relevant regulations of the

Company.

The relevant operation regarding the acquisition or disposal of assets shall be all subject

to the relevant provisions of the internal control system of the Company. I n the event of

major violations discovered, the related personnel shall be disciplined depending on the

circumstances surrounding the violation.

Article 8 The total amount of the real estate not for business use and its right-of-use assets or the

securities acquired by the Company and each of its subsidiaries, and the limits of

individual securities shall be subject to the Banking Act and the regulations of the


Article 9 The control procedure for the acquisition or disposal of assets by the subsidiary company:

1. The subsidiary company shall, in accordance with the relevant regulations and the

provisions of the competent authority, enact and implement the procedure for the


2. For the acquisition or disposal of assets by the subsidiary company, it shall be

71

subject to the business competency rules of each subsidiary company.

3. The subsidiary company shall ensure that the procedure for the acquisition or

disposal of assets enacted is in compliance with the relevant laws and regulations

and check precisely whether the relevant matters are conducted in accordance with

the procedure. The internal audit of the Company shall review the audit report or

self-inspection report and other related matters of the subsidiary company.

4. The Company shall handle the relevant matters concerning the regulatory filing for

the public announcement on behalf of the subsidiary company, in accordance with

the provisions of Article 31.

Article 10 In acquiring or disposing of real property, equipment, or right-of-use assets thereof

where the transaction amount reaches 20 percent of the Company's paid-in capital or

NTD300 million or more, the Company, unless transacting with a domestic government

agency, engaging others to build on its own land, engaging others to build on rented land,

or acquiring or disposing of equipment or right-of-use assets thereof held for business

use, shall obtain an appraisal report prior to the date of occurrence of the event from a

professional appraiser and shall further comply with the following provisions:

1. Where due to special circumstances it is necessary to give a limited price, specified

price, or special price as a reference basis for the transaction price, the transaction

shall be submitted for approval in advance by the board of directors; the same

procedure shall also be followed whenever there is any subsequent change to the

terms and conditions of the transaction.

2. Where the transaction amount is NTD1 billion or more, appraisals from two or more

professional appraisers shall be obtained.

3. Where any one of the following circumstances applies with respect to the

professional appraiser's appraisal results, unless all the appraisal results for the

assets to be acquired are higher than the transaction amount, or all the appraisal

results for the assets to be disposed of are lower than the transaction amount, a

certified public accountant shall be engaged to perform the appraisal in accordance

with the provisions of Statement of Auditing Standards No. 20 published by the

ROC Accounting Research and Development Foundation (ARDF) and render a

specific opinion regarding the reason for the discrepancy and the appropriateness of

the transaction price:

(1) The discrepancy between the appraisal result and the transaction amount is 20

percent or more of the transaction amount.

(2) The discrepancy between the appraisal results of two or more professional

appraisers is 10 percent or more of the transaction amount.

4. No more than 3 months may elapse between the date of the appraisal report issued

by a professional appraiser and the contract execution date; provided, where the

publicly announced current value for the same period is used and not more than 6

months have elapsed, an opinion may still be issued by the original professional

appraiser.

Article 11 The Company acquiring or disposing of securities shall, prior to the date of occurrence

of the event, obtain financial statements of the issuing company for the most recent

period, certified or reviewed by a certified public accountant (CPA), for reference in

appraising the transaction price, and if the dollar amount of the transaction is 20

percent of the Company's paid-in capital or NTD300 million or more, the Company

shall additionally engage a certified public accountant prior to the date of occurrence of

the event to provide an opinion regarding the reasonableness of the transaction price. If

72

the CPA needs to use the report of an expert as evidence, the CPA shall do so in

accordance with the provisions of Statement of Auditing Standards No. 20 published

by the ARDF. This requirement does not apply, however, to publicly quoted prices of

securities that have an active market, or where otherwise provided by regulations of the

Financial Supervisory Commission (FSC).

Article 12 Where the Company acquires or disposes of intangible assets or right-of-use assets

thereof or memberships and the transaction amount reaches 20 percent or more of paid-

in capital or NTD300 million or more, except in transactions with a domestic

government agency, the Company shall engage a certified public accountant prior to

the date of occurrence of the event to render an opinion on the reasonableness of the

transaction price; the CPA shall comply with the provisions of Statement of Auditing

Standards No. 20 published by the ARDF.

Article 13 The calculation of the transaction amounts referred to in the preceding 3 articles shall

be done in accordance with Article 28, paragraph 2 herein, and "within the preceding

year" as used herein refers to the year preceding the date of occurrence of the current

transaction. Items for which an appraisal report from a professional appraiser or a

CPA's opinion has been obtained need not be counted toward the transaction amount.

Article 14 Where a public company acquires or disposes of assets through court auction

procedures, the evidentiary documentation issued by the court may be substituted for

the appraisal report or CPA opinion.

Article 15 When the Company engages in any acquisition or disposal of assets from or to a related

party, in addition to ensuring that the necessary resolutions are adopted and the

reasonableness of the transaction terms is appraised, if the transaction amount reaches

10 percent or more of the Company's total assets, the Company shall also obtain an

appraisal report from a professional appraiser or a CPA's opinion in compliance with

the provisions of the preceding Section and this Section.

The calculation of the transaction amount referred to in the preceding paragraph shall

be made in accordance with Article 13 herein.

When judging whether a transaction counterparty is a related party, in addition to legal

formalities, the substance of the relationship shall also be considered.

Article 16 When the Company intends to acquire or dispose of real property or right-of-use assets

thereof from or to a related party, or when it intends to acquire or dispose of assets

other than real property or right-of-use assets thereof from or to a related party and the

transaction amount reaches 20 percent or more of paid-in capital, 10 percent or more of

the Company's total assets, or NTD300 million or more, except in trading of domestic

government bonds or bonds and separate and resale agreements, or subscription or

redemption of money market funds issued by domestic securities investment trust

enterprises, the company may not proceed to enter into a transaction contract or make a

payment until the following matters have been approved by the board of directors and

recognized by the supervisors:

1. The purpose, necessity and anticipated benefit of the acquisition or disposal of assets.

2. The reason for choosing the related party as a transaction counterparty.

3. With respect to the acquisition of real property or right-of-use assets thereof from a

related party, information regarding appraisal of the reasonableness of the

preliminary transaction terms in accordance with Article 17 and Article 18.

4. The date and price at which the related party originally acquired the real property,

the original transaction counterparty, and that transaction counterparty's relationship

73

to the company and the related party.

5. Monthly cash flow forecasts for the year commencing from the anticipated month of

signing of the contract, and evaluation of the necessity of the transaction, and

reasonableness of the fund utilization.

6. An appraisal report from a professional appraiser or a CPA's opinion obtained in

compliance with the preceding article.

7. Restrictive covenants and other important stipulations associated with the transaction.

The calculation of the transaction amounts referred to in the preceding paragraph shall

be made in accordance with Article 28, paragraph 2 herein, and "within the preceding

year" as used herein refers to the year preceding the date of occurrence of the current

transaction. Items that have been approved by the board of directors and recognized by

the supervisors need not be counted toward the transaction amount.

When a matter is submitted for discussion by the board of directors pursuant to

paragraph 1, the board of directors shall take into full consideration each independent

director's opinions. If an independent director objects to or expresses reservations about

any matter, it shall be recorded in the minutes of the board of directors meeting.

Where an audit committee has been established in accordance with the provisions of the

Act, the matters for which paragraph 1 requires recognition by the supervisors shall first

be approved by one-half or more of all audit committee members and then submitted to

the board of directors for a resolution, and shall be subject to mutatis mutandis

application of Article 6, paragraphs 1, subparagraphs 2 and 3.

Article 17 The Company acquires real property or right-of-use assets thereof from a related party

shall evaluate the reasonableness of the transaction costs by the following means:

1. Based upon the related party's transaction price plus necessary interest on funding

and the costs to be duly borne by the buyer. "Necessary interest on funding" is

imputed as the weighted average interest rate on borrowing in the year the Company

purchases the property; provided, it may not be higher than the maximum non-

financial industry lending rate announced by the Ministry of Finance.

2. Total loan value appraisal from a financial institution where the related party has

previously created a mortgage on the property as security for a loan; provided, the

actual cumulative amount loaned by the financial institution shall have been 70

percent or more of the financial institution's appraised loan value of the property and

the period of the loan shall have been 1 year or more. However, this shall not apply

where the financial institution is a related party of one of the transaction

counterparties.

Where land and structures thereupon are combined as a single property purchased or

leased in one transaction, the transaction costs for the land and the structures may be

separately appraised in accordance with either of the means listed in the preceding

paragraph.

The Company that acquires real property or right-of-use assets thereof from a related

party and appraises the cost of the real property or right-of-use assets thereof in

accordance with the preceding two paragraphs shall also engage a CPA to check the

appraisal and render a specific opinion.

Where the Company acquires real property or right-of-use assets thereof from a related

party and one of the following circumstances exists, the acquisition shall be conducted

in accordance with the preceding article, and the preceding three paragraphs do not

apply:

74

1. The related party acquired the real property or right-of-use assets thereof through


2. More than 5 years will have elapsed from the time the related party signed the

contract to obtain the real property or right-of-use assets thereof to the signing date

for the current transaction.

3. The real property is acquired through signing of a joint development contract with

the related party, or through engaging a related party to build real property, either

on the company's own land or on rented land.

4. The real property right-of-use assets for business use are acquired by the public

company with its parent or subsidiaries, or by its subsidiaries in which it directly or

indirectly holds 100 percent of the issued shares or authorized capital.

Article 18 When the results of a public company's appraisal conducted in accordance with

paragraph 1 and paragraph 2 of the preceding Article are uniformly lower than the

transaction price, the matter shall be handled in compliance with Article 19. However,

where the following circumstances exist, objective evidence has been submitted and

specific opinions on reasonableness have been obtained from a professional real

property appraiser and a CPA have been obtained, this restriction shall not apply:

1. Where the related party acquired undeveloped land or leased land for development,

it may submit proof of compliance with one of the following conditions:

(1) Where undeveloped land is appraised in accordance with the means in the

preceding Article, and structures according to the related party's construction

cost plus reasonable construction profit are valued in excess of the actual

transaction price. The "Reasonable construction profit" shall be deemed the

average gross operating profit margin of the related party's construction division

over the most recent 3 years or the gross profit margin for the construction

industry for the most recent period as announced by the Ministry of Finance,

whichever is lower.

(2) Completed transactions by unrelated parties within the preceding year involving

other floors of the same property or neighboring or closely valued parcels of

land, where the land area and transaction terms are similar after calculation of

reasonable price discrepancies in floor or area land prices in accordance with

standard property market sale or leasing practices.

2. Where the Company acquiring real property, or obtaining real property right-of-use

assets through leasing, from a related party provides evidence that the terms of the

transaction are similar to the terms of completed transactions involving neighboring

or closely valued parcels of land of a similar size by unrelated parties within the

preceding year.

Completed transactions involving neighboring or closely valued parcels of land in the

preceding paragraph in principle refers to parcels on the same or an adjacent block and

within a distance of no more than 500 meters or parcels close in publicly announced

current value; transactions involving similarly sized parcels in principle refers to

transactions completed by unrelated parties for parcels with a land area of no less than

50 percent of the property in the planned transaction; within the preceding year refers

to the year preceding the date of occurrence of the acquisition of the real property or

obtainment of the right-of-use assets thereof.

Article 19 Where the Company acquires real property or right-of-use assets thereof from a related

party and the results of appraisals conducted in accordance with the preceding two

articles are uniformly lower than the transaction price, the following steps shall be

75

taken:

1. Special reserve shall be set aside in accordance with Article 41, paragraph 1 of the

Securities and Exchange Act against the difference between the real property or

right-of-use assets thereof transaction price and the appraised cost, and may not be

distributed or used for capital increase or issuance of bonus shares. Where a

public company uses the equity method to account for its investment in another

company, then the special reserve called for under Article 41, paragraph 1 of the

Securities and Exchange Act shall be set aside pro rata in a proportion consistent

with the share of public company's equity stake in the other company.

2. Audit Committee shall comply with Article 218 of the Company Act.

3. Actions taken pursuant to the preceding two subparagraphs shall be reported to a

shareholders meeting, and the details of the transaction shall be disclosed in the

annual report and any investment prospectus.

The Company, having set aside a special reserve under the preceding paragraph, may

not utilize the special reserve until it has recognized a loss on decline in market value

of the assets it purchased or leased at a premium, or they have been disposed of, or the

leasing contract has been terminated, or adequate compensation has been made, or the

status quo ante has been restored, or there is other evidence confirming that there was

nothing unreasonable about the transaction, and the FSC has given its consent.

For the company's acquisition of the real estate or its right-of-use assets from the

related party, if there is other evidence indicating that the transaction has abnormal

business operations, it shall also be handled in accordance with the preceding two

provisions.

Article 20 The Company that conducts a merger, demerger, acquisition, or transfer of shares,

prior to convening the board of directors to resolve on the matter, shall engage a CPA,

attorney, or securities underwriter to give an opinion on the reasonableness of the share

exchange ratio, acquisition price, or distribution of cash or other property to

shareholders, and submit it to the board of directors for deliberation and passage.

However, the requirement of obtaining an aforesaid opinion on reasonableness issued

by an expert may be exempted in the case of a merger by the Company of a subsidiary

in which it directly or indirectly holds 100 percent of the issued shares or authorized

capital, and in the case of a merger between subsidiaries in which the Company

directly or indirectly holds 100 percent of the respective subsidiaries’ issued shares or

authorized capital.

Article 21 The Company shall prepare a public report to shareholders detailing important

contractual content and matters relevant to the merger, demerger, or acquisition prior to

the shareholders meeting and include it along with the expert opinion referred to in

paragraph 1 of the preceding Article when sending shareholders notification of the

shareholders meeting for reference in deciding whether to approve the merger,

demerger, or acquisition. Provided, where a provision of another act exempts a

company from convening a shareholders meeting to approve the merger, demerger, or

acquisition, this restriction shall not apply.

Where the shareholders meeting of the Company fails to convene or pass a resolution

due to lack of a quorum, insufficient votes, or other legal restriction, or the proposal is

rejected by the shareholders meeting, the Company shall immediately publicly explain

the reason, the follow-up measures, and the preliminary date of the next shareholders

meeting.

Article 22 The Company shall convene a board of directors meeting and shareholders meeting on

76

the day of the transaction to resolve matters relevant to the merger, demerger, or

acquisition, unless another act provides otherwise or the FSC is notified in advance of

extraordinary circumstances and grants consent.

The Company participating in a transfer of shares shall call a board of directors

meeting on the day of the transaction, unless another act provides otherwise or the FSC

is notified in advance of extraordinary circumstances and grants consent.

When participating in a merger, demerger, acquisition, or transfer of another company's

shares, the Company shall prepare a full written record of the following information

and retain it for 5 years for reference:

1. Basic identification data for personnel: Including the occupational titles, names, and

national ID numbers (or passport numbers in the case of foreign nationals) of all

persons involved in the planning or implementation of any merger, demerger,

acquisition, or transfer of another company's shares prior to disclosure of the

information.

2. Dates of material events: including the signing of any letter of intent or

memorandum of understanding, the hiring of a financial or legal advisor, the

execution of a contract, and the convening of a board of directors meeting.

3. Important documents and minutes: Including merger, demerger, acquisition, and

share transfer plans, any letter of intent or memorandum of understanding, material

contracts, and minutes of board of directors' meetings.

When participating in a merger, demerger, acquisition, or transfer of another

company's shares, the Company shall, within 2 days counting inclusively from the

date of passage of a resolution by the board of directors, report (in the prescribed

format and via the Internet-based information system) the information set out in

subparagraphs 1 and 2 of the preceding paragraph to the FSC for recordation.

Where any of the companies participating in a merger, demerger, acquisition, or

transfer of another company's shares is neither listed on an exchange nor has its

shares traded on an OTC market, the company(s) so listed or traded shall sign an

agreement with such company whereby the latter is required to abide by the

provisions of the preceding 2 paragraphs.

Article 23 Every person participating in or privy to the plan for merger, demerger, acquisition, or

transfer of shares shall issue a written undertaking of confidentiality and may not

disclose the content of the plan prior to public disclosure of the information and may

not trade, in their own name or under the name of another person, in any stock or other

equity security of any company related to the plan for merger, demerger, acquisition, or

transfer of shares.

Article 24 The Company participating in a merger, demerger, acquisition, or transfer of shares

may not arbitrarily alter the share exchange ratio or acquisition price unless under the

below-listed circumstances, and shall stipulate the circumstances permitting alteration

in the contract for the merger, demerger, acquisition, or transfer of shares:

1. Cash capital increase, issuance of convertible corporate bonds, or the issuance of

bonus shares, issuance of corporate bonds with warrants, preferred shares with

warrants, stock warrants, or other equity-based securities.

2. An action, such as a disposal of major assets, that affects the company's financial

operations.

3. An event, such as a major disaster or major change in technology, that affects

shareholder equity or share price.

77

4. An adjustment where any of the companies participating in the merger, demerger,

acquisition, or transfer of shares from another company, buys back treasury stock.

5. An increase or decrease in the number of entities or companies participating in the

merger, demerger, acquisition, or transfer of shares.

6. Other terms/conditions that the contract stipulates may be altered and that have been

publicly disclosed.

Article 25 The contract for participation by the Company in a merger, demerger, acquisition, or of

shares shall record the rights and obligations of the companies participating in the

merger, demerger, acquisition, or transfer of shares, and shall also record the following:


2. Principles for the handling of equity-type securities previously issued or treasury

stock previously bought back by any company that is extinguished in a merger or that

is demerged.

3. The amount of treasury stock participating companies are permitted under law to buy

back after the record date of calculation of the share exchange ratio, and the

principles for handling thereof.

4. The manner of handling changes in the number of participating entities or companies.

5. Preliminary progress schedule for plan execution, and anticipated completion date.

6. Scheduled date for convening the legally mandated shareholders meeting if the plan

exceeds the deadline without completion, and relevant procedures.

Article 26 After public disclosure of the information, if the Company participating in the merger,

demerger, acquisition, or share transfer intends further to carry out a merger, demerger,

acquisition, or share transfer with another company, all of the participating companies

shall carry out anew the procedures or legal actions that had originally been completed

toward the merger, demerger, acquisition, or share transfer; except that where the

number of participating companies is decreased and a participating company's

shareholders meeting has adopted a resolution authorizing the board of directors to

alter the limits of authority, such participating company may be exempted from calling

another shareholders meeting to resolve on the matter anew.

Article 27 Where any of the companies participating in a merger, demerger, acquisition, or

transfer of shares is not a public company, the Company shall sign an agreement with

the non-public company whereby the latter is required to abide by the provisions of

Article 22, Article 23, and the preceding article.

Article 28 Under any of the following circumstances, the Company acquiring or disposing of

assets shall publicly announce and report the relevant information on the FSC's

designated website in the appropriate format as prescribed by regulations within 2 days

counting inclusively from the date of occurrence of the event:

1. Acquisition or disposal of real property or right-of-use assets thereof from or to a

related party, or acquisition or disposal of assets other than real property or right-of-

use assets thereof from or to a related party where the transaction amount reaches 20

percent or more of paid-in capital, 10 percent or more of the Company's total assets,

or NTD300 million or more; provided, this shall not apply to trading of domestic

government bonds or bonds and separate and resale agreements, or subscription or


enterprises.

78

2. Merger, demerger, acquisition, or transfer of shares.

3. Losses from derivatives trading reaching the limits on aggregate losses or losses on

individual contracts set out in the procedures adopted by the Company.

4. Where equipment or right-of-use assets thereof for business use are acquired or

disposed of, and furthermore the transaction counterparty is not a related party, and

the transaction amount meets any of the following criteria:

(1) For a public company whose paid-in capital is less than NTD10 billion, the

transaction amount reaches NTD500 million or more.

(2) For a public company whose paid-in capital is NTD10 billion or more, the

transaction amount reaches NTD1 billion or more.

5. Where land is acquired under an arrangement on engaging others to build on the

company's own land, engaging others to build on rented land, joint construction and

allocation of housing units, joint construction and allocation of ownership

percentages, or joint construction and separate sale, and furthermore the transaction

counterparty is not a related party, and the amount the Company expects to invest in

the transaction reaches NTD500 million.

6. Where an asset transaction other than any of those referred to in the preceding 5

subparagraphs, a disposal of receivables by the Company, or an investment in the

mainland China area reaches 20 percent or more of paid-in capital of the Company or

NTD300 million; provided, this shall not apply to the following circumstances:

(1) Trading of domestic government bonds.

(2) The Company's securities trading on securities exchanges or OTC markets, or

subscription of ordinary corporate bonds or general bank debentures without

equity characteristics (excluding subordinated debt) that are offered and issued in

the primary market, or subscription or redemption of securities investment trust

funds or futures trust funds, or subscription by a securities firm of securities as

necessitated by its undertaking business or as an advisory recommending

securities firm for an emerging stock company, in accordance with the rules of

the Taipei Exchange.

(3) Trading of bonds under repurchase and resale agreements, or subscription or


enterprises.

The amount of transactions above shall be calculated as follows:

1. The amount of any individual transaction.

2. The cumulative transaction amount of acquisitions and disposals of the same type

of underlying asset with the same transaction counterparty within the preceding

year.

3. The cumulative transaction amount of acquisitions and disposals (cumulative

acquisitions and disposals, respectively) of real property or right-of-use assets

thereof within the same development project within the preceding year.

4. The cumulative transaction amount of acquisitions and disposals (cumulative

acquisitions and disposals, respectively) of the same security within the preceding

year.

"Within the preceding year" as used in the preceding paragraph refers to the year

preceding the date of occurrence of the current transaction. Items duly announced in

accordance with these Regulations need not be counted toward the transaction amount.

79

The Company shall compile monthly reports on the status of derivatives trading engaged

in up to the end of the preceding month by the Company and any subsidiaries that are not

domestic public companies and enter the information in the prescribed format into the

information reporting website designated by the FSC by the 10th day of each month.

When the Company at the time of public announcement makes an error or omission in an

item required by regulations to be publicly announced and so is required to correct it, all

the items shall be again publicly announced and reported in their entirety within two days

counting inclusively from the date of knowing of such error or omission.

The Company acquiring or disposing of assets shall keep all relevant contracts, meeting

minutes, log books, appraisal reports and CPA, attorney, and securities underwriter

opinions at the company, where they shall be retained for 5 years except where another

act provides otherwise.


1. For the trading by the Company in the securities of its parent company, subsidiary

company or its related enterprise from the domestic or overseas exchange markets or

OTCs, the format for items and contents to be publicly disclosed is set out as Appendix 2.

2. Where land is acquired under an arrangement on engaging others to build on the

company's own land, engaging others to build on rented land, joint construction and

allocation of housing units, joint construction and allocation of ownership percentages, or

joint construction and separate sale, the format for the items and contents to be publicly

disclosed is set out as Appendix 3.

3. For the acquisition or disposal of real property, equipment or its right-of-use assets, and

the related party transactions, the format for the public disclosure is set out as Appendix 4.

4. For the trading in securities, intangible assets or right-of-use assets thereof or

memberships which are neither listed on an exchange nor has its shares traded on an OTC

market, and the disposal of right of claim by the Company, the format for the public


5. For the investment in the mainland China area, the format for public disclosure is set out

as Appendix 6.

6. For the derivatives trading, the format for the public disclosure of information within 2

days counting inclusively from the date of occurrence of the event is set out as Appendix

7-1.

7. For the derivatives trading, the format for the public disclosure of information by the

tenth of each month is set out as Appendix 7-2.

8. For the transaction in a merger, demerger, acquisition, or transfer of shares, the

announcement format is set out as Appendix 8.

Article 30 Where any of the following circumstances occurs with respect to a transaction that a

public company has already publicly announced and reported in accordance with

Article 28, a public report of relevant information shall be made on the information

reporting website designated by the FSC within 2 days counting inclusively from the

date of occurrence of the event:

1. Change, termination, or rescission of a contract signed in regard to the original transaction.

2. The merger, demerger, acquisition, or transfer of shares is not completed by the scheduled

date set forth in the contract.

3. Change to the originally publicly announced and reported information.

80

Article 31 Information required to be publicly announced and reported in accordance with the

provisions of Article 28 and Article 30 on acquisitions and disposals of assets by a

public company's subsidiary that is not itself a public company in Taiwan shall be

reported by the Company.

The paid-in capital or total assets of the Company shall be the standard applicable to a

subsidiary referred to in the preceding paragraph in determining whether, relative to

paid-in capital or total assets, it reaches a threshold requiring public announcement and

regulatory filing under Article 28, paragraph 1.

Article 32 For the calculation of 10 percent of total assets under the Procedure, the total assets

stated in the most recent parent company only financial report or individual financial

report prepared under the Regulations Governing the Preparation of Financial Reports

by Securities Issuers shall be used.

Article 33 Where it is not specified in the Procedure, it shall be subject to the relevant laws and

regulations and the competent authorities.

Article 34 After the Procedure is approved by the board of directors, it shall be submitted to the

shareholders' meeting for approval. In the event of amendments, the procedure shall

apply.

These Articles of Incorporation were set up on April 28, 1989.

The 1stamendment was implemented on October 29, 1991.

The 2nd

amendment was implemented on May 27, 1995.

The 3rd

amendment was implemented on December 28, 1999.

The 4th

amendment was implemented on April 24, 2003.

The 5th

amendment was implemented on June 15, 2007.

The 6th


The 7th


The 8th


The 9th


The 10th


The - amendment was implemented on -

81

APPENDIX 1

The appraisal report shall specify the following items:

1. The items specified under the technical rules for the appraisal of real estate.

2. The matters related to the professional appraiser and appraisal officer.

(1) The name, capital amount, organizational structure and personnel composition of the

professional appraiser.

(2) The name, age, and educational and career background (with certificates) of the appraiser ;

the number of years and duration being engaged in the appraisal work, and the number of

cases undertaking the appraisal work.

(3) The relationship between the professional appraiser, appraisal officer and the principal of the

appraisal.

(4) The appraisal report shall include a statement attesting to the professional competence and

independence of the appraisal personnel who prepared the report or opinion, and that they

have evaluated and found that the information used is reasonable and accurate, and that they

have complied with applicable laws and regulations, and the matters contained therein shall

contain no misrepresentations or nondisclosures.

(5) The date on which the appraisal report is issued.

3. The basic information on the target surveyed shall include at least the name, nature, location,

area and other information of the target.

4. A comparative example of real estate transactions in the target area.

5. For the types of the appraisal being limited price, specified price or special price, the limited,

specified or special conditions; whether the current situation meets such conditions; the reason

and rationality of the difference from the normal price; and whether such limited price, specified

price or special price shall be sufficient to serve as the reference for the trading price.

6. In the case of a contract for joint construction, the reasonable allocation ratio between the two

parties shall be stated.

7. Estimation of land value-added tax.

8. In the case that appraised value of a real estate at the same appraisal date among appraisers

differs and the difference in value is in excess of 20 percent, whether it been handled in

accordance with Article 41 of the Real Estate Appraiser Act.

9. The annex shall include the appraisal details of the target, the ownership registration material,

the cadastral map transcript, the urban plan sketch, the location map of the target, the land use

zoning certificate, and the current status of the target.

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APPENDIX 2

(Applicable for the securities trading in the domestic and overseas centralized securities exchange

markets or over-the-counter markets)

Announcement by the x x Co., Ltd.

Date:

The Company hereby announces the relevant information on the securities it acquired or disposed in

accordance with the “Regulations Governing the Acquisition or Disposal of Assets by Public

Companies” as follows:

1. Name of the securities:

2. Date of the transaction: from (day) (month) (year) to (day) (month) (year)

3. Quantity: ; price per unit: NTD ; total amount: NTD

4. If the transaction counterparty is a related party, the counterparty of the transaction: (ex. xx

Incorporation); the relationship with the company: (ex. the invested company re-invested by

the Company holding xx% of its shares), the date that the board of directors passes the

resolution: (day) (month) (year) ; the date of the supervisor's recognition: (day) (month)

(year)

5. Gains (or losses) of disposition: NTD

6. Accumulative quantity of the trading securities held to date (including this

transaction): ; amount: NTD ; shareholding ratio: %; rights restricted: (ex.

pledge)

7. Relationship with the target company of the transaction:

8. Ratio of the portfolio investment (including this transaction) to date accounting for the most

recent financial report: total assets % ; total equity % ; the most recent financial

report working capital (not applicable for the financial holding company, bank, bills finance

and insurance industry) : NTD

9. Specific purpose for the acquisition or disposition:

10. Whether or not objected by the director in this transaction:

11. Other statements:

Notes:

1. Item 4: If the counterparty of the transaction is a related party, the filing item “date of the

supervisor's recognition” shall be the date of approval of the audit committee, if the audit

committee has been set up in accordance with the provisions of the Act.

2. Item 5: not applicable for the securities acquired.

3. Item 8:

(1) The portfolio investment is the total amount (including this transaction) held by

the company to date of its own settlement; the total assets and total equity are the

amounts specified in the most recent financial statements of the company.

(2) If the securities are acquired with the working capital being negative, the source of

the funds for acquiring the securities and the specific reason for acquiring the

securities even under the situation of insufficient funds shall be additionally

announced.

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APPENDIX 3 (Applicable for the real property acquired where the land is acquired under an

arrangement on engaging others to build on the company's own land, engaging others to build on

rented land, joint construction and allocation of housing units, joint construction and allocation of

ownership percentages, or joint construction and separate sale)


Date:

The Company hereby announces the relevant information on the xx assets it intends to acquire with

the means of xx in accordance with the “Regulations Governing the Acquisition or Disposal of

Assets by Public Companies” as follows:

1. Type of contract:

2. Date of the occurrence: from (day) (month) (year) to (day) (month) (year)

3. Contract counterparty: ; the relationship with the company:

4. If the transaction counterparty is a related party, the date that the board of directors passes the


(year)

5. Total contract amount: NTD ; Estimated investment amount: NTD

Duration of the contract: from (day) (month) (year) to (day) (month) (year)

Limitation clauses:

Other important agreements:

6. Name of firm or company of the professional appraiser: ; appraisal result: NTD

Name of real estate appraiser: ; practicing license No. of the real estate appraiser:

If the appraisal result has material difference, the reason for such difference and the

accountant's opinion:

Name of accounting firm: ; certified public accountant name: ; practicing license No. of

the certified public accountant:

Whether the appraisal report adopts a limited price, a specified price or special price:

Whether the appraisal report has not been obtained: ; reasons for not yet obtaining the

appraisal report:

7. Specific purpose for the acquisition:



Notes:

1. Item 2: The date of occurrence means the date of contract signing, date of payment, date of

execution of a trading order, date of title transfer, date of a resolution of the board of directors,

or other date that can confirm the counterparty and monetary amount of the transaction,

whichever date is earlier.




3. Item 5: Other important agreements shall indicate whether there is a repurchase (reverse)

agreement, cancellation of the contract or other uncertain or special terms.

4. Item 6:

(1) Not applicable for the real property acquired where the land is acquired under an

arrangement on engaging others to build on the company's own land, engaging others to

build on rented land; the appraisal result shall indicate the appraiser's assessment opinion

on the reasonableness of the cooperation mode of the contract.

(2) When the reference price of the transaction price is based on a limited price, a specified

price or a special price, the normal price and the appraisal result of the limited price or

84

specified price shall be announced separately.

(3) Non-related party transactions: based on the date of occurrence of the current

transaction, the transaction amount within the preceding year reaches 20 percent or more

of paid-in capital, or NTD300 million or more, a professional appraisal report or a

certified public accountant opinion shall be obtained.

(4) Related party transactions: based on the date of occurrence of the current transaction, the

transaction amount within the preceding year reaches 20 percent or more of paid-in

capital, or NTD300 million or more, or 10 percent or more of the company's total assets,

a professional appraisal report or a certified public accountant opinion shall be obtained.

(5) In the case of a company with shares having no par value or a par value other than NTD10,

based on the date of occurrence of the current transaction, the transaction amount within

the preceding year reaches 10 percent or more of the equity attributed to the shareholders

of the parent company, or NTD300 million or more, a professional appraisal report or a

CPA opinion shall be obtained.

(6) If the appraisal results of the acquired asset are all higher than the transaction price, or

the appraisal results of the disposed assets are all lower than the transaction price, it

shall not be necessary to obtain another certified public accountant opinion.

85

APPENDIX 4 (Applicable for acquisition or disposal of the real estate, equipment or its right-of-

use assets)


Date:

The Company hereby announces the relevant information on the xx assets it acquired/disposed in

accordance with the “

Regulations Governing the Acquisition or Disposal of Assets by Public Companies” as follows:

1. Name and type of the target: (ex. the land located in xx subsection, xx section, northern

district, Taichung City)

2. Date of the occurrence: (day) (month) (year)

3. Quantity of trading units: (ex. xx square meters, equivalent to xx ping); price per unit:

NTD ; total amount: NTD

4. Counterparty of the transaction: (ex. xx Inc.); the relationship with the company: (ex. the

invested company re-invested by the company holding xx% of its shares)

5. If the transaction counterparty being a related party:

(1) Date of adoption by the board of directors: the date that the board of directors passes the


(year)

(2) If the real estate or its right of-use assets is acquired from a related party, the appraisal

price in accordance with the provisions of Articles 16 and 17 of the Criteria:

6. Reasons for selecting the related party for the transaction:

Owner of the previous transfer: ; relationship with the company: ;

relationship with the counterparty of the transaction:

Last transfer date: (day) (month) (year) ; amount: NTD

7. The owner within the last 5 years of the transaction target has been the company's related

party:

Date of the acquisition by the related party: (day) (month) (year); acquisition price: NTD ;

relationship with the company at the time of acquisition:

Date of the disposal by the related party: (day) (month) (year); disposition price: NTD ;

relationship with the company at the time of disposition:

8. Estimated gains (or losses) from the disposition: NTD

9. Terms on delivery or payment (including payment period and amount):

Limitation clauses:


10. Type of transaction decided: (ex. bidding, price comparison or bargaining)

Reference basis for price decision:

Decision made by:

11. Name of firm or company of the professional appraiser: ; appraisal amount: NTD

Name of professional appraiser: ; practicing certificate No. of the professional

appraiser: ; when the appraisal results have significant difference, the reason for such

difference and the certified public accountant's opinion:

Name of accounting firm: ; certified public accountant name: ; certified public

accountant practicing certificate No.: ;

Whether the appraisal report adopts a limited price, a specified price or a special price:

Whether the appraisal report has not yet obtained: ; reasons for not yet

obtaining the appraisal report:

12. Broker:

Brokerage fee: NTD

86




Notes:





2. Item 4: If the counterparty of the transaction is a natural person without being a related party

of the company, it is exempted to disclose the name.




4. Item 8: not applicable for the acquisition of assets; if deferred gains (or losses) out of

disposition are expected, a list shall be made to explain on the recognition.


agreement, cancellation of the contract or other uncertain or special terms. In the case of the

right-of-use asset, the lease term, whether the priority lease or rent exists upon lease

expiration, and other important matters regarding the lease shall be indicated.

6. Item 11:

(1) When the reference price of the transaction price is based on a limited price, a specified

price or a special price, the normal price and the appraisal result of the limited price or

specified price shall be announced separately.









(4) In the case of a company with shares having no par value or a par value other than

NTD10, based on the date of occurrence of the current transaction, the transaction

amount within the preceding year reaches 10 percent or more of the equity attributed to

the shareholders of the parent company, or NTD300 million or more, a professional

appraisal report or a certified public accountant opinion shall be obtained.

(5) If the assets are acquired or disposed of by the court auction procedure, the certificate

issued by the court may be used instead of the appraisal report or certified public

accountant's opinion.

(6) If the appraisal results of the acquired real estate, equipment or its right-of-use assets are

all higher than the transaction price, or the appraisal results of the disposed real estate,

equipment or its right-of-use assets are all lower than the transaction price, it shall not be

necessary to obtain another certified public accountant opinion.

87

APPENDIX 5

(Applicable for trading in the securities, intangible assets or its right-of-use assets, membership

certificate and the right of claims disposed by the Company not on the centralized securities

exchange market or over-the-counter market )


Date:

The Company hereby announces the relevant information on xx securities (intangible assets or its

right-of-use assets, membership certificate, the right of claims) it acquired or disposed in accordance

with the “ Regulations Governing the Acquisition or Disposal of Assets by Public Companies” as

follows:

1. Transaction target: (in case of preferred stocks, the terms and conditions of its issuance shall

be indicated, such as the dividend yield ratio.)

2. Date of the occurrence: (day) (month) (year)

3. Quantity of trading units: ; price per unit: NTD ; total amount: NTD

4. Counterparty of the transaction: (ex. xx Inc.); the relationship with the company: (ex. the

invested company re-invested by the company holding xx% of its shares)

5. If the transaction counterparty being a related party, the date of resolution passed by the board

of directors: (day) (month) (year) ; the date of the supervisor's recognition: (day) (month)

(year)

6. Reasons for selecting the related party for the transaction:

Owner of the previous transfer: ; relationship with the company: ; relationship with

the counterparty of the transaction:

Last transfer date: (day) (month) (year) ; amount: NTD

7. The owner within the last 5 years of the transaction target has been the company's related

party:

Date of the acquisition by the related party: (day) (month) (year); acquisition price: NTD ;

relationship with the company at the time of acquisition:

Date of the disposal by the related party: (day) (month) (year); disposition price: NTD ;

relationship with the company at the time of disposition:

8. The relevant matters concerning the disposition of the right of claims:

(1) The type of collateral attached to the right of claims disposed:

(2) If such disposition is concerning the right of claims toward the related party:

Name of the related party: ;

Face value of this disposition of the right of claims toward such related party:

9. Gains (or losses) from the disposition: NTD

10. Terms on delivery or payment (including payment period and amount):

Limitation clauses of the contract:


11. Method of transaction decision: ; decision made by:

Reference basis for price decision:

Net value per share of the target company of the securities acquired or disposed: 12. Whether the certified public accountant issued an opinion that the transaction price is reasonable:


accountant practicing certificate No.:

13. Accumulative quantity of the trading securities held to date (including this

transaction): ; amount: NTD ; shareholding ratio: %; rights restricted: (ex.

pledge)

14. Ratio of the portfolio investment (including this transaction) to date accounting for the most

88

recent financial report: total assets % ; total equity % ; the most recent financial

report working capital (not applicable for the financial holding company, bank, bills finance

and insurance industry) : NTD

15. Broker: ; brokerage fee: NTD




Notes:





2. Item 4: If the counterparty of the transaction is a natural person without being a related party

of the company, it is exempted to disclose the name.




4. Item 9: not applicable for the acquisition of assets; if deferred gains (or losses) out of

disposition are expected, a list shall be made to explain on the recognition.


agreement, cancellation of the contract or other uncertain or special terms. In the case of the

right-of-use asset, the lease term, whether the priority lease or rent exists upon lease

expiration, and other important matters regarding the lease shall be indicated.

6. Item 12:









(3) In the case of a company with shares having no par value or a par value other than

NTD10, based on the date of occurrence of the current transaction, the transaction amount

within the preceding year reaches 10 percent or more of the equity attributed to the

shareholders of the parent company, or NTD300 million or more, a professional appraisal

report or a certified public accountant opinion shall be obtained.

(4) If the assets are acquired or disposed of by the court auction procedure, the certificate

issued by the court may be used instead of the appraisal report or certified public

accountant's opinion.

7. Item 14:

(1) The portfolio investment is the total amount (including this transaction) held by the

company to date of its own settlement; the total assets and total equity are the amounts

specified in the most recent financial statements of the company.

(2) If the securities are acquired with the working capital being negative, the source of the

funds for acquiring the securities and the specific reason for acquiring the securities even

under the situation of insufficient funds shall be additionally announced.

89

APPENDIX 6 (Applicable for investment in mainland China area) The Company hereby announces the relevant information on the investment in mainland China are

in accordance with the “Regulations Governing the Acquisition or Disposal of Assets by Public


1. Increased (decreased) investment portion in this transaction:

(1) Date of the occurrence: (day) (month) (year)

(2) Investment method:

(3) Quantity of trading units: ; price per unit: NTD ; total amount: NTD

(4) Information on the invested company in mainland China:

(1) Name of the company:

(2) Paid-in capital: NTD

(3) Intended capital increase in this transaction: NTD

(4) Major business items:

(5) Financial statements of the most recent year:

Type of CPA's opinion: ; total equity: ; profit and loss amount:

(6) Actual investment amount to date in the invested company of mainland China of

this transaction:

(5) Counterparty of the transaction: ; relationship with the company:

(6) If the transaction counterparty being a related party, the date of resolution passed by the

board of directors: (day) (month) (year) ; the date of the supervisor's recognition: (day)

(month) (year)

(7) Reasons for selecting the related party for the transaction:

Owner of the previous transfer: ; relationship with the company: ; relationship

with the counterparty of the transaction: ; last transfer date: (day) (month) (year) ;

amount: NTD

(8) The owner within the last 5 years of the transaction target has been the company's

related party:

Date of the acquisition by the related party: (day) (month) (year); acquisition price:

NTD ; relationship with the company at the time of acquisition:

Date of the disposal by the related party: (day) (month) (year); disposition price:

NTD ; relationship with the company at the time of disposition:

(9) Gains (or losses) of disposition:

(10) Terms on delivery or payment (including payment period and amount): ; limitation

clauses of the contract: ; Other important agreements:

(11) Method of transaction decision: ; decision made by: ; reference basis for price

decision:

(12) Whether the certified public accountant issued an opinion that the transaction price is

reasonable:


accountant practicing certificate No.:

(13) Broker:

(14) Specific purpose for the acquisition or disposition:

(15) Whether or not objected by the director in this transaction:

2. Total investment amount in the mainland China to date:

(1) The total amount of investment approved by the Investment Commission (MOEAIC)

in the mainland China area (including this investment): NTD

Paid-in capital: %

accounting for the total assets ratio of the most recent financial statements: %

Total equity: %

90

(2) The actual total amount of investment in the mainland China area: NTD

Paid-in capital: %

accounting for the total assets ratio of the most recent financial statements: %

Total equity: %

The amount of gains or losses recognized in the past three years for the investment in

mainland China: NTD , NTD , NTD

The amount of profit remitted back in the last three years: NTD , NTD

(3) Other statements:

Notes:

1. Investing in the mainland China area includes the following investment methods:

(1) Direct investments in the company of the mainland China.

(2) Remittances from the third region to invest the company of the mainland China.

(3) Investments in establishing a company in the third region to reinvest in the company of the

mainland China.

(4) Investments in an existing company in the third region to reinvest in the company of the

mainland China.

(5) Other methods of investment in the mainland China.

2. Item 1 (1): The date of occurrence means the date of contract signing, date of payment, date of

execution of a trading order, date of title transfer, date of a resolution of the board of directors, or

other date that can confirm the counterparty and monetary amount of the transaction, whichever

date is earlier.

3. Item 1 (6): If the counterparty of the transaction is a related party, the filing item “date of the



91

APPENDIX 7-1 (Applicable for public disclosure of Information on engaging in the derivatives

trading within 2 days counting inclusively from the date of occurrence of the event) Announcement by the x x Co., Ltd.

Date:

The Company hereby announces the relevant information on engaging in the derivatives trading

in accordance with the “Regulations Governing the Acquisition or Disposal of Assets by Public


1. Type of contract (Note 1):

2. Date of the occurrence:

3. Amount of the contract (Note 2):

4. Amount of the margin (or premium) paid:

5. Reasons for engaging in derivatives(Note 3):

6. Amount of losses assessed at fair value (including realized and unrealized):

Maximum amount of losses for overall or individual contracts under the Handling Procedure:

Reasons for losses and impact on the company:

7. Contract period:

8. Limitation clauses:

9. Other important agreements:


Note 1: The type of contract shall indicate the futures contract, the forward contract, the exchange or

the option contract.

Note 2: The contract notional amount shall disclose the principal amount, fixed amount,

denomination or other similar amount of the contract.

Note 3: The reason for engaging in derivatives transactions; the purpose is for trading or for hedging.

For the purpose of hedging, the hedged item, its amount and profit and loss status shall be

indicated.

Note 4: The embedded derivatives commodity that are separately recognized from the main contract

are derivatives commodity under the provisions of this form.

92

APPENDIX 7-2 (Applicable for public disclosure of information on engaging in the derivatives trading being reported before 10th of every month)

In accordance with the “Regulations Governing the Acquisition or Disposal of Assets by Public Companies”, the Company hereby announces the relevant information

on the accumulated derivatives trading engaged by the Company, its overseas subsidiaries and domestic non-public subsidiaries as of the end of the month of the year

as follows: (The announcements shall be made in separate forms with respect to the Company, its overseas subsidiaries and domestic non-public subsidiaries.)

1. Applicable for non-banking & bills financing industry (Unit: NTD thousand) Contract Type Futures Individual Options Portfolio

Options

Forward

Contract

Swaps Hybrid contract (including

the mixed product as

designated at fair value

through profit and loss)

Others

Transaction Information Put Call Put Call

Holding for trading Margin paid

Premium received (paid)

Open

Contract

Total contract amount

Fair value

Recognized as the non-realized gains

and losses in the current year

Offset

Contract


Recognized as the realized gains and

losses in the current year

No

t ho

ldin

g F

or trad

ing

Does not

match Hedging

Accounting

Margin paid


Open

Contract


Fair value



Offset

Contract




Match Heding

Accounting



Open

Contract


Fair value



Offset

Contract




93

Note 1: This table shall indicate the announcement of the derivative trading information as of the end of last month, not only the trading situation of one

single month.

Note 2: The announcement of the overseas subsidiaries and the domestic non-public subsidiaries shall be made by the public company on their behalf.

If they are not engaged in derivatives trading, they shall perform the “No-filing Setting” operation on a monthly basis.

Note 3: For a hybrid contract of which the commodity of its main contract is within the scope of IFRS9 and does not meet the contractual cash flow

characteristic test, the overall information of the hybrid contract shall be stated in this form, and additional notes may be made to describe the

nature of the contract, the trading conditions and other information in the remark column.

Note 4: For a hybrid contract of which the commodity of its main contract is not within the scope of IFRS9, the transaction content shall be

disassembled into its original form, except that the accounting treatment of the embedded derivative instrument is not required to be recognized

separately from its main contract (non-derivatives), and the information of the derivative trading shall be stated in this form. In addition, for the

overall hybrid contract “designated as a financial asset or financial liability measured at fair value through profit or loss” by the company, a

separate form shall be used for filing subject to the regulations and additional notes may be made to describe the nature of the contract, the

trading conditions and other information in the remark column.

94

2. Applicable for the banking & bills financing industry

for the trading on behalf of customer accounts, some certain parts may not be listed for statistics) Unit: US$1,000

Contract Type Interest

Rate

Exchange

Rate

Equity

Securities

Commodity Credit Others

Notional Amount

Outstanding

OTC Market For the Purpose of Trading

Not for the Purpose of Trading

Exchange Market For the Purpose of Trading

Not for the Purpose of Trading

Fair Value For the Purpose of

Trading

Total Positive Amount

Total Negative Amount

Not for the

Purpose of Trading

Item Hedged

Hedging Instrument

Gains and Losses Amount

Recognized in the

Statements

For the Purpose of Trading

Not for the

Purpose of Trading

Item Hedged

Hedging Instrument

The Company may additionally disclose the portion in line with the hedge account which is classified into the purpose of hedging.

95

APPENDIX 8 (Applicable for conducting a merger, demerger, acquisition or transfer of

shares)


Date:

The Company hereby announces the relevant information on conducting a merger, demerger,

acquisition or transfer of shares in accordance with the “Regulations Governing the Acquisition or

Disposal of Assets by Public Companies” as follows:

1. Type of merger and acquisition: (ex. merger, demerger, acquisition or transfer of shares)

2. Date of occurrence:

3. Name of the company participating in the merger and acquisition: (ex. the name of the company that merges

the other company, is divided into a newly established company, acquires or take assignment of the shares of

the target company)

4. The counterparty of the transaction: (the transaction partner that mergers another company, takes

over the divide d and assigned company, acquires or take assignment of the shares of the

target company )

5. The relationship between the counterparty and the company: (The invested company reinvested by the

Company holding xx% of its shares)

Reasons for selecting the related company or related party for acquisition or transfer of shares:

Whether it does not impact on the shareholders' equity:

6.Purpose of merger and acquisition:

7. Benefits expected after the merger and acquisition :

8.Impact of the net value per share and earnings per share after the merger and acquisition :

9.Conversion ratio and calculation basis:

Whether the certified public accountant, lawyer or securities underwriter has issued an opinion with

reasonable assurance:

Name of certified public accountant firm, law firm or securities underwriter company:

Name of certified public accountant, lawyer: ; practicing certificate No. of certified public accountant or

lawyer:

10.Schedule of completion:

11. Relevant matters regarding the rights and obligations of the surviving or newly established company that

generally assumes the dissolved (or divided) company:

12. Basic information on the participating companies in the merger and acquisition:

13. Relevant matters regarding division:

(1) Assessed value of the business and assets prepared to be transferred to the surviving or the newly

established company

(2) The total number, type and quantity of shares acquired by the divided company or its shareholders

(3) When the capital of the divided company is reduced, the relevant matters regarding the capital

reduction

14. Future terms and conditions and restrictions of the transfer of shares acquired:

96

15. Other important agreements:



Notes:

I. Item 9: Where a public company merges its subsidiary held directly or indirectly 100% of the

issued shares or total capital, or the merger between its subsidiaries held directly or indirectly

100% of the issued shares or total capital, it is not necessary to obtain a reasonable opinion from a

CPA, attorney or securities underwriter on the share conversion ratio, the purchase price or the

allotment on cash or other property to the shareholders.

2. Item 11: The relevant matters regarding the surviving or newly established company generally

assuming the rights and obligations of the dissolved company shall include the principles for

handling treasury shares and already-issued equity securities).

3. Item 12: The basic information of the participating companies in the merger and acquisition

include the company name and the main content of its business.

97

Discussions No. 3

Proposal: The Company Corporate Charter (Articles of

Incorporation) amendment is submitted for discussion.

1. In order to implement corporate governance, the election of

directors is conducted overall via the nomination system,

and the provisions of Article 21 are amended.

2. The mapping of the Articles of Incorporation before and

after the amendment and Draft of Amendment is shown in

the table below. (Please refer to Page 98~108 of the

Annual Meeting Handbook)

Resolutions:

98

“Taichung Commercial Bank’s Corporate Charter” (Articles of

Incorporation) amended before and after

Clauses after the amendment Original clause Remark

Article 21

The Bank’s Board is composed of 9~15

directors elected among the competent

individuals in the meeting of

shareholders for a 3-year tenure and can

be reelected in accordance with Article

198 of the Company Act. The total

ordered stock shares of all directors

shall comply with the requirements of

the “Rules and Review Procedures for

Director and Supervisor Share

Ownership Ratios at Public

Companies.”

For the directors (including independent

directors) of this Bank, the nomination

system is adopted to have directors

elected from the list of candidates.

For the directors, the number of

independent directors shall not be less

than two seats, and one fifth of the

director seats; also, non-independent

directors and independent directors

should be elected together for the

respective number of seats with the

candidates receiving the higher electoral

votes elected.

The professional qualifications,

shareholding and part-time job

restrictions, definition of independence,

nomination method, proxy and other

compliance matters of the independent

directors shall be handled in accordance

with the “Regulations Governing

Appointment of Independent Directors

and Compliance Matters for Public

Companies”.

Article 21

The Bank’s Board is composed of 9~15

directors elected among the competent

individuals in the meeting of

shareholders for a 3-year tenure and can

be reelected in accordance with Article

198 of the Company Act. The total

ordered stock shares of all directors

shall comply with the requirements of

the “Rules and Review Procedures for

Director and Supervisor Share

Ownership Ratios at Public

Companies.”

For the directors referred to above, the

number of independent directors shall

not be less than two seats, and one fifth

of the director seats; also, the

nomination system is adopted to have

independent directors elected from the

list of candidates. Non-independent

directors and independent directors

should be elected together for the

respective number of seats with the

candidates receiving the higher electoral

votes elected.

The professional qualifications,

shareholding and part-time job

restrictions, definition of independence,

nomination method, proxy and other

compliance matters of the independent

directors shall be handled in accordance

with the “Regulations Governing

Appointment of Independent Directors

and Compliance Matters for Public

Companies”.

In order to

implement

corporate

governance, the

election of

directors is

conducted overall

via the

nomination

system, and the

provisions of

Article 21 are

amended.

99


Company Corporate Charter (Articles of Incorporation) (Draft) Chapter 1 General rules

Article 1 The Bank was organized and incorporated in accordance with The Banking Act of

The Republic of China and the Company Corporate Charter (Articles of

Incorporation), known as “Taichung Commercial Bank” (hereinafter referred to as

“Taichung Bank”)

Article 2 The Bank is dedicated to support the national policy in finance and banking, and

provide viable financial service and advocate industrial and economic development.

Article 3 The Bank’s head office is in Taichung City and with appropriate branches set-up

domestically and internationally depending on its business operations. The

incorporation, revocation, or amendment of branch offices are reported to the

competent authorities for approval and are registered with the Ministry of Economic

Affairs in accordance with the resolutions of the Board.

Article 4 The Bank has announcements made by publishing it in the local daily newspaper

where the head office of the Bank is located or by the instructions of the competent

authorities.

Chapter 2 Stock

Article 5 The Bank’s authorized capital amounted to NTD43.2 billion with 4.32 billion shares

issued at NTD10 par, in which, the Board is authorized to have the unissued shares

issued by installments.

Preferred shares may be offered within the total amount of shares as mentioned in the

previous paragraph.

Article 5-1 The rights and obligations of the preferred shares of the Bank and other important

conditions for issuance are shown below:

1. If the Bank has earnings after account settlement, it shall appropriate the payment

of applicable taxes and for write-off loss carried forward from previous periods.

If there is still a balance, appropriate or make reversal for the legal reserve and

special reserve as required by law. The remainder shall be distributed as the stock

dividend of the year at the first priority.

2. Dividends for preferred shares shall be set at no more than 8% per annum.

3. Dividends for preferred shares shall be calculated on the offering price per share

and will be paid in cash once a year. After the ratification of the financial

statements by the annual meeting of shareholders, the Board shall set the

dividend day for the distribution of dividends of the previous fiscal year. The

distribution of dividends in the year of offering and the year of redemption shall

be based on the quantity of the issuing day.

4. The Bank is discretionary in payment of stock dividend for preferred shares. If

the Bank has no earnings in particular year and there is no payment of stock

dividend for common stocks, or the earnings are insufficient for dividend

payment, or the payment of dividend of preferred shares makes the capital

100

adequacy ratio of the Bank fall below the minimum requirements under law or

the competent authority, the Bank may resolve not to pay dividend for preferred

shares. Holders of preferred shares shall not have any objection of such decision.

If the preferred shares so issued are the non-accumulative type, the dividends not

being distributed or inadequate amount of dividends shall not be accumulated to

deferred payments with subsequent years in which the Bank has earnings.

5. Further to the entitlement of dividend stated in Subparagraph 3, if the preferred

shares offered are non-participating, the holders of preferred shares are not

entitled to cash dividend or stock dividend for common stocks through for cash

payment or capitalization of retained earnings and capital reserve.

6. Holders of preferred shares issued by the Bank have the priority to distribution of

residual assets over the holders of common stocks up to the amount of cash in the

offering. In case the competent authority ordered for a takeover of the Bank,

discontinuation of operation for clearing, and liquidation, the priority of the

holders of preferred shares is the same as the holders of common stocks.

7. Holders of preferred shares are not entitled to vote and taking part in the election

but could be elected as Directors, and are entitled to vote only in the

Shareholders’ Meeting of preferred shares and session of the Shareholders’

Meeting related to the rights and obligations of the holders of preferred shares.

8. No conversion of the convertible preferred shares issued by the Bank within 1

year from the day of offering. The timing for conversion shall be determined by

the Board as an integral part of the condition of offering under authorization.

Holders of convertible preferred shares may apply for conversion of preferred

shares in their holding to common stocks in whole or in part as stated in the

conditions of offering at the ratio of 1 preferred share to 1 common stock

(conversion ratio is 1:1). After the conversion of preferred shares to common

stocks, the rights and obligations shall be the same as common stocks. The

payment of dividend in the year of conversion of preferred shares shall be based

on the exact number of outstanding days of the shares in proportion to the

number of days in the year in the calculation. However, preferred shares

converted to common stocks prior to the ex-right (dividend) day are not entitled

to the payment of dividend for preferred shares in the year of payment and

payment in subsequent years, but are entitled to the payment of dividend of

common stocks from earnings and capital reserve.

9. There is no maturity date for preferred shares issued by the Bank and the holders

of preferred shares are not entitled to claim for the redemption of the shares. The

Bank may redeem the outstanding preferred shares in whole or in part from the

day after the 5th

anniversary of the offering of preferred shares under law or at the

permission of the competent authority. Redemption will be made at the offering

price. The preferred shares not being redeemed still be granted the rights and

obligations as mentioned in preceding paragraphs. Where the Bank may

determine to pay stock dividend in particular year, the payable dividend to the

deadline of redemption shall be calculated on the exact number of outstanding

days.

10. If the preferred shares issued by the Bank have a maturity date, it shall be no less

than 5 years. Holders of preferred shares are not entitled to request the Bank for

redemption of the shares before maturity. At maturity or the day after the

101

5th

anniversary of the issuance day and as permitted by applicable laws and the

competent authority, the Bank may redeem the shares at the offering price and

under related regulations of issuance, issue new shares for compulsory

conversation with the preferred shares (in the ratio of 1:1), or redeem by another

means as permitted by law. If the Bank cannot redeem the preferred shares in

whole or in part at maturity under objective factors or force majeure, the rights

inherent to the preferred shares shall prevail under the same conditions for

issuance provided under related regulations for issuance until the whole issue

was redeemed by the Bank.

The Board shall be authorized to assign the title, issuing date and the terms and

conditions for the offering of preferred shares at the time of offering pending on the

situation of the capital market and the willingness of the investors and in accordance

with the Articles of Incorporation of the Bank and other applicable legal rules.

Article 6 The Bank’s shares are ordered with the signature or seal of at least three directors

affixed for lawful issuance.

The Bank may have new shares issued by a book-entry in accordance with the

Company Act.

Article 7 The Bank’s dividend distribution is proposed by the Board for resolution in the

meeting of shareholders, but the Bank may not propose to have the capital distributed

as dividends when there are no earnings.

Article 8 The Company’s stock is processed in accordance with the “Regulations Governing the

Administration of Shareholder Services of Public Companies” published by the

competent authorities and other relevant laws and regulations.

Article 9 The Bank’s stock shares cannot be transferred within 60 days prior to the Annual

Meeting of Shareholders, 30 days prior to the extraordinary meeting of shareholders,

or 5 days prior to the record date of the bank’s distributing dividends, bonus or other

benefits.

Article 10 The Bank’s elected directors shall report the shareholding at the time of election to the

competent authorities. A director in office who has stock shares transferred for over

one half of the shareholding at the time of election will be discharged automatically.

A director in office shall report to the competent authorities and announce any

increase or decrease of shareholdings.

The director who is reelected prior to the tenure expired and has shares transferred

before inauguration for over one half of the shareholding at the time of election, or has

shares transferred for over one half of the shareholding during the stop-transferring

period before the meeting of shareholders convened will be disqualified.

Chapter 3 Business operation

Article 11 The Bank’s business operation is as follows:

1. H101021 Commercial banking

2. H301011 Securities firms

3. H408011 Futures introducing brokers

It is limited to the businesses authorized by the competent authorities referred to

102

above.

Article 12 The Bank may operate other businesses authorized by the competent authorities.

Chapter 4 Meeting of shareholders

Article 13 The meeting of shareholders includes the annual meeting of shareholders and

extraordinary meeting of shareholders. The annual meeting of shareholders is held

once a year and it is to be convened by the Board within 6 months after the fiscal year.

The extraordinary meeting of shareholders is to be convened by the Board or the

Auditing Committee when it is necessary. Shareholders who have over 3%

shareholding for more than 1 year may request the Board to convene an extraordinary

meeting of shareholders by filing a written proposal with the matters and reasons

detailed.

Where necessary, the meeting of the holders of preferred shares may be convened

under the applicable legal rules.

Article 14 Shareholders should be informed of the meeting date, place and subject 30 days in

advance for the Annual Meeting of Shareholders and 15 days in advance for the

extraordinary meeting of shareholders.

Article 15 Shareholders who are unable to attend the meeting of shareholders may issue the

Bank’s proxy with the scope of authorization detailed and signed or sealed to

commission the representative attending the meeting, but a shareholder is limited to

issuing one proxy and assigning one representative only. Proxy shall be served to the

Bank 5 days prior to the meeting of shareholders. When the proxy is issued in

duplicate, whichever is served first shall prevail. The proxy referred to above that was

announced to be revoked is not subject to this restriction.

Other pending matters are to be processed in accordance with the “Regulations

Governing the Use of Proxies for Attendance at Shareholder Meeting of Public

Companies” published by the competent authorities.

Article 16 The resolutions reached in the meeting of shareholders and the executions are as

follows:

1. Regulating and amending the Bank’s Company Corporate Charter (Articles of

Incorporation).

2. Resolutions reached on capital increase or decrease;

3. The election or dismissal of directors.

4. Audit the financial statements prepared by the Board and the Auditing

Committee’s Report. The reviewers for auditing the financial statements and

reports are to be appointed at the meeting of shareholders.

5. Resolutions reached on the distribution of earnings and shareholder bonus;

6. Resolutions reached on the other important matters;

Article 17 The resolutions reached in the meeting of shareholders, unless otherwise provided in

the Company Act, must be with the majority votes of the attending shareholders and

the shareholdings of the attending shareholders is over one half of the total number of

shares issued.

Article 18 If the shareholdings of the attending shareholders are not more than 50% but one third

103

of the total number of shares issued, a pseudo-resolution can be reached with the

majority votes of the attending shareholders. The shareholders should be informed

regarding the pseudo-resolution reached and another meeting of shareholders will be

convened within one month.

The pseudo-resolution reached in the meeting of shareholders referred to above with

the attendance of shareholders representing over one third of the shareholdings and

resolved with the majority votes is deemed as a resolution reached.

Article 19 Shareholders are entitled to one vote per share, unless otherwise provided by law.

Article 20 The minutes of the meeting of shareholders shall include the meeting time and date

and place, the name of the Chairman and the method of the resolutions, the essentials

of procedure and results, and the signature or seal of the Chairman. It should be

permanently reserved throughout the duration of the Company. The attendance

registry for the signature of the attending shareholders or the proxy of the

representative should be reserved for at least one year. However, for the litigation

filed by the shareholders in accordance with Article 189 of the Company Act, it

should be reserved until the end of the proceedings.

Chapter 5 Directors and the Board of Directors

Article 21 The Bank’s Board is composed of 9~15 directors elected among the competent

individuals in the meeting of shareholders for a 3-year tenure and can be reelected in

accordance with Article 198 of the Company Act. The total ordered stock shares of all

directors shall comply with the requirements of the “Rules and Review Procedures for

Director and Supervisor Share Ownership Ratios at Public Companies.”

For the directors (including independent directors) of this Bank, the nomination

system is adopted to have directors elected from the list of candidates.

For the directors, the number of independent directors shall not be less than two seats,

and one fifth of the director seats; also, non-independent directors and independent

directors should be elected together for the respective number of seats with the

candidates receiving the higher electoral votes elected.

The professional qualifications, shareholding and part-time job restrictions, definition

of independence, nomination method, proxy and other compliance matters of the

independent directors shall be handled in accordance with the “Regulations Governing

Appointment of Independent Directors and Compliance Matters for Public

Companies”.

Article 22 The Board shall have 3~5 managing directors elected by voting with the consent of

the majority attending directors and the attendance of two thirds of the directors.

According to the “Regulations Governing Appointment of Independent Directors and

Compliance Matters for Pubic Companies,” there must be at least one independent

director among the managing directors, and shall not constitute less than one fifth of

the managing directors. The Vice Chairman and Managing Director will be appointed,

if necessary, by a resolution of the Board.

Chairman, Vice Chairman and Managing Director will be elected among the

managing directors in accordance with the methods described in the preceding

paragraph. The chairman chairs the meeting of shareholders, the Board and the

104

General Board internally, and represents the Bank externally. When the Chairman is

on leave or unable to exercise his powers for certain reasons, the vice chairman is to

act on the Chairman’s behalf. When the vice chairman is on leave or is unable to

exercise his/her powers for certain reasons, the chairman is to appoint one managing

director to act on his/her behalf. If a representative is not appointed by the chairman,

one of the managing directors is elected to chair the meeting.

If the credibility of the Bank or the person in charge is damaged by the spreading

rumors or fraud, the chairman of the Bank should immediately file a lawsuit to the

prosecution office according to law.

When the Board meeting is in recess, the managing directors shall comply with the

law and regulations, the resolutions of the meeting of shareholders and the resolution

of the Board to execute banking business by convention convened by the chairman at

any time and resolved with the consent of the majority votes of the majority attending

general shareholders.

Article 23 The Board of Directors exercises the following authorities:

1. Review and approval of bylaws;

2. The review and approval of important business and plans, and the decision on

business plan;

3. Review and approval of important contracts;

4. Review and approval of budget;

5. The proposed earnings distribution;

6. The proposed capital increase or decrease;

7. The establishment, revocation or amendment of the Bank’s branches;

8. The property trade and investment decisions;

9. Auditing management and execution;

10. The appointment and dismissal of the managers;

11. The other powers entrusted in accordance with the law and regulations and in the

meeting of shareholders;

Article 24 The Board is to convene a meeting quarterly. An extraordinary meeting can be

convened for urgent matters or upon the request of a majority of the directors, unless

otherwise provided by the Company Act; it is to be convened by the Chairman. To

strengthen the management functions, the Board may set up functional committees for

various types of functionalities with the terms of powers regulated by the Board

separately.

Article 25 Directors shall attend the Board meeting in person. The directors who are unable to

attend the meeting for reasons may appoint another director to attend the meeting by

proxy each time and with the scope of authorization detailed.

The proxy referred to above is limited to one representative only.

Article 26 The resolutions of the Board, unless otherwise provided by the Company Act, must be

with the attendance of the majority of the directors and the consent of the majority of

the attending directors. The minutes of meeting should be signed or sealed by the

Chairman.

105

Article 27 When the number of the director discharged is over one third of the elected seats, the

Board shall convene a meeting of shareholders for a lawful election. The newly

reelected directors are to serve the remaining tenure of the former directors.

Article 27-1 The Board of Directors is authorized to have the remuneration to the chairman, vice

chairman, managing director, and independent directors determined and paid by

referring to the general payment standard of the industry.

Independent Directors are not eligible for our bank’s earnings distribution.

Our bank may pay for liability insurance policies that cover the liabilities for damages

as defined by statutes or court ruling within the scope of the business of Directors.

Article 28 The President and Vice President may be invited to attend the Board meetings,

managing director and responsible personnel meeting for consultation.

Chapter 6 Audit Committee

Article 29 The Auditing Committee of the Bank is consisted of all the independent directors. The

term of office is identical with the term of office for the independent directors and the

committee shall contain at least three members of whom at least one shall be expertise

in accounting or finance.

The performance of the duties and exercise of rights by the Auditing Committee, the

meeting procedure and other rules to comply shall be based on the “Regulations

Governing the Exercise of Powers by the Audit Committees of Public Companies”

and the “Organizational Code of the Auditing Committee” of the Bank.

Article 29-1 (Deleted)

Article 30 (Deleted)


Chapter 7 Manager

Article 32 The Bank has one President appointed to manage business fully adhering to the

resolutions of the Board of Directors, and with one Vice President and several Deputy

Executive Vice President appointed to help the President in business operations whose

appointment is with the consent of a majority of the Board of Directors. In addition,

several managers at all levels are appointed by the President who are proposed to the

Board of Directors for appointment and dismissal with the consent of a majority of the

Board of Directors.

The Bank has one Chief Auditor appointed, a position equivalent to the Vice President,

with the consent of a majority of the Audit Committee and two thirds of the Board of

Directors; also, the appointment, dismissal, and transfer of the Chief Auditor should

be reported to the competent authorities for approval in advance.

If the said appointment of the Chief Auditor in the preceding paragraph is without the

consent of a majority of the Audit Committee, the resolution of the Audit Committee

should be stated in the minutes of the Board meeting.

Chapter 8 Accounting

106

Article 33 The Bank has the business operations settled at the end of each month and the final

settlement scheduled on December 31.

Article 34 The Bank shall have the following books and statements prepared after the annual

settlement for the review of the Board and the audit of the Audit Committee; also,

submitted to the meeting of shareholders for admission and reported to the competent

authorities and the Central Bank for filing within 15 days, respectively.

1. Business report

2. Financial statements

3. Earnings distribution or deficit compensation proposal;

Article 35 If there is a profit, the Bank shall appropriate 0.5% to 3% as remuneration to the

employees. The Board shall determine if stock or cash shall be released for such

purpose. In addition, the Bank may allocate no more than 1.5% of the aforementioned

amount as remuneration to the Directors. The distribution of remuneration to

employees and directors should be reported in the shareholders’ meeting. If the Bank

has accumulated deficit, an equivalent amount should be reserved for making up such

loss, then the remuneration to employees and directors can be appropriated in

accordance with the ratio stated in the preceding paragraph thereafter.

Article 36 If the Bank has earnings after account settlement, appropriate for payment of

applicable taxes as required by law and for write-off loss carried forward, followed by

the appropriation of 30% as legal reserve. No further appropriation is necessary if the

amount of legal reserve is equivalent to the paid-in capital of the Bank. The remainder

shall be appropriated or made reversal for special reserve, followed by the distribution

of dividends of preferred shares. If there is still a balance, pool up with accumulated

undistributed earnings and the amount of reversal of special reserve as required by law

for the distribution of dividends and bonuses to the shareholders at the proposal of the

Board and ratification of the General Meeting.

For the earnings distribution proposed to the Board of Directors in the shareholders’

meeting for resolution in the preceding paragraph, a working capital should be

reserved first according to the changes in the operating environment, business

operation, and investment, the ratio of cash and stock dividends should be proposed,

of which, cash dividends should not be less than 10% of the total dividend amount.

If the capital adequacy ratio fails to reach the legal ratio, the earnings shall be

allocated in accordance with the Banking Act of The Republic of China and the

competent authority’s requirements.

Chapter 9 Appendix

Article 37 The organization code of the Bank shall be instituted separately.

Article 38 The matters that are not regulated in the Company Corporate Charter (Articles of

Incorporation) should be processed in accordance with the Company Act, the Banking

Act of The Republic of China and related laws and regulations.

Article 39 The Company Corporate Charter (Articles of Incorporation) is implemented after the

resolution reached in the meeting of shareholders, so is the amendment. The Company

Corporate Charter (Articles of Incorporation) was established on October 22, 1977

and implemented on January 1, 1978.

107

The 1st amendment was implemented on March 4, 1979.

The 2nd

amendment was implemented on March 9, 1980.

The 3rd


The 4th


The 5th


The 6th


The 7th


The 8th


The 9th


The 10th


The 11th

amendment was implemented on October 5, 1989.

The 12th


The 13th


The 14th


The 15th


The 16th


The 17th


The 18th


The 19th


The 20th


The 21st amendment was implemented on June 20, 1998.

The 22nd


The 23rd


The 24th


The 25th


The 26th


The 27th


The 28th


The 29th


The 30th



The 32nd


The 33rd

amendment was implemented on June 22, 2011

The 34th


108

The 35th


The 36th


The 37th


The 38th


The 39th


The 40th

amendment was implemented on

109

Discussions No. 4

Proposal: Amendments to the Regulations Governing Selection of

Directors. Please discuss.

Explanation:

1. In order to implement corporate governance, the nomination system will be adopted starting from next session (24th session) of directors' election. Therefore, based on the sample template issued by the Taiwan Stock Exchange Co., Ltd. of "XXX Co., Ltd. Procedures for Election of Directors and Supervisors", the “Guidelines for the Selection Election of Directors of Taichung Commercial Bank Co., Ltd.” is to be amended and its name is to be revised to "Procedures for the Election of Directors of Taichung Commercial Bank Co., Ltd. (Draft)".

2. The Comparison Chart of the Amended Articles and the Draft Amendments thereof are hereto attached. (Please see pages 110-119 of this handbook)

Resolutions:

http://eng.selaw.com.tw/LawArticle.aspx?LawID=FL028629&ModifyDate=1040128


110

The Comparison Chart of the Amended Articles of Procedures for

the Election of Directors of Taichung Commercial Bank Co., Ltd.


Name of the regulation:

Procedures for the Election of

Directors of Taichung

Commercial Bank Co., Ltd.

Name of the regulation: Procedures for

the Selection of Directors of Taichung

Commercial Bank Co., Ltd.

The reference is

taken from the

sample template

issued by the

Taiwan Stock

Exchange of

"XXX Co., Ltd.

Procedures for

Election of

Directors and

Supervisors" to

modify the name

of the regulation.

Article 1

The election of directors of the

Company shall be handled in

accordance with the Procedures,

unless otherwise provided by

laws, regulations, or the Articles

of Incorporation.

Article 1

The selection of directors of Taichung

Commercial Bank Co., Ltd. (hereinafter

referred to as the Bank) shall be held by

the shareholders' meeting in accordance

with the Guidelines

Article 10

For the matter not specified in the

Guidelines, it shall be handled in

accordance with the Company Act, the

Articles of Incorporation of the Bank

and the relevant regulations.

The numbering

of the article is

adjusted and

some wordings

are modified.

Article 2

The composition of the board of

directors of the Company shall be

determined by taking diversity

into consideration and formulating

an appropriate policy on diversity

based on the Company's business

operations, operating dynamics,

and development needs. The

standards shall include the

following 2 dimensions:

1. Basic requirements and

values: Gender, age,

nationality, and culture, etc.

2. Professional knowledge and

The reference is

taken from the

Article 3 of

“Sample

Template for

XXX Co., Ltd.

Procedures for

Election of

Directors and

Supervisors”

issued by the

Taiwan Stock

Exchange to add

this article.











111

skills: a professional

background (e.g., law,

accounting, industry, finance,

marketing, technology),

professional skills, and

industry experience.

Each board member shall have the

necessary knowledge, skill, and

experience to perform their duties;

the abilities that must be present in

the board as a whole are as

follows:

1. The ability to make judgments

about operations.

2. Accounting and financial

analysis ability.

3. Business management ability.

4. Risk management ability.

5. Crisis management ability.

6. Knowledge of the industry.

7. An international market

perspective.

8. Leadership ability.

9. Decision-making ability.

More than half of the directors

shall be persons who have neither

a spousal relationship nor a

relationship within the second

degree of kinship with any other

director.

The board of directors of this

Company shall consider adjusting

its composition based on the

results of performance evaluation.

Article 3

The qualifications and selection

for the independent directors of

this Company shall comply with

the “Regulations Governing

Appointment of Independent

Directors and Compliance Matters

for Public Companies” and the

The reference is

taken from the

Article 5 of

“Sample

Template for

XXX Co., Ltd.

Procedures for

Election of

Directors and





112

“Corporate Governance Best-

Practice Principles

Supervisors”

issued by the

Taiwan Stock

Exchange to add

this article.

Article 4

Elections of both directors and

supervisors in this Company shall

be conducted in accordance with

the candidate nomination system

and procedures set out in Article

192-1 of the Company Act. This

Corporation shall review the

qualifications, education, working

experience, background, and the

existence of any other matters set

forth in Article 30 of the Company

Act with respect to nominee

directors and supervisors and may

not arbitrarily add requirements

for documentation of other

qualifications. It shall further

provide the results of the review to

shareholders for their reference, so

that qualified directors and

supervisors will be elected.

When the number of directors falls

below five due to the dismissal of

a director for any reason, the

Company shall hold a by-election

to fill the vacancy at its next

shareholders meeting. When the

number of directors falls short by

one third of the total number

prescribed in the Company's

articles of incorporation, the

Company shall call a special

shareholders meeting within 60

days from the date of occurrence

to hold a by-election to fill the

vacancies.

When the number of independent

directors falls below that required

under the proviso of Article 14-2,


Exchange Act, or the related

provisions of the Taiwan Stock

The reference is

taken from the

Article 6 of

“Sample

Template for

XXX Co., Ltd.

Procedures for

Election of

Directors and

Supervisors”

issued by the

Taiwan Stock

Exchange to add

this article.







113

Exchange Corporation rules

governing the review of listings, a

by-election shall be held at the

next shareholders meeting to fill

the vacancy. When the

independent directors are

dismissed en masse, an

extraordinary shareholders

meeting shall be called within 60

days from the date of occurrence

to hold a by-election to fill the

vacancies.

Article 5

The single-named ballot

cumulative voting system shall be

used for election of the directors

of the Company. Each share will

have voting rights in number equal

to the directors to be elected, and

may be cast for a single candidate

or split among multiple

candidates.

Article 2

The single-named ballot cumulative

voting method shall be used for election

of the directors of the Bank.

Each share will have voting rights in

number equal to the directors to be

elected, and may be cast for a single

candidate or split among multiple

candidates, and the attendance card

numbers printed on the ballots may be

used instead of recording the names of

voting shareholders.

The numbering

of the article is

adjusted and

some wordings

are modified.

Article 6

The board of directors shall

prepare separate ballots for

directors and supervisors in

numbers corresponding to the

directors or supervisors to be

elected. The number of voting

rights associated with each ballot

shall be specified on the ballots,

which shall then be distributed to

the attending shareholders at the

shareholders meeting. Attendance

card numbers printed on the

ballots may be used instead of

recording the names of voting

shareholders.

Article 5

The election ballots shall be prepared by

the Bank and shall be numbered in

accordance with the attendance card

numbers and specified with the number

of voting rights associated with each

ballot.

The numbering

of the article is

adjusted and

some wordings

are modified.

Article 7

The number of directors will be as

specified in the Company's articles

of incorporation and the resolution

of the Board of Directors, with

voting rights separately calculated

for independent and non-

Article 4

The number of directors in accordance

with and as specified in the articles of

incorporation of the Bank shall be

elected by the shareholders meeting in

accordance with Article 198 of the

Company Act and other relevant

1.The numbering

of the article

is adjusted

and some

wordings are

modified.

2. Paragraph 2 is

114

independent director positions.

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 specified number of

positions, they shall draw lots to

determine the winner, with the

chair drawing lots on behalf of any

person not in attendance.

regulations. 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

specified number of positions, they shall

draw lots to determine the winner, with

the chair drawing lots on behalf of any

person not in attendance but with the

same number of votes.

The election of the directors for

independent and non-independent

director positions shall be conducted in

one proceeding with voting rights

separately calculated.

deleted.

Article 8

Before the election begins, the

chair shall appoint the counting

personnel and a number of persons

with shareholder status to perform

the duties of vote monitoring. The

ballot boxes shall be prepared by

the board of directors and publicly

checked by the v

Article 3

When the election begins, the chair

shall appoint the personnel to perform

the respective duties of vote monitoring

and counting. The ballot boxes shall be

prepared by the board of directors and

publicly checked by the vote monitoring

personnel before voting commences.

The numbering

of the article is

adjusted, and the

wording is

slightly modified.

And taking

reference of

Article 10 of the

sample template

issued by the

Taiwan Stock

Exchange of

"XXX Co., Ltd.

Procedures for

Election of

Directors and

Supervisors" to

modify the

wording.

Article 9

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, the voter shall enter

the candidate's full name and

identity card number. However,

when the candidate is a

governmental organization or

juristic-person shareholder, the

Article 6

If a candidate is a shareholder, a voter

must enter the candidate's account name

and shareholder account number or the

identification number in the "candidate"

column of the ballot and then drop it in

the voting box; However, when the

candidate is a governmental

organization or juristic-person

shareholder, the name of such

governmental organization or juristic-

person shareholder shall be entered in

The numbering

of the article is

adjusted and

some wordings

are modified.






115

name of the governmental


shareholder shall be entered in the

column for the candidate's account

name in the ballot paper, or both

the name of the governmental


shareholder and the name of its

representative may be entered.

When there are multiple

representatives, the names of each

respective representative shall be

entered.

the column for the candidate's account

name in the ballot paper in accordance

with Paragraph 1, Article 27 of the

Company Act, or both the name of such

governmental organization or juristic-

person shareholder and the name of its

representative may be entered in

accordance with Paragraph 2 of the

same Act.

Article 10

A ballot is invalid under any of the


1. The ballot was not prepared by

the board of directors.

2. A blank ballot is placed in the

ballot box.

3. The writing is unclear and

indecipherable or has been

altered.

4. The candidate whose name is

entered in the ballot is a

shareholder, but the candidate's

account name and shareholder

account number do not conform

with those given in the

shareholder register, or the

candidate whose name is

entered in the ballot is a non-

shareholder, and a cross-check

shows that the candidate's name

and identity card number do not

match.

5. Other words or marks are

entered in addition to the

candidate's account name or

shareholder account number

(or identity card number) and

the number of voting rights

allotted.

6. The name of the candidate

entered in the ballot is

Article 7

A ballot is invalid under any of the


1. The ballot was not prepared

prescribed by the Guidelines.

2. A blank ballot is placed in the ballot

box.

3. The writing is unclear and

indecipherable or has been altered.

4. The candidate whose name is entered

in the ballot is a shareholder, but the

candidate's account name and

shareholder account number or the

identification number do not conform

with those given in the shareholder

register.

5. With more than 2 names of the

candidates being stated on the same

ballot.

6. Other words or marks are entered in

addition to the candidate's account

name and shareholder account

number (or identification number)

and the number of voting rights

allotted.

7. For the matter not handled in

accordance with Article 6.

The numbering

of the article is

adjusted, and the

wording is

slightly modified.

And taking

reference of

Article 12 of the

sample template

issued by the

Taiwan Stock

Exchange of

"XXX Co., Ltd.

Procedures for

Election of

Directors and

Supervisors" to

modify the

wording.






116

identical to that of another

shareholder, but no

shareholder account number

or identity card number is

provided in the ballot to

identify such individual.

Article 11

The voting rights shall be

calculated on site immediately

after the end of the poll, and the

results of the calculation,

including the list of persons

elected as directors or supervisors

and the numbers of votes with

which they were elected, shall be

announced by the chair on the site.

The ballots for the election


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 8

The voting rights shall be calculated on

site immediately after the end of the

poll, and the results of the calculation

shall be announced by the chairman on-

site.

1. The numbering

of the article is

adjusted and

some wordings

are modified.

2. The reference is

taken from the

Article 13 of

“Sample

Template for

XXX Co., Ltd.

Procedures for

Election of

Directors and

Supervisors”

issued by the

Taiwan Stock

Exchange to

add the

paragraph 2.

Article 12

The board of directors of the

Company shall issue notifications

to the persons elected as directors.

Article 9

The board of directors shall issue

notifications to the persons elected as

directors.

The numbering of

the article is

adjusted and

some wordings

are modified.

Article 13

These Procedures, and any

amendments hereto, shall be

implemented after approval by a


Article 11

The Guidelines and any amendments

hereto, shall be drawn up by the board

of directors of the Bank and

implemented after approval by a


The numbering of

the article is

adjusted and

some wordings

are modified.






117

Procedures for Election of Directors of Taichung Commercial

Bank Co., Ltd. (Draft) This regulation was set up in the 6th Extraordinary Meeting of Shareholders on Oct. 20, 1968.

The 1st amendment was made in the 11th Extraordinary Meeting of Shareholders on Oct. 26, 1980.

The 2nd amendment was made in the 13th Extraordinary Meeting of Shareholders on Oct. 4, 1986.

The 3rd amendment was made in the 14th Extraordinary Meeting of Shareholders on Oct. 4, 1989.

The 4th amendment was made in the 15th Extraordinary Meeting of Shareholders on Oct. 13, 1992.

The 5th amendment was made in the 41th Annual Meeting of Shareholders on Jun. 5, 1993.

The 6th amendment was made in the 17th Extraordinary Meeting of Shareholders on Oct. 12, 1998.

The 7th amendment was made in the Annual Meeting of Shareholders on May 17, 2002.

The 8th amendment was made in the Annual Meeting of Shareholders on Jun. 15, 2007.

The 9h amendment was made in the Annual Meeting of Shareholders on Jun. 13, 2013.

The 10th amendment was made in an Annual Meeting of Shareholders.

Article 1 The election of directors of the Company shall be handled in accordance with the

Guidelines, unless otherwise provided by laws, regulations, or the Articles of

Incorporation.

Article 2 The composition of the board of directors of the Company shall be determined by taking

diversity into consideration and formulating an appropriate policy on diversity based on

the Company's business operations, operating dynamics, and development needs. The

standards shall include the following 2 dimensions:

1. Basic requirements and values: Gender, age, nationality, and culture, etc.

2. Professional knowledge and skills: a professional background (e.g., law,

accounting, industry, finance, marketing, and technology), professional skills, and

industry experience.

Each board member shall have the necessary knowledge, skill, and experience to

perform their duties; the abilities that must be present in the board as a whole are as

follows:

1. The ability to make judgments about operations.

2. Accounting and financial analysis ability.

3. Business management ability.

4. Risk management ability.

5. Crisis management ability.

6. Knowledge of the industry.

7. An international market perspective.

8. Leadership ability.

9. Decision-making ability.

More than half of the directors shall be persons who have neither a spousal

relationship nor a relationship within the second degree of kinship with any other

director.

The board of directors of this Company shall consider adjusting its composition

based on the results of performance evaluation.

Article 3 The qualifications and selection for the independent directors of this Company shall

118

comply with the “Regulations Governing Appointment of Independent Directors and

Compliance Matters for Public Companies” and the “Corporate Governance Best

Practice Principles for TWSE/TPEx Listed Companies

Article 4 Elections of both directors and supervisors in this Company shall be conducted in

accordance with the candidate nomination system and procedures set out in Article 192-

1 of the Company Act. This Corporation shall review the qualifications, education,

working experience, background, and the existence of any other matters set forth in

Article 30 of the Company Act with respect to nominee directors and supervisors and

may not arbitrarily add requirements for documentation of other qualifications. It shall

further provide the results of the review to shareholders for their reference, so that

qualified directors and supervisors will be elected.

When the number of directors falls below five due to the dismissal of a director for any

reason, the Company shall hold a by-election to fill the vacancy at its next shareholders

meeting. When the number of directors falls short by one third of the total number

prescribed in the Company's articles of incorporation, the Company shall call a special

shareholders meeting within 60 days from the date of occurrence to hold a by-election

to fill the vacancies.

When the number of independent directors falls below that required under the proviso

of Article 14-2, paragraph 1 of the Securities and Exchange Act, or the related

provisions of the Taiwan Stock Exchange Corporation rules governing the review of

listings, a by-election shall be held at the next shareholders meeting to fill the vacancy.

When the independent directors are dismissed en masse, an extraordinary shareholders

meeting shall be called within 60 days from the date of occurrence to hold a by-election

to fill the vacancies.

Article 5 The single-named ballot cumulative voting system shall be used for election of the

directors of the Company. Each share will have voting rights in number equal to the

directors to be elected, and may be cast for a single candidate or split among multiple

candidates.

Article 6 The board of directors shall prepare separate ballots for directors and supervisors in

numbers corresponding to the directors or supervisors to be elected. The number of

voting rights associated with each ballot shall be specified on the ballots, which shall

then be distributed to the attending shareholders at the shareholders meeting. Attendance

card numbers printed on the ballots may be used instead of recording the names of

voting shareholders.

Article 7 The number of directors will be as specified of the Company's articles of incorporation,

with voting rights separately calculated for independent and non-independent director

positions. 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 specified number of

positions, they shall draw lots to determine the winner, with the chair drawing lots on

behalf of any person not in attendance.

Article 8 Before the election begins, the chair shall appoint the counting personnel and a number

of persons with shareholder status to perform the duties of vote monitoring. The ballot

boxes shall be prepared by the board of directors and publicly checked by the v

Article 9 If a candidate is a shareholder, a voter must enter the candidate's account name and

119

shareholder account number in the "candidate" column of the ballot; for a non-

shareholder, the voter shall enter the candidate's full name and identity card number.

However, 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 paper, or

both the name of the governmental organization or juristic-person shareholder and the

name of its representative may be entered. When there are multiple representatives, the

names of each representative shall be entered.

Article 10 A ballot is invalid under any of the following circumstances:

1. The ballot was not prepared by the board of directors.

2. A blank ballot is placed in the ballot box.

3. The writing is unclear and indecipherable or has been altered.

4. The candidate whose name is entered in the ballot is a shareholder, but the

candidate's account name and shareholder account number do not conform with

those given in the shareholder register, or the candidate whose name is entered

in the ballot is a non-shareholder, and a cross-check shows that the candidate's

name and identity card number do not match.

5. Other words or marks are entered in addition to the candidate's account name or

shareholder account number (or identity card number) and the number of voting

rights allotted.

6. The name of the candidate entered in the ballot is identical to that of another

shareholder, but no shareholder account number or identity card number is

provided in the ballot to identify such individual.

Article 11 The voting rights shall be calculated on site immediately after the end of the poll, and

the results of the calculation, including the list of persons elected as directors or

supervisors and the numbers of votes with which they were elected, shall be announced

by the chair on the 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 12 The board of directors of the Company shall issue notifications to the persons elected as

directors.

Article13 These Procedures, and any amendments hereto, shall be implemented after approval by

a shareholders meeting.

120

Discussions No. 5

Proposal: Amendments to the Rules of Procedure for Shareholders

Meeting. Please discuss.

Explanation:

1. The amendments are explained as follows:

(1) The addition of Article 172 of the Amended

Company Act promulgated by Order Hua-tsung-

yi-jing No. 10700083291 on August 1, 2018,

specifies the matters that shall be listed in the

notice to convene a shareholders' meeting, and

such matters shall not be put forth as extemporary

motions.

(2) According to the “Sample Template for xxx Co.

Ltd. Rules of Procedure for Shareholders'

Meeting” as amended on November 12, 2015 by

the Financial Supervisory Commission with

Order Jin-guan-zheng-fa No. 1040044352,

Article 56-1 and Article 60-2 of the Regulations

Governing the Offering and Issuance of

Securities Issuer are added to specify the matters

that shall be listed in the notice to convene a

shareholders' meeting, and shall not be set forth

as extemporary motion.

(3) To delete the relevant wording of a supervisor,

and to modify the rest of the wording.

2. The Comparison Chart of the Amended Articles and

the Draft Amendments thereof are hereto attached.

(Please see pages 121-129 of this handbook)

Resolutions:

121


Rules of Procedure for Shareholder Meetings


Article 3

(Paragraph 1-obmitted)

The Company’s meeting of

shareholders shall be convened by

the Board, unless otherwise

provided by law. The Company

shall have the Annual Meeting of

Shareholders notice, proxy and

the proposal and information on

admission, discussions and

directors election and dismissal

compiled into electronic files and

uploaded to the MOPS 30 days

prior to the annual meeting of

shareholders or fifteen days prior

to the extraordinary meeting of

shareholders. Also, the Annual

Meeting Handbook and the

supplementary information are


uploaded to the MOPS 21 days

prior to the Annual Meeting of

Shareholders or 15 days prior to

the extraordinary meeting of

shareholders. The Annual

Meeting Handbooks and the


made available to shareholders 15

days prior to the annual meeting

of shareholders; also, on display

at the Company’s and its Stock

Agent’s and distributed to

shareholders at the meeting place.


Election or dismissal of directors,

amendments to the articles of

incorporation, reduction of

capital, application for the

approval of ceasing its status as a

public company, approval of

competing with the company by

Article 3


The Company’s meeting of

shareholders shall be convened by the

Board, unless otherwise provided by

law. The Company shall have the

Annual Meeting of Shareholders notice,

proxy and the proposal and information

on admission, discussions and directors

and supervisors election and dismissal


uploaded to the MOPS 30 days prior to

the annual meeting of shareholders or

fifteen days prior to the extraordinary

meeting of shareholders. Also, the

Annual Meeting Handbook and the



uploaded to the MOPS 21 days prior to

the Annual Meeting of Shareholders or

15 days prior to the extraordinary

meeting of shareholders. The Annual

Meeting Handbooks and the

supplementary information are made

available to shareholders 15 days prior

to the annual meeting of shareholders;

also, on display at the Company’s and

its Stock Agent’s and distributed to

shareholders at the meeting place.


The election or dismissal of directors,

supervisors, amendments to the

Company Corporate Charter (Articles of

Incorporation), dissolution, merger,

division or the clauses of Paragraph 1,

Article 185 of the Company Act, the

matters stated in Article 26-1 and

1. The Bank set up an

audit committee to

replace the

supervisor in June,

2014. Thus, in

paragraph 2 and 4,

the wording of

supervisor shall be

deleted.

2. The addition of Article

172 of the Amended

Company Act

promulgated by

Order No.

10700083291 on

August 1, 2018,

specifies the matters

that shall be listed in

the notice to

convene a

shareholders'

meeting, and such

matters shall not be

put forth as

extemporary

motions; The major

content thereof may

be posted on the

website of the

competent securities

authority or the

website designated

by the Company,

and such website

address shall be

stated in the notice.

3. According to the

“Sample Template

for xxx Co. Ltd.

Rules of Procedure

for Shareholders'

Meeting” as

amended by the

Financial

Supervisory

122


directors, surplus profit

distributed in the form of new

shares, reserve distributed in the

form of new shares, the

dissolution, merger, or demerger

of the corporation, 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, and the essential contents

shall be explained. None of the

above matters may be raised by

an extraordinary motion. The

essential contents may be posted

on the website designated by the competent authority in charge of

securities affairs or the company,

and such website shall be indicated

in the above notice.

Shareholder holding 1 percent or

more of the total number of

issued shares may submit to this

Corporation a written proposal for

discussion at a regular

shareholders meeting. Such

proposals, however, are limited to

one item only, and no proposal

containing more than one item

will be included in the meeting

agenda. Unless any of the

circumstances under Article 172-

1, paragraph 4 of the Company

Act is satisfied, the board of

directors of the Company shall

include the proposal submitted by

a shareholder in the list of

proposals to be discussed at a

meeting of shareholders:

(Paragraph 6-8-obmitted)

Article 43-6 of Securities and Exchange

Act shall be stated in the reasons for

convening the meeting not in the

motion.

Shareholder holding 1 percent or more

of the total number of issued shares may

submit to the Company a written

proposal for discussion at a regular

shareholders meeting. Such proposals,

however, are limited to one item only,

and no proposal containing more than

one item will be included in the meeting

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.

(Paragraph 6-8 omitted)

Commission dated

Nov. 12, 2015 with

Order No.

1040044352, Article

56-1 and Article 60-

2 of the Regulations

Governing the

Offering and

Issuance of

Securities Issuer

are added to specify

the matters that shall

be listed in the

notice to convene a

shareholders'

meeting, and shall

not be set forth as

extemporary motion.

4. The wording of

Paragraph 5 is

modified in

accordance with

Article 172 of the

Company Act.

123


Article 6


The Company should have the

annual meeting handbook, annual

reports, attendance pass, speech

slip, voting ballots, and other

meeting materials delivered to the

attending shareholders; also, the

electoral ballots should be

distributed for the election of

directors, if applicable.


Article 6


The Company should have the annual

meeting handbook, annual reports,

attendance pass, speech slip, voting

ballots, and other meeting materials

delivered to the attending shareholders;

also, the electoral ballots should be

distributed for the election of directors

and supervisors, if applicable.


The Bank set up an

audit committee to

replace the supervisor

in June, 2014. Thus, in

paragraph 2, the

wording of supervisor

shall be deleted.

Article 14

The election of directors held at

the meeting of shareholders

should be arranged in accordance

with the Company’s election

specifications and with the

election results announced

immediately at the meeting place.

(Paragraph 2 omitted)

Article 14

The election of directors and

supervisors held at the meeting of

shareholders should be arranged in

accordance with the Company’s

election specifications and with the

election results announced immediately

at the meeting place.

(Paragraph 2 omitted)

The Bank set up an

audit committee to

replace the supervisor

in June, 2014. Thus, in

paragraph 1, the

wording of supervisor

shall be deleted.

124

Rules of Procedure for Shareholder Meetings (Draft)

Resolved in the Annual Meeting of Shareholders on June 20, 1998

Resolved in the Annual Meeting of Shareholders s on June 13, 2013

Resolved in the Annual Meeting of Shareholders s on

Article 1 The rules for compliance are stipulated in accordance with Article 5 of the “Corporate

Governance Best Practice Principles for TWSE/TPEx Listed Companies” for establishing

the Company’s excellent meeting of shareholders governance system, substantiating

supervisory function, and enhancing management functions.

Article 2 The Company’s procedures for shareholders meeting shall follow these Procedures, unless

otherwise provided by law or the Company’s Articles of Incorporation.

Article 3 The Company’s meeting of shareholders shall be convened by the Board, unless

otherwise provided by law.

The Company’s meeting of shareholders shall be convened by the Board, unless

otherwise provided by law. The Company shall have the Annual Meeting of Shareholders

notice, proxy and the proposal and information on admission, discussions and directors

election and dismissal compiled into electronic files and uploaded to the MOPS 30 days

prior to the annual meeting of shareholders or fifteen days prior to the extraordinary

meeting of shareholders. Also, the Annual Meeting Handbook and the supplementary

information are compiled into electronic files and uploaded to the MOPS 21 days prior to

the Annual Meeting of Shareholders or 15 days prior to the extraordinary meeting of

shareholders. The Annual Meeting Handbooks and the supplementary information are

made available to shareholders 15 days prior to the annual meeting of shareholders; also,

on display at the Company’s and its Stock Agent’s and distributed to shareholders at the

meeting place.

The reasons for convening the meeting should be stated in the notice and announcement.

The notice with the consent of the counterparty can be issued electronically.

Election or dismissal of directors, amendments to the articles of incorporation, reduction

of capital, application for the approval of ceasing its status as a public company, approval

of competing with the company by directors, surplus profit distributed in the form of new

shares, reserve distributed in the form of new shares, the dissolution, merger, or demerger

of the corporation, 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, and

the essential contents shall be explained. None of the above matters may be raised by an

extraordinary motion. The essential contents may be posted on the website designated by

the competent authority in charge of securities affairs or the company, and such website

shall be indicated in the above notice.

Shareholder holding 1 percent or more of the total number of issued shares may submit to

this Corporation a written proposal for discussion at a regular shareholders meeting. Such

125

proposals, however, are limited to one item only, and no proposal containing more than

one item will be included in the meeting agenda. Unless any of the circumstances under

Article 172-1, paragraph 4 of the Company Act is satisfied, the board of directors of the

Company shall include the proposal submitted by a shareholder in the list of proposals to

be discussed at a regular meeting of shareholders:

The Company shall announce the proposals admitted, the premises and the admission

period before the stock stop-transfer date prior to the Annual Meeting of Shareholders is

convened; also, the admitting period may not be less than 10 days.

Motion proposed by shareholders is limited to three hundred words. A proposed motion

of more than three hundred words will not be included in the proposal. The proposing

shareholders must attend the Annual Meeting of Shareholders in person or by proxy and

must participate in the proposal discussion.

The Company shall have the proposing shareholder notified about the proposal results

before the date of the meeting notice and must have the proposals in compliance with this

provision included in the meeting notice. The Board shall state the reasons for not

including the proposal of shareholders in the meeting agenda.

Article 4 Shareholders may attend the meeting of shareholders by proxy that is printed and issued

by the Company with the scope of authorization detailed.

It is limited to one proxy per shareholder and one proxy only that should be served to the

Company five days prior to the meeting of shareholders. When the proxy is issued in



After serving the proxy to the Company, the shareholders who wish to attend the meeting

of the shareholders in person or to vote in writing or by electronic means shall notify the

Company in writing to revoke the proxy two days prior to the meeting of the shareholders.

If the proxy is not revoked before the deadline, the vote by proxy shall prevail.

Article 5 The place of meeting of shareholders should be at the Company’s or any suitable location

or for shareholders to attend the meeting conveniently; also, the meeting of shareholders

shall not be started before 9:00 or after 15:00.

Article 6 The Company should have the attendance registry ready for the signature of the attending

shareholders or the shareholder’s representative (hereinafter referred to as the

Shareholders), or the attending shareholders may have the signature card submitted as an

alternative to the signature.

The Company should have the annual meeting handbook, annual reports, attendance pass,

speech slip, voting ballots, and other meeting materials delivered to the attending

shareholders; also, the electoral ballots should be distributed for the election of directors,

if applicable.

Shareholders should attend the meeting of shareholders with the presentation of the

attendance pass, attendance card or other attendance documents. Proxy solicitors should

have identity documents with them for examination.

When the government or juridical person is a shareholder, the shareholder attending the

meeting by proxy is not limited to one representative. The juridical person that has

attended the meeting of shareholder by proxy can authorize only one representative to

attend the meeting.

Article 7 If the meeting of shareholders is convened by the Board, the Chairman of the Board is to

126

chair the meeting. If the Chairman is on leave or is unable to exercise his powers for

certain reasons, the Vice Chairman is to chair the meeting. If a Vice Chairman is not

appointed or the Vice Chairman is also on leave or is unable to perform his duties for

certain reasons, the Chairman is to appoint one of the managing directors to chair the

meeting. If a managing director is not appointed, one of the directors is appointed to chair

the meeting. If a representative is not appointed by the Chairman, one of the managing

directors or directors should be elected among the board members to chair the meeting.

The Company may assign the appointed attorney, CPA, or responsible personnel to attend

the meeting of the shareholders.

Article 8 The Company should have the entire meeting of shareholders taped in audio or video

recording and stored for at least one year.

However, for the litigation filed by the shareholders in accordance with Article 189 of the

Company Act, it should be reserved until the end of the proceedings.

Article 9 Attendance of the meeting of shareholders should be calculated in accordance with the

shareholdings. The shareholding attendance is based on the attendance registry or the

signature cards submitted, plus the votes exercised in writing or by electronic means.

The Chairman shall call the meeting to order at the meeting time. If the shareholding of

the attending shareholders is not more than half of the total number of shares issued, the

Chairman may announce the meeting postponed, which is limited to two postponements

and for less than one-hour in total. If the shareholding of the attending shareholders

remaining do not constitute more than one third of the total number of shares issued after

the two postponements, the Chairman may announce to have the meeting aborted.

If the shareholdings of the attending shareholders are not more than half of the total

number of shares issued after two postponements but more than one third of the total

number of shares issued, a pseudo-resolution can be resolved in accordance with

Paragraph 1, Article 175 of the Company Act; also, shareholders should be informed

regarding the pseudo-resolution with another meeting of shareholders to be convened

within one month.

If the shareholdings of the attending shareholders are more than one half of the total

number of shares issued before the end of the meeting, the Chairman may have the

pseudo-resolution presented again in the next meeting of the shareholders for resolution

in accordance with Article 174 of the Company Act.

Article 10 If the meeting of shareholders is convened by the Board, the agenda is scheduled by the

Board; also, the meeting should be conducted in accordance with the agenda scheduled

and it may not be amended without the resolution reached in the meeting of shareholders.

If the meeting of shareholders is convened by an authorized person other than the Board,

the provision referred to above is applicable.

The Chairman may not have the meeting adjourned at his discretion before the proposals

(including motions) resolved in the two agendas referred to above. If the Chairman has

the meeting adjourned in violation of the Rules of Procedure for Shareholder Meetings,

the other Board members shall promptly assist the attending shareholders in accordance

with the legal procedures to have one shareholder elected as the Chairman with the

majority votes of the attending shareholders to continuously chair the meeting.

A Chairman who believes that the proposal under discussion is ready for voting may at

his discretion stop the discussion and call for a vote.

127

Article 11 Attending shareholders before speaking on the subject must fill out the speech slip,

shareholder account number, and account name (or attendance pass number) in detail, and

then the Chairman is to determine the order of speakers.

Attending shareholders who have speech slips submitted but not speak shall be deemed as

silent shareholders. If there is a discrepancy found between the text of the speech and the

speech slip submitted, the contents of the speech shall prevail.

Each shareholder may not speak more than twice on the same motion for 5 minutes each

time without the consent of the Chairman. However, the Chairman may have the speaking

shareholders who violate the rules or speak beyond the scope of those issues silenced.

Attending shareholders may not interfere with the speaking shareholders without the

consent of the Chairman and the speaking shareholders. The Chairman will have the

violating shareholders stopped.

If the juridical person shareholder has more than two representatives assigned to attend

the meeting of shareholders, only one of the two representatives may speak on the same

proposal.

The Chairman may reply to the speaking shareholders personally or by the designated

personnel.

Article 12 Resolutions of the meeting of shareholders should be based on their shareholdings.

For the resolutions in the meeting of shareholders, the shares of the shareholders without

votes are not included in the calculation of outstanding shares.

Shareholders who have a conflict of interest with the proposals that are detrimental to the

Company’s interests shall not vote, and cannot vote by proxy on behalf of the other

shareholders.

The shares without votes referred to above are not included in the calculation of the

attending shareholders’ votes.

Except for Trust agencies or stock agencies approved by the securities regulatory

authorities, the votes of the representative delegated by two or more shareholders shall

not exceed 3% of the total votes representing the total number of shares issued; also, the

votes exceeding the threshold shall not be counted.

Article 13 Shareholders are entitled to one vote per share; except for those subject to restrictions or

the non-voting matters illustrated in Paragraph 2, Article 179 of the Company Act.

The Company’s meeting of shareholders can be convened with the votes cast in writing or

by electronic means. When the vote is cast in writing or by electronic means, the election

method should be stated in the notice of meeting of shareholders. Shareholders who have

their votes cast in writing or by electronic means are deemed as attending the meeting in

person. However, with respect to motions and original proposal amendments of the

meeting of shareholders, it is deemed as a waiver.

For the votes exercised in writing or by electronic means referred to above, the intention

should be delivered to the Company two days prior to the meeting of shareholders. For

the intention expressed in duplicate, whichever is delivered first shall prevail. The

intention referred to above that was announced to be revoked is not subject to this

restriction.

Shareholders after exercising their votes in writing or by electronic means wish to attend

the meeting of shareholders in person shall have the intension of exercising votes in

128

writing or by electronic means revoked the same way of exercising their votes two days

prior to the meeting commencement date. For overdue revocations, the votes exercised in

writing or by electronic means shall prevail. If the vote is exercised in writing or by

electronic means and a representative is to attend the meeting of shareholders by proxy,

the votes exercised by the representative in person shall prevail.

For the resolution of proposals, unless otherwise provided in the Company Act and the

Company Corporate Charter (Articles of Incorporation), the consent of a majority vote of

the attending shareholders shall prevail. The motion resolved by the Chairman’s

consulting the attending shareholders without dissent is deemed as passed and with the

same effect as voting.

When there is an amendment or alternative for the same motion, the Chairman shall have

the order of vote, including the original proposal, determined accordingly. If one of the

motions has been passed, the other motions shall be deemed as rejected without the need

for further resolution.

Chairman is to appoint the scrutineers and counting officers who must be shareholders.

Ballot counting should be held at the meeting place with the ballot counting result

announced immediately and records kept.

Article 14 The election of directors held at the meeting of shareholders should be arranged in

accordance with the Company’s election specifications and with the election results

announced immediately at the meeting place.

Electoral ballots referred to above shall be sealed and signed by the scrutineers and

reserved for at least one year. However, for the litigation filed by the shareholders in

accordance with Article 189 of the Company Act, it should be reserved until the end of

the proceedings.

Article 15 The resolutions reached in the meeting of shareholders should be documented in the

minutes of meeting and signed or sealed by the Chairman; also, it should be uploaded to

the MOPS within 20 days after the meeting adjournment.

The minutes of meeting should be prepared in accordance with the year, month, date,

place, name of the Chairman, the resolution method, meeting procedure and the results,

and shall be permanently reserved throughout the duration of the Company.

Article 16 The Company shall have the statistical report for the number of shares solicited by the

solicitor and the number of shares by proxy prepared in the specific format during the

meeting of the shareholders commencement date and disclosed in the meeting.

For the resolutions reached in the meeting of shareholders that involved laws and

regulations or the material information defined by the Taiwan Stock Exchange

Corporation, the Company shall, within the specified time, have the information uploaded

to MOPS.

Article 17 The staff responsible for organizing the meeting of shareholders shall wear identification

badges or armbands.

The Chairman may direct disciplinary personnel or security personnel to help keep the

meeting place in order. The disciplinary personnel or security personnel that help keep the

meeting place in order should wear an armband with “Marshal” affixed or an

identification card.

When the meeting place is equipped with amplifying equipment, the Chairman may stop

129

shareholders who do not use the speaking device provided by the Company from

speaking.

The Chairman may instruct the disciplinary personnel or security personnel to have

shareholders who violate the Rules of Procedure for Shareholder Meetings, disobey the

instructions of the Chairman, intervene in the meeting proceedings and fail to comply

with the disciplinary act escrowed to leave the meeting place.

Article 18 The Chairman may announce the meeting in recess. The Chairman may rule to have the

meeting suspended temporarily under unruly circumstance and have the meeting resume

depending on the situation.

If the meeting place cannot be used continuously before the proposals (including motions)

resolved in the agendas scheduled, it can be resolved to be continued in the meeting of

shareholders to find another venue for the meeting.

The meeting of shareholders may, in accordance with Article 182 of the Company Act,

resolve to have the meeting postponed or resumed in five days.

Article 19 The Rules of Procedure for Shareholder Meetings is implemented after the resolution

reached in the meeting of shareholders, so is the amendment and revocation.

130

Questions and Motions

131

Appendix

- 132-

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders


Opinion

We have audited the accompanying parent company only financial statements of Taichung Commercial Bank

Co., Ltd. (the “Bank”), which comprise the balance sheets as of December 31, 2018 and 2017, and the

statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes

to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material

respects, the financial position of the Bank as of December 31, 2018 and 2017, and its financial performance

and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of

Financial Reports by Public Banks.

Basis for Opinion

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

Statements of Financial Institutions 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 Financial Statements section of our report. We are independent of the

Bank 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.

Emphasis of Matter

We draw attention to Note 3 of the parent company only financial statements, which describes Taichung

Commercial Bank Co., Ltd. initial application of the amendments to the Regulations Governing the

Preparation of Financial Reports by Public Banks, the International Financial Reporting Standards (IFRS),

International Accounting Standards (IAS), Interpretations of IFRIC (IFRIC), and Interpretations of SIC (SIC)

endorsed and issued into effect by the FSC starting from 2018. The Bank elects not to restate prior reporting

periods when applying the abovementioned standards, interpretations and interpretations endorsed and issued.

Our opinion is not modified in respect of this matter.

Key Audit Matters

Appendix 1

- 133-

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

our audit of the parent company only financial statements for the year ended December 31, 2018.

These matters were addressed in the context of our audit of the parent company only financial

statements as a whole, and in forming our opinion thereon, and we do not provide a separate

opinion on these matters.

The following are the descriptions of the key audit matters in the audit of the parent company only

financial statements of the Bank for the year ended December 31, 2018:

Expected Credit Losses of Notes Discounted and Loans, Net

As described in Notes 13 and 30 to the parent company only financial statements, notes

discounted and loans amounted to $451,728,578 thousand which accounted for 66% of total assets at

December 31, 2018 and the expected credit losses of the notes discounted and loans and receivables

amounted to $487,296 thousand which accounted for 5% of total net revenue for the year ended

December 31, 2018. Due to the large amount, the account has a significant influence on the Bank.

As discussed in Note 5, the measurement of expected credit losses of notes discounted and loans

involves various financial factors, such as probability of default and loss given default. Therefore,

the expected credit losses of notes discounted and loans were identified as one of the key audit

matters.

The relevant accounting policies, estimations, assumptions and other information are referred to in

Notes 4, 5, 13 and 30 to the parent company only financial statements.

The audit procedures performed for the expected credit losses of notes discounted and loans were

as follows:

We understood and tested the internal controls for the expected credit losses of notes discounted

and loans of Taichung Commercial Bank Co., Ltd.

We selected samples from schedule of expected credit losses of the notes discounted and loans

assessed by Taichung Commercial Bank Co., Ltd., and evaluated collateral’s value and feasibility of

the expected credit losses.

We understood and tested the key parameters for the expected credit losses of notes discounted

and loans (such as probability of default and loss given default) assessed by Taichung Commercial

Bank Co., Ltd. in assessing whether the expected credit losses were reasonable and met the current

experience and the economic situation in Taiwan.

Interest Revenue Recognition on Notes Discounted and Loans

As described in Note 33 to the parent company only financial statements, interest revenue on notes

discounted and loans of Taichung Commercial Bank Co., Ltd. amounted to $10,725,813 thousand

which accounted for 100% of total net revenue for the year ended December 31, 2018, which was the

- 134-

main revenue for Taichung Commercial Bank Co., Ltd. The establishment of loans of Taichung

Commercial Bank Co., Ltd. must be verified and reviewed by the supervisors who have been

authorized. The input data done by person in-charge have to be reviewed by the division supervisors

before loans are being disbursed. Taichung Commercial Bank Co., Ltd. use IT systems to compute

monthly interest revenue on notes discounted and loans automatically. The computation of interest

revenue on notes discounted and loans of Taichung Commercial Bank Co., Ltd. is highly dependent

on the IT systems. The input data of loans and the operation logic are very important for the accuracy

of the computation of interest revenue on notes discounted and loans. Therefore, interest revenue

recognition on notes discounted and loans was identified as one of the key audit matters.

The relevant accounting policies, estimations and other information are referred to in Notes 4 and 30

to the parent company only financial statements.

The audit procedures performed for interest revenue recognition on notes discounted and loans were

as follows:

• We understood and tested the internal controls for accuracy of interest revenue of notes

discounted and loans, included the understanding and testing of internal controls for IT system.

• We selected samples of interest revenue computed by IT system and cross-checked whether the samples agreed with the contracts. Subsequently, we recomputed interest revenue and verified that the amounts did not differ significantly from the reported amounts.

Responsibilities of Management and Those Charged with Governance for the Parent Company Only Financial Statements

Management is responsible for the preparation and fair presentation of the parent company only

financial statements in accordance with the Regulations Governing the Preparation of Financial

Reports by Public Banks, and for such internal control as management determines is necessary

to enable the preparation of parent company only financial statements that are free from

material misstatement, whether due to fraud or error.

In preparing the parent company only financial statements, management is responsible for

assessing the Bank’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 Bank 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

Bank’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Parent Company Only Financial Statements

Our objectives are to obtain reasonable assurance about whether the parent company only

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 parent company only 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 parent company only 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 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 Bank’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 Bank’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 parent company only 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 Bank to cease to

continue as a going concern.

5. Evaluate the overall presentation, structure and content of the parent company only financial

statements, including the disclosures, and whether the parent company only 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 ofentities or

business activities within the Bank to express an opinion on the parent company only financial

statements. We are responsible for the direction, supervision, and performance of the audit. We

remain solely responsible for our audit opinion.

- 135-

- 136-

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 parent company only financial statements for the

year ended December 31, 2018 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 Wen-Yea

Shyu and Kwan-Chung Lai.

Deloitte & Touche

Taipei, Taiwan

Republic of China

March 14, 2019

The accompanying parent company only financial statements are intended only to present the 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 parent company only financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying parent company only 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 parent company only financial statements shall prevail.

Notice to Readers

- 137-

TAICHUNG COMMERCIAL BANK CO., LTD.

BALANCE SHEETS

DECEMBER 31, 2018 AND 2017

(In Thousands of New Taiwan Dollars)

2018 2017

ASSETS Amount % Amount %

CASH AND CASH EQUIVALENTS $ 14,971,054 2 $ 13,944,328 2

DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS 31,768,897 5 30,121,642 5

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 26,136,939 4 30,965,512 5

FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME 28,197,495 4 - -

INVESTMENTS IN DEBT INSTRUMENTS AT AMORTIZED COST 100,462,761 15 - -

SECURITIES PURCHASED UNDER RESELL AGREEMENTS 9,094,151 1 11,283,082 2

RECEIVABLES, NET 5,028,141 1 6,329,074 1

NOTES DISCOUNTED AND LOANS, NET 451,728,578 66 429,656,232 65

AVAILABLE-FOR-SALE FINANCIAL ASSETS, NET - - 31,192,871 5

HELD-TO-MATURITY FINANCIAL ASSETS, NET - - 85,542,095 13

INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD, NET 5,224,701 1 4,735,107 1

OTHER FINANCIAL ASSETS, NET 1,111 - 1,067,625 -

PROPERTIES AND EQUIPMENT, NET 9,368,329 1 9,296,259 1

INVESTMENT PROPERTIES, NET 22,660 - 22,750 -

INTANGIBLE ASSETS, NET 125,025 - 115,605 -

DEFERRED TAX ASSETS 732,826 - 635,955 -

OTHER ASSETS 1,295,939 - 1,581,823 -

TOTAL $ 684,158,607 100 $ 656,489,960 100

LIABILITIES AND EQUITY

DUE TO THE CENTRAL BANK AND OTHER BANKS $ 3,378,752 1 $ 9,518,872 1

FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS 162,127 - 207,225 -

SECURITIES SOLD UNDER REPURCHASE AGREEMENTS 9,904,467 1 4,307,810 1

PAYABLES 11,342,864 2 12,195,742 2

CURRENT TAX LIABILITIES 296,788 - 223,235 -

DEPOSITS AND REMITTANCES 589,242,889 86 567,255,591 86

BANK DEBENTURES 20,000,000 3 17,500,000 3

OTHER FINANCIAL LIABILITIES 2,127 - 43,434 -

PROVISIONS 1,421,814 - 1,389,979 -

DEFERRED TAX LIABILITIES 111,021 - 111,021 -

OTHER LIABILITIES 472,105 - 335,111 -

Total liabilities 636,334,954 93 613,088,020 93

EQUITY

Ordinary shares 35,255,084 5 32,931,789 5

Capital surplus 726,981 - 684,156 -

Retained earnings

Legal reserve 6,985,726 1 5,896,530 1

Special reserve 110,159 - 73,833 -

Unappropriated earnings 4,093,133 1 3,630,655 1

Other equity 652,570 - 184,977 -

Total equity 47,823,653 7 43,401,940 7

TOTAL $ 684,158,607 100 $ 656,489,960 100

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

(With Deloitte & Touche auditors’ report dated March 14, 2019)

- 138-


STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

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

Percentage

2018 2017

Increase

(Decrease)

Amount % Amount % %

INTEREST REVENUE $ 12,453,151 117 $ 11,591,419 112 7

INTEREST EXPENSE (4,462,015) (42) (3,768,078) (36) 18

NET INTEREST 7,991,136 75 7,823,341 76 2

NET INCOME AND LOSS OTHER

THAN INTEREST

Service fee income, net 1,792,954 17 1,553,501 15 15

Gains on financial assets and liabilities

at fair value through profit or loss 146,351 1 472,898 5 (69)

Realized gains on available-for-sale

financial assets - - 27,608 - (100)

Realized gains on financial assets at

fair value through other

comprehensive income 54,017 1 - - -

Foreign exchange gains (losses), net 254,894 2 (91,229) (1) 379

Impairment losses on assets (17,488) - (50,533) - (65)

Share of profit of associates and joint

venture for using the equity method 435,743 4 252,540 2 73

Net (loss) gain on disposal of property (2,689) - 348,277 3 (101)

Other non-interest (losses) gains, net 20,105 - 11,676 - 72

TOTAL NET REVENUE 10,675,023 100 10,348,079 100 3

BAD-DEBT EXPENSES AND

PROVISION FOR LOSSES ON

COMMITMENTS AND

GUARANTEES

(410,947) (4) (946,897) (9) (57)

(Continued)

- 139-





Percentage

2018 2017

Increase

(Decrease)

Amount % Amount % %

OPERATING EXPENSES

Employee benefits $ (3,343,879) (31) $ (3,001,210) (29) 11

Depreciation and amortization (235,924) (2) (258,431) (3) (9)

Other selling and administrative

expenses (2,046,101) (19) (1,871,903) (18) 9

Total operating expenses (5,625,904) (52) (5,131,544) (50) 10

PROFIT BEFORE INCOME TAX

FROM CONTINUING

OPERATIONS 4,638,172 44 4,269,638 41 9

INCOME TAX EXPENSE (629,803) (6) (637,096) (6) (1)

NET PROFIT FOR THE YEAR 4,008,369 38 3,632,542 35 10

OTHER COMPREHENSIVE INCOME

Items that will not be reclassified

subsequently to profit or loss:

Remeasurement of defined benefit

plans (69,552) (1) (3,687) - 1,786

Unrealized gains on investments in

equity instruments at fair value

through other comprehensive

income 50,761 1 - - -

Share of the other comprehensive

income of associates and joint

venture accounted for using the

equity method 36,287 - 53 - 68,366

Income tax relating to items that

will not be reclassified

subsequently to profit or loss 29,425 - 626 - 4,600


subsequently to profit or loss,

net of income tax 46,921 - (3,008) - 1,660

(Continued)

- 140-





Percentage

2018 2017

Increase

(Decrease)

Amount % Amount % %

Items that may be reclassified


Exchange differences on the

translation of financial statements

of foreign operations $ 13,818 - $ (2,856) - 584

Unrealized gains on available-for-

sale financial assets - - 196,642 2 (100)


loss of associates accounted and

joint venture for using the equity

method (13,638) - (15,029) - (9)

Unrealized losses on investments in

debt instruments designated as at


comprehensive income (13,948) - - - -


may be reclassified subsequently

to profit or loss - - (7,414) - 100


subsequently to profit or loss,

net of income tax (13,768) - 171,343 2 (108)

Other comprehensive income for

the year, net of income tax 33,153 - 168,335 2 (80)

TOTAL COMPREHENSIVE INCOME

FOR THE YEAR $ 4,041,522 38 $ 3,800,877 37 6

EARNINGS PER SHARE

Basic $1.18 $1.08

Diluted $1.18 $1.08


(With Deloitte & Touche auditors’ report dated March 14, 2019) (Concluded)

- 141-


STATEMENTS OF CHANGES IN EQUITY



Other Equity

Retained Earnings

Exchange

Differences on the

Translation of

Financial

Unrealized Gain on

Financial Assets at

Fair Value

Through Other

Unrealized

Gain on

Unappropriated Statements of Comprehensive Available-for-sale

Ordinary Shares Capital Surplus Legal Reserve Special Reserve Earnings Foreign Operations Income Financial Assets Total Equity

BALANCE AT JANUARY 1, 2017 $ 32,381,307 $ 684,156 $ 4,881,792 $ 38,685 $ 3,382,461 $ (23,183) $ - $ 36,817 $ 41,382,035

Appropriation of 2016 earnings

Legal reserve - - 1,014,738 - (1,014,738) - - - -

Special reserve - - - 35,148 (35,148) - - - -

Cash dividends - - - - (1,780,972) - - - (1,780,972)

Share dividends 550,482 - - - (550,482) - - - -

Net profit for the year ended December 31, 2017 - - - - 3,632,542 - - - 3,632,542

Other comprehensive (loss) income for the year ended December 31, 2017, net of income

tax - - - - (3,008) (15,324) - 186,667 168,335

Total comprehensive income (loss) for the year ended December 31, 2017 - - - - 3,629,534 (15,324) - 186,667 3,800,877

BALANCE AT DECEMBER 31, 2017 32,931,789 684,156 5,896,530 73,833 3,630,655 (38,507) - 223,484 43,401,940

Effect of retrospective application and retrospective restatement (Notes 3) - - - - (80,676) - 623,457 (223,484) 319,297

BALANCE AT JANUARY 1, 2018 AS RETROSPECTIVE 32,931,789 684,156 5,896,530 73,833 3,549,979 (38,507) 623,457 - 43,721,237


Legal reserve - - 1,089,196 - (1,089,196) - - - -

Special reserve - - - 36,326 (36,326) - - - -

Cash dividends - - - - (1,481,931) - - - (1,481,931)

Share dividends 823,295 - - - (823,295) - - - -



tax - - - - (29,117) 180 62,090 - 33,153

Total comprehensive income for the year ended December 31, 2018 - - - - 3,979,252 180 62,090 - 4,041,522

Issuance of ordinary shares for cash 1,500,000 30,000 - - - - - - 1,530,000

Compensation costs of employee share options - 12,825 - - - - - - 12,825

Disposals of investments in equity instruments designated as at fair value through other

comprehensive income - - - - (5,350) - 5,350 - -

BALANCE AT DECEMBER 31, 2018 $ 35,255,084 $ 726,981 $ 6,985,726 $ 110,159 $ 4,093,133 $ (38,327) $ 690,897 $ - $ 47,823,653



- 142-


STATEMENTS OF CASH FLOWS



2018 2017

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax $ 4,638,172 $ 4,269,638

Adjustments for:

Depreciation expenses 189,733 197,125

Amortization expenses 46,191 61,306

Expected credit losses/bad-debt expenses 410,947 946,897

Gains on financial assets and liabilities at fair value through profit or

loss (146,351) (472,898)

Losses on disposal of properties and equipment 2,689 395

Gains on disposal of investment properties - (348,672)

Interest expense 4,462,015 3,768,078

Interest revenue (12,453,151) (11,591,419)

Dividend income (27,230) (21,619)

Provision for losses on others (2,437) 26,000

Compensation costs of employee share options 12,825 -

Share of profit of associates (435,743) (252,540)

Gains on disposal of investments (26,787) (27,608)

Impairment loss on financial assets 17,488 50,533

Unrealized (gain) loss on foreign currency exchange (356,756) 850,912

Total adjustment (8,306,567) (6,813,510)

Net changes in operating assets and liabilities

Due from the central bank and call loans to other banks (746,918) (609,388)

Financial assets at fair value through profit or loss 5,834,931 (7,418,639)

Receivables 1,491,373 (2,189,611)

Notes discounted and loans (22,586,332) (6,492,597)

Other financial assets 38,085 (35,342)

Other assets (24,203) 8,780

Due to the central Bank and other banks (6,140,120) (2,098,856)

Financial liabilities at fair value through profit or loss (4,770) (813,642)

Securities sold under repurchase agreements 5,596,657 85,552

Payables (954,873) 2,939,543

Deposits and remittances 21,987,298 26,012,882

Other financial liabilities (41,307) (30,062)

Provision for employee benefits (45,369) (24,423)

Other liabilities 136,994 45,134

Changes in operating assets and liabilities 4,541,446 9,379,331

Cash generated from operations 873,051 6,835,459

Interest received 12,515,028 11,676,535

Dividend received 28,096 22,230

Interest paid (4,360,020) (3,637,226)

Income tax paid (623,696) (410,195)

Net cash generated from operating activities 8,432,459 14,486,803

(Continued)

- 143-





2018 2017

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from disposal of financial assets at fair value through other

comprehensive income $ 4,297,417 -

Purchase of financial assets at amortized cost (761,952,805) -

Proceeds from sale of financial assets at amortized cost 45,650 -

Proceeds from repayments sale of financial assets at amortized cost 746,586,250 -

Purchase of available-for-sale financial assets - (1,050,000)

Proceeds from sale of available-for-sale financial assets - 7,319,614

Purchase of held-to-maturity financial assets - (748,721,306)

Proceeds from sale of held-to-maturity financial assets - 258,565

Proceeds from repayments sale of held-to-maturity financial assets - 676,269,904

Payments for properties and equipment (265,369) (122,022)

Proceeds from disposal of properties and equipment 967 -

Decrease in refundable deposits 87,287 63,679

Payments for intangible assets (55,611) (52,367)

Proceeds from disposal of investment properties - 403,950

Net cash used in investing activities (11,256,214) (65,629,983)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issue of bank debentures 2,500,000 6,000,000

Repayments of bank debentures - (1,500,000)

Cash dividends paid to owners of the Bank (1,481,931) (1,780,972)

Proceeds from issuance of ordinary shares 1,530,000 -

Net cash generated from financing activities 2,548,069 2,719,028

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE

OF CASH AND CASH EQUIVALENTS HELD IN FOREIGN

CURRENCIES 13,818 (2,856)

NET DECREASE IN CASH AND CASH EQUIVALENTS (261,868) (48,427,008)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR 38,811,338 87,238,346

CASH AND CASH EQUIVALENTS AT THE END OF YEAR $ 38,549,470 $ 38,811,338

(Continued)

- 144-





December 31

2018 2017

RECONCILIATIONS OF THE AMOUNTS IN THE STATEMENTS

OF CASH FLOWS WITH THE EQUIVALENT ITEMS REPORTED

IN THE BALANCE SHEETS AT DECEMBER 31, 2018 AND 2017

Cash and cash equivalents in the balance sheets $ 14,971,054 $ 13,944,328

Due from the central bank and call loans to other banks in accordance

with cash and cash equivalents under IAS 7 “Statement of Cash

Flows” 14,484,265 13,583,928

Securities purchased under resell agreements in accordance with cash

and cash equivalents under IAS 7 “Statement of Cash Flows” 9,094,151 11,283,082

Cash and cash equivalents at the end of the year $ 38,549,470 $ 38,811,338

The notes are an integral part of the financial statements.


Auditor’s Report

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders


Opinion

We have audited the accompanying consolidated financial statements of Taichung Commercial

Bank Co., Ltd. (the “Bank”) and its subsidiaries (collectively referred to as the “Group”), which

comprise the consolidated balance sheets as of December 31, 2018 and 2017, and the consolidated

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

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, 2018 and 2017, and

its consolidated financial performance and its consolidated cash flows for the years then ended in

accordance with the Regulations Governing the Preparation of Financial Reports by Public Banks,

Regulations Governing the Preparation of Financial Reports by Securities Firms, and International

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

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

Supervisory Commission (FSC) of the Republic of China.

Basis for Opinion

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

of Financial Statements of Financial Institutions 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.

Emphasis of Matter

We draw attention to Note 3 of the consolidated financial statements, which describes Taichung

Commercial Bank Co., Ltd. and its subsidiaries initial application of the amendments to the

Regulations Governing the Preparation of Financial Reports by Public Banks, Regulations

Governing the Preparation of Financial Reports by Securities Firms, and the International Financial

Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRIC

(IFRIC), and Interpretations of SIC (SIC) endorsed and issued into effect by the FSC starting from

2018. The Group elects not to restate prior reporting periods when applying the above-mentioned

standards, interpretations and interpretations endorsed and issued. Our opinion is not modified in

respect of this matter.

- 145-

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, 2018. 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.

The following are the descriptions of the key audit matters in the audit of the consolidated financial

statements of the Group for the year ended December 31, 2018:

Expected Credit Losses of Notes Discounted and Loans, Net

As described in Notes 13 and 33 to the consolidated financial statements, notes discounted and

loans amounted to $452,594,552 thousand which accounted for 66% of total assets at December 31,

2018 and the expected credit losses of the notes discounted and loans amounted to $487,333

thousand which accounted for 4% of total net revenue for the year ended December 31, 2018. Due

to the large amount, the account has a significant influence on the Group. As discussed in Note 5,

the measurement of expected credit losses of notes discounted and loans involves various financial

factors, such as probability of default and loss given default. Therefore, the expected credit losses

of notes discounted and loans were identified as one of the key audit matters.

The relevant accounting policies, estimations, assumptions and other information are referred to in

Notes 4, 5, 13 and 33 to the consolidated financial statements.

The audit procedures performed for the expected credit losses of notes discounted and loans were

as follows:

We understood and tested the internal controls for the expected credit losses of notes

discounted and loans of Taichung Commercial Bank Co., Ltd. and its subsidiaries.

We selected samples from schedule of expected credit losses of the notes discounted and loans

assessed by Taichung Commercial Bank Co., Ltd. and its subsidiaries, and evaluated

collateral’s value and feasibility of the expected credit losses.

We understood and tested the key parameters for the expected credit losses of notes discounted

and loans (such as probability of default and loss given default) assessed by Taichung

Commercial Bank Co., Ltd. and its subsidiaries in assessing whether the expected credit losses

were reasonable and met the current experience and the economic situation in Taiwan.

Interest Revenue Recognition on Notes Discounted and Loans

As described in Note 33 to the consolidated financial statements, interest revenue on notes

discounted and loans of Taichung Commercial Bank Co., Ltd. and its subsidiaries amounted to

$10,785,290 thousand which accounted for 92% of total net revenue for the year ended December

31, 2018, which was the main revenue for Taichung Commercial Bank Co., Ltd. and its

subsidiaries. The establishment of loans of Taichung Commercial Bank Co., Ltd. and its

subsidiaries must be verified and reviewed by the supervisors who have been authorized. The input

data done by person in-charge have to be reviewed by the division supervisors before loans are

being disbursed. Taichung Commercial Bank Co., Ltd. and its subsidiaries use IT systems to

compute monthly interest revenue on notes discounted and loans automatically. The computation

of interest revenue on notes discounted and loans of Taichung Commercial Bank Co., Ltd. and its

subsidiaries is highly dependent on the IT systems. The input data of loans and the operation logic

are very important for the accuracy of the computation of interest revenue on notes discounted and

loans. Therefore, interest revenue recognition on notes discounted and loans was identified as one

- 146 -

of the key audit matters.

The relevant accounting policies, estimations and other information are referred to in Notes 4 and

33 to the consolidated financial statements.

The audit procedures performed for interest revenue recognition on notes discounted and loans

were as follows:

We understood and tested the internal controls for accuracy of interest revenue of notes

discounted and loans, included the understanding and testing of internal controls for IT system.

We selected samples of interest revenue computed by IT system and cross-checked whether

the samples agreed with the contracts. Subsequently, we recomputed interest revenue and

verified that the amounts did not differ significantly from the reported amounts.

Other Matter

We have also audited the parent company only financial statements of Taichung Commercial Bank

Co., Ltd. as of and for the years ended December 31, 2018 and 2017 on which we have issued an

unmodified opinion with emphasis of matter and unmodified opinion, respectively.

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 Reports by

Public Banks, Regulations Governing the Preparation of Financial Reports by Securities Firms, and

International Financial Reporting Standards (IFRS), International Accounting Standards (IAS),

IFRIC Interpretations (IFRIC), 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 from 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.

- 147-

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 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.

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, 2018 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.

- 148-

The engagement partners on the audit resulting in this independent auditors’ report are Wen-Yea

Shyu and Kwan-Chung Lai.

Deloitte & Touche

Taipei, Taiwan

Republic of China

March 14, 2019

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.

- 149-

- 150-

TAICHUNG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2018 AND 2017


2018 2017

ASSETS Amount % Amount %

CASH AND CASH EQUIVALENTS $ 15,874,631 2 $ 15,001,053 2

DUE FROM THE CENTRAL BANK AND CALL LOANS TO OTHER BANKS 31,768,897 5 30,121,642 5

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 26,336,500 4 31,210,074 5

FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME 28,933,152 4 - -

INVESTMENTS IN DEBT INSTRUMENTS AT AMORTIZED COST 100,462,761 15 - -

SECURITIES PURCHASED UNDER RESELL AGREEMENTS 9,294,168 1 11,283,082 2

RECEIVABLES, NET 12,780,910 2 13,658,151 2

CURRENT TAX ASSETS 35 - 5,701 -

NOTES DISCOUNTED AND LOANS, NET 452,594,552 66 430,857,960 65

AVAILABLE-FOR-SALE FINANCIAL ASSETS, NET - - 31,615,817 5

HELD-TO-MATURITY FINANCIAL ASSETS, NET - - 85,542,095 13

INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD, NET 153,423 - 128,113 -

RESTRICTED ASSETS, NET 447,036 - 249,003 -

OTHER FINANCIAL ASSETS, NET 1,111 - 1,067,625 -

PROPERTIES AND EQUIPMENT, NET 9,446,769 1 9,387,663 1

INVESTMENT PROPERTIES, NET 108,950 - 45,250 -

INTANGIBLE ASSETS, NET 163,172 - 160,054 -

DEFERRED TAX ASSETS 781,879 - 681,396 -

OTHER ASSETS 1,684,157 - 2,009,404 -

TOTAL $ 690,832,103 100 $ 663,024,083 100

LIABILITIES AND EQUITY

DUE TO THE CENTRAL BANK AND OTHER BANKS $ 3,378,752 1 $ 9,518,872 1

FUNDS BORROWED FROM CENTRAL BANK AND OTHER BANKS 5,495,519 1 5,120,940 1

FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS 165,360 - 207,225 -

SECURITIES SOLD UNDER REPURCHASE AGREEMENTS 9,904,467 1 4,307,810 1

PAYABLES 12,254,764 2 13,331,722 2

CURRENT TAX LIABILITIES 380,869 - 255,559 -

DEPOSITS AND REMITTANCES 587,967,658 85 566,094,780 85

BANK DEBENTURES 20,000,000 3 17,500,000 3

OTHER FINANCIAL LIABILITIES 1,000,807 - 1,057,866 -

PROVISIONS 1,421,814 - 1,389,979 -

DEFERRED TAX LIABILITIES 111,021 - 111,021 -

OTHER LIABILITIES 927,419 - 726,369 -

Total liabilities 643,008,450 93 619,622,143 93

EQUITY ATTRIBUTABLE TO OWNERS OF THE BANK

Ordinary shares 35,255,084 5 32,931,789 5

Capital surplus 726,981 - 684,156 -

Retained earnings

Legal reserve 6,985,726 1 5,896,530 1

Special reserve 110,159 - 73,833 -

Unappropriated earnings 4,093,133 1 3,630,655 1

Other equity 652,570 - 184,977 -

Total equity attributable to owners of the Bank 47,823,653 7 43,401,940 7

Total equity 47,823,653 7 43,401,940 7

TOTAL $ 690,832,103 100 $ 663,024,083 100

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


- 151 -


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



Percentage

2018 2017

Increase

(Decrease)

Amount % Amount % %

INTEREST REVENUE $ 13,060,733 112 $ 12,078,007 106 8

INTEREST EXPENSE (4,626,523) (40) (3,892,000) (34) 19

NET INTEREST 8,434,210 72 8,186,007 72 3

NET INCOME AND LOSS OTHER

THAN INTEREST

Service fee income, net 2,846,174 24 2,448,579 22 16

Gains on financial assets and liabilities

at fair value through profit or loss 117,134 1 490,717 4 (76)

Realized gains on available-for-sale

financial assets - - 34,743 - (100)

Realized gains on financial assets at


comprehensive income 77,048 1 - - -

Foreign exchange gains (losses), net 232,895 2 (88,738) (1) 362

Impairment losses on assets (17,488) - (50,533) - (65)

Share of loss of associates and joint

venture for using the equity method (6,716) - (2,875) - 134

Net (loss) gain on disposal of property (2,437) - 347,810 3 (101)

Other non-interest gains, net 8,604 - 29,045 - (70)

TOTAL NET REVENUE 11,689,424 100 11,394,755 100 3

BAD-DEBT EXPENSES AND

PROVISION FOR LOSSES ON

COMMITMENTS AND

GUARANTEES (472,772) (4) (1,124,859) (10) (58)

(Continued)

- 152-





Percentage

2018 2017

Increase

(Decrease)

Amount % Amount % %

OPERATING EXPENSES

Employee benefits $ (3,723,758) (32) $ (3,348,251) (29) 11

Depreciation and amortization (273,401) (2) (287,221) (3) (5)

Other selling and administrative

expenses (2,459,610) (21) (2,279,212) (20) 8

Total operating expenses (6,456,769) (55) (5,914,684) (52) 9

PROFIT BEFORE INCOME TAX

FROM CONTINUING

OPERATIONS 4,759,883 41 4,355,212 38 9

INCOME TAX EXPENSE (751,514) (6) (722,670) (6) 4

NET PROFIT FOR THE YEAR 4,008,369 35 3,632,542 32 10

OTHER COMPREHENSIVE INCOME



Remeasurement of defined benefit

plans (69,552) (1) (3,687) - 1,786

Unrealized gains on investments in

equity instruments at fair value

through other comprehensive

income 87,452 1 - - -


(loss) income of associates and

joint venture accounted for using

the equity method (404) - 53 - (862)


will not be reclassified

subsequently to profit or loss 29,425 - 626 - 4,600


subsequently to profit or (loss),

net of income tax 46,921 - (3,008) - 1,660

(Continued)

- 153 -





Percentage

2018 2017

Increase

(Decrease)

Amount % Amount % %



Exchange differences on the

translation of financial statements

of foreign operations $ 180 - $ (15,324) - 101

Unrealized gains on available-for-

sale financial assets - - 194,081 1 (100)

Unrealized losses on investments in

debt instruments designated as at


comprehensive income (13,948) - - - -


may be reclassified subsequently

to profit or loss - - (7,414) - 100


subsequently to profit or (loss),

net of income tax (13,768) - 171,343 1 (108)

Other comprehensive income for

the year, net of income tax 33,153 - 168,335 1 (80)

TOTAL COMPREHENSIVE INCOME

FOR THE YEAR $ 4,041,522 35 $ 3,800,877 33 6

EARNINGS PER SHARE

Basic $1.18 $1.08

Diluted $1.18 $1.08



- 154 -


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



Other Equity

Retained Earnings

Exchange

Differences on the

Translation of

Financial

Unrealized Gain on

Financial Assets at

Fair Value

Through Other

Unrealized

Gain on

Unappropriated Statements of Comprehensive Available-for-sale

Common Stock Capital Surplus Legal Reserve Special Reserve Earnings Foreign Operations Income Financial Assets Total Equity

BALANCE AT JANUARY 1, 2017 $ 32,381,307 $ 684,156 $ 4,881,792 $ 38,685 $ 3,382,461 $ (23,183) $ - $ 36,817 $ 41,382,035


Legal reserve - - 1,014,738 - (1,014,738) - - - -

Special reserve - - - 35,148 (35,148) - - - -

Cash dividends - - - - (1,780,972) - - - (1,780,972)

Share dividends 550,482 - - - (550,482) - - - -



tax - - - - (3,008) (15,324) - 186,667 168,335

Total comprehensive income (loss) for the year ended December 31, 2017 - - - - 3,629,534 (15,324) - 186,667 3,800,877

BALANCE AT DECEMBER 31, 2017 32,931,789 684,156 5,896,530 73,833 3,630,655 (38,507) - 223,484 43,401,940

Effect of retrospective application and retrospective restatement - - - - (80,676) - 623,457 (223,484) 319,297

BALANCE AT JANUARY 1, 2018 AS RETROSPECTIVE 32,931,789 684,156 5,896,530 73,833 3,549,979 (38,507) 623,457 - 43,721,237


Legal reserve - - 1,089,196 - (1,089,196) - - - -

Special reserve - - - 36,326 (36,326) - - - -

Cash dividends - - - - (1,481,931) - - - (1,481,931)

Share dividends 823,295 - - - (823,295) - - - -



tax - - - - (29,117) 180 62,090 - 33,153

Total comprehensive income for the year ended December 31, 2018 - - - - 3,979,252 180 62,090 - 4,041,522

Issuance of ordinary shares for cash 1,500,000 30,000 - - - - - - 1,530,000

Compensation costs of employee share options - 12,825 - - - - - - 12,825

Disposals of investments in equity instruments designated as at fair value through other

comprehensive income - - - - (5,350) - 5,350 - -

BALANCE AT DECEMBER 31, 2018 $ 35,255,084 $ 726,981 $ 6,985,726 $ 110,159 $ 4,093,133 $ (38,327) $ 690,897 $ - $ 47,823,653



- 155 -


CONSOLIDATED STATEMENTS OF CASH FLOWS



2018 2017

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax $ 4,759,883 $ 4,355,212

Adjustments for:

Depreciation expenses 220,234 219,647

Amortization expenses 53,167 67,574

Expected credit losses/bad-debt expenses 472,772 1,124,859

Gains on financial assets and liabilities at fair value through profit or

loss (117,134) (490,717)

Losses on disposal of properties and equipment 2,437 862

Gains on disposal of investment properties - (348,672)

Interest expense 4,626,523 3,892,000

Interest revenue (13,060,733) (12,078,007)

Dividend income (50,261) (28,754)

Provision for losses on others (2,437) 26,000

Compensation costs of employee share options 12,825 -

Share of loss of associates 6,716 2,875

Gains on disposal of investments (26,787) (27,608)

Impairment loss on financial assets 17,488 50,533

Unrealized (gain) loss on foreign currency exchange (429,099) 850,927

Total adjustment (8,274,289) (6,738,481)

Net changes in operating assets and liabilities

Due from the central bank and call loans to other banks (746,918) (609,388)

Financial assets at fair value through profit or loss 6,738,946 (7,478,148)

Receivables 1,079,969 (3,977,913)

Notes discounted and loans (22,250,976) (6,428,669)

Other financial assets 38,085 (35,342)

Other assets (214,693) 31,149

Due to the central Bank and other banks (6,140,120) (2,098,856)

Financial liabilities at fair value through profit or loss (889,768) (813,642)

Securities sold under repurchase agreements 5,596,657 85,552

Payables (1,190,405) 3,391,522

Deposits and remittances 21,872,878 26,285,772

Other financial liabilities (41,307) (30,062)

Provision for employee benefits (45,369) (24,423)

Other liabilities 34,502 110,770

Changes in operating assets and liabilities 3,841,481 8,408,322

Cash generated from operations 327,075 6,025,053

Interest received 13,120,974 12,172,096

Dividend received 50,261 28,754

Interest paid (4,513,076) (3,757,507)

Income tax paid (691,596) (502,272)

Net cash generated from operating activities 8,293,638 13,966,124

(Continued)

- 156 -





2018 2017

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of financial assets at fair value through other comprehensive

income $ (276,021) $ -

Proceeds from disposal of financial assets at fair value through other

comprehensive income 4,297,417 -

Purchase of financial assets at amortized cost (761,952,805) -

Proceeds from sale of financial assets at amortized cost 45,650 -

Proceeds from repayments sale of financial assets at amortized cost 746,586,250 -

Purchase of available-for-sale financial assets - (1,351,137)

Proceeds from sale of available-for-sale financial assets - 7,319,614

Purchase of held-to-maturity financial assets - (748,721,306)

Proceeds from sale of held-to-maturity financial assets - 258,565

Proceeds from repayments sale of held-to-maturity financial assets - 676,269,904

Payments for properties and equipment (282,743) (196,583)

Proceeds from disposal of properties and equipment 1,930 24,921

Decrease in refundable deposits 117,963 46,516

Payments for intangible assets (56,112) (56,197)

Payments for investment properties (63,790) (22,500)

Proceeds from disposal of investment properties - 403,950

Net cash used in investing activities (11,582,261) (66,024,253)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from funds borrowed from central bank and other banks 374,579 921,082

(Repayments of ) proceeds from commercial papers issued (15,752) 279,961

Proceeds from issue of bank debentures 2,500,000 6,000,000

Repayments of bank debentures - (1,500,000)

Proceeds from guarantee deposits received 166,548 -

Cash dividends paid to owners of the Bank (1,481,931) (1,780,972)

Proceeds from issuance of ordinary shares 1,530,000 -

Net cash generated from financing activities 3,073,444 3,920,071

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE

OF CASH AND CASH EQUIVALENTS HELD IN FOREIGN

CURRENCIES 180 (15,324)

NET DECREASE IN CASH AND CASH EQUIVALENTS (214,999) (48,153,382)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR 39,868,063 88,021,445

CASH AND CASH EQUIVALENTS AT THE END OF YEAR $ 39,653,064 $ 39,868,063

(Continued)

- 157-





December 31

2018 2017

RECONCILIATIONS OF THE AMOUNTS IN THE CONSOLIDATED

STATEMENTS OF CASH FLOWS WITH THE EQUIVALENT

ITEMS REPORTED IN THE CONSOLIDATED BALANCE

SHEETS AT DECEMBER 31, 2018 AND 2017

Cash and cash equivalents in the consolidated balance sheets $ 15,874,631 $ 15,001,053

Due from the central bank and call loans to other banks in accordance

with cash and cash equivalents under IAS 7 “Statement of Cash

Flows” 14,484,265 13,583,928

Securities purchased under resell agreements in accordance with cash

and cash equivalents under IAS 7 “Statement of Cash Flows” 9,294,168 11,283,082

Cash and cash equivalents at the end of the year $ 39,653,064 $ 39,868,063



- 158 -


Rules of Procedure for Shareholder Meetings



Article 1 The rules for compliance are stipulated in accordance with Article 5 of the “Corporate

Governance Best Practice Principles for TWSE/TPEx Listed Companies” for

establishing the Company’s excellent meeting of shareholders governance system,

substantiating supervisory function, and enhancing management functions.

Article 2 The Rules of Procedure for Shareholder Meetings is processed in accordance with the

Rules, unless otherwise provided by law or Company Corporate Charter (Articles of

Incorporation).

Article 3 The Company’s meeting of shareholders shall be convened by the Board, unless

otherwise provided by law. The Company shall have the Annual Meeting of

Shareholders notice, proxy and the proposal and information on admission, discussions

and directors and supervisors election and dismissal compiled into electronic files and

uploaded to the MOPS 30 days prior to the annual meeting of shareholders or fifteen

days prior to the extraordinary meeting of shareholders. Also, the Annual Meeting

Handbook and the supplementary information are compiled into electronic files and

uploaded to the MOPS 21 days prior to the Annual Meeting of Shareholders or 15 days

prior to the extraordinary meeting of shareholders. The Annual Meeting Handbooks and

the supplementary information are made available to shareholders 15 days prior to the

annual meeting of shareholders; also, on display at the Company’s and its Stock Agent’s

and distributed to shareholders at the meeting place.

The reasons for convening the meeting should be stated in the notice and announcement.

The notice with the consent of the counterparty can be issued electronically.

The election or dismissal of directors, supervisors, amendments to the Company

Corporate Charter (Articles of Incorporation), dissolution, merger, division or the

clauses of Paragraph 1, Article 185 of the Company Act, the matters stated in Article 26-

1 and Article 43-6 of Securities and Exchange Act shall be stated in the reasons for

convening the meeting not in the motion.

Shareholders who have over 1% shareholdings in the Company’s total number of shares

issued may propose to the Company in writing to convene the Annual Meeting of

Shareholders. But it is limited to one proposal and the additional proposals will not be

included in the meeting agenda. In addition, the Board may have the proposals of

shareholders that fall under the circumstances stated in Paragraph 4, Article 172-1 of the

Company Act excluded from meeting discussions.

The Company shall announce the proposals admitted, the premises and the admission

period before the stock stop-transfer date prior to the Annual Meeting of Shareholders is

convened; also, the admitting period may not be less than 10 days.

Motion proposed by shareholders is limited to three hundred words. A proposed motion

of more than three hundred words will not be included in the proposal. The proposing

shareholders must attend the Annual Meeting of Shareholders in person or by proxy and

Appendix 2

- 159-

must participate in the proposal discussion.

The Company shall have the proposing shareholder notified about the proposal results

before the date of the meeting notice and must have the proposals in compliance with

this provision included in the meeting notice. The Board shall state the reasons for not

including the proposal of shareholders in the meeting agenda.

Article 4 Shareholders may attend the meeting of shareholders by proxy that is printed and issued

by the Company with the scope of authorization detailed.

It is limited to one proxy per shareholder and one proxy only that should be served to the

Company five days prior to the meeting of shareholders. When the proxy is issued in



After serving the proxy to the Company, the shareholders who wish to attend the

meeting of the shareholders in person or to vote in writing or by electronic means shall

notify the Company in writing to revoke the proxy two days prior to the meeting of the

shareholders. If the proxy is not revoked before the deadline, the vote by proxy shall

prevail.

Article 5 The place of meeting of shareholders should be at the Company’s or any suitable

location or for shareholders to attend the meeting conveniently; also, the meeting of

shareholders shall not be started before 9:00 or after 15:00.

Article 6 The Company should have the attendance registry ready for the signature of the

attending shareholders or the shareholder’s representative (hereinafter referred to as the

Shareholders), or the attending shareholders may have the signature card submitted as an

alternative to the signature.

The Company should have the annual meeting handbook, annual reports, attendance

pass, speech slip, voting ballots, and other meeting materials delivered to the attending

shareholders; also, the electoral ballots should be distributed for the election of directors

and supervisors, if applicable.

Shareholders should attend the meeting of shareholders with the presentation of the

attendance pass, attendance card or other attendance documents. Proxy solicitors should

have identity documents with them for examination.

When the government or juridical person is a shareholder, the shareholder attending the

meeting by proxy is not limited to one representative. The juridical person that has

attended the meeting of shareholder by proxy can authorize only one representative to

attend the meeting.

Article 7 If the meeting of shareholders is convened by the Board, the Chairman of the Board is to

chair the meeting. If the Chairman is on leave or is unable to exercise his powers for

certain reasons, the Vice Chairman is to chair the meeting. If a Vice Chairman is not

appointed or the Vice Chairman is also on leave or is unable to perform his duties for

certain reasons, the Chairman is to appoint one of the managing directors to chair the

meeting. If a managing director is not appointed, one of the directors is appointed to

chair the meeting. If a representative is not appointed by the Chairman, one of the

managing directors or directors should be elected among the board members to chair the

meeting.

The Company may assign the appointed attorney, CPA, or responsible personnel to

attend the meeting of the shareholders.

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Article 8 The Company should have the entire meeting of shareholders taped in audio or video

recording and stored for at least one year.

However, for the litigation filed by the shareholders in accordance with Article 189 of

the Company Act, it should be reserved until the end of the proceedings.

Article 9 Attendance of the meeting of shareholders should be calculated in accordance with the

shareholdings. The shareholding attendance is based on the attendance registry or the

signature cards submitted, plus the votes exercised in writing or by electronic means.

The Chairman shall call the meeting to order at the meeting time. If the shareholding of

the attending shareholders is not more than half of the total number of shares issued, the

Chairman may announce the meeting postponed, which is limited to two postponements

and for less than one-hour in total. If the shareholding of the attending shareholders

remaining do not constitute more than one third of the total number of shares issued after

the two postponements, the Chairman may announce to have the meeting aborted.

If the shareholdings of the attending shareholders are not more than half of the total

number of shares issued after two postponements but more than one third of the total

number of shares issued, a pseudo-resolution can be resolved in accordance with

Paragraph 1, Article 175 of the Company Act; also, shareholders should be informed

regarding the pseudo-resolution with another meeting of shareholders to be convened

within one month.

If the shareholdings of the attending shareholders are more than one half of the total

number of shares issued before the end of the meeting, the Chairman may have the

pseudo-resolution presented again in the next meeting of the shareholders for resolution

in accordance with Article 174 of the Company Act.

Article 10 If the meeting of shareholders is convened by the Board, the agenda is scheduled by the

Board; also, the meeting should be conducted in accordance with the agenda scheduled

and it may not be amended without the resolution reached in the meeting of shareholders.

If the meeting of shareholders is convened by an authorized person other than the Board,

the provision referred to above is applicable.

The Chairman may not have the meeting adjourned at his discretion before the proposals

(including motions) resolved in the two agendas referred to above. If the Chairman has

the meeting adjourned in violation of the Rules of Procedure for Shareholder Meetings,

the other Board members shall promptly assist the attending shareholders in accordance

with the legal procedures to have one shareholder elected as the Chairman with the

majority votes of the attending shareholders to continuously chair the meeting.

A Chairman who believes that the proposal under discussion is ready for voting may at

his discretion stop the discussion and call for a vote.

Article 11 Attending shareholders before speaking on the subject must fill out the speech slip,

shareholder account number, and account name (or attendance pass number) in detail,

and then the Chairman is to determine the order of speakers.

Attending shareholders who have speech slips submitted but not speak shall be deemed

as silent shareholders. If there is a discrepancy found between the text of the speech and

the speech slip submitted, the contents of the speech shall prevail.

Each shareholder may not speak more than twice on the same motion for 5 minutes each

time without the consent of the Chairman. However, the Chairman may have the

speaking shareholders who violate the rules or speak beyond the scope of those issues

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silenced.

Attending shareholders may not interfere with the speaking shareholders without the

consent of the Chairman and the speaking shareholders. The Chairman will have the

violating shareholders stopped.

If the juridical person shareholder has more than two representatives assigned to attend

the meeting of shareholders, only one of the two representatives may speak on the same

proposal.

The Chairman may reply to the speaking shareholders personally or by the designated

personnel.

Article 12 Resolutions of the meeting of shareholders should be based on their shareholdings.

For the resolutions in the meeting of shareholders, the shares of the shareholders without

votes are not included in the calculation of outstanding shares. Shareholders who have a

conflict of interest with the proposals that are detrimental to the Company’s interests

shall not vote, and cannot vote by proxy on behalf of the other shareholders. The shares

without votes referred to above are not included in the calculation of the attending

shareholders’ votes. Except for Trust agencies or stock agencies approved by the

securities regulatory authorities, the votes of the representative delegated by two or more

shareholders shall not exceed 3% of the total votes representing the total number of

shares issued; also, the votes exceeding the threshold shall not be counted.

Article 13 Shareholders are entitled to one vote per share; except for those subject to restrictions or

the non-voting matters illustrated in Paragraph 2, Article 179 of the Company Act.

The Company’s meeting of shareholders can be convened with the votes cast in writing

or by electronic means. When the vote is cast in writing or by electronic means, the

election method should be stated in the notice of meeting of shareholders. Shareholders

who have their votes cast in writing or by electronic means are deemed as attending the

meeting in person. However, with respect to motions and original proposal amendments

of the meeting of shareholders, it is deemed as a waiver.

For the votes exercised in writing or by electronic means referred to above, the intention

should be delivered to the Company two days prior to the meeting of shareholders. For

the intention expressed in duplicate, whichever is delivered first shall prevail. The

intention referred to above that was announced to be revoked is not subject to this

restriction.

Shareholders after exercising their votes in writing or by electronic means wish to attend

the meeting of shareholders in person shall have the intension of exercising votes in

writing or by electronic means revoked the same way of exercising their votes two days

prior to the meeting commencement date. For overdue revocations, the votes exercised

in writing or by electronic means shall prevail. If the vote is exercised in writing or by

electronic means and a representative is to attend the meeting of shareholders by proxy,

the votes exercised by the representative in person shall prevail.

For the resolution of proposals, unless otherwise provided in the Company Act and the

Company Corporate Charter (Articles of Incorporation), the consent of a majority vote

of the attending shareholders shall prevail. The motion resolved by the Chairman’s

consulting the attending shareholders without dissent is deemed as passed and with the

same effect as voting.

When there is an amendment or alternative for the same motion, the Chairman shall

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have the order of vote, including the original proposal, determined accordingly. If one of

the motions has been passed, the other motions shall be deemed as rejected without the

need for further resolution.

Chairman is to appoint the scrutineers and counting officers who must be shareholders.

Ballot counting should be held at the meeting place with the ballot counting result

announced immediately and records kept.

Article 14 The election of directors and supervisors held at the meeting of shareholders should be

arranged in accordance with the Company’s election specifications and with the election

results announced immediately at the meeting place.

Electoral ballots referred to above shall be sealed and signed by the scrutineers and

reserved for at least one year. However, for the litigation filed by the shareholders in

accordance with Article 189 of the Company Act, it should be reserved until the end of

the proceedings.

Article 15 The resolutions reached in the meeting of shareholders should be documented in the

minutes of meeting and signed or sealed by the Chairman; also, it should be uploaded to

the MOPS within 20 days after the meeting adjournment.

The minutes of meeting should be prepared in accordance with the year, month, date,

place, name of the Chairman, the resolution method, meeting procedure and the results,

and shall be permanently reserved throughout the duration of the Company.

Article 16 The Company shall have the statistical report for the number of shares solicited by the

solicitor and the number of shares by proxy prepared in the specific format during the

meeting of the shareholders commencement date and disclosed in the meeting.

For the resolutions reached in the meeting of shareholders that involved laws and

regulations or the material information defined by the Taiwan Stock Exchange

Corporation, the Company shall, within the specified time, have the information

uploaded to MOPS.

Article 17 The staff responsible for organizing the meeting of shareholders shall wear identification

badges or armbands.

The Chairman may direct disciplinary personnel or security personnel to help keep the

meeting place in order. The disciplinary personnel or security personnel that help keep

the meeting place in order should wear an armband with “Marshal” affixed or an

identification card.

When the meeting place is equipped with amplifying equipment, the Chairman may stop

shareholders who do not use the speaking device provided by the Company from

speaking.

The Chairman may instruct the disciplinary personnel or security personnel to have

shareholders who violate the Rules of Procedure for Shareholder Meetings, disobey the

instructions of the Chairman, intervene in the meeting proceedings and fail to comply

with the disciplinary act escrowed to leave the meeting place.

Article 18 The Chairman may announce the meeting in recess. The Chairman may rule to have the

meeting suspended temporarily under unruly circumstance and have the meeting resume

depending on the situation.

If the meeting place cannot be used continuously before the proposals (including

motions) resolved in the agendas scheduled, it can be resolved to be continued in the

- 163 -

meeting of shareholders to find another venue for the meeting. The meeting of

shareholders may, in accordance with Article 182 of the Company Act, resolve to have

the meeting postponed or resumed in five days.

Article 19 The Rules of Procedure for Shareholder Meetings is implemented after the resolution

reached in the meeting of shareholders, so is the amendment and revocation.

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Company Corporate Charter (Articles of Incorporation)

Chapter 1 General rules

Article 1 The Bank was organized and incorporated in accordance with The Banking Act of

The Republic of China and the Company Corporate Charter (Articles of

Incorporation), known as “Taichung Commercial Bank” (hereinafter referred to as

“Taichung Bank”)

Article 2 The Bank is dedicated to support the national policy in finance and banking, and

provide viable financial service and advocate industrial and economic development.

Article 3 The Bank’s head office is in Taichung City and with appropriate branches set-up

domestically and internationally depending on its business operations. The

incorporation, revocation, or amendment of branch offices are reported to the

competent authorities for approval and are registered with the Ministry of Economic

Affairs in accordance with the resolutions of the Board.

Article 4 The Bank has announcements made by publishing it in the local daily newspaper

where the head office of the Bank is located or by the instructions of the competent

authorities.

Chapter 2 Stock

Article 5 The Bank’s authorized capital amounted to NTD43.2 billion with 4.32 billion shares

issued at NTD10 par, in which, the Board is authorized to have the unissued shares

issued by installments.

Preferred shares may be offered within the total amount of shares as mentioned in the

previous paragraph.

Article 5-1 The rights and obligations of the preferred shares of the Bank and other important

conditions for issuance are shown below:

1. If the Bank has earnings after account settlement, it shall appropriate the payment

of applicable taxes and for write-off loss carried forward from previous periods.

If there is still a balance, appropriate or make reversal for the legal reserve and

special reserve as required by law. The remainder shall be distributed as the stock

dividend of the year at the first priority.

2. Dividends for preferred shares shall be set at no more than 8% per annum.

3. Dividends for preferred shares shall be calculated on the offering price per share

and will be paid in cash once a year. After the ratification of the financial

statements by the annual meeting of shareholders, the Board shall set the

dividend day for the distribution of dividends of the previous fiscal year. The

distribution of dividends in the year of offering and the year of redemption shall

be based on the quantity of the issuing day.

4. The Bank is discretionary in payment of stock dividend for preferred shares. If

the Bank has no earnings in particular year and there is no payment of stock

dividend for common stocks, or the earnings are insufficient for dividend

payment, or the payment of dividend of preferred shares makes the capital

adequacy ratio of the Bank fall below the minimum requirements under law or

the competent authority, the Bank may resolve not to pay dividend for preferred

Appendix 3

165

shares. Holders of preferred shares shall not have any objection of such decision.

If the preferred shares so issued are the non-accumulative type, the dividends not

being distributed or inadequate amount of dividends shall not be accumulated to

deferred payments with subsequent years in which the Bank has earnings.

5. Further to the entitlement of dividend stated in Subparagraph 3, if the preferred

shares offered are non-participating, the holders of preferred shares are not

entitled to cash dividend or stock dividend for common stocks through for cash

payment or capitalization of retained earnings and capital reserve.

6. Holders of preferred shares issued by the Bank have the priority to distribution of

residual assets over the holders of common stocks up to the amount of cash in the

offering. In case the competent authority ordered for a takeover of the Bank,

discontinuation of operation for clearing, and liquidation, the priority of the

holders of preferred shares is the same as the holders of common stocks.

7. Holders of preferred shares are not entitled to vote and taking part in the election

but could be elected as Directors, and are entitled to vote only in the

Shareholders’ Meeting of preferred shares and session of the Shareholders’

Meeting related to the rights and obligations of the holders of preferred shares.

8. No conversion of the convertible preferred shares issued by the Bank within 1

year from the day of offering. The timing for conversion shall be determined by

the Board as an integral part of the condition of offering under authorization.

Holders of convertible preferred shares may apply for conversion of preferred

shares in their holding to common stocks in whole or in part as stated in the

conditions of offering at the ratio of 1 preferred share to 1 common stock

(conversion ratio is 1:1). After the conversion of preferred shares to common

stocks, the rights and obligations shall be the same as common stocks. The

payment of dividend in the year of conversion of preferred shares shall be based

on the exact number of outstanding days of the shares in proportion to the

number of days in the year in the calculation. However, preferred shares

converted to common stocks prior to the ex-right (dividend) day are not entitled

to the payment of dividend for preferred shares in the year of payment and

payment in subsequent years, but are entitled to the payment of dividend of

common stocks from earnings and capital reserve.

9. There is no maturity date for preferred shares issued by the Bank and the holders

of preferred shares are not entitled to claim for the redemption of the shares. The

Bank may redeem the outstanding preferred shares in whole or in part from the

day after the 5th

anniversary of the offering of preferred shares under law or at the

permission of the competent authority. Redemption will be made at the offering

price. The preferred shares not being redeemed still be granted the rights and

obligations as mentioned in preceding paragraphs. Where the Bank may

determine to pay stock dividend in particular year, the payable dividend to the

deadline of redemption shall be calculated on the exact number of outstanding

days.

10. If the preferred shares issued by the Bank have a maturity date, it shall be no less

than 5 years. Holders of preferred shares are not entitled to request the Bank for

redemption of the shares before maturity. At maturity or the day after the 5th

anniversary of the issuance day and as permitted by applicable laws and the

competent authority, the Bank may redeem the shares at the offering price and

166

under related regulations of issuance, issue new shares for compulsory

conversation with the preferred shares (in the ratio of 1:1), or redeem by another

means as permitted by law. If the Bank cannot redeem the preferred shares in

whole or in part at maturity under objective factors or force majeure, the rights

inherent to the preferred shares shall prevail under the same conditions for

issuance provided under related regulations for issuance until the whole issue

was redeemed by the Bank.

The Board shall be authorized to assign the title, issuing date and the terms and

conditions for the offering of preferred shares at the time of offering pending on the

situation of the capital market and the willingness of the investors and in accordance

with the Articles of Incorporation of the Bank and other applicable legal rules.

Article 6 The Bank’s shares are ordered with the signature or seal of at least three directors

affixed for lawful issuance.

The Bank may have new shares issued by a book-entry in accordance with the

Company Act.

Article 7 The Bank’s dividend distribution is proposed by the Board for resolution in the

meeting of shareholders, but the Bank may not propose to have the capital distributed

as dividends when there are no earnings.

Article 8 The Company’s stock is processed in accordance with the “Regulations Governing the

Administration of Shareholder Services of Public Companies” published by the

competent authorities and other relevant laws and regulations.

Article 9 The Bank’s stock shares cannot be transferred within 60 days prior to the Annual

Meeting of Shareholders, 30 days prior to the extraordinary meeting of shareholders,

or 5 days prior to the record date of the bank’s distributing dividends, bonus or other

benefits.

Article 10 The Bank’s elected directors shall report the shareholding at the time of election to the

competent authorities. A director in office who has stock shares transferred for over

one half of the shareholding at the time of election will be discharged automatically.

A director in office shall report to the competent authorities and announce any

increase or decrease of shareholdings.

The director who is reelected prior to the tenure expired and has shares transferred

before inauguration for over one half of the shareholding at the time of election, or has

shares transferred for over one half of the shareholding during the stop-transferring

period before the meeting of shareholders convened will be disqualified.

Chapter 3 Business operation

Article 11 The Bank’s business operation is as follows:

1. H101021 Commercial banking

2. H301011 Securities firms

3. H408011 Futures introducing brokers

It is limited to the businesses authorized by the competent authorities referred to

above.

Article 12 The Bank may operate other businesses authorized by the competent authorities.

167

Chapter 4 Meeting of shareholders

Article 13 The meeting of shareholders includes the annual meeting of shareholders and

extraordinary meeting of shareholders. The annual meeting of shareholders is held

once a year and it is to be convened by the Board within 6 months after the fiscal year.

The extraordinary meeting of shareholders is to be convened by the Board or the

Auditing Committee when it is necessary. Shareholders who have over 3%

shareholding for more than 1 year may request the Board to convene an extraordinary

meeting of shareholders by filing a written proposal with the matters and reasons

detailed.

Where necessary, the meeting of the holders of preferred shares may be convened

under the applicable legal rules.

Article 14 Shareholders should be informed of the meeting date, place and subject 30 days in

advance for the Annual Meeting of Shareholders and 15 days in advance for the

extraordinary meeting of shareholders.

Article 15 Shareholders who are unable to attend the meeting of shareholders may issue the

Bank’s proxy with the scope of authorization detailed and signed or sealed to

commission the representative attending the meeting, but a shareholder is limited to

issuing one proxy and assigning one representative only. Proxy shall be served to the

Bank 5 days prior to the meeting of shareholders. When the proxy is issued in



Other pending matters are to be processed in accordance with the “Regulations

Governing the Use of Proxies for Attendance at Shareholder Meeting of Public

Companies” published by the competent authorities.

Article 16 The resolutions reached in the meeting of shareholders and the executions are as

follows:

1. Regulating and amending the Bank’s Company Corporate Charter (Articles of

Incorporation).

2. Resolutions reached on capital increase or decrease;

3. The election or dismissal of directors.

4. Audit the financial statements prepared by the Board and the Auditing

Committee’s Report. The reviewers for auditing the financial statements and

reports are to be appointed at the meeting of shareholders.

5. Resolutions reached on the distribution of earnings and shareholder bonus;

6. Resolutions reached on the other important matters;

Article 17 The resolutions reached in the meeting of shareholders, unless otherwise provided in

the Company Act, must be with the majority votes of the attending shareholders and

the shareholdings of the attending shareholders is over one half of the total number of

shares issued.

Article 18 If the shareholdings of the attending shareholders are not more than 50% but one third

of the total number of shares issued, a pseudo-resolution can be reached with the

majority votes of the attending shareholders. The shareholders should be informed

regarding the pseudo-resolution reached and another meeting of shareholders will be

168

convened within one month.

The pseudo-resolution reached in the meeting of shareholders referred to above with

the attendance of shareholders representing over one third of the shareholdings and

resolved with the majority votes is deemed as a resolution reached.

Article 19 Shareholders are entitled to one vote per share, unless otherwise provided by law.

Article 20 The minutes of the meeting of shareholders shall include the meeting time and date

and place, the name of the Chairman and the method of the resolutions, the essentials

of procedure and results, and the signature or seal of the Chairman. It should be

permanently reserved throughout the duration of the Company. The attendance

registry for the signature of the attending shareholders or the proxy of the

representative should be reserved for at least one year. However, for the litigation

filed by the shareholders in accordance with Article 189 of the Company Act, it

should be reserved until the end of the proceedings.

Chapter 5 Directors and the Board of Directors

Article 21 The Bank’s Board is composed of 9~15 directors elected among the competent

individuals in the meeting of shareholders for a 3-year tenure and can be reelected in

accordance with Article 198 of the Company Act. The total ordered stock shares of all

directors shall comply with the requirements of the “Rules and Review Procedures for

Director and Supervisor Share Ownership Ratios at Public Companies.”

For the directors referred to above, the number of independent directors shall not be

less than two seats, and one fifth of the director seats; also, the nomination system is

adopted to have independent directors elected from the list of candidates. Non-

independent directors and independent directors should be elected together for the

respective number of seats with the candidates receiving the higher electoral votes

elected.

The professional qualifications, shareholding and part-time job restrictions,

definition of independence, nomination method, proxy and other compliance

matters of the independent directors shall be handled in accordance with the

“Regulations Governing Appointment of Independent Directors and Compliance

Matters for Public Companies”.

Article 22 The Board shall have 3~5 managing directors elected by voting with the consent of

the majority attending directors and the attendance of two thirds of the directors.

According to the “Regulations Governing Appointment of Independent Directors and

Compliance Matters for Pubic Companies,” there must be at least one independent

director among the managing directors, and shall not constitute less than one fifth of

the managing directors. The Vice Chairman and Managing Director will be appointed,

if necessary, by a resolution of the Board.

Chairman, Vice Chairman and Managing Director will be elected among the

managing directors in accordance with the methods described in the preceding

paragraph. The chairman chairs the meeting of shareholders, the Board and the

General Board internally, and represents the Bank externally. When the Chairman is

on leave or unable to exercise his powers for certain reasons, the vice chairman is to

act on the Chairman’s behalf. When the vice chairman is on leave or is unable to

169

exercise his/her powers for certain reasons, the chairman is to appoint one managing

director to act on his/her behalf. If a representative is not appointed by the chairman,

one of the managing directors is elected to chair the meeting.

If the credibility of the Bank or the person in charge is damaged by the spreading

rumors or fraud, the chairman of the Bank should immediately file a lawsuit to the

prosecution office according to law.

When the Board meeting is in recess, the managing directors shall comply with the

law and regulations, the resolutions of the meeting of shareholders and the resolution

of the Board to execute banking business by convention convened by the chairman at

any time and resolved with the consent of the majority votes of the majority attending

general shareholders.

Article 23 The Board of Directors exercises the following authorities:

1. Review and approval of bylaws;

2. The review and approval of important business and plans, and the decision on

business plan;

3. Review and approval of important contracts;

4. Review and approval of budget;

5. The proposed earnings distribution;

6. The proposed capital increase or decrease;

7. The establishment, revocation or amendment of the Bank’s branches;

8. The property trade and investment decisions;

9. Auditing management and execution;

10. The appointment and dismissal of the managers;

11. The other powers entrusted in accordance with the law and regulations and in the

meeting of shareholders;

Article 24 The Board is to convene a meeting quarterly. An extraordinary meeting can be

convened for urgent matters or upon the request of a majority of the directors, unless

otherwise provided by the Company Act; it is to be convened by the Chairman. To

strengthen the management functions, the Board may set up functional committees for

various types of functionalities with the terms of powers regulated by the Board

separately.

Article 25 Directors shall attend the Board meeting in person. The directors who are unable to

attend the meeting for reasons may appoint another director to attend the meeting by

proxy each time and with the scope of authorization detailed.

The proxy referred to above is limited to one representative only.

Article 26 The resolutions of the Board, unless otherwise provided by the Company Act, must be

with the attendance of the majority of the directors and the consent of the majority of

the attending directors. The minutes of meeting should be signed or sealed by the

Chairman.

Article 27 When the number of the director discharged is over one third of the elected seats, the

Board shall convene a meeting of shareholders for a lawful election. The newly

reelected directors are to serve the remaining tenure of the former directors.

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Article 27-1 The Board of Directors is authorized to have the remuneration to the chairman, vice

chairman, managing director, and independent directors determined and paid by

referring to the general payment standard of the industry.

Independent Directors are not eligible for our bank’s earnings distribution. Our bank

may pay for liability insurance policies that cover the liabilities for damages as

defined by statutes or court ruling within the scope of the business of Directors.

Article 28 The President and Vice President may be invited to attend the Board meetings,

managing director and responsible personnel meeting for consultation.

Chapter 6 Audit Committee

Article 29 The Auditing Committee of the Bank is consisted of all the independent directors. The

term of office is identical with the term of office for the independent directors and the

committee shall contain at least three members of whom at least one shall be expertise

in accounting or finance.

The performance of the duties and exercise of rights by the Auditing Committee, the

meeting procedure and other rules to comply shall be based on the “Regulations

Governing the Exercise of Powers by the Audit Committees of Public Companies”

and the “Organizational Code of the Auditing Committee” of the Bank.

Article 29-1 (Deleted)



Chapter 7 Manager

Article 32 The Bank has one President appointed to manage business fully adhering to the

resolutions of the Board of Directors, and with one Vice President and several Deputy

Executive Vice President appointed to help the President in business operations whose

appointment is with the consent of a majority of the Board of Directors. In addition,

several managers at all levels are appointed by the President who are proposed to the

Board of Directors for appointment and dismissal with the consent of a majority of the

Board of Directors.

The Bank has one Chief Auditor appointed, a position equivalent to the Vice President,

with the consent of a majority of the Audit Committee and two thirds of the Board of

Directors; also, the appointment, dismissal, and transfer of the Chief Auditor should

be reported to the competent authorities for approval in advance.

If the said appointment of the Chief Auditor in the preceding paragraph is without the

consent of a majority of the Audit Committee, the resolution of the Audit Committee

should be stated in the minutes of the Board meeting.

Chapter 8 Accounting

Article 33 The Bank has the business operations settled at the end of each month and the final

settlement scheduled on December 31.

Article 34 The Bank shall have the following books and statements prepared after the annual

171

settlement for the review of the Board and the audit of the Audit Committee; also,

submitted to the meeting of shareholders for admission and reported to the competent

authorities and the Central Bank for filing within 15 days, respectively.

1. Business report

2. Financial statements

3. Earnings distribution or deficit compensation proposal;

Article 35 If there is a profit, the Bank shall appropriate 0.5% to 3% as remuneration to the

employees. The Board shall determine if stock or cash shall be released for such

purpose. In addition, the Bank may allocate no more than 1.5% of the aforementioned

amount as remuneration to the Directors. The distribution of remuneration to

employees and directors should be reported in the shareholders’ meeting. If the Bank

has accumulated deficit, an equivalent amount should be reserved for making up such

loss, then the remuneration to employees and directors can be appropriated in

accordance with the ratio stated in the preceding paragraph thereafter.

Article 36 If the Bank has earnings after account settlement, appropriate for payment of

applicable taxes as required by law and for write-off loss carried forward, followed by

the appropriation of 30% as legal reserve. No further appropriation is necessary if the

amount of legal reserve is equivalent to the paid-in capital of the Bank. The remainder

shall be appropriated or made reversal for special reserve, followed by the distribution

of dividends of preferred shares. If there is still a balance, pool up with accumulated

undistributed earnings and the amount of reversal of special reserve as required by law

for the distribution of dividends and bonuses to the shareholders at the proposal of the

Board and ratification of the General Meeting.

For the earnings distribution proposed to the Board of Directors in the shareholders’

meeting for resolution in the preceding paragraph, a working capital should be

reserved first according to the changes in the operating environment, business

operation, and investment, the ratio of cash and stock dividends should be proposed,

of which, cash dividends should not be less than 10% of the total dividend amount.

If the capital adequacy ratio fails to reach the legal ratio, the earnings shall be

allocated in accordance with the Banking Act of The Republic of China and the

competent authority’s requirements.

Chapter 9 Appendix

Article 37 The organization code of the Bank shall be instituted separately.

Article 38 The matters that are not regulated in the Company Corporate Charter (Articles of

Incorporation) should be processed in accordance with the Company Act, the Banking

Act of The Republic of China and related laws and regulations.

Article 39 The Company Corporate Charter (Articles of Incorporation) is implemented after the

resolution reached in the meeting of shareholders, so is the amendment. The Company

Corporate Charter (Articles of Incorporation) was established on October 22, 1977

and implemented on January 1, 1978.

The 1st amendment was implemented on March 4, 1979.

172

The 2nd


The 3rd


The 4th


The 5th


The 6th


The 7th


The 8th


The 9th


The 10th


The 11th


The 12th


The 13th


The 14th


The 15th


The 16th


The 17th


The 18th


The 19th


The 20th



The 22nd


The 23rd


The 24th


The 25th


The 26th


The 27th


The 28th


The 29th


The 30th



The 32nd


The 33rd

amendment was implemented on June 22, 2011

The 34th


The 35th


The 36th


173

The 37th


The 38th


The 39th


174

Shareholdings of Directors 1. All directors minimum shareholding and the shareholdings listed in the registry of shareholders

Title Shareholdings Shareholdings

registered in the

registry of

shareholders

Remarks

Director 84,612,202 Shares 299,637,522

Shares

Note: The stop transfer date is scheduled on April 29, 2019.

2. Directors shareholding list

Title Name Shareholdings

registered in

the registry of

shareholders

Remarks

Chairman Hsu Tian Investment Co., Ltd.,

Representative: Kuei-Fong Wang

95,880,803

Managing

Director

Hsu Tian Investment Co., Ltd.,

Representative: Ming-Hsiung Huang

95,880,803

Independent

managing

director

Li -Woon Lim 0

Independent

director

Jin-Yi Lee 0

Independent

director

Hsin-Chang Tsai 0

Director Hsu Tian Investment Co., Ltd.,

Representative: Te-Wei Chia

95,880,803


Representative: Hsin-Ching Chang

95,880,803


Representative: Wei-Liang Lin

95,880,803


Representative: Lai-Hsing Tsai 95,880,803

Director Pan Asia Chemical Corporation: Ming-

Shan Chuang

201,963,956

Director Ho Yang Management Consultant Co.,

Ltd., Representative: Chien-Hui Huang

1,792,763

Appendix 4

Documents

The 2019 Annual Meeting of Shareholders Annual meeting ... · 3. Management Presentation (Company Reports): (1) The 2018 Business Reports (2) Audit Committee’s Review Report on