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CSBC AGM Information 2019

Jul 8, 2019

51982_rns_2019-07-08_f5e76950-0ebf-4cd4-80fc-398195506879.pdf

AGM Information

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Stock Code: 2208

CSBC CORPORATION,TAIWAN Handbook for the 2019 Annual Meeting of Shareholders

MEETING TIME: JUNE 26, 2019

THIS IS A TRANSLATION OF THE HANDBOOK FOR THE 2019 ANNUAL SHAREHOLDERS’ MEETING (THE “HANDBOOK”) OF CSBC

CORPORATION,TAIWAN. (THE “COMPANY”). THIS TRANSLATION IS INTENDED FOR REFERENCE ONLY AND NOTHING ELSE, THE COMPANY HEREBY DISCLAIMS ANY AND ALL LIABILITIES WHATSOEVER FOR THE TRANSLATION. THE CHINESE TEXT OF THE HANDBOOK SHALL GOVERN ANY AND ALL MATTERS RELATED TO THE INTERPRETATION OF THE SUBJECT MATTER STATED HEREIN

1

Table of Contents

Meeting Procedure ................................................................................................... 3 Meeting Agenda ........................................................................................................ 4 Management Presentations .................................................................................... 6 Proposals .............................................................................................................. 10 Discussion 1 ......................................................................................................... 12 Elections ............................................................................................................... 14 Discussion 2 ......................................................................................................... 15 Questions and Motions ........................................................................................ 16 ANNEX Annex 1 :2018 Business Report ........................................................................... 17 Annex 2 :Audit Committee's Review report ........................................................ 20 Annex 3 :2018 Financial Statements and consolidated Financial Statements ...... 21 Annex 4 :Deficit Compensation Statement 2018 ................................................. 33 Annex 5 :”ARTICLES OF INCORPORATION” Comparison of Articles Before and After Amendments ........................................................................ 34 Annex 6 : “Procedures for Acquisition or Disposal of Assets” Comparison of Articles Before and After Amendments ............................................... 36 Annex 7 : List of candidates for the 17th director (independent director) ........... 63 Appendix Appendix 1 :Rules of Shareholders' Meeting ...................................................... 66 Appendix 2 :Articles of Incorporation ................................................................. 77 Appendix 3 :Directors' election method .............................................................. 89 Appendix 4: Procedures for Acquisition or Disposal of Assets ........................... 92 Appendix 5: The Impact of Stock Dividend Issuance on Business Performance, EPS, and Shareholder Return Rate ............................................... 114 Appendix 6: Shareholding of Directors ............................................................. 115 Appendix 7: Other explanations ........................................................................ 117

2

Meeting Procedure

CSBC CORPORATION,TAIWAN

Procedure for the 2 019 Annual Meeting of Shareholders

Call the Meeting to Order

Chairperson Remarks

Management Presentation (Company Reports)

Proposals

Discussion 1

Elections

Discussion 2

Questions and Motions

Adjournment

3

Meeting Agenda

CSBC CORPORATION,TAIWAN Year 2019

Agenda of Annual Meeting of Shareholders

Time: 10:00 a.m. on Wednesday, June 26,2019

Place: The Auditorium in CSBC,TAIWAN

(No.3,Jhonggang Road,Siaogang District,Kaohsiung,Taiwan,R.O.C)

Call the Meeting to Order.

Chairperson Remarks

Management Presentations

  1. 2018 Annual Business Report.

  2. 2018 Annual Final Report of Audit Committee.

  3. 2018 Annual Remuneration Distribution Report of Employees and Directors.

  4. Report the accumulated losses of CSBC Corporation, Taiwan reach one-half of paid-in capital.

  5. Report the endorsement guarantees overrun situation improve.

Proposals

  1. Ratification of 2018 business report and financial statements.

  2. To recognize the offset of the accumulated Loss of 2018.

Discussion 1

  1. Amendment to the Company ARTICLES OF INCORPORATION.

  2. Amendment to the ”Procedures for Acquisition or Disposal of Assets”.

Elections

Election of 15 directors for 17 th (including 3 independent directors).

Discussion 2

Proposal of Release the Prohibition on Directors from Participation in Competitive Business.

4

Questions and Motions

Adjournment

5

Management Presentations

Report No. 1

2018 Annual Business Report

Explanation:

The 2018 Annual Business Report is attached as pp.17~19, Annex 1.

Report No. 2

2018 Annual Final Report of Audit Committee Explanation:

The 2018 Annual Final Report of Audit Committee is attached as pp.20, Annex 2.

Report No. 3

2018 Annual Remuneration Distribution Report of Employees and Directors Explanation:

The pre-tax loss of the Company for 2018 is NT$3,338,571,000. As there is no pre-tax profit (the profit before deducting the employee remuneration and directors’

remuneration), the employee bonus and directors’ remuneration for 2018 will not be distributed in accordance with the provisions of Article 35 of the Articles of Association of the Company.

~6~

Report No. 4

Report the accumulated losses of CSBC Corporation, Taiwan reach one-half of paid-in capital.

Explanation:

  • 1.The accumulated losses of the company, as of December 31, 2018 was 4,025,442,805 NT dollars, exceeding 50% of the paid-up capital of 3,729,917,490 NT dollars. A report is to be brought up in the shareholder’s meeting according to Article 211 of the Company Act.

  • 2.The company’s losses exceeding 50% of the paid-up capital are mainly due to factors such as the global economic growth, lack of obvious improvement in international trade volume, and the decline of international shipping costs. As a result, companies tend to be conservative in placing new ship orders, resulting in low ship prces. The expected loss is recognized.

  • 3.Revelant coping measures:

  • (1)Operations:

    • Under the implementation of the 2018 upgrade and transformation program, the goal of decreasing the operating loss of 2018 by half has been achieved (from a loss of 5.8 billion to a loss of 3.1 billion). EP10 program is to be implemented in order to achieve the goal of turning losses into profits by continuously improving efficiency, performance and profitalibilty, and completing major invements and manpower planning.

Annual goal of EP10 upgrade program:

  • 1.Turning losses into profits

    • ▓ Improve production and administrative effeciency

    • ▓ Strict adherence to CKP-81

    • ▓ Empthasize on tapping new resources and limiting expenditures

  • 2.Profits from new businesses

    • ▓ On-schedule production of offshore steel structure

    • ▓ Business contract of maritime construction

    • ▓ Contracting and execution of shipbuiding and repairing business

  • 3.Organizational reengineering

    • ▓ Completion of project-based investment plans

    • ▓ Orginizational adjustment and factory planning

    • ▓ Completion of personnel succession and manpower planning

  • (2)Finance:

In response to future developments, the company has completed the second phase

~7~

of capital increment by cash in January 2019 and intends to cover the losses with legal reserve and capital surplus, in order to enrich the working capital and improve financial structure.

~8~

Report No. 5

Report the endorsement guarantees overrun situation improved. Explanation:

The company’s endorsement/guarantee quota for Fuhai Company had an outstanding balance of 811 million NT dollars. However, due to recent operating losses, as of September 30, 2018, incidents arose where the ceiling for endorsement/guarantee for a singular enterprise was exceeded. The Board of Directors resolved to revoke the outstanding balance (NT$811 million) of the endorsement/guarantee quota for Fuhai Company on November 9, 2018. As such, the outstanding balance for endorsement/guarantee for others was zeroed; the overrun situation has been improved.

~9~

Proposals

Proposed by the Board

1. Proposal:

Ratification of 2018 business report and financial statements

Explanation:

CSBC CORPORATION,TAIWAN’s Business Report and Financial Statements have been duly audited by the PRICEWATERHOUSECOOPERS Taiwan(RwC Taiwan) and have been examined by the audit committees.(Please refer to pp. 17-19 Annex 1 and pp.21-32 Annex 3 of the Handbook)

Resolution:

~10~

Proposed by the Board

2. Proposal:

To recognize the offset of the accumulated Loss of 2018

Explanation:

  • 1.The initial balance of accumulated deficit of the Company is NT$1,052,113,533, plus other comprehensive income of 2018 NT$103,005,137, minus the net loss of 2018 NT$3,100,212,159, and plus reversal of special reserve NT$23,877,750, the accumulated deficit is NT$4,025,442,805.After offsetting by legal reserve and capital surplus, the balance of accumulated deficit at the end of 2018 is NT$1,032,180,841.

  • 2.Because of the accumulated deficit NT$1,032,180,841, articles of corporation, and company act, It’s proposed not to distribute dividends.

  • 3.Please approve the proposal of 2018 Deficit Compensation, Deficit Compensation Statement refer to page 33 of Annex 4.

Resolution:

~11~

Discussion 1

Proposed by the Board

1.Proposal:

Amendment to the Company ARTICLES OF INCORPORATION.

Explanation:

  • 1.According to the official document Jing-Shang-Zi No. 10802400700 made on January 22, 2019 by the Taiwan Stock Exchange via the Minitry of Econimic Affairs, the provisions concerning doubt shall apply according to Article 240 of the Company Act.

  • 2.Please refer to pp.34-35 Annex 5 for the comparison of the amdended articles. Resolution:

~12~

Proposed by the Board 2.Proposal:

Amendment to the ”Procedures for Acquisition or Disposal of Assets”. Explanation:

  • 1.In accordance with the official document Jin-Guan-Zheng-Fa-Zi No.1070331908 of the Financial Supervisory Committee, made on August 29, 2018, the acquisition or disposal of securities, are exempted from the requirement of opinions expressed by accountants, and revisions are to be made to Point 9 of the company’s guidelines.

  • 2.In accordance with the official document Jin-Guan-Zheng-Fa Zi No. 10703410725, Points 2, 3, 4, 8, 10, 14, 15, 16, 17, and 28 of the company’s revised guidelines are to be revised.

  • 3.The original Clause 7 is repetitive of the revised Clauses 8 and 9, and therefore deleted after revision. The original Clause 8 is amended to act in conjunction with relevant management guidelines of the company, and revised to become Clause 6. Please refer to pp.36-62 Annex 6 for a comparison of the revised provisions.

  • Resolution:

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Elections

Proposed by the Board

Proposal:

Election of 15 directors for 17 th (including 3 independent directors).

Explanation:

  • 1.The term of the directors of the16th board validity period from June 23, 2016 to June 22, 2019.

  • 2.The 20th Board meeting of the 16th Board of Directors approve to elect the 15 directors (including 3 independent directors) of the 17th term of the board of directors, serving a term of three years from June 26, 2019 to June 25, 2021

  • 3.The candidate nomination system is adopted in election of the 17th term of the board of directors. Please refer to pp.63-65 Annex 7 ” The directors nominated candidates list”.

Resolution:

~14~

Discussion 2

Proposed by the Board

Proposal:

Proposal of Release the Prohibition on Directors from Participation in Competitive Business.

Explanation:

  • 1.According to Article 209 of the Company Act, ‘A director who does anything for himself or on behalf of another person that is within the scope of the company's business, shall explain to the meeting of shareholders the essential contents of such an act and secure its approval.’

  • 2.In order to take full advantage of the expertise and relevant experience of the company’s directors and their representatives, it is proposed, according to Article 209 of the Company Act, to lift the ban of the non-compete clause for the company’s directors and restrictions which prevents their representatives as natural persons who exercise the authority of the directors from conducting business originally listed under the non-compete clause under the “Article of Incorporation.”

  • 3.Without prejudice to the normal business and interests of the company, it is proposed to discuss the lifting of the non-compete clause on the newly elected directors and their representatives in the 2019 regular meeting of shareholders.

  • 4.The list of directors and their representatives who are to be relieved from the non-compete restriction:

Position Name Other company positions
Directors Hwang
Chien-Chih		 Vice President,Commercial Division of
CSC

Resolution:

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Questions and Motions

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ANNEX

Annex 1

2018 Business Report

Dear Shareholders,

I. Letter to Shareholders

Dear Shareholders,

First of all, I would like to thank you for your continuing support throughout the year. CSBC has responded to the changing business climate by adopting an aggressive stance in strengthening our competitiveness. Total consolidated revenue for 2018 was NT$13,012,326 thousands, a 20.68% decrease compared with NT$16,404,344 thousands in 2017. Net loss decreased to NT$3,100,085 thousands, compared with 2017 net loss of NT$5,883,199 thousands.

The results of our operating performance in 2018 and business plan for 2019 are illustrated as follows:

Operating Performance in 2018

1. Consolidated financial results

Unit: NT$ thousands

Unit: NT$ thou
2018 2017 Percent Change
（%）
Net sales 13,012,326 16,404,344 -20.68%
Grossprofit(loss) -2,593,864 -5,721,888 54.67%
Operatingincome(loss) -3,417,597 -6,228,965 45.13%
Pre-tax income(loss) -3,338,941 -6,353,042 47.44%
Net income(loss) -3,100,085 -5,883,199 47.31%

Net sales amounted to NT$13,012,326 thousands and gross loss came in at NT$2,593,864 thousands in 2018. Net loss decreased by more than 47.31% from 2017.

2. The description of Orderbook

  • (1) The orderbook of CSBC

As of the end of December, 2018 we had 18 merchant-ship orders (18 in Kaohsiung) and 23 official-ship orders (5 in Kaohsiung plus 18 in Keelung). The orderbook in Kaohsiung factory is already planned to delivery in September of 2025, and that in the Keelung factory is in October of 2023. And in October of 2018 CSBC signed 60 underwater pin-piles of offshore

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wind power.

  • (2) Ship deliveried

There are 8 vessels in Kaohsiung factory (one semi-submersible vessel and seven 2,800TEU container vessels) and one is in Keelung factory (1,800 TEU container vessel).

3. Research and development status

In 2018, CSBC invested a total of NT$117,000 thousands in R&D for the ship researches as well as the development of new products. Having successfully 17 developed projects in 2018, it goes into application for CSBC. CSBC is committed to investing in long-term growth by delivering continuous innovations.

4. Major investment status

In 2018, CSBC invested a total of NT$40.32 billions in major investments including the replacement of GOC& LLC-6, the enhancement of capacity of the RS31 area of the pier, the construction of 140-meter barge, multi-purpose steel production line.

Business Plan for 2019

According to journal reports, the shipping and shipbuilding market in 2019 will gradually balance between supply and demand, and the data of various indicators are tending to be optimistic and conservative.

The production volume in 2019 is 244,873 CGT, which is about 36.2% higher than in 2018. CSBC will follow the national shipbuilding policy and actively strive for the IDS business and the patrol frigate business; CSBC is expected to undertake the business of offshore wind farm turnkey project and anti-corrosion engineering, in addition to the barge and underwater basic structure business.

In the 2019 Annual Outlook Meeting, CSBC formulates the EP10 plan, and develops the company's nine major foci under the belief "inheriting shipbuilding, guarding the ocean" and principles "turning losses into profits, profiting new businesses, and reengineering". The nine foci are as below：

  1. Improve production and administrative efficiency

  2. Adher to CKP-81

  3. Strengthen to add profit and reducing cost

  4. On-time production of offshore structure

  5. Contract for offshore engineering business

  6. Contract and execution of repaired ship business

~18~

  1. Complete the project of investment plan

  2. The adjustment of organization and plant planning

  3. Completion Inheritance and human resource

CSBC continues to upgrade productivity, profit & performance. Therefore, we expect to achieve goals.

Finally, CSBC is moving towards stable operation and taking the three major businesses of merchant ship, military naval ship and offshore wind power, and using relevant measures to promoting operational performance. It is expected to create more core competitiveness and expand overall benefit. Let CSBC be the sustainable enterprise and create maximum value for shareholders.

Sincerely yours,

Chairman President CHENG,WEN-LON

TSENG,KUO-CHENG

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Annex 2

Audit Committee's Review report

This proposal is the presentation by the Board of Directors of the Company's 2018 Business Report, Financial Statements, and the Deficit Compensation Proposal. Of these items, the Financial Statements have been audited by external auditors of PricewaterhouseCoopers(PwC) Taiwan, and an opinion and report have been issued on the Financial Statements.The aforementioned proposal regarding Business Report, Financial Statements, and the Deficit Compensation Proposal have been reviewed and determined to be correct and accurate by the Audit Committee. Per the regulations in Article 14-4 of Securities and Exchange Act and Article 219 of the Company Act, we hereby submit this report.

To:

2019 General Shareholders' Meeting of CSBC Corporation.

CSBC CORPORATION,TAIWAN

Audit Committee Convenor: LIEU, DER-MING

March 15, 2019

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Annex 3

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR18000429

To the Board of Directors and Shareholders of CSBC CORPORATION, TAIWAN

Opinion

We have audited the accompanying consolidated balance sheets of CSBC CORPORATION, TAIWAN and its subsidiaries (the “Group”) as at December 31, 2018 and 2017, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and 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 at 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 Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

The most significant key audit matters in our audit of the consolidated financial statements of the

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current period are as follows:

Accounting estimates and assumptions for total cost of construction contract

Description

Please refer to Note 4(28) for a description of the accounting policy on construction contracts. Please refer to Note 5 for critical accounting estimates and assumptions for total cost of construction contracts.

The Group is engaged in the business of designing and building of various ships and cruisers. Assumptions for estimated construction cost include cost for equipment, material, labor and etc. Data used for assumptions involves subjective judgement and accounting estimates and are highly uncertain. As a result, assumptions used are material to the total construction cost and further affects the calculation of construction profit.

As the data used for assumptions involves subjective judgement and accounting estimates are highly uncertain, this may affect the completeness and relevant assertions. Considering that the estimated total cost of construction contracts is material to the financial statements, therefore, we assessed that these accounting estimates and assumptions as one of the key audit matters for this year.

How our audit addressed the matter

The scope of our audit responded to the risk as follows:

  1. Assessing the effectiveness of CSBC Group’s internal control regarding the estimation process of total cost of construction contract. This includes:

  2. (1) Whether the data used by management for estimates and assumptions is complete, relevant and accurate.

  3. (2) Whether accounting estimates and assumptions have been reviewed and approved by proper management level.

  4. (3) Whether the segregation of duties is appropriate.

  5. Obtaining the Estimate at Completion Reports, selecting sample reports and verifying the accuracy, completeness and relevance of the data that was used for assumptions and estimations. Checking whether the use of estimates and assumptions in the Estimate at Completion Reports are appropriate.

  6. Comparing cost at completion for the same or similar ships and then assessing the reasonableness of the Estimate at Completion Report.

Assessment of construction loss

Description

Please refer to Note 4(28) for a description of the accounting policy on construction contracts.

~22~

There is a concern regarding the oversupply in the shipbuilding industry worldwide. Customers tend to behave conservatively which causes a decline in ship prices. Thus, there is a high possibility of total construction cost exceeding total construction revenue. In accordance with the Group’s accounting policy on construction contracts, when there is a high possibility of total construction cost exceeding total construction revenue, estimated loss shall be recognised immediately.

The aforementioned estimated loss shall include constructions that have not yet been initiated. As the estimated loss is material to the financial statements, therefore, we assessed that the estimated loss as one of the key audit matters for this year.

How our audit addressed the matter

The scope of our audit responded to the risk as follows:

  1. Obtaining calculation table of construction in progress – construction income / loss. Checking whether it includes all the construction contracts including those contracts that have not yet been initiated.

  2. Testing the accuracy of calculation table by selecting samples and performing the following audit procedures:

  3. (1) Reviewing construction contracts and checking the contractual price and foreign exchange rates in order to verify the accuracy of calculation.

  4. (2) Verifying estimated total construction cost to management’s calculation in order to check the consistency of estimates and assumptions used.

Other matter – Parent company only financial reports

We have audited and expressed an unqualified opinion on the parent company only financial statements of CSBC CORPORATION TAIWAN, as at and for the years ended December 31, 2018 and 2017.

~23~

Responsibilities of management and those charged with governance for the consolidated financial statements

Management of the Company 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 Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, 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.

Auditor’s 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 auditor’s 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 ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgement 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

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estimates and related disclosures made by management.

  1. 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 auditor’s 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 auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

  2. 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.

  3. Obtain sufficient appropriate audit evidence regarding the financial information of the 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 of the current period and are therefore the key audit matters. We describe these matters in our auditor’s 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.

WANG, KUO-HUA WU, CHIEN-CHIH

For and on behalf of PricewaterhouseCoopers, Taiwan March 15, 2019

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------------------------------------------------------------------------------------------------------------------------------------------------The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

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CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

Assets Notes
6(1)
6(17)(21) and 7
6(17)
6(2)(17) and 12(4)
6(17) and 7
6(17) and 12(5)
7
6(3)(17)
6(4) and 7
6(5)
6(6)
6(7)
6(8)
6(27)
7		 December 31, 2018
$
137,942
6,654,429
-
900,190
-
-
19,100
83,760
2,532
1,337,814
1,278,330
2,069
10,416,166
10,992
10,581,323
208,162
14,611
1,564,427
30,750
12,410,265
$
22,826,431		 December 31, 2017
Current assets
1100
Cash and cash equivalents
1140
Current contract assets
1150
Notes receivable, net
1170
Accounts receivable, net
1180
Accounts receivable - related
parties
1190
Receivables from customers on
construction contracts
1200
Other receivables
1210
Other receivables - related parties
1220
Current income tax assets
130X
Inventories, net
1410
Prepayments
1479
Other current assets, others
11XX
Total current assets
Non-current assets
1550
Investments accounted for under
equity method
1600
Property, plant and equipment, net
1760
Investment property, net
1780
Intangible assets, net
1840
Deferred income tax assets
1920
Redundable deposits
15XX
Total non-current assets
1XXX
Total assets		 $
281,814
-
5,790
1,361,950
24,976
5,326,519
114,854
24,942
-
2,321,061
626,292
490
10,088,688
1,645
10,563,764
234,055
23,010
1,351,762
20,469
12,194,705
$
22,283,393

(Continued)

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CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity Notes
December 31, 2018
December 31, 2017
6(9)
$
1,290,150 $
2,287,784
6(10)
-
699,769
12(4)
-
280
6(17)(21) and 7
2,751,268
-
-
15
6(17) and 7
428,768
223,073
6(17) and 7
713,262
1,170,559
6(17) and 12(5)
-
1,060,906
6(17), 7 and 12(5)
-
1,023,847
6(11)
1,069,263
1,284,818
-
222
6(12)(17) and 7
2,527,559
140,219
3,344
91,074
8,783,614
7,982,566
6(13)
5,698,537
5,498,057
6(27)
1,324,697
1,324,910
6(14)
670,361
659,156
6(14)
71,139
82,344
6(15)
94,368
171,702
184,928
172,614
13,233
12,960
8,057,263
7,921,743
16,840,877
15,904,309
6(18)
3,729,918
7,435,652
6(16)(19)
2,005,515
1,965
6(20)
1,065,297
1,065,297
3,166,471
3,190,349
(
4,025,443 ) (
5,357,848)
5,941,758
6,335,415
43,796
43,669
5,985,554
6,379,084
6(29), 7 and 9
$
22,826,431 $
22,283,393
Current liabilities
2100
Short-term borrowings
2110
Short-term notes and bills payable
2120
Financial liabilities at fair value
through profit or loss - current
2130
Contract liabilities - Current
2150
Notes payable
2160
Notes payable - related parties
2170
Accounts payable
2190
Payables to customers on
construction contracts
2195
Payables to customers on
construction contracts - related
parties
2200
Other payables
2230
Current income tax liabilities
2250
Provisions for liabilities - current
2310
Unearned receipts
21XX
Total current liabilities
Non-current liabilities
2540
Long-term borrowings
2570
Deferred income tax liabilities
2610
Long-term notes, accounts and
overdue payable
2630
Long-term deferred revenue
2640
Net defined benefit liability,
non-current
2645
Guarantee deposits received
2670
Other non-current liabilities,
others
25XX
Total non-current liabilities
2XXX
Total Liabilities
Equity attributable to owners of
parent
Share capital
3110
Common stock
Capital surplus
3200
Capital surplus
Retained earnings
3310
Legal reserve
3320
Special reserve
3350
Accumulated deficit
31XX
Total equity attributable to
owners of the parent
36XX
Non-controlling interest
3XXX
Total equity
Significant contingent liabilities
and unrecognized contract
commitments
3X2X
Total liabilities and equity

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

~28~

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

Items Notes
2018
2017
6(21), 7 and 12(5)
$
13,012,326
$
16,404,344
6(3)(8)(25)(26) and
7
(
15,606,190) (
22,126,232)
(
2,593,864) (
5,721,888)
6(8)(25)(26)
(
90,533) (
78,575)
(
306,829) (
301,826)
(
117,013) (
126,676)
(
309,358)
-
(
823,733) (
507,077)
(
3,417,597) (
6,228,965)
6(7)(14)(22)
87,430
45,615
6(23)
20,009 (
127,543)
6(6)(14)(24)
(
26,130) (
21,281)
6(5)
(
2,653) (
20,868)
78,656 (
124,077)
(
3,338,941) (
6,353,042)
6(27)
238,857
469,843
($
3,100,084) ($
5,883,199)
6(15)
$
128,756
$
39,602
6(27)
(
25,752) (
6,732)
$
103,004
$
32,870
( $
2,997,080) ($
5,850,329)
( $
3,100,211) ($
5,880,118)
127 (
3,081)
( $
3,100,084) ($
5,883,199)
( $
2,997,207) ($
5,847,248)
127 (
3,081)
($
2,997,080) ($
5,850,329)
6(28)
( $
8.87) ($
18.79)
4000
Operating revenue
5000
Operating costs
5900
Net operating loss
Operating expenses
6100
Selling expenses
6200
General and administrative
expenses
6300
Research and development
expenses
6450
Impairment loss (impairment
gain and reversal of impairment
loss) determined in accordance
with IFRS 9
6000
Total operating expenses
6900
Operating loss
Non-operating income and
expenses
7010
Other income
7020
Other gains and losses
7050
Finance costs
7060
Share of loss of associates and
joint ventures accounted for
under equity method
7000
Total non-operating income
and expenses
7900
Loss before income tax
7950
Income tax benefit
8200
Loss for the year
Other comprehensive income
Components of other
comprehensive income that will
not be reclassified to profit or loss
8311
Gains on remeasurements of
defined benefit plans
8349
Income tax related to
components of other
comprehensive income that will
not be reclassified to profit or
loss
8300
Other comprehensive income
8500
Total comprehensive loss for the
year
Profit (loss), attributable to:
8610
Equity holders of the company
8620
Non-controlling interest
Total
Comprehensive (loss) income
attributable to:
8710
Equity holders of the company
8720
Non-controlling interest
Total
Basic earnings per share
9750
Total basic earnings per share

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

~29~

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

2017
Balance at January 1, 2017
Loss for the year, net of tax
Other comprehensive income
Total comprehensive income
Cash dividends distributed to
non-controlling interests
Balance at December 31, 2017
2018
Balance at January 1, 2018
Profit (loss) for the year, net of tax
Other comprehensive income
Total comprehensive income
Reversal of special reserve
Capital reduction to offset accumulated
deficits
Cash capital increase
Share-based payments
Balance at December 31, 2018		 Notes Equity attributable to Equity attributable to Equity attributable to o wners ofthe parent wners ofthe parent Non-controlling
interest		 Total equity
Share capital –
common stock		 Capitalsurplus Retained earnings Total
Additional
paid-in capital		 Employee
share options		 Others Legal reserve Special reserve Accumulated
deficit
6(20)
6(18)(20)
6(18)
6(16)		 $ 7,435,652
-
-
-
-
$ 7,435,652
$ 7,435,652
-
-
-
-
(
4,305,734 )
600,000
-
$ 3,729,918		 $
-
-
-
-
-
$
-
$
-
-
-
-
-
-
1,926,000
-
$ 1,926,000		 $
-
-
-
-
-
$
-
$
-
-
-
-
-
-
-
77,550
$
77,550		 $
1,965
-
-
-
-
$
1,965
$
1,965
-
-
-
-
-
-
-
$
1,965		 $ 1,065,297
-
-
-
-
$ 1,065,297
$ 1,065,297
-
-
-
-
-
-
-
$ 1,065,297		 $ 3,190,349
-
-
-
-
$ 3,190,349
$ 3,190,349
-
-
-
(
23,878 )
-
-
-
$ 3,166,471		 $
489,400
(
5,880,118 )
32,870
(
5,847,248 )
-
($ 5,357,848 )
($ 5,357,848 )
(
3,100,211 )
103,004
(
2,997,207 )

23,878
4,305,734
-
-
($ 4,025,443 )		 $ 12,182,663
(
5,880,118 )
32,870
(
5,847,248 )
-
$ 6,335,415
$ 6,335,415
(
3,100,211 )
103,004
(
2,997,207 )
-
-
2,526,000
77,550
$ 5,941,758		 $
46,995
(
3,081 )
-
(
3,081 )
(
245 )
$
43,669
$
43,669

127
-

127
-
-
-
-
$
43,796		 $ 12,229,658
(
5,883,199 )
32,870
(
5,850,329 )
(
245 )
$ 6,379,084
$ 6,379,084
(
3,100,084 )
103,004
(
2,997,080 )
-
-
2,526,000
77,550
$ 5,985,554

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

~30~

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax
Adjustments
Adjustments to reconcile profit (loss)
Expected credit loss/Provision for bad debt expense

Depreciation of property, plant and equipment

Depreciation of investment property

Amortization of intangible and other assets

Loss on investments accounted for using equity method

(Loss)profit on valuation of financial assets and liabilities

Government grant income

Interest income

Share-based payments

Interest expense

Loss on disposal of property, plant and equipment

Gain on disposal of investment properties

Impairment loss

Changes in operating assets and liabilities
Changes in operating assets
Increase in current contract assets
Decrease (increase) in notes receivable
Decrease (increase) in accounts receivable
Decrease (increase) in accounts receivable - related parties
Decrease in receivables from customers on construction
contracts
Decrease in receivables from customers on construction
contracts - related parties
Decrease (increase) in other receivables
(Increase) decrease in other receivables - related parties
Decrease in inventories
(Increase) decrease in prepayments
(Increase) decrease in other current assets
Changes in operating liabilities
(Decrease) increase in financial liabilities at fair value
through profit or loss
Increase in current contract liabilities
(Decrase) increase in notes payable
Increase (decrase) in notes payable - related parties
(Decrease) increase in accounts payable
Decrease in payables to customers on construction contracts
Increase in payables to customers on construction contracts -
related parties
Decrease in other payables
Increase in provisions for liabilities - current
(Decrease) increased in unearned receipts
Increase in net defined benefit liability - non-current
Cash outflow generated from operations
Interest received
Payment of interest
Income tax paid
Net cash flows used in operating activities		 Notes
2018
2017
( $
3,338,941 ) ( $
6,353,042 )
12(2)(4)
309,358
7,353
6(6)(25)
547,334
515,546
6(7)
401
375
6(8)(25)
17,396
15,908
6(5)
2,653
20,868
6(23)
2,838 (
11,463 )
6(22)
(
11,206 ) (
11,018 )
6(22)
(
7,809 ) (
2,368 )
6(16)
77,550
-
6(24)
26,130
21,281
6(23)
3,742
1,221
6(23)
(
68,570 )
-
6(5)(23)
-
144,103
(
594,182 )
-
5,790 (
5,790 )
157,690 (
624,030 )
24,976 (
21,212 )
-
2,416,985
-
1,793,119
93,795 (
48,280 )
(
58,818 )
17,098
1,038,368
1,531,805
(
652,038 )
492,637
(
1,579 )
83
(
3,118 )
11,743
1,873,603
-
(
15 )
15
205,695 (
101,384 )
(
457,297 )
90,515
- (
1,551,493 )
-
1,023,847
(
201,470 ) (
5,529 )
441,236
532
(
87,730 )
80,772
51,422
30,790
(
602,796 ) (
519,013 )
7,774
2,402
(
69,215 ) (
82,089 )
(
533 ) (
3,455 )
(
664,770 ) (
602,155 )

(Continued)

~31~

CSBC CORPORATION, TAIWAN AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of investments accounted for using equity method

Acquisition of property, plant and equipment

Cash payments for acquiring investment properties

Proceeds from disposal of investment properties
Acquisition of intangible assets

Increase in refundable deposits
Decrease in refundable deposits
Net cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term borrowings

Decrease in short-term notes and bills payable

Proceeds from long-term debt

Repayments of long-term debt

Increase in guarantee deposit received

Decrease in guarantee deposit received

Increase (decrease) in other non-current liabilities

Cash dividends paid to non-controlling interests
Cash capital increase

Net cash flows from financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year
 Notes
2018
2017
6(5)
( $
12,000 ) $
-
6(30)
(
583,550 ) (
420,965 )
6(7)
(
940 )
-
95,002
-
6(8)
(
8,997 ) (
10,071 )
(
45,711 ) (
317,125 )
35,430
381,788
(
520,766 ) (
366,373 )
6(31)
(
997,634 ) (
4,107,341 )
6(31)
(
699,769 ) (
299,966 )
6(31)
700,000
5,498,057
6(31)
(
499,520 )
-
6(31)
135,006
102,038
6(31)
(
122,692 ) (
133,141 )
6(31)
273 (
193 )
- (
245 )
6(18)
2,526,000
-
1,041,664
1,059,209
(
143,872 )
90,681
6(1)
281,814
191,133
6(1)
$
137,942 $
281,814

The accompanying notes are an integral part of these parent company only financial statements.

~32~

Annex 4

CSBC Corporation, Taiwan Deficit Compensation Statement 2018

Unit : NT$

Unit : NT$ Unit : NT$
Items Dollars
Subtotal Total
Beginning deficit to be compensated
+: Other comprehensive income of 2018
-: Net loss of 2018
+: Reversal of special reserve
Deficit to be compensated
Deficit compensation items
Legal reserve
Capital surplus-additional paid-in capital-
common stock
Capital surplus-other donated assets
received
Accumulated deficit at the end of 2018
103,005,137
(3,100,212,159)
23,877,750


1,065,296,864
1,926,000,000
1,965,100

 ($1,052,113,533)



(4,025,442,805)
($1,032,180,841)

Chairman: President: Accounting Manager: CHENG, WEN-LON TSENG,KUO-CHENG YANG, CHING-AN

~33~

Annex 5

CBSC Corporation, Taiwan Chart of Amendments to the Articles of Incorporation

Articles
Revised articles		 Pre-modified article Descriptions
Article
35-1
If there is a surplus after the
current year's accounts, the
Company shall first pay the
business income tax according
to law and make up for the
accumulated loss in the previous
years. If there is a balance, the
Company shall appropriate 10%
of it as the statutory surplus
reserve.
However,
if
the
statutory surplus reserve has
reached the total amount of
paid-in
capital,
then
this
requirement does not apply. A
special surplus reserve shall then
be appropriated according to
Article 41 of the Securities
Exchange Law. If there is still a
balance, the board of directors
shall
draft
a
distribution
proposal for the resolution of the
shareholders’ meeting and the
distribution afterwards.
The Board of Directors may
distribute all or part of the
dividends and bonuses, capital
surplus or legal reserve in cash,
on condition that more than 2/3
of the Board have attended the



























If there is a surplus after the
current year's accounts, the
Company shall first pay the
business income tax according
to law and make up for the
accumulated loss in the previous
years. If there is a balance, the
Company shall appropriate 10%
of it as the statutory surplus
reserve.
However,
if
the
statutory surplus reserve has
reached the total amount of
paid-in
capital,
then
this
requirement does not apply. A
special surplus reserve shall then
be appropriated according to
Article 41 of the Securities
Exchange Law. If there is still a
balance, the board of directors
shall
draft
a
distribution
proposal for the resolution of the
shareholders’ meeting and the
distribution afterwards.





















▓According
to the official
document
Jing-Shang-Zi
No.
10802400700
made
on
January
22,
2019 by the
Taiwan Stock
Exchange via
the Minitry of
Econimic
Affairs,
the
provisions
concerning
doubt
shall
apply
according to
Article
240
and
Paragraph 2,
Article 241 of
the Company
Act.
Number and date
of
this

~34~

Articles
Revised articles		 Pre-modified article Descriptions
meeting and more than half of
the attendees approved, and a
report shall be submitted to the
shareholder’s
meeting.
Resolution
via
shareholder’s
meeting as mentioned in the
preceding parapgraph shall not
apply.
In
accordance
with
the
Company’s
operating
environment,
growth,
future
capital needs and long-term
financial planning, as well as to
meet the shareholders’ cash
needs,
the
Company
may
appropriate more than 10% of
the
aforesaid
distributable
earnings as cash and stock
dividend. The proportion of cash
dividend shall not be less than
10% of the total dividend.


















In
accordance
with
the
Company’s
operating
environment,
growth,
future
capital needs and long-term
financial planning, as well as to
meet the shareholders’ cash
needs,
the
Company
may
appropriate more than 10% of
the
aforesaid
distributable
earnings as cash and stock
dividend. The proportion of cash
dividend shall not be less than
10% of the total dividend.











amendment
Article
39
The Articles of Association
were established on July 27,
1973.
The
49th
amendment
was
passed in the 2019 shareholder’s
annualgeneral meeting.



The Articles of Association
were established on July 27,
1973.

~35~

Annex 6

CSBC Corporation, Taiwan “Procedures for Acquisition or Disposal of Assets” :Comparison of Articles Before and After Amendments

No.
Revision		 Befor Revision ExplanatoryNotes
1 Article 1
These Key Points are established in
accordance with the provisions of
Article 6-1 of the Regulations
Governing the Acquisition and
Disposal of Assets by Public
Companies (hereinafter referred to
as the Regulations) promulgated by
the Financial Supervisory
Commission ((hereinafter referred to
as the FSC).		 Article 1
These management Key Points are
established in accordance with the
provisions of Article 6-1 of the
Regulations Governing the
Acquisition and Disposal of Assets
by Public Companies (hereinafter
referred to as the Regulations)
promulgated by the Financial
Supervisory Commission
((hereinafter referred to as the FSC).		 Revision on wording
for terms used in these
Guidelines to be
consistent.
2 Article 2
The scope of Assets provided in
these Guidelines shall include :
(1) Investment such as stocks,
bonds, corporate bonds, bank
indentures, fund securities,
depository receipts, call (put)
warrants, beneficiary securities
and asset-back securities, etc.
(2) Real estate (including land,
buildings and fixtures, real
estate of an investment nature)
and equipment.
(3) Memberships.
(4) Patents, copyrights, trademarks,
franchise rights and other
intangible assets.
(5) Right-of-use assets.
(6) Derivative products.
(7) Assets acquired or disposed of
through a merger, division,
acquisitionorshare exchangein		 Article 2
The term "assets" referred to in these
Key Points includes the following:
(1)Investments in stocks,
government bonds, corporate
bonds, financial bonds,
securities representing the
interest in funds, depositary
receipts, call (put) warrants,
beneficial certificates,
asset-backed securities and
structured products (with
guaranteed principals and
interests).
(2)Real estate (including land,
houses and buildings,
investment- oriented real estate
and land use rights) and
equipment.
(3)Memberships.
(4)Patents, copyrights, trademarks,
franchise rights and other
intangible assets.
(5)Derivative products.
(6)Assets acquired or disposed of
through a merger, division,
acquisitionorshare exchangein		 1. Identical with
Article 1
2. Amended based
on Article 3 of the
Regulations
Governing the
Acquisition and
Disposal of Assets
by Public
Companies
(hereinafter the
Regulations).
3. Amended based
on Letter No.
Jin-Guan-Zheng-F
a-Zi 10703410725
dated 26
November 2018
by the Financial
Supervisory
Commission.

~36~

No.
Revision		 Befor Revision ExplanatoryNotes
accordance with law.
(8) Other majorassets.		 accordance with law.
(7)Other majorassets.
3 Article 3
The terms used in these Guidelines
shall be defined as follows:
(1) Derivatives: refer to 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" of which definition
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 share transfers in
accordance with law: refer to
assets that are acquired or
disposed through mergers,
demergers, acquisitions or share
transfers pursuant to Business
Mergers and Acquisitions Act,
the Financial Holding Company
Act, the Financial Institutions
Merger Act or other laws, or
acceptance of other companies’
shares pursuant to Article 156-3
of the Company Act on issuance
of new shares (hereinafter
referred to as “share transferee”).
(3) Related party or subsidiary: as
defined in the Regulations
Governing the Preparation of
Financial Reports by Securities		 Article 3
The terms in these Key Points are
defined as follows:
(1) Derivative products: forward
contracts, options contracts,
futures contracts, leverage
contracts and swap contracts,
and compound contracts
combining the products above
whose values are derived from
assets, interest rates, foreign
exchange rates, indices or other
interests. The "forward
contracts" do 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 a merger, division,
acquisition or share exchange in
accordance with law: assets
acquired or disposed through a
merger, division or acquisition
conducted under the Business
Mergers and Acquisitions Act,
Financial Holding Company Act,
Financial Institution Merger Act
or other acts, or through a share
transfer from another company
in exchange for the issuance of
new shares of its own
(hereinafter referred to as "share
exchange") pursuant o Article
156-8 of the Company Law.
(3) Related party or subsidiary: as
defined in the Regulations
Governing the Preparation of
Financial Reports by Securities		 Amended based on
Letter No.
Jin-Guan-Zheng-Fa-Zi
10703410725 dated
26 November 2018 by
the Financial
Supervisory
Commission.

~37~

No.
Revision		 Befor Revision ExplanatoryNotes
Issuers.
(4) Professional appraiser: this refers
to real estate appraisers or other
appraisers who carry out
appraisals of real estate or
equipment in accordance with
law.
 Issuers.
(4) Professional appraiser: a real
estate appraiser or a practitioner
duly authorized by law to engage
in the value appraisal of real
estate or other fixed assets.
4 Article 4
Professional appraisers and their
officers, certified public accounts,
attorneys, and securities
underwriters that provide the
Company with appraisal reports or
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
Securities and Exchange Act,
the Company Act, the Banking
Act, the Insurance Act, the
Financial Holding Company
Act, 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 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		 Article 4
Regarding the appraisal report or the
opinion of a CPA, a lawyer or a
securities underwriter obtained by
the Company, the professional
appraiser and its appraisal personnel,
the CPA, the lawyer or the securities
underwrite shall not be a related
party of any party to the transaction.		 Amended based on
Letter No.
Jin-Guan-Zheng-Fa-Zi
10703410725 dated
26 November 2018 by
the Financial
Supervisory
Commission.

~38~

No. Revision Befor Revision ExplanatoryNotes
related parties ofeachother.
5 Article 5
Any amendment to these Guidelines
or acquisition or disposal of separate
assets, which should be approved by
the Board of Directors in accordance
with these Guidelines or other laws
and regulations, any deliberations by
the Board of Directors should take
into full consideration the views of
each Independent Directors. Where
an Independent Director raises
objection or reserves his or her
opinion (including written
statement), should be recorded in the
meeting minutes of the Board of
Directors.
The amendment to these Guidelines
and transaction involving major
assets or derivatives shall require the
approval of a simple majority of all
members of the Audit Committee,
with such decisions submitted to the
Board of Directors for its approval.
In the event that the proposal as
preceding sub-Article , which fails
to be adopted by a simple majority
of all members of the Audit
Committee i, such proposal may be
implemented, if approved by
two-thirds or more of all Directors,
and the resolution of the Audit
Committee should be recorded in the
meeting minutes of the Board of
Directors.		 Article 6
If an amendment to the Key Points
or the acquisition or disposal
procedures of individual assets
needs to be approved by the Board
of Directors in accordance with the
provisions of the Key Points or other
laws and regulations, the opinions of
the independent directors shall be
fully taken into account in the
discussion of the board meeting. If
there is an objection or reservation
(including a written statement) by an
independent director or a director, it
shall be recorded in the minutes of
the board meeting.
Transactions of major assets or
derivative products shall be
approved by more than one-half of
all the members of the Audit
Committee and proposed to the
Board of Directors for resolution.		 1. Adjustment on
provision number.
2. Identical with
Article 1.
3. Amended based
on Articles 6 and 8
of the Regulations.
6 Deleted Article 7
Appraisal procedures:
(1) For the acquisition or disposal of
securities that are traded on
non-centralized markets or at the
premises of securities brokers,
the securities’ net value per
share, profitability and future
development potential as well as
the market interest rate, bond
coupon rate, debtor's credit and
prevailing transaction price shall
be taken into account.		 This Article is similar
to Articles 10 and 11
of the original
provisions, hence
deleted.

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No.
Revision		 Befor Revision ExplanatoryNotes
(2) For the acquisition or disposal of
securities that are traded on
centralized markets or at the
premises of securities brokers,
the prices shall be determined
according to the prevailing share
or bond prices.
(3) For the acquisition or disposal of
assets other than those in the
preceding two paragraphs, the
price inquiry method, price
comparison method, price
negotiation method or open
tender method shall be adopted,
and the announced present value,
appraised present value and
actual transaction price of the
neighboring real estate shall be
referred to. If a professional
appraisal report is required for
the asset according to the
provisions of the relevant laws
and regulations and the Key
Points, the appraisal report from
a professional appraiser shall be
referred to.
7 Article 6
The practice procedures and the
department in charge of for the
acquisition and disposal of assets :
(1) Assets acquired or disposed of
through long-term equity
investment on other incorporated
or newly incorporated company:
carried out in compliance with
Articles 7 and 9 of these
Guidelines and Guidelines for
Re-investment of the Company.
(2) Investment on stocks,
government bonds, corporate
bonds, financial bonds, securities
representing interest in a fund,
depository receipts, call (put)
warrants, beneficial interest
securities and asset-backed
securities, etc.: carried out in
compliance with Articles 7 and 9
of these Guidelines and		 Article 8
Asset acquisition or disposal
procedures:
(1) For an acquisition or disposal of
assets, for the decision of the
unit in charge and the execution
of the unit in the second Article
of this Article, the organizing
unit shall evaluate the reasons
for the acquisition or disposal,
the subject matter, the
counterparty of the transaction,
the transfer price, the receipt and
payment conditions, and the
reference price.
(2) For the Company's short and
long-term securities and
derivative investment, the
execution unit is the financial
unit. Regarding the execution
units of real estate and other
fixed assets, pleasereferto the		 1. Adjustment on
provision number.
2. The Company
established
separate
regulations for
management of
long-term equity
investment,
financial
derivatives and
fixed-assets, etc.,
the details are
carried out based
on Guidelines for
Re-investment,
Procedures for

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No.
Revision		 Befor Revision ExplanatoryNotes
Procedures for Financial Product
Transactions of the Company.
(3) Real estate, equipment or its
right-of-use assets: carried out in
compliance with Article 8 of
these Guidelines and Guidelines
for Fixed-Asset Management.
(4) Other assets: unless regulated
otherwise in the Company Act,
Business Mergers and
Acquisitions Act, other laws or
regulations, the Articles of
Association of the Company and
Sections 3 and 4 of this Chapter,
should be submitted for the
approval by General Manager
after the evaluation by the
planning unit.		 Company's Key Points for Fixed
Asset Management. For asset
other than securities, real estate
or other fixed assets, the
investment shall be evaluated by
the planning unit beforehand.
(3) If there are control-procedure
related provisions specified in
regulations other than the Key
Points, such provisions shall be
followed:
1.Liquid and non-liquid financial
investment:
A.Reinvestments for business
purposes and their equity
disposal shall be approved
by the Board of Directors.
B.For low-risk investment
targets such as government
bonds, corporate bonds,
financial bonds, domestic
and foreign bond funds,
domestic
and
foreign
monetary funds, negotiable
certificates
of
deposit,
short-term
commercial
bills and bank acceptance
bills which are acquired or
disposed of for financial
purposes, the department
in charge shall be fully
authorized to handle such
transactions according to
the Company's "Financial
Product Transaction and
Processing Procedures".
C.For other financial product
investments, if the amount
of a single transaction or
the cumulative transaction
amount within one year
amounts
to
NT$100
million,
the
transaction
shall be approved by the
Board of Directors. If the
amount
is
less
than
NT$100
million,
the
department in charge shall		 Financial Product
Transactions and
Guidelines for
Fixed-Asset
Management.

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No.
Revision		 Befor Revision ExplanatoryNotes
be
fully
authorized
to
handle the transaction and
report it in the next board
meeting afterwards.
2.Real estate and other fixed
assets:They shall be handled in
accordance with the provisions
of Article 10.2 of the Key
Points.
3.Other assets: Unless there are
provisions available in the
Company Law, the Merger and
Acquisition Law or other laws,
or the Articles of Association of
the Company or the provisions
of Sections 3 and 4 of this
Chapter, such transactions shall
be approved by the General
Manager.
8 Article 7
The total amount of investment,
limitation on individual items, and
total amount of real estate which
are not for business use by the
Company and its subsidiaries are
regulated as follows:
(1) The total amount of investment
of the Company shall not exceed
40% of the Company’s paid-in
capital, in which investment in
securities that are not long-term
re-investments shall not exceed
10% of the Company’s paid-in
capital.
(2) The limitation on individual
items concerning long-term
re-investment of the Company is
shall not exceed 35% of the
Company’s paid-in capital,
investment in securities that are
not long-term re-investments of
which limitation on individual
securities shall not exceed 5%
of the Company’s paid-in
capital.
(3) Save for Subsidiary with
investment as its primary
business, the totalamount of
Article 9
The total amount of investment,
limitation on individual items, and
total amount of real estate which
are not for business use by the
Company and its subsidiaries are
regulated as follows:
(1) The total amount of investment
of the Company shall not exceed
40% of the Company’s paid-in
capital, in which investment in
securities that are not long-term
re-investments shall not exceed
10% of the Company’s paid-in
capital.
(2) The limitation on individual
items concerning long-term
re-investment of the Company is
shall not exceed 35% of the
Company’s paid-in capital,
investment in securities that are
not long-term re-investments of
which limitation on individual
securities shall not exceed 5%
of the Company’s paid-in
capital.
(3) Save for Subsidiary with
investment as its primary
business, the totalamount of
1. Adjustment on
provision number.
2. The original Item
2, Section 1,
Sub-Article 3,
Article 8 is
deleted, “low-risk
investment targets
acquired or
disposed of for
purpose of
financial
planning”
provided in this
Sub-Article is in
compliance with
the Procedures for
Financial Product
Transactions of
the Company.

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No.
Revision		 Befor Revision ExplanatoryNotes
investment of each Subsidiary
shall not hall not exceed 40% of
the Subsidiary’s paid-in capital,
investment of securities that are
not long-term re-investments
shall not exceed 10% of the
Subsidiary’s paid-in capital. The
long-term re-investment of each
Subsidiary is bound by
limitation of individual item that
shall not exceed 35% of the
Subsidiary’s paid-in capital,
investment in securities that are
not long-term re-investments is
bound by limitation of individual
item that shall not exceed 5% of
the Subsidiary’s paid-in capital.
(4) The total amount of the
acquisition of real estate by the
Company and each of its
subsidiaries which are not for
business use shall not exceed
10% of the paid-in capital of
each company.
The securities provided in the
preceding sub-Article do not include
the low-risk investment targets
acquired or disposed of for purpose
of financial planning in accordance
with the Procedures for Financial
Product Transactions of the
Company.		 investment of each Subsidiary
shall not hall not exceed 40% of
the Subsidiary’s paid-in capital,
investment of securities that are
not long-term re-investments
shall not exceed 10% of the
Subsidiary’s paid-in capital. The
long-term re-investment of each
Subsidiary is bound by
limitation of individual item that
shall not exceed 35% of the
Subsidiary’s paid-in capital,
investment in securities that are
not long-term re-investments is
bound by limitation of individual
item that shall not exceed 5% of
the Subsidiary’s paid-in capital.
(4) The total amount of the
acquisition of real estate by the
Company and each of its
subsidiaries which are not for
business use shall not exceed
10% of the paid-in capital of
each company.
The Securities provided in the
preceding
sub-Article
do
not
include the low-risk investment
targets acquired or disposed of for
purpose
of
financial
planning
provided in Item 2, Section 1,
Sub-Article 3, Article 8.
9 Article 8
In acquiring or disposing of real
estate, equipment, or right-of-use
assets thereof where the transaction
amount reaches NTD 300 million or		 Article 10
Regarding
the
Company’s
acquisition or disposal of property
or
equipment,
except
for
transactions
with
government		 1. Adjustment on
provision number.
2. Amended based
on Letter No.

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No.
Revision		 Befor Revision ExplanatoryNotes
more, the company, unless
transacting with governmental
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; same procedure
applies to any subsequent
change to the terms and
conditions of the transaction.
(2) If the transaction amount
exceeds NT$1 billion, two or
more professional appraisers
shall be hired for the appraisal.
(3) If the appraisal result of the
professional appraiser has one of
the following circumstances,
unless the appraisal result of the
assets to be acquired is higher
than the transaction amount or
the appraisal result of the assets
to be disposal of is lower than
the transaction amount, a CPA
shall be contacted for a specific
opinion on the difference and the
fairness of the transaction price
in accordance with the
provisions of the Audit
Standards Bulletin No. 20 of the
Accounting Research and
Development Foundation:
1.The difference between the
appraisal
result
and
the		 entities, commissioned-construction
on the Company’s own land,
commissioned-construction
on
leased land, or acquisition or
disposal of equipment for business
use, if the transaction amount
reaches
NT$300
million,
a
professional
valuer’s
appraisal
report shall be obtained before the
date of occurrence of the fact, and
the transaction shall meet the
following requirements:
(1) The transaction shall be
approved by the Board of
Directors if a limited price,
specified price or special price is
to be used as the reference price
of the transaction for special
reasons. This requirement also
applies to future changes to the
transaction conditions.
(2) If the transaction amount
exceeds NT$1 billion, two or
more professional appraisers
shall be hired for the appraisal.
(3) If the appraisal result of the
professional appraiser has one of
the following circumstances,
unless the appraisal result of the
assets to be acquired is higher
than the transaction amount or
the appraisal result of the assets
to be disposal of is lower than
the transaction amount, a CPA
shall be contacted for a specific
opinion on the difference and the
fairness of the transaction price
in accordance with the
provisions of the Audit
Standards Bulletin No. 20 of the
Accounting Research and
Development Foundation:
1.The difference between the
appraisal
result
and
the		 Jin-Guan-Zheng-F
a-Zi 10703410725
dated 26
November 2018
by the Financial
Supervisory
Commission.

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No.
Revision		 Befor Revision ExplanatoryNotes
transaction amount is more than
20% of the transaction amount.
2.The difference between the
appraisal results of two or more
professional appraisers is more
than 10% of the transaction
amount.
(4) The time lag between the issuing
date of the professional
appraiser’s appraisal report and
the contract date shall not be
more than three months.
However, if the appraisal report
applies to the publically
announced present value of the
same period and is not more than
six months, then the Company
may request the original
professional appraiser to issue an
opinion.
For acquisition or disposal other than
real estate, equipment, or right-of-use
assets thereof provided in the
preceding sub-Article, the transaction
price shall be decided based on the
publicly announced value, appraised
value, actual closing prices for
nearby real estate, etc., or based on
the price appraised by two
professional appraisers or more.		 transaction amount is more than
20% of the transaction amount.
2.The difference between the
appraisal results of two or more
professional appraisers is more
than 10% of the transaction
amount.
(4) The time lag between the issuing
date of the professional
appraiser’s appraisal report and
the contract date shall not be
more than three months.
However, if the appraisal report
applies to the publically
announced present value of the
same period and is not more than
six months, then the Company
may request the original
professional appraiser to issue an
opinion.
In the case of acquisition or disposal
of real estate or other fixed assets
other than those in the preceding
Article, the publically announced
present value, appraised value and
the actual transaction price of the
neighboring real estate shall be
referred to, or two or more
professional appraisers shall be hired
for the price appraisal in order to
determine the transaction price.
10 Article 9
When acquiring or disposing of
securities, the Company shall, prior
to the date of occurrence of the
event, obtain financial statements of		 Article 11
When acquiring or disposing of
securities, the Company shall, prior
to the date of occurrence of the
event, obtain financial statements of		 1. Adjustment on
provision number.
2. Amended based
on Order No.

~45~

No.
Revision		 Befor Revision ExplanatoryNotes
the underlying 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
transaction price reaches NTD 300
million or more, the company shall
additionally engage a CPA 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 accordance with
the provisions of Statement of
Auditing Standards No. 20
published by the Accounting
Research and Development
Foundation (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).
The exceptions otherwise regulated
by the Financial Supervisory
Commission in the preceding
sub-paragraph refer to the following
conditions:
(1) Acquiring securities through
cash contribution in
incorporation by promotion or
by public offering in accordance
with the law, and epresenting the
rights rin the securities acquired
is proportional with the
contribution.
(2) Securities issued at face value by
an underlying company carrying
out a capital increased by cash in
accordance with relevant laws
and regulations, with the
Company participating in
subscription to such securities.		 the underlying 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
transaction price reaches NTD 300
million or more, the company shall
additionally engage a CPA 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 accordance with
the provisions of Statement of
Auditing Standards No. 20
published by the Accounting
Research and Development
Foundation (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).
The exceptions provided in the
preceding sub-paragraph refer to the
following conditions:
(1) The exceptions provided in the
preceding sub-paragraph refer to
the following
conditions:Acquiring securities
through cash contribution in
incorporation by promotion or
by public offering in accordance
with the Company Act, and the
rights shown in the securities
acquired is proportional with the
contribution.
(2) Securities issued at face value by
an underlying company carrying
out a capital increased by cash
in accordance with relevant laws
and regulations, with the
Company as a sponsor of the
issue.		 Jin-Guan-Zheng-F
a-Zi 10703319083
dated 29 August
2018 by the
Financial
Supervisory
Commission.

~46~

No.
Revision		 Befor Revision ExplanatoryNotes
(3) Securities issued by an investee
company wholly and directly or
indirectly invested by the
Company that is carrying out a
capital increased by cash, with
the Company participating in
subscription to such securities,
or securities issued by the
wholly invested subsidiaries
sponsoring each other in
carrying out cash capital
increase.
(4) Securities listed and traded on
the stock exchange or on the
securities Market and emerging
stocks.
(5) Domestic government bonds,
bonds under repurchase and
resale agreements.
(6) Public offering of funds.
(7) Listed securities acquired or
disposed of in accordance with
the Taiwan Stock Exchange
Corporation and the Taipei
Exchange Rules governing the
purchase of listed securities by
reverse auction or rules
governing the auction of listed
securities.
(8) Securities acquired through the
Company’s sponsorship of a
seasoned equity offering by a
public company or subscription
of domestic corporate bonds
(including financial bonds),
when the securities acquired are
not privately placed.
(9) Subscription to fund shares
before the establishment of a
fund in accordance with
Paragraph 1, Article 11 of the
Securities Investment Trust and
Consulting Act, or subscription
or redemption of domestic
private placement funds,
provided that the trust agreement
for the fund specifies an		 (3) Securities issued by an investee
company wholly invested by the
Company that is carrying out a
capital increased by cash, with
the Company as a sponsor of the
issue.
(4) Securities listed and traded on
the stock exchange or on the
securities Market and emerging
stocks.
(5) Government bonds, bonds under
repurchase and resale
agreements.
(6) Domestic or overseas public
offering of funds.
(7) Listed securities acquired or
disposed of in accordance with
the stock exchange or the
securities market rules governing
the purchase of listed securities
by reverse auction or rules
governing the auction of listed
securities.
(8) Securities acquired through the
Company’s sponsorship of a
seasoned equity offering by a
public company or subscription
of domestic corporate bonds
(including financial bonds),
when the securities acquired are
not privately placed.
(9) Subscription to fund shares
before the establishment of a
fund in accordance with
Paragraph 1, Article 11 of the
Securities Investment Trust and
Consulting Act, or subscription
or redemption of domestic
private placement funds,
provided that the trust agreement
for the fund specifies an

~47~

No. Revision Befor Revision ExplanatoryNotes
investment strategy in which,
aside from securities margin
transactions and open positions
held in securities-related
products, the investment scope
of the remaining portion is the
same as that of a publicly offered
fund.		 investment strategy in which,
aside from securities margin
transactions and open positions
held in securities-related
products, the investment scope
of the remaining portion is the
same as that of a publicly offered
fund.
11 Article 10
Where the acquisition or disposal of
intangible assets or right-to-use
assets or membership by the
Company amounts to NTD 100
million, save for transactions with
domestic governmental agency, the
Company shall before the date of
occurrence of the event, engage
certified public accountant to
provide opinion on the
reasonableness of the transaction
price, and the said certified public
accountant shall work in accordance
with provisions of Statement of
Auditing Standards No. 20
published by the Accounting
Research and Development
Foundation.		 Article 12
Regarding the Company’s
acquisition or disposal of
memberships or intangible assets
with a transaction amount of
NT$100 million or more, except for
transactions with government
entities, the accountant shall be
consulted before the date of
occurrence of the fact for an opinion
on the rationality. The accountant
shall handle the matter in
accordance with the provisions of
the Audit Standards Bulletin No. 20
of the Accounting Research and
Development Foundation.		 1. Adjustment on
provision number.
2. Amended based
on Letter No.
Jin-Guan-Zheng-F
a-Zi 10703410725
dated 26
November 2018
by the Financial
Supervisory
Commission.
12 Article 11
The calculation of the transaction
amounts referred to in the preceding
three Articles shall be done in
accordance with Sub-Article 2,
Article 28, and "within the
preceding year" 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 certified
public accountant's opinion has been
obtained need not be counted toward
the transaction amount.		 Article 12-1
The calculation of the transaction
amounts above shall be handled in
accordance with the provisions in
Articles 28.2 and 28.3.		 1. Adjustment on
provision number.
2. Calculation of the
amount of
transaction is
regulated in
Sub-Article 2 of
Article 28.
3. Amended based
on Article 12 of
the Regulations.
13 Article 12
 Article 5
 Adjustment on
provision number
14 Article 13
When the Company engages in any
acquisitionordisposalofassetsfrom		 Article 13
When the Company engages in any
acquisitionordisposalofassets with		 Adjustment as shown
in provision.

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No.
Revision		 Befor Revision ExplanatoryNotes
or to a related party, in addition to
ensuring that the necessary
resolutions are adopted and the
reasonableness of the transaction
terms is appraised in accordance
with the preceding Section and this
Section, if the transaction amount
reaches 10% or more of the
Company's total assets, the
Company shall also obtain an
appraisal report from a professional
appraiser or a certified public
accountant's opinion in compliance
with the provisions of the preceding
Section.
The calculation of the transaction
amount referred to in the preceding
sub-Article shall be made in
accordance with Article 11.
When judging whether a trading
counterparty is a related party, in
addition to legal formalities, the
substance of the relationship shall be
considered.		 a related party, in addition to
ensuring that the necessary
resolutions are adopted in
accordance with the provisions of
the preceding Section and this
Section 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 accordance with the
provisions of the preceding Section.
The calculation of the transaction
amount referred to in the preceding
paragraph shall be made in
accordance with the provisions of
Articles 28.2 and 28.3.
When judging whether a trading
counterparty is a related party, in
addition to legal formalities, the
substance of the relationship shall be
considered.
15 Article 14
When acquiring or disposing of real
estate or right-of-use assets thereof
from or to a related party, or when
acquiringor disposingof assets		 Article 14
When acquiring or disposing of real
estate thereof from or to a related
party, or when acquiring or
disposingof assets other than real		 Amended based on
Letter No.
Jin-Guan-Zheng-Fa-Zi
10703410725 dated

~49~

No.
Revision		 Befor Revision ExplanatoryNotes
other than real estate or right-of-use
assets thereof from or to a related
party and the transaction amount
reaches NTD 300 million or more,
except in trading of domestic
government bonds or bonds under
repurchase 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 documents have been
approved by the Audit Committee
and the Board of Directors:
(1) The purpose, necessity and
anticipated benefit of the
acquisition or disposal of assets.
(2) The reason for choosing the
related party as the transaction
counterparty.
(3) With respect to the acquisition of
real estate or right-of-use assets
thereof from a related party,
information regarding appraisal
of the reasonableness of the
preliminary transaction terms in
accordance with Articles 15 and
16.
(4) The date and price of the related
party’s original acquisition of the
real estate, the original
transaction counterparty, and the
transaction counterparty's
relationship with the Company
and the related party.
(5) The monthly cash flow forecasts
for the year commencing from
the anticipated month of contract
signing, the evaluation of the
necessity of the transaction, and
the reasonableness of the funds
utilization.
(6) An appraisal report from a
professional appraiser or a CPA's
opinion obtained in accordance
with theprecedingArticle.		 estate thereof from or to a related
party and the transaction price
reaches NTD 300 million or more,
except in trading of government
bonds or bonds under repurchase
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 documents have been
approved by Audit Committee and
the Board of Directors:
(1) The purpose, necessity and
anticipated benefit of the
acquisition or disposal of assets.
(2) The reason for choosing the
related party as the transaction
counterparty.
(3) With respect to the acquisition of
real estate from a related party,
the information regarding the
evaluation of the reasonableness
of the preliminary transaction
terms in accordance with Article
15 and Article 16.
(4) The date and price of the related
party’s original acquisition of the
real estate, the original
transaction counterparty, and the
transaction counterparty's
relationship with the Company
and the related party.
(5) The monthly cash flow forecasts
for the year commencing from
the anticipated month of contract
signing, the evaluation of the
necessity of the transaction, and
the reasonableness of the funds
utilization.
(6) An appraisal report from a
professional appraiser or a CPA's
opinion obtained in accordance
with theprecedingArticle.		 26 November 2018 by
the Financial
Supervisory
Commission.

~50~

No.
Revision		 Befor Revision ExplanatoryNotes
(7) Restrictive conditions and other
important agreements associated
with the transaction.
The calculation of the transaction
amounts referred to in the preceding
paragraph
shall
be
made
in
accordance with the provisions of
Article 28.2, and "within one year"
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.
With respect to the following types
of transactions, when the
transactions are to be conducted
between the Company and its parent
or subsidiaries, or between its
subsidiaries in which it directly or
indirectly holds 100% of the issued
shares or authorized capital, the
Board of Directors may refer to
Article 6 and delegate the Chairman
to decide such matters and have the
decisions subsequently submitted to
and ratified in the next Board of
Directors meeting:
(1) Acquisition or disposal of
equipment or right-of-use assets
thereof held for business use.
(2) Acquisition or disposal of real
estate right-of-use assets held for
business use.
When such matter is submitted for
deliberation by the Board of
Directors pursuant to Sub-Article 1,
the Board of Directors shall take into
full consideration each independent
director's opinions. If an
independent director objects to or
expresses reservations, it shall be
recorded in the meeting minutes of
the Board of Directors.
The matters for which Sub-Article 1
requires approval by simple majority
of all members of the Audit		 (7) Restrictive conditions and other
important agreements associated
with the transaction.
The calculation of the transaction
amounts referred to in the preceding
paragraph
shall
be
made
in
accordance with the provisions of
Article 28.2, and "within one year"
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
business-purpose
equipment
between the Company and its parent
company
or
subsidiaries,
the
Company's Board of Directors may,
pursuant to the provisions of Article
10, delegate the Chairman to make a
decision, and have the decision
submitted in the next board meeting
for recognition afterwards.
When a matter is submitted for
discussion in the board meeting
pursuant to theprovisions of the

~51~

No.
Revision		 Befor Revision ExplanatoryNotes
Committee, to which Sub-Article 2
of Article 36 shall be applied_mutatis_
mutandis.		 preceding paragraph, each
independent director's opinions shall
be fully taken into consideration. If
there is any objection or reservation
from the independent directors, it
shall be recorded in the minutes of
the boardmeeting.
16 Article 15
When acquiring real estate or
right-of-use assets thereof from a
related party, the Company shall
evaluate the reasonableness of the
transaction costs by the following
means:
(1) Based on the related party's
transaction price plus necessary
interest on funding and the costs
to be duly borne by the buyer.
The "necessary interest on
funding" is calculated as the
weighted average interest rate of
borrowing in the year the
Company purchases the real
estate, provided that it may not
be higher than the maximum
borrowing rate for non-financial
industries as announced by the
Ministry of Finance.
(2) The total appraised loan value by
a financial institution where the
related party has previously
pledged the asset for a for a loan
from the financial institution,
provided that the actual
cumulative loan amount
extended by the financial
institution shall have reached 70
percent or more of the financial
institution's appraised loan
value, 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 leasedinone		 Article 15
For an acquisition of real estate
from a related party, the Company
shall evaluate the reasonableness of
the
transaction
costs
by
the
following means:
(1) Based on the related party's
transaction price plus necessary
interest on funding and the costs
to be duly borne by the buyer.
The "necessary interest on
funding" is calculated as the
weighted average interest rate of
borrowing in the year the
Company purchases the real
estate, provided that it may not
be higher than the maximum
borrowing rate for non-financial
industries as announced by the
Ministry of Finance.
(2) The total appraised loan value by
a financial institution where the
related party has previously
pledged the asset for a for a loan
from the financial institution,
provided that the actual
cumulative loan amount
extended by the financial
institution shall have reached 70
percent or more of the financial
institution's appraised loan
value, 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 the land and the building of
the
same
object
matter
are
purchased together, the transaction		 Amended based on
Letter No.
Jin-Guan-Zheng-Fa-Zi
10703410725 dated
26 November 2018 by
the Financial
Supervisory
Commission.

~52~

No.
Revision		 Befor Revision ExplanatoryNotes
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 sub-Article.
When acquiring real estate or
right-of-use assets thereof from a
related party, aside from appraising
the cost of the real estate or
right-of-use assets thereof in
accordance with the preceding two
sub-Articles, the Company shall
also engage a certified public
accountant to check the appraisal
and render a specific opinion.
Where any one of the following
circumstances exists, the provisions
in the preceding three paragraphs
shall not apply:
(1) The related party acquired the
real estate or right-of-use assets
thereof through inheritance or as
a gift.
(2) More than 5 years have elapsed
from the time the related party
signed the contract to obtain the
real estate or right-of-use assets
thereof to the signing date for the
current transaction.
(3) The real estate is acquired
through a joint development
contract with the related party, or
construction on the Company’s
own land or construction on
leased land with the construction
work commissioned to the
related party.
(4) The real estate right-of-use
assets for business use are
acquired by the Company with
its parent or subsidiaries, or by
its subsidiaries in which it
directly or indirectly holds 100%
of the issued shares or
authorized capital		 costs for the land and the building
may be respectively appraised in
accordance with either of the
means in the preceding paragraph.
For the Company’s acquisition of
real estate from a related party, in
addition to appraising the costs of
the real estate in accordance with
the provisions in paragraphs 1 and
2 above, the Company shall engage
a CPA to check the appraisal results
and render a specific opinion.
Where any one of the following
circumstances exists, the provisions
in the preceding three paragraphs
shall not apply:
(1) The related party acquired the
real estate 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 estate to the
signing date for the current
transaction.
(3) The real estate is acquired
through a joint development
contract with the related party, or
construction on the Company’s
own land or construction on
leased land with the construction
work commissioned to the
related party.
17 Article 16
When the results of the Company's
appraisalconductedinaccordance		 Article 16
When the results of the Company's
appraisalconductedinaccordance		 Amended based on
Letter No.

~53~

No.
Revision		 Befor Revision ExplanatoryNotes
with paragraph 1 and paragraph 2
of the preceding Article are both
lower than the transaction price, the
matter
shall
be
handled
in
compliance
with
Article
17.
However, If any of the following
circumstances
exist,
and
the
objective
evidence
has
been
submitted and the specific opinions
on
reasonableness
have
been
obtained from a professional real
estate appraiser and a CPA, 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.The
undeveloped
land
is
appraised in accordance with
the means in the preceding
Article,
and
the
buildings
according to the related party's
construction
cost
plus
reasonable construction profit,
and the valued exceeds 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 past 3 years or
the gross profit margin of the
construction industry in the
latest 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
target
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 landprices in accordance		 with paragraph 1 and paragraph 2
of the preceding Article are both
lower than the transaction price, the
matter
shall
be
handled
in
compliance
with
Article
17.
However, If any of the following
circumstances
exist,
and
the
objective
evidence
has
been
submitted and the specific opinions
on
reasonableness
have
been
obtained from a professional real
estate appraiser and a CPA, 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.The
undeveloped
land
is
appraised in accordance with
the means in the preceding
Article,
and
the
buildings
according to the related party's
construction
cost
plus
reasonable construction profit,
and the valued exceeds 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 past 3 years or
the gross profit margin of the
construction industry in the
latest period as announced by
the
Ministry
of
Finance,
whichever is lower.
2.The transactions of other floors
of the same subject building, or
the transactions of non-related
parties in the neighboring area
within the past year, with
similar floor areas, have similar
transaction terms based on the
evaluation of the reasonable
price differences of such floors
or areas in accordance with the
propertytrading practice.		 Jin-Guan-Zheng-Fa-Zi
10703410725 dated
26 November 2018 by
the Financial
Supervisory
Commission.

~54~

No.
Revision		 Befor Revision ExplanatoryNotes
with standard property market
sale practices.
(2) Where acquiring real estate, or
obtaining real estate right-of-use
assets through leasing from a
related party, the Company
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
Transactions involving neighboring
or closely valued parcels of land in
the preceding sub-Article 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% of the target
property in the planned transaction;
within the preceding year refers to
the year preceding the date of
occurrence of the acquisition of the
real estate or the right-of-use assets
thereof.		 3.Where the other floors of the
same subject building leased by
non-related parties within the
past
year
have
similar
transaction terms, based on the
evaluation of the reasonable
price differences of such floors
in accordance with the property
rental practice.
(2) The Company can provide
evidence that the real estate
acquired from a related party has
terms similar to those of
transactions completed in the
neighboring area by unrelated
parties within the past year, and
the area size is similar.
The aforesaid transactions in the
neighboring
area
refers
to
transactions on the same or an
adjacent street and within an area
of less than 500 meters from the
subject matter of the transaction, or
transactions
with
similar
announced present values. The
aforesaid similar area size means
that the area of the transaction of a
non-related party is not less than
50% of the area of the subject
matter of the transaction. The
aforesaid one year refers to the year
before the date on which the real
estate transaction occurs.
18 Article 17
Where acquiring real estate or
right-of-use assets thereof from a
related party and the results of
appraisals conductedinaccordance		 Article 17
Regarding
the
Company’s
acquisition of real estate from a
related party, if the results of the
appraisalsinaccordance withthe		 Amended based on
Letter No.
Jin-Guan-Zheng-Fa-Zi

~55~

No.
Revision		 Befor Revision ExplanatoryNotes
with Articles 15 and 16 are
uniformly lower than the transaction
price, the Company shall take the
following steps:
(1) A special reserve shall be set
aside in accordance with Article
1, Article 41 of the Securities
and Exchange Act against the
margin between the transaction
price of the real estate or
right-of-use assets thereof and
the appraised cost, and may not
be distributed or used for capital
increase or issuance of bonus
shares.
(2) The Audit Committee shall
handle the above in accordance
with the provisions of Article
208 of the Company Law.
(3) Actions taken pursuant to the
preceding two sections shall be
reported to the shareholders
meeting, and the details of the
transaction shall be disclosed in
the annual report and prospectus.
After setting aside a special reserve
under the preceding sub-Article, the
Company 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
Financial Supervisory Commission
has approved.
When the Company acquires real
estate or right-of-use assets thereof
from a related party, if there is other
evidence indicating that the
acquisitionwas not an arm’s length		 provisions of Articles 15 and 16 are
lower than the transaction price,
then the following matters shall be
handled.
(1) The Company shall make a
provision of a special surplus
reserve in accordance with the
provisions of Paragraph 1 of
Article 41 of the Securities
Exchange Act on the difference
between the transaction price of
the real estate and the appraised
cost, and shall not distribute the
surplus or convert it into capital
increase.
(2) The Audit Committee shall
handle the above in accordance
with the provisions of Article
208 of the Company Law.
(3) The handling of the matters in
Paragraphs 1 and 2 above shall
be reported in the shareholders'
meeting, and the details of the
transaction shall be disclosed in
the annual report and the
prospectus.
If the Company has set aside a
special
surplus
reserve
in
accordance with the provisions of
the preceding paragraph, it may not
utilize the special surplus reserve
until it has recognized a loss when
there is a decline in the market
value of the assets it purchased at a
premium, or the assets have been
disposed
of,
or
an
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 Financial Supervisory
Commission has given its approval.
If the Company obtains real estate
from a related party, it shall also
comply with the provisions in the
preceding two paragraphs if there
is other evidence indicatingthat the		 10703410725 dated
26 November 2018 by
the Financial
Supervisory
Commission.

~56~

No. Revision Befor Revision ExplanatoryNotes
transaction, the Company shall
comply with the provisions of the
preceding two sub-Articles.		 transaction does not conform to the
regular business mode.
19 Article 18

2 omitted >
(5) Periodic evaluation and
exception handling:
1.Financial
Department
shall
evaluate the derivative position
at least once a week, and at
least twice a month for hedge
transactions due to business
needs. The evaluation report
shall be give to the senior
executives authorized by the
Board of Directors.
 Article 18

2 omitted >
(5) Periodic evaluation and
exception handling:
1.Financial
Department
shall
evaluate the derivative position
at least once a week, and at
least twice a month for hedge
transactions due to business
needs. The evaluation report
shall be presented to the senior
executives authorized by the
Board of Directors.
 Revision on wording.
20 Article 23
In the Company’s participation in a
merger, division or acquisition,
unless the law provides otherwise
or the FSC is notified in advance
due to extraordinary circumstances
and has granted its consent, the
Company shall convene a board
meeting
and
a
shareholders’
meeting on the same day for a
resolution on the merger, division
or acquisition related matters.
The companies participating in a
share exchange shall, unless the
law provides otherwise or the FSC
is notified in advance due to
extraordinary circumstances and
has granted its consent, convene a
board meeting on the same day.
When participating in a merger,
division, acquisition or share
exchange, the Company shall
prepare a full written record of the
following information and retain it
for 5 years for reference:
(1) Basic personnel data: including
the job titles, names and ID
numbers (or passport numbers in
the case of foreign nationals)of		 Article 23
In the Company’s participation in a
merger, division or acquisition,
unless the law provides otherwise
or the FSC is notified in advance
due to extraordinary circumstances
and has granted its consent, the
Company shall convene a board
meeting
and
a
shareholders’
meeting on the same day for a
resolution on the merger, division
or acquisition related matters.
The companies participating in a
share exchange shall, unless the
law provides otherwise or the FSC
is notified in advance due to
extraordinary circumstances and
has granted its consent, convene a
board meeting on the same day.
When participating in a merger,
division, acquisition or share
exchange, the Company shall
prepare a full written record of the
following information and retain it
for 5 years for reference:
(1) Basic personnel data: including
the job titles, names and ID
numbers (or passport numbers in
the case of foreign nationals)of

~57~

No. Revision Befor Revision Explanatory Notes all persons involved in the all persons involved in the planning or implementation of a planning or implementation of a merger, division, acquisition or merger, division, acquisition or share exchange prior to the share exchange prior to the disclosure of the transaction disclosure of the transaction information. information. (2) Dates of material events: (2) Dates of material events: including the dates of signing including the dates of signing any letter of intent or any letter of intent or memorandum of understanding, memorandum of understanding, hiring a financial or legal hiring a financial or legal advisor, executing a contract and advisor, executing a contract and convening a board meeting. convening a board meeting. (3) Important documents and (3) Important documents and minutes: including the merger, minutes: including the merger, division, acquisition or share division, acquisition or share exchange plan, the letter of exchange plan, the letter of intent or memorandum of intent or memorandum of understanding, material contracts understanding, material contracts and minutes of board meetings. and minutes of board meetings. The Company shall, within 2 days The Company shall, within 2 days from the date a resolution is passed from the date a resolution is passed in the board meeting, report the in the board meeting, report the information set out in subparagraphs information set out in 1 and 2 of the preceding paragraph subparagraphs 1 and 2 of the to the FSC for recordation in the preceding paragraph to the FSC for prescribed format and via the recordation in the prescribed Internet-based information system. format and via the Internet-based information system. 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 shall sign an agreement with such company and carried out in accordance with the provisions of the preceding two sub-Articles. Article 27 Article 27 21 Adjustment on Where any of the companies In the Company’s participation in a wording. participating in a merger, demerger, merger, division, acquisition or acquisition, or transfer of shares is share exchange, if any of the not a public company, the Company participating companies is not a shall sign an agreement with the public company, the public non-public company and carries out company(s) shall sign an in accordance with the provisions of agreement with the non-public Articles 22, 23 and 26. company whereby the latter is

~58~

No.
Revision		 Befor Revision ExplanatoryNotes
required to abide by the provisions
of Articles22,23 and26.
22 Article 28
If
any
of
the
following
circumstances
occurs
in
the
Company’s acquisition or disposal
of assets, the relevant information
shall be declared on the FSC’s
designated website based on its
nature within two days from the
date of occurrence of the fact:
(1) Acquisition or disposal of real
estate or right-of-use assets
thereof from or to a related party,
or acquisition or disposal of
assets other than real estate or
right-of-use assets thereof from
or to a related party where the
transaction amount reaches NTD
300 million or more; provided
that this shall not apply to
trading of domestic government
bonds or bonds under repurchase
and resale agreements, or
subscription or redemption of
money market funds issued by
domestic securities investment
trust enterprises.
(2) The Company’s merger,
division, acquisition or share
exchange
(3) The loss of derivative
transactions reaches the total or
individual contract loss limit
specified in Article 18.1(5)(B).
(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
reaches NTD 500 million or
more. And if the Company has
its paid-in capital reaches NTD
10 billion or more, the
transaction amount reaches NTD
1 billion or more
(5) Wherelandis acquired underan		 Article 28
If
any
of
the
following
circumstances
occurs
in
the
Company’s acquisition or disposal
of assets, the relevant information
shall be declared on the FSC’s
designated website based on its
nature within two days from the
date of occurrence of the fact:
(1) The Company’s acquisition or
disposal of property with related
parties, or acquisition or disposal
of non-property assets with
related parties and the
transaction amount reaches
NT$300 million, with the
exception of the purchase and
sale of government bonds, bonds
with re-purchase or re-sale
agreements and subscription or
repurchase of money market
funds issue by domestic
securities investment trust
enterprises,
(2) The Company’s merger,
division, acquisition or share
exchange
(3) The loss of derivative
transactions reaches the total or
individual contract loss limit
specified in Article 18.1(5)(B).
(4) The type of assets acquired or
disposed of is equipment for
business use, the transaction
counterparty is an unrelated
party, and the amount of the
transaction is NT$500 million or
more. If the amount of the
Company's paid-in capital is
more than NT$10 billion, the
amount of the transaction is
NT$1 billion or more.
(5) The propertyis acquired through		 Amended based on
Letter No.
Jin-Guan-Zheng-Fa-Zi
10703410725 dated
26 November 2018 by
the Financial
Supervisory
Commission.

~59~

No.
Revision		 Befor Revision ExplanatoryNotes
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 NTD 500
million or more.
(6) Transactions of assets other than
those in the five items above, or
investment in mainland China,
and the transaction amount
reaches NT$300 million, with
the exception of the following:
1.Trading
of
domestic
government bonds.
2.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
stipulated
in
the
preceding
sub-Article shall be calculated as
follows, provided that excluding
the part which has been regulated
and announced in these Guidelines:
(1) The amount of each transaction.
(2) The total amount of all
transactions with the same
counterparty in one year for
assets of the same nature.
(3) The cumulative transaction
amount of acquisitions and
disposals (cumulative
acquisitions and disposals,
respectively) of real estate or
right-of-use assets thereof
within the same development
projectwithin thepreceding		 commissioned- construction on
the Company’s own land,
commissioned- construction on
leased land, joint construction
with building allotment or joint
construction with respective sale
of the building, with the
expected amount of the
Company’s investment in the
transaction more than NT$500
million
(6) Transactions of assets other than
those in the five items above, or
investment in mainland China,
and the transaction amount
reaches NT$300 million, with
the exception of the following:
1.Trading of government bonds.
2.Trading
of
bonds
with
repurchase or resale agreements
or the purchase or repurchase of
money market funds issue by
domestic securities investment
trust enterprises,
The amounts of the aforesaid
transactions
are
calculated
as
follows, but the amounts already
announced
according
to
the
requirements shall not be included.
(1) The amount of each transaction.
(2) The total amount of all
transactions with the same
counterparty in one year for
assets of the same nature.
(3) The total amount of transactions
of property in the same
development plan (with
acquisition and disposal accrued
separately) in one year.

~60~

No. Revision Befor Revision ExplanatoryNotes
year.
(4) The total amount of transactions
of the same securities (with
acquisition and disposal accrued
separately) in one year.
The Company shall enter into the
FSC’s designated website by the
10th of each month the information
about the derivative transactions of
the Company and its non-public
domestic subsidiaries as of the end
of
the
previous
month
in
accordance
with
the
FSC’s
prescribed format.
If there is any error or omission in
the Company’s announcement in
accordance with the regulations,
then
it
shall
make
another
announcement
of
all
such
information again within two days
from the day of awareness of the
fact.
The Company shall obtain and keep
at its premises the relevant
contracts, the meeting minutes, the
reference books, the appraisal
reports, and the opinions of the
accountant, the lawyer and the
securities underwriter. Unless
otherwise required by law, such
documents shall be retained for at
least fiveyears.		 (4) The total amount of transactions
of the same securities (with
acquisition and disposal accrued
separately) in one year.
The Company shall enter into the
FSC’s designated website by the
10th of each month the information
about the derivative transactions of
the Company and its non-public
domestic subsidiaries as of the end
of
the
previous
month
in
accordance
with
the
FSC’s
prescribed format.
If there is any error or omission in
the Company’s announcement in
accordance with the regulations,
then
it
shall
make
another
announcement
of
all
such
information again within two days
from the day of awareness of the
fact.
The Company shall obtain and keep
at
its
premises
the
relevant
contracts, the meeting minutes, the
reference
books,
the
appraisal
reports, and the opinions of the
accountant, the lawyer and the
securities
underwriter.
Unless
otherwise required by law, such
documents shall be retained for at
least fiveyears.
23 Article 30
Subsidiaries that are domestic public
companies shall establish their own
Guidelines for Handling the
Acquisition and Disposal of Assets
based on the Regulations;
subsidiaries that are not public
companies in the Republic of China,
shall established their own
Guidelines for Handling the
Acquisition and Disposal of Assets
based on theseGuidelines.		 Article 30
Subsidiaries that are domestic public
companies shall establish their own
Guidelines for Handling the
Acquisition and Disposal of Assets
based on the Regulations;
subsidiaries that are not public
companies in the Republic of China,
shall established their own
Guidelines for Handling the
Acquisition and Disposal of Assets
based on theseGuidelines.		 Identical with para. 1.
24 Article 34
Matters not provided in these
Guidelines shall be governed by the
relevant laws and regulations.		 Article 34
Matters not provided in these
Guidelines shall be governed by the
relevant laws and regulations.		 Identical with para. 1.

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No.
Revision		 Befor Revision ExplanatoryNotes
25 Article 35
Of all guidelines of the Company, in
the event of any discrepancy of
provisions concerning acquisition
and disposal of assets with these
Guidelines, these Guidelines shall
prevail.		 Article 35
Of all guidelines of the Company, in
the event of any discrepancy of
provisions concerning acquisition
and disposal of assets with these
Guidelines, these Guidelines shall
prevail.		 Identical with para. 1.
26 Article 36
These Guidelines and any
amendments hereto shall come into
force after that approval by
the audit committee, submission to
the board of directors for a
resolution and approval by the
shareholders meeting		 Article 36
These Guidelines and any
amendments hereto shall come into
force after that approval by
the audit committee, submission to
the board of directors for a
resolution and approval by the
shareholders meeting		 Identical with para. 1.

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Annex 7

Candidates for Directors(independent directors) of the 17th term of the Board of Directors.

Category Name Share Held Education and Experience
Director Ministry of Economic
Affairs Representative:
CHENG, WEN-LON		 105,070,366 .Ph.D.
of
Civil
Engineering
University of Washington, USA
.Chairman of CSBC, Taiwan
.Deputy
Director,
Public
Construction
Committee,
Executive Yuan
.Deputy Mayor, Kaohsiung City
Government
Director Ministry of Economic
Affairs Representative:
TSENG,
KUO-CHENG		 105,070,366 .Master
of
Naval
Architect
Engineering,
National
Taiwan
University
.President of CSBC, Taiwan
.Vice President of CSBC,Taiwan
Director Ministry of Economic
Affairs Representative:
HUANG, JIH-CHIN		 105,070,366 .Graduated
from
Sheet
Metal
Department,
National
Tainan
Industrial High School
.Chairman of Employees’ Welfare
Committee, CSBC
.Chairman of Labor Union, CSBC
.Technician
of
QA
Department,
CSBC
Director Ministry of Economic
Affairs Representative:
LAN, SYU-CING		 105,070,366 .Graduated from Department of
Navigation,
National
Keelung
Maritime Vocational High School
.Chairman, Keelung Yard Labor
Union, CSBC
.Technician of KeelungYard,CSBC
Director Ministry of National
Development Fund,
Executive Yuan:
WU, WEN-KUEI		 36,032,305 .Master,
Department
of
Earth
Science, NCKU
.Counselor
Adjunct
Director
of
Office the Zhongxing New Village
Revitalization Project
.Deputy Director and Director of
Central Region Branch, National
Property Administration Director,
Ministryof Finance
Director Ministry of Yao-Hwa
Co.,Ltd Management		 36,032,305 .Master,
Institute
of
Chemical
Engineering,
National
Central

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Commission:
CHEN,
YUNG-TSUNG		 University
.Director of section Department 4,
State-owned
Enterprise
Commission,Ministry of Economic
Affairs
Director Ministry of National
Defense Industrial
Developmengt
Fundation:
LIU, CHIH-PIN		 25,000,000 .Graduated from National Defense
University
.Deputy Chief of Staff Eecutive
Officer
.Deputy Commander of Naval
Command
.Commander, Command of Naval
Fleet
Director CPC (Corporation,
Taiwan
Representative)		 23,777,487 -
Director China Steel
Representative:
HWANG,
CHIEN-CHIH		 7,751,346 .Bachelor of Economics, Tunghai
University
.Vice President of China Steel
Corporation
.Assistant Vice President of China
Steel Corporation
Director Kaohsiung City
Representative of
Industrial Labor Union
of CSBC:
HOU, DE-LONG
20,688,200		 .Graduated from Department of
Marine Engine Department of
Electric Engineering, Kaohsiung
Municipal Kaohsiung Industrial
High School
.Director, 16thBoard of Directors,
CSBC
.Chairman, Labor Union, CSBC.
.Chairman,
Employees’
Welfare
Committee, CSBC.
.Chairman,
Kaohsiung
City
Confederation of Trade Unions
Director Kaohsiung City
Representative of
Industrial Labor Union
of CSBC:
HSIEH, KUO-JUNG
20,688,200		 .Graduated from Department of
Marine Engineering, Kaohsiung
Institute of Marine Technology.
.Director, 16thBoard of Directors,
CSBC
.Chairman,
Employees’
Welfare
Committee, CSBC.
.Standing
Supervisor
of
Labor
Union,CSBC

~64~

Director Yue-Li Investment
Corporation		 20,688,200 -
Independent
Director		 LIEU, DER-MING 0 .Ph.D. Institute of Economics, Ohio
State University, USA
.Professor of Financial Management
Department, National Sun Yat-sen
University
.Consultant of Securities and Futures
Management Committee Ministry
of Finance
Independent
Director		 LIN, HUI-JENG 0 .Ph.D.
of
Naval
Architect
Engineering,
National
Taiwan
University
.Chairman of Chun Yu Works & Co.,
Ltd.
.Professor,
National
Taiwan
University
.President,
National
Penghu
University
of
Science
and
Technology
Independent
Director		 CHEN, CHIH-YANG 0 .Master of Law, National Chung
Hsing University
.Director of the Chen Chih Yang Law
Firm

~65~

Appendix

Appendix 1

Rules of Procedure for Shareholders' Meeting CSBC Corporation, Taiwan

Passed in the 1[st] extraordinary shareholders’ meeting of 2002 on December 9, 2002 Passed in the 1[st] extraordinary shareholders’ meeting of 2008 on March 24, 2008 Passed in the general shareholders’ meeting of 2008 on June 20, 2008 Passed in the general shareholders’ meeting of 2012 on June 13, 2012 Passed in the general shareholders’ meeting of 2014 on June 26, 2014 Passed in the general shareholders’ meeting of 2015 on June 29, 2015

  1. Except as otherwise provided in the laws and regulations, the procedure of the shareholders' meetings of CSBC Corporation, Taiwan (hereinafter referred to as the Company) shall be handled in accordance with these Rules.

  2. The shareholder referred to in these Rules means the shareholder him/herself or the representative appointed by the shareholder or the shareholder’s proxy for attending the meeting.

  3. Except as otherwise provided in the laws and regulations, the shareholders' meeting of the Company shall be convened by the board of directors.

  4. The Company shall, 30 days before a general shareholders’ meeting or 15 days before an extraordinary shareholders’ meeting, produce the shareholders’ meeting notice, the power of attorney form, and the information about items for recognition and discussion and election or dismissal of directors into an electronic file for upload on the MOPS. In addition, the Company shall, 21 days before a general shareholders’ meeting or 15 days before an extraordinary shareholders’ meeting, produce the rules of procedures for the shareholders’ meeting and supplementary materials into an electronic file for upload on the MOPS. The Company shall, 15 days before a shareholders’ meeting, prepare the shareholders’ meeting agenda handbook and supplementary materials and make them available for the shareholders to obtain and review at any time. In addition, the handbook shall be displayed at the Company and its stock registrar and

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transfer agent, and distributed on-site at the meeting.

The meeting notice and announcement shall contain the reasons for convening the meeting. The notice delivery may be done electronically with the consent of the counterparty.

The election or dismissal of directors, or amendments to the Articles of Association, or dissolution, merger, or division of the Company, or matters in the provisions of Article 185 of the Company Law, Articles 26.1 or 43.6 of the Securities Exchange Act, or Articles 56.1 or 60.2 of the Regulations Governing the Offering and Issuance of Securities by Securities Issuers shall be listed in the reasons for convening the meeting and shall not be brought up as extraordinary motions.

Shareholders who hold more than one percent of the total number of issued shares may submit in writing to the Company a motion proposal for the general shareholders’ meeting, but the number of proposals is limited to one. Proposals more than one shall not be included as motions. If the motion proposed by a shareholder falls into one of the circumstances of the Paragraph 4 of Article 172 of the Company Law, the board of directors shall not include it as a motion.

The Company shall, before the book-close date of the general shareholders’ meeting, notify the shareholders of the acceptance of proposals from the shareholders, the place for submitting such proposals and the period for acceptance of proposals. The acceptance period shall not be less than 10 days.

The shareholder’s proposal shall be no more than 300 words. Proposals more than 300 words will not be included as motions. The shareholder making the motion proposal shall be present at or appoint a proxy to attend the shareholders' meeting and participate in the discussion of the motion.

The Company shall notify the shareholder making the motion proposal of the results of the processing before the notice of convening the shareholders' meeting, and include in the meeting notice the motions meeting the criteria of the Article. For a shareholder’s proposal not included in the motions, the board of directors shall state the reasons in the

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shareholders' meeting.

  1. The shareholders shall, at each shareholder's meeting, issue a power of attorney in the form printed by the Company, specify the scope of authorization, and appoint a proxy to attend the shareholders' meeting.

Each shareholder is limited to issuing one power of attorney and appointing one proxy only. The power of attorney shall be delivered to the Company 5 days before the shareholders’ meeting. If the power of attorney is duplicated, the first one that is delivered shall prevail. This requirement does not apply to a statement revoking the former power of attorney.

Upon the delivery of the power of attorney to the Company, the shareholder who wishes to attend the shareholders' meeting in person or wishes to exercise the voting right in writing or electronically shall notify the Company in writing to the cancel the proxy appointment 2 days before the shareholders' meeting, otherwise the voting right exercised by the appointed proxy who attends the meeting shall prevail.

  1. The time and place of the shareholders' meeting shall be determined by the board of directors, and the meeting shall be held at the place where the head office of the Company is located or a place convenient for the shareholders' attendance and suitable for holding the shareholders' meeting. The meeting start time shall not be earlier than 9:00 am or later than 3:00 pm.

  2. The Company shall prepare a rules-of-procedure handbook for the shareholders' meeting and announce the rules-of-procedure handbook and other relevant information before the shareholders' meeting.

The measures concerning the time, manner and main matters in the rules of procedure handbook in the aforesaid announcement and other matters to be followed shall be determined by the securities regulatory authority.

The attendance at the shareholders' meeting shall be determined by the submission of the attendance card to the Company by either the shareholder or the proxy appointed by the shareholder.

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The Company shall deliver the rules-of-procedure handbook, annual report, attendance certificate, speech slip, vote and other meeting information to the shareholders present at the shareholders' meeting. If there is an election of directors, the election ballot shall also be delivered

The shareholder shall attend the shareholders' meeting by attendance certificate, attendance card or other attendance documents. The Company shall not arbitrarily add any other supporting documents to prove the identity of the shareholders. The solicitor for the power of attorney shall carry identity documents for verification.

If the government or a legal person is a shareholder, the representative for the shareholders' meeting is not limited to one person only. If a legal person is appointed to attend the shareholders' meeting, only one representative shall be sent.

  1. If a shareholders meeting is convened by the board of directors, the meeting shall be chaired by the chairperson of the board. If the chairperson of the board is on leave or for any reason and unable to exercise the powers of a chairperson, the chairperson shall appoint one of the directors to act as the chairperson for the meeting. If the chairperson does not make such an appointment, then the chairperson for the meeting shall be elected among the directors.

If the shareholders' meeting is convened by a party other than the board of directors, the chairperson of the meeting shall be the convening party. If there are two or more convening parties, one of them shall be elected as the chairperson.

For a shareholders' meeting convened by the board of directors, the chairperson shall personally presided over the meeting, and shall have more than half of the directors of the board and at least one member from each functional committee attend the meeting. The attendance shall be recorded in the meeting minutes.

The Company may appoint its lawyer, accountant or related persons to attend the shareholders' meeting in a non-voting capacity.

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  1. The Company shall audio-record or video-record the whole process of the shareholders' meeting, and shall retain the recording together with the attending shareholders' sign-in register and the powers of attorney for at least one year. For any lawsuit filed by a shareholder in accordance with Article 189 of the Company Law, such documents shall be kept until the end of the proceedings.

  2. The attendance of the shareholders' meeting shall be on a share basis. The number of shares represented by the attending shareholders shall be based on the sign-in register or the attendance cards submitted, plus the number of shares with the voting rights exercised in writing or electronically.

The chairperson shall call the meeting to order at the scheduled meeting start time. If the attending shareholders do not represent a majority of the total number of shares issued, the chairperson may announce a postponement, provided that no more than two such postponements for a combined total length of no more than 1 hour may be made. If after two postponements the attending shareholders still represent less than one third of the total number of issued shares, the chairperson shall announced the meeting aborted.

If the quorum is not met after two postponements as referred to in the preceding paragraph, but the attending shareholders represent one third or more of the total number of issued shares, then pursuant to Paragraph 1 of Article 175 of the Company Law, a tentative resolution may be adopted with the consent of the attending shareholders with the majority voting rights. The shareholders shall be informed of the tentative resolution, and another shareholders’ meeting shall be convened within a month.

For the shareholders' meeting reconvened, shareholders representing one third or more of the total number of issued shares still have to attend, and the consent of the attending shareholders with the majority voting rights shall be obtained. A formal resolution shall be made.

  1. If a shareholders’ meeting is convened by the board of directors, the meeting agenda shall be set by the board of directors. The meeting shall

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proceed in the order as set in the agenda, which may not be changed without a resolution of the shareholders’ meeting.

The provisions of the preceding paragraph apply mutatis mutandis to a shareholders’ meeting convened by a party with the power to convene that is not the board of directors.

The chairperson may not declare the meeting adjourned prior to completion of deliberation on the meeting agenda of the preceding two paragraphs (including extraordinary motions), except by a resolution of the shareholders’ meeting.

After the meeting is adjourned, the shareholders shall not elect another chairperson to continue the meeting at the original site or another place. However, if the chairperson declares the meeting adjourned in violation of the rules of procedure, with the consent of the attending shareholders with the majority voting rights, a new chairperson may be elected to continue the meeting.

The Chairman shall allow the opportunity for a full explanation and discussion of the amendments or extraordinary motions proposed by the shareholders. If a motion has been duly discussed and the chairperson thinks that the point of voting has been reached, the chairperson may announce a stop to the discussion. If necessary, the chairperson may suspend the discussion. The chairperson shall start the voting session for the motion with its discussion terminated or suspended.

  1. Before speaking, an attending shareholder must write down on a speaker's slip the subject of the speech, his/her shareholder account number (or attendance certificate number), and account name. The order in which the shareholders speak shall be set by the chairperson.

An attending shareholder who has submitted a speaker's slip but does not actually speak shall be deemed to have not spoken. When the content of the speech does not correspond to the subject given on the speaker's slip, the spoken content shall prevail.

Except with the consent of the chairperson, a shareholder may not speak

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for more than twice on the same motion, and a single speech may not exceed 5 minutes. If a shareholder's speech violates the rules or exceeds the scope of the agenda item, the chairperson may terminate the speech.

At the time a shareholder is speaking, the other shareholders shall not speak and interfere except with the consent of the chairperson and the speaking shareholder, otherwise the chairperson shall stop this interfering behavior.

Where a legal-person shareholder appoints two or more representatives to attend a shareholders' meeting, only one of the representatives may speak on the same motion.

After an attending shareholder has spoken, the chairperson may respond in person or appoint a relevant person to respond.

  1. The vote calculation of the shareholders' meeting shall be on a share basis. If the government or a legal person is a shareholder, its representative shall exercise the voting rights on behalf of the shareholder.

For the resolution of the shareholders' meeting, the shareholdings of shareholders with no voting rights shall not be included in the total number of shares issued.

Shareholders are not allowed to participate in the voting on matters with their own interests involved in that are potentially harmful to the interests of the Company, and shall not act on behalf of other shareholders to exercise their voting rights.

The number of shares with no voting rights in the preceding paragraph shall not be included in the number of voting rights of the shareholders who have attended the meeting.

A shareholder may entrust a proxy to attend the shareholders' meeting. Except trust businesses or stock agents approved by the competent authority, if a proxy is entrusted by two or more shareholders, the voting rights of the proxy shall not exceed 3% of the total number of voting rights of the issued shares, otherwise the voting rights exceeding the

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percentage shall not be counted.

  1. Shareholders have one voting right for each share, except restricted shares or shares with no voting rights as listed in Item 2 of Paragraph 179 of the Company Law.

In the Company’s shareholders' meeting, an electronic method shall be adopted for the exercise of voting rights, which may also be exercised in writing. The notice of the shareholders' meeting shall stipulate whether the voting rights are exercised in writing or electronically. Shareholders who exercise their voting rights either in writing or electronically are deemed to be present at the shareholders' meeting in person. However, they shall be deemed to abstain from extraordinary motions and amendments to the original motions of the shareholders' meeting.

For a shareholder who exercises the voting rights in writing or electronically in the preceding paragraph, the shareholder’s decision shall be delivered to the Company 2 days before the date of the shareholders' meeting. If the decision is duplicated, the first one that is delivered shall prevail. This requirement does not apply to a statement revoking the former decision.

After a shareholder exercises the voting rights in writing or electronically, if the shareholder wishes to attend the meeting in person, he/she shall, in the same way as the exercise of the voting rights, cancel the decision on the exercise of the voting rights in the preceding paragraph 2 days before the date of the shareholders' meeting. If the cancellation is not made before the deadline, the voting rights exercised in writing or electronically shall prevail. If a shareholder exercises the voting rights in writing or electronically and entrusts a proxy by a power of attorney to attend the shareholders' meeting, the voting rights exercised by the entrusted proxy shall prevail.

Unless otherwise provided in the Company Law and the Articles of Association of the Company, a motion is subject to the consent of the majority of the shareholders' voting rights. When voting, the shareholders shall vote on a case-by-case basis after the chairperson or his/her

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designated person announces the total number of voting rights of the attending shareholders case-by-case basis, and the results of the shareholders' consent, objection and abstention shall be entered into the MOPS on the day after the shareholders' meeting.

At the time of the vote, if there is no objection after the chairperson’s inquiry, the motion shall be regarded as passed, and it shall bear the same effectiveness as that of voting. If there is any objection, the voting method shall be adopted in accordance with the provisions of the preceding paragraph.

In the case of an amendment or an alternative to the same motion, the chairperson shall combine it with the original motion and determine the order of voting. If one of the motions is passed, the other motion shall be deemed to be vetoed and no further voting shall be required.

The scrutineer of the motion and vote counting personnel shall be designated by the chairperson, but the scrutineer shall be a shareholder.

The results of the vote shall be announced on the spot and recorded accordingly.

  1. If there is an election of directors in the shareholders’ meeting, the election shall be handled in accordance with the election related regulations of the Company, and the results shall be announced on the spot.

The electoral votes for the preceding election shall be sealed and signed by the scrutineer and kept for at least one year. For any lawsuit filed by a shareholder in accordance with Article 189 of the Company Law, such documents shall be kept until the end of the proceedings.

  1. The resolutions of a shareholders' meeting shall be recorded in the shareholders' meeting minutes to be signed or sealed by the chairperson, and be distributed to the shareholders within 20 days after the meeting. The preparation and distribution of the meeting minutes may be carried out electronically.

The distribution of the aforesaid meeting minutes may be carried out by way of a public announcement.

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The meeting minutes shall record in detail the year, month, day and venue of the meeting, the name of the chairperson, the method of resolution, the summary of the proceedings and the results. The minutes shall be kept permanently during the existence of the Company.

The resolution of the preceding paragraph is based on the chairperson’s inquiry with the shareholders. If the shareholders have no objection to the motion, it shall be recorded that "the motion is passed with no objection after the chairperson’s inquiry with all the attending shareholders". However, if the shareholders object to the motion, it shall be recorded that the voting method was adopted as well as the number of voting rights for the motion and the ratio of such voting rights.

  1. The number of shares solicited by the solicitors and the number of shares represented by the proxies shall be clearly disclosed in the prescribed statistical form and posted in the venue of the shareholders' meeting on the day of the shareholders' meeting.

In case a resolution of the shareholders' meeting belongs to major information specified in the decree and by the competent authority, the Company shall transmit the contents to the MOPS within the prescribed time.

  1. The chairperson may direct the proctors (or security personnel) to help maintain the order at the meeting. When the proctors (or security personnel) help maintain the order at the meeting, they shall wear an identification card.

For shareholders who violate the rules of procedure, do not follow the chairperson's correction and disturb the conduct of the meeting, the chairperson may direct the proctors or security personnel to ask them to leave the venue.

  1. During the course of a meeting, the chairperson may announce a break based on time considerations. In case of a force majeure event, the chairperson may rule the meeting temporarily suspended, and announce a meeting resumption time depending on the situation.

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If the meeting venue can no longer be used before the end of the meeting agenda (including extraordinary motions), the shareholders may find another venue to continue the meeting.

A meeting resolution may be made to postpone or continue the shareholders’ meeting within 5 days in accordance with the provisions of Article 182 of the Company Law.

  1. Matters not stipulated in these Rules shall be handled in accordance with the pro-visions of the Company Law, the Articles of Association of the Company and relevant laws and regulations.

  2. The Rules are implemented after the adoption of the resolution in the shareholders’ meeting, and the same procedure applies to the amendments.

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Appendix 2

CSBC Corporation, Taiwan Articles of Incorporation

Chapter I General Provisions

Article 1 The Company is organized in accordance with the provisions of the Company Law of the Republic of China, ” ” and is known as CSBC Corporation, Taiwan .

Article 2 The businesses of the Company are as follows:

  • (1) CA01030 Steel casting business

  • (2) CA02010 Metal structure and construction component manufacturing business

  • (3) CB01010 Machinery and equipment manufacturing business

  • (4) CB01030 Pollution control equipment manufacturing business

  • (5) CD01010 Ship and parts manufacturing business

  • (6) CD01030 Automobile and parts manufacturing business

  • (7) E599010 Piping engineering business

  • (8) E601010 Electrical equipment business

  • (9) E603120 Sandblasting engineering business

  • (10) E604010 Mechanical installation business

  • (11) E901010 Painting business

  • (12) EZ15010 Insulation installation works

  • (13) EZ99990 Other engineering business

  • (14) F401021 Telecommunications-control RF equipment import business

  • (15) I599990 Other design business

  • (16) J101040 Waste disposal business

  • (17) CD01070 Business port ship repair business

  • (18) G301011 Shipping business

  • (19) G302010 Boat operation business

  • (20) G402011 Sea shipping contracting business

  • (21) G403010 Ship rental industry

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  • (22) G406040 Business port ship barging business

  • (23) G406051 Business port cargo tally business

  • (24) G406061 Business port cargo ship loading and unloading contracting business

  • (25) G407010 Salvage business

  • (26) G408010 Maritime rescue business

  • (27) ZZ99999 Businesses not prohibited or restricted by law, in addition to the permitted businesses.

  • Article 3 The office of the Company is located in the Kaohsiung City. If necessary, branch offices of the Company may be established with the approval of the board of directors.

  • Article 4 The Company may undertake external guarantees due to business needs, and the operations shall be handled pursuant to the endorsement and guarantee related measures of the Company.

  • Article 5 The announcement method of the Company shall be in compliance with the provisions of Article 28 of the Company Law.

Chapter II Shares

  • Article 6 The total capital of the Company is set at NT$11,138,997,170 which is divided into 1,113,899,717 shares at NT$10 per share which are issued in different batches.

  • Article 7 The shares of the Company shall be numbered and signed or stamped by more than three directors of the Company. The shares shall stipulate the matters prescribed in Article 162 of the Company Law and be issued after the certification of the competent authority or its authorized certification agent.

  • If the shares issued by the Company are not in printed form, the central depository shall be contacted for registration.

  • Article 8 The Company's shares are all in registered form, unless the Company issues scriptless shares. The share shall bear the real name of the shareholder. If the shareholder is the

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government or a legal person, the address and the real name of the shareholder or its representative shall be recorded in detail in the Company’s shareholders’ register. If the legal person is owned by two or more persons, one of them shall be appointed as the representative.

  • Article 9 For title transfer of shares, lost shares or destroyed shares, the matter shall be handled in accordance with the Company Law and the “Criteria Governing Handling of Stock Affairs by Public Companies” promulgated by the competent authority.

  • Article 10 When a new share is applied for due to share division, defacement or misappropriation, the Company may charge a processing fee.

  • Article 11 Shareholders shall submit the specimens of their signatures or seals to the Company for registration for the purpose of collecting dividends or exercising their rights.

  • Article 12 Where a shareholder’s seal registered with the Company is lost, damaged or replaced, the matter as well as any other matters relating to the stock affairs of the Company shall be handled in accordance with the “Criteria Governing Handling of Stock Affairs by Public Companies” promulgated by the competent authority.

  • Article 13 Share title transfer shall be suspended 60 days before the date of the general shareholders’ meeting, or 30 days before the extraordinary shareholders’ meeting, or 5 days before the date on which the Company decides to distribute dividends, bonuses or other interests.

Chapter III Shareholders’ Meeting

  • Article 14 The shareholders' meeting includes the general shareholders' meeting and the extraordinary shareholders’ meeting:

  • (1) The general shareholders' meeting is convened at least once a year and is held within 6 months after the end of each fiscal year.

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  • (2) The extraordinary shareholders' meeting is convened in accordance with the law when necessary.

  • Article 15 The convening procedures of the shareholders' meeting shall be handled in accordance with the provisions of the Company Law, the Securities Exchange Law and the relevant laws and regulations.

  • Article 16 Unless otherwise provided in the Company Law, the chairman of the board shall be the chairman of the shareholders' meeting. If the chairman of the board is on leave or for any reason unable to exercise his or her duties, the chairman of the board shall appoint a director as the agent. If the chairman of the board does not make an appointment, the directors shall elect one of them to be the agent.

  • Article 17 For the passing of a resolution in a shareholders' meeting, unless otherwise provided in the Company Law, the shareholders' meeting shall be attended by more than half of the shareholders, and the resolution shall be approved by more than half of the attending shareholders before its implementation.

  • Article 18 Each share of the shareholder has one voting right, but the shareholder with any of the circumstances in Paragraph 2 of Article 179 of the Company Law shall have no voting rights.

  • Article 19 When a shareholder is unable to attend the shareholders' meeting for any reason, he/she shall handle the matter in accordance with the provisions of the Rules Governing the Use of Proxies for Attendance at Shareholder Meetings promulgated by the competent authority.

  • Article 20 The shareholders' meeting shall be handled in accordance with the rules of procedure of the shareholders' meeting of the Company.

  • The resolutions of the shareholders' meeting shall be recorded in the meeting minutes which shall be signed or sealed by the chairman and distributed to the shareholders

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within 20 days after the meeting. The meeting minutes together with the shareholders’ sign-in register and the power of attorneys shall be kept at the Company.

The aforesaid meeting minutes may be produced electronically.

The aforesaid meeting minutes may be distributed by way of a public announcement.

Chapter IV Directors and Audit Committee

Article 21 The Company has 10 to 15 seats of directors, and the candidates shall be nominated by the shareholders from the list of candidates. The term of directors shall not exceed three years, but directors may be re-elected.

According to the provisions of Article 14.2 of the Securities Exchange Law, at least three among the aforesaid directors of the Company shall be independent directors. The professional qualifications, shareholdings, part-time job restrictions, determination of independence and method of nomination of the independent directors and other matters to be followed shall be handled in accordance with the relevant securities management laws and regulations.

Independent directors and non-independent directors shall be nominated separately. The election shall be held jointly, but the seats shall be calculated separately.

The minimum shareholding ratio of all the directors of the Company shall be in compliance with the relevant securities management laws and regulations.

In order to diversify the risk of directors' liabilities, the Company shall, within their term of office, purchase liability insurance for them in respect of their business scopes for the liabilities they shall bear in accordance with the law.

Article 22 The remuneration of the directors of the Company is entrusted to the board of directors to determine, with the consideration of the value of their participation in the Company's operation,

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their contribution and the remuneration of the directors of peer companies.

Other benefits may be granted to the chairman of the board in accordance with the relevant provisions concerning the remuneration of practitioners in the business.

Article 23 For a shortfall of one-third of the directors’ seats, an extraordinary shareholders’ meeting shall be held in accordance with the provisions of the Company Law for an election of the directors.

In the event of a vacancy of a director from the government or a legal person, the government or the legal person shall appoint another representative to make up the original term.

Article 24

The authority of the board of directors is as follows:

  1. Approving the Company's business plan.

  2. Approving the Company's financial statements.

  3. Establishing or amending the internal control system in accordance with the provisions of Article 14.1 of the Securities Exchange Law.

  4. Establishing or amending the procedures for major financial activities such as the acquisition or disposal of assets, engagement in derivative transactions, loans to others and endorsements or guarantees according to the provisions of Article 36.1 of the Securities Exchange Law.

  5. Fund raising, issuing or private fund raising of securities with the nature of equity.

  6. Hiring and dismissal of financial, accounting or internal audit managers.

  7. Donations to related parties or significant donations to non-related parties. Public welfare donations due to major natural disasters may be recognized in the next board meeting.

  8. Issues which shall be decided in the shareholders' meeting or proposed in the board meeting, or major issues

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specified by the competent authority as stipulated in Article 14.3 of the Securities Exchange Law and other laws or regulations.

Article 25 The Company has set up the Audit Committee in accordance with the provisions of Article 14.4 of the Securities Exchange Law. The Audit Committee’s responsibilities, organization rules and other matters to be followed shall be handled in accordance with the provisions of the Company Law, the Securities Exchange Law, other relevant laws and regulations and the rules and regulations of the Company.

Article 26 For the setup of the board of directors, more than two-thirds of the directors shall be present at the meeting and the consent of the majority of the attending directors shall be obtained. A chairman shall be elected among the directors to perform all the affairs of the Company in accordance with the decrees, articles of association, and the resolutions of the shareholders' meeting and the board meeting. The chairman of the board internally is the chairman of the shareholders' meeting and the board meeting, and externally represents the Company.

If the board meeting is conducted via video, the directors shall be deemed to be present in person via video.

Article 27 Except that the first board meeting of each term of directors shall be convened by the director with votes representing the most voting rights or in accordance with the provisions of the Company Law, the other board meetings shall be convened by the chairman of the board. The notice of the board meeting shall state the date, venue and cause of the meeting, and the directors and supervisors shall be notified in writing or electronically 7 days ago. In case of an emergency, a board meeting may be convened at any time. If the meeting notice is to be sent by electronic means, it is subject to the consent of the counterparties.

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  • Article 28 The chairman is also the chairman of the board. If the chairman of the board can not perform his/her duty for any reason, he/she shall appoint one of the directors to act as the agent. If the chairman does not make the appointment, then the directors shall elect one of them to be the agent.

  • Article 29 For the passing of a resolution in a board meeting, except as otherwise provided in the Company Law, the board meeting shall be attended by more than half of the directors, and the resolution shall be approved by more than half of the attending directors before its implementation.

  • Article 30 The director may, pursuant to Article 205 of the Company Law, issue a power of attorney and list the scope of authorization to appoint another director to attend the board meeting. The appointed director may exercise the voting rights within the scope of authorization, but each director may accept the authorization of one person only. A director living abroad may appoint another director in writing to attend the board meeting on a regular basis.

Chapter V Human Resources

  • Article 31 The Company has one general manager and several managers. The appointment, dismissal and remuneration of the managers shall be handled in accordance with the provisions of Article 29 of the Company Law.

  • Article 32 The general manager shall handle the affairs of the Company under the supervision of the board of directors. The managers shall assist the general manager in the duties of the general manager, and shall have the right to sign on behalf of the Company within the scope of the approved regulations or written authorization of the general manager.

  • Article 33 The general manager may hire other employees required by the Company within the number of employees approved by the board of directors.

Chapter VI Financial Statements

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Article 34 At the end of each accounting year of the Company, the following documents shall be prepared by the board of directors for delivery to the audit committee 30 days before the general shareholders’ meeting for review and then submission to the shareholders' meeting for recognition:

  1. The business report

  2. The financial statements

  3. The motion concerning earnings distribution or loss make-up

Article 35 If the Company has a profit for the year, it shall distribute an employee bonus of not less than 1 percent and not more than 5 percent of the profit, and the payment may be made in share or in cash. The directors' remuneration shall not be more than 1 percent of the profit. However, if the Company still has an accumulated loss, it shall make up for the loss first.

The profit for the current year in the first paragraph refers to the pre-tax profit for the current year before the deduction of the employee bonus and the directors’ remuneration.

For the distribution of the employee bonus and the directors’ remuneration, the board meeting shall be attended by more than two-thirds of the directors, and the resolution shall be approved by more than half of the attending directors. The payment shall be made in one go.

Article 35.1 If there is a surplus after the current year's accounts, the Company shall first pay the business income tax according to law and make up for the accumulated loss in the previous years. If there is a balance, the Company shall appropriate 10% of it as the statutory surplus reserve. However, if the statutory surplus reserve has reached the total amount of paid-in capital, then this requirement does not apply. A special surplus reserve shall then be appropriated according to Article 41 of the Securities Exchange Law. If there is still a balance, the board of directors shall draft a distribution

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proposal for the resolution of the shareholders’ meeting and the distribution afterwards.

In accordance with the Company’s operating environment, growth, future capital needs and long-term financial planning, as well as to meet the shareholders’ cash needs, the Company may appropriate more than 10% of the aforesaid distributable earnings as cash and stock dividend. The proportion of cash dividend shall not be less than 10% of the total dividend.

Chapter VII Supplementary Provisions

Article 36

  • Article 37

The Company’s organization rules and important rules of business dealing, and the division of responsibilities among the board of directors, the chairman of the board and the general manager shall be approved by the board of directors. The details of the duties of the management department shall be approved by the general manager.

  • If the Company revokes its public offering in future, it shall propose the resolution to the shareholders' meeting and shall not change the provisions during the listing period.

  • Article 38 Matters not stipulated in the Articles of Association shall be handled in accordance with the provisions of the Company Law and other relevant laws and regulations.

  • Article 39 The Articles of Association were established on July 27, 1973.

1973.
No. Amendment date Remarks
1 February 16, 1974 Passed in the 1974 extraordinary
shareholders’meeting.
2 November 18, 1975
Passed in the 1975 extraordinary
shareholders’meeting.
3 July 16, 1976
Passed in the 1976 general shareholders’
meeting.
4 January 27, 1977
Passed in the 1977 general shareholders’
meeting.
5 December 20, 1977
Passed in the 1977 extraordinary
shareholders’meeting.
6 December 14, 1978
Passed in the 1978 general shareholders’
meeting.

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7 December 20, 1979 Passed in the 1979 general shareholders’
meeting.
8 December 19, 1980
Passed in the 1980 general shareholders’
meeting.
9 April 9, 1982
Passed in the 1982 general shareholders’
meeting.
10 March 8, 1983
Passed in the 1983 general shareholders’
meeting.
11 December 20, 1983
Passed in the 1983 general shareholders’
meeting.
12 December 18, 1984
Passed in the 1984 general shareholders’
meeting.
13 December 17, 1985
Passed in the 1985 general shareholders’
meeting.
14 December 30, 1986
Passed in the 1986 general shareholders’
meeting.
15 October 27, 1987
Passed in the 1987 general shareholders’
meeting.
16 September 13, 1988
Passed in the 1988 general shareholders’
meeting.
17 September 29, 1989
Passed in the 1989 general shareholders’
meeting.
18 May 29, 1990
Passed in the first 1990 extraordinary
shareholders’meeting.
19 December 10, 1990
Passed in the 1990 general shareholders’
meeting.
20 April 24, 1992
Passed in the 1991 general shareholders’
meeting.
21 November 5, 1992
Passed in the 1992 general shareholders’
meeting.
22 February 11, 1993
Passed in the 1992 extraordinary
shareholders’meeting.
23 October 27, 1995
Passed in the 1995 general shareholders’
meeting.
24 December 27, 1995
Passed in the second 1995 extraordinary
shareholders’meeting.
25 September 20, 1996
Passed in the 1996 general shareholders’
meeting.
26 September 30, 1997
Passed in the 1997 general shareholders’
meeting.
27 March 25, 1998
Passed in the first 1998 extraordinary
shareholders’meeting.
28 June 15, 2000
Passed in the first 2000 extraordinary
shareholders’meeting.
29 June 8, 2001
Passed in the 2001 general shareholders’
meeting.
30 June 14, 2002
Passed in the 2002 general shareholders’
meeting.

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31 December 9, 2002 Passed in the first 2002 extraordinary
shareholders’meeting.
32 December 9, 2002
Passed in the first 2002 extraordinary
shareholders’meeting.
33 June 23, 2003
Passed in the 2003 general shareholders’
meeting.
34 June 23, 2003
Passed in the 2003 general shareholders’
meeting.
35 September 5, 2003
Passed in the first 2003 extraordinary
shareholders’meeting.
36 September 5, 2003
Passed in the first 2003 extraordinary
shareholders’meeting.
37 November 28, 2003
Passed in the second 2003 extraordinary
shareholders’meeting.
38 November 28, 2003
Passed in the second 2003 extraordinary
shareholders’meeting.
39 June 16, 2006
Passed in the 2006 general shareholders’
meeting.
40 March 1, 2007
Passed in the first 2007 extraordinary
shareholders’meeting.
41 December 14, 2007
Passed in the second 2007 extraordinary
shareholders’meeting.
42 March 24, 2008
Passed in the first 2008 extraordinary
shareholders’meeting.
43 February 13, 2009
Passed in the first 2009 extraordinary
shareholders’meeting.
44 June 23, 2009
Passed in the 2009 general shareholders’
meeting.
45 June 13, 2012
Passed in the 2012 general shareholders’
meeting.
46 June 26, 2013
Passed in the 2013 general shareholders’
meeting.
47 June 26, 2014
Passed in the 2014 general shareholders’
meeting.
48 June 23, 2016
Passed in the 2016 general shareholders’
meeting.

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Appendix 3

CSBC Corporation, Taiwan Rules for Election of Directors

Approved by the 1[st] interim shareholders meeting in 2008, 24 March 2008. Approved by the general shareholders meeting in 2014, 26 June 2014. Approved by the general shareholders meeting in 2015, 29 June 2015.

Article 1 Unless otherwise provided in laws and regulations or the Articles of Association of the Company, the Directors of this Company shall be elected in accordance with the Rules.

  • Article 2 The election of the Directors of the Company shall be conducted in accordance with the candidate nomination system set out in Article 192-1 of the Company Act.

In the election of Directors of the Company, the number of votes exercisable in respect of one share shall be the same as the number of Directors to be elected, and the total number of votes can be cast for a single candidate or may be split among multiple candidates.

  • Article 3 The qualifications for the Independent Directors shall comply with Articles 2, 3 and 4 of the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies.

The election of the Independent Directors shall be govered by Articles 5, 6, 7, 8 and 9 of the Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Comapanies, and shall be carried out based on Article 24 of the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies.

  • Article 4 The Board of Directors shall prepare the ballots for the election (“ballots”) in number equal to the number of the Directors to be elected and note the number of votes, the ballots shall be distributed to the shareholders attending the shareholders meeting.

The name of voters can be replaced with the attendance card number printed on the ballot.

  • Article 5 The election of the Independent Directors and Non-independent Directors shall be held together, provided that the numbers of the elected Independent and Non-independent Directors are calculated separately.

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The votes for the Independent and Non-independent Directors are to be calculated separately, pursuant to the seats provided in the Articles of Association of the Company, candidates who acquire more votes shown by the ballots should win the seats of Directors in order, if two or more persons acquire the same number of votes and the number of persons exceeds the seats available, the persons acquiring the same number of votes shall draw lots to decide, the Chair shall draw lots on behalf of the candidate who is not present.

  • Article 6 Before the election starts, the Chair shall appoint several persons from among the shareholders to act as ballot examiners and ballot counters and to perform duty of each.

  • Article 7 The ballot box used for the election of Directors shall be prepared by the Board of Directors and checked in public by the ballot examiners before voting.

  • Article 8 If the candidate is the shareholder of the Company, voters shall fill-in the ‘Candidate’ column with the candidate’s account name and shareholder number or ID number; if the candidate is not the shareholder of the Company, voters shall fill-in the column with the candidate’s name and ID number. If the candidate is a governmental agency or legal entity, the name of the governmental agency or legal entity, or the name of the governmental agency or legal entity with its representative’s name should be filled-in the column; if the representatives are more than one person, the name of each representative shall be filled-in.

  • Article 9 Ballots shall be deemed invalid under the following conditions:

  • (1) Form of Ballots is not in compliance with the Rules;

  • (2) Blank ballots cast into the ballot box;

  • (3) Illegible writing or writing which is altered;

  • (4) If the candidate is the shareholder of the Company, the account name or shareholder number of the candidate filled-in the ballot is inconsistent with the register of shareholders; if the candidate is not the shareholder of the Company, his or her name or ID number filled-in the ballot is found incorrect after verification;

  • (5) Ballots inserted with other written characters in addition to candidate’s account name (name) or shareholder number (ID number) and the number of votes for the candidate;

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  • (6) The candidate’s account name (name) or shareholder’s number (ID number) are not filled-in;

  • (7) Two or more candidates are written on a single ballot;

  • (8) Candidate’s name filled-in the ballot being the same as another candidate’s name and the respective shareholder number (ID number) is not indicated to distinguish them.

  • Article 10 The ballots should be calculated in the meeting immediately after the voting ended, and the result of the election should be announced by the Chair on site.

  • Article 11 The Board of Directors of the Company shall issue notifications to the persons elected as Directors.

  • Article 12 The Rules and any amendments hereto shall become effective after approval by the shareholders meeting.

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Appendix 4

CSBC Corporation, Taiwan

“Procedures for Acquisition or Disposal of Assets”

Established on July 24, 2008, reference Chuan-Tsai No. 0970003187 Amended on June 7, 2010, letter reference Chuan-Tsai No. 099000128 Amended on June 15, 2012, letter reference Chuan-Tsai No. 1010000964 Amended on June 28, 2013, letter reference Chuan-Tsai No. 1020001052 Amended on July 1, 2014, letter reference Chuan-Tsai No. 1030001079 Amended on June 28, 2017, letter reference Chuan-Tsai No. 1067150089 Amended on January 9, 2018, letter reference Chuan-Tsai No. 1067150169 Chapter I General Provisions

  • Article 1 These Key Points are established in accordance with the provisions of Article 6-1 of the Regulations Governing the Acquisition and Disposal of Assets by Public Companies (hereinafter referred to as the Regulations) promulgated by the Financial Supervisory Commission ((hereinafter referred to as the FSC).

  • Article 2 The term "assets" referred to in these Key Points includes the following:

  • Investments in stocks, government bonds, corporate bonds, financial bonds, securities representing the interest in funds, depositary receipts, call (put) warrants, beneficial certificates, asset-backed securities and structured products (with guaranteed principals and interests).

  • Real estate (including land, houses and buildings, investmentoriented real estate and land use rights) and equipment.

  • Memberships.

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

  • Derivative products.

  • Assets acquired or disposed of through a merger, division, acquisition or share exchange in accordance with law.

  • Other major assets.

  • Article 3 The terms in these Key Points are defined as follows:

  • Derivative products: forward contracts, options contracts, futures contracts, leverage contracts and swap contracts, and compound contracts combining the products above whose values are derived from assets, interest rates, foreign exchange rates, indices or other interests. The "forward contracts" do not include insurance contracts, performance contracts, after-sales

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service contracts, long-term leasing contracts or long-term purchase (sales) contracts.

  1. Assets acquired or disposed through a merger, division, acquisition or share exchange in accordance with law: assets acquired or disposed through a merger, division or acquisition conducted under the Business Mergers and Acquisitions Act, Financial Holding Company Act, Financial Institution Merger Act or other acts, or through a share transfer from another company in exchange for the issuance of new shares of its own (hereinafter referred to as "share exchange") pursuant o Article 156-8 of the Company Law.

  2. Related party or subsidiary: as defined in the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

  3. Professional appraiser: a real estate appraiser or a practitioner duly authorized by law to engage in the value appraisal of real estate or other fixed assets.

  4. Date of occurrence of the fact: the date of contract signing, the date of payment, the date of consignment trade, the date of title transfer, the date of the boards of directors’ resolution, or another date on which the counterparty and monetary amount of the transaction can be confirmed, whichever date is earlier. For an investment for which an approval of the competent authority is required, the earlier of the dates above or the date of receipt of approval of the competent authority shall prevail.

  5. Investment in mainland China: an investment in mainland China approved by the Investment Commission of the Ministry of Economic Affairs in accordance with the provisions of the Regulations Governing Permission for Investment or Technical Cooperation in the Mainland Area.

  6. Within one year: one year retrospectively from the date of acquisition, disposal or occurrence of the transaction of assets.

  7. The term "recent financial statements" means the publicly announced financial statements of the Company that have been audited or certified by a CPA before the acquisition or disposal of assets.

  8. The provisions concerning ten percent of the total assets in the Key Points are calculated on the basis of the total amount of

~93~ 

  - assets in the latest individual or respective financial statements as provided in the guidelines for the securities issuer’s preparation of financial statements.

  • Article 4 Regarding the appraisal report or the opinion of a CPA, a lawyer or a securities underwriter obtained by the Company, the professional appraiser and its appraisal personnel, the CPA, the lawyer or the securities underwrite shall not be a related party of any party to the transaction.

  • Article 5 Where the Company acquires or disposes of assets through court auction procedures, the evidentiary documentation issued by the court may substitute the appraisal report or CPA opinion.

  • Article 6 If an amendment to the Key Points or the acquisition or disposal procedures of individual assets needs to be approved by the Board of Directors in accordance with the provisions of the Key Points or other laws and regulations, the opinions of the independent directors shall be fully taken into account in the discussion of the board meeting. If there is an objection or reservation (including a written statement) by an independent director or a director, it shall be recorded in the minutes of the board meeting.

  • Transactions of major assets or derivative products shall be approved by more than one-half of all the members of the Audit Committee and proposed to the Board of Directors for resolution.

  • Chapter II Disposal Procedures

Section 1 Asset Acquisition or Disposal

  • Article 7 Appraisal procedures:

  • For the acquisition or disposal of securities that are traded on non-centralized markets or at the premises of securities brokers, the securities’ net value per share, profitability and future development potential as well as the market interest rate, bond coupon rate, debtor's credit and prevailing transaction price shall be taken into account.

  • For the acquisition or disposal of securities that are traded on centralized markets or at the premises of securities brokers, the prices shall be determined according to the prevailing share or bond prices.

  • For the acquisition or disposal of assets other than those in the preceding two paragraphs, the price inquiry method, price comparison method, price negotiation method or open tender

~94~

method shall be adopted, and the announced present value, appraised present value and actual transaction price of the neighboring real estate shall be referred to. If a professional appraisal report is required for the asset according to the provisions of the relevant laws and regulations and the Key Points, the appraisal report from a professional appraiser shall be referred to.

Article 8

Asset acquisition or disposal procedures:

  1. For an acquisition or disposal of assets, for the decision of the unit in charge and the execution of the unit in the second paragraph of this Article, the organizing unit shall evaluate the reasons for the acquisition or disposal, the subject matter, the counterparty of the transaction, the transfer price, the receipt and payment conditions, and the reference price.

  2. For the Company's short and long-term securities and derivative investment, the execution unit is the financial unit. Regarding the execution units of real estate and other fixed assets, please refer to the Company's Key Points for Fixed Asset Management. For asset other than securities, real estate or other fixed assets, the investment shall be evaluated by the planning unit beforehand.

  3. If there are control-procedure related provisions specified in regulations other than the Key Points, such provisions shall be followed:

  4. (1) Liquid and non-liquid financial investment:

    • A. Reinvestments for business purposes and their equity disposal shall be approved by the Board of Directors.

    • B. For low-risk investment targets such as government bonds, corporate bonds, financial bonds, domestic and foreign bond funds, domestic and foreign monetary funds, negotiable certificates of deposit, short-term commercial bills and bank acceptance bills which are acquired or disposed of for financial purposes, the department in charge shall be fully authorized to handle such transactions according to the Company's "Financial Product Transaction and Processing Procedures".

    • C. For other financial product investments, if the amount of a single transaction or the cumulative transaction amount within one year amounts to NT$100 million, the

~95~

transaction shall be approved by the Board of Directors. If the amount is less than NT$100 million, the department in charge shall be fully authorized to handle the transaction and report it in the next board meeting afterwards.

  • (2) Real estate and other fixed assets:

They shall be handled in accordance with the provisions of Article 10.2 of the Key Points.

  • (3) Other assets: Unless there are provisions available in the Company Law, the Merger and Acquisition Law or other laws, or the Articles of Association of the Company or the provisions of Sections 3 and 4 of this Chapter, such transactions shall be approved by the General Manager.

  • Article 9 The total amount of investment, limitation on individual items, and total amount of real estate which are not for business use by the Company and its subsidiaries are regulated as follows:

  • The total amount of investment of the Company shall not exceed 40% of the Company’s paid-in capital, in which investment in securities that are not long-term re-investments shall not exceed 10% of the Company’s paid-in capital.

  • The limitation on individual items concerning long-term re-investment of the Company is shall not exceed 35% of the Company’s paid-in capital, investment in securities that are not long-term re-investments of which limitation on individual securities shall not exceed 5% of the Company’s paid-in capital.

  • Save for Subsidiary with investment as its primary business, the total amount of investment of each Subsidiary shall not hall not exceed 40% of the Subsidiary’s paid-in capital, investment of securities that are not long-term re-investments shall not exceed 10% of the Subsidiary’s paid-in capital. The long-term re-investment of each Subsidiary is bound by limitation of individual item that shall not exceed 35% of the Subsidiary’s paid-in capital, investment in securities that are not long-term re-investments is bound by limitation of individual item that shall not exceed 5% of the Subsidiary’s paid-in capital.

  • The total amount of the acquisition of real estate by the Company and each of its subsidiaries which are not for business use shall not exceed 10% of the paid-in capital of each company. The Securities provided in the preceding sub-paragraph do not

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include the low-risk investment targets acquired or disposed of for purpose of financial planning provided in Item 2, Section 1, Sub-paragraph 3, Paragraph 8.

  • Article 10 Regarding the Company’s acquisition or disposal of property or equipment, except for transactions with government entities, commissioned-construction on the Company’s own land, commissioned-construction on leased land, or acquisition or disposal of equipment for business use, if the transaction amount reaches NT$300 million, a professional valuer’s appraisal report shall be obtained before the date of occurrence of the fact, and the transaction shall meet the following requirements:

  • The transaction shall be approved by the Board of Directors if a limited price, specified price or special price is to be used as the reference price of the transaction for special reasons. This requirement also applies to future changes to the transaction conditions.

  • If the transaction amount exceeds NT$1 billion, two or more professional appraisers shall be hired for the appraisal.

  • If the appraisal result of the professional appraiser has one of the following circumstances, unless the appraisal result of the assets to be acquired is higher than the transaction amount or the appraisal result of the assets to be disposal of is lower than the transaction amount, a CPA shall be contacted for a specific opinion on the difference and the fairness of the transaction price in accordance with the provisions of the Audit Standards Bulletin No. 20 of the Accounting Research and Development Foundation:

    • (1) The difference between the appraisal result and the transaction amount is more than 20% of the transaction amount.

    • (2) The difference between the appraisal results of two or more professional appraisers is more than 10% of the transaction amount.

  • The time lag between the issuing date of the professional appraiser’s appraisal report and the contract date shall not be more than three months. However, if the appraisal report applies to the publically announced present value of the same period and is not more than six months, then the Company may request the

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original professional appraiser to issue an opinion.

In the case of acquisition or disposal of real estate or other fixed assets other than those in the preceding paragraph, the publically announced present value, appraised value and the actual transaction price of the neighboring real estate shall be referred to, or two or more professional appraisers shall be hired for the price appraisal in order to determine the transaction price.

Article 11 When acquiring or disposing of securities, the Company shall, prior to the date of occurrence of the event, obtain financial statements of the underlying 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 transaction price reaches NTD 300 million or more, the company shall additionally engage a CPA 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 accordance with the provisions of Statement of Auditing Standards No. 20 published by the Accounting Research and Development Foundation (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).

The exceptions provided in the preceding sub-paragraph refer to the following conditions:

  1. Acquiring securities through cash contribution in incorporation by promotion or by public offering in accordance with the Company Act, and the rights shown in the securities acquired is proportional with the contribution.

  2. Securities issued at face value by an underlying company carrying out a capital increased by cash in accordance with relevant laws and regulations, with the Company as a sponsor of the issue.

  3. Securities issued by an investee company wholly invested by the Company that is carrying out a capital increased by cash, with the Company as a sponsor of the issue.

  4. Securities listed and traded on the stock exchange or on the securities Market and emerging stocks.

  5. Government bonds, bonds under repurchase and resale

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agreements.

  1. Domestic or overseas public offering of funds.

  2. Listed securities acquired or disposed of in accordance with the stock exchange or the securities market rules governing the purchase of listed securities by reverse auction or rules governing the auction of listed securities.

  3. Securities acquired through the Company’s sponsorship of a seasoned equity offering by a public company or subscription of domestic corporate bonds (including financial bonds), when the securities acquired are not privately placed.

  4. Subscription to fund shares before the establishment of a fund in accordance with Paragraph 1, Article 11 of the Securities Investment Trust and Consulting Act, or subscription or redemption of domestic private placement funds, provided that the trust agreement for the fund specifies an investment strategy in which, aside from securities margin transactions and open positions held in securities-related products, the investment scope of the remaining portion is the same as that of a publicly offered fund.

  5. Article 12 Regarding the Company’s acquisition or disposal of memberships or intangible assets with a transaction amount of NT$100 million or more, except for transactions with government entities, the accountant shall be consulted before the date of occurrence of the fact for an opinion on the rationality. The accountant shall handle the matter in accordance with the provisions of the Audit Standards Bulletin No. 20 of the Accounting Research and Development Foundation.

  6. Article 12-1 The calculation of the transaction amounts above shall be handled in accordance with the provisions in Articles 28.2 and 28.3.

  7. Section II Transactions with Related Parties

  8. Article 13 When the Company engages in any acquisition or disposal of assets with a related party, in addition to ensuring that the necessary resolutions are adopted in accordance with the provisions of the preceding Section and this Section 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 accordance with the provisions of the preceding

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Section.

The calculation of the transaction amount referred to in the preceding paragraph shall be made in accordance with the provisions of Articles 28.2 and 28.3.

When judging whether a trading counterparty is a related party, in addition to legal formalities, the substance of the relationship shall be considered.

Article 14 When acquiring or disposing of real estate thereof from or to a related party, or when acquiring or disposing of assets other than real estate thereof from or to a related party and the transaction price reaches NTD 300 million or more, except in trading of government bonds or bonds under repurchase 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 documents have been approved by Audit Committee and the Board of Directors:

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

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

  3. With respect to the acquisition of real estate from a related party, the information regarding the evaluation of the reasonableness of the preliminary transaction terms in accordance with Article 15 and Article 16.

  4. The date and price of the related party’s original acquisition of the real estate, the original transaction counterparty, and the transaction counterparty's relationship with the Company and the related party.

  5. The monthly cash flow forecasts for the year commencing from the anticipated month of contract signing, the evaluation of the necessity of the transaction, and the reasonableness of the funds utilization.

  6. An appraisal report from a professional appraiser or a CPA's opinion obtained in accordance with the preceding Article.

  7. Restrictive conditions and other important agreements associated with the transaction.

The calculation of the transaction amounts referred to in the preceding paragraph shall be made in accordance with the

~100~

provisions of Article 28.2, and "within one year" 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 business-purpose equipment between the Company and its parent company or subsidiaries, the Company's Board of Directors may, pursuant to the provisions of Article 10, delegate the Chairman to make a decision, and have the decision submitted in the next board meeting for recognition afterwards.

When a matter is submitted for discussion in the board meeting pursuant to the provisions of the preceding paragraph, each independent director's opinions shall be fully taken into consideration. If there is any objection or reservation from the independent directors, it shall be recorded in the minutes of the board meeting.

Article 15 For an acquisition of real estate from a related party, the Company shall evaluate the reasonableness of the transaction costs by the following means:

  1. Based on the related party's transaction price plus necessary interest on funding and the costs to be duly borne by the buyer. The "necessary interest on funding" is calculated as the weighted average interest rate of borrowing in the year the Company purchases the real estate, provided that it may not be higher than the maximum borrowing rate for non-financial industries as announced by the Ministry of Finance.

  2. The total appraised loan value by a financial institution where the related party has previously pledged the asset for a for a loan from the financial institution, provided that the actual cumulative loan amount extended by the financial institution shall have reached 70 percent or more of the financial institution's appraised loan value, 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 the land and the building of the same object matter are purchased together, the transaction costs for the land and the

~101~

building may be respectively appraised in accordance with either of the means in the preceding paragraph.

For the Company’s acquisition of real estate from a related party, in addition to appraising the costs of the real estate in accordance with the provisions in paragraphs 1 and 2 above, the Company shall engage a CPA to check the appraisal results and render a specific opinion.

Where any one of the following circumstances exists, the provisions in the preceding three paragraphs shall not apply:

  1. The related party acquired the real estate 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 estate to the signing date for the current transaction.

  3. The real estate is acquired through a joint development contract with the related party, or construction on the Company’s own land or construction on leased land with the construction work commissioned to the related party.

  4. Article 16 When the results of the Company's appraisal conducted in accordance with paragraph 1 and paragraph 2 of the preceding Article are both lower than the transaction price, the matter shall be handled in compliance with Article 17. However, If any of the following circumstances exist, and the objective evidence has been submitted and the specific opinions on reasonableness have been obtained from a professional real estate appraiser and a CPA, this restriction shall not apply:

  5. 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) The undeveloped land is appraised in accordance with the means in the preceding Article, and the buildings according to the related party's construction cost plus reasonable construction profit, and the valued exceeds 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 past 3 years or the gross profit margin of the construction industry in the latest period as announced by the Ministry of Finance,

~102~

whichever is lower. 

  - (2) The transactions of other floors of the same subject building, or the transactions of non-related parties in the neighboring area within the past year, with similar floor areas, have similar transaction terms based on the evaluation of the reasonable price differences of such floors or areas in accordance with the property trading practice.

  - (3) Where the other floors of the same subject building leased by non-related parties within the past year have similar transaction terms, based on the evaluation of the reasonable price differences of such floors in accordance with the property rental practice.

  1. The Company can provide evidence that the real estate acquired from a related party has terms similar to those of transactions completed in the neighboring area by unrelated parties within the past year, and the area size is similar.

  2. The aforesaid transactions in the neighboring area refers to transactions on the same or an adjacent street and within an area of less than 500 meters from the subject matter of the transaction, or transactions with similar announced present values. The aforesaid similar area size means that the area of the transaction of a non-related party is not less than 50% of the area of the subject matter of the transaction. The aforesaid one year refers to the year before the date on which the real estate transaction occurs.

  3. Article 17 Regarding the Company’s acquisition of real estate from a related party, if the results of the appraisals in accordance with the provisions of Articles 15 and 16 are lower than the transaction price, then the following matters shall be handled.

  4. The Company shall make a provision of a special surplus reserve in accordance with the provisions of Paragraph 1 of Article 41 of the Securities Exchange Act on the difference between the transaction price of the real estate and the appraised cost, and shall not distribute the surplus or convert it into capital increase.

  5. The Audit Committee shall handle the above in accordance with the provisions of Article 208 of the Company Law.

  6. The handling of the matters in Paragraphs 1 and 2 above shall be reported in the shareholders' meeting, and the details of the transaction shall be disclosed in the annual report and the

~103~

prospectus.

If the Company has set aside a special surplus reserve in accordance with the provisions of the preceding paragraph, it may not utilize the special surplus reserve until it has recognized a loss when there is a decline in the market value of the assets it purchased at a premium, or the assets have been disposed of, or an 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 Financial Supervisory Commission has given its approval.

If the Company obtains real estate from a related party, it shall also comply with the provisions in the preceding two paragraphs if there is other evidence indicating that the transaction does not conform to the regular business mode.

Section III Engagement in Derivative Transactions

Article 18 The trading principle and direction, risk management measures to be

adopted and auditing matters for the Company’s derivative transactions are as follows:

  1. Trading principle and policy:

  2. (1) Business and risk-hedging strategy: The Company’s derivative transactions shall be for non-trading purposes only, and shall be for risk hedging in principle. The relevant units shall strictly adhere to the principle and policy, pay attention to risk management and provide periodic reports.

  3. (2) Transaction types: Currently the Company’s derivative transactions are limited to foreign exchange forwards, exchange rate options, currency swaps and interest rate swaps which are for risk hedging purposes based on business needs.

  4. (3) Division of responsibility:

    • A. Finance Department: Finance Department is the unit executing derivative trading. It shall at all times grasp the Company's overall position and domestic and international financial situations, engage in transactions below the authorized limit in an appropriate time, and monitor the cash flow of the existing positions to reduce the settlement risk in the future. Finance Department shall send the vouchers and related information of the transactions engaged in to Accounting Department.

~104~ 

  - B. Accounting Department: Accounting Department shall make accounting entries based on the vouchers sent from Financial Department and follow the generally accepted accounting principles.

  • (4) Performance evaluation: After the end of each month, Accounting Department shall, according to the current profits and losses arising from the actual settlement of the derivative trading contracts in the month, prepare a statistical report to the Finance Department for its further report to the Deputy General Manager in charge to serve as a reference for performance evaluation.

  • (5) Total amount of contracts and maximum amount of loss:

    • A. The total amount of derivative contracts of foreign exchange forward, exchange rate option and currency swap shall be limited to 50% of the Company’s estimated total net exposure of foreign exchange receipts and payments in the coming year. The total amount of interest rate swap contracts shall be limited to the Company's total long-term liabilities.

    • B. For derivative transactions, the maximum loss of all or individual contract shall not exceed 20% of the total or individual contractual amount.

  • Risk management measures:

  • (1) The following risks shall be considered in the scope of risk management and avoided in advance:

    • A. Credit risk: the risk of loss due to the counterparty's non-performance of the terms of the contract.

    • B. Market risk: the risk of loss due to the fluctuation of the derivative’s market price in the future.

    • C. Liquidity risk: the risk of loss due to the depth of the market and of settlement at a reasonable market price, and the risk of insufficient funding for settlement in the future.

    • D. Cash flow risk: In order to ensure the stability of the working capital turnover of the Company, for the funding of derivative transactions the Company shall take into account its cash flow and the estimated future cash receipts and payments.

    • E. Operational risk: the risk of loss due to human negligence,

~105~

poor supervision, fraud and improper control management.

  • F. Legal risk: the risk of loss due to a lack of details in the contract, false authorization and difference in the interpretation of the provisions of laws and regulations.

  • (2) The trader and the confirmation and settlement personnel roles shall be taken by Finance Department, and these roles can not be undertaken concurrently. The trader shall forward the transaction certificate or contract (transaction slip) to the confirmation personnel for reconciliation with the bank. The confirmation personnel shall then notify the settlement personnel, and send the transaction details to Accounting Department for accounting entry. Accounting Department shall be irregularly reconcile with the bank or confirm via letter.

  • (3) The risk measurement, supervision and control personnel shall be assigned to different departments from those in the preceding paragraph, and shall report to the Board of Directors or to the senior executives who are not responsible for the transactions or the decision-making on positions.

  • (4) Authorization limits and levels:

  • A. According to the Company's business and risk position, the authorization limits are as follows:

Level of authority Transaction
limit		 Total daily limit
General Manager US$ equivalent
of NT$10
million		 US$ equivalent of
NT$30 million
Deputy General
Manager or
Assistant Deputy
General Manager		 US$ equivalent
of NT$5 ~ 10
million
(exclusive)		 US$ equivalent of
NT$10 million
(exclusive)
Finance Manager US$ equivalent
of NT$0 ~ 5
million
(exclusive)		 US$ equivalent of
NT$5 million
(exclusive)
  • B. If the personnel are authorized in accordance with the provisions, the authorization shall be reported in the next board meeting afterwards.

~106~ 

     - (5) Periodic evaluation and exception handling:

        - A. Financial Department shall evaluate the derivative position at least once a week, and at least twice a month for hedge transactions due to business needs. The evaluation report shall be presented to the senior executives authorized by the Board of Directors.

        - B. The senior executives authorized by the Board of Directors shall regularly evaluate the performance of derivative transactions on a quarterly basis in accordance with the established business strategies, and check whether the risks assumed are within acceptable limits. The results of the quarterly performance evaluation shall be recorded in the Finance Department's business report for the board meeting.

        - C. The senior executives authorized by the Board of Directors shall regularly evaluate the adequacy of the risk management procedures currently in use, and check whether they are adhered to.

        - D. The senior executives authorized by the Board of Directors shall supervise derivative transactions and the profit and loss situation. If they discover in the market price evaluation report that the loss has exceeded the upper limit, they shall take necessary measures and immediately report to the Board of Directors. The board meeting shall be attended by independent directors to express their opinions.

  3. Internal audit:

     - Internal auditors shall regularly check the appropriateness of the internal control system, check the transaction department’s compliance with derivative trading regulations, and make an audit report accordingly. If major violations are discovered, they shall notify the Audit Committee in writing.

  • Article 19 For the Company’s derivative transactions, a log book shall be established in which the types and amounts of derivative transactions engaged in, the approval dates and the matters to be evaluated as specified in Articles 18.2(5)A and 18.2(5)B shall be recorded in detail.

  • Section IV Merger, Division, Acquisition and Share Exchange

  • Article 20 When conducting merger, demerger, acquisition, or transfer of shares, the Company shall, prior to convening the Board of Directors to

~107~

resolve on the matter, 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 approval. 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 its subsidiary in which it directly or indirectly holds 100 percent of the issued shares or authorized capital, or in the case of a merger between its 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 related to a merger, division or acquisition prior to the shareholders meeting, and attach to it the expert opinion referred to in the preceding Article and the shareholders’ meeting notice for the shareholders’ reference and decision regarding whether to approve the merger, division or acquisition. This requirement shall not apply if the provisions of the law exempt the Company from convening a shareholders meeting to approve the merger, division or acquisition.

Where the shareholders meeting fails to be convened or a resolution fails to be passed due to lack of a quorum, insufficient votes or other legal restrictions, or the proposal is rejected in the shareholders meeting, the Company shall immediately explain to the public the reason, the follow-up measures and the preliminary date of the next shareholders meeting.

  • Article 22 Every person participating in or privy to the plan for merger, division, acquisition, or transfer of shares shall issue a written undertaking of confidentiality, may not disclose the content of the plan prior to public disclosure of the information, and may not trade, in his/her own name or another person’s name, in any stock or other equity-related securities of any company related to the merger, division, acquisition, or share exchange plan.

  • Article 23 In the Company’s participation in a merger, division or acquisition, unless the law provides otherwise or the FSC is notified in advance due to extraordinary circumstances and has granted its consent, the Company shall convene a board meeting and a shareholders’

~108~

meeting on the same day for a resolution on the merger, division or acquisition related matters.

The companies participating in a share exchange shall, unless the law provides otherwise or the FSC is notified in advance due to extraordinary circumstances and has granted its consent, convene a board meeting on the same day.

When participating in a merger, division, acquisition or share exchange, the Company shall prepare a full written record of the following information and retain it for 5 years for reference:

  1. Basic personnel data: including the job titles, names and ID numbers (or passport numbers in the case of foreign nationals) of all persons involved in the planning or implementation of a merger, division, acquisition or share exchange prior to the disclosure of the transaction information.

  2. Dates of material events: including the dates of signing any letter of intent or memorandum of understanding, hiring a financial or legal advisor, executing a contract and convening a board meeting.

  3. Important documents and minutes: including the merger, division, acquisition or share exchange plan, the letter of intent or memorandum of understanding, material contracts and minutes of board meetings.

  4. The Company shall, within 2 days from the date a resolution is passed in the board meeting, report the information set out in subparagraphs 1 and 2 of the preceding paragraph to the FSC for recordation in the prescribed format and via the Internet-based information system.

  5. Article 24 In the Company’s participation in a merger, division, acquisition or share exchange, the share exchange ratio or acquisition price may not be arbitrarily altered unless in any of the circumstances below, and if any alteration is made, the circumstances where the alteration is permitted shall be stipulated in the contract for the merger, division, acquisition, or share exchange:

  6. The handling of cash capital increase and the issuance of convertible corporate bonds, bonus shares, corporate bonds with stock options, preferred shares with stock options, beneficiary certificates of stock options or other equity-based securities.

  7. An act such as a disposal of major assets which may affect the

~109~

Company's financial operations.

  1. An event such as a major disaster or a major change in technology which may affect the shareholders’ interests or share price.

  2. Any of the companies participating in the merger, division, acquisition, or share exchange buys back treasury stock.

  3. An increase or decrease in the number of entities or companies participating in the merger, division, acquisition or share exchange.

  4. Other terms/conditions that the contract stipulates may be altered and that have been publicly disclosed.

  5. Article 25 In the Company’s participation in a merger, division, acquisition or share exchange, the contract shall record the rights and obligations of the participating companies as well as the following:

  6. Handling of breach of contract.

  7. Principles for the handling of equity-based securities previously issued or treasury stock previously bought back by any company that is extinguished in a merger or is divided.

  8. The quantity of treasury stock the participating companies are permitted by law to buy back after the record date of calculation of the share exchange ratio, and the principles for handling thereof.

  9. The method for handling changes in the number of participating entities or companies.

  10. The preliminary timetable for plan execution and the expected completion date.

  11. If the plan can not be completed as scheduled, the expected date for convening the legally mandated shareholders meeting and relevant procedures.

  12. Article 26 After public disclosure of the information, if any company participating in the merger, division, acquisition or share exchange intends to carry out another merger, division, acquisition or share exchange with another company, unless the number of participating companies is decreased and the companies’ shareholders’ meetings have passed resolutions to authorize the board of directors to alter the limits of authority so that the participating companies may be exempted from convening another shareholders meeting to resolve on the matter anew, all of the participating companies shall carry out anew the procedures or legal actions that have originally been

~110~

completed for the merger, division, acquisition or share exchange.

  • Article 27 In the Company’s participation in a merger, division, acquisition or share exchange, if any of the participating companies is not a public company, the public company(s) shall sign an agreement with the non-public company whereby the latter is required to abide by the provisions of Articles 22, 23 and 26.

Chapter III Information Disclosure

  • Article 28 If any of the following circumstances occurs in the Company’s acquisition or disposal of assets, the relevant information shall be declared on the FSC’s designated website based on its nature within two days from the date of occurrence of the fact:

  • The Company’s acquisition or disposal of property with related parties, or acquisition or disposal of non-property assets with related parties and the transaction amount reaches NT$300 million, with the exception of the purchase and sale of government bonds, bonds with re-purchase or re-sale agreements and subscription or repurchase of money market funds issue by domestic securities investment trust enterprises,

  • The Company’s merger, division, acquisition or share exchange

  • The loss of derivative transactions reaches the total or individual contract loss limit specified in Article 18.1(5)(B).

  • The type of assets acquired or disposed of is equipment for business use, the transaction counterparty is an unrelated party, and the amount of the transaction is NT$500 million or more. If the amount of the Company's paid-in capital is more than NT$10 billion, the amount of the transaction is NT$1 billion or more.

  • The property is acquired through commissioned- construction on the Company’s own land, commissioned- construction on leased land, joint construction with building allotment or joint construction with respective sale of the building, with the expected amount of the Company’s investment in the transaction more than NT$500 million

  • Transactions of assets other than those in the five items above, or investment in mainland China, and the transaction amount reaches NT$300 million, with the exception of the following:

  • (1) Trading of government bonds.

  • (2) Trading of bonds with repurchase or resale agreements or the purchase or repurchase of money market funds issue by domestic securities investment trust enterprises,

~111~

The amounts of the aforesaid transactions are calculated as follows, but the amounts already announced according to the requirements shall not be included.

  1. The amount of each transaction.

  2. The total amount of all transactions with the same counterparty in one year for assets of the same nature.

  3. The total amount of transactions of property in the same development plan (with acquisition and disposal accrued separately) in one year.

  4. The total amount of transactions of the same securities (with acquisition and disposal accrued separately) in one year.

The Company shall enter into the FSC’s designated website by the 10th of each month the information about the derivative transactions of the Company and its non-public domestic subsidiaries as of the end of the previous month in accordance with the FSC’s prescribed format.

If there is any error or omission in the Company’s announcement in accordance with the regulations, then it shall make another announcement of all such information again within two days from the day of awareness of the fact.

The Company shall obtain and keep at its premises the relevant contracts, the meeting minutes, the reference books, the appraisal reports, and the opinions of the accountant, the lawyer and the securities underwriter. Unless otherwise required by law, such documents shall be retained for at least five years.

Article 29 Where any of the following circumstances occurs with respect to a transaction that the Company has already publicly announced and reported in accordance with the preceding article, a public report of relevant information shall be made on the information reporting website designated by the FSC within 2 days from the date of occurrence of the event:

  1. The contract originally signed for the transaction is changed, terminated or rescinded.

  2. The merger, division, acquisition, or share exchange is not completed on the scheduled completion date set forth in the contract.

  3. There is a change to the contents of the public announcement already made.

~112~

Chapter IV Supplementary Provisions

  • Article 30 Subsidiaries which are domestic public companies shall, in accordance with the Key Points, set up their own points for asset acquisition or disposal. Subsidiaries which are not domestic public companies shall, follow the format of the Key Points, set up their own points for asset acquisition or disposal.

  • Article 31 For an asset acquisition or disposal by a subsidiary which is not a domestic public company, if a public announcement and reporting need to be made in accordance with the provisions of Chapter III for the asset acquisition or disposal, the matters shall be handled by the Company on behalf of the subsidiary.

  • Article 32 The directors and supervisors dispatched by the Company to its subsidiaries shall supervise the execution of asset acquisition or disposal according to the Key Points.

  • Regarding the adequacy of a subsidiary’s asset acquisition or disposal, in the case the subsidiary is a domestic public company, the audit report of the subsidiary’s internal auditors shall be sent to the Company for review. If the subsidiary is not a domestic public company, the Company may appoint its own internal auditor or instructs the subsidiary to appoint an external auditor to conduct an ad hoc audit.

  • Article 33 The managers and other employees of the Company who violate the provisions of the Key Points, depending on the circumstances, shall be subject to disciplinary action according to the provisions of the Company’s personnel management system.

  • Article 34 Matters not covered in the Key Points shall be handled in accordance with the relevant laws and regulations.

  • Article 35 If any of the provisions of the Company’s management measures on acquisition or disposal of assets is inconsistent with those of the Key Points, the Key Points shall prevail.

  • Article 36 The Key Points are subject to the consent of the Audit Committee, and shall be implemented after the resolutions are passed in the board meeting and the shareholders' meeting.

~113~

Appendix 5

The Impact of Stock Dividend Issuance on Business Performance, EPS, and Shareholder Return Rate

The Company has no right of distribution and does not apply.

~114~

Appendix 6

Shareholding of Directors

(Shareholding number of all directors, date as of April 28 2019)

Title Name
or
Legal person name		 Shareholder no.
or
Identification
number		 Number of
shares held		 Shareholding
ratio
Chairman Ministry of Economic
Affairs Representative:
CHENG,WEN-LON		 1 105,070,366
22.21%
Director Ministry of Economic
Affairs Representative:
TSENG,KUO-CHENG		 1 105,070,366
22.21%
Director Ministry of Economic
Affairs Representative:
Huang,Ying-Fang		 1 105,070,366
22.21%
Director Ministry of Economic
Affairs Representative:
Wu,Wen-Kuei		 1 105,070,366
22.21%
Director Ministry of Economic
Affairs Representative:
Lu,Wen-Tsan		 1 105,070,366
22.21%
Director Ministry of Economic
Affairs Representative:
HUANG, JIH-CHIN		 1 105,070,366
22.21%
Director Ministry of Economic
Affairs Representative:
LAN, SYU-CING		 1 105,070,366
22.21%
Director CPC (Corporation, Taiwan
Representative):
Yin Ling- Ying		 2 23,777,487
5.03%
Director China Steel Representative:
Hwang Chien-Chih
47200		 7,751,346
1.64%
Director Yue-Li Investment
Corporation		 47215 2,652,411
0.56%
Director Kaohsiung City
Representative of Industrial
Labor Union of CSBC:
HOU,DE-LONG		 47213 428,000
0.09％
Director Kaohsiung City
Representative of Industrial
Labor Union of CSBC:
HSIEH,KUO-JUNG		 47213 428,000
0.09％
Independent
Director		 LIN, HUI-JENG X100****** 0
0.00％
Independe
nt Director		 LIEU, DER-MING R102****** 0
0.00％

~115~

Total number of shares held 139,679,610 29.53 ％

  • Note:1.The Company's paid-up capital of NT $4,729,917,490 and issued shares of 472,991,749.

  • 2.In accordance with the provisions of Article 26 of the Securities Exchange Act, all directors of the Company shall have a minimum of 16,000,000 shares

~116~

Appendix 7

Other explanations:

  • The shareholders meeting, shareholder proposal processing instructions :

  • 1.According to Article 172 of the Company Law,Shareholders who hold more than one percent of the total number of issued shares will be able to submit to the Company in writing or electric, and must subject to a limited number of 300 words.

  • 2.The Company shareholders' meeting will accept the application for shareholders, the period is 2019/4/19 to 2019/4/29, and has been published in accordance with the law at the Public information observatory

  • 3.No shareholder's proposal was received before the proposal deadline

~117~

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