Taishin FHC Corporate Social Responsibility Report 2019

130 Stakeholder Engagement ● Specific Issue #1: Chang Hwa Bank (CHB) Investment ● Conduct Enhancement Program for Financial Advisors ● Relief and Revitalization Plan in Response to COVID-19 ● Specific Issue #1: Chang Hwa Bank (CHB) Investment Our statement with regards to CHB investments Response to Specific Issues Investor Media Stakeholder Type Concerned Issue Time of Query Taishin's Response (1) Our statement with regards to CHB investments (2) Our approaches to safeguarding shareholders' rights, and progress report The IR department provides explanations via email, telephone, investor conference, or face-to-face meetings; meanwhile, information is also disclosed on web pages (in the form of major announcement, press release etc) Communication methods include telephone, email, press conference, seminar and press release. Any wrongly reported facts will be clarified by the PR department Whole year, 2019 On July 22, 2005, Taishin Financial Holdings ("Taishin", "Taishin FHC") participated in an open bid for 1.4 billion shares of preferred stock issued by Chang Hwa Bank ("CHB"). Apart from local bidders (including Mega Financial Holdings, Fubon Financial Holdings and Taishin), a foreign institution (i.e. Temasek Holdings from Singapore) also contend- ed for the bid. The bid was won by Taishin for a sum of TWD36.568 billion, and, with the approval of the FSC, the company acquired a 22.55% ownership interest in CHB, making it the largest shareholder. The Ministry of Finance had previously announced on July 5, 2005, and had issued an official correspondence through CHB on July 21, 2005, addressing "all bidders of the 2005 CHB cash issue" and informing them of the Ministry's commitment to transfer control of CHB to the winning bidder. The correspondence reads: "Until such time as the Ministry of Finance sells its shares, it shall maintain its policy to support the largest shareholder in acquiring control over the bank, provided that the winning bidder remains the largest shareholder.” The correspondence was evidence of the Ministry's intent to support the winning bidder in acquir- ing more than 50% of director and supervisor seats in CHB. During CHB's board elections held in 2005, 2008, and 2011, the Ministry of Finance kept its promise and supported Taishin acquire a majority of seats at the board. However, during CHB's 2014 board election, the Ministry of Finance reneged on the promises it had made in 2005, and rallied state-owned banks and state-owned enterprises to purchase CHB shares right before CHB's extraordinary shareholder meeting, while at the same time making extensive efforts to acquire proxy forms from the market. As a result, Taishin acquired only 2 out of 9 director seats and had 1 Taishin-nomi- nated independent director elected on board despite being CHB's largest shareholder. According to Article 4 of the Financial Holding Company Act, CHB was no longer Taishin's subsidiary. Given the fact that the Ministry of Finance had reneged on its written promise and in doing so had caused Taishin to lose control over CHB and suffer immense losses, Taishin raised a civil lawsuit and provisional injunction to the Taipei District Court against the Ministry of Finance and filed a complaint to the Control Yuan to protect the legal right of Taishin's 200,000+ shareholders. Taishin hoped the judicial and administrative systemwould compel the Ministry of Finance to fulfill its written commit - ments and restore Taishin's control over CHB.