Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility

Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report Message from the Chairman 02 Sustainability of Hua Nan 04 About This Report 08 About Hua Nan Financial Holdings 10 10 About Hua Nan Financial Holdings 15 Material Issues and Stakeholders 20 United Nations Sustainable Development Goals (SDGs)

Sustainable 24 26 1.1 Corporate Governance Governance 33 1.2 Integrity Management 35 1.3 Risk Management 40 1.4 Legal Compliance

Financial Innovation 50 54 2.1 Digital Banking Development and Financial Innovation and Services 61 2.2 Valuing Customer Rights 68 2.3 Information Security 71 2.4 Creating Positive Impact of Financial Services

Employee Care 80 82 3.1 Recruitment and Diversity 89 3.2 Employee Remuneration and Interests 96 3.3 Human Capital Development 103 3.4 Occupational Safety and Health

Environmental 110 112 4.1 Environmental Policy and Results Sustainability 113 4.2 Environmental Policy Implementation 122 4.3 Environmental Charity Events

Positive 124 127 5.1 Popularizing Knowledge Societal Impact 133 5.2 Supporting Sports Activities 140 5.3 Caring for the Disadvantaged Groups 143 5.4 Nurturing the Cultural and Creative Industry

Appendix 147 147 CPA's Limited Assurance Report 149 GRI Index Table Message from the Chairman

Hua Nan Financial Holdings was the first financial As a member of the financial industry, we holding company established in Taiwan. Founded recognize that the financial industry is an on January 29, 1919, Hua Nan Commercial important driving force to the development Bank marked its 100th anniversary in 2019. As of other industries. Only by combining the a century-old enterprise, we are fully aware that Environmental, Social, and corporate Governance an enterprise can only operate everlasting by (ESG) with the main lines of business can we seeking new changes and advancing with the bring positive benefits to society. The task of times. the financial industry is to provide funds for enterprises and individuals, so as to drive the 2018 marks the 5th year of the Company's industrial development and enhance people's compilation of the CSR Report. We are constantly well-being. Achieving outstanding performance adjusting our pace and forging ahead steadily. is the most significant fulfillment of our corporate In 2017, we first integrated the UN's Sustainable social responsibility and the basis for the Development Goals (SDGs) into the Group's sustainable development of the Group. corporate social responsibility activities to examine current practices and respond to future For a long time, the Group has continuously business risks. In 2018, we further adopted the upheld the concept of “taking from society, giving framework of Integrated Reporting and reviewed back to society" on the basis of stable profitability the input and output of six major capitals in order to protect the tangible assets of customers and to convey the Group's corporate value to our the original intentions of numerous people. In stakeholders more effectively. 2018, Hua Nan Financial Holdings' financial

2 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

performance hit a record high with NT$14.621 Industries (Phase 1)" by the Financial Supervisory billion in consolidated net profit after tax (an Commission and won the Circular Economy increase of 22%) and an EPS of NT$1.27. We Industry Special Award, won the Financial reported the largest growth of profits among all Service Merit Award in the 5th Top Solar Award financial holding companies in Taiwan. from the Ministry of Economic Affairs, and won the Green Energy Financial Contribution Award In non-financial performance, we also achieved in the Renewable Energy Promotion Award from remarkable success. In the 5th Corporate Taichung City Government, all of which were the Governance Evaluation conducted by Taiwan recognition of the Group's commitment to green Stock Exchange Corporation, Hua Nan Financial finance. Holdings ranked top 5% of all listed companies. Hua Nan Financial Holdings was once again In addition, HNCB has conducted BSI selected as a constituent stock in the FTSE4 assessments and certifications for three Good Emerging Index and FTSE4 Good TIP consecutive years since 2016, and obtained the Taiwan ESG Index. In addition, Hua Nan Financial ISO 14001 Environmental Management System Holdings received the Sustainable Development and ISO 14064-1 Greenhouse Gas Inventory Model Award in the 25th National Quality Award certifications. At the end of 2018, we also from the Ministry of Economic Affairs, and three obtained the ISO 50001 Energy Management excellence awards in the 9th Great Award from System certification. In the future, we will Taiwan Academy of Banking and Finance, gradually expand the scope of GHG inventory in namely the Best Social Responsibility Award, hopes of fully tracking and analyzing the Group's the Best Digital Finance Award, and the Best GHG emissions and reducing the environmental Consumer Finance Award. It was the state- impact. HNCB started to integrate the Spirit of owned bank that won the most awards. This the Equator Principles into its credit investigation shows that our ESG performance has received process in 2018 in the hope of guiding corporate the recognition from domestic and international customers to appreciate the impact of their professional agencies. business activities on the environment and society with its financial influence. As a member of the global village, the Group expects to pursue a new economic model for In the future, we will uphold the Group's five core sustainable development by responding to principles of "Honesty, Efficiency, Activeness, environmental issues with its core business. In Responsibility, and Teamwork (HEART)" to April 2018, HNCB issued NT$1 billion in green maintain sustainable development and create a bonds. HNCB has established the "Green better society for all. Energy Technology Financing Promotion Team" to integrate internal resources and the Bank's business capacity for advancing green energy technology financing businesses. The Team Chairman also works with foreign banks, green energy technology operators, and local governments to expand green finance business opportunities. In 2018, Hua Nan Commercial Bank was selected as an excellence bank for "Incentive Policy for Loans from Domestic Banks to Innovative Key

3 Sustainability of Hua Nan

Awards

Sustainable Development Model Award in the 25th National Quality Award

On December 6, 2018, the Ministry of Economic Affairs held the awards ceremony for the 25th National Quality Award at Taipei International Convention Center, where President Tsai attended to present the awards. Hua Nan Financial Holdings won the Sustainable Development Model Award in the 25th National Quality Award, and the then Chairman Wu, Tang-Chieh received the award in person. Hua Nan Financial Holdings was the first state-owned bank that won the National Quality Award, showing that the Company has performed excellently in corporate governance, green finance, and environmental sustainability in recent years.

President Tsai (Left) awarded the Sustainable Development Model Chairman Wu, Tang-Chieh (third from the right, front row) and Award to Chairman Wu, Tang-Chieh (Right) on Behalf of Hua Nan President Lo, Puo-Chu (fourth from the right, front row) received the Financial Holdings. Sustainable Development Model Award with colleagues.

Three Excellence Awards in the Taiwan Banking and Finance Best Practice Awards

On December 14, 2018, Taiwan Academy of Banking and Finance held the awards ceremony for the 9th Taiwan Banking and Finance Best Practice Awards, where President of Hua Nan Financial Holdings Lo, Puo-Chu and President of Hua Nan Commercial Bank Cheng, Yung- Chun received the awards in person. The Group received three excellence awards in the Taiwan Banking and Finance Best Practice Awards, namely the Best Social Responsibility Award, the Best Digital Finance Award, and the Best Consumer Finance Award. It was the state-owned bank that won the most awards. Chairman of Taiwan Academy of Banking and Finance Wu, Chung- Shu (third from the left, front row) and President of Hua Nan Financial Holdings Lo, Puo-Chu (second from the left, front row), and colleagues.

4 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

List of Awards in 2018

HNFHC (Hua Nan Financial Holdings Co.) • Selected as a constituent stock of the FTSE4Good Emerging Index in 2018 • Selected in Top 5% listed companies in Taiwan Stock Exchange Corporation's Corporate Governance Evaluation • Selected for inclusion as a constituent in the TWSE Corporate Governance 100 Index for 4 consecutive years • Selected as a constituent stock of the FTSE4Good TIP Taiwan ESG Index • One Financial Service Platform won the Comprehensive Innovation Leader Award in the DX Awards organized by the International Data Corporation (IDC) in 2018 • Included in the "Taiwan High Compensation 100 Index" for 5 consecutive years • Won the Gold Sponsorship, Long-term Sponsorship, and Promotional Bronze Awards in the 2018 Sports Contribution Award • Won the Second Prize in the "Buying Power for New Products and Services of Social Innovation Purchase Reward Program"

HNCB (Hua Nan Commercial Bank) • Received the Best Sustainability Award in the Financial Holdings Bank category of the 2018 Taiwan Bank Service Evaluation (organized by Excellence Group) • Selected as an excellence bank for "Asset Trust for the Senior and the Disabled" by the Financial Supervisory Commission and won the first place in the Excellent Performance Bank Evaluation in July 2018 • Selected as an excellence bank for "Incentive Policy for Loans from Domestic Banks to Innovative Key Industries (Phase 1)" by the Financial Supervisory Commission and won the Circular Economy Industry Special Award • Won the Financial Service Merit Award in the 5th Top Solar Award from the Ministry of Economic Affairs • Won the Green Energy Financial Contribution Award in the Renewable Energy Promotion Award from Taichung City Government • Received the Healthy Workplace Certification - Health Promotion Mark and Health Initiation Mark • Songjian Building received the Excellence Award in the 2018 Taipower Electricity Conservation Competition • Received the certificate of appreciation from the Environmental Protection Administration, Executive Yuan and selected as the Green Procurement Benchmark by the Department of Environmental Protection, Taipei City Government in September and November 2018, respectively • Received a medal for "Over-the-counter Intervention against Fraud"

HNSC (Hua Nan Securities Co.) • Won the Best Securities Broker Award in the Excellence Best Securities Firm Evaluation • Won the first place in the "Trading Volume Growth Diamond Award for Futures Commission Merchants" and the second place in the "Trading Volume Growth Diamond Award for Futures Exchange Supporters" in the 4th Futures Diamond Awards • Won the third place in the "Excellence Contribution Award" in the Securities Firm ETF Trading Competition • Won the third place in the "Best Customer Referral" in the Wealth Management Award • Won the Best Enthusiasm Award in the 9th TWKC • Received the Full Sprint Award in Digital Book-entry for Taiwan Depository & Clearing Corporation E-passbook

5 Sustainability of Hua Nan

SCIC (South China Insurance Co.) • Received the Information Security Quality Award from the British Standards Institution (BSI) • Received the "Best Insurance Professionalism Award", "Best Professional Consultant Award - Manager Hsu, Kuo-Tong from Risk Management Department", and "Best Communication Office Award - Taipei Branch" in the 19th Insurance Faith Hope Love Award from RMIM Inc. • Received the Outstanding Agricultural Insurance Contribution Award in the 12th Agricultural Finance Award from the Council of Agriculture, Executive Yuan • Received the Outstanding Business Award in the 2018 Microinsurance Competition from the Insurance Bureau, Financial Supervisory Commission • Received the Healthy Workplace Certification - Health Initiation Mark • Won the Best Social Responsibility Merit Award in the 2018 Insurance Faith Hope Love Award

HNIT (Hua Nan Investment Trust) • The Hua Nan Long Win Balanced Fund won the Gold Diamond Award for the 21st Balanced Fund "Three-year Term" Value Stock • The Hua Nan Long Win Balanced Fund won the 2018 Thomson Reuters Lipper Taiwan Fund Awards for the "Three-year Term" Mixed Taiwan Balanced Fund • Hua Nan Multi-Assets Balanced Income Fund TWD Inc won the Gold Diamond Award for the 21st Multi-Assets Balanced Fund Global "Three-year Term" Value Stock

Sustainability Highlights in 2018

Governance

Reported NT$14.621 billion in consolidated net profit after tax (an increase of 22%) and an EPS of NT$1.27 Adopted the Equator Principles 99.86% of the employees signed 9,917 copies of Letter of Undertaking for Intergrity Management As of 2018, 100% of the suppliers signed 578 copies of Letter of Commitment based on the requirements of each subsidiary More than 1,600 people participated in anti-money laundering training As of April 1, 2019, 3,063 employees of the Group have obtained the CAMS (Certified Anti- Money Laundering Specialist) certificate In January 2019, the Company commissioned EY Taiwan to conduct the evaluation of the Board performance for 2018 As of March 28, 2019, the Group has obtained 58 financial patents

6 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

Environmental

HNCB introduced ISO50001 for the first year The headquarters and each branch of HNCB reduced electricity consumption by 1,694,551 kWh, a decrease of 9.1% per capita The headquarters and each branch of HNCB reduced fuel consumption by 72,989 L, a decrease of 11%

The headquarters and each branch of HNCB reduced carbon emissions by 353 tons CO2e, a decrease of 4.8% per capita The headquarters and each branch of HNCB reduced water consumption by 27,673 L The amount of loans granted to green energy technology, new agriculture, and circular economy businesses totaled NT$534.4 billion, with the total balance of NT$257.5 billion The amount of investment in energy-saving business stocks totaled NT$690 million, and the amount of investment in green bonds totaled NT$5.46 billion Papaya insurance benefited 19 farmers for the first year The scale of the Hua Nan Global Agribusiness and Water Fund totaled NT$395 million as of 2018

Social

The growth rate of licenses obtained by employees of HNCB reached 10.24% The employee satisfaction rate exceeded 90% for 3 consecutive years The average salary adjustment of Hua Nan Financial Holdings, Hua Nan Commercial Bank, Hua Nan Securities, South China Insurance, and Hua Nan Assets Management exceeded 3% in 2018 Female employees of the Group accounted for 56%, and female supervisors of the Group accounted for 49% The expenditures on charitable activities totaled NT$102,828,745 in 2018, with 4,577 volunteer hours Additional 173 branches introduced the smart reception system The number of fraud cases reported in 2018 decreased by 33, and the amount of fraud decreased by NT$39.85 million A total of 14,256 microloan cases were granted, with the credit balance of NT$35,743,190,000 As of 2018, 602 housing loans for elderly care were granted The principal of the Asset Trust for the Senior and the Disabled increased by NT$177 million, with 746 additional beneficiaries From 2017 to 2018, 12 urban renewal cases were approved

7 Sustainability of Hua Nan

About This Report

Under the framework of five aspects, namely sustainable governance, financial innovation and services, employee care, environmental sustainability, and social benefits, this Report reveals the views and measures taken by Hua Nan Financial Holdings and its subsidiaries in the process of operations when faced with economic, social and environmental sustainability issues, and serves as the primary interface for communicating with the Company's stakeholders.

Reporting Period This Report covers information generated mainly between January 1 to December 31, 2018. Some information is updated to June 2019. The coverage period is specified in the report.

Boundary and Scope This year’s report primarily presents performance in the Taiwan region. The scope of information includes the parent company, Hua Nan Financial Holdings, and its six subsidiaries: Hua Nan Commercial Bank, Hua Nan Securities, South China Insurance, Hua Nan Investment Trust, Hua Nan Venture Capital and Hua Nan Assets Management. During the reporting period, the scale, structure and ownership of Hua Nan Financial Holdings did not change significantly. The Group’s offshore operations are proposed to be gradually included in the future reports in order to present a comprehensive view on the corporate social responsibility (CSR) management of the Hua Nan Financial Group.

8 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

Data Collection Process and Assurance Method of Measurement The Company had engaged PricewaterhouseCoopers Data in this Report were collected by inviting Taiwan to conduct independent limited assurance relevant departments to summarize the on some of the performance data in this Report Company's performance in the economic, social in accordance with the Statements of Assurance and environmental aspects in accordance with Engagements Standards No. 1 “Assurance relevant international standards and initiatives Engagements Other than Audits or Reviews of through data collection during daily operational Historical Financial Information”. The assurance management, issue discussions and interviews statement was provided in the appendix of the report. with each units. Four-year data from 2015 to 2018 were disclosed for some performance indicators. Issuance The collection, measurement and calculation Hua Nan Financial Holdings will publish its annual methods of various indicators were mainly based CSR Report on the Company's official website. on the local regulatory requirements. Areas where The time of the previous publication was June the local regulations did not cover, international 2018 and the issuance date for this version is standards (e.g. ISO-related international July 2019 (Chinese version). standards) were referenced. Where no international standards were applicable, industry Feedback standards or industry practices were adopted. Administrative Management Division, Hua Nan Financial Holdings Co., Ltd. Preparation Guidelines Tel: +886223713111 ext. 6309 The structure of this Report was based on the Fax: +886287291943 framework set out in the "Taiwan Stock Exchange Official website: www.hnfhc.com.tw Corporation Rules Governing the Preparation and E-mail: [email protected] Filing of Corporate Social Responsibility Reports Address: 23F, No. 123, Songren Rd., by TWSE Listed Companies", the Core Indicators Xinyi Dist., Taipei City, Taiwan under the Sustainability Reporting Guidelines of (R.O.C.) the Global Reporting Initiative (GRI Standards), and the Integrated Reporting formulated by the International Integrated Reporting Council (IIRC), while reflecting the UN Sustainable Development Goals (SDGs).

9 About Hua Nan Financial Holdings

Group Introduction Hua Nan Financial Holdings Co., Ltd. was the Co., Ltd. subsequently, all with 100% ownership. first financial holding company established in To increase operating performance, Hua Nan Taiwan. The Company was incorporated through Venture Capital incorporated and merged Hua a share swap between Hua Nan Commercial Nan Financial Management Consulting Company Bank Ltd. and EnTrust Securities Co., Ltd. on in 2013 and Hua Nan Commercial Bank merged December 19, 2001 with headquarters located HNCB Insurance Agency in 2017. In the future, in Taipei. To expand our scope of financial Hua Nan Financial Holdings will steadily expand services, the Group incorporated South China its business operations under strict risk controls Insurance and Hua Nan Securities successively and continuously exert group synergy effects to and established Hua Nan Venture Capital, become an excellent financial institution in the Hua Nan Financial Management Consulting Asia-Pacific region. Company and Hua Nan Assets Management

Founded in 1919, Hua Nan Commercial Bank has operated for 100 years with the main lines of business covering personal finance, corporate finance, foreign exchange, trust, and wealth management. As of 2018, Hua Nan Commercial Hua Nan Bank had nearly 200 operations and 7,620 employees in Taiwan and around Commercial Bank the world, with the total asset amounting to NT$2,622.1 billion. With the sound financial structure, Hua Nan Commercial Bank has been highly recognized by the credit rating agencies.

Founded in 1988, Hua Nan Securities is a securities firm with the main lines Hua Nan of business covering brokerage, proprietary trading, underwriting, and stock Securities agency. Hua Nan Securities has also provided new financial services, such as wealth management and offshore securities unit (OSU).

Founded in 1963, South China Insurance offers various insurance products and damage prevention services, including fire insurance, marine insurance, South China vehicle insurance, accident insurance, and health and injury insurance. South Insurance China Insurance boasts its excellent business growth and solid profitability better than the market.

Founded in 1992, Hua Nan Investment Trust offers a diversity of wealth Hua Nan management products and services, including public placement funds, private Investment Trust placement funds, and discretionary investment services.

Founded in 2004, Hua Nan Venture Capital has invested in nearly 100 Hua Nan Venture domestic and foreign companies covering the fields of semiconductor, Capital optoelectronics, and biotechnology and successfully fostered the development of start-ups.

Founded in 2005, Hua Nan Assets Management mainly assists the government Hua Nan Assets in solving non-performing loans of financial institutions, with the main lines of Management business covering non-performing loan investment and real estate investment and management.

10 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

Hua Nan Financial Holdings

Hua Nan Hua Nan South China Hua Nan Hua Nan Hua Nan Commercial Bank Securities Insurance Investment Venture Assets 100% 100% 100% Trust Capital Management Company 100% 100% 100%

Hua Nan Hua Nan Hua Nan Hua Nan International Securities (BVI) Futures Leasing Co., Ltd Management Holding 100% 99.95% 100% 99.80%

Hua Nan Hua Nan Banks Securities International Securities Leasing (Shenzhen) (Hong Kong) Insurance Asset Management Co., Ltd. 100% 100% Business

Business Locations

inancial olins 1 ans 18 Secrities 1 Taiwan roperty nsrance 0 nestent rst 1 entre Capital 1 C 1

ans 1 Overseas (Asia, Europe, Americas, etc.) Secrities 1 roperty nsrance 1

11 About Hua Nan Financial Holdings

Group's Business Performance in 2018 Business Performance

Item 2015 2016 2017 2018

Net revenue 39,565,414 42,232,422 42,220,548 46,002,484 (NT$, in thousands)

Total assets 2,350,288,574 2,545,941,962 2,573,419,750 2,684,206,863 (NT$, in thousands)

Equity 153,069,327 158,983,270 164,234,163 174,157,583 (NT$, in thousands)

Dividends paid to shareholders 5,783,342 6,240,972 7,364,347 5,523,260 (NT$, in thousands)

Tax paid to government* 2,543,063 2,769,662 2,392,584 2,070,719 (NT$, in thousands)

* Based on the audited consolidated financial statements of Hua Nan Financial Holdings for 2018. * More than 90% of the Group's net income is generated in Taiwan, which also incurs most of the income tax expenses.

Taxes paid in the region as a percentage of total taxes in 2018

Taiwan Overseas

12 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

Interaction within the Financial Industry

The Group is fully aware of the business The Group did not incur any expenses relating development directions of each financial industry to political activities. Expenses relating to through participation in external associations associations and financial conferences in 2018 and make recommendations on relevant issues. amounted to NT$13,911,228. Those associations include the Taiwan Financial Participation Services Roundtable, the Bankers Association As of Number of in Industry of the ROC, Taiwan Securities Association, the 2018 Directors Associations Non-Life Insurance Association of the ROC, Trust Association of ROC, the Securities Investment HNFHC 9 2 Trust & Consulting Association of the ROC, HNCB 14 4 Insurance Society of the ROC, Chung Hwa Financial Research & Development Association HNSC 10 2 (CHFRDA), Taiwan Stock Affairs Association, SCIC 15 5 Actuarial Institute of Chinese Taipei, the Financial Executives Institute of Taiwan, the Bankers HNIT 1 1 Association of Taipei, Cross-Strait CEO Summit, HNVC 1 0 Taiwan Institute for Sustainable Energy, and other similar organizations.

The Process of Sustainability Implementation • Adopted the Equator Principles • Incorporated AMC and HNVC • Employees signed the Letter • Approved the Integrity of Undertaking for Integrity Management Regulations Management

• Established the Corporate • Established the Integrity • Established the Legal Social Responsibility Committee Management Committee Compliance Committee of the • Approved the Code of • Formulated the Letter of Group Corporate Social Responsibility Commitment for the Group's • HNCB, HNSI, and SCIC of Hua Nan Financial Group suppliers completed the due diligence • Built a whistleblowing section guidelines and signed the on the official website Statement of Compliance • Formulated Hua Nan Financial • HNCB completed the Holdings' "Environmental introduction of ISO50001 Management Policy" Energy Management System • Completed the introduction and obtained the SGS of ISO 14001 Environmental certification Management System and • Organized two social enterprise obtained the BSI certification fairs to support the development • Completed the introduction of social enterprises of ISO 14064 Greenhouse • Conduct a third-party Board Gas Emissions Inventory and performance evaluation obtained the BSI certification

13 About Hua Nan Financial Holdings

Identification of Major CSR Topics and Stakeholders

2018 Major CSR Issue performances and changes in the industrial environment. We used analysis methods for 2018 marks the 5th year of the Company's domestic and foreign banking industries to compilation of the CSR Report. The assessment implement the assessment procedures. experience and result of past years were adopted as the basis for this year to review the operating

Identification of Stakeholders Through discussions held by each team within the CSR Committee, we identified 8 main categories of stakeholders, including customers, employees, competent authorities, investors, media, suppliers, external experts and trade associations, and Step 1 communities and non-profit organizations. Identification Identification of Issues of Concern From the issues of concern to the industry at home and abroad in the GRI Standards, we selected 18 issues based on internal evaluations concerning their relevance to the Group and recommendations from external consultants.

Impact of Issues Step 2 Questionnaires concerning the 18 issues were distributed in order Prioritization to understand the degree of concern of stakeholders and the level of impact on the Company. A total of 61 valid questionnaires were retrieved and 11 material issues were chosen.

Upon the materiality analysis of CSR issues, each team would Step 3 verify their completeness and further assess the level of influence Validation and boundary of major issues, and prepare for information collection.

Upon completion of the report, CSR Committee would examine Step 4 and review the report to ensure the appropriateness and accuracy of CSR information and performance. The results of the review Review would be used as an important reference for the report of the following year.

14 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

Based on this year's operating performance and changes in the industrial environment, the material issues in 2018 were adjusted below according to the above identification process:

Original Material Issue Adjustment Description Customer Privacy and Increased Information and Internet Security Information Security coverage

Green Finance/Social Integrated similar Product Environmental/Social Responsible Finance issues Responsibility Investment

GHG Emissions/Climate Change Climate Change Strategies Increased precision Strategies

Water Resources, Energy, and Energy and Resource Increased precision Waste Management Management

Employee Recruitment and Employee Recruitment and Integrated related Diversification Human Capital Development issues Development

Diversified and Healthy Occupational Safety and Health Increased precision Workplace

Corporate Citizen and Charitable Social Welfare Increased precision Activities

Material Issues Concerned by Stakeholders

Questionnaires concerning the 18 issues were the degree of any positive or negative impact distributed to the Company's CSR core team, which the Company and its value chain have management and employees, competent on the environment, society and the economy authorities, investors, suppliers, customers, regarding the issue. According to the results of trade associations, and media. A total of 61 valid identification, this year's material issues were questionnaires were retrieved in 2018. divided into critical issues (red bubbles), important issues (orange bubbles) and basic issues (yellow In addition, the materiality matrix was adjusted in bubbles), thereby forming the materiality matrix. 2018. In the adjusted matrix, the horizontal axis This year's report disclosed critical issues and is the significance of the issue to the business important issues based on the framework of the operations, and the vertical axis is the issue's GRI Standards. impact on the stakeholder assessment and decision-making. The size of bubble refers to

15 About Hua Nan Financial Holdings

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Corresponding GRI (Note 1) Scope of Impact (Note 2) Interested Issue Within the Outside the Stakeholders Issue No. Issue Organization Organization Competent authorities, Corporate investors, 102 General Disclosure V V Governance suppliers, trade associations, media Customer Rights 417 Marketing and Labeling V Customers, media Investors, Business 201 Economic Performance V suppliers, Performance employees Digital Financial 203 Indirect Economic Impact V Investors Services Investors, suppliers, Customer Privacy and customers, 418 Customer Privacy V V Information Security employees, trade associations, media

16 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

Corresponding GRI (Note 1) Scope of Impact (Note 2) Interested Issue Within the Outside the Stakeholders Issue No. Issue Organization Organization Competent authorities, investors, 205 Anti-Corruption, Public suppliers, Integrity Management V V 415 Policy customers, employees, trade associations, media Employee Recruitment and 404 Training and education V Investors Development Employee Investors, Remuneration and 401 Labor Relations V employees, media Equity Competent authorities, investors, 102 General Disclosure Risk Management V suppliers, 201 Economic Performance customers, trade associations, media Anti-Corruption Competent 205 Socioeconomic Leagal Compliance V V authorities, 419 Compliance investors, media

Occupational Safety and Health 403 Employee Diversity and Diversified and 405 Equal Opportunities V Media Healthy Workplace 407 Freedom of Association and Collective Bargaining Note 1: For the GRI Index Table, refer to the appendix to this Report. Note 2: The scope of impact is the boundary of a material issue. This table mainly describes the scope of impact of material issues and the association of the organization with these impacts based on the GRI Standards. The association of the organization with these impacts is divided into three levels of involvement: whether the organization directly causes the impacts, contributes to the impacts, or is directly related to the impacts through its business relationship. In the scope of impact, issues within the organization are mainly impacts caused by the Company directly (such as issues relating to employees and products and services); issues outside the organization are mainly impacts caused by the Company through its business relationship (such as issues relating to customers and suppliers); in addition, impacts relating to compliance and integrity management are indirectly caused by the Company with competent authorities.

17 About Hua Nan Financial Holdings

Communication with Stakeholders

Stakeholder Significance Channel of Communication

1. Set up a dedicated customer service Hua Nan upholds the service hotline. ideal of "focusing on the 2. Set up a dedicated mailbox to deal with customer and provide the queries from the public. customer with the ultimate 3. Conduct satisfaction surveys via phone or Customers experience" and remains Internet. committed to providing more 4. Deliver brochures containing the latest high-quality financial products financial information regularly. and services to create mutual 5. Organize wealth management and prosperity with customers. investment seminars.

1. Set up a dedicated hotline for employee complaints and sexual harassment Employees are Hua Nan's reports. most important business 2. Set up an employee message board on partners and talents are the intranet. Employees the key to companies' core 3. Hold labor-management meetings competitiveness and the periodically. foundation for sustainable 4. Regularly convene meetings of Employee corporate operations. Welfare Committee and Labor Retirement Reserve Supervision Committee.

1. Comply with rules and regulations of the relevant competent authorities in Competent authorities have conducting the Group's business activities increased their supervisory and fully disclose relevant information. standards for the finance Competent 2. Improve the quality of financial products industry and Hua Nan actively Authorities and business in line with the directions cooperates with government taken by the financial and economic policies and strictly complies policies of the government. with related regulations. 3. Attend seminars and forums held by the competent authorities.

1. Convene regular shareholders’ meetings and issue annual reports in English and The support of shareholders Chinese to convey business performance and investors are the power to shareholders. Investors behind Hua Nan's growth. 2. Regularly hold investors conferences, We value and treat each issue press releases, and disclosure shareholder's opinions equally. relevant financial information. 3. Set up an Investor Relation section on the official website.

18 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

Stakeholder Significance Channel of Communication

The media is an important 1. Regularly hold investors conferences channel for communication and issue press releases to disclosure between Hua Nan and relevant financial information. Media stakeholders and we aim to 2. Establish good interactions with the media provide positive influence for and relay relevant business topics of the the society. Company in a timely manner.

Suppliers are Hua Nan's important partners in sustainable development. We maintain responsible 1. Suppliers are required to comply with partnerships with suppliers and labor safety and environmental protection Suppliers to jointly achieve the goals of laws and regulations during transactions. sustainable development in 2. Purchase information transparency. ethics and honesty, labor and human rights, health and safety, and environmental protection.

1. Actively participate in external associations and other organizations The expertise of external to be fully aware of the developmental External experts and seminars organized direction of the financial industry. Experts by trade associations allow Hua 2. Participate in seminars and exchange and Trade Nan to fully understand each ideas with academic or consulting Associations financial industrial development agencies. trend. 3. Disclose relevant information in accordance with regulations on the Market Observation Post System website.

1. Regularly hold charitable events for vulnerable and disadvantaged groups. Hua Nan is committed to 2. Work in line with relevant advocacy facilitating stable social activities to assist communities in development and fulfillment understanding government policies. Communities of its corporate social 3. Long-term sponsorship of domestic youth and Charitable responsibilities. Communities baseball activities. Organize the Baseball Organizations and charitable organizations Dream classroom and other suchlike are important partners for Hua activities to nurture Taiwan baseball Nan to create positive social talents. impact. 4. Hold or sponsor academic and art-related activities.

19 About Hua Nan Financial Holdings

Future business strategy Looking ahead into the future, Hua Nan Financial III. Deepen financial technology, simplify process Group shall adopt the four major directions flow, improve service quality and operating including "legal compliance, risk management, efficiency, and expand customer base across talent cultivation, technology advancement" as generations and groups. the blueprint to improve the overall business IV. Construct a culture of governance, risk performance. We will also set 5 core strategies to management, and compliance (GRC) to protect the interests of shareholders, employees, ensure information security. and customers, while pursuing stable growth: V. Fulfill corporate social responsibility, I. Diversify income sources: Increase net service strengthen corporate governance, cultivate charge income and net financial income. talent, and achieve sustainable operation. II. Balance profit contribution within the Group and increase the benefits of asset and capital utilization.

United Nations Sustainable Development Goals (SDGs) The United Nations' Millennium Development As a corporate citizen of Taiwan, Hua Nan cannot Goals released in 2000 were succeeded by the 17 be absent in future sustainable development. Sustainable Development Goals (SDGs) in 2016, Since 2017, Hua Nan has connected its business opening a new era for sustainable development. strategies with SDGs. In 2018, we further In the face of rapid changes in the economy, reviewed five aspects of CSR and selected the environment, and society, the government, 14 SDGs to demonstrate our resolution for enterprises, and individuals interact with each sustainable development. other and partner to achieve the sustainable development. SDGs have become a global common language for sustainable development, enabling all parties to communicate and partner more effectively about social contributions in the hope of making greater influence.

20 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

21 About Hua Nan Financial Holdings

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22 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

S S nsre aailability an nsre inclsie u sstainable nsre access to eitable an ality s anaeent o ater aorable reliable an

ecation an t a an sanitation or all sstainable enery or all proote lielon ciee ener eality learnin an oens i

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23 Sustainability Governance

Corporate iersity o te oar o irectors Coittees or lillin Corporate erorance alation o te oar oernance Input oernance o irectors Sustainable Strategies inancial an nterrity anaeent Cltre anceent o nterrity anaeent Resorces Resorces nterity nsre iersity in te coposition o te oar an nterrity anaeent olicy pleentation o nterrity - enance te eectieness o te oar perorance e esinate nit in care o corporate oernance is te Corporate anaeent anaeent oernance Section ner te inistratie anaeent iision o a an Strenten te tree lines o eense in te internal inancial olins Co t total o eployees are in care o conctin Ris anaeent nit pleentation o Ris anaeent control te eternal ealation o te oar perorance Ris stablis a cltre o interity anaeent an e esinate nit in care o interity anaeent is te Corporate anaeent Ris anaeent olicy Cliate Cane Ris an pportnity ipleent coe o conct oernance Section ner te inistratie anaeent iision o a an pleent te policy an procere o antioney inancial olins Co t ic consists o eployees lanerin an conterterroris inancin n 2018 eac sbsiiarysbsbsiiary itin te rop oranie leal eal Copliance nit ntioney anerin an copliance trainin corses on leal copliance antioney lanerin interity anaeent an ris anaeent eal Conterterroris inancin pleentation o eal e total nber o antioney lanerin trainin ors eceee 100 Copliance Copliance iolations o Relations an Correctie ain a an Coercial an or eaple te reibrseent or te easres CS test ees an annal ebersip ees totale 11 illion as o pril 1 201

Action Plans

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ntellient Society an an Relationsip Resorces

e tirparty ealation o te oar perorance as coplete s o 2018 100 o te sppliers sine 8 etters o Coitent base on te reireents o eac sbsiiary 8 o te eployees sine 1 etters o nertain or nterity anaeent n 2018 ore tan 2000 pieces o inoration on iris cases aor neatie nes or essaes an a list o politically epose persons at oe an abroa ere sare itin te rop ater eientiication a total o 1 cases in 11 cateories ere sspicios oneylanerin transactions Sc inoration as sare an analye internally by te rop to speciically ientiy te crrent oney lanerin riss tat te rop ace y analyin te cateorie cases te rop as eectiely itiate an controlle te antioney lanerin an conterterrorist inancin riss e total nber o trainees in relate antioney lanerin trainin eceee 100 persons s o pril 1 201 te rop as a total o 0 eployees it CS certiication an te nber contines to increase inclin tose obtainin CS an CSC ner CS aance CS e rops inoration sarin plator as been establise to sare inoration on antioney lanerin itin te rop in accorance it an to abie to relate las an relations

24 Sustainability Governance

Action Plans

ntellient Society an an Relationsip Resorces

25 Sustainability Governance

1 1 Corporate Governance

"Corporate governance" is our first priority, and business operations. a strong legal compliance culture can effectively In terms of governance structure, the Company minimize risks, stabilize the Group's profits, aims for the functions of legal compliance, and establish the foundation for sustainable risk management, internal auditing and self- governance and development. We are committed examination to take effects simultaneously in to maintaining business ethics and an effective order to form a tight safety net and effectively system of accountability that exceed standards prevent any violation during business expansion. in the industry while upholding a high-level We hope to facilitate a close network of corporate governance system in all business governance, risk management, legal compliance, aspects. We conduct our business with integrity and internal audits (GRC) and abide by the and gradually build our corporate governance "ART" principles (including advantages: increase culture in hopes of realizing the long-term capital efficiency, implement cross-marketing, interests of shareholders and other stakeholders. and strictly control costs; risks: strictly abide by Compliance with statutory laws and regulations legal compliance and risk management policies; in company operations is the basic requirement technology: use FinTech). The key item, "risks" of corporate governance. The Company's has become an important core value in the management's implementation of legal Company's culture. compliance includes the establishment of a With the hard work of the Group, we ranked top refined internal control system in accordance with 5% of all listed companies in the 5th Corporate the “Regulations Governing Establishment of Governance Evaluation in 2018; in addition, we Internal Control Systems by Public Companies”, have been selected as a constituent stock of the “Implementation Rules of Internal Audit and the TWSE Corporate Governance 100 Index Internal Control System of Financial Holding for four consecutive years since 2015. We Companies and Banking Industries” and the were also selected as a constituent stock of Company's "Corporate Governance Best Practice the FTSE4Good Emerging Index in June 2017 Principles" . The Company thoroughly implements and the FTSE4Good TIP TaiwanESG Index in the legal compliance system and carries out risk December of the same year. management to ensure legal compliance of its

Ranking Top 5% of all listed companies in the 5th Corporate Governance Evaluation

Selected as a Constituent Stock of the FTSE4Good Emerging Index

Selected as a constituent stock of the FTSE4Good TIP Taiwan ESG Index

26 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

Sareolers eetin it Coittee

oernance oar o irectors Reneration Coittee nits an nctions nterity anaeent Cairan Coittee ice Cairan rop siness Stratey Coittee rop Corporate Social Responsibility Coittee

rop eal resient Copliance Coittee

集團資產負債管理rop sset rop noration rop aretin rop Ris an iability Stratey Coittee Stratey Coittee anaeent anaeent Coittee Coittee

1.1.1 Diversity of the Board of Directors 12 regular Board meetings and 1 extraordinary Board meeting in 2018. The average actual The Company's Board of Directors currently attendance rate of the directors is over 88.26%. includes 19 directors and is composed of The Board has four independent directors, professionals from the financial, industrial, accounting for 21% of the Board members. In and academic sectors. Its diverse composition addition, none of the Company’s independent includes 4 female members. As of July 1, 2019, directors concurrently serve as directors (including the average tenure is 5.35 years. With regard independent directors) or supervisors in more to Board operations, the Company convened than three TWSE (TPEx) listed companies.

Experience in the Legal Expertise Others Financial Industry

Insurance Expertise 1 Accounting Expertise 1 14 2 Labor Relations Expertise 1 Note: The tenure of the directors is calculated from the date of the director's first appointment as a director of the Company until July 1, 2019.

27 Sustainability Governance

Date Elected/ Director/Representative Gender Education/Work Experience Appointed Department of Commerce, National

Chairman Taiwan University Chang, Yun-Peng Director & President of Hua Nan Financial Representative of the 2019.06.14 Holdings Co, Ltd., Managing Director & Ministry of Finance President of Hua Nan Commercial Bank, Chairman & President of Hua Nan Venture Capital, Chairman of Bank of Kaohsiung

Chairman Lin, Ming-Cheng Master of Law, Keio University, Japan

Vice Representative of the Chairman of Hua Nan Financial Holdings Memorial Scholarship 2019.06.14 Co., Ltd., Chairman of Hua Nan Commercial Foundation of Lin, Hsiung- Bank, Director of Central Bank, Chairman Chen of the Bankers Association of Taipei

Bachelor of Public Finance, National Chung Hsing University (currently Director National Taipei University) Lo, Puo-Chu Manager of E-Financial Department/ Representative of the 2019.06.14 Manager of Audit Office of the Board of Ministry of Finance Directors, Hua Nan Commercial Bank, Chief Auditor of Hua Nan Financial Holdings Co., Ltd.

Ph. D. of Finance and Insurance, University of Rhode Island, the U.S. Associate Professor of Department of Risk Director Management and Insurance, National Cheng, Shih-Ching Chengchi University, Deputy Director of Representative of Bank of 2019.06.14 Risk and Insurance Research Center, Taiwan National Chengchi University, Member of the Fund Management Committee of the Council of Indigenous Peoples, Executive Yuan

Director Master of Industrial Engineering & Lin, Ming-Yu Management, National Chin-Yi University Representative of Bank of 2019.06.19 of Technology Taiwan Deputy Minister of the Ministry of Labor

Director Ph.D. of Finance, National Chengchi Wang, Chou-Wen University Representative of Bank of 2019.06.14 Professor & Chairman of Department of Taiwan Finance, National Sun Yat-Sen University

Director Ph.D. of Economics, Texas A&M Chen, Ho-Chyuan University, the U.S. Representative of Bank of 2019.06.14 Professor & Chairman of Department Taiwan of Economics, National Chung Cheng University Director Chang, Chiao-Hsiang Master of Business Administration, New Representative of Bank of 2019.06.14 York Institute of Technology Taiwan Director of Mega Securities

Director Ph.D. of Finance, London School of Yen, Yu-Ming Economics and Political Science Representative of Bank of 2019.06.14 Full-time Associate Professor of Department Taiwan of International Business, National Chengchi University

28 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

Date Elected/ Director/Representative Gender Education/Work Experience Appointed

Director T. Lin Master of Real Estate Economics and Representative of the Finance, London School of Economics Memorial Scholarship 2019.06.14 and Political Science, UK Foundation of Lin, Hsiung- Fund Manager of Mercury Asset Chen Management

Director Lin, Chih-Yang Representative of the Master of Commerce, National Taiwan Memorial Scholarship 2019.06.14 University Foundation of Lin, Hsiung- Attorney of Taipei Bar Association Chen

Director Lin, Chih-Yu Master of Business Administration, Representative of the University of California, Los Angeles, Memorial Scholarship 2019.06.14 U.S.A. Foundation of Lin, Hsiung- Assistant Vice President of Hua Nan Chen Venture Capital

Director Bachelor of Foreign Languages and Hsu Chen, An-Lan Literature, Tunghai University Representative of He Quan 2019.06.14 Chairman of Hua Nan Securities, Director Investment Co., Ltd. of Hua Nan Commercial Bank Director Hsu, Michael Yuan-Jen MBA of Wharton School, University of Representative of He Quan 2019.06.14 Pennsylvania Investment Co., Ltd. Vice Chairman of Hua Nan Securities

Director Shen, Vivien Chia-Ying Ph.D of Public Health (ABD), John Representative of Hopkins University, U.S.A. 2019.06.14 China Man-Made Fiber Vice President of Hongkong and Shanghai Corporation Banking Corporation Limited (HSBC) Independent

Director Master of Commerce, National Taiwan University Wu, Kuei-Sun 2019.06.14 Director General of Accounting Department, Central Bank, Chairman of Taiwan Clearing House Development Foundation Independent Director Ph.D of Law, Kobe University, Japan Lin, Kuo-Chuan 2019.06.14 Full-time Professor of College of Law, National Chengchi University Independent Director Master of Accounting, National Taiwan Yang, Ming-Hsien 2019.06.14 University Chairman of Deloitte & Touche Independent

Director Bachelor of Law, National Chengchi University Chen, Sung-Tung 2019.06.14 Public Prosecutor of Yunlin, Taichung, and Hsinchu District Prosecutors Offices, lawyer

29 Sustainability Governance

Diversity of Governance Organization

Age Total

31-50 5 2 7

51 or above 10 2 12

Total 15 4 19

Audit Committee fraud preventive measures in conjunction with laws and regulations to ensure ethical operation, The Audit Committee reports to the Board of planning a whistleblowing system and ensuring Directors, and it commenced operation in 2011. its execution effectiveness, promoting and It consists of all four independent directors, coordinating ethical policies and associated and at least two of them have accounting or training as well as handling matters in relation finance expertise. Its functions include mandates to the establishment, supervision and execution specified in the "Securities and Exchange Act" of ethical operation policies. It convened five and the "Company Act". The Audit Committee meetings in 2018, and the personal attendance convened 12 meetings in 2018 and all members rate of the committee members is 95%. attended at least 11 meetings. The personal attendance rate of committee members is 92%. Remuneration Committee 1.1.2 Performance Evaluation of the The Remuneration Committee reports to the Board of Directors Board of Directors, and it commenced operations The Board of Directors and the management in 2013. It consists of all independent directors annually review the self-assessment outcomes of of the Company. Its function is to establish and each managerial unit and the audit reports issued regularly review the policies, systems, standards by the auditing unit. The review is supervised by and structures of the performance evaluation the Audit Committee. and remuneration of directors and managers, so as to periodically assess and determine their The Company also established the "Guidelines remuneration packages. The Remuneration for Evaluating the Performance of the Board of Committee convened six meetings in 2018, and Directors", and the members of the Board and all members attended at least five meetings. The the Board secretary perform an annual internal personal attendance rate of committee members performance evaluation at the end of the year is 96%. on five major aspects of the Board (degree of understanding of the Company's goals Integrity Management Committee and missions and participation in operations; In 2016, the Company voluntarily established the knowledge of the duties of directors and the Integrity Management Committee, which reports quality of the Board's decisions; the Board's directly to the Board of Directors. It consists of all composition and structure; selection of suitable independent directors. The Integrity Management directors and continuing professional education; Committee is responsible for assisting in and internal controls); in addition, a third-party incorporating ethics and moral value into the evaluation of the Board performance is conducted Company’s operating strategies, establishing by an independent professional institution or

30 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018 expert organization at least every three years. and knowledge of the duties of directors, the The results of the performance evaluation are quality of the Board's decisions and degree submitted to the Board of Directors within 3 of understanding of the Company's goals and months after the end of the year. mission, the Board's composition and structure, the selection of suitable directors and continuing The results of the performance evaluation professional education, and internal controls. shall be deemed to "meet standards" when the achievement rates of all measured indicators are According to the evaluation conducted by EY above 80%. According to the results of the Board Taiwan, EY Taiwan believes that the Board of performance evaluation, the Company "met Directors of the Company has the healthy and standards" in both 2016 and 2017. sound interaction that is one of the fundamental elements of a high performance. Based on this In January 2019, the Company engaged EY good foundation, we expect that the observations Taiwan to conduct the evaluation of the Board on the members, operations, risk management, performance for 2018 in terms of structure, and performance supervision of the Board of people, and process and information through Directors can help the Company and the Board documentation review, self-evaluation survey, and of Directors continuously improve and become on-site interview. The results of the evaluation an industry model for corporate governance and have been reported to the board of directors, Board performance. including the degree of participation in operations

1.1.3 Strategic Committees for Better Corporate Governance

The Group has established the following strategic committees to strengthen corporate governance and enhance management efficiency.

Committee Purpose of Establishment

Group Corporate Social Fulfill the corporate social responsibility of the Group and actively Responsibility Committee promote relevant matters

Research matters relating to the Group’s mid-term and long-term Group Business Strategy development strategies, major investments, capital raising, mid and Committee long-term financing, annual budgets and performance evaluation of subsidiaries

Group Legal Compliance Formulate and review the Group's legal compliance system, AML/ Committee CFT programs, and material legal compliance incidents.

Research matters relating to the interest rate risk, liquidity risk, Group Asset and Liability exchange rate risk and risk-based capital management in the Management Committee banking book (non-trading book) of the Group.

Research matters related to cross-selling management, wealth Group Marketing Strategy management product assessment, channel development Committee management and customer relationship management of the Group.

Group Risk Management Research matters relating to the market risk, credit risk, operational Committee risk or other risks of the Group.

Research key matters relating to the short-term, mid-term, and Group Information Strategy long-term information strategies and information development of Committee the Group.

31 Sustainability Governance

Corporate Social Responsibility The Group established a CSR Committee Committee with the chairman serving as the convener to promote the fulfillment of corporate social The Group has endeavored to improve the responsibility throughout the Group. The main quality of financial products and business in line duties of the Committee include formulating major with the directions taken by the financial and strategies which shall be adopted by the Group economic policies of the government, so as to in fulfilling its corporate social responsibilities, provide industrial and commercial enterprises as supervising the implementation of corporate well as the general public with comprehensive social responsibility and examining the results financial services. We fully utilize our capacities thereof, monitoring the preparation and review of of promoting the industrial and economic the annual CSR report, and assessing relevant development and the well-being of society. In CSR regulations and significant issues for future addition, we adhere to the core values of 'HEART' reference. The Corporate Social Responsibility - Honesty, Efficiency, Activeness, Responsibility, Committee convened three meetings in 2018, and and Teamwork, and are committed to enhance the personal attendance rate of the committee business performance, protect customer rights members is 96%. Its composition is shown below. and maximize shareholder value in order to build a sustainable financial group.

Organizational Chart of Hua Nan Financial Group CSR Committee

Convener Chairman of Hua Nan Financial Holdings

Deputy Convener Vice Chairman of Hua Nan Financial Holdings

Members Presidents of the Hua Nan Financial Holdings and its subsidiaries

Corporate Customer Employee Environmental Social Governance Rights Care Sustainability Participation Team Team Team Team Team

Shareholder Product Liability Employee Environmental Community Care Rights Customer Rights Compensation Protection Charitable and Benefits Board Customer Service Green Activities Operations Employee Procurement Sports Customer Training Integrity Personal Data Work Place Development Management Protection Skills Energy Risk Management Management Management Labor Relations Legal Compliance Disclosure of Information

The members of each team are composed of representatives from Hua Nan Financial Holdings and its subsidiaries with one convener and one director-general who are in charge of supervising and managing the team affairs.

32 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

1 2 Integrity management

The principle of integrity is the ground for Nan Venture Capital Personnel Management sustainable development of the financial industry. Guidelines”. To implement and strengthen the principle of 1.2.3 Advancement of Integrity integrity and take a further step to develop a good management culture, the Group believes that the principle must be applied to all aspects of the Company’s Internal Advancement - Employees activities. Therefore, it is the first and foremost To integrate the integrity management culture fundamental rule for customers and employees as into the corporate culture of the Group, we have well as the society and the overall environment. used channels, such as the elevator TV wall and 1.2.1 Integrity management Culture periodic publications, to strengthen the promotion of the ethical culture. We have also included The Company has established the "Hua Nan related regulations on integrity management in Financial Holdings Integrity Management the legal compliance education and training of the Committee Charter" in March 2016 and Group. In 2018, each subsidiary/sub-subsidiary established the Integrity Management Committee within the Group organized legal compliance composed of all independent directors. The training courses on legal compliance, anti-money Committee is responsible for the Company's laundering, integrity management, and risk integrity management policies and the management. formulation, supervision, and implementation of the fraud prevention measures. Please refer to To further implement the integrity management the "Integrity Management Committee" section culture of the Group's employees, we began in the Corporate Governance Chapter for its requiring employees to sign the "Letter of main work scope. The Company's Integrity Undertaking for Integrity Management" in January Management Committee convenes at least once 2018. In addition to complying with laws and every year, and the meeting minutes are reported regulations relating to business activities, the to the Board of Directors and listed as material employees of the Group are required to avoid files of the Company. any unethical conduct in the process of business activities and to fulfill the duty of care as a good 1.2.2 Integrity management Policy administrator, so as to ensure the implementation of integrity management. As of February 2019, The Group has established the "Hua Nan the number of signatories reached 9,917 and Financial Holdings Integrity Management the proportion of employees who have signed Principles" as the Group's policy. In addition, the Letter of Undertaking is more than 99.86%. companies within the Group have set up related Certain employees have not signed the Letter regulations according to their respective business of Undertaking due to maternal leave or unpaid characteristics, e.g. “Hua Nan Financial Holdings parental leave. Employee Work Rules”, “Hua Nan Commercial Bank Employee Work Rules”, “Hua Nan External Advancement - Suppliers Securities Employee Code of Conduct”, “South The Company has established the "Supplier China Insurance Codes of Ethical Conduct”, “Hua Code of Conduct" in order to implement the Nan Investment Trust Managerial Practice”, “Hua Group's commitment and responsibility to Nan Assets Management Work Rules” and “Hua supplier management, ensure responsible

33 Sustainability Governance

partnerships with suppliers, jointly achieve the education and training program, we also promote goals of sustainable development in ethics the Integrity Management Principles on the and honesty, labor and human rights, health screen in the elevators of Hua Nan Commercial and safety, and environmental sustainability, Bank's headquarters building. We shall also and to comply with the "Hua Nan Financial continue to promote education on regulations Holdings Integrity Management Principles". The related to integrity to intensify the Group's Company has required suppliers to sign the integrity culture. "Letter of Commitment" since November 2016. Establishment of a Consistent A total of 578 copies have been signed as of Whistleblowing System within the Group the end of 2018. Based on the requirements of the subsidiary companies, 100% of the According to Article 34-2 of the "Implementation suppliers which are required to sign the Letter Rules of Internal Audit and Internal Control of Commitment have signed it. The supplier System of Financial Holding Companies and checklist was formulated on April 18, 2018 to Banking Industries", in order to promote a robust check the following: operation and build a corporate culture of integrity and transparency, financial holding companies (1) Whether the place of operation is a country shall set up the whistleblowing system, and with high risk of corruption designate a unit with independent functions at the (2) Whether the remittance counterparty is head office to accept and investigate the reported consistent with the transaction counterparty issues.

(3) Whether the supplier has established the The requirements for the establishment of Integrity Management Policy or related the whistleblowing system are stipulated by regulations the Financial Supervisory Commission (the FSC) in the "Implementation Rules of Internal (4) Whether there are public records of Audit and Internal Control System of Financial unethical conduct (e.g., bribery, illegal Holding Companies and Banking Industries," the political donations, etc.) of the Company "Regulations Governing the Establishment of and its representative in the most recent Internal Control Systems by Service Enterprises year (Judicial Yuan Law and Regulations in Securities and Futures Markets," and the Retrieving System: https://law.judicial.gov.tw/) "Regulations Governing Implementation of Supplier Code of Conduct: http://www.ir-cloud. Internal Control and Auditing System of Insurance com/taiwan/2880/engovernancepage/18/CH/ Enterprises;" that is, in addition to the Company, Behavioral%20Information10700418.pdf subsidiaries/sub-subsidiaries of the Group shall 1.2.4 Implementation of Integrity set up the respective whistleblowing system management according to the regulations governing the internal control system of the corresponding sector (bank, We received two letters reporting matters relating securities, property insurance, investment trust, to integrity management in 2018. Hua Nan futures, and investment consulting) promulgated Financial Holdings has responded to the letters by the FSC. To ensure that all reported issues and the reported incident was not true after within the Group are properly and consistently investigations. In 2018, there was one violation handled, the Company seeks for the opinions of of the "Hua Nan Financial Holdings Integrity competent authorities and refers to the practices Management Principles". The subsequent of other companies in the same industry, and responses were as follows: 1 major demerit and 1 then reports the whistleblowing system to the reprimand. In addition to including related integrity Group Legal Compliance Committee, the Audit management regulations in legal compliance Committee, and the Board of Directors in order

34 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018 for review and approval. In addition to the above, procedures for handling the reported cases within subsidiaries/sub-subsidiaries within the Group the Group, such as the confidentiality of a whistle- (venture capital and asset management, and blower's identity and reported cases, avoidance leasing) shall set up the consistent whistleblowing of conflicts of interest, prohibition of unfavorable system according to the same standards. personnel measures, protection of a whistle- blower's right to work, disclosure of fraudulent Announcement of Consistent practices of the management, obligation to report Whistleblowing Channels within the Group illegal acts, and punishment for false reporting, Each subsidiary/sub-subsidiary has established the Company has established the "Guidelines the consistent whistleblowing channels within for Whistleblowing System Operations" and the the Group, including mail, hotline, fax, and standard operating procedures for whistleblowing. email. These whistleblowing channels are These regulations provide clear and specific announced on the website and through notice procedures for handling reported cases within the and correspondence. Group. In addition, the Company compiles the Establishment of Consistent Reported number and handling status of reported cases in Case Handling Procedures within the each company within the Group every month to Group control the handling status of reported cases and avoid any damage to the Company's reputation. To clearly stipulate the standard operating

1 3 Risk Management

Risk management is one of the Group's core and implement a set of standards for risk competitive advantages and the Group's business management applicable to all members of the involves the acceptance and management of Group and use it to identify, measure, control, risks. Any business decision that involve risks assume and manage risks and reflect the Group’s must achieve appropriate balance between business goals and corporate value in order to risks and returns. The Group aims to establish maximize value for shareholders. 1.3.1 Risk Management Unit

Board of Directors

Chairman Vice Chairman

President Group Risk Management Group Asset and Liability Committee Management Committee Vice President

Risk Management Department

Credit Risk Market Risk Operational Risk Risk Integration Measurement Section Section Risk Section Section Section Responsible for assetliability management

Risk Management Function of Each Subsidiary

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Group Risk Management Committee Company's Risk Management Department serves as the deputy convener. The members consist of The President serves as the convener of the the Company's Vice Presidents, Director of the Group Risk Management Committee and the Vice Finance Department, Director of the Marketing President of the Company's Risk Management Department, Director of the Risk Management Department serves as the deputy convener. Department, and the Presidents and supervisors The members consist of the Chief Compliance responsible for assets and liabilities of subsidiary Officer of the company, the Director of the Risk companies designated by the convener, and Management Department, the Director of the related personnel. Personnel designated by the Legal Compliance Department, Risk Management convener may be adjusted in accordance with supervisors of subsidiary companies designated the topics discussed in the current Committee by the convener, and other personnel. Personnel meeting and the importance of the subsidiary designated by the convener may be adjusted company to the overall balance sheet of the in accordance with the topics discussed in the Group. Where necessary, external professional current Committee meeting and the importance consultants may also be invited to attend the of the subsidiary company to the overall risk meetings. One meeting shall be convened each management of the Group. Where necessary, quarter, but the convener may convene meetings external professional consultants can also be at any time based on business requirements. invited to attend the meetings. One meeting shall be convened each quarter but the convener may The main roles and responsibilities of the Group convene meetings at any time based on business Asset and Liability Management Committee requirements. include: provide macroeconomic analysis and interest rate forecasts, study rules and The main roles and responsibilities of the Group regulations related to the Group' asset and Risk Management Committee include: study the liability management, study limits related to the rules and regulations related to the management Group's asset and liability management, adjust, of the Group's credit, market and operational control and manage the exposure positions of risks, study limits related to the Group's credit assets and liabilities on the Group's non-trading and market risks, study the Group's new financial book, monitor the Group's various liquidity instruments or product plans, study the high- indicators, study and execute the Group's capital risk proposal of the Group's operational risk management strategies, review the composition assessment procedures, study the planning of and performance of the Group's investment the Group's major risk management system portfolios, review the Group's asset and liability establishment, review the Group's major reporting management report submitted to the Board of events submitted to the Board of Directors, and Directors, and study topics related to the Group's deal with topics concerning the Group's credit, interest rate risk, liquidity risk, exchange rate risk, market, operational, or other risks. investment portfolio strategies, economic profits Group Asset and Liability Management and capital management. Committee The Company has established the Risk The President serves as the convener of Management Department to take charge of the the Group Asset and Liability Management Group risk management affairs and affairs related Committee and the Vice President of the

36 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

to the aforementioned Committee. It regularly control, assume and manage risks, ensure that reports the risk management implementation the operational risks are controlled under the status to the Board of Directors. The Risk tolerance level and reflect the Group’s business Management Department includes five sections: goals and corporate value, the Company has Credit Risk Section, Market Risk Section, established the "Guidelines Governing the Operational Risk Section, Risk Integration Section Group Risk Management". Under the Guidelines, and Risk Measurement Section. Depending on policies are respectively set out for each risk the business nature and actual needs, each category, including “Group Corporate Finance subsidiary may set up an independent risk Credit Risk Management Policy”, “Group Personal management department or function. The main Finance Credit Risk Management Policy”, functions of the Group's risk management are as “Group Market Risk Management Policy”, “Group follows: 1. integrate Group risks; 2. formulate, Asset and Liability Management Policy” and approve and control Group risk-related “Group Operational Risk Management Policy”. policies ; 3. set, approve and control Group The approving authority of the aforementioned risk limits; 4. coordinate and manage risk guidelines and policies is the Company’s Board issues across subsidiaries; and 5. approve of Directors. product plans. Relevant provisions are established under each 1.3.2 Risk Management Policy risk management policy and submitted to the Group Risk Management Committee and Asset To establish and implement a set of standards and Liability Management Committee for review. applicable to all members of the Hua Nan They would be implemented upon approval from Financial Group and use it to identify, measure, the President.

Approval Level

Group Risk Management Guidelines Board of Directors

Credit Risks

Asset and Market Operational Liability Risks Risks Management Risk Management Asset and Liability Board of Directors Policies Management Policies

Credit Risks

Asset and Market Operational Liability Risks Risks Management Provisions for Provisions for Risk Management Asset and Liability Management President

37 Sustainability Governance

1.3.3 Implementation of Risk training and the total training hours amounted Management to 3,808 hours (272 employees *14 hours for each course). To encourage recommendations The monthly risk management report prepared for risk management mechanisms to improve by the Risk Management Department of the risk management performance, HNCB provides Company is submitted to the chairman for additional points for annual performance approval and the quarterly report is submitted to evaluations of branches whose recommendations the Board of Directors. Those reports help the for risk management tools or SOPs are adopted directors and managers in understanding and by the management unit responsible in the head mastering the Group’s risk profile for supervision office. Employees who make the proposals and decision-making purposes. In addition, the can also receive rewards in accordance with relevant business regulations and the control the Provisions for Employees' Research and points and limits of operating procedures Development Proposals". submitted by the subsidiaries to the Company are included in the agenda of the Group 1.3.4 Climate Change Risk and Risk Management Committee in accordance Opportunity with the regulations. The Risk Management According to the Global Risks Report 2019 Department would put forth their evaluations and released by the World Economic Forum, the recommendations concerning the proposal for risks associated with climate change have been managers to make decisions. the most concerned issue for three consecutive To strengthen the culture and awareness of risk years. In terms of the possibility of risk and the management, HNCB has launched physical impact of risk, the risks associated with climate and online risk management courses each year change continue to be among the top five. to continue to build awareness for "everyone's As the environmental awareness is rising, all responsibility in risk management". HNCB companies across the world must face the issue organizes annual risk management courses in of carbon emissions reduction. It will contribute to accordance with the "Transition Program for the industrial revolutions and encourage companies Training and Transfer of Current Employees". to integrate sustainable development issues into The courses include training on asset integration business strategies to effectively incorporate management, stakeholder regulations, corporate core competencies of the companies, manage credit ratings, derivatives risk management, various risks, and improve efficiency. HNFHC legal compliance and anti-money laundering pays close attention to operating risks derived and counter-terrorist financing, operational risk from climate change and periodically performs management and capital use efficiency, and evaluation and management on climate change branch performance evaluation programs. A total risks. We also uncover development opportunities of 4 "Risk Management Courses" were organized it brought forth to strengthen corporate social in 2018 and 14 hours of lectures were provided for responsibilities and sustainable governance. each course. A total of 272 employees received

38 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

Climate Change Risk

Description Reputation Risk Financial Impact

Failure to achieve voluntary carbon reduction ■■ HNFHC invests approximately NT$50 million in targets (by 5% in 2020 compared with 2016). human resources, operating capital, plans, and equipment procurement for carbon emissions reduction each year. ■■ The estimated shortfall from the target in energy savings is approximately NT$9.21 million.

Description Change in Financial Impact Average Climate change has caused a continuous Temperature ■■ Every one-degree Celsius increase in increase in the annual average temperature temperature is expected to increase electricity and the demand for air-conditioning has charges by NT$8.06 million each year. increased the electricity charges at the operating locations.

Description Typhoon Financial Impact

Climate change has increased the occurrence ■■ The replacement of equipment damaged by and intensity of typhoons and the operations typhoons is estimated at NT$6 million. of HNFHC's subsidiary companies may also ■■ The use of existing manpower for management be affected by mandatory holidays due to and the construction of removable flood- typhoons. prevention boards would cost NT$4.5 million.

Climate Change Response Strategy and Opportunity

Description Carbon Financial Impact Reduction ■■ Introduced the ISO 50001 Energy Action ■■ The management labor cost each year would Management System to improve energy amount to NT$3.17 million. usage efficiency systematically. ■■ 6% of the air-conditioning equipment each ■■ Continue to use the Smart Energy year is replaced at an investment cost of Conservation Management Platform approximately NT$44.89 million. for energy management at operating branches (electricity consumption status, temperature, CO2, etc.). ■■ Replace old power-consuming equipment. ■■ Strengthen employees' awareness of energy conservation.

Description "5+2" Innovative Financial Impact Industry ■■ Support three industries, namely "green Development ■■ The financial impact of the "5+2" industrial loan energy technologies", "new agriculture", balance and interest difference calculations and "circular economy", to help companies would amount to NT$5.08 billion. transition toward sustainable economic ■■ The cost of manpower would be NT$7.5 development and consolidate Taiwan's million each year for five members of the green position on the global stage. energy team.

39 Sustainability Governance

1 4 Legal Compliance

International supervision standards for 1.4.1 Legal compliance Unit compliance, anti-money laundering and counter-terrorist financing have increased and Hua Nan Financial Holdings is responsible for management issues involving subsequent legal the planning, management and execution of the compliance risks have become more important. legal compliance system. The Vice President is To comply with international trends and keep up the dedicated chief legal compliance officer of with the times, the Group maintains existing legal the Head Office and handles legal compliance compliance functions and continues to improve matters. Subsidiary companies have established various improvement measures. For instance, independent legal compliance units and appointed we have actively built an information system to a chief compliance officer of the head office in review changes in regulations and implement accordance with the laws of their respective various legal compliance tasks to reduce the cost industries. The parent company and subsidiary of manual operations and errors in management. companies make adjustments for consistency in We have also adopted a comprehensive legal compliance systems and norms to facilitate knowledge database management system, the in-depth management of the Group's legal composed the internal regulations compiled on compliance affairs. the Group's employee website and uploaded Group Legal Compliance Committee the latest regulations and forms at all times To strengthen the implementation of the Group's for employee inquiries, carrying out legal legal compliance system, we have set up the compliance affairs. Also, in order to control and Group Legal Compliance Committee. The respond to legal compliance risks at any time, main roles and responsibilities of the Group reporting information on legal compliance has Legal Compliance Committee are to formulate been available through the legal compliance and review the Group's compliance system, to information system. review the enforcement actions and downgrade In addition, the Group also advances legal imposed by financial authorities at home and compliance risk assessments and management abroad, and to implement AML/CFT programs. structures to build a strong corporate compliance The Chairman serves as the convener, and the culture. To improve the awareness of legal Vice Chairman serves as the deputy convener. compliance of Company's employees, we The members consist of the President of the continue to provide consultation, communication, Company, the Chief Compliance Officer of the regulatory education, training, and case studies Head Office, and chairmen and presidents of on violations of laws or regulations, material subsidiaries/sub-subsidiaries. Where necessary, discrepancies found in internal and external the Vice President of the Company, directors audits, and other material compliance incidents. of responsible departments, chief compliance Case studies and practices are integrated officers of the head offices of subsidiaries/sub- to analyze and explain regulations so that subsidiaries or external professional consultants employees can gain a deeper understanding may also be invited to attend the meetings as of regulations and actual implementation to Non-member. prevent violations and integrate the culture of The main roles and responsibilities of the Group compliance into the Group's corporate culture Legal Compliance Committee are to formulate and organization language.

40 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

the Group's legal compliance system, to review Group's legal compliance system, the results of the performance of the Group's legal compliance each company's money laundering and terrorist system and the effectiveness of the Group's financing risk assessment in 2017 and the report legal compliance, to study the amendment to on the anti-money laundering and counter-terrorist the Group’s anti-money laundering and counter- financing program for 2018, the implementation terrorist financing program, to review the action of the Group's key legal compliance projects, plan for the Group’s annual anti-money laundering the results of the Group's Institutional Risk and counter-terrorist financing program and its Assessment (IRA), the statement of risk appetite, performance, and to report the implementation of the anti-money laundering and counter-terrorist the Group's key legal compliance projects. financing program for 2018, and the certification of the Responsible Officer (RO) under the Foreign In 2018, the Group Legal Compliance Committee Account Tax Compliance Act (FATCA). convened five meetings, and discuss issues such as the quarterly implementation of the Group Legal Compliance Committee

Convener Chairman Chief Auditor Attending as Nonmember Deputy Convener Vice Chairman

Member President

Eternal Vice President Chief Legagl Compliance Officer Chairmen and Presidents Professional of Hua Nan of the Head Office of SubsidiariesSubsubsidiaries Consultants Financial Holdings Member Member Attending as Attending as Nonmember Nonmember Directors of Responsible Chief Legal Compliance Officers Departments of Hua Nan of the Head Offices Financial Holdings of SubsidiariesSubsubsidiaries Attending as Nonmember Attending as Nonmember

1.4.2 Implementation of Legal legal compliance status that affects the operation Compliance of the Company and improvement measures for key compliance events, such as illegal acts or To effectively follow the changes in laws and noncompliance cases or material deficiencies regulations, Hua Nan Financial Holdings identified during the internal and external audits, summarizes the changes in every industry are included in the quarterly legal compliance within the Group, conducts gap analysis, and report. Such report is reviewed at Group Legal formulates compliance plans on a weekly basis. Compliance Committee on a semi-annual basis; To comply with changes in laws and regulations, moreover, the Chief Compliance Officer of each each subsidiary/sub-subsidiary of the Group Company’s Head Office is required to report to adopts the same methods mentioned above and the Board of Directors and the Audit Committee formulates corresponding measures. In addition, or supervisors. To control legal compliance

41 Sustainability Governance

risks and explore the effectiveness of legal To effectively evaluate the performance of the compliance, Hua Nan Financial Holdings, Hua subsidiary companies' legal compliance system, Nan Commercial Bank, and Hua Nan Securities understand the Group's compliance risks and conduct the field visit on a regular basis and strengthen preventive measures, we have provide recommendations for the findings and implemented enhancement measures for the legal follow up the improvements in the hope of compliance system. They are described below: improving the effectiveness of legal compliance system.

To continuously monitor and manage the Group's legal compliance Legal Compliance affairs, the Company has established the Legal Compliance Information Information Submission System on the Intranet for employees to submit information Submission System on the progress and implementation of key legal compliance matters, gap analysis and response to changes in the laws and regulations, and violations. Through the real-time and periodic submission of information, the Company is able to control the implementation of legal compliance within the Group.

To ensure the completeness of the report on the implementation of legal compliance prepared by subsidiaries, the Company revised the subsidiaries' KPIs for the legal compliance and legal affairs management in 2018, mainly including revising the description of goals and rating methods for suspicious activity reports (SAR) in the evaluation items in compliance with anti-money laundering and counter-terrorist financing regulations, and adding the rating methods for failure to include in the Performance report on the implementation of legal compliance any defects in key laws Evaluation of and regulations found in the internal/external audit report. We set key Subsidiaries compliance indicators to monitor inspection opinions on subsidiaries' internal and external audits and legal compliance inspections as well as the occurrence and improvement status of violations, and to ensure the Group's overall compliance with anti-money laundering and counter- terrorist financing regulations. Moreover, through regular and continuous education and training, employees within the Group can understand the changes in laws and regulations at home and abroad and raise their awareness of legal compliance. Among the evaluation items for the performance evaluation of Hua Nan Securities, the proportion of points for compliance and legal evaluation items has been increased from 5% to 10%.

In view of the effective compliance with laws and regulations, it is necessary to keep abreast of the changes in the legal environment and respond in time. The Company has established the procedures and guidelines for the submission and approval system, where each company within the Group is required to control changes in laws and regulations Submission and through various channels at any time and report to the superior Approval System for approval upon knowledge (receipt) of information on laws and regulations; the superior is responsible to approve the compliance status of each department, conduct the gap analysis, and formulate compliance plans, based on which the internal policies and systems are adjusted and established. For the purpose of regular inspections, each company within the Group is required to conduct the regular reviews, internal audits, and education and training on changes in laws and regulations and case study to increase the employees' awareness of legal compliance.

42 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

In recent years, Hua Nan Financial Holdings has also gained understanding of the compliance status of each company and key Special Inspections compliance practices both at home and abroad. Measures include on Legal compliance investigations on subsidiaries and sub-subsidiaries and Compliance System annual legal compliance audits. HNFHC has also proposed relevant Implementation recommendations. The execution standards and intensity of legal and Performance of compliance within the Group have gradually become consistent. The Subsidiaries and audit reports and recommendations are reported to the Group Legal Sub-subsidiaries Compliance Committee, Audit Committee, and the Board of Directors and made available to each department for reference; the Company also follows up the results of improvement. Related inspection reports are also submitted to the departments in charge of audit and risk management for reference during the performance of the second and third lines of defence.

1.4.3 Legal Compliance Training through the Group's Legal Compliance Mailbox for them to make preparations and comply with The Group aims to build employees' compliance changes in regulations. In addition, the Company DNA to fully integrate compliance awareness periodically compiles major legal compliance into business activities. We therefore implement incidents, discrepancies found in internal and legal compliance training through multiple external audits, and penalties on other companies methods. With regard to education for the Group in the industry and places them on the Group's on changes in the regulatory environment, we employee website for employees to view at any currently compile the status of amendments and time. drafts of competent authorities' regulations in Each year, the Company organizes continuous various industries, important announcements legal compliance training for the Group. Topic- and press releases, penalty cases for other specific training is also organized for new companies in the same industry and deliver or popular issues. In 2018, the Company them to employees of the group periodically

43 Sustainability Governance

incorporated the following topics into legal cases, common types of defects found in the compliance training for the Group: the industry, and related key laws and regulations "Regulations Governing the Implementation in legal compliance training, so as to avoid the of the Common Standard on Reporting and recurrence of the same type of cases. Due Diligence for Financial Institutions", the Taking Hua Nan Commercial Bank for example, Whistleblowing System, the FinTech and to strengthen legal compliance and anti-money Information Security Risk Management, and laundering culture, legal compliance officers and the EU's General Data Protection Regulation the staff are required to undergo qualification (GDPR). In terms of legal compliance training training and all trainees must pass exams to for compliance officers and the staff, the obtain certificates. Every year, detailed training training hours and the number of trainees met programs are provided for senior executives the regulations of the competent authorities and regular employees, and a series of physical competent authorities. In 2018, more than 200 courses, online courses, and video education are directors than 200 directors, supervisors, and provided based on the nature of each business. managements attended, showing that the Group To verify employees' studies on important attaches great importance to legal compliance, regulations, we periodically implement online from the management to the staff. tests for important regulations. 1.4.4 Overseas Compliance Officers Forum

The Group has always based its sound operations on "rule of law, risk, technology, talent". The head office and overseas branches shall attach more importance to the development and implementation of a corporate culture of anti- money laundering and legal compliance. The head office shall provide necessary support and assistance for overseas branches; in addition, the The Group aims to incorporate the concept Board of Directors and the senior management of legal compliance into business activities by shall establish the legal compliance policy and a implementing legal compliance training through top-down framework of legal compliance and anti- multiple methods. At present, the company-wide money laundering to monitor, prevent, and identify legal compliance training is organized every possible legal compliance risks. quarter, covering key laws and regulations, official As Hua Nan Commercial Bank has operations in letters, violations, defects found in the internal/ Europe, Asia, the U.S., and Australia, it is the first external audits, and self-evaluation review. In among the state-owned banks that has organized addition, the legal compliance unit requires each the Overseas Compliance Officers Forum since business unit to conduct the gap analysis in case 2018 to strengthen the supervision of overseas of a change in laws and regulations, and checks branches and interaction between the compliance whether each business unit amends related officers of the head office and overseas branches. regulations in accordance with the laws and In the seminar, attendants, including legal regulations within the given time limit. To improve compliance officers of overseas branches and the employees' awareness of legal compliance, directors, supervisors, and executives of Hua Nan the legal compliance unit shares the punishment Financial Holdings and Hua Nan Commercial

44 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

Bank, will share the supervisory regulations and money laundering regulations established by trends in each country. The seminar was held each competent authority in charge of relevant from January 31 to February 2, 2018 with 88 business, subsidiaries/sub-subsidiaries following attendants. The seminar for 2019 was held from the certain standard regulations can facilitate the January 30 to January 31 with 90 attendants. overall control of money laundering risks within the Group. Therefore, the Group has established 1.4.5 Anti-money Laundering and the consistent anti-money laundering and counter- Counter-terrorist Financing terrorist financing policy and procedures.

1. Consistent Anti-money Laundering and 2. The Group's Anti-money Laundering and Counter-terrorist Financing Policy and Counter-terrorist Financing Plan Procedures within the Group The Group has established the Group's Anti- With the exception of the venture capital company money Laundering and Counter-terrorist which is not an applicable target specified in Financing Plan. By establishing overall group Article 5 of the "Money Laundering Control Act", regulations to mitigate the money laundering and subsidiaries and sub-subsidiaries in the banking, terrorist financing risks in various businesses securities, investment trust, investment consulting, of the Group. The Company has established futures, property insurance, AMC, and lease the Group's Anti-money Laundering and are required to abide by anti-money laundering Counter-terrorist Financing Plan upon approval regulations, including offshore companies, such of the Board of Directors. The Plan mainly as oversea branches of the bank and securities specifies the establishment of dedicated anti- firm (Hong Kong). The Company integrates money laundering units and supervisors, risk the common control mechanisms based on assessment, due diligence, reporting, record the regulations of each sector and conducts retention, information sharing, continuous review the gap analysis of key regulations to ensure and monitoring, internal audits, and training that each company within the Group complies programs. Subsidiaries and sub-subsidiaries with the anti-money laundering regulations of the Group that are applicable to the "Money and the anti-money laundering program at the Laundering Control Act" have established group level. Compared with inconsistent anti- policies and procedures including the Anti-Money

45 Sustainability Governance

Laundering and Counter-Terrorist Financing 4. Compliance of Oversea Branches Policy, Guidelines, Manuals, SOPs, and other Although current requirements for anti-money internal regulations. laundering in the laws of various countries mostly 3. Engagement of Group Advisers and adhere to the 40 Recommendations of the Establishment of Compliance Standards Financial Action Task Force on Money Laundering (FATF), the content of laws remain different and To ensure the level of compliance, the Group has financial supervisory authorities in different areas engaged advisers to provide guidance on the anti- implement varying levels of supervision which money laundering and counter-terrorist financing substantially increased difficulties for compliance system optimization, and included subsidiaries and management. and sub-subsidiaries, including Hua Nan Assets Management and Hua Nan International Leasing Taking Hua Nan Commercial Bank for example. Co., Ltd., to be part of the Group’s anti-money Hua Nan Commercial Bank currently has 13 laundering and counter-terrorist financing offshore branch institutions spread across nine program. In addition, to enhance the Group's anti- countries or regions on four continents. According money laundering and counter-terrorist financing to the "Directions Governing Internal Control mechanism, identify, measure and monitor risks System of Anti-Money Laundering and Counter in accordance with the domestic and foreign laws Terrorism Financing of Banking Business, and regulations and guidelines and requirements Electronic Payment Institutions and Electronic of international agencies, and establish the Stored Value Card Issuers", oversea branches internal control and audit system standards for are required to implement anti-money laundering anti-money laundering and counter-terrorist or counter-terrorist financing measures consistent financing that are consistent across the Group, with those adopted by the head office while The Company has established the management meeting local regulatory requirements. Where the organization and the Group's anti-money minimum requirements between the head office laundering and counter-terrorist financing program and branchs differ, the higher standard shall be to manage the compliance of each subsidiary/ adopted as the basis for compliance. Therefore, sub-subsidiary based on the consistent standards. the Head Office has required oversea branches Through the understanding of the risk assessment to analyze the differences between related of the subsidiaries/sub-subsidiaries, the Company anti-money laundering regulations in Taiwan undergoes risk assessment at the group level. By and abroad in 2017 in order to understand the setting the risk appetite, the Company mitigate gap between countries' anti-money laundering money laundering and terrorist financing risks regulations. For the organization and employees, and control the operations of money laundering HNCB actively recruited local employees with prevention across the Group. Each company experience in competent authorities and large within the Group also actively invests a certain financial institutions to strengthen the expertise amount of resources and expenses in establishing of supervisors and staff members responsible the anti-money laundering unit, recruiting for anti-money laundering or counter-terrorist professionals, appointing advisers, acquiring the financing and introduce international thinking. anti-money laundering database and information With regard to the anti-money laundering and system, sharing the information across the Group, Counter-terrorism Financing, each overseas and carrying out continuous employee education branches have implemented an Institution Risk and training. Assessment (IRA) and adjusted their compliance

46 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

system to include anti-money laundering and Sharing Practice Reference for Financial Holding counter-terrorist financing plans based on the Companies formulated by the Bankers Association results of the risk assessment. In addition, of the Republic of China and acknowledged by oversea branches have continuously established the FSC. The aforementioned guidelines and anti-money laundering assistive systems to standard operating procedures provide clear improve the accuracy and efficiency of transaction regulations for the collection, storage, movement, monitoring and name checking. Information and use of anti-money laundering information technology is adopted to process related work performed by each subsidiary/sub-subsidiary and continue the optimization of functions. within the Group to which the "Money Laundering Control Act" applies. Under the "Money In addition, Hua Nan Securities requires Laundering Control Act" and the "Personal employees to sign the "Employee Code of Information Protection Act", each subsidiary/sub- Conduct" online every year. The Employee Code subsidiary within the Group may compare, review, of Conduct, which clearly specifies the laws and confirm, transmit, and use the Group's anti-money regulations associated with money laundering laundering information to mitigate the money prevention, requests employees to stay alert to laundering and terrorist financing risks. money laundering, terrorist financing, or other illegal transactions at any time, properly confirm To increase the benefits of sharing of information the identity of the customers and beneficiary on anti-money laundering and counter- owners, and keep a record of transactions. In terrorist financing within the Group, the Group addition, employees are under obligation to help has established the Anti-money Laundering stop money laundering and shall not suggest, Information Sharing Platform, where information conceal, or assist others in converting illegal can be uploaded and reported immediately to proceeds into seemingly legal funds. Employees strengthen information sharing between the shall also report any suspicious activities as soon companies within the Group. In addition, the as possible according to the regulations of the Company can analyze information obtained from Company. the platform to explore the distribution of high-risk cases within the Group. Based on the comparison 5. Establishment of the Group's Anti-money and analysis of categorized cases and risk Laundering Information Sharing Platform assessment reports, the Company can formulate Given that sharing anti-money laundering the effective mitigation measures to control the information within the Group can effectively money laundering and terrorist financing risks. mitigate the money laundering and terrorist To share information on due diligence reports, financing risks of each subsidiary/sub-subsidiary transactions and accounts, abnormal transactions within the Group, the Company has established or activities, SAR cases, negative news figures the "Guidances for Anti-money Laundering and among domestic and overseas branches, Hua Counter-terrorist Financing Information Sharing" Nan Commercial Bank has established related and the standard operating procedures for the regulations and information systems. Group's information sharing in accordance with the "Implementation Rules of Internal Audit and 6. Anti-money Laundering Training Internal Control System of Financial Holding With continuous advancements in money Companies and Banking Industries" promulgated laundering and terrorist financing methods and by the FSC and the Anti-money Laundering continuous improvement in new criminal methods, and Counter-terrorist Financing Information competent authorities have increased standards

47 Sustainability Governance

and requirements in line with the international knowledge of money laundering prevention and awareness of anti-money laundering and counter- to ensure the effectiveness of training. Those terrorist financing issues. Flaws in anti-money who fail to qualify must take supplementary tests laundering tasks will cause material harm to at the Head Office. In addition to enhancing the reputation of the Company and the country knowledge of legal compliance, Hua Nan and we must be wary of such risks. Financial Commercial Bank also organizes the training institutions shall continue to implement legal program for anti-money laundering and counter- compliance and anti-money laundering and terrorist financing on a regular basis to improve counter-terrorist financing, and shall continue the ability to identify suspicious transactions. The to provide employee training. In addition to program introduces the money laundering and the required hours of training implemented in terrorist financing cases to help the anti-money accordance with requirements of the Financial laundering and counter-terrorist financing officers Supervisory Commission, the Company also and clerks of business units identify and stay works hard to expand the culture of compliance alert to various criminal activities. The Company within the Group and make it an important has also engaged Taiwan Academy of Banking core value of the Company. The Company and Finance to arrange the public prosecutors or seeks to cultivate the Board of Directors, senior investigators of the Investigation Bureau, Ministry management, and base-level employees' anti- of Justice to improve the ability to review cases. money laundering and counter-terrorist financing In response to the third mutual evaluation of the expertise and integrate the anti-money laundering Asia/Pacific Group on Money Laundering (APG) and counter-terrorist financing culture into the in November 2018, the then Chairman Wu, Tang- work of each employee. Chieh led more than 1,600 responsible executives Following the industry-leading legal compliance and employees to attend more than 100 hours of education and training provided for the Board of intensive training. Directors and senior management of Hua Nan To increase employees' expertise, the Company Financial Group in 2016, the Chairman of the encourages employees to take the Certified Anti- Company invites directors, independent directors, Money Laundering Specialist (CAMS) test and and supervisors of all companies within the improve their professional capabilities. In addition Group, as well as the senior management and to providing full reimbursement for the test fees personnel in the departments of legal compliance, and the membership fees for the first year, the internal audit, risk management, and anti-money CAMS certification is also listed as a consideration laundering, to attend the Group's anti-money for reassignments or talent pool assessment. We laundering education and training every year. hope to use employees who have passed CAMS In addition, to ensure that every Group member certification as seed instructors in the anti-money is aware of anti-money laundering and counter- laundering training of all business units to make terrorist financing, all companies within the Group our due diligence investigations and review of have implemented the anti-money laundering suspected money laundering transactions more training and exams since June 2017. Taking Hua comprehensive and accurate. As of April 1, 2019, Nan Commercial Bank for example, Hua Nan the Group has a total of 3,063 employees with Commercial Bank organizes the "Anti-money CAMS certification, and the number continues to Laundering and Counter-terrorist Financing Test" increase, including those obtaining CAMS-AUDIT at least once every year to strengthen employees' and CAMS-FCI under ACAMS (advanced CAMS).

48 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

1.4.6 Material Violations of Regulations and Corrective Measures

SCIC

Defect in car insurance payment receipt: When SCIC conducted car insurance payment receipt and underwriting activity, some payment receipt dates were later than effective dates, and some insurance agent premiums were not received within the agreed one month period according Contents of to the contract in insurance agent premium receipt activity, which violated the Violation "Procedure for Car Insurance Payment Receipt and Underwriting and Matters Need Attention" and Subparagraph 2, Paragraph 1, Article 5 of the "Procedure for Insurance Companies to Implement Internal Control and Audit" stipulated in accordance with Paragraph 3-1, Article 148 of the Insurance Act. The Company was penalized in accordance with Paragraph 5, Article 171-1 of the Insurance Act.

Amount of NT$1.2 million Fine

(I) Review of the violation: 1. Strengthen the payment receipt management by completing the payment of premiums before the effective date of an insurance policy. 2. The employees of business units shall follow up the collection of insurance agent premiums on a regular basis and request insurance agents to pay the premiums collected before they become overdue. 3. Compile the uncollected premiums and their reasons and submit them to the heads of business units on a regular basis for review and improvement; impose an administrative punishment on the sales personnel based on the frequency of violations. (II) Follow-up improvement in the violation: 1. Sales personnel delaying the payment of premiums paid by customers: (1) The sales personnel shall complete the payment via the financial payment system, and the insurance policy will be printed automatically after write-off based on the financial system control rules. The Finance Department prepares a monthly exception report. The Car Business Follow-up Department assists with the exception report follow-up. Corrective (2) If the sales personnel delay the payment, they shall create a reason Measures for such delay in the system before printing the insurance policy. If the delayed payment is caused by the fault of the sales personnel, in order not to affect customer's right, the policy will still be printed out after the payment. However, the Finance Department will include it in the violation report and the sales personnel will receive an administrative punishment. 2. If an insurance agent fails to pay the premiums within the agreed one month period according to the contract, the following corrective measures shall be taken by liability: (1) The delay is caused by the insurance agent: In order to rectify the violation, either one of the following three actions will be taken based on the seriousness of violation: communication with the agent, warning in written format, or suspension of agency. (2) The policy is sold through the insurance agent, but the Company's own personnel cause the delay: In order to rectify the violation, either one of the following three actions will be taken based on the seriousness of violation: administrative punishment, retain part of the operation bonus, or suspension of the person's sales activity.

Explanation: Material violations of regulations are cases with losses in penalties in excess of NT$1 million or business restrictions.

49 Financial Innovation and Services

Digital Banking > Channel Integration > Big Data Implementation Sustainable Strategies Input > Mobile Payment > Talent Cultivation Development and Financial Human Financial Innovation > Digital Marketing Resources Resources Provide convenient digital financial services and > Fair Design and Sale of > Accessible Financial Services promote financial innovation - Investment in software and hardware amounted to NT$24.38 million. Valuing Customer - A total of 16 training courses on financial innovation were organized, and 186 people attended. Products Promote financial education and fraud prevention Rights > Financial Education and Fraud - Taking Hua Nan Commercial Bank and South China Insurance for example, Hua Nan Commercial > Customer Communication and Prevention Promote green finance Bank has spent NT$10.5 million in developing patents as of 2018; South China Insurance's Instant Insurance Claim Project Team consists of 14 members with a budget of NT$7,135,000. Services Close the gap between the rich and the poor and improve social resilience - The Group's budget for the cultivation of big data talents amounted to NT$4,981,500 in 2018. > Information Security Strategy > Information Security System Strengthen sustainable financial products - A total of 9 training courses on financial education and fraud prevention were organized (875 Information trainees). Certification Enhance the health and well-being of the elderly Security > Information Security - The Green Energy Team consists of 5 members with an annual cost of NT$7.5 million. and people with disabilities Implementation Measures - Green bonds totaling NT$1 billion were issued. Advance urban renewal and create sustainable - The total number of micro-business loans reached 14,256 as of 2018. services Creating Positive > Micro Products > Charity Trust - Micro-insurance coverage was provided for 4,920 individuals in 2018. - A total of 19 members participated in the development and promotion of Papaya Insurance. > Aging Society > Agricultural Insurance Impact of - The development of "Housing Loans for Elderly Care" in 2016-2017 amounted to NT$1.96 million, Financial Services > Advancing Urban Renewal and > Information Security Insurance and the labor cost totaled NT$7.5 million based on the number of members participating in the Creating Sustainable Services Innovation development of "Housing Loans for Elderly Care". The total cost reached NT$9.46 million. - The labor cost of the Urban Renewal Team was estimated at NT$15 million. > Green Finance - The total loans approved for urban renewal reached NT$9.8 billion. Action Plans

1. Adopt a smart reception system in physical outlets 8. Offer papaya insurance and the Hua 2. Expand mobile payment services Nan Global Agribusiness and Water 3. Develop financial patents Fund 4. Cultivate FinTech talents 9. Promote the Asset Trust for the Senior and the Disabled and housing loans for 5. Strengthen the advocacy against fraud elderly care 6. Investing in the low-carbon energy industry: 10. Implement the "Three Arrows of Urban Facilitate the Green Finance Action Plans and Renewal", including the establishment loans to “5+2” key industries and provide of Urban Renewal Team, enhanced city/county governments loans to the green cooperation with quality builders, and Output energy industry and boiler upgrading urban renewal of self-use buildings 7. Provide a number of SMEs and policy-based concessional loans and microloans to enhance the financial accessibility to the financially disadvantaged

- A smart reception system was introduced to 173 Smart Manufacturing Society and Human branches. Relationship Resources - A total of additional 40,476 application forms were filled in through reservation to reduce 675 hours of waiting for customers (1 minutes per application). - The Group has obtained 58 financial patents as of March 28, 2019. - A total of 22 employees within the Group completed the 1st Big Data Analysis Expert Training. - A total of 350 teams and 1,525 participants attended the Hua Nan Financial Holdings' 3rd FinTech Innovation Contest in 2018, and more than 10 students participating in the contest have worked for the Group. - The number of fraud cases was reduced by 33 from that in 2017, and the amount of fraud cases was reduced by NT$39.85 million. - The number of green energy loans increased by 4. - A total of NT$534.4 billion in green energy technologies, new agriculture, and circular economy industries was approved, and the loan balance was NT$257.5 billion. - Investments in energy conservation and environmental protection industries and green bonds amounted to NT$690 million and NT$5.46 billion, respectively. - The credit balance of micro-business loans amounted to NT$35,743,190,000; the number of micro-insurance cases was 1, and the claim amounted to NT$300,000. - As of the end of 2018, the scale of Hua Nan Global Agribusiness and Water Fund was NT$395 million. - The number of Papaya Insurance beneficiaries totaled 19 in 2018. - The housing loans for elderly care totaled 602 cases as of 2018. - The accumulated amount of Asset Trust for the Senior and the Disabled increased by NT$177 million, and the 50 number of beneficiaries increased by 746. - From 2017 to 2018, the number of approved Urban Renewal Projects was 12. Financial Innovation and Services

- A smart reception system was introduced to 173 Smart Manufacturing Society and Human branches. Relationship Resources - A total of additional 40,476 application forms were filled in through reservation to reduce 675 hours of waiting for customers (1 minutes per application). - The Group has obtained 58 financial patents as of March 28, 2019. - A total of 22 employees within the Group completed the 1st Big Data Analysis Expert Training. - A total of 350 teams and 1,525 participants attended the Hua Nan Financial Holdings' 3rd FinTech Innovation Contest in 2018, and more than 10 students participating in the contest have worked for the Group. - The number of fraud cases was reduced by 33 from that in 2017, and the amount of fraud cases was reduced by NT$39.85 million. - The number of green energy loans increased by 4. - A total of NT$534.4 billion in green energy technologies, new agriculture, and circular economy industries was approved, and the loan balance was NT$257.5 billion. - Investments in energy conservation and environmental protection industries and green bonds amounted to NT$690 million and NT$5.46 billion, respectively. - The credit balance of micro-business loans amounted to NT$35,743,190,000; the number of micro-insurance cases was 1, and the claim amounted to NT$300,000. - As of the end of 2018, the scale of Hua Nan Global Agribusiness and Water Fund was NT$395 million. - The number of Papaya Insurance beneficiaries totaled 19 in 2018. - The housing loans for elderly care totaled 602 cases as of 2018. - The accumulated amount of Asset Trust for the Senior and the Disabled increased by NT$177 million, and the number of beneficiaries increased by 746. 51 - From 2017 to 2018, the number of approved Urban Renewal Projects was 12. Financial Innovation and Services

Hua Nan Financial Holdings won the Comprehensive Hua Nan Commercial Bank won the 12th Wealth Experience Innovation Leadership Management Bank and Securities Evaluation The 2nd IDC Digital Transformation Award Best Trust Award

Hua Nan Commercial Hua Nan Commercial Bank won the Asset Trust for Bank won a Medal for the Senior and the Disabled Outstanding First Place in the Outstanding Performance in Performance Bank Evaluation Over-the-counter Intervention and Fraud Prevention

Hua Nan Commercial Bank won the 5th Top Solar Hua Nan Commercial Bank won the Renewable Award Energy Promotion Award Financial Service Merit Award Green Energy Financial Contribution Award

Hua Nan Commercial Bank won the Incentive Policy Hua Nan Securities won the Excellence Best for Loans from Domestic Banks to Innovative Key Securities Firm Evaluation Industries (Phase 1) Best Securities Broker Award Excellence Bank and Circular Economy Industry Special Award

52 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

South China Insurance won the Insurance Quality South China Insurance won the 20th Insurance Faith Award Hope Love Award Best Image Excellence Award Best Insurance Professionalism Award

South China Insurance won the Information Security Hua Nan Investment Trust: Hua Nan Long Win Quality Award Balanced Fund won the "Three-year Term" Mixed from the British Standards Institution (BSI) Taiwan Balanced Fund 2018 Thomson Reuters Lipper Taiwan Fund Awards

Hua Nan Investment Hua Nan Commercial Bank won the 9th Taiwan Trust: Hua Nan Multi- Banking and Finance Best Practice Awards Assets Balanced Best Consumer Finance Award Income Fund TWD Best Digital Finance Award Inc won the 21st Multi- Assets Balanced Fund Global "Three-year Term" Value Stock Hua Nan Securities won the Securities Firm ETF Gold Diamond Trading Competition Award Third Place in the Excellence Contribution Award

Hua Nan Securities won the 4th Futures Diamond Awards First Place in the Trading Volume Growth Diamond Award for Futures Commission Merchants Second Place in the Trading Volume Growth Diamond Award for Futures Exchange Supporters

Hua Nan Securities won the Wealth Management Hua Nan Securities won the 9th TWKC Award Best Enthusiasm Award Third Place in the Best Customer Referral Award

Hua Nan Securities won the Digital Book-entry Hua Nan Investment Trust: Hua Nan Long Win for Taiwan Depository & Clearing Corporation Balanced Fund won the 21st Balanced Fund "Three- E-passbook year Term" Value Stock Full Sprint Award Gold Diamond Award

53 Financial Innovation and Services

2 1 Digital Banking Development and Financial Innovation

The rapid advancement of FinTech has allowed customers can experience convenient, quick, people's financial activities to transcend the safe, innovative, zero-barrier, and heart-warming restrictions of space and time. To provide more services. precision services and quickly understand Financial Patents customer demands, the Group has adopted 5 major strategies, including "channel integration", As of December 31, 2018, HNCB has obtained "mobile payment", "digital marketing", "big data 44 financial patents, including 40 utility model implementation", and "talent cultivation" to patents and 4 invention patents, from the continue to advance digital financial development. Intellectual Property Office of the Ministry of The Group is committed to integrating and Economic Affairs; HNSC has obtained 6 financial implementing its resources and online and patents, including 5 utility model patents and offline channels to integrate and adopt the latest 1 invention patent, and Hua Nan Investment technologies on the basis of its financial expertise Trust has obtained 1 utility model patent from in order to build an automatic recommendation the Intellectual Property Office of the Ministry of system for financial products and services of the Economic Affairs. Group and establish a one-stop financial service As of March 28, 2019, Hua Nan Commercial platform that satisfy customers' diverse demands. Bank and Hua Nan Securities have respectively We also cultivate internal big data analysis obtained 50 and 6 financial patents approved by experts and recruit students with outstanding the Intellectual Property Office of the Ministry of FinTech performance on campus to continue to Economic Affairs; South China Insurance and inject innovation powers for FinTech development Hua Nan Assets Management have also obtained in the Group. In the future, the Group shall 1 financial patent, respectively. These financial continue to uphold the service ideal of "focusing patents encompass mobile platforms, big data, AI, on the customer and provide the customer with security protocols, and biometrics. The number of the ultimate experience" to provide more high- financial patents is as follows: quality financial products and services so that

Number of FinTech Patents As of March 28, 2019

Patent Mobile Security Big Data AI Blockchain Biometrics Others Total Category Platform Protocols Hua Nan Commercial 21 6 4 2 3 5 9 50 Bank Hua Nan 0 1 4 0 0 0 1 6 Securities South China 1 0 0 0 0 0 0 1 Insurance Hua Nan Investment 0 0 0 0 0 0 1 1 Trust

54 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

Note: Key financial patents obtained by each subsidiary are as follows:

1. HNCB: In September 2016, HNCB obtained the patent on "Electronic Red Envelope" from the Intellectual Property Office of the Ministry of Economic Affairs, making it the first state-owned bank in Taiwan that obtained a FinTech patent. In early 2017, HNCB applied this patent to a marketing campaign, where customers shook their mobile phones to send red envelopes and receive cash incentives. In recent years, HNCB has actively developed FinTech and obtained important patents, such as Mobile Withdrawal System, Financial Account Management System, Active-Active Data Center, Active-Active Backup Architecture, and ID Image Uploading and Search System.

2. HNSC: Facing ever-changing stock market information and complicated analysis reports, most investors found it hard to select good stocks. In view of this, HNSC has worked with Hua Nan Securities Investment Management to develop two smart stock selection APPs since 2016. The APPs were launched on May 17, 2017 to provide a smart investment environment more in line with the needs of customers. The APPs were praised by many customers as soon as they were launched, and their functions, such as New Stock Selection Evaluation Logic and Stock Analysis Report System, have obtained the patents.

3. SCIC: To improve the service quality of automobile insurance and develop FinTech, SCIC has developed the Instant Insurance Claim System since 2017. The Instant Insurance Claim System was launched in February 2018 and obtained the utility model patent in March 2019. Through the Property Insurance Field Staff Operating System and Device, the field staff use iPad to process claims on-site by uploading information on policyholders' losses to the system, which automatically proposes claims corresponding to the types of loss and controls the quality and light signals to ensure the efficiency and quality of automobile insurance claims.

4. HNIT: In the past, investors made investments based on their own judgment; however, many investors were unable to judge the boom and industry cycle especially when the market fluctuated significantly with several interference factors. Many investors also lacked confidence and were unable to invest at a suitable time, making their efforts in vain. 2018 is the first year of robot-based wealth management. Financial players quickly followed the trend of FinTech and offered services in the field of robot-based wealth management or investment. Most investments were made in funds. In December 2018, HNIT obtained the patent on the Smart Fund Investment System. Developed based on a big data investment plan, the Smart Fund Investment System adopts AI and big data analysis to realize the investment discipline, reducing the risk of market fluctuations and securing the stable return on investment in both bull and bear markets.

55 Financial Innovation and Services

2.1.1 Channel Integration adopts big data technologies applications and analyses to provide customers with high-quality, In response to the arrival of the digital era, diverse, comprehensive, and secure digital the Group continues to organize marketing financial services. Transactions through online campaign to promote digital channels and channels have exceeded 80% in recent years. it

1. Personal and corporate mobile banking Special Digital Finance 2. First state-owned bank to offer "SnY Digital Service" Products 3. "Taiwan Pay QR Code Mobile Payment" HCE mobile debit card

1. HNCB was the first to launch Bank 3.0 online services for digital banking and it provides online application services including online banking, credit card, and personal consumer loans. All services were placed online in October 2015 and HNCB became the first state-owned bank that was approved by the FSC for opening up 12 Bank 3.0 online application services.

Special Digital Finance 2. HNCB was the first to open WeChat Pay cross-border payment Services collection services in Taiwan and it provides stores in Taiwan with a convenient and secure payment collection method. 3. HNCB launched the "Interactive Teller Machine (ITM)" to take the load off counter services. 4. HNCB became the first state-owned bank to launch the "quick login" service with biometrics technologies that greatly improved the convenience for customers to log into services.

Hua Nan Commercial Bank

To improve the quality of digital financial services in physical channels, HNCB introduced the smart reception system in 2018. All branches were equipped with digital services, such as prioritized services for customers who have filled out forms in advance, iBeacon identifier and message push, smart reception, and lobby manager service.

Customers can download the "HNCB Reservation" app on mobile phones or tablets Prioritized Services and fill out the deposit, withdrawal, fund transfer for Customers who and fund remittance information to obtain the QR Have Filled Out code. They can use the QR code at the branch to Forms in Advance register their arrival and enjoy prioritized services to reduce the amount of waiting time.

Customers who switch on the Bluetooth iBeacon Identifier function on mobile phones can receive the Device iBeacon instantaneous broadcast message and customized service information.

Lobby Manager The lobby manager guides customers and adjusts Service staffing with iPad.

56 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

On January 3, 2019, HNCB replaced online ads and EDMs with a low contact rate by the LINE official account to increase the interaction with customers and enhance customer relationships.

"Quick and Easy Loans" Online Credit Application Platform

The "Quick and Easy Loans" online credit application platform provides 24-hour application services. Customers can calculate their own loan credit line and interest rates and enjoy the efficiency and convenience of modern digital technologies.

HNCB became the first state-owned bank to provide the "Credit Line Interest Rate Calculation" service for credit loans. In 2018, the number of applications and approved cases and the amount processed on the online platform grew by 50% or more from the same period in 2017. Results for the approval can be provided in as little as 3 hours and funds are appropriated on the same day. Customers are not required to visit the bank for the application, verification, or fund appropriation and loan procedures have become simple and efficient.

South China Insurance

South China Insurance completed the establishment of the eCover e-commerce website (https://www.ecover.com. tw) in 2001, making it one of the few property insurance companies that established online insurance service at early stages. Online insurance service was officially launched in January 2015. In July 2016, the website equipped with responsive web design (RWD) was launched. As of 2018, the website has provided comprehensive travel insurance, automobile insurance, motorcycle insurance, residential fire insurance, member section, and claim services to provide customers more convenient insurance services.

Hua Nan Assets Management

HNAMC was the first financial holding company in Taiwan that offered the entrusted auction service. In 2018, HNAMC integrated the Group's resources and launched the "Foreclosure Partner" to offer one-stop service for foreclosed houses; an exclusive website, a toll-free service line, and the LINE official account were also established to provide related information, such as monthly reports on foreclosed houses, one-on-one online consulting service, and knowledge of foreclosure.

57 Financial Innovation and Services

2.1.2 Mobile Payment such as account opening, e-trading, stock market trends, and smart customer services. Service is To promote mobile payment and attract young no longer limited by time and space and can be customers, HNCB launched ApplePay in April offered to meet the needs of customers more 2018. In response to the ongoing government precisely, quickly, and flexibly. policy on mobile payment, HNCB continued Hua Nan Securities also provides more smart to increase the availability of TaiwanPay. In services in many aspects through LINE, such November 2018, HNCB allowed its credit cards as stock price inquiry, AI-based stock selection, to bind to Taiwan Mobile Payment APP with the ordering, account inquiry, smart customer service, QRCODE. and investment information push and inquiry. To allow customers to experience the In the future, Hua Nan Securities expects to convenience of mobile payment, HNCB organized introduce more personalized and differentiated a donation event in 2018, where people were services online, enabling customers to manage invited to make a donation through HNCB Pay their assets anywhere and anytime based on the (TaiwanPay). A total of 60,000 donations were financial trends with a networking device. Hua made, amounting to nearly NT$2.6 million. In the Nan Securities will continuously fulfill the Group's first half of 2019, HNCB also organized a HNCB business philosophy of creating customer- Pay donation event in cooperation with Taiwan oriented ultimate experience and provide instant Alliance for Advancement of Youth Rights and investment and wealth management services Welfare, Light Children Association, Huikuang based on the needs of customers. Guide Dog Foundation Taiwan, and Taiwan South China Insurance Cancer Friends New Life Association. To embrace the digital development, South China In response to the government's goal of achieving Insurance has established the LINE@ platform 90% of mobile payment by 2025, HNCB Pay to provide a diversity of marketing services, (TaiwanPay) has been made available at over including online insurance, electronic compulsory 3,200 FamilyMart stores across Taiwan since insurance card, online payment, automobile November 2018 to increase the availability of insurance claim APP reporting, service location, mobile payment. and customer services, and news and knowledge 2.1.3 Digital Marketing of insurance. In the future, South China Insurance expects to introduce AI and robotics and provide Hua Nan Commercial Bank more advanced online services. To attract the young generation and enhance the brand image, HNCB has actively managed social media marketing, including LINE, Facebook, YouTube, and IG, and organized online and offline activities that increase the interaction with customers.

Hua Nan Securities

In response to the rapid advancement of FinTech, Hua Nan Securities is committed to developing an online investment and wealth management network. Hua Nan Securities has launched the exclusive APP to offer a series of online services,

58 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

2.1.4 Big Data Implementation Smart Marketing Platform at the group level and formed the Group Big Data Service Promotion We are committed to applying big data analysis Task Force. HNFHC was responsible to supervise to various aspects of digital finance based on the development of big data service in each a customer-oriented approach. In 2018, we subsidiary company. The specific four aspects of established the Big Data Analysis Platform and big data services are as follows:

Form the Group Big Data Study the introduction of Data Personnel Analysis Team and cultivate external data permitted by data scientists to improve law and integrate internal the Group's technological, information to expand a analytical and business customer-oriented database. power of big data.

Establish the regulations Create big data analysis for analysis and marketing models to promote marketing system management Application and optimize customer Management and introduce data, new experience; expand analytics, and machine the strategy planning, learning model verification business analysis, and risk mechanisms to improve the management of big data quality of analytical data. analysis.

Big Data Implementation and Results Future Development and Application Based on a customer-oriented approach, we Precision Marketing for Consumer Finance: integrated marketing resources of 38 online We use big data analyses and algorithms and offline channels across subsidiaries to to complete model establishment of the detect the customers' behavior and response customers of the Group. We also use the instantly. With a machine learning model and generated customer tags to create individual automated product recommendation service, product recommendation association models we met customers' current need for products which integrate similarities of the behavior of and services and delivered superior customer customer groups and uniqueness of products experience with S.M.A.R.T marketing. of individual customers to build an automatic recommendation system for the Group's Single View products and services. Create a 360-degree customer profile and Public Opinion Application for Corporate know customers in an all-round manner Finance: Mobility Through internal data and public opinion Track customers' behavior and response in analysis, we provide positive and negative online and offline channels information, such as business forecast and risk warning, for business units' reference Automation in the process of business promotion, loan Automatically introduce product application, and post-loan management. recommendation information Risk Warning: Real Time We use the "Automobile Insurance Loss Make instant response to customer needs Forecast Model" to determine the probability of losses and help the assessors review insurance requirements and select quality applicants.

59 Financial Innovation and Services

2.1.5 Talent Cultivation The 2nd Big Data Analysis Expert Training is currently ongoing to continuously cultivate 25 big To establish and maintain each subsidiary's data analysis experts in hopes of strengthening capacity for big data analysis, master the latest the Group's capacity for big data analysis and technology and application of big data analysis, introducing big data applications to each business and facilitate the Group's strategy planning, unit. business promotion, business opportunity and Hua Nan Commercial Bank organizes internal risk assessment, we enhance the skills of big basic training on digital finance on a regular basis data analysis experts and cultivate talents in and encourages clerks to take related digital digital finance through continuous education and finance certification examinations held by external training. organizations. Each branch selects 1~2 clerk(s) The Group has cultivated a total of 22 big data as the e-commerce seed member(s) to receive analysis experts in the 1st Big Data Analysis enhanced internal and external training and gain Expert Training, which features a stringent and hands-on practice in digital finance services. continuous training system, including monthly Hua Nan Commercial Bank also seeks for young training transfer, sharing of practical output and talents or outstanding professionals in campus marketing application, and advice and guidance activities and contests. from external experts on the results of big data analysis.

Hua Nan Financial Holdings' 3rd FinTech Innovation Contest

Hua Nan Financial Holdings organized the 3rd FinTech Innovation Contest in 2018, which integrated the innovative power of the industry, government, academia, researchers, and startups. A total of 350 teams from 225 departments in 63 universities/colleges participated in the event, where more than 5,000 elites, including exchange students from Singapore, Malaysia, Japan, Hong Kong, and China gathered and manifested new promise of FinTech in Taiwan.

60 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

The four intentions of the event are (1) to facilitate national development and cultivation of talents in Fintech, (2) to allow students to connect with the industry earlier, (3) to improve the competitiveness of the financial industry; and (4) to attract talents in FinTech research and development. Since 2017, the Group has provided students selected for the finals an opportunity to participate in an interview directly in the next 3 years. As of today, more than 10 students have worked for the Group.

2 2 Valuing Customer Rights

"Customer-centricity" is Hua Nan Group's long-term goal of the Group. The Group also business philosophy in servicing customers. understands the needs of customers through HNCB respects customers and values customer diversified channels of customer communication. feedback. We adopt communication and service 2.2.1 Fair Design and Sale of Products methods that are more easily understood and accepted by customers to provide continuous Hua Nan Financial Holdings has established care and communication and bring us closer to group-level internal management regulations: customers. To ensure that the rights and interests 1. "Financial Consumer Protection Management of customers are protected, we implement the Outlines of Hua Nan Financial Group": To customer satisfaction survey. The Group also supervise the Group's subsidiaries to ensure values the rights and interests of people with that the interests of consumers are protected, disabilities by providing a friendly financial and that financial consumer disputes are environment for people with disabilities to handled fairly, rationally and effectively. ensure their full access to basic rights and fair, reasonable and convenient financial services. 2. "Directions for Wealth Management Product Assessment of Hua Nan Financial Group": To The increasingly complex financial transactions consolidate the Group's resources, manage and financial environment have brought many the Group's wealth management products, risks to investors, which also highlights the and assess whether the rationality and risks of inadequacy of management of risk tolerance for each product have been adequately disclosed their own financial transactions and those of their in order to safeguard the customer rights. customers. The financial industry values integrity first and foremost. How to maintain the rights and 3. Two-stage reviews for certain products: interests of customers through fair design and The Group's products must comply with the sale of financial products, obtain the qualification regulations of each subsidiary company for the certified financial planner (CFP), and and shall be subject to review in the product improve expertise in wealth management is the review meetings of each subsidiary company.

61 Financial Innovation and Services

Compared to competitors, certain risky or complex products require a second-stage review in the HNFHC product review meeting Customers to fully protect consumer interests and control the risks of the Group.

HNCB has established the regulations governing The customer service staff confirm the protection of customer rights: the unit in charge according to the customer's appeal 1. To assess the reasonableness of products, fully expose the risks of products, and adapt to the risk attributes of customers and products, The customer service staff refer the HNCB has referred to the Guidelines for appeal beyond their authority to the Review of Wealth Management Products branch or business management unit and the Guidelines for Suitability of Wealth Management Products formulated by the competent authorities, so as to protect the The unit in charge handles the rights and interests of customers. These customer opinion case according to guidelines also serve as the basis for bank the customer's appeal clerks in related operations.

2. When providing wealth management The unit in charge records the products for customers, HNCB shall assess handling status in the customer service electronic form or on the a customer's risk attribute and review the risk information platform and closes the level of the products, and shall adjust the risk case after the approval of its head according to the Guidelines for Suitability of Wealth Management Products to protect the rights and interests of customers.

2.2.2 Customer Communication and automatically notifies the person in charge of the Services issue and the supervisor through emails. The feedback is processed fairly, reasonably, and Hua Nan Commercial Bank effectively in accordance with the Guidelines HNCB provides customers with diverse, for Handling Financial Consumer Disputes, and convenient, and instantaneous consultation respond to the customer within 30 days. channels to provide customers with immediate Hua Nan Securities feedback on their opinions and questions. The "Customer Service Center" is responsible Customers can provide opinions for business for all customer feedback. It provides diverse units directly and they can also use the toll-free communication channels and customers can grievance hotline, customer service line, smart provide grievances through the customer service customer service, SMS line, Internet telephone, hotline, customer service mailbox, customer online text messages, opinion mailboxes, ITM message board, customer service LINE@ visual customer service, and mail to voice their account, and branch personnel or supervisors. concerns. After the contact window accepts, Grievances are classified in accordance with the receives and processes the feedback, it notifies four major guidelines specified in the "Regulations related units through the system and the system on Customer Complaint Procedures and

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Voice of Customer

Ms. Chiu called the HNCB Customer Service Center due to a credit card problem. As the Customer Service Center was busy at that time, Ms. Chiu left a message for the customer service staff to call back. The customer service staff provided a thorough and professional explanation for the credit card problem proposed by Ms. Chiu. As Ms. Chiu intended to cancel the credit card application that did not meet her needs, the customer service staff first provided credit card-related benefits and sincerely persuaded Ms. Chiu to stay with HNCB. Ms. Chiu made a comment through HNCB's opinion mailbox on the evening to appreciate the "voice message" function and the professionalism, courtesy and attentive service attitude of the customer service staff.

Management". Each processing unit complies with the principles of fairness, reasonableness, and effectiveness in Hua Nan Securities' Customers "Financial Consumer Protection Management Policy" to process the grievances. The results shall be delivered to the customer within seven Customer service personnel record days of receiving the grievances, and the issues stated in customer calls response shall be completed within thirty days at and classifies issues based on four major guidelines the latest.

South China Insurance

In order to improve the efficiency and quality The feedback is transferred to of consumer dispute handling and to protect related units, branches, or managers the customer rights, a "Policyholder Complaint Committee" has been set up to supervise and manage relevant consumer disputes. In order The processing unit seeks a solution for the customer's issue to increase the emphasis placed on consumer and completes the customer dispute cases, the “Consumer Dispute Resolution feedback case before submitting System” has been re-formulated and rules the customer grievance form to the unit supervisor who applies the seal governing regular reviews, follow-up audits and and delivers it back to the customer education and training practices have been service unit introduced. The complaint review meetings are held monthly for the relevant units to improve Customer service personnel record services or as education and training. The and retain related information for "Consumer Dispute Cases Review Task Force" five years was established to review special or major disputes, so as to quickly resolve consumer disputes with consumers and improve service quality.

63 Financial Innovation and Services

Summary of Customer Grievances and 2. HNSC handled 34 grievances in 2018 and Handling Status the average handling days was 3 days, which was less than 30 calendar days stipulated in Proportion Number of Number of Closed Grievances of Closed the Financial Consumer Protection Act. Most Cases A/B in 2018 A Cases B (%) of the grievances were about services and HNCB 16 16 100% were solved after communication with the HNSC 34 34 100% customers. SCIC 20 20 100% 3. SCIC handled 26 grievances in 2018 and the 1. HNCB handled 16 grievances in 2018 and the average handling days was 1 day, which was average handling days was 9 days, which was less than 30 calendar days stipulated in the less than 30 calendar days stipulated in the Financial Consumer Protection Act. Most of Financial Consumer Protection Act. Most of the grievances were about claims, and the the grievances were about personal loans, and type of disputes was mostly the identification the type of disputes was mostly the difference of disability level. in perspectives. All grievances were properly handled.

Customer Satisfaction Survey of HNCB eneral Cstoers Hua Nan Commercial Bank values each customer group. The surveys of overall satisfaction, customer service satisfaction and business satisfaction were conducted with general customers, calling customers, and wealth management customers. The results were as follows:

erall Satisaction ercentae o Satisie Cstoers

64 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

Callin Cstoers HNCB CFP Certification Test Results

With the development of increasingly diverse financial products and tax cooperation around the world, HNCB seeks to improve the expertise of wealth management personnel for tax and wealth management planning for high net worth customers, and plans for the Certified Financial Planner (CFP) professional qualification test. The test encompasses investment, wealth management, tax planning, risk management, cash flow planning, and comprehensive asset placement, and it is a challenging qualification certification for wealth management professionals in the finance industry. HNCB has therefore provided Cstoer Serice Satisaction multiple incentives to encourage wealth ercentae o Satisie Cstoers management personnel to actively register for the test. As of the end of March 2019, the ealt anaeent Cstoers Bank has nearly 100 certified personnel, and most of the qualified personnel are wealth management personnel. This demonstrates that HNCB's personnel have continued to improve and make advancements. Their overall qualifications place them among the top in the wealth management sector of the banking industry and they can effectively protect the interests of financial consumers.

Satisaction Cstoer Satisaction ercentae

65 Financial Innovation and Services

South China Insurance's Claim Care

To enhance the quality of claim service and reduce the complaint rate, the auto insurance section organized the “Claim Care Team” to provide post-claim services via phone to understand the service quality of claim personnel and customer needs. For questions raised by customers, the team would ask the claim personnel to call and explain again. For complaints, the team would immediately notify and ask the claim supervisor of the region to intervene and respond. Depending on the outcome, the team may call the customer again. The caring mechanism not

only assists customers in solving urgent problems ercentae o Satisie Cstoers and increasing customer satisfaction, but also e sreys tarete tir party liability insrance clais forestalls complaints.

2.2.3 Accessible Financial Services

Hua Nan Commercial Bank

The following service measures are implemented to provide various financial services for people with disabilities and ensure their access to basic rights and fair, reasonable and convenient financial services based on the different requirements for different disabilities:

1. Each business unit has installed a "service bell" at the entrance of the business venue to help and guide people with disabilities in processing various financial businesses.

2. Each business unit has established a "care window" (accessible service desk) to provide various financial services to people with disabilities.

3. Bank clerks provide depository and exchange applications and verification services at customers' homes.

4. When visually-impaired customers open accounts without the assistance of friends or relatives, a clerk who is not responsible for the account opening and the supervisor shall jointly serve as witnesses to assist account opening operations.

5. HNCB has actively installed accessible ATMs across Taiwan to provide the physically challenged and visually impaired with accessible services. As of the end of 2018, a total of 611 wheelchair accessible ATMs have been installed and ten of them are also equipped with audio functions for the visually impaired.

6. To ensure that people with disabilities have full access to basic rights and fair, reasonable, and convenient financial services, accessible service is available on the company website (www.hncb.com.tw), online banking, online ATM, and has obtained the AA Label stipulated in the Web Accessibility Guidelines 2.0 formulated by the National Communications Commission.

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7. The web content allows people with disabilities to use the keyboard in place of the mouse to navigate each block of the web page, along with special aids (such as Braille display, voice box and Braille computer) and listen to key financial information in each block. In the future, HNCB will continuously optimize related accessible financial services to implement financial inclusion.

8. The corporate website provides “feedback mail” for the aurally and verbally challenged persons to make financial requests or suggestions via text. They can also make online inquiries about progress and results.

9. "SMS service" is available on the official website for the aurally and verbally challenged persons to inquire about financial services or marketing campaigns through SMS.

10. "Smartchat Customer Service" is available on HNCB's official website, online banking and "Hua Nan Mobile Banking" App. The aurally and verbally challenged persons can use online text chat to make inquiries about various business or marketing activities of the Bank.

11. To promote inclusive finance, HNCB has provided customers with disability cards (or handbooks) three discounted transaction fees on inter-bank transfers with bank cards each month by applying at the counter.

12. "Online credit card activation service" is available for the aurally challenged persons to activate their credit cards online; instant SMS notification is also provided to reduce the risk of fraud and misappropriation.

13. "Online credit card loss reporting service" is available for the aurally challenged persons to report the loss of their credit cards on HNCB's official website and online banking.

14. "Friendly credit card SMS service" is provided for the visually impaired to call the HNCB Customer Service Center and check their credit card spending through the reading function of the mobile phone.

67 Financial Innovation and Services

Hua Nan Securities 2.2.4 Financial Education and Fraud Based on the individual needs of disabled Prevention persons, 41 branches in Taiwan provide friendly Fraud Prevention environment and services, such as online account opening and field services, and guide the disabled In order to protect people from fraud, Hua persons in choosing the appropriate transaction Nan Commercial Bank makes inquiries when method, e.g. face-to-face, letters, telegraph, customers transact at the counters. The telephone or electronic trading. transactions include deposits, withdrawals, remittances, transfers, termination of term Hua Nan AMC deposits, etc. or applications of designated A section, "Contact Us", is available on HNAMC's account transfers. To facilitate fraud prevention, official website, where customers may leave a HNCB has continuously invested resources message to apply for entrusted auction service; and manpower. In 2018, HNCB organized 9 the LINE official account, "Foreclosure Partner", training courses (for a total of 875 trainees) to was also launched to offer one-stop service for provide bank clerks fraud prevention courses on foreclosed houses to the aurally and verbally financial fraud methods and how to interact with challenged persons. The aurally and verbally customers. challenged persons may inquire about foreclosed In 2018, HNCB encountered 28 fraud cases houses with text and request application at home. amounting to NT$29.67 million, a decrease of 33 cases and NT$39.85 million, showing the concrete results in the promotion of fraud prevention. In 2018, HNCB successfully stopped frauds amounting to NT$13.47 million and received a medal from the National Police Agency, Ministry of the Interior for the outstanding performance in over-the- counter intervention and fraud prevention.

2 3 Information Security

Companies and government agencies have of Taiwan also pay the same level of attention suffered frequent hacker attacks, blackmail, or to whether financial institutions have properly leaks of personal information in recent years. planned information security management. Advancements in information and Internet Internet security risks would increase as digital technologies may have drastically improved the FinTech advances. Hackers and all types usage experience of companies or consumers, of Internet attacks may break into financial but behind such advancements lie key issues, information systems and information security such as information protection and information protection must be refined. The cost of prevention security management. Companies must heed would invariably increase. Hua Nan Financial the advice of information security consultants Holdings and its subsidiary companies have and work on fixing IT loopholes. The awareness implemented ISO 27001 and related information for risk transfer and insurance has increased security management systems and actively substantially. In addition, competent authorities

68 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

follows the government and competent authorities' of the Group's capacity for information security. information security plans. Hua Nan Financial Hua Nan Financial Holdings established the Holdings and its subsidiary companies have Group Information Strategy Committee in 2012, become the members of the Financial Information with the President as the Chairman. Consisting Sharing and Analysis Center (F-ISAC). of executive vice presidents and directors of 2.3.1 Information Security Strategy departments of Hua Nan Financial Holdings and presidents of subsidiary companies, the Group Hua Nan Financial Holdings' information security Information Strategy Committee convenes a management strategies are included in the annual meeting once every six months to review the information strategy. The medium to long-term implementation of the action plans for the Group's information development strategy also include a information security strategies made by each chapter dedicated to strengthening information subsidiary company and the KPI reports of the security protection mechanisms. The development annual action plans. The Group Information of information strategies in 2018 focused on five Strategy Committee also discusses the following major aspects, namely "increase profitability of year's information strategies, including the the Group", "support legal compliance", "control Group's short-term (the following year), medium- digital technologies", "strengthen information term, and long-term information strategies, and security", and "cultivate information talents". The reports to the Board of Directors every year. execution of "strengthen information security" The Group Information Strategy Committee also includes compliance with related information supervises the implementation of the "information security management regulations, implementation security enhancement" plan formulated by each of information security assessment operations, subsidiary company. The status is updated implementation of Financial Information Sharing regularly to review results and implement and Analysis Center (F-ISAC), and advancement information security strategies.

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69 Financial Innovation and Services

2.3.2 Information Security Implementation establishing a joint defense mechanism, Measures and enhancing preventive action. (3) Cultivate talents in information security: 1. Under the premise of respecting the Specific measures include expanding confidentiality of customer information the scale of human resources, improving and protecting the security of customer expertise, and making training plans. transactions, Hua Nan Financial Holdings has established the "Hua Nan Financial 2.3.3 Information Security System Holdings Customer Information Confidentiality Certification Measures" in accordance with the Financial Holding Company Act, the Personal All subsidiary companies of the Group (except Information Protection Act, the Regulations for venture capital which is not applicable due Governing Cross-Marketing between to its business) have obtained the ISO/IEC Subsidiaries of Financial Holding Companies 27001:2013 information security management formulated by the FSC, and the regulations system certification. The scope of certification of the competent authorities to maintain the includes the design, development and security, completeness, and correctness maintenance of the business information system, of customer information and to ensure the the operations and management of information reasonableness of the use of customer technologies, database system management, information. network management, server environment security, information security management, and 2. HNCB continues to implement information data processing and management. In addition, security measures based on the vision of HNCB has introduced the Information Service "providing a safe, fast, and stable information Management System and obtained the ISO/ environment" without information security IEC 20000-1:2011 certification, which covers incidents and errors in changes: information service level management, ongoing (1) Enhance legal compliance: Specific and availability management, financial budgeting, measures include improving related supplier management, capacity management, information security regulations, incident and problem handling, configuration establishing a designated information changes, and release management. security organization, evaluating With regard to the protection of personal information security regularly, and information, entities that directly process personal obtaining international information security information, such as HNCB, South China certification and regulatory evaluation. Insurance, and AMC, have all passed the BS (2) Improve the information security 10012 personal information management system infrastructure: Specific measures include certification. strengthening information security,

Venture ISO Standard HNFHC HNCB HNSC SCIC HNIT AMC Capital ISO 20000 V NA ISO 27001 V V V V V NA V BS 10012 V V NA V

Through the hard work of every employee, the Group did not infringe upon the privacy rights of customers nor mislay customer information in 2018.

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2 4 Creating Positive Impact of Financial Services

Under the initiative from UN, the concept of 2.4.1 Micro Products financial inclusion has drawn the public attention. It claims that the disadvantaged groups in the Hua Nan Commercial Bank offers a number of society shall obtain the necessary financial SME and preferential loans and helps SMEs services at reasonable cost and that they shall utilize various preferential loan programs and gain sufficient literacy through financial education guarantee mechanisms of credit guarantee to utilize financial resources. For people living in funds to secure operating funds. It alleviates the remote areas and low-income groups to enjoy problems of inadequate guarantee and financial comprehensive financial services, financial burdens faced by SMEs and enhances their long- institutions should provide more diverse services term competitiveness and growth potential. It also to lift the restrictions imposed by conventional increases Hua Nan Commercial Bank's potential services, solve the predicaments caused by customer base, creating a win-win situation for factors such as inaccessibility, income shortfall or both Hua Nan Commercial Bank and SMEs. As of culture difference in line with social justice, and 2018, the total number of micro products reached share the fruits of economic growth. The Group 14,256 and the credit balance amounted to offers various micro products and agricultural NT$35,743,190,000. Among them Small and insurance against natural disasters, helps small Medium Enterprise Innovation Development and medium enterprises obtain preferential loans, Project Loan, Small and Medium Enterprise and provides eco-friendly financial products. Innovation Development Project Loan, Culture and Creativity Industry Preferential Loan, and Promotion of Industrial Innovation or Research and Development Loans amounted to 173 cases and the credit balance was NT$593,970,000.

2017 2017 2018 2018 Micro Products Number of Micro Credit Balance Number of Micro Credit Balance Products (NT$10,000) Products (NT$10,000)

Youth Entrepreneurship and Start-Up 756 33,128 767 26,690 Loan

Micro Loans for Female Entrepreneurs 135 3,832 118 3,903

Entrepreneurial Loans for the Unemployed with Employment 4 164 7 327 Insurance

Preferential Mortgage for First-time 13,450 3,695,618 13,191 3,484,002 Home Owners

Small and Medium Enterprise Project 125 49,880 117 46,485 Lending

Small and Medium Enterprise 42 13,443 34 9,115 Innovation Development Project Loan

Culture and Creativity Industry 20 4,177 18 2,060 Preferential Loan

Promotion of Industrial Innovation or 4 1,964 4 1,737 Research and Development Loans

Total 14,536 3,802,206 14,256 3,574,319

71 Financial Innovation and Services

South China Insurance provides micro-insurance coverage was mainly extended to indigenous products that enable disadvantaged households peoples, fishermen, farmers, people with and welfare groups to purchase basic insurance disabilities, and recipients of services provided with less premiums in order to mitigate various by social welfare and charity organizations. The risks and protect families or individuals from content of coverage includes disabilities or deaths experiencing financial difficulties due to accidents. caused by accidents. As of 2018, a total 4,920 This eliminates the gaps in government social individuals were provided with micro-insurance. insurance or social assistance mechanism. The

Year 2016 2017 2018

Number of Policyholders 4,464 4,930 4,920

Number of Insurance Policies 60 49 37

Total Insurance Premium (NT$) 650,346 600,787 680,748

2.4.2 Aging Society 2017. The Trust helps the elderly use trusts to gain the peace of mind and the trust system is In the face of the aging society in Taiwan, the used to manage assets to achieve the goal of impact of declining birth rates, and changes in the providing care for future days. concepts of parent support, retirement planning According to the statistics from the "Asset Trust has become increasingly important. HNCB helps for the Senior and the Disabled" from the 4th citizens plan for retirement ahead of time and use quarter of 2018 compiled by the Trust Association, suitable wealth management methods to create HNCB accumulated 10,006 individuals as stable sources of income and help customer build beneficiaries, which placed it first in the industry. their own happy lives. HNCB also advanced the The principal of trust assets amounted to inter-departmental happy life project to provide NT$2,023 million, ranking second in the industry. diverse personal financial products to satisfy diverse financial demands of different target Hua Nan Commercial Bank was consecutively customers. In addition, HNCB has also listed selected by the FSC as an outstanding bank for elderly care trusts and reverse mortgages as the performance of Asset Trust for the Senior and key businesses in hopes of helping people who the Disabled in 2016 and 2017 and won the first are approaching retirement age or planning place among all banks in 2017. retirement lives create comprehensive elderly life Housing Loans for Elderly Care guarantees to take care of their lives in retirement (including Mortgage for the Elderly and and create happy lives. HNCB aims to fulfill its Happy Benefit Loan) social responsibilities and create a society in which the elderly is well taken care of. HNCB launched the industry-first revolving "Mortgage for the Elderly" in March 2016. Elderly Care and Inheritance Trust Different from the monthly fixed appropriation, it HNCB launched the NTD-denominated "Elderly provides a credit line that is available each month Care and Inheritance Trust" in January 2016 and and unused credit line can be accumulated for opened up foreign currency operations in October use in the next month. It allows for more flexible

72 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

and user-friendly fund use and reduces the and Urban Regeneration Center on August 2, stress on the elderly, allowing them to use their 2018, President Tsai, Ing-Wen indicated that funds more effectively and live a more stable and residential safety was a top priority. Since the secure life in retirement. new government took office, it has reinforced and rebuilt old and unsafe buildings to provide a safe To provide the elderly diverse choices and living environment and cityscape. protections for their funds, HNCB has launched the upgraded product, Happy Benefit Loan, in HNCB has been upholding the social cooperation with Taiwan Life Insurance Co., Ltd. responsibility for living justice and proposed the in May 2017. Combining elderly care trusts with "Three Arrows of Urban Renewal", including the immediate annuity insurance, Happy Benefit Loan establishment of Urban Renewal Team, enhanced protects the funds of the elderly in retirement in a cooperation with quality builders, and urban more complete manner. renewal of self-use buildings. To meet the needs of households, HNCB has also provided financial As of the end of December 2018, HNCB's services, such as funding, trust, and mortgage for housing loans for elderly care totaled 602 cases, urban renewal and reconstruction of unsafe and an increase of 158 cases from 444 cases at the old buildings, in line with the government policy. end of 2017, and the approved amount totaled From 2017 to 2018, 12 urban renewal cases were NT$2.712 billion, an increase of NT$814 million approved, and the total loans reached NT$9.8 from NT$1.898 billion at the end of 2017. The billion. performance has increased significantly and HNCB now ranks third in terms of market share, HNCB has actively promoted urban renewal demonstrating its performance in resolving projects. Successful cases included the Dunnan fund issues for the elderly in their retirement. In Urban Renewal Project in 2018, Shihe Building 2018, Hua Nan Commercial Bank won the Best Urban Renewal Project in 2012, Wan's Garden Consumer Finance Award in the 9th Taiwan Urban Renewal Project in 2015, and NTU OPUS Banking and Finance Best Practice Awards ONE Urban Renewal Project in 2017. organized by Taiwan Academy of Banking and Dunnan Urban Renewal Project - Turning Sea- Finance and supervised by the FSC and Council sand Building into Luxury Building of Agriculture, Executive Yuan. HNCB successfully supported the reconstruction 2.4.3 Advancing Urban Renewal and of a sea-sand building on Dunhua South Road Creating Sustainable Services in Taipei City in line with the government policy. The beam-raising ceremony took place at 10 Financial institutions provide a full range of a.m. on August 5, 2018 to gradually realize the financial services such as real estate trust households' dream of reconstruction. contracts, construction insurance, financing for rebuilding expenses, conversion of existing With the area of 653 ping, the Dunnan Urban mortgages prior to the renewal, and mortgages Renewal Project led by Chung-Hsin Electric for separate units after the renewal when & Machinery Mfg. Corp. is located near the processing urban renewal businesses. They intersection of Dunhua South Road and Civic help the government, construction operators, Boulevard in Daan District, Taipei City. In August and residents successfully complete the urban 2011, these two 7-story and 16-story sea sand renewal plan. They achieve profitability while houses having been built for more than 30 years helping national economic development and were ordered by Taipei City Government to be fulfilling their corporate social responsibilities. demolished. Through long-term integration and In the inauguration of the National Housing continuous explanations, Chung-Hsin Electric &

73 Financial Innovation and Services

Machinery Mfg. Corp. has obtained the consent of underground and 75 households. The value of all households to turning the original buildings into each household doubled or more. HNCB only SRC buildings with 6 stories underground and 23 collected trust fees and interest, and the real stories above the ground and 140 households. estate management company charged service The reconstruction is expected to be completed in fees, creating the maximum value for the owners mid-2020. of the Shihe Building Urban Renewal Project.

HNCB has taken action to support the urban Wan's Garden Urban Renewal Project renewal policy. Since 2016, HNCB has HNCB successfully supported the reconstruction provided the households of the Dunnan Urban of the old building near Dongyuan Elementary Renewal Project compensation for early loans, School. The groundbreaking ceremony took place land property and building fund trust during on the morning of May 19, 2012. Several 70-year- construction, and construction funding to secure olds were excited about the reconstruction of their the funds of the builder and households. After houses and congratulated each other. the construction is completed, households will embrace a safe and happy living environment. Located at Lane 344, Wanda Road, Wanhua District, Taipei City, the Wan's Garden Urban Shihe Building Urban Renewal Project Renewal Project has the area of 1,264 ping Shihe Building is located in Zhongshan District, and 76 households. Aiming to creating value for Taipei City. HNCB successfully supported the owners, Ruentex Group visited each household urban renewal project led by the households of and obtained the consent of 94.25% of the Shihe Building. The groundbreaking ceremony households in 2007 to turning the originally took place at 10 a.m. on October 15, 2009 to turn disordered building into a RC residential building an old building into new one. with 4 stories underground and 26 stories above the ground and 179 households. The construction After five years of integration with 61 households, was completed at the end of 2014. the Shihe Building Project was completed. Most households recalled that Shihe Building, after To improve the cityscape and support the being listed as an unsafe building by Taipei City reconstruction of old buildings, HNCB provided Government in June 2004, reported NT$300,000/ Ruentex Group financial services, such as ping, which was far lower than NT$500,000/ building fund trust and construction funding, ping of secondhand buildings nearby. After the helping the government, the builder, and urban renewal, Shihe Building reported at least households complete the Wan's Garden Urban NT$700,000/ping. Renewal Project and fulfilling its corporate social responsibility. Since July 2007, HNCB has participated in the planning of the Shihe Building Urban Renewal NTU OPUS ONE Urban Renewal Project Project. Located at the intersection of Section 2, HNCB successfully supported the reconstruction Changan East Road and Longjiang Road, Shihe of the old building on Section 3, Roosevelt Road Building with 12 stories above the ground and in Taipei City. The groundbreaking ceremony 1 story underground and 61 households was took place on December 24, 2012 to facilitate the turned into a residential and commercial building development and utilization of urban land. with 15 stories above the ground and 3 stories

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After 11 years of integration, the NTU OPUS ONE project is expected to effectively improve the old Urban Renewal Project was completed. Located and run-down industrial park environment and at the intersection of Section 3, Roosevelt Road help promote the renewal of the industrial park. and Xinhai Road, the NTU OPUS ONE Urban It will also improve the competitiveness of the Renewal Project has the land area of 883 ping industry. and the construction area of 9,570 ping and 34 Urban Renewal Forum households. The original 3~5-story building was turned into a SRC residential and commercial HNCB organized the "Seminar on Taiwan's building with 5 stories underground and 19 stories Urban Renewal Strategy - A Case Study of Mori above the ground and 145 households. The Building Group" with Commercial Times on construction was completed in 2015. October 18, 2018 and invited experts from the industry, government, and academia to attend. Since 2011, HNCB has participated in the Deputy Minister of the Interior Hua, Ching-Chun planning of the NTU OPUS ONE Urban Renewal emphasized that the participation of the financial Project and provided financial services, such system was definitely the most important key to as construction funding. After reconstruction, the development of urban renewal and that "urban the building reported NT$1.5~1.7 million/ping, regeneration" was the bigger vision of promoting three times more than the value of secondhand urban renewal projects. Deputy Minister Hua also buildings (NT$500,000~600,000/ping) in the area indicated that we could refer to successful urban before reconstruction. HNCB helped original 34 renewal projects in Roppongi and Toranomon, households embrace better living quality and Japan and learned the overall financial made the original old and messy cityscape look structure and financial cooperation in Japan. As brand-new. successful urban renewal projects require more Tucheng Urban Renewal Project comprehensive financial participation, HNCB has proposed the "Three Arrows of Urban Renewal", HNAMC has actively advanced the Tucheng including the establishment of Urban Renewal Urban Renewal project. After three years of hard Team, enhanced cooperation with quality work, HNAMC finally obtained the approval of builders, and urban renewal of self-use buildings. the Urban Redevelopment Office of New Taipei Through this seminar, HNCB expects to bring new City Government in June 2017 and commenced perspectives to Taiwan's urban renewal based on with construction in November 2018. It was the the Japan's successful experience. first urban renewal application in the country for an Industrial Park under the management of the Industrial Development Bureau, MOEA. To promote energy conservation and carbon reduction, the design concept of environmental sustainability has been incorporated into the urban renewal project. HNAMC is currently applying for the green building candidate certificate. After its completion in 2021, HNAMC will apply for a silver green building label or above. The urban renewal

75 Financial Innovation and Services

2.4.4 Green Finance offshore wind power operators, obtain the funding required for operations and development. In response to the "Green Finance Action Plan" According to estimates of the Bureau of Energy, of the government that channels resources of the M.O.E.A., investments totaling NT$1.2 trillion in finance industry to the development of domestic solar photovoltaics and NT$600 billion in offshore green energy industries, we seek to implement wind power are required to achieve the goal of President Tsai, Ing-wen's transformation of the attaining 20% in power generation from green economic structure and pursue a new economic energy in 2025. The immense NT$1.8 trillion fund model for sustainable development. The short- requirement will generate considerable market term goal of the plan is to help green energy opportunities. operators, particularly solar photovoltaic and

Hua Nan Group Green Financial Products

• HNCB invested NT$690 million in energy conservation and environmental protection industries and NT$5.46 billion in green bonds in 2018, which were increased by NT$560 million and NT$4.36 billion when compare to 2017. Investment • Hua Nan Venture Capital invested approximately NT$119 million in energy conservation in 2018 which accounted for 9% of its overall investment portfolio.

• On 31 December, 2018, HNCB approved a total of NT$534.4 billion in green energy technologies, new agriculture, and circular economy industries, and the loan balance was NT$257.5 billion; in particular, the loan balance of the circular economy industry reached NT$172.6 billion. • On January 30, 2018, HNCB entered into a memorandum of understanding with Topco Quartz products Co., Ltd. for a solar photovoltaic strategic alliance to share industry information, technology, and financing and refer customers to cross-industry alliances, together making a contribution to the development of Taiwan's solar photovoltaic industry. • HNCB worked with local governments to launch related green energy loans.

Serial City/County Government Name of Project Loan Number 1 Hsinchu City Government Hsinchu City Green Energy Industry Project Loan Loans 2 Taoyuan City Government Taoyuan City Green Energy Industry Project Loan Taichung City Green Energy Industry & Heating 3 Taichung City Government Equipment Upgrading Project Loan Yunlin County Green Energy Industry & Boiler 4 Yunlin County Government Upgrading and New Agriculture Project Loan Tainan City Solar Photovoltaic Equipment Purchasing 5 Tainan City Government & Boiler Upgrading Project Loan

Note: As of the end of 2018, HNCB has processed 10 green energy project loans, including Jim Mei Green Energy Limited. • HNCB has continuously promoted green finance related products. In 2018, HNCB won the Excellence Bank and Circular Economy Industry Special Award in the FSC's Incentive Policy for Loans from Domestic Banks to Innovative Key Industries (Phase 1), the Financial Service Merit Award in the 5th Top Solar Award, M.O.E.A., and the Green Energy Financial Contribution Award in the Taichung City Renewable Energy Promotion Award.

76 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

• Hua Nan Investment Trust launched the "Hua Nan Global Agribusiness and Water Fund" in 2007. It was the first fund in Taiwan that focused on the food Funds industry and opportunities in water financing. As of the end of 2018, the scale of the fund was NT$395 million.

Products • HNCB has issued NT$1 billion in Senior Debt Green Financing Bonds on (Green Bonds) April 25, 2018 with a duration of 3 years.

Seminar on Triple Wins of Circular Economy

HNCB organized the Seminar on Circular Economy x Sustainable City with Commercial Times on November 8, 2018 and invited experts from the industry, government, and academia to explore the experience at home and abroad and identify existing issues in the hope of promoting the development of circular economy and sustainable cities. More than 90% of Taiwan’s energy, fertilizer and feed depend on foreign imports. By promoting the development of circular economy, the government is able to drive the industrial development, protect the environment and sustainable development of cities, and create local job opportunities and harmonious society. HNCB continuously values the green energy industry, incorporates the Equator Principles into the credit review standards, and helps business transformation. On April 13, 2018, HNCB received the Circular Economy Industry Special Award in the Incentive Policy for Loans from Domestic Banks to Innovative Key Industries from the FSC.

To fulfill the corporate social responsibility and incorporate the Equator Principles into the lending process, HNCB planned to formulate the Sustainable Lending Principles and the Negative List Implementation for the Environmental, Social, and Government (ESG) matters of of the Equator customers. The Sustainable Lending Principles and the Negative Principles List are expected to be completed in June 2019 to strengthen the completeness of the risk assessment framework and promote the sustainable development of ESG.

77 Financial Innovation and Services

2.4.5 Charity Trusts rainfall reaches 600 mm in five consecutive days during a typhoon. As the claims are based on Charity trusts are mainly trusts set up by the the real-time meteorological data provided by the public for the creation of public interest. All Central Weather Bureau, they are quick, simple, trusts established for the purpose of charitable, and fair and objective. cultural, academic, technical, religious, sacrificial To allow farmers to better understand the or other public interest and approved by the coverage of papaya insurance, the Agricultural competent authority are considered charity trusts. Insurance Team of South China Insurance worked According to the statistics from the 4th quarter of with the Agricultural and Food Agency, Council 2018 compiled by the Trust Association, HNCB of Agriculture, and Tainan City Government currently serves as the trustee in 35 cases, and Pingtung County Government to organize which placed it second in the industry. A total of 10 seminars at Yu-ching District Farmers' 878 households of disadvantaged communities Association, Nan-shi District Farmers' Association, (including individuals, foundations, and schools) Nanhua District Farmers' Association, Shanshang received donations of NT$386 million from public District Farmers' Association, and Danai District welfare trusts in 2018. Farmers' Association in Tainan City and Neipu 2.4.6 Agricultural Insurance Farmers' Association, Nanzhou District Farmers' Association, Gaoshu Farmers' Association, South China Insurance Changzhi Township Farmers' Association, and Papaya Insurance Yanpu Office in Pingtung County, respectively, Taiwan is located in the subtropical region, from October 15 to November 16, 2018. and the extreme climate can significantly affect After the sale of Papaya Insurance was approved the stable harvest of crops. In view of this, the on August 7, 2018, the actual period of sale Council of Agriculture has actively guided property lasted for about 1 month only in response to the insurance companies to develop crop insurance insurance subsidies provided by the Agricultural products to transfer farmers' risks. In response and Food Agency and local governments. In to the government policy, South China Insurance 2018, South China Insurance processed 22 has developed papaya insurance based on the Papaya Insurance cases based on the wind wind speed and rainfall parameters since 2017. speed parameter or wind speed and rainfall The sale of papaya insurance was approved by parameters. The actual sale in the first phase the Insurance Bureau, FSC on August 7, 2018 to (October and November 2018) is as follows: protect the farmers' papaya production from loss Number of Insurance Number of and transfer farmers' risks. Area Insurance Premium Farmers Policies (NT$) The weather-based papaya insurance is the Tainan City 12 13 NT$ 419,347 first crop insurance that additionally insures Pingtung agricultural facilities (screened growth rooms). 7 9 NT$ 479,180 County Papaya can be separately insured for the "wind Total 19 22 NT$ 898,527 speed parameter" or "wind speed and rainfall parameters", while screened growth rooms are Since the first phase sale is scheduled for a time provided with coverage for the "wind speed when natural disasters are not likely to occur, parameter". According to the claim standards, farmers who were busy with farming were less farmers are entitled to a claim if the maximum likely to purchase Papaya Insurance; in addition, gust measured by the designated weather station Papaya Insurance is a full-year policy, so most reaches Beaufort Scale 10 or if accumulated

78 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018 farmers expressed their intention to purchase the coverage in early 2018 to provide adequate Papaya Insurance some other time. The next sale information security coverage. Based on this phase of Papaya Insurance is scheduled during experience, South China Insurance continued to March and April 2019. South China Insurance will maintain close contact with other business units devote every effort to achieve better sales and and outlets in the hope of extending this success provide Papaya Insurance for more farmers. to other enterprises. 2.4.7 Information Security Insurance When a company develops to a certain scale, it Innovation will think about how to improve its performance, reduce risks, and achieve the goal of sustainable South China Insurance: Information development. The most commonly used Security Insurance method is to obtain the ISO certification. We At present, most information security insurance have actively engaged with business standard products in the market are designed against the certification companies, such as BSI. When leaks of personal information. Considering the guiding enterprises to implement the ISO full and wide protection of information security Information Security Management certification, insurance products, South China Insurance has business standard certification companies developed electronic and cybercrime insurance will refer the enterprises to us for information and data protection insurance at the same time. security insurance in a timely manner. In the These insurance products protect banks from the future, they will guide information security and loss of funds or property due to the invasion of forensic companies to obtain insurance licenses their computers or communication systems and and develop innovative marketing approaches compensate for any claims requested by third to protect enterprises from losses caused by parties, reputation remedies, and defense costs unexpected information security incidents. due to the leaks of business data or personal information.

The above insurance products protect enterprises against damage caused by the occurrence of the information security incidents and also provide damage prevention services, such as identification of information security vulnerability. They belong to the information security check before the occurrence of any information security incidents, which is a distinctive feature of the products.

South China Insurance's information security insurance was reviewed on October 27, 2017. As South China Insurance launched information security insurance for the first time, it carefully assessed the qualifications and fully explored HNCB's information security protections and information environment configuration and management. After several discussions and explanations, South China Insurance included all branches of HNCB at home and abroad in

79 Employee Care

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Action Plans

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Hua Nan has always upheld "lawfulness, risk achieve balance between work and life. management, talent cultivation, and science The Group continues to incorporate the core and technology" as the main values for the values "HEART" (Honesty, Efficiency, Activeness, Group's healthy development. Employees Responsibility, and Teamwork) into the operations are the Company's most precious resources and fulfill its corporate social responsibility through and we provide competitive reward, benefits, specific actions. Facing multiple new challenges and promotion systems to encourage talented in the external environment, we use diverse talent employees. We also actively provide benefits recruitment channels for recruitment and invest all that are superior to regulatory requirements kinds of resources in employee training in order to increase employee welfare. The Group has to optimize employees' competitiveness. We work always taken good care of employees' physical together with employees to maximize synergy and mental health and built a safe and high- within the Group and achieve new heights. quality work environment to help employees

Hua Nan Financial Holdings has been included in the Taiwan High Compensation 100 Index for five consecutive years

HNCB has released a series of films featuring "HNCB Has Changed, Spreading Happiness", with four main topics, namely Career Development, Wedding & Parenting Allowance, Promotion, and Overseas Allowance, explaining the career policy and employee benefits. The series of films have been widely recognized and shared.

Hua Nan Commercial Bank received the Healthy South China Insurance received the Healthy Workplace Certification- Workplace Certification- Health Promotion Mark and Health Health Initiation Mark Initiation Mark

3 1 Recruitment and Diversity

For the Group, each employee is an important are not encumbered by seniority in promotion team partner. The Group has gradually opportunities. We also help employees who transformed in response to the current digital seek challenges to participate in various talent technology trends and new form of business development programs to expedite their career models. The job descriptions and the scope of development. talent recruitment have become more diverse each year and we have also actively created innovative organizational culture to attract 3.1.1 Employee Composition young people. Take HNCB as an example. We The Group has continuously recruited new implemented diversified recruitment and provide employees in the past 3 years to invigorate the fast promotion channels so that employees

82 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018 organization and bring in new ideas. In 2018, the since long time ago, creating more employment Group recruited 879 new employees, an increase opportunities. In addition, they enjoy the same of 20% from the previous year. The Group salary and benefits as other employees and the provides special care for the disadvantaged ease of transportation and other requirements are employees. The hiring of physically and mentally taken into account for determining their working challenged employees meets legally required environment and work assignments so that they ratios and has exceeded the required ratio could make full use of their expertise.

Employee Distribution

Taiwan Oversea* Total

Total

HNFHC 33 47 0 0 33 47 80

HNCB 2,928 4,350 94 38 3,022 4,388 7,410

HNSC 497 901 2 0 499 901 1,400

SCIC 442 532 1 0 443 532 975

HNIT 29 40 0 0 29 40 69

HNVC 6 4 0 0 6 4 10

AMC 15 23 0 0 15 23 38

Total 3,950 5,897 97 38 4,047 5,935 9,982

Note 1: Oversea indicates employess dispatched overseas from Taiwan.

2018 Age (All Employees) HNFHC HNCB HNSC SCIC HNIT HNVC AMC Total

Under 30 Years 5 949 100 241 3 1 5 1,304 Old

31~50 Years 62 4,453 892 569 50 7 30 6,063 Old

51 Years Old or 13 2,008 408 165 16 2 3 2,615 Above

Total 80 7,410 1,400 975 69 10 38 9,982

In addition, the Group also values gender equality and employment rights and provides all employees with fair and reasonable compensation, diverse employment and career development opportunities. Therefore, male and female employees do not face discrimination with regard to salary, benefits, promotion opportunities, and pension payment according to gender equality under the UN's SDGs. As of the end of 2018, regular female employees accounted for 56% of all regular employees in the Group, and female supervisors and executives accounted for 42% of all supervisors and executives in the Group, showing the reasonable ratios in terms of employment and promotion of female employees.

83 Employee Care

Ratio of Female Employees in the Group

Ratio of Female Ratio of Female Entry-level Ratio of Female Ratio of Female Senior Supervisors Supervisors to Executives to All Employees (%) to All Senior All Entry-level Executives (%) Supervisors (%) Supervisors (%)

HNFHC 59% 36% 40% 38%

HNCB 59% 54% 53% 54%

HNSC 64% 74% 27% 44%

SCIC 55% 43% 0% 41%

HNIT 58% 71% 43% 57%

HNVC 40% 0% 0% 0%

AMC 61% 69% 33% 63%

Average 56% 49% 28% 42%

Note 1: Senior supervisors refer to from the President to supervisors two levels below (including the President). Note 2: Entry-level supervisors refer to supervisors other than senior supervisors who lead employees.

Number of Employees of Disadvantaged Groups

Ratio of 2018 Category and Number of Employees Employment

people HNCB 162 2.19% (including employees with disabilities and indigenous peoples)

people HNSC 9 1.83% (employees with disabilities)

people SCIC 23 2.36% (including employees with disabilities and indigenous peoples)

Note 1: According to laws and regulations, when a private business has more than 100 employees, employees in each category shall not be less than 1% of all employees. Note 2: HNSC's employees of disadvantaged groups are calculated based on the number of the insured in the Head Office as of December 31, 2018, which is in line with the requirements of the competent authority (9/490=1.83%).

84 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

Employee Turnover in 2018

Age Total Turnover Number of 51 Years 51 Years Rate* Total Under 30 31~50 Under 30 31~50 Turnover Old or Old or Years Old Years Old Years Old Years Old Above Above

HNFHC 80 0 0 0 2 0 0 2 3%

HNCB 7,410 21 51 73 44 53 77 319 4%

HNSC 1,400 12 41 28 7 62 26 176 13%

SCIC 975 21 23 6 25 26 6 107 11%

HNIT 69 0 2 0 0 7 0 9 13%

HNVC 10 0 0 0 0 0 0 0 0%

AMC 38 0 0 0 0 1 0 1 3%

Total 9,982 54 117 107 78 149 109 614 6%

Note 1: Turnover includes layoffs, retirements, and voluntary resignations. Employees who leave during the probation are not included. Note 2: Turnover rate = Total number of turnover in 2018 / Total number of on-the-job employees as of December 31, 2018.

3.1.2 Talent Recruitment Equality Policy quarterly recruitment in 2018. In addition, HNCB also organizes flexible recruitment for wealth Domestic Talent Recruitment management personnel from time to time to In order to recruit talents, the Group has gradually quickly fill in the gap in human resources. In line adjusted recruitment methods in response to with the business growth and the cultivation of industrial trends and changes in human resource talents with potential, job openings have also requirements. The Group recruits new employees become more diverse (e.g. management trainees, through Job Banks and the Taiwan Academy legal compliance personnel, IT personnel, credit of Banking and Finance. For instance, HNCB investigation and extension personnel, financial adjusted the semi-annual public recruitment to trading personnel, and English translators).

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New Recruits in 2018

Total Age Ratio Number of New 51 Years 51 Years of New Total Under 30 31~50 Under 30 31~50 Recruits* Old or Old or Recruits Years Old Years Old Years Old Years Old Above Above

HNFHC 80 0 1 1 4 6 0 12 15%

HNCB 7,410 106 139 3 171 166 0 585 8%

HNSC 1,400 29 42 9 19 59 8 166 12%

SCIC 975 28 19 0 37 14 0 98 10%

HNIT 69 2 6 1 1 4 1 15 22%

HNVC 10 0 0 0 0 0 0 0 0%

AMC 38 1 0 0 2 0 0 3 8%

Total 9,982 166 207 14 234 249 9 879 9%

Note 1: The calculation formula for the new recruit ratio: Total number of new employees in 2018/Total number of employees as of December 31, 2018, excluding the number of employees who were recruited and departed in 2018.

Overseas Recruitment also included communication skills and teamwork enhancement courses and the overall training To train talents in line with the New Southbound period is approximately 3-4 months. Policy, HNCB continued to recruit and hire suitable foreign talents through recruitment Campus Collaboration channels, such as the matchmaking platform To shorten the distance between the industry and of the M.O.E.A., Contact Taiwan, Overseas the academia and recruit talented individual to Community Affairs Council, and other private serve in the Group, certain subsidiary companies non-profit institutions, in 2018. In addition, HNCB of Hua Nan Group have commenced industrial- also implemented the "Overseas Personnel academic internship collaboration with multiple Trainee Development Plan" to cultivate short, universities to let students understand trends in medium, and long-term overseas personnel the finance industry and interact with experts of trainees. The training included: Internal courses the industry during the internship. The students - The courses focus on the passage of overseas gain professional knowledge through hands-on experience and current laws and regulations of learning, while the companies gain reputation the head office and overseas branches. External and advance professional talents recruit. The courses - The courses focus on economic and Group currently conducts industrial-academic trade analysis of different foreign regions and collaboration with more than 10 universities with introduction of local financial regulations; they more than 54 participants.

86 Hua Nan Financial Holdings Co., Ltd. Corporate Social Responsibility Report 2018

HNSC

Scope of Number of Target Partners Cooperation Participants Internship I-Shou University, Chang Jung Christian Program University, Chihlee University of Technology, 27 Benefits Achieved National Taiwan Normal University, Ming Assisted in cultivating Chuan University, Soochow University, Yu outstanding business Da High School of Commerce and Home talents. Economics

Internship Plan Priority was given to junior and senior students in the department of finance management or related departments; licenses, securities courses, or club experiences were pluses.

SCIC

Scope of Number of Target Partners Cooperation Participants Internship National Taichung University of Science Program and Technology, Chaoyang University of 8 Benefits Achieved Technology, Ming Chuan University One intern began Internship Plan services at the Company after 1. Priority was given to senior students in the department of insurance and graduation and we finance of National Taichung University of Science and Technology and recruited talented Chaoyang University of Technology; those willing to participate in the students to the internship plan submitted their profile and passed the interview before starting Company during the the internship. internship. 2. Graduate students of Ming Chuan University expecting to start the second year of study participated in the internship plan through the school referral system. 3. During the internship, students were provided with various types of work experiences, such as insurance, hands-on practice, and sales, and gave a presentation to share their opinions at the end of the internship.

HNIT

Scope of Number of Target Partners Cooperation Participants Industrial Fu Jen Catholic University, National Sun Learning Yat-sen University, Soochow University, 17 Benefits Achieved Feng Chia University, Yuan Ze University Strengthened Internship Plan interns' knowledge of the investment Department: Junior and senior students and graduate students in the business trust industry and school improved their Screening: Student's autobiography professional financial Content of internship: 1. Macroeconomics, 2. Stock and Bond Investment, knowledge. 3. Fundamental, Technical and Econometric Analysis, 4. Risk Management, Hedge Strategy, 5. Investment and Wealth Management and Planning, 6. Fund Regulations and Practice

87 Employee Care

AMC

Number of Scope of Cooperation Target Partners Participants Summer Internship Department of Land Program for University Economics, National Chengchi 2 Benefits Achieved and College Students University Provided hands-on Internship Plan practice for students to understand the Priority was given to junior and senior students in the Department of Land operating models Economics. of the real estate 1. Professors of Department of Land Economics, National Chengchi University investment industry. referred students. 2. Content of internship is to learn the real estate investment analysis.

Work-study Programs for Disadvantaged Students are as follows:

HNCB

Number of Scope of Cooperation Target Partners Participants University/College Student Summer Target Partners: China Youth Corps Banking Business Internship Team Participants: Domestic university/college students 10

The event aims to increase the actual experience of university and college students in finance related departments to cultivate talented personnel and Benefits increase the quality of financial services. Achieved

Number of Scope of Cooperation Target Partners Participants Work-Study Program for Youths Target Partners: Youth Development Administration, from Economically Disadvantaged Ministry of Education 39 Families of the Youth Development Participants: Students aged 16 to 29 from domestic Administration, Ministry of public or private high schools or above that are Education recognized by the Ministry of Education with one of the following qualifications: (1) From a low-income family; (2) From a medium to low-income family; (3) Received a student loan in the past year; (4) Received subsidies from the Ministry of Education's scholarship program for disadvantaged university and college students.

Contributed to the synergy of the public and private sectors and integrated the resources and powers of government authorities, public companies, state-owned banks, and special institutions to cater to the needs of youths from financially disadvantaged families by providing them with Benefits opportunities to work during their studies and helping them learn, Achieved experience, explore, and develop their own competitiveness in future careers so that they can prepare for future careers and the Program would in turn reduce wealth inequality within the nation.

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3 2 Employee Remuneration and Equity

3.2.1 Employee Remuneration and Taking HNFHC and HNCB for example, they Benefits have adjusted salaries through the public announcement in eight consecutive years since The Group provides a competitive salary system 2010. Each subsidiary company issues year- in accordance with its rank and position structure end bonuses and performance rewards, and the in hopes of helping employees wherever possible salaries of employees are not lower than the legal so that they can focus on their work without minimum salary. Moreover, the compensation worries and work hard with the Group. policy of the Group is consistent across genders and ages in order to remain fair and reasonable.

Salary of Full-time Non-managerial Employees in the Past Two Years

Annual Item Unit 2017 2018 Variance

Number of Full-time Non- Person 8,823 8,876 0.60% managerial Employees

Total Salary of Full-time Non- NT$1,000 9,375,957 10,928,695 16.56% managerial Employees

Average Salary of Full-time NT$1,000 1,063 1,231 15.80% Non-managerial Employees

Median Salary of Full-time NT$1,000 920 1,070 16.30% Non-managerial Employees

Note 1: The calculations above include HNFHC, HNCB, HNSC, and SCIC. Note 2: The number of full-time non-managerial employees refers to the number of employees who have been paid for six months or more in the year after deducting the number of full-time supervisors (managers), full-time employees of overseas branches, and part-time employees. Note 3: The total salary refers to the employees' salary for the year, including recurring salary (base pay and monthly fixed allowance and bonus), overtime pay and non-recurring salary (non-monthly allowance, year-end bonus, performance bonus, employee compensation, etc.).

Employee Benefit Measures to build an equal, healthy, and happy work place. We also provide competitive overall reward and Human resources are the important foundation for benefit systems to attract, encourage, and retain the competitiveness of the Group. We continue to talented individuals. reform and improve the organization to implement employee care and we strictly abide by labor laws

89 Employee Care

Employee External pressure will be directly reflected on physical health when it exceeds Health Care the scope of personal endurance. These mental health and physical effects not only reduce personal work performance but also negatively impact interpersonal relations and the operations of the organization and its performance. To help improve employees' knowledge in healthcare and help employees resolve personal issues that may influence their work performance, Hua Nan Group provides multiple health-related activities such as periodic measurement of blood pressure, physical and mental health consultation services provided by doctors appointed by the Group, and healthcare education seminars. We also established nursery rooms for female employees with breastfeeding requirements after giving birth. Taking HNCB for example, if an employee is hospitalized for more than 3 days, the unit supervisor may assign an employee to visit the employee and bring gifts of less than NT$3,000.

Leave Policy The Group values all important stages in employees' lives including their Superior to the marriage with sweethearts, giving birth to happy children, or low points in life Regulations of the Labor where they must deal with deaths in the family. HNFHC and HNCB provide the Standards Act leave policies that are superior to regulatory requirements for employees to prioritize family and become support one another so that the warmth of the Hua Nan family can be delivered to each employee.

Leave Policy Regulations of the Labor Standards Act Marriage Leave 14 days 8 days Bereavement Leave 21 days 8 days (Death of a Parent, Adoptive Parent, Step-parent, or Spouse) Tocolysis Leave Full pay within 30 days; Half salary within 30 days 30% of salary for employees and no salary afterwards. who take leave between 30 days and three months.

Marriage and The number of marriages and childbirths in Taiwan have reached record Childbirth low each year. HNFHC and HNCB responded to the government's policy for Subsidies encouraging marriage and reproduction for couples of appropriate ages and began providing benefits including NT$30,000 in subsidies for marriages and NT$100,000 for each childbirth in 2017. HNSC provides NT$6,000 in marriage subsidies and NT$2,000 in gifts for childbirth subsidies. HNVC also provides NT$20,000 in marriage subsidies and NT$2,000 in gifts for childbirth subsidies. The Group assists the government in resolving the issue of low birthrates and fulfills corporate social responsibilities. We also encourage all employees and their children to grow and prosper within this big family. HNFHC, HNCB, HNSC, and HNIT provided marriage subsidies to 126 employees and childbirth subsidies to 205 employees in 2018.

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Children Care HNFHC and HNCB provide academic subsidies and scholarships to employees' and Benefits children who study in elementary schools, junior high schools, senior high schools, and universities to encourage them to study hard. Subsidies are provided to all qualified applicants. HNFHC

Subsidies Scholarships First Period Number of Applicants 26 Number of Applicants 3 (Employees) (Employees)

Number of Beneficiaries 43 Number of Beneficiaries 3 (Employees' Children) (Employees' Children)

Subsidies Scholarships Second Period Number of Applicants 22 Number of Applicants 3 (Employees) (Employees)

Number of Beneficiaries 36 Number of Beneficiaries 3 (Employees' Children) (Employees' Children)

HNCB

Subsidies Scholarships First Period Number of Applicants 2,031 Number of Applicants 631 (Employees) (Employees)

Number of Beneficiaries 3,034 Number of Beneficiaries 720 (Employees' Children) (Employees' Children)

Subsidies Scholarships Second Period Number of Applicants 1,971 Number of Applicants 603 (Employees) (Employees)

Number of Beneficiaries 2,948 Number of Beneficiaries 687 (Employees' Children) (Employees' Children)

Note 1: The first period is from September 2017 to January 2018; the second period is from February 2018 to June 2018. Note 2: Due to the overall low birth rate in Taiwan, the number of applicants in the second period was generally lower than that in the first period.

Maternal Health HNCB has implemented the Maternal Health Protection Program, to which Protection female employees are entitled within the period of pregnancy to one year after Program delivery. After receiving the self-evaluation form provided by female employees during the protection, the head of the department is required to avoid work causing harm to their health, such as lifting and handling or work overload. After being informed of the female employees under protection, the General Administration Department will conduct the risk assessment, control, and classified management for work that may cause harm to their health and make work adjustment or replacement based on the physician's advice with related records kept. As to HNSC, female employees during pregnancy or lactation are encouraged to propose work causing harm to their health on their own initiative, and HNSC will arrange for the contracted physician to give advice and make necessary work adjustment or replacement based on the physician's advice.

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3.2.2 Employee Satisfaction Survey Findings of the Past Three Years HNCB values the results of the employee To discover whether employees identify with the satisfaction survey each year and uses each core values, overall systems, work environment, survey to understand employees' internal needs organizational culture, and leadership of the and opinions (e.g. the key factors behind an Company, HNCB conducts a bank-wide employee increase in turnover rate or low morale) in order satisfaction survey every December. Upon to review the internal management status of completion of the survey, the results are analyzed the organization. For items with low satisfaction in detail to compile the "Employee Satisfaction or employees' feedback, HNCB proposes Survey Report". This report is submitted to senior actual improvement strategies immediately to management as a reference for the next year's help employees resolve difficulties. In terms of business plan. We also value our employees' "relationship with management", the satisfaction feedback and refer to this report for continuous rate in 2018 was higher than that in the previous improvement and advancement. two years, showing that HNCB attached great For units with low satisfaction and where there importance to communication with employees has been specific feedback on management and that bank clerks were willing to work under issues of supervisors, a supervisor of the the improved leadership of supervisors. Human Resources Department will actively bring employees for inspections at the units to understand the current status and help resolve the issue.

2018 Item 2016 2017 2018 Target Core Values, Overall System 85.65% 85.6% 87.76% 75% Work Environment, Organizational 93.34% 93.3% 93.14% 75% Culture Satisfaction Employee Rate of Each Immediate Satisfaction Category (%) Relationship Supervisor 93.41% 92.82% 93.60% N/A Rate with (Current) Management Unit Manager 91.55% 94.83% 94.93% N/A (Current) Average Satisfaction Rate (%) 91% 92% 92% N/A Percentage of Employee Participation in the Coverage* Survey (%) 100% 100% 100% N/A Recipient: All Employees of HNCB (100%) Note 1: Coverage is not the response rate.

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3.2.3 Employee Communication company within the Group, including business overview and business performance and The sound development and growth of a latest events, and organize online events and company rely on the efforts made by both the surveys from time to time. HNFHC and HNCB management and the employees; therefore, it is have signed a "collective agreement" with the necessary to maintain effective communication Corporate Union based on the labor conditions with employees to bring employees' talent into full agreed between both parties. The collective play. agreement specifies that if the Company's The management of the Group continue to create business is contracted, merged or reorganized, a good work environment for employees, provide resulting in the necessity of layoff, the employees sufficient support at work, and care for the need to be laid off shall be compensated preferentially of employees. The Group provides smooth based on their seniority in addition to the communication channels for employees to voice pension or severance payment according to their opinions and receive attention. These the regulations. Taking HNCB for example, it channels improve their sense of identity and organizes the uniform voting each year and holds satisfaction rate with the companies and achieve the internal recruitment seminar from time to the purpose of talent retention. time based on business needs. Employees may register and participate freely to share information We also convey important company information and opinions with each other. to all employees through the bulletin of each

Union To protect labor rights and facilitate labor relations, employees of HNCB Participation initiated the establishment of the "Corporate Union of HNFHC and Its Subsidiaries". Employees may decide whether to join the union of their own free will. Union participation in the past three years is as follows:

Nu o los Nu o los in t nion in t nion C 2 C 1 C 08 C 010

Nu o los in t nion C 2 C 10

In addition, HNFHC and HNCB have signed a "collective agreement" with the Corporate Union based on the labor conditions agreed between both parties. They convened a meeting every three years to review and amend the collective agreement to ensure the labor conditions and improve labor relations.

93 Employee Care

Labor- HNFHC management Meetings Number of Labor- Major Issues Discussed management Meetings Held

1. Extended working hours in accordance with the Labor Standards Act and the Employee Work Rules due to business needs. 3 2. Adjusted holidays and make-up workdays according to the government's work calendar to allow employees to enjoy continuous holidays.

HNCB