ANNUAL REPORT 2018 - SinoPac...Fulfillment of a Beautiful Life Through Finance 2 3 Fulfillment of a...

ANNUALR E P O R T2018

15Overseas Offices

8,796Employees

29Subsidiaries

SinoPac Financial Holdings Company Limited was established on May 9th, 2002 (Stock Code: 2890), consisting of subsidiaries in a wide range of financial services including banking, securities, investment trusts, insurance broking, leasing, and venture capital. The Company includes a global service network with locations in Hong Kong, Macau, Nanjing, Shanghai, Guangzhou, Chongqing, Tianjin, Dongguan, Kunshan, Xiamen, Vietnam, Thailand, Myanmar, Los Angeles, and London.

SinoPac Holdings was established when Bank SinoPac and National Securities merged, creating the first successful integration between a banking institution and a securities firm in the history of Taiwan's financial services industry. At its shareholders' meeting held on August 26, 2005, Sinopac Holdings approved a share swap transaction with the International Bank of Taipei to make the latter a wholly owned subsidiary, a move meant to strengthen the Company's international competitiveness and expand its business scope. On July 20, 2006, SinoPac Holdings changed its Chinese name to Yong Fong Holdings. Bank SinoPac and International Bank of Taipei completed its merger that same year, with the former as the surviving entity.

Bank SinoPac consists of 125 branches, plus its subsidiary, Bank SinoPac (China), in Nanjing which was inaugurated in February 2014, the first wholly-owned subsidiary of a Taiwanese bank in mainland China.

SinoPac Securities is the first securities firm listing on Taiwan’s TPEx. In September 2016, SinoPac Securities accepted the transfer of IBT Securities' brokerage business, business equipment, and the net assets of its margin trading and short selling accounts, providing a catalyst to improve SinoPac Securities' brokerage market share and profitability for the benefit of its shareholders.

Looking towards the future, SinoPac Holdings shall continue to reinvent and innovate the business, strengthen compliance and risk management, and under strict risk controls fulfill customer requirements and develop appropriate products per market demand, expand the scale of our “digital finance” offerings, provide specialty products and services, and respond to changing economic trends and optimize asset allocation to create sustainable and stable profitability. SinoPac Holdings upholds the vision of “Fulfillment a beautiful life through finance”, and places great emphasis on human values, professionalism, and principles of good faith as well as provide our customers overall financial solutions.

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Message to Shareholders

Financial Overview

Awards and Accolades

Corporate Profile

Performance of Major Subsidiaries in 2018

SinoPac Holdings Five Major Themes for 2019

Risk Management

Information Security Management

Our Employees

Sustainability Achievements

Condensed Financial Statements

Contents Prologue

188Branches

Printed on : May 1, 2019 1

Fulfillment of a Beautiful Life Through Finance www.sinopac.com

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Fulfillment of a Beautiful Life Through Finance

2018 Economic and Market RetrospectiveAfter the global economy's revival in 2017, the outlook for the global economy and for financing needs was generally positive at the beginning of 2018. However, financial market conditions soon changed in response to the dynamic macro environment. First, the U.S. confronted monetary policy normalization as the U.S. Fed continuously hiked rates, restricting the momentum of economic growth. Second, U.S. tax cuts led to cross-border capital flows and a corresponding increase in the volatility of global financial markets. Third, growing trade protectionism occurred after U.S. President Donald Trump provoked tensions with major trading partners including China, Germany, Canada, and Mexico, in response to negative trade balances. This slowed the growth of global trade and caused uncertainty in the industrial chain, thereby sideling corporate investment. In addition to this, the political turmoil caused by Brexit induced the G7 countries to tighten monetary policy, which resulted in the common challenge of a worldwide economic slowdown.

With regard to Taiwan's economy, the results from the first and second quarters of 2018 were favorable, posting growth rates of 3% or above. However, in the third quarter, exports slowed and the trade balance decreased month over month. Coupled with the uncertainty of the global economy and of financial markets, this affected consumer confidence and further restricted domestic demand growth. The growth rate throughout 2018 was estimated at 2.63%, according to the Directorate General of Budget, Accounting, and Statistics of the Executive Yuan.

SinoPac Holdings Business Strategies and Performance Upholding Supervision and Management, Strategic Leadership, and the Realization of Synergy were the major themes for 2018. Under the framework of sound corporate governance and risk management, SinoPac Holdings witnessed steady growth in profits thanks to the diligent efforts of the management and employees. In 2018, SinoPac Holdings posted a consolidated net income after tax of NT$9.428 billion, EPS after tax of NT$0.84, and return on equity (ROE) of 6.72%. Our consolidated net income after tax expanded 3.79% from 2017. At the end of 2018, our net value reached NT$141.8 billion, and our net value per share was NT$12.58.

In terms of Supervision and Management, SinoPac Holdings established the Ethical Management Committee, consisting of all independent directors of SinoPac Holdings and its subsidiaries and a whistle-blowing system to demonstrate our commitment to ethical management. The Sustainable Development Committee was also incorporated into the organization to achieve four major missions : Ethics and Decency, Wealth Building, Environmental Sustainability and Social Responsibility. SinoPac Holdings, in keeping with the international trend toward corporate social responsibility, introduced a performance evaluation mechanism for the board of directors and established a human rights policy. In addition, SinoPac Holdings strengthened our three lines of defense to enhance our internal auditing, compliance, and risk management corporate culture. Beginning in 2018, full-time internal auditing, compliance, and risk management officers are now appointed and held to the highest standards. A more stringent related-party managing mechanism was also implemented and further enhanced.

In terms of Strategic Leadership, SinoPac Holdings built a specialized, lean decision-making organization after restructuring. SinoPac Holdings also accelerated our transformation in digital finance by establishing the Digital & Technology Division and the Information Security Committee, which are responsible for information infrastructure, increasing the number of mobile payment service providers, and deepening industry-academia collaboration. As for our overseas businesses, Bank SinoPac (China), the flagship bank for SinoPac Holdings in mainland China, has established its headquarters in Nanjing, its Shanghai Branch on the Yangtze River Delta, and its Guangzhou Branch on the Pearl River Delta; it has also proposed opening a branch in Chengdu. With the operations of Bank SinoPac (China) and SinoPac Leasing spanning eastern, northern, southern, and southwestern China, SinoPac Holdings has achieved significant results in cross-border financial services. In the ASEAN region, Bank SinoPac first opened the Ho Chi Minh City Branch in Vietnam, followed by SinoPac Leasing representative offices in Thailand and Myanmar. At the same time, we have been expanding our collaboration with local financial industries to extend our business presence and create business opportunities in neighboring markets such as Cambodia.

In terms of Realization of Synergy, SinoPac Holdings integrated group resources and established a designated team in charge of facilitating cross-selling among SinoPac Holdings and its subsidiaries. In response to our business development, SinoPac Holdings prudently reviewed the efficiency of capital allocation and continuously conducted mergers and acquisitions of subsidiaries to improve the use of capital. The number of subsidiaries was reduced from 33 at the end of 2017 to 29 at the end of 2018.

Business Strategies and Performance of Major Subsidiaries Bank SinoPac is committed to putting customers first and to providing innovative products and services. Our goal is to expand the depth and breadth of business dealings with customers and to grow our business scale with proper risk management. Bank SinoPac boasted a consolidated net income of NT$9.674 billion, EPS after tax of NT$1.12, and ROE of 7.60% in 2018. Regarding the scale of business, at the end of 2018, Bank SinoPac's consolidated assets totaled NT$1,485.3 billion, an increase of NT$52.1 billion from the previous year. Deposits totaled NT$1,195.1 billion and loans totaled NT$932.6 billion, increases of 3.62% and 6.13%, respectively, from the end of the previous year. The loan-to-deposit ratio was 78.04%, an increase of 1.84% from the end of the previous year. In terms of wealth management, Bank SinoPac worked actively to develop a customer-oriented business model, to obtain an in-depth understanding of client needs and risk tolerance, and to offer asset allocation services that paid equal attention to risks and returns. Bank SinoPac has actively participated in multiple financial transactions in financial markets across Taiwan and Asia. We have established comprehensive platforms for FX, interest rates, fixed income, and derivatives, making it one of the key market makers among domestic banks. In August 2018, the Financial Supervisory Commission (FSC) approved Bank SinoPac’s Offshore Banking Unit (OBU) for bond underwriting and bond trading, allowing Bank SinoPac to provide more comprehensive financial products and services.

SinoPac Securities continues to develop our wealth management business, taking clear steps toward building a fintech securities firm featuring wealth management services. In 2018, we launched an investment consulting service through Line@ to provide AI-based wealth management. An industry-leading wealth management website was also established in conjunction with Reuters to integrate the offer prices of Taiwanese stocks, options, and overseas stocks, creating a digital environment centered on customer experience. With innovative strategies and comprehensive professional services, SinoPac Securities added new sources of income and outperformed our peers with regard to many business indicators. In 2018, SinoPac Securities posted a consolidated net income after tax of NT$467 million, EPS after tax of NT$0.29, and ROE of 1.80%. In terms of market share, SinoPac Securities maintained the ranking for our core brokerage business and advanced the sub-brokerage business market share to second place. Assets under management (AUM) surged 34% YoY to NT$13.7 billion, making SinoPac Securities the market leader in terms of growth. Strong Capital Structure and Record-High Credit Ratings SinoPac Holdings had a stable capital adequacy ratio (CAR), which reached 123.63% at the end of 2018. Bank SinoPac maintained a high CAR, while the consolidated CAR reached 14.44% at the end of 2018. With stringent control over the quality of assets, Bank SinoPac's non-performing loan ratio was merely 0.25% in 2018, a decrease of 0.03% from the end of 2017. The debt coverage ratio reached 561.17%. Starting from the inception of SinoPac Holdings in 2002, improved capital and business operations have propelled upgrades in our credit ratings by international institutions, which reached a record high in 2018. This demonstrates wide recognition of our restructuring efforts. The results of the latest credit ratings are summarized below:


Chairman / ONG Wen-Chyi

Type of Credit Rating

Credit Rating Institution

Long-term Credit Rating

Short-term Credit Rating

Outlook for Credit Rating

Date of Credit Rating

InternationalStandard & Poor's BBB A-2 Stable August 13, 2018

Fitch Ratings BBB F2 Stable September 12, 2018

DomesticFitch Ratings A+(twn) F1+(twn) Stable September 12, 2018

Taiwan Ratings twA+ twA-1 Stable August 13, 2018

http://www.sinopac.com/en/index.html


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Fulfillment of Corporate Social Responsibility 2018 marks the seventieth anniversary of Bank SinoPac and the thirtieth anniversary of SinoPac Securities. In 2018, SinoPac Holdings established the Sustainable Development Committee and was selected for the FTSE4Good TIP Taiwan ESG Index, showing that our commitment to sustainable development was widely recognized. SinoPac Holdings has been caring for Taiwan too, cultivating the cultural and creative industries, and making immense efforts to promote art, culture and academic education for the long term. We provide resources and take specific action to give back to clients, shareholders, and society, thereby fulfilling our corporate social responsibility and achieving a triple-win outcome.

In terms of charity, SinoPac Holdings hosted 20 charitable events across 17 cities and counties in 2018, including a mountain-and-beach cleanup and other community-involvement programs. SinoPac Holdings volunteers participated in the events, which reached more than 4,000 local residents. Bank SinoPac has also sponsored the Taipei Children's Arts Festival organized by the Taipei City Government Department of Cultural Affairs for 11 consecutive years. This has opened up the world of art to children and allowed them to experience creativity and life. In 2018, Bank SinoPac especially arranged two charitable "Buchettino" performances for the Eden Social Welfare Foundation, hoping to delight and amaze children with a variety of different needs. In addition, Bank SinoPac worked with the Sunshine Social Welfare Foundation to promote the Sunshine Foundation Mentorship, where Bank SinoPac volunteers helped the victims of the New Taipei water park explosion who had intended to work in the financial industry understand the necessary qualifications through interaction, internships, and training. We are extremely pleased that some of the victims who participated in the Sunshine Foundation Mentorship program now work for Bank SinoPac. SinoPac Securities has also participated in a long-term lunchbox project for the Children Are Us Foundation. In 2018, more than 1,000 employees ordered 8,889 lunchboxes from the Children Are Us Foundation to support remote areas. Finally, long-term care has been a topic of interest in recent years. In 2018, volunteers from SinoPac Securities Investment Trust visited Taitung to participate in a volunteer event organized by TFF-Bloomberg Best Funds Awards. The volunteers helped harvest and dry pandan leaves, accompanied the elderly with dementia through the Christmas event, and provided them with free haircuts.

In terms of the cultural and creative industries, and as a responsible corporate citizen, Bank SinoPac is fully committed to garnering more praise and recognition for the culture and beauty of Taiwan. Bank SinoPac actively contributes to local culture, encouraging youth to return to the countryside and start new businesses. For five consecutive years, Bank SinoPac has been the title sponsor of the Simple Life Festival, which enables participants to focus on their passions and to create value with them. Bank SinoPac creates digital banking experiences at the festival, where a demonstration of accessible, convenient, and safe financial services is provided to deliver the message to younger generations that "banking is simple" and that it can assist them in achieving their dreams of becoming young entrepreneurs. For five

President / Stanley CHU

years in a row, Bank SinoPac has also sponsored SinoPac Legacy Taipei, a music performance event held in Huashan 1914 Creative Park, providing a stage for young performers to realize their dreams. Using corporate strength, Bank SinoPac additionally sponsored the 2018 Taichung World Flora Exposition with the aim of promoting local tourism, industrial upgrades, and art performances. We also sponsored the Toyota BOTY Taiwan 2018 dance competition to encourage youth to express themselves.

As for the promotion of education, Bank SinoPac has also initiated a three-year industry-academia collaboration with National Cheng Kung University, which incorporated the university’s R&D capabilities and talent cultivation to create the first Financial AI Technology Center in Taiwan. By combining financial big data and deep-learning techniques, new applications for FinTech have been developed. Bank SinoPac has also introduced AI to credit investigations and chosen National Cheng Kung University as its future financial life lab. To cultivate talent, Bank SinoPac has provided scholarships for 100 students in the fields of information engineering, medicine, business administration, and finance and accounting for two consecutive years.

Business Outlook and Strategies for 2019 Looking ahead to 2019, although the U.S. will continue to maintain steady growth, its GDP growth rate is expected to drop 2.9% in 2018, according to U.S. Bureau of Economic Analysis, due to the impact of tax cuts and the Sino-US trade war. China will be most affected by the trade war, and its GDP growth rate is expected to fall from 6.6% in 2018 (estimated by National Bureau of Statistics, China) to 6.5-6.0% in 2019, according to Chinese government statistics. Subject to an economic slowdown in both the U.S. and China, Taiwan's economic growth rate in 2019 is expected to fall 2.27%, according to Directorate General of Budget, Accounting, and Statistics of the Executive Yuan. As the economy slows, inflation will moderate, and the economy will flash a green or yellow-blue light. Thus, the Central Bank is very likely to maintain current interest rates in 2019.

To prepare for the opportunities and challenges of FinTech in a dynamic market, since 2018, SinoPac Holdings has operated on the principles of "Construct, Ascend, Align, Ahead" and proposed five major themes for 2019: 1. Enhance portfolios and raise operational efficiency2. Boost fee income3. Elevate overseas revenues 4. Accelerate digital transformation5. Strengthen corporate governance, sustainable development and risk management frameworks

In addition, SinoPac Holdings expects to shape five aspects of corporate culture, namely: Contribution Orientation, Discussion and Decision, Professional Respect, Systematic Governance, and Team Collaboration, which guide all employees to face future challenges with a new work mindset under the framework of sound and sustainable governance. SinoPac Holdings will urge its subsidiaries to continuously strengthen their risk management core capacities and to maximize profits under a proper risk control framework, in addition to strengthening key business development and undertaking structural adjustments.

Over the past 70 years, SinoPac Holdings has contributed to the economic growth and transformation of Taiwan with its financial expertise and quality services. We have expanded our service network overseas to continuously achieve excellence for both the business operations of SinoPac Holdings and our clients. In 2019, SinoPac Holdings will adhere to our customer-first business philosophy and transform into a forward-looking financial service provider for both offline and online channels. Upholding the core value of "Fulfillment a beautiful life through finance," the board of directors, the management, and all employees at SinoPac Holdings will strive to provide better customer experience, enhance shareholder value, and live up to shareholders' high expectations.

President

Stanley CHUChairman

ONG Wen-Chyi



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Unit : NT$ million

Item 2016 2017 2018

Total assets 1,678,930 1,599,161 1,604,926

Total equity (Ex-dividends) 133,898 138,260 141,821

Net interest revenues 16,613 16,103 15,799

Net fee revenues 9,193 9,514 9,946

Total net revenues 30,820 32,506 32,113

Profit 8,282 9,084 9,428

Earnings per share (NT$) 0.73 0.81 0.84

Book value per share (NT$) 12.54 12.51 12.58

Return on equity (%) 6.24 6.68 6.72

Return on assets (%) 1.07 1.17 1.27

Group capital adequacy ratio (%) 119.2 130.4 123.6

Bank SinoPac CAR (%) 14.1 15.3 14.4

Bank SinoPac Tier 1 Ratio (%) 11.9 13.2 12.7

Bank SinoPac Common Equity Tier 1 Ratio (%) 11.5 12.5 12.0

SinoPac Holdings Operation and Profitability

Total assets Total equity (Ex-dividends)

Net interest revenues Net fee revenues

Total net revenues Profit

Earnings per share (NT$) Book value per share (NT$)

Return on assets (%)Return on equity (%)

1,604,926

1,599,161

1,678,930

2018

2017

2016

2018

2017

2016

141,821

138,260

133,898

1,604,926 NT$ million 141,821 NT$ million

2018

2017

2016

15,799

16,103

16,613

2018

2017

2016

9,946

9,514

9,193

15,799 NT$ million 9,946 NT$ million

2018

2017

2016

32,113

32,506

30,820

2018

2017

2016

9,428

9,084

8,282


2018

2017

2016

0.84

0.81

073

2018

2017

2016

12.58

12.51

12.54

0.84 NT$ 12.58 NT$

2018

2017

2016

1.27

1.17

1.07

6.72

6.68

6.24

2018

2017

2016

6.72% 1.27%

Total assets Total equity (Ex-dividends)

Net interest revenues Net fee revenues

Total net revenues Profit

Earnings per share (NT$) Book value per share (NT$)

Return on assets (%)Return on equity (%)

1,604,926

1,599,161

1,678,930

2018

2017

2016

2018

2017

2016

141,821

138,260

133,898

1,604,926 NT$ million 141,821 NT$ million

2018

2017

2016

15,799

16,103

16,613

2018

2017

2016

9,946

9,514

9,193


2018

2017

2016

32,113

32,506

30,820

2018

2017

2016

9,428

9,084

8,282


2018

2017

2016

0.84

0.81

073

2018

2017

2016

12.58

12.51

12.54

0.84 NT$ 12.58 NT$

2018

2017

2016

1.27

1.17

1.07

6.72

6.68

6.24

2018

2017

2016

6.72% 1.27%

Financial Overview

ROE = Net income / Average equity ROA = ﹝Net income + interest expense X (1- Tax Rate)﹞ / Average total assets



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A constituent of the FTSE4Good TIP Taiwan ESG Index.

SinoPacSecurities

SinoPacHoldings

BankSinoPac

FTSE4Good

The Asset

Taiwan Academy of Banking and Finance

The Asset

Best Digital Finance Award from the Taiwan Academy of Banking and Finance at the Ninth Annual Taiwan Banking and Finance Best Practice Awards.

The Asset’s prestigious Triple A Digital Awards for : Best Retail Digital Payments Experience, Most Innovative ATM Project, Most Innovative Corporate Payment Project. Derivatives House of the Year

Best FX Derivatives House

Best Index Provider

Best Structured Investment Product Award - 30 Days USD/ CNH CCS Linked Deposit

Best Flow Derivatives House

Best ETF Market Maker – Highly Commended in Taiwan

Best Equity Derivatives House – Highly Commended in Taiwan


2018.03Bank SinoPac’s Feng Yun Mortgage was awarded The Asian Banker’s Mortgage and Home Loan Product of the Year in Asia for 2018. SinoPac Securities won Wealth Magazine’s Best Digital Wealth Management in Securities, and Best Video Marketing in the 2018 Wealth Management Awards.

2018.06Bank SinoPac’s Feng Yun Mortgage and Temple Finance were awarded Taiwan’s Outstanding Enterprise Manager Association Design Innovation Award of the Year in the Top 10 Outstanding Innovations of the Year Awards. SinoPac Securities’s Fintech Services Project was awarded by Outstanding Enterprise Manager Association of the 14th Golden Torch Awards for the Top Ten Innovative Design of the year.

2018.07Bank SinoPac was awarded Asian Banking & Finance’s Taiwan Domestic Technology & Operations Bank of the Year in 2018. SinoPac Securities was the winner of the Best Digital Platform Experience Award and the runner-up for the Best Digital Innovation Award in the 12th Wealth Management Banks and Securities Firms Evaluation conducted by Business Today.

2018.09SinoPac Securities was awarded the Most Well-Rounded Digital Services Award in the 2018 Securities Company Evaluation conducted by Excellence Magazine.

2018.10Bank SinoPac was honored with the Best E-Commerce Efficiency Award and the Best Chargeback Processing Effectiveness Award at the Visa Global Service Quality Performance Awards. SinoPac Securities won Excellence in Fintech Securities in Wealth Magazine’s 2018 Taiwan Financial Awards.

2018.11Bank SinoPac won Taipei Computer Association’s Information Technology Month 2018 Top 100 Most Innovative Products – FinTech Award. Bank SinoPac was awarded the Best E-payment Service Innovation Award by Financial Information Service Co., Ltd.

2018.12Bank SinoPac was recognized by the Taiwan Academy of Banking and Finance with the Best Digital Finance Award in the Ninth Annual Outstanding Financial Enterprises Awards.

2019.03SinoPac Securities’s Open Finance Ecosystem was awarded the 2019 Golden Peak Award of Outstanding Commodities of the Year by Outstanding Enterprise Manager Association.

SinoPac SITC was awarded the 2019 Golden Peak Award for Outstanding Commodities of the Year.

2019.04Bank SinoPac was honored with The Asset’s prestigious Triple A Digital Awards for the Best Retail Digital Payments Experience, the Most Innovative ATM Project, and the Most Innovative Corporate Payment Project.

FinTech and Innovation



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2018.03Bank SinoPac was the winner of the Excellent Credit Growth Award of the Year from the Overseas Credit Guarantee Fund (Taiwan) in 2017.

2018.07Bank SinoPac was awarded the Best Green Finance Award by Excellence Magazine.

2018.10Bank SinoPac proudly received a Top Solar Quality Financial Services Provider Award from the Energy Bureau of the Ministry of Economic Affairs.

SinoPac Securities received the iCAP Course Quality Certification from the Ministry of Labor.

SinoPac International Leasing in Nanjing was recognized as the Jiangsu Province Financial Leasing Company of the Year in 2018 by the Financial Leasing Industry Association of Jiangsu Province.

2018.11SinoPac Holdings won the Innovation Growth Award for Best Performance in a Single Category and was named one of the Top 50 Corporations in the Corporate Sustainability Report Awards held by the Taiwan Institute for Sustainable Energy.

Bank SinoPac won the Excellent Green Procurement Award from the Taipei City Government Department of Environmental Protection.

2018.12SinoPac Holdings was selected as a constituent of the FTSE4Good TIP Taiwan ESG Index.

Sustainability and Overall Outstanding Performance

2018.01Bank SinoPac was named runner-up for the IRS Trading Competition Team Award, held by Taipei Exchange.

Bank SinoPac was awarded the Thomson Reuters Top CNH (Spot) Entity Award and the Top CNH (Spot) Trader Award.

Bank SinoPac became the first Taiwanese bank to join the National Association of Financial Market Institutional Investors (NAFMII).

SinoPac Securities won second place in the Taiwan Stock Exchange’s Negotiable Securities Award for Underwriter in 2017.

SinoPac Securities was awarded second place for Excellence in Warrants Issuer and third place for Impressive Warrants Sales in the 2017 Awards for Warrants Issuers conferred by Taipei Exchange. The Company also won second place for the Market Making Heroes Award in the 2017 Bond ETF Trading Contest and was awarded the Excellent Central Government Bonds Market Maker Award in the second half of 2017.

2018.04Bank SinoPac was named the Best Interbank FX Market Offshore Member by the China Foreign Exchange Trading System.

2018.07SinoPac Securities won the Taipei Exchange’s Excellent Central Government Bonds Market Maker Award in the first half of 2018.

2018.08Bank SinoPac was honored with five trading awards from The Asset, including Derivatives House of the Year, Best FX Derivatives House, Best Index Provider, Best Structured Investment Product Award - 30 Days USD/CNH CCS Linked Deposit, and Best Flow Derivatives House.

SinoPac Securities was awarded The Asset’s Best ETF Market Maker - Highly Commended in Taiwan and Best Equity Derivatives House - Highly Commended in Taiwan.

Bank SinoPac was awarded the Exchange Rate Commodity Market Making Performance Diamond Award (Banking) by Taiwan Futures Exchange.

2018.09SinoPac Securities won second place in the Futures Introducing Broker Trading Volume Diamond Award and the FX Market Maker Performance Diamond Award - Futures Proprietary Merchants at the Fourth TAIFEX Futures Diamond Awards organized by Taiwan Futures Exchange.

2018.10SinoPac Securities won Excellence Allocation Award, Stocks Rising Award, and Taiwan ETF Liquidity Provider Award in the ETF Trading and Market Making Competition held by the Taiwan Stock Exchange in 2018.

SinoPac SITC won third place for the highest trading volume in investment trusts in the Taiwan Futures Exchange Diamond Awards.

2019.01 SinoPac Securities won first place in the Taiwan Stock Exchange’s Economy Accelerator Award - IPO Funding, second place for Negotiable Securities Award -Underwriter, and third place for Economy Accelerator Award - IPO Market Value in 2018.

SinoPac Securities won the Taipei Exchange’s Excellent Central Government Bonds Market Maker Award in the second half of 2018.

2019.02Bank SinoPac was the winner of six prestigious awards from Refinitiv: Top 5 High Trading Volume Bank 2018, Top CNH (Spot) Entity 2018, Top CNH (Spot) Trader 2018, Top FX Swap Entity 2018, Top FX Swap Trader 2018, and FX Regulation Adoption Entity 2018.

SinoPac Securities won Warrants Number Breakthrough Award, Warrants Number Circulation Award, and Excellent Warrants Value Award in 2018 incentive activities for warrants issuers and securities brokers held by the Taiwan Stock Exchange.

SinoPac Securities won No 2 in Warrants Sales Award for warrants issuers, and No 2 in Excellent Warrants Value Award in 2018 incentive activities for warrants issuers held by the Taipei Exchange.

CapitalMarkets and Financial

Transactions

2018.01SinoPac SITC was honored house awards from the 2nd Benchmark Fund of the Year Award, namely the Outstanding Performance in the technology sector、Greater China Equity and the Best Performing of Balanced Fund.

2018.03SinoPac Securities was awarded Wealth Magazine’s Best Digital Wealth Management in Securities and Best Service in Securities in the 2018 Wealth Management Awards.

SinoPac SITC nominated the Twenty-First Annual Gold Diamond Award for Three-Year-Term Domestic Technology Equity Funds hosted by Taipei Foundation of Finance.

SinoPac SITC won the Lipper Fund Awards: Taiwan - 5-year Technology Equity Fund and 10-year Balanced Fund in NTD.

2018.06SinoPac Securities’s Channel Transition (Transaction toward Wealth Management) was awarded by the Outstanding Enterprise Manager Association of the 14th Golden Torch Awards for the Top Ten Innovative Design of the year.

2018.09SinoPac Securities won Excellence Magazine’s Best Wealth Management Award for the 2018 Securities Company Evaluation.

2018.10SinoPac Securities was honored with Wealth Magazine’s Excellence in Broker Service in the 2018 Taiwan Financial Awards.

2019.01SinoPac SITC was honored house awards from the 3rd Benchmark Fund of the Year Award, namely the Outstanding Performance in SME Equity、China Equity and the Best Performing in the Technology Sector and Greater China Equity.

2019.03SinoPac Securities won Wealth Magazine’s Best Wealth Management in Securities, Best Wealth Value Added in Securities, and Best Sales Team in Securities in the 2019 Wealth Management Awards.

Wealth Management


London

Thailand

Hong KongMacau

Taiwan

Myanmar

Vietnam

DongguanCanton

Xiamen

Tianjin

Chongqing Shanghai

NanjingKunshan

Los Angeles


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Bank SinoPacSinoPac SecuritiesSinoPac FuturesSinoPac Securities Investment ServiceSinoPac LeasingSinoPac SITCSinoPac Venture Capital

Taiwan

SinoPac Securities (Europe)

UK / London

Bank SinoPac, Hong Kong Branch / Kowloon BranchSinoPac Insurance BrokersSinoPac Securities (Asia)SinoPac Asset Management (Asia)SinoPac Solutions and ServicesSinoPac Capital (Asia)SinoPac (Asia) Nominees

Hong Kong

Bank SinoPac, Macau Branch

Macau

SinoPac Leasing, Myanmar Rep. Office

Myanmar

Bank SinoPac, HO Chi Minh BranchBank SinoPac, Vietnam Rep. Office

Vietnam

SinoPac Leasing, Bangkok Rep. Office

Thailand

Bank SinoPac Los Angeles Branch

USA / Los Angeles

ChongqingSinoPac Leasing (Tianjin), Chongqing Branch

Guangzhou / DongguanBank SinoPac (China), Guangzhou BranchSinoPac International Leasing, Dongguan Branch

XiamenGolden Trust SinoPac Fund Management SinoPac International Leasing, Xiamen Branch

Shanghai / KunshanBank SinoPac(China), Shanghai BranchSinoPac Financial Consulting (Shanghai)SinoPac Securities (Asia), Shanghai Rep. OfficeSinoPac International Leasing, Kunshan Branch

NanjingBank SinoPac (China), Headquarters/ Nanjing BranchSinoPac International Leasing, Headquarters

TianjinSinoPac Leasing (Tianjin), Headquarters

China

Corporate Profile



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SinoPac Holdings Organizational Structure

SinoPac HoldingsSinoPac Holdings (the Company) was established on May 9, 2002 (Stock Code: 2890), and consists of a broad range of financial services subsidiaries including banking, securities, investment trusts, insurance broking, leasing, and venture capital. The Company includes a global service network with locations in Hong Kong, Macau, Nanjing, Shanghai, Canton, Chongqing, Tianjin, Dongguan, Kunshan, Xiamen, Vietnam, Thailand, Myanmar, Los Angeles, and London.SinoPac Holdings was established when Bank SinoPac and National Securities merged, creating one of the earliest successful horizontal alliances between a banking institution and a securities firm in the history of Taiwan's financial services industry. In 2005, Bank SinoPac made the International Bank of Taipei its subsidiary through a share swap transaction. On July 20, 2006, SinoPac Holdings changed its Chinese name to Yong Feng Holdings. Bank SinoPac and International Bank of Taipei completed their merger in the same year, changing the name to Bank SinoPac (Yong Feng Bank in Chinese).

Bank SinoPacBank SinoPac was founded in a merger of equals between Bank SinoPac under SinoPac Holdings and International Bank of Taipei on November 13, 2006. Major business areas encompass corporate banking services, retail banking services, consumer banking services, wealth management services, financial markets services, and digital banking services. Bank SinoPac has 125 domestic branches, including 84 in greater Taipei, as well as branches in metropolitan areas in central Taiwan, southern Taiwan, Hualien, and Kinmen.Bank SinoPac has proactively established multiple overseas branches across the global market, including the Hong Kong Branch, the Kowloon Branch, and the Macau Branch. In 2014, Bank SinoPac (China) Limited, the first Taiwan-invested, wholly-owned subsidiary incorporated in Nanjing, China, was established. It is currently headquartered in Nanjing, consisting of two branches – Shanghai and Guangzhou. With the help of branches located in the coastal area in the pan-Pacific region, including the Los Angeles Branch (California, USA), the Ho Chi Minh City Branch (Vietnam), and the Vietnam Representative Office, Bank SinoPac was able to build an extensive business network which provides customers with comprehensive services.

SinoPac SecuritiesSinoPac Securities, established in 1988, was the first among its peers to be listed on Taiwan’s TPEx market. SinoPac Securities’ services include broking, proprietary trading, underwriting, international business, fixed income, and new financial products, and it is a major integrated securities firm with 54 service locations in Taiwan. The company prides itself on offering top-ranking, leading services in the financial sector and is actively expanding its business to international markets, including Hong Kong, Shanghai, and London, structuring the best financial integration service platform. SinoPac Securities is developing digital finance actively, with the expectation of building up its brand as a digital technology securities firm offering wealth management services, and to become the financial innovation leader in the securities industry . With innovative, digital business strategies and professional services, our ultimate goal is to provide customers with the best integrated financial services.

SinoPac Leasing SinoPac Leasing Corporation (SPL) was established in 1997. In response to clients’ needs for corporate development at different stages, SPL provides a diverse range of services including finance leasing, operating leasing, real estate leasing, and installment sales and financing. In addition to continuous dedication to providing services in Taiwan, SPL has also been expanding in the Asian market, with two subsidiaries located in China, SinoPac International Leasing Corporation and SinoPac Leasing (Tian Jin) Co., Ltd. Service locations span Nanjing, Dongguan, Xiamen, Kunshan, Tianjin, and Chongqing. In recent years, SPL has accelerated growth in Southeast Asia, opening branches in Myanmar and Thailand in order to seize business opportunities and serve local overseas Chinese customers. As the global market structure has changed in terms of business transformation and innovation, SPL has successfully launched outstanding and flexible services, which have garnered wide recognition. SPL’s subsidiary, SinoPac International Leasing was recognized as the Jiangsu Province Financial Lease Company of the Year by the Financial Leasing Industry Association of Jiangsu Province for the second time. Operating in a new and rapidly changing environment, SPL is committed to providing diversified, professional financial leasing services to its customers across various regions and industries. SinoPac SITCEstablished in 1997, SinoPac Securities Investment Trust (SinoPac SITC), adheres to the business philosophy of “professional management, service integrity, and excellence in performance,” and provides diversified and innovative products and services for mutual funds, discretionary investment services, and private offered funds. As of 2018, a total of 20 mutual funds had been launched, including international and domestic equity funds, balanced funds, funds of funds, index funds, ETFs, principal guaranteed funds, and fixed-income funds. Discretionary investment services were offered to clients with varying needs, including government funds, individual clients, and institutional clients. SinoPac SITC headquarters is located in Taipei, and also have branches in Taichung and Kaohsiung. In 2014, SinoPac SITC with Xiamen International Trust Co., Ltd. in a joint venture to establish Golden Trust SinoPac Fund Management Co., Ltd., It is the first west coast joint venture fund management company in west-strait economic zone.

SinoPac Venture Capital

Investment AmountNT$2,000

100%

SinoPac SITC


100%

SinoPac Leasing


100%

SinoPacSecurities


100%

Bank SinoPac

Investment Amount NT$75,400

100%

SinoPac Holdings

Unit : NT$ million



16 17

Diverse Board MembersOur board of directors is diverse in gender, age, professional skills and backgrounds, possessing crucial knowledge, skills, and capabilities to perform their duties. The Board is currently comprised of nine directors with three-year terms, including three independent directors, one executive director and five non-executive directors. The selection and appointment of candidates are not limited by age or gender, as decisions are made primarily based on professional abilities, observance of ethical standards, and reputation. Three current members have doctorate degrees and six have master’s degrees, facilitating their operational decisions, accounting and financial aspects analyses, business management, crisis management, application of professional knowledge related to the industry, insights into international markets, leadership skills, general decision making skills, and risk management skills. Furthermore, the Board’s expertise aligns with the Company’s long-term development strategies.

General Shareholders’ Meeting

Finance Management

Division

Operation Management

Division

Digital & Technology

Division

Human Resources

Division

RiskManagement

Division

Legal &Compliance

Division

Audit Committee

Remuneration Committee

Ethical ManagementCommittee

Secretariat

Audit Division

President Office

Risk ManagementDivision

Sustainable DevelopmentCommittee

Management Committee

Honor Reward/Penality Evaluation Committee

Information SecurityCommittee

Board of Directors

Chairman

President

SinoP

ac Securities

Bank S

inoPac

Other S

ubsidiaries

SinoPac Holdings Organizational Structure

SinoPac Venture CapitalSinoPac Venture Capital was established in 2003. In recent years, the company has focused on six core investments: FinTech, biotechnology and medical devices, intelligent manufacturing, cultural and creative industries, circular economies, AIOT, proactively managing current portfolios to reduce investment risks and maximize steady and satisfactory returns on investment. At the moment, investments are primarily made in Taiwan. SinoPac Venture Capital will continue to expand overseas investment businesses, especially in Southeast Asia, to broaden our global vision and develop international investment abilities by building industry networks and promoting overseas cooperation. Meanwhile, constant effort has gone into integrating SinoPac Holdings’ resources and strengthening cooperation. This includes the cross-selling mechanism across SinoPac Holdings’ subsidiaries, which ensures that one-stop purchasing can fulfill customers’ financial needs at different stages, thereby boosting customer satisfaction and trust.

Title Name Education & Key Past Positions

ChairmanHsinex International Corp. / ONG Wen-Chyi

Chairman, Chunghwa Post Co., Ltd.BA, International Relations, Dept. of Political Science, National Taiwan UniversityRepresentative (Ambassadorial ranking), Taipei Economic and Cultural Center in IndiaDirector, Taiwan's Financial Supervisory Commission, Office in New YorkCounsellor, Permanent Mission of Taiwan to the WTO (Geneva)Professor, Department of Finance, National Chengchi University

Independent Director

SCHIVE Chi

Professor, National Taiwan UniversityChair Professor, Shih Hsin UniversityChair Professor, Shih Hsin UniversityMinister without Portfolio, The Executive Yuan, R.O.C.Chairman, Taiwan Stock Exchange CorporationPh. D., Case Western Reserve University


James J. SHEU

Independent Director of Bank SinoPacChief Risk Officer, Chinatrust Financial Holding Co., Ltd.President, Chinatrust Financial Holding Co., Ltd.MBA, The Wharton School of the University of Pennsylvania, USA


TSAI Ying-Yi

Associate Professor, Department of Applied Economics, National University ofKaohsiung the Head of the Department of AppliedEconomics, National University of KaohsiungIndependent Director of SinoPac SecuritiesIndependent Director of Bank SinoPacPh. D. in Economics, University of Essex, UK

DirectorYFY Inc. /CHIU Cheng-Hsiung

Chairman, Bank SinoPacVice Premier, Executive Yuan, R.O.C.Minister, Ministry of Finance, R.O.C.Deputy Governor, The Central Bank of the Republic of ChinaChairman, EnTie Commercial Bank.Ph. D. in Economics, The Ohio State University, USA

DirectorYFY Inc. /Stanley CHU

Chairman, Cathay Securities CorporationAdjunct Professional Expert, Graduate Institute of International Business, National Taiwan UniversitySpokesman and Senior Executive Vice President, Taiwan Stock Exchange CorporationDirector / Senior Executive Vice President, Taiwan Futures ExchangeE.M.B.A., National Taiwan University

DirectorYFY Inc. /YEH Chi-Hsing

Owner, Davinci Personal Data Protection and high-Tech Law FirmAssistant Professor, Law school, Soochow UniversityMaster in Law, Soochow UniversityIntellectual Property Diploma, Franklin Pierce Law Center, USA

Director CHEN Chia-HsienChairman, SinoPac Call Center Co., Ltd.Director, International Bank of TaipeiMBA, University of Virginia, USA

DirectorHsinex International Corp. /HO Yi-Da

Chairman, Yuen Foong Co., Ltd.President and CEO, Yuen Foong Co., Ltd.Chairman & President ,Yuen Foong Yu Consumer Products Co., Ltd.MBA, MIT Sloan School of Management, USABachelor of Science in Management Science, MIT Sloan School of Management



18 19

3. The Ethical Management CommitteeThe Ethical Management Committee at SinoPac Holdings consists of three to nine members, all of whom are independent directors from SinoPac Holdings, Bank SinoPac and SinoPac Securities. The Committee is responsible for reviewing ethics management policies and prevention programs and for supervising the performance of the managerial departments. The committee shall report regularly to the Board on the company’s compliance status. Principal responsibilities are listed below.

(1) Facilitate the integration of integrity and ethical values into the Company's business strategy, review relevant preventive measures in accordance with laws and regulations, and monitor checks and balances.

(2) Review preventive programs that address unethical conduct, including operational standards and procedures as well as conduct guidelines.

(3) Supervise the internal organization, constitution, and responsibilities of the managing departments. Establish mechanisms that allow mutual checks and balances for higher-risk business activities within current business scopes.

(4) Oversee the implementation and coordination of effective ethics policies training. (5) Set up a reporting mechanism and monitor its effectiveness. (6) Assist the Board in monitoring the auditing of the management team and evaluate the effectiveness of the preventive

measures used to implement ethical business operations. Regularly evaluate the company’s adherence to related policies based on applicable procedures and write relevant reports.

SinoPac Holdings’ Ethical Management Committee consists of eight members. Two meetings were held in 2018 with an average attendance rate of 100%.

Duties and Operations of the Functional Committees

1. The Audit Committee The Audit Committee at SinoPac Holdings is composed of all the independent directors. Objectives of the Audit Committee include overseeing the company’s financial reporting process, monitoring the appointment and dismissal of independent accountants, assessing independence and performance of accountants, promoting effective internal corporate governance, ensuring compliance with applicable laws and regulations, and evaluating existing or potential risks in the company. The Audit Committee is expected to facilitate decision making for the Board with its technical expertise, while remaining independent throughout the process. In order to perform its required responsibilities, the Committee has the right to conduct any appropriate review and investigation, including hiring lawyers, accountants, or other consultants to assist committee members in carrying out their duties. The audit committee at SinoPac Holdings consists of three members. In 2018, eight meetings were held with an average attendance rate of 100%.

2. The Remuneration CommitteeThe Remuneration Committee at SinoPac Holdings is required to have at least three members, all of whom must be the company’s independent directors. Objectives of the Committee are to establish appropriate reward policies for the company’s directors and managers, whose performance and rewards framework will be reviewed on a regular basis. Remuneration for directors and managers will also be evaluated and determined. The Remuneration Committee at SinoPac Holdings consists of three members, as well as all independent directors of the company. In 2018, ten meetings were held with an average attendance rate of 96.67%.

Name GenderFinancialHoldings/Banking

Securities/Investment

OtherIndustrial

Cyber-security/

Information

Accounting/Finance

Cyber-security/Information

Int'l Experience

RiskMgmt

Wen-Chyi ONG Male 3 3 3 3 3 3

Chi SHIVE* Male 3 3 3 3 3 3

James J. SHEU* Male 3 3 3 3 3 3

Ying-Yi TSAI* Male 3 3 3 3 3

Cheng-Hsiung CHIU Male 3 3 3 3 3 3

Stanley CHU Male 3 3 3 3 3 3

Chi-Hsing YEH Male 3 3 3 3 3

Chia-Hsien CHEN Male 3 3 3 3 3 3

Yi-Da HO Male 3 3 3 3 3 3 3

Note : *Independent Director

AuditCommittee

100%RemunerationCommittee

96.67%Ethical Corporate

ManagementCommittee

100%Attendance

Rate

Diverse Board Members

Our board of directors is diverse in gender, age, professional skills and backgrounds, possessing crucial knowledge, skills, and capabilities

to perform their duties. The Board is currently comprised of nine directors with three-year terms, including three independent directors,

one executive director and five non-executive directors. The selection and appointment of candidates are not limited by age or gender,

as decisions are made primarily based on professional abilities, observance of ethical standards, and reputation. Three current members

have doctorate degrees and six have master's degrees, facilitating their operational decisions, accounting and financial aspects analyses,

business management, crisis management, application of professional knowledge related to the industry, insights into international

markets, leadership skills, general decision making skills, and risk management skills. Furthermore, the Board's expertise aligns with the

Company's long-term development strategies.



20 21

Corporate banking services

As of the end of 2018, the outstanding corporate lending balance was NT$503.7 billion, approximately 37% of which was foreign currency lending. The volume for factoring was NT$60.5 billion, and the volume for foreign exchange was US$218.5 billion. Loans to SMEs stood at NT$165.3 billion, with market share ranking sixth among domestic private banks. Total SME credit guarantees amounted to NT$33.7 billion, ranking third among domestic private banks.

Brokerage business

● Brokerage business yielded steady profits, ranking fourth in the industry with a market share of 4.86%. E-Trading business also ranked fourth in the industry, with a market share of 5.36%.

● Futures and options business gained a market share of 6.08%, ranking fourth in the industry.

Warrants business

3,596 warrants were issued with a market share of 9.78%, ranking fourth in the industry.

Wealth management

business

● Sub-brokerage business ranked second in market share for two consecutive years. The trading volume in 2018 reached NT$355.7 billion, with an increase of 11.30% YOY compared to NT$319.6 billion in 2017.

● Pan-wealth management income delivered steady profits. In 2018, the income total was NT$1.253 billion with an increase of 7.83% YOY compared to NT$1.162 billion in 2017.

● The wealth management trust AUM amounted to NT$13.654 billion, with an increase of 34.11% YOY, achieving the highest annual growth rate in the industry.

Financialmarketsbusiness

In August 2018, the offshore banking units of Bank SinoPac gained approval from the Financial Supervisory Commission (FSC) to underwrite bonds and issue various types of bonds at their branches, delivering a more comprehensive range of financial products and services to clients. To further boost market share for domestic and foreign exchange markets, Bank SinoPac has been optimizing self-developed digital forex trading platforms. Taking advantage of the CFETS (China Foreign Exchange Trade System) certification, which few domestic financial institutions possess, Bank SinoPac sustained dynamic RMB trading volume growth for two consecutive years and effectively generated profits, making the Bank one of the key market makers for foreign exchange futures and foreign exchange futures options.

Underwriting business

● Underwriting business ranked fifth with 15 underwriting cases handled and a market share of 7.81%. An overall underwriting volume of NT$6.573 billion came from underwriting cases as lead underwriter, ranking fifth with a market share of 6.52%. The underwriting fees income was NT$361 million, which grew by 17.59% from NT$307 million in the previous year.

● Stock transfer agent business ranked sixth, with services provided to 271 companies.

Consumerbankingservices

Various new credit cards were launched in the third quarter of 2018. The number of credit cards in circulation grew by 2% compared with the previous year. The value of credit card transactions increased 3%. Overall assets were stable and credit card profits remained stable. As of the end of 2018, the outstanding balance of credit card receivables was NT$15.079 billion. Credit loans rose slightly across branches, with an outstanding balance totaling NT$19.2 billion, representing 7% in YOY growth.

Retail banking services

As of the end of 2018, the outstanding balance of mortgage loans stood at NT$418.3 billion, the outstanding balance of auto loans was NT$6.3 billion, and the outstanding balance of for personal loans was NT$2.8 billion.

Electronic banking services

Bank SinoPac has been working on innovative digital applications. In 2018, credit card holders on the credit card service platform were integrated into the retail banking services MMA trading platform in order to provide comprehensive services and enhance customer experience and convenience. Bank SinoPac received the Taiwan Domestic Technology & Operations Bank of the Year Award in May of 2018 from Asian Banking & Finance in recognition of its Paybill Platform and efforts to create payment solutions and connect business partners via APIs. Bank SinoPac was awarded the Best E-Payment Service Innovation Award from Financial Information Service Co., Ltd. for the second year in November of 2018.

Wealth management

services

The total outstanding balance of non-discretionary money trust investments for domestic and foreign securities at the end of 2018 totaled NT$111.4 billion, and the total volume of sales amounted to NT$49.3 billion. The outstanding balance of general trust business (including real estate trusts, employee stock ownership trust and employee benefit savings trusts, and securities trusts) was NT$26.5 billion. The total outstanding balance of assets under custody was NT$302.8 billion, and the total premium received from bancassurance operations was NT$28.2 billion.


Bank SinoPac：

Foreign Exchange Volume

$218.5Unit : US$ billion

Custody Assets

$302.8Unit : NT$ billion

SME Loans

$165.3 Unit : NT$ billion

Corporate Lending Balance


Mortgage Loans Stood


Credit Loans


SinoPac Securities：

Sub-Brokerage Business Trading Volume

$355.7Unit : NT$ billion Unit : NT$ billion

Stock Transfer Agent Business(number of services companies)

271Ranked sixth

Wealth Management Trust AUM

$13.654

Brokerage Business

No.4Market share 4.86%.

Sub-Brokerage Business

No.2Two consecutive years

Warrants Business(number of warrants issued)

3,596Ranked fourth


Enhance portfolios and raise operational

efficiency

01.

Boost feeincome

02.

Elevateoverseasrevenues

03Accelerate

digitaltransformation

04.

Strengthen corporate governance, sustainable

development, and risk management

frameworks

05. FIVEMAJOR

THEMES

Fulfillmentof a Beautiful Life Through

Finance

TeamCollaboration

SystematicGovernance

Discussion and Decision

ProfessionalRespect

ContributionOrientation

Corporate Culture

Management Strategy

Construct Ascend Align Ahead

Accelerate digital transformation04.

Elevate overseas revenues03.

01. Enhance portfolios and raise operational efficiency

FIVE MAJOR THEMES

‧Make prompt and proper adjustments to our portfolio and increase asset utilization efficiency.

‧Expand partner APIs to embrace Open Banking. ‧Actively collaborate with universities and

start-ups to leverage digital technologies.

Boost fee income02.‧Adopt digital marketing strategies and collaborations

to attract potential customers. ‧Enhance customer engagement with our products and

the diversification of our services through data analysis.

‧Build a new business model for wealth management.‧Continue to expand our sub-brokerage business.

‧Expand overseas businesses and launch a cross-subsidiary business platform.

‧Cultivate relationships with major industrial parks in ASEAN countries and seek opportunities for SME relocation.

05. Strengthen corporate governance, sustainable development, and risk management frameworks

‧Implement risk-based internal auditing for Bank SinoPac.

‧Promote responsible finance.‧Develop information security blueprints and

strengthen network security. ‧Strengthen risk appetite frameworks and use

fintech to elevate the quality of risk control.


22 23

SinoPac Holdings established five major themes on the basis of four stages:

SinoPac Holdings Five Major Themes for 2019



24 25

Risk Management Organizational StructureSinoPac Financial Holdings has established a clear risk management structure consisting of four specialized layers. From top to bottom, it consists of: the board of directors, the Risk Management Committee, the Risk Management Division, and the Audit Division. This clearly distinguishes the authorities and responsibilities, hierarchical authorization, and fully defines the risk management rules and limits for each risk to achieve the best balance between profits and risk management.

The board of directors is the highest supervisory unit. The chairman of the board of directors oversees the Risk Management Committee, which consists of six members: four board members, the director of the Risk Management Division, and a risk management professional. The committee is responsible for reviewing risk management policies, evaluating overall risk exposure and risk conditions, and supervising the risk management activities of all units. The Risk Management Division, established under the president of SinoPac Holdings, is responsible for coordinating the development of SinoPac Holdings’ overall financial holdings risk management policies and principles, and also the planning and implementation of the risk management system. In addition, Bank SinoPac, SinoPac Securities, and all other subsidiaries also established risk management units responsible for promoting risk management policies, reporting risk exposures, and offering comprehensive risk management advice to new or significant businesses in order to fully define the risk management rules and limits for each risk and achieve the best balance between profits and risk management. At the same time, the General Audit Division functions as an independent third line of defense. It is under the board of directors to ensure continuous improvement, and so that progress and results will be reported directly to the board.

Risk Management Objectives and PoliciesBy establishing an appropriate risk management organizational structure, management standards, control mechanisms, a risk-reporting system, and a sound risk management culture, SinoPac Holdings integrates and manages all relevant risks and timely reviews the revised management mechanisms and measures to fully define the risk management rules and limits for each risk to prevent the occurrence of major risk events and to obtain the best balance between profits and risk management.

1. Emerging Risk Identification Process and Results Due to climate change, emerging technologies, and demographic changes, various emerging risks have appeared. Effective identification and assessment of emerging risks and the development of response measures are important issues for financial institutions. Each year, SinoPac Holdings refers to emerging-risk-related reports issued by external organizations, provides subsidiaries with annual emerging risk assessments and establishes risk response measures, collects data on the emerging risks facing subsidiaries, identifies emerging risks at the financial holdings level, and develops risk response measures for management.

2. Management Policies and Response Strategies for Climate Change RisksSinoPac Holdings understands the risks and opportunities climate change poses to business operations, and continues to pay attention to climate-related financial disclosure (TCFD) issues. By regularly holding SinoPac ESG Seminars, we stay abreast of climate-change issues facing the financial industry and raise risk awareness from the highest corporate levels to regular employees to clients, thereby promoting industry exchanges on climate-change issues and taking advantage of international climate change development trends. In February of 2019, Bank SinoPac held a SinoPac ESG Seminar, which focused on the challenges climate change poses to the financial industry. Lectures and seminars were given by external experts and scholars, and over 200 of SinoPac’s senior executives, clients, and peers attended. Views on international climate change trends were exchanged, and the current state of the financial industry, appropriate responses, strategic adjustments, and future prospects were all discussed.

Board of Directors

The board of directors is the highest unit of risk supervision. In addition to being responsible for approving the risk management guidelines of SinoPac Holdings, it also authorizes the management to be responsible for daily risk management.

Risk Management Committee

The Risk Management Committee methodically reviews risk management policies, risk management organization systems and processes, and overall risk limits.

Risk Management Division

Responsible for coordinating and developing SinoPac Holdings’ overall risk management policy and system, planning and model verification, calculating and evaluating risk-weighted assets and capital adequacy, and consolidating risk data for SinoPac Holdings and its subsidiaries.

Audit Division

The Audit Division, under the Board of Directors, is responsible for independent auditing and is the third line of defense in the risk management hierarchy. It is responsible for the planning and implementation of various types of audits.

Audit Division

SinoPac SecuritiesRisk Management Division

Other SubsidiariesRisk Management Division

SinoPac HoldingsRisk Management Committee

Management Committee

Bank SinoPacRisk Management Division

The Board of Directors

Chairman

President

SinoPac HoldingsRisk Management Division

Risk Management



26 27

Information Security ObjectivesAs a member of the financial services industry, SinoPac Holdings understands that with the rapid growth of digital finance, the focus on information security management has become a critical issue. We recognize that information is as important as any other business asset and must be properly managed and protected. Therefore, by establishing a management system that conforms to international standards, enhancing information security awareness, setting specific goals, continuing to improve, and striving to maintain the security of information systems, we will protect consumer rights and ensure the confidentiality, integrity, and availability of important information assets. Confidentiality: Ensure that only authorized personnel have access to information.Integrity: Protect the accuracy and integrity of information and processing methods.Availability: Ensure that authorized users have access to information and related assets when needed. Customer Data PrivacyIn order to protect the security and privacy of customers' personal data, SinoPac Holdings has established relevant management policies, including the creation of a customer information confidentiality measures page on the website to announce the collection, storage, and protection of customer data, and to provide customers with the right to opt-in or opt-out of information sharing. The Compliance Division is always poised to adjust confidentiality measures in response to changes in technology, society, and the law, and to make the relevant public announcements.In order to ensure personal data maintenance, each subsidiary has invested considerable resources in establishing personal data protection management teams responsible for promoting and reviewing all matters and plans related to personal data protection and management. These teams also aperiodically holding meetings to report and discuss issues.

Information Security Developments in 20181. To effectively promote information security, SinoPac Holdings established the Information Security Committee. Additionally, in

response to Article 38-1, Paragraph 1, of the Implementation Rules of Internal Audit and Internal Control System of Financial Holding Companies and Banking Industries and Article 36-2, Paragraph 1, of the Criteria for Establishment of Internal Control Systems by Securities and Futures Service Enterprises, Bank SinoPac and SinoPac Securities also established information security units.

2. Bank SinoPac and SinoPac Securities ISO 27001 Information Security Management System (ISMS) certifications passed the annual reviews.

Bank SinoPacInformation Security Division

SinoPac SecuritiesInformation Security Division

Other subsidiaries Informationsecurity management units

The Board of Directors

Chairman of the Board

President

Information Security Committee

Risk Type Impacts Response Measures

Information Security Risks

Inadequate design of information security architecture, or inadequate control of the system, network, or privacy management mechanisms, could increase the possibilities of hacking incidents and personal data leaks. In addition to affecting the Company's information security, this could also result in litigation, fines, interruption of business operations, and other risks, triggering a credibility crisis.

1. Continuous ISO 27001 Information Security Management System (ISMS) certification improves information security protection mechanisms and strengthens personal information protections, including advanced persistent threat (APT) protection, defense against DDoS attacks, email-content filtering, malware detection, website and APP vulnerability scanning, and security testing.

2. To ensure the continuity of operations, we coordinate with disaster recovery plans to conduct regular on-site and off-site backup exercises.

3. For high-risk systems (such as ATM and SWIFT systems), architecture isolation and system protection enhancement are employed.

4. To enhance employee information security awareness, social engineering exercises are regularly conducted, information security and personal data protection awareness is enhanced, and emergency response planning exercises for individual infringement incidents are conducted.

Anti-terrorism and money laundering controls

Failure to comply with the relevant regulations for preventing money launder ing and combat ing terrorism would be detrimental to the Company's reputation and also put the Company at risk for severe penalties.

1. SinoPac’s subsidiaries are supervised and comprehensive money-laundering and terrorism-financing risk assessments are conducted on a regular basis so that management can decide the protection mechanisms to be established, develop the appropriate risk reduction measures, and implement prevention plans in a timely and dynamic manner.

2. Before launching a new product or service or handling a new business, the Company will conduct money-laundering and terrorism-financing risk assessments and establish corresponding risk management measures to reduce the identified risks.

3. SinoPac Holdings established an information-sharing process and an information-sharing platform to share money-laundering and terrorism-financing information with subsidiaries on a regular (or as needed) basis for use by subsidiaries in the prevention of money laundering and counter-terrorism purposes.

4. Employees are assigned to participate in anti-money laundering and anti-terrorism-financing education training so that colleagues can understand the latest legal developments and related internal regulations.


Information Security Organizational StructureTo strengthen the information security management of SinoPac Holdings and its subsidiaries, a secure and reliable information system has been established to ensure the security of data, systems, equipment and networks. This, in conjunction with raising employee information security awareness, helps us protect customer rights and interests and comply with the relevant information security regulations. The Company has established information security policy measures and an information security committee responsible for information security promotion and governance, security risk monitoring, and management. The convener of the Information Security Committee,

either the president or a senior executive specified by the president, is primarily responsible for the following: 1. Review information security policies and

practices.2. Inspect and review of the information security

management system.3. Review information security awareness and

educational training programs.4. Assess and determine information security

infrastructure.5. Other information security management

matters.



28 29

Talent Cultivation and RetentionIn order for employees to have ample opportunities to grow and learn, SinoPac Holdings has created an optimal learning environment where, based on professional and personal traits, each employee is given training and self-improvement opportunities. Each year, our talent cultivation program is formulated based on the business strategies, business priorities, and human resources strategies of SinoPac Holdings and its subsidiaries. Our systematic curriculum not only enhances employees’ professional knowledge, it also enables them to grow with the organization. In 2018, overall investment in training was approximately NT$47.27 million, or an average of NT$6,053 per person; training hours totaled 380,053 hours, averaging 48.66 hours per person. In 2018, overall funding and time investment in education and training increased over the previous year, demonstrating SinoPac Holdings’ continued commitment to and support of talent cultivation.

Professional Ability Development Plan

• Corporate university training program• Internal auditing, compliance, and risk management training programs• Continued support of the Mentor Program

GrassrootsTalent Cultivation

• Management Competency Training Prograr• EMBA+ & EMBA Programs• Elite Talent (MA/IMA) Reserve Training Program

ManagementTalent Cultivation

DigitalTalent Development

• Digital Talent Development Program• Digital seminars

• SinoPac Securities was the first to receive the iCap Course Quality Certification• Talent cultivation focused on training effectiveness

ProfessionalTalent Cultivation

Systematicprofessionaldevelopment

training

Comprehensiveinvestment

managementtalent

Fintech anddigital

transformation training

Financeprofessionaldevelopment

talent

ladders were designed, and customized management competency courses were tailored to each level. This will strengthen management competencies at each level and allow managers to strive for the upper echelons of their careers. In addition, management suitability tests and management competency evaluations will be administered and, based on the results, the talent requirements for key positions will be gradually adjusted. The EMBA training series for reserve managers will also be employed to enhance the talent pool and cultivate the core management of the Company.

2. EMBA+ and EMBA ProgramsIn addition to strengthening the six core management competencies, SinoPac Holdings also focuses on communication and consensus among management. Therefore, a special EMBA+/EMBA class was created as a talent platform that combines learning, interaction, and observation. The classes are composed of management selected from SinoPac Holdings’ various subsidiaries; the EMBA+ class is composed of senior executive vice presidents and executive vice presidents, while the EMBA class is composed primarily of senior vice presidents and vice presidents. Both tracks have small class sizes to enhance overall interaction and learning outcomes. The course design combines the Company's six core management competencies, and collaborates with well-known domestic management consulting firms and lecturers to offer systematic and relevant courses rich in content that inspire management to think innovatively, understand current trends, and further enhance leadership and management capabilities.In addition to classroom courses, activities such as reading workshops, speeches, laser paintball, golf lessons, the Leader Campus Innovation Institute, and Mountain Climbing are arranged to increase the diversity of the overall training content and to create a space for interaction to enhance the effectiveness of the program overall. At the same time, it is hoped that participants can strengthen their internal networks and enhance mutual interaction, trust, and understanding, thereby creating a strong foundation upon which to build their future careers.

3. SinoPac Elite Talent (MA/IMA) Expertise-Oriented Reserve Training ProgramSinoPac’s Elite Reserve Training is based on the three main concepts: professional development, experiential learning, and comprehensive division rotation training. Through a variety of intensive classes, activities, and division rotation, Bank SinoPac’s new elite talents progress rapidly and accumulate practical experience during the training period, toward the goal of cultivating dynamic new management professionals. The training program employs phased training, providing basic finance training, as well as training and internship experience across divisions; IMA has also added a training course abroad to ensure that the development of professional ability has both depth and breadth. In addition, learning aids such as Coaches and Mentors have been introduced to strengthen interaction and communication and to accelerate learning and development.

1. Management Competency Training ProgramSince 2015, SinoPac Holdings has been comprehensively enhancing the cultivation of management leadership. In 2017, SinoPac’s six core management competencies were established to define competency indicators and management behaviors, and to evaluate management, ensuring that every level of management has a clear understanding of the organization’s requirements and their own positions. In 2018, the Management Competency Training Program was launched, providing comprehensive training to reserve managers, new managers and senior executives. Based on management levels and the six core competencies, management blueprint

Talent Incentive and Promotion MechanismsEach year, SinoPac Holdings conducts regular performance reviews based on the Employee Assessment Criteria, in addition to workplace behavior and management behavior evaluations so that employees can assess their learning and performance results and use them as the basis for future development. After the assessment process is established at the beginning of each year, direct supervisors/unit supervisors regularly review performance and correct targets, as well as conducting semi-annual and year-end performance reviews. Full-time employees who have already passed the probationary employee evaluation prior to the performance review are required to participate in the review process. In 2018, the proportion of employees receiving regular performance reviews was 100%.On the annual year-end self-assessment performance reviews, employees outline their career development plans (cross-company, or cross-business) and request training courses that would be helpful to their career development. Then, during performance interviews with management, career development plans are discussed and follow-up arrangements are made. Once the annual assessment of employees has been approved and finalized, direct supervisors will schedule two-way interviews to exchange opinions with employees. After the interviews, employees comment on and sign their performance evaluation forms, which are reviewed by unit supervisors before being transferred to the human resources department to be added to employees’ personal files.

Our Employees

• Through in-depth interviews peers and feedback from subordinates, the management competency evaluation will be more complete and comprehensive, giving upper management more confidence when deciding whom to promote.

• Using a variety of evaluation indicators, the qualifications required for each position can be identified and made into talent pool. These can then be further analyzed to determine which employees are best suited to SinoPac’s culture and to clearly define the qualities and characteristics of exceptional management.

• Develop a task-based leadership training module that combines more flexible curriculum design, project-oriented cross-group collaboration, feedback from professionals and management, competency models, and project task indicators.

• In the future, data will be combined and analyzed to ascertain whether the management trainees in each course have aligned to the organization’s development and to assess the effectiveness of the task-based leadership training module.

360-Degree Management Competency Evaluation

Create a SinoPacManagement Talent Pool

Develop a Task-BasedLeadership Training Module

Future Plans to Strengthen Managerial Professional Development

Comprehensive Investment Management Talent



30 31

Practice Corporate Social Responsibility In order to practice corporate social responsibility and achieve the goal of sustainable development, the Sustainable Development Committee was formally established in 2018. The chairman of the board of directors serves as the chairman, and the committee members consist of the president of SinoPac Holdings, as well as chairmen and presidents of its subsidiaries. The five task forces created under the committee are: Corporate Governance, Customer Relations, Employee Welfare, Social Involvement, and Environmental Protection. The Sustainable Development Committee meets quarterly and present its performance reports and plans to the Board on a semi-annual basis.

The Sustainable Development Committee integrated the core financial business of SinoPac Holdings into strategic blueprints to promote sustainability. The Committee proposed four sustainability missions including “Ethics and Decency, Wealth Building, Environmental Sustainability and Social Responsibility” to foster mutually-beneficial relationships with the public. Based on these four missions, the Committee can assist the Company fulfill its corporate social responsibility duties and pursue sustainable business.

In December 2018, SinoPac Holdings was listed as a constituent of the FTSE4Good TIP Taiwan ESG Index, which as of the end of 2018, consisted of 69 listed companies. Following the Company’s sustainable development blueprints, several plans have since been launched to attain short-term and medium-term goals and to meet international ESG selection criteria. Action plans for sustainability in 2019 include the following: Strengthening Information Security, Inclusive Finance, Promoting Workplace Health and Safety, Enhancing Employee Connections with the Company, and the Task-Force on Climate-related Financial Disclosures. In addition, seven action plan have been set for 2019:

1. Get listed as a constituent in a national and international ESG index 2. Participate in corporate governance evaluations conducted by assessment agencies3. Enhance information disclosure quality and channels 4. Enter ESG-related awards competitions5. Host forums and lectures6. Obtain a variety of international certifications7. Participate in and sign various international ESG initiatives

Notable Corporate Governance, Environmental and Social Achievements in 2018:I. Corporate Governance SinoPac Holdings initiated the Corporate Governance Inspection and Improvement Project in 2017. The President of SinoPac Holdings doubled as the project manager. Our company was the first financial holding company to proactively take the initiative to conduct thorough inspections of corporate governance to effect continuous improvements. Collaborating with a credible third-party inspection agency, and based on the results of their inspection, a two-year action plan was derived, with the ultimate goal of “setting a benchmark of excellence in the industry.” According to the results of Corporate Governance Review published by the Taiwan Stock Exchange on April 30, 2019, SinoPac Holdings had leapt to the top 6%-20% (the second best category) in the ranking of the overall listed companies, distinguishing itself by strengthening the structure and operation of the Board, safeguarding shareholders' rights and treating shareholders equally, improving information transparency and fulfilling corporate social responsibility.

1. Blueprints for the Corporate Governance Inspection and Improvement Project

May 2017SinoPac Holdings announced the launch of Corporate Governance Inspection and Improvement Project.

June - July 2017SinoPac Holdings consulted an internationally-renowned management consulting firm about the Corporate Governance Inspection and Improvement Project.

Dec. 2017SinoPac Holdings released the consulting firm’s inspection results and implemented the Corporate Governance Improvement Action Plan.

Aug - Nov 2017‧External consultants completed

empirical research on the corporate governmance of SinoPac Holdings

management within three months.‧The External consulting firm drafted the

Corporate Governance Improvement Action Plan.

2018SinoPac Holdings accom-plished 99% of the Corporate Governance Improvement Action Plan.

2019SinoPac Holdings will apply for a risk-based internal auditing to complete the ongoing project.

2017 2018 2019


SocialInvolvement

Customer Relations

EmployeeWelfare

Corporate Governance

EnvironmentalProtection

Ethics andDecency

Social Responsibility

Wealth Building

Environmental Sustainability

‧Optimize the corporate governanceframework‧Integrate information security protection framework for the domestic and overseas business system

‧Implement sustainable finance‧Optimize and expand green financialproducts and services‧Sign the Equator Principles‧Implement the Stewardship Principles for Institutional Investors‧Expand the implementation of inclusive finance

‧Strengthen the breadth and depth of ESG topic education and training‧Follow up on international human rights issues and strengthen the human rights risk management framework‧Improve employees' remuneration structure‧Promote employee health and safety‧Contribute to the better life of employees

‧Establish comprehensive benefit assessment mechanisms for social involvement activities‧Review and optimize social involvement themes

‧Improve suppliers' sustainability awareness and voluntary actions‧Establish science-based targets (SBT) for carbon emissions reduction‧Establish response measures for climate change risks and opportunities‧Expand the scope of greenhouse gas inventory

Main Themeof Sustainability Long-Term GoalMission

Sust

aina

ble

Dev

elop

men

t C

omm

itte

e



32 33

Six Key Areas Objectives 2018 Execution Results

• Enhanced the performance assessment for internal auditing, compliance and risk management at each subsidiary according to the highest standards in the industry.

• Recruited supervisors with practical experience in internal auditing, compliance and risk management and increased full-time positions in compliance and risk management departments.

• Expanded manpower in internal auditing, compliance and risk management at SinoPac Holdings, Bank SinoPac, and SinoPac Securities by 15% to tighten supervision.

• Made special recruiting plans and courses for internal auditing, compliance and risk management and developed a comprehensive training program.

Review of the professional knowledge and skills required for internal audit, compliance, and risk management personnel to identify the gaps and room for improvement of key competencies.

Enhancement of talentsin audit,

compliance and risk

management functions

2. Six Key Areas, Objectives and Results of the Corporate Governance Inspection and Improvement ProjectIn 2018, SinoPac Holdings resolved to promote corporate governance, formulating four basic principles as well as establishing the Ethical Management Committee and internal whistleblowing system. In August, the rating of SinoPac Holdings was elevated by international credit rating agencies, the greatest feat it has achieved since it was founded in 2002. International credit rating agencies have affirmed the improvements in SinoPac Holdings' corporate governance standards. SinoPac Holdings have established a comprehensive system to manage related-party transactions and have refined our holding framework to enhance overall operational transparency. Furthermore, SinoPac Holdings established the Sustainable Development Committee in 2018 and set the four main missions for sustainable development including "Ethics and Decency, Wealth Building, Environmental Sustainability and Social Responsibility". SinoPac Holdings were also selected as a constituent of the FTSE4Good TIP Taiwan ESG Index for the first time. These are testaments of the improved performance of SinoPac Holdings’ structural adjustments and intensification of sustainable development goals and SinoPac Holdings received widespread recognition from external entities.

Six Key Areas Objectives 2018 Execution Results

• Strengthened the reporting obligations and responsibilities for management about the related parties they declare. Management must verify the correctness and completeness of their declared related parties on a monthly basis and must be examined by systems for anomalies in unreported information about their declared related parties. For example, information must be cross-verified when a manager applies for company benefits and for addition of their dependents to insurance, or when multiple managers declare the same related party. A penalty system was established for detected errors, and for unreported and unconfirmed information within the specified time limit.

• Strengthened the related-party transaction summary and verification mechanisms k and regularly checked the inconsistent declarations in the related-party database.

• Bank SinoPac strengthened its credit risk early warning mechanism and added early-warning patterns for industrial competitive status in its internal regulations. It also established automatic early-warning mechanisms for high-risk customers with abnormal credit information.

• Bank SinoPac completed the automated review mechanisms for credit cards.• For customers whose securities margin financing or trading amount reached a certain level,

SinoPac Securities (Asia) required the customers to provide relevant documents to prove their financial resources in accordance with Taiwan’s regulations. For customers with higher amount of securities financing position, SinoPac Securities (Asia) adopted a more strict assessment of the value of collaterals provided by the customers. It also established more stringent operation procedures for credit and limit management.

Optimization of the Know Your Customer (KYC), credit extension, and other internal control procedures for related party transactions.

Operations management

• Established the Ethical Management Committee, the fifth such committee nationwide, consisting entirely of independent directors of SinoPac Holdings and key subsidiaries. The scope of the committee members is unmatched in the industry.

• Established the Sustainable Development Committee which is chaired by the Chairman of SinoPac Holdings. Members include the President of SinoPac Holdings and chairmen and presidents of major subsidiary companies. The Committee developed short, medium, and long-term plans for the sustainable development blueprint and it proposed four main missions for sustainable development including "Ethics and Decency, Wealth Building, Environmental Sustainability and Social Responsibility".

• Formulated the " Guidelines for Corporate Social Responsibility", "Guidelines for Code of Ethical Conduct", "Guidelines for Ethical Corporate Management" and "Procedures for Ethical Management and Guidelines for Conduct" which were applied to all subsidiary companies.

• Established the "Guidelines for Corporate Governance" for Bank SinoPac and SinoPac Securities.• Introduced a performance evaluation to enhance the effectiveness of the Board of Directors.• Formulated a Human Rights Policy, vowed to respect human rights and freedom of

association in the workplace, and highlighted the importance of building a safe and healthy workplace for all employees.

• Completed an internal annual inspection to “Detect Business Risk"; annual inspections will be conducted hereafter to ensure effective operation of the internal control system.

• Reviewed the division of authority between three lines of defenses in internal controls, and reaffirmed the responsibilities of the first, second, and third lines of defense to ensure they function properly.

• Improved information disclosure transparency and instituted a system to notify the Board of major emergencies.

Optimization of governance framework and the Board of Directors oversight mechanisms for material issues, improvement of information disclosure transparency, and establishment of internal rules and guidelines for sustainable corporate governance.

Corporate governance and

sustainable development

• SinoPac Holdings, Bank SinoPac, SinoPac Securities, and SinoPac Leasing included digital financial risks, strategic risks, reputation risks, compliance risks, and other risks into their risk management regulations

• SinoPac Securities and SinoPac Securities (Asia) added guidelines and measures for the liquidity management to improve the comprehensiveness of its risk management regulations.

• SinoPac Holdings included risk appetite management mechanisms into its risk management policies; Bank SinoPac, SinoPac Securities, and SinoPac Leasing completed the establishment of related regulations on risk appetite and drafted their risk appetite statements in accordance with the 2019 budget and business plan.

• After SinoPac Holdings reviewed the appropriateness of the risk management organizational structure of subsidiary companies, the role of the risk management unit of SinoPac Leasing, previously the President's Office, was assigned to the new Risk Management Division to strengthen risk management functions.

• Bank SinoPac, SinoPac Securities, and SinoPac Leasing initiated the annual operating risk self-assessment which shall be implemented on an annual basis.

• Bank SinoPac adopted a more advanced methodology to complete stress tests of the Bank. The results showed that the capital adequacy ratio under stressed conditions met qualification standards set by the competent authorities.

• Bank SinoPac incorporated the qualitative verification factors into its model verification methodology.

• Bank SinoPac optimized the credit extension and tiered authorization for corporate customers and added different scopes of authorization for different levels of managers of credit extension management units for corporate financing based on the different credit limits on the credit ratings.

• SinoPac Leasing established qualitative rating standards for industries with higher risk exposures and incorporated the development of risk measurement tools into its medium to long-term plans.

Assessment of the Group's risk management including the control framework, risk-monitoring coverage, and risk exposure assignment and management mechanisms for the compilation of risk exposure to the same person or the same concerned party.

Risk management

• Improved legal compliance management quality and formulated standard operating procedures for the management and random sampling inspections on compliance operations.

• Bank SinoPac established a risk-based compliance risk assessment methodology for overseas branches.

• SinoPac Securities (Asia) and SinoPac Capital International Limited tailored their compliance regulations to meet the managerial needs of their parent companies and the special needs of local businesses.

Optimization of the legal compliance system and investigation mechanisms for related parties.

Legal & compliance

• Formulated a Whistleblowing Policy, stipulating acceptable methods and promising to protect whistleblowers from improper punishment. All reports involving directors of the Board or supervisors shall be submitted to the Ethical Management Committee of SinoPac Holdings.

• Formulated Whistleblowing Procedures, establishing standard procedures for the acceptance of reports, investigations, and the submission of s reports.

• Improved auditing methodology by adding sampling methods and sampling standards; classified auditing deficiencies by levels in writing.

• Improved the quality of internal auditing and established standards for retaining audit logs and set up sampling standards and instructions.

• Promoted risk-based internal auditing, adjusted risk assessment factors for the annual audit plans, established risk assessment procedures, and regular inspection mechanisms.

• Established a quality-control mechanism for internal auditing.

Improvement of the quality of internal audit, establishment of whistleblowing and internal investigation mechanisms, and promotion of a risk-based internal auditing system.

Internal audit



34 35

II. Environmental Achievements 1. Green Finance

SinoPac Holdings promotes sustainable finance as its core business. The main sustainable financial products include green bonds, green financing, green investment and green funds. In 2017, Bank SinoPac became the first qualified domestic bank for green bond issuance. It also provided financing to the solar energy industry and the eco-friendly textile industry. SinoPac Venture Capital reduces its impact on the environment by investing in eco-friendly industries. In order to promote the development of domestic energy-saving industries, SinoPac Investment Trust is actively investing in green funds, such as China's new energies and green manufacturing, while issuing SinoPac China Economic Construction Fund. SinoPac Holdings and its subsidiaries combine the core values of the financing industry to promote sustainable development.

(1) Green BondsBank SinoPac became the first qualified green bond issuer in 2017 and was recognized by the internationally-renowned bond market information platform MTN-i. Advocating the government's green finance policy and following the 5+2 Industrial Transformation Plan, Bank SinoPac helped the green energy technology industry obtain medium- and long-term funds to promote environmental sustainability. Bank SinoPac also dedicated itself to the green bond market. In 2017, it raised and issued US$45 million in 30-year green bonds to loan money to the Solar Power Equipment Financing Project, which aims boost renewable energy and energy technology. The funds raised by the bonds had been fully injected into the project by November 29, 2017. The Project is expected to generate approximately 38 million kWh of electricity per year, which would reduce CO2 emissions by 20,000 metric tons per year. Moreover, Bank SinoPac acted as the financial advisor to the Societe Generale, Taipei Branch during its first debenture issuance in 2018. The bond aimed to raise funds for Societe Generale to offer loans for its Offshore Wind Power Project. Bank SinoPac raised NT$200 million of principal.

(2) Green FinancingSince the launch of the Green Energy Project Financing Plan in 2012, Bank SinoPac has been committed to the green energy industry supply chain. Adopting a multi-channel promotion model, Bank SinoPac strongly advocated for the Million Solar Roofs Project and closely collaborated with local governments. Project finances and loans were provided to enterprises and households to install solar power generators. The amount of green energy financing in 2018 was estimated to reach NT$15.597 billion, 2.2 times higher than that of 2017. In addition, Bank SinoPac financed domestic textile manufacturers that incoporated eco-friendly processing. As of the end of 2018, Bank SinoPac had provided financing to 27 manufacturers, equivalent to NT$4.06 billion in total.

(3) Green InvestmentAfter incorporating ESG policies of corporate bond issuers into its bond investment evaluation in 2018, Bank SinoPac invested up to US$61 million in five companies that showed outstanding ESG performance. SinoPac Securities underwrote two eco-friendly energy companies and helped them apply for primary listing or primary OTC listing. SinoPac Venture Capital increased its investment in the green industry to NT$326 million, which was 2.4 times higher than that of 2017.

(4) Green FundsSinoPac SITC, investing in theme funds, such as China's new energy and green manufacturing, issued the China Economic Construction Fund. The fund size reached NT$890 million in 2018. Its main investment focuses on the industries supported by China's five-year economic construction program, including new economy, new energy, environmental protection equipment, and green manufacturing. To accommodate environmental changes and market demand, SinoPac SITC is planning to issue green funds related to solar energy, electric vehicles, and smart energy conservation.

2. Green Operations The Environmental Policy and Environmental Management System Objectives and Measures, formulated in 2018, are successfully implemented by the company and its subsidiaries, dedicated to environmental sustainability management. The contexts of organizations are further examined from lifecycle perspectives to reduce the impact of business operations on the natural environment. Recently, we have obtained two pass certificates issued by an internationally-renowned institute, the British Standards Institute, in the ISO 14001 Environmental Management System and ISO 14064-1 Greenhouse Gas Inventory.

3. Green ProcurementIn 2018, the total purchase amount of the company and its subsidiaries was NT$1.863 billion. Green procurement accounted for 5.1%, or NT$96 million, of the total amount. The main purchases included eco-friendly equipment, green building materials, and products with carbon neutral certifications. In 2018, the Company was once again awarded 2018 Corporate Green Procurement Excellence Award by the Taipei City Government Environmental Protection Bureau for purchasing eco-friendly products.

Green BondsUS$45million

GreenFinancingNT$19.6billion

Green FundsNT$890million

GreenInvestment

US$61million

Green Procurement

4. Sustainable Supply Chain ManagementSinoPac Holdings launched a sustainable supply chain management plan in 2018. Integrating with its Code of Conduct for Corporate Social Responsibility, it developed a Supplier Corporate Social Responsibility Code of Conduct with four dimensions: labor rights, occupational safety and health, environmental protection and business ethics. SinoPac Holdings and its subsidiaries urged their suppliers to fulfill their social responsibility by the same standards. In the first quarter of 2019, SinoPac Holdings conducted a sustainability risk assessment for 224 suppliers. The coverage rate reached 58% and accounted for 65.48% of total purchases in 2018. The supplier sustainability assessment will aid SinoPac Holdings in identifying, classifying, and managing major risks in the supply chain in the future. SinoPac Holdings is planning to conduct a due diligence investigation on its key suppliers in 2019, including field visits and information sharing meetings regarding ESG-related managing methods and findings. A supplier conference will be held at the end of 2019 to discuss its policies with suppliers and discuss sustainability knowledge as it relates to the global supply chain. At the conference, suppliers can share their practical experience and discuss possible collaborations.

In 2016, SinoPac Holdings started signing Human Rights and Environmental Sustainability Commitment Letters with major suppliers. Up to 69% of the suppliers signed the contract. In 2018, to promote sustainable supply chains, the scope of the letter was expanded to include the four major aspects of the Supplier Code of Corporate Social Responsibility. All suppliers were requested to sign the Supplier Corporate Social Responsibility Commitment, and commit to respecting labor human rights, prohibiting discrimination and child labor, and promoting safety and health. Also included are environmental protection, procurement of eco-friendly products, business ethics, and integrity management. The goals of the letter were to boost the economy, maintain a balance between society and environment, and pursue sustainability. Up to 50.6% of the suppliers signed the letter in 2018. SinoPac Holdings aims to increase the percentage to 60% by the end of 2019.

Annual Procurement 2017 2018

Amount of Local Procurement (NTD)

1,528,752,191 1,820,776,879

Percentage of Local Procurement

77.6% 97.7%

Amount of Green Procurement (NTD)

25,150,000 95,535,818

Percentage of Green Procurement

1.28% 5.1%



36 37

2. Smart Wholesale Market Transaction Facilitation Platform Bank SinoPac aims to create a new type of digital finance in agricultural transactions. Its collaboration with the wholesale market transformed financial services in the traditional wholesale market. Given the fact that the wholesale market was still operating on a manual basis, Bank SinoPac conducted an in-depth study of the wholesale market trading system and operating procedures. Using the Internet, Internet of Things, Big Data and Cloud Technology, Bank SinoPac introduced financial technology processes into the existing trading platform and built a Smart Wholesale Market Transaction Facilitation Platform. New Taipei City Fruits and Vegetables Whole Marketing and Transporting Co., Ltd. now has become the first wholesale market to use the Smart Wholesale Market Transaction Facilitation Platform since January 2016. By the end of 2018, Bank SinoPac had introduced the Smart Wholesale Market Transaction Facilitation Platform to six other companies, including Sanchong Fruits and Vegetables Marketing and Transporting Company, Banqiao Fruits and Vegetables Marketing and Transporting Company, Taoyuan Comprehensive Agricultural Products Wholesale Market, Taipei Fishery Production and Marketing Co., Ltd., Hualien County Vegetable Marketing Cooperative and Taipei Livestock Transporting and Marketing Co., Ltd.

The introduction of the Smart Wholesale Market Transaction Facilitation Platform has brought many changes to how goods are traded on the wholesale market. Particularly, Bank SinoPac has brought merchants convenience, flexibility, smart finance and customer-oriented experience. The merchantse are given merchant cards with RFID tags that allow cardholders to engage in trades, check credit limits, and print transaction details after they register with the wholesale market. As soon as the merchants make a deposit by scanning their cards’ QR codes on a deposit machine, the available limit is automatically raised. The merchant cards also provide advanced payments and auto-payment services to process management fees and miscellaneous expenses.

In addition, it is not easy for most merchants to obtain bank credit lines because they usually do not set up or belong to companies and are thus not able to provide complete financial statements as supporting documents. Bank SinoPac provides credit lines to the merchants based on their transaction records and the amounts approved by the wholesale market. Based on analyses of the merchants' transaction data and potential needs, their credit limits may be raised on peak trading days (such as Chinese New Year and Mid-Autumn Festival) to meet their purchase needs.

As of the end of 2018, the Platform had a coverage rate of 12.5% in the fruit and vegetable market and 11% in the fishery market. More than 2,000 merchants were using the service, with service financing amounting to NT$11.3 billion. Fintech was successfully integrated into the wholesale market ecology, making this an achievement of inclusive finance and garnering greater recognition for Bank SinoPac. In 2018, Bank SinoPac participated in the Ninth Annual Taiwan Outstanding Financial Business Awards for Innovative Eco-Financial Services - New Type of Digital Transaction in Wholesale Market and was honored with the Best Digital Finance Award.

NT$11.3 billion

Cash advanceservices reached 12.5%

Fruit and vegetablemarket coveragereached 12.5%

2,000

Serving more than2,000 Merchants

11%Fishery market

accounted for 11%

Smart Wholesale Market Transaction Facilitation Platform

7 MTMarine Pollutant

17 CitiesSocial Concern

20 FestivalsCharitable event

"Heart-for-Taiwan" Round-the-Island Charity Project

NT$11.3 billion

Cash advanceservices reached 12.5%

Fruit and vegetablemarket coveragereached 12.5%

2,000

Serving more than2,000 Merchants

11%Fishery market

accounted for 11%

Smart Wholesale Market Transaction Facilitation Platform

7 MTMarine Pollutant

17 CitiesSocial Concern

20 FestivalsCharitable event

"Heart-for-Taiwan" Round-the-Island Charity Project

1. "Heart-for-Taiwan" Round-the-Island Charity ProjectIn 2018, from July 21 to October 13, with joy and positive thinking, three charity vans representing happiness, caring and environmental protection toured 17 cities and counties in Taiwan for nearly three months. With a focus on environmental sustainability and localized care, 20 public charity festivals were held in order to give back to the communities. Over 600 SinoPac employees volunteered for the project, as did more than 1,000 relatives and customers, all of which benefitted in excess of 4,000 people and cleaned up over seven metric tons of debris at five major beaches in Taiwan.

III. Positive Contributions to Society 2018 Quantitative Results for Charity EventsIn 2018, SinoPac Holdings charity events focused on four main aspects: environmental sustainability, local care, educational cooperation, and culture and the arts. Through various means, including title sponsorships, joint activities, corporate volunteer participation, and in-depth counseling, SinoPac gave back to Taiwanese society. Charity contributions by SinoPac Holdings and its subsidiaries have increased annually over the previous three years. In 2018, total charity expenditures reached NT$45 million, accounting for 0.14% of total revenue, and employee volunteer hours totaled 1,580 hours.

2018 Charity Event Contributions

Type Funds (in thousands of NT dollars) Volunteer hours

Environmental sustainability 248 743

Localized care 397 837

Educational cooperation 418 0

Culture and the arts 2,125 0

Other donations 1,330 0



38 39

Unit: NT$ thousand

Item2014 2015 2016 2017 2018

Cash and cash equivalents, due from the central bank and call loans to other banks, net 135,683,585 120,954,583 170,529,104 124,094,306 117,306,767

Financial assets at fair value through profit or loss 89,579,463 115,223,185 117,189,893 132,109,580 84,863,422

Available-for-sale financial assets, net 210,731,779 198,608,674 241,794,535 231,553,240 -

Financial assets at fair value through other comprehensive income - - - - 209,421,072

Investments in debt instruments at amortised cost - - - - 93,680,834

Securities purchased under agreement to resell 21,223,630 11,121,490 16,758,811 26,716,912 22,205,182

Receivables, net 176,436,847 108,175,419 75,586,574 81,073,680 75,646,292

Current tax assets 223,665 260,197 393,253 353,015 327,581

Discounts and loans, net 790,968,841 879,165,818 894,394,211 869,373,052 922,363,664

Held-to-maturity financial assets, net 46,114,048 69,118,675 78,132,231 56,607,945 -

Investment accounted for using the equity method 472,255 449,707 420,179 400,982 486,466

Other financial assets, net 41,870,795 46,102,980 45,466,838 34,933,428 39,666,796

Property and equipment, net 13,807,482 12,960,235 12,565,470 12,307,080 12,573,066

Investment property, net 1,735,411 2,383,510 2,649,839 2,606,685 2,589,456

Intangible assets, net 2,837,131 2,702,649 3,209,306 2,334,566 2,234,897

Deferred tax assets 3,255,311 2,940,812 2,988,558 2,257,074 2,352,648

Other assets, net 14,793,593 17,436,717 16,851,549 22,439,338 19,207,974

Total assets 1,549,733,836 1,587,604,651 1,678,930,351 1,599,160,883 1,604,926,117

Deposits from the central bank and banks 69,606,337 61,329,958 29,854,651 29,620,926 37,964,931

Financial liabilities at fair value through profit or loss 24,135,076 30,188,309 26,801,740 24,036,034 22,778,944

Derivative financial liabilities for hedging 32,887 42,569 19,705 - -

Securities sold under agreements to repurchase 41,761,224 44,552,287 45,686,894 66,003,594 46,778,129

Commercial paper payable, net 27,877,220 31,704,540 46,819,831 44,881,207 33,813,602

Payables 35,417,648 30,997,414 34,745,908 40,590,035 37,637,667

Current tax liabilities 1,416,960 356,048 790,532 1,093,265 1,095,078

Deposits and remittances 1,115,170,251 1,148,614,361 1,249,596,128 1,148,590,896 1,190,750,602

Bonds Payable 48,565,756 43,428,046 41,779,336 42,529,694 35,722,483

Preferred stock liabilities 18,437 18,437 18,437 18,437 18,437

Other financial liabilities (Note2) 48,254,142 51,682,555 56,479,034 47,046,753 43,988,080

Provisions 3,326,772 3,342,224 3,215,411 3,121,843 3,431,929

Deferred tax liabilities 1,444,509 1,716,199 1,562,452 1,281,032 1,544,742

Other liabilities 7,233,259 7,916,877 7,662,339 12,087,464 7,580,096

Total liabilitiesEx-dividends 1,424,260,478 1,455,889,824 1,545,032,398 1,460,901,180 1,463,104,720

Post-dividends 1,428,995,938 1,460,282,392 1,548,705,072 1,466,426,206 (Note3)

Equity attributable to owners of the Company

Share capitalEx-dividends 94,709,209 101,679,807 106,763,797 110,500,530 112,710,541

Post-dividends 101,679,807 106,763,797 110,500,530 112,710,541 (Note3)

Capital surplus 2,227,009 2,227,009 2,227,009 2,228,771 2,228,771

Retained earningsEx-dividends 26,267,887 25,256,910 24,016,672 25,546,808 27,244,218


Other equity 2,209,702 2,491,658 832,637 (19,910) (365,543)

Non-controlling interests 59,551 59,443 57,838 3,504 3,410

Total equityEx-dividends 125,473,358 131,714,827 133,897,953 138,259,703 141,821,397


Consolidated Balance Sheets


Note1：The financial statements for each year were audited by CPA. There is no audited or reviewed SinoPac Financial Holdings Company Limited and its subsidiaries financial statements in 2019 before the date of printing.Note2：Other financial liabilities include short-term borrowings and long-term borrowings.Note3：The appropriation of earnings for 2018 has not been resolved by the shareholders' meeting.

Unit: NT$ thousand (expect EPS in NT$)

Item2014 2015 2016 2017 2018

Interest revenue 30,981,428 29,989,072 27,671,502 28,201,870 29,549,174

Less：Interest expense 12,840,730 12,750,282 11,058,904 12,098,814 13,750,214

Net interest 18,140,698 17,238,790 16,612,598 16,103,056 15,798,960

Net revenues other than interest 20,356,638 15,327,551 14,207,589 16,402,895 16,313,996

Total net revenues 38,497,336 32,566,341 30,820,187 32,505,951 32,112,956

Allowance for doubtful accounts and guarantees 4,037,666 496,379 1,592,243 2,435,754 1,506,551

Operating expenses 19,576,070 19,612,956 19,701,784 19,520,429 19,353,480

Income (loss) from continuing operations before income tax 14,883,600 12,457,006 9,526,160 10,549,768 11,252,925

Income tax expense 1,866,397 1,600,564 1,244,612 1,465,349 1,824,600

Income from continuing operations after income tax 13,017,203 10,856,442 8,281,548 9,084,419 9,428,325

Profit (loss) 13,017,203 10,856,442 8,281,548 9,084,419 9,428,325

Other comprehensive income, net of tax 153,951 120,487 (1,705,854) (998,313) (995,612)

Total comprehensive income 13,171,154 10,976,929 6,575,694 8,086,106 8,432,713

Profit attributable to owners of parent 13,017,551 10,856,550 8,283,153 9,085,309 9,428,419

Profit attributable to non-controlling interests (348) (108) (1,605) (890) (94)

Comprehensive income attributable to owners of parent 13,171,502 10,977,037 6,577,299 8,086,996 8,432,807

Comprehensive income attributable to non-controlling interests (348) (108) (1,605) (890) (94)

Earnings per share (Note2) 1.22 0.96 0.73 0.81 0.84

Consolidated Statements Of Comprehensive Income

Note1：The financial statements for each year were audited by CPA. There is no audited or reviewed SinoPac Financial Holdings Company Limited and its subsidiaries financial statements in 2019 before the date of

printing.

Note2：Earnings per share are retroactively adjusted with earnings recapitalization.


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Financial Overview


Corporate Profile


SinoPac Holdings Financial Management Strategic Directions for 2019


Risk Management


Our Employees


Contents

Address: 3&6~13F., No. 306, Bade Rd. Sec. 2, Taipei City 104, Taiwan (R.O.C.)Tel: 886-2-8161-8935

Website: http://www.sinopac.com

Annual Report Download

http://www.sinopac.com/en/financeInfo/download20170217124757318000000000000320.html


ANNUALR E P O R T2018

ANNUAL REPORT 2018 - SinoPac...Fulfillment of a Beautiful Life Through Finance 2 3 Fulfillment of a...

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