(Note: This English translation is provided for reference only and might not exactly reflect thefull text of the original language.)

Q&A: Stewardship Principles for Institutional Investors
2017.02.15
No. Question
1

Does

Answerendorsing

Principles
signatory's

the An institutional investor becomes a signatory afteralter

a disclosing a statement of how the Principles has

existing been applied (hereinafter the "statement") on its

relationship of rights and website and a website designated by the Corporate
obligations with its clients, Governance Center. Endorsement of the Principles
beneficiaries, shareholders isor other stakeholders?

intendedtohelpclients,

beneficiaries,

shareholders and other stakeholders understand therole of institutional investors in an investment chain,
as well as stewardship-related policies and activities.
Endorsing the Principles does not add to, alter,
restrict or release the institutional investor from its
existing relationship of rights and obligations withclients,

beneficiaries,

shareholders

orotherstakeholders, nor does it impose restrictions on anyof institutional investors' investment strategies (e.g.
short-term trading of securities in order to benefit
from market spreads or selling stocks of investee
companies). Institutional investors are encouragedby the Corporate Governance Center to support andcomply with the Principles so as to enhancelong-term value for themselves and fund providers
1

(Note: This English translation is provided for reference only and might not exactly reflect thefull text of the original language.)

Q&A: Stewardship Principles for Institutional Investors
2017.02.15
No. Question

Answerwhile at the same time improve the quality ofcorporate governance for the domestic capitalmarket.

2What are the purposes and "Comply or Explain" originated in the UK and has
effects of the "Comply or been adopted internationally, especially in Europe,Explain" basis?

as a means of implementing corporate governancecodes. The system of Comply or Explain aims toretain flexibility to the Principles and prevent
compliance from becoming a mere formality,
thereby inspiring signatories to improve theirstewardship practices.

The Principles are notlegislative regulations, nor do they include articles
on punishment. If a signatory is unable to complywith certain principles, it must provide a reasonable
explanation in its statement or incorporate such
explanation on its website or reports such as
business reports or annual reports, provided thatrelevant disclosures must be made in an ethical andtransparent manner.
3Willasignatory

be The Principles do not state that institutional

regulated in its access to investors must not obtain internal information ofanduse

ofinvestee investee companies.
2If, from their dialogue and(Note: This English translation is provided for reference only and might not exactly reflect thefull text of the original language.)

Q&A: Stewardship Principles for Institutional Investors
2017.02.15
No. Question
companies'

Answernon-public interaction

information?

withinvestee

companies,

theinstitutional investors become aware of non-public
information which may have a significant impact on
the stock price of the investee companies, it mustabide by its duty of confidentiality and prevent theoccurrence of insider trading in accordance withrelevant laws and regulations.

4Are

theextentsof The mass amount of capital and a great number of

stewardship engagements companies which an institutional investor may
influencedby

low invest are various. It may engage in different extents

shareholding of investee of monitoring, dialog and interaction with its
companies?

investee companies by contemplating costs andbenefits in order to optimize the efficiency ofresources adopted for improving long-term value of
assets held or managed by it. Materiality and costand benefit have been contemplated underGuidelines 2-5, 3-2, 4-1, 4-2, 5-1, 5-3 and 6-3 of thePrinciples.

3

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Q&A: Stewardship Principles for Institutional Investors
2017.02.15
No. Question
5

WhatAnswer
arepotential Two common situations of conflicts of interest aresituations of conflicts of listed under Guideline 2-3:
interest, and how can they 1. Where an institutional investor, for its own
be managed?

benefits, makes a decision or takes an action to thedisadvantage of clients or beneficiaries.
2. Where an institutional investor, for the benefits ofcertain clients or beneficiaries, makes a decision ortakes an action to the disadvantage of other clients,
beneficiaries or stakeholders.

In practice, however, potential conflicts of interest
caused by the employees of institutional investors
must also be taken into consideration.

For

example, where an employee of an institutional
investor, for his/her own benefits, sacrifices theinterests

ofinvestee

companies,

clients

orbeneficiaries, or incurs unreasonable expenses orcosts to the institutional investor.

Measures of managing conflicts of interest include
training, delegation of duties, information security,
monitoring4mechanismandreasonable(Note: This English translation is provided for reference only and might not exactly reflect thefull text of the original language.)

Q&A: Stewardship Principles for Institutional Investors
2017.02.15
No. Question

Answerremuneration policies. To fulfill the managementof conflicts of interest, an institutional investor isadvised to regularly review the status of policy
implementation

andmakeimprovements

accordingly.
6

Does it go against the The Principles encourage a signatory to properly
requirementofthe exercise voting rights of stocks held or entrusted forPrinciples if a signatory is management by it and respect that different
unabletoattenda investors may have different views on the same

shareholders' meeting or motions. Even more, there may also be different
cast a vote?

opinions among clients and beneficiaries.

The

spirit of the Principles is fulfilled where mutual
long-term interests among clients, beneficiaries andinvestee companies have been taken into accountby institutional investors before making voting
decisions.

If,

in

aninstitutional

investor's

judgment, voting will not realize or improve thelong-term interests of its clients and beneficiaries(e.g. it has decided to clearly sell its shareholding
prior to shareholders' meetings), it may even abstain
from voting.

5

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Q&A: Stewardship Principles for Institutional Investors
2017.02.15
No. Question
7Answer

To what extent and in what Dialogue and interaction between institutionalmanner is dialogue and investors and investee companies vary in mannerinteraction with investee and extent. The following are manners of dialogue
companies

deemed and interaction listed under Guideline 4-2 of theappropriate?

Principles but these are not arranged in order of theextent of dialogue and interaction:
1.

Writtenorverbalcommunications

withmanagement;
2. Public statements on specific issues;
3. Expression of opinions at shareholders' meetings;
4. Submitting motions at shareholders' meetings;
5. Voting at shareholders' meetings.

Regardless of any manner used to form a dialogue
and interact with investee companies, the goal is toreach consensus with investee companies on thecreation of long-term value, so as to enhance valueof assets possessed or managed by institutional
investors.
8How does an institutional Various stakeholders often have different opinions
investor handle situations on the same issue. The Principles aim to enhance
whereclientsor long-term value of institutional investors and fund6

(Note: This English translation is provided for reference only and might not exactly reflect thefull text of the original language.)

Q&A: Stewardship Principles for Institutional Investors
2017.02.15
No. Question

Answerbeneficiaries

have providers by monitoring, engaging in dialogue andconflicting opinions on the interaction with investee companies. To this end,
same issue?

institutional investors must understand and respectneeds and opinions of clients or beneficiaries,
though various decisions (including investment
decisions or voting decisions for motions raised atshareholders' meetings) shall still be made in a
professionalmannerbycontemplating

theenhancement of long-term value of assets underpossession or management.
9Are

there

concerning

regulations The Principles are not mandatory regulations.
recordsof Signatories may determine, in their discretion, items

stewardship activities and to record and retention schedule.
the retention thereof?

For thepurposes of long-term analysis and comparison, it isadvisable to retain relevant records for a period ofat least three to five years.

10 Howunderwill

requirements To facilitate communications between institutionalPrinciple

6

be investors and clients or beneficiaries and fulfill

fulfilled in situations where stewardship responsibilities, institutional investors
clients and beneficiaries shall regularly disclose the status of fulfilment ofare large in number and stewardship responsibilities in accordance withthe agreement does not agreement with or request from its clients or7(Note: This English translation is provided for reference only and might not exactly reflect thefull text of the original language.)

Q&A: Stewardship Principles for Institutional Investors
2017.02.15
No. Question

Answerstipulate that institutional beneficiaries.
investors

shallprovidecontent

concerning

its Please refer to Guideline 6-3 for situations where

status of fulfillment of clients and beneficiaries are vast in number or thestewardship
responsibilities
frequency?

provision concerning the content and frequency ofandthe stewardship duties is not specified in an agreement.
In such situation, an institutional investor is advised
to disclose its stewardship activities annually on its
website or in its reports such as business report andannual reports.

Further, to prevent the processfrom becoming a mere formality and avoid
quantitative comparison to an excessive degree, thedisclosure of stewardship activities must balance
between quality and quantity.

For instance,

disclosing not only the attendance to and voting
status at shareholders' meetings but also ongoing
communications

withmanagement

toreachagreement, cooperative efforts to improve thequality of governance for the company, promotionof sustainable development of investee companiesetc.

8(Note: This English translation is provided for reference only and might not exactly reflect thefull text of the original language.)

Q&A: Stewardship Principles for Institutional Investors
2017.02.15
No. Question

Answer

11 Can a financial holding Investments made by a financial holding company
company be a signatory, or are mainly for controlling purposes or long-termshouldeach

subsidiaries

ofact

asrespective signatory?

its investment. The Principles do not have particulara requirements as to whether a financial holding
company itself or each of its subsidiaries shouldendorse the Principles.

It must be stressed,

however, that relevant stewardship policies ofdifferent financial enterprise under the samefinancial holding group may differ. As the parent
company of the business group, the financial holding
company sets an example for the development ofstewardship culture and emphasis in the focus oflong-term risks and performance.

Where eachsubsidiary endorse the Principles and set up relevant
policies respectively, the financial holding company
is advised to supervise on the stewardship activities
conduct by its subsidiaries and disclosure status
thereof.
12 How are the "various types According to existing laws and regulations, motions
submitted at shareholders' meetings can beofmotions" specified classified into the following types:
underclassified?

Guideline

5-4 1.

Ratification of business report and financialstatements;
9

(Note: This English translation is provided for reference only and might not exactly reflect thefull text of the original language.)

Q&A: Stewardship Principles for Institutional Investors
2017.02.15
No. QuestionAnswer
2.

Distribution of earnings or deficit offsetting;3.

Promulgation and amendments to Articles andprocedures;

4.

Election of directors or supervisors;

5.

Discharge of directors or supervisors;

6.

Release of directors from non-competition
restrictions;7.

Issuance of new restricted employee shares;

8.

Issuance of employee stock warrants which theexercise price is lower than the closing price ofthe company stocks as of the issuing date;

9.

Transferring shares to employees at less than
the average actual share repurchase price;

10. Dissolution,

merger,acquisition,shareexchange or split-up of the company;
11. Capital increase (Including general cash offeringandissuanceofnewsharesthrough

capitalization of earnings, reserves or employeebonuses);
12. Private placement of securities;
13. Capital reduction to offset the loss or returning
capital to shareholders;
14. Claimimg for the disgorgement;
15. Others.

10(Note: This English translation is provided for reference only and might not exactly reflect thefull text of the original language.)

Q&A: Stewardship Principles for Institutional Investors
2017.02.15
No. Question

AnswerInstitutional investors may, by reference to theabove classifications, disclose voting activities infavor, opposition or abstention of each type ofmotions within a specific period. For example, "In
the year of OOOO, with regard to the ratification ofbusiness reports and financial statements, total
number of votes was OOO, with OO votes in favor(OO%), OO votes in oppositions (OO%), OO votes inabstention (OO%)."In addition, institutional investors may also disclose
voting activities in favor, opposition or abstention ofmotions submitted to shareholders' meetings ofeach investee company but to conceal the numberof votes to avoid revealing investment portfolio.
For example, "Year OOOO OOOO company regularshareholders' meeting, Motion 1____, in favor."

Personal voting records sorted by the preceding 15
categories are expected to be available for
Signatories which vote through the StockVote
Platform (www.stockvote.com.tw) conducted by the11(Note: This English translation is provided for reference only and might not exactly reflect thefull text of the original language.)

Q&A: Stewardship Principles for Institutional Investors
2017.02.15
No. Question

AnswerTaiwan Depository & Clearing Corporation inSeptember, 2017 as a reference for disclosing votingresults.

13 Are signatories required to Guideline 3-2 noted that “in determining themonitor

allinformation content, extent and frequency of monitoring

aspects listed in Guideline investee companies, an institutional investor is3-2?

advised to consider its purposes of investment, costand benefits.” Hence, the focus of investors while
monitoring investee companies may be different.
Signatories are not required to monitor all aspects
listed in Guideline 3-2.
Insufficient disclosure of material information ofinvestee companies might also be a factor forinvestors to evaluate these companies’ ability toidentify

risks

andinformationtransparency.

Institutional investors may also demand investee
companies to improve their transparency anddisclose relevant information.

12