• The rise of global trade protectionism has increased supply chain costs and reduced efficiency. If coupled with weaker-than-expected growth in AI industry demand. This uncertainty over tariffs may lead to a significant slowdown in the global economy.
• Taiwan's economy is export-oriented. If international trade growth slows, it may lead to reduced consumer willingness and a decline in export activities, and the economy may face the risk of recession in the future.
• Prolonged slow economic growth may lead to stagnant inflation, recession, or global growth contraction, which in turn may lead to a decline in the stock market, a decrease in bond market yields, an increase in market volatility, and an increase in credit risks. These outcomes may result in a decrease in the Company's investment income and an increase in the overdue amounts of its loan businesses.

• In view of the Russo-Ukrainian War, the Israel-Palestine conflict, and recent military attacks launched by the United States and Israel against Iran, global geopolitical conflicts may continue to deteriorate. These conflicts could expand into regional warfare, cause commodity prices to skyrocket, exacerbate inflation, and cripple supply chains, which drastically increase operational costs, and the long-term impacts will become even more significant.
• The tensions in the Taiwan Strait have intensified. China has repeatedly stated that it does not rule out the use of military force to invade Taiwan, and the People's Liberation Army launched a military exercise around Taiwan without prior notice in December 2025. If the situation continues to deteriorate, it could spiral into a political or military conflict, affecting global economic stability and corporate operations.

• The main subsidiaries of SinoPac Holdings are its banking and securities businesses, accounting for 73.46% and 24.32% of revenue, respectively. If an economic downturn occurs in countries or regions where SinoPac Holdings and its subsidiaries conduct investment and lending activities, the value of financial assets will fall and the default risks of loan customers will increase, thereby affecting the profitability of subsidiaries and impacting the overall revenue of SinoPac Holdings.
  • Bank SinoPac and King's Town Bank: An economic downturn will result in a gradual decline in the profitability of investees, which would have a significant impact on asset prices and result in a reduction in investment income. Adverse economic conditions will affect the development of wealth management businesses. In addition, difficulties in business operations reduce companies' willingness to invest, making it more difficult to develop loan businesses and affecting the repayment capacity of loan customers.
  • SinoPac Securities: Economic downturn could impact both the stock and bond markets. The Company and its customers may suffer severe losses in investment positions. In the event of an economic slowdown or stagnation, the Company's operations may be affected due to the impact on customers' financial arrangement and investment willingness.

This emerging risk impacts the global economy and stock markets, causing supply chain disruptions and significantly raising operational costs for businesses. The impacts on the business and operations of SinoPac Holdings and its subsidiaries are as follows:

• Shortages of vital resources and rising commodity prices reduce the operational cost management and profitability of the Bank's investees and loan customers, while increasing the credit risk, market risk, and country risk of the Bank's credit and investment portfolios.
• Intensive volatility in international financial markets (including stock, bond, ETF, and foreign exchange markets) significantly decreases the asset value of investment positions. This reduces the Company's investment income and also dampens customers' willingness to commit to wealth management and investment.
• The Company's exposure to China accounts for 30% of its net value. If an armed conflict breaks out across the Taiwan Strait, in addition to the impact on credit asset quality and the asset value of investment positions, it could also result in damage to offices, casualties, and loss of data. As conflicts impact national infrastructure such as power grids, networks, or financial centers, operations are vulnerable to risks of disruption and even loss of assets.
• Countries in the Middle East account for 6% of the Company's overall overseas risk exposure, with the United Arab Emirates as the country with the highest exposure. An assessment of the Middle East war's impact on GDP, industries, and financial markets, as well as its effect on the capital adequacy of SinoPac Holdings showed that all capital adequacy ratios of SinoPac Holdings remain higher than the statutory ratios.

• SinoPac Holdings evaluates future risk factors (such as bonds, equities, credit spreads, foreign exchange, and non-performing loans of borrowers) and simulates the impact of potential losses on capital adequacy under scenarios ranging from mild to extreme. The capital adequacy ratio of SinoPac Holdings remains above regulatory requirements.
• Closely monitor international political and economic conditions to prevent over-concentration of assets. Pay close attention to the quality of assets with risk exposures and establish investment and lending limits for industries and countries based on industry characteristics and business risk profiles.
• Continue to monitor market developments, adjust corresponding investment strategies based on market changes, and develop a long-term asset allocation approach for investments. Review current market conditions when major changes occur and adjust asset portfolios or develop new products in response to changes.
• Implement daily monitoring of the profit and loss of SinoPac Holdings and subsidiaries as well as their Value at Risk (VaR) to rigorously implement risk management response measures for early warning, limit exceedance or stop loss.
• Strengthen post-lending monitoring and management mechanisms and actively monitor the operations of customers affected by economic conditions. Where necessary, increase required collateral or recover loans upon maturity to reduce risks.

• Closely monitor international political and economic conditions and changes in financial markets and conduct daily estimation and monitoring of the Value at Risk limit (VaR limit) for the upcoming month.
• Consider future industry developments and national political and economic trends, establish credit and investment limits for individual industries as well as specific limits for individual countries and overseas regions, and implement restrictive controls on high-risk emerging countries.
• Strengthen credit and investment risk assessments, KYC processes, and due diligence. Enhance the review and monitoring of high-risk countries, regions, and industries, and ensure that investments strictly adhere to transaction stop-losses, asset value evaluations, and position adjustments.
• Evaluate the operation of customers who are listed for early warning, relief, anomaly, and collection of overdue payments, and report the response measures.
• Strengthen information security management, disaster recovery, exercises, detection, and protection measures in accordance with the information security policy and related guidelines of SinoPac Holdings.