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Corporate Governance

Corporate governance organization structure

Corporate Governance Principles - The corporate governance system of the Company shall adhere to the following principles in addition to the relevant laws, regulations and the articles of incorporation:

I. Establish an effective corporate governance structure.
II. Protect the rights and interests of shareholders.
III. Strengthen the powers of the Board of Directors.
IV. Fulfill the function of the Audit Committee.
V. Respect the rights and interests of stakeholders.
VI. Enhance information transparency.

Corporate governance organization structure

Establish internal control system
The Company shall follow the “Criteria Governing Establishment of Internal Control Systems by Public Reporting Companies” and take into consideration the overall operational activities of itself and its subsidiaries in the design and enforcement of an internal control system. Reviews shall be conducted on a continuous basis to ensure the continued effectiveness of the system’s design and enforcement in the light of changes in the Company’s internal and external environment.
Handling of Shareholder Suggestions or Disputes
To protect the rights and interests of shareholders, a spokesperson and deputy spokesperson have been appointed by the Company. The share services agent “Chinatrust Share Services Department” have also been retained to handle shareholder suggestions, queries and disputes in an appropriate manner.
Board of Directors Structure

The Board of Directors of the Company shall be responsible to the Company and shareholders. The procedures and arrangements of the corporate governance system shall ensure that, Board of Directors complies with the laws and regulations, the articles of incorporation, and the resolutions of shareholders meetings during the exercising of its authority.
The structure of Company's Board of Directors shall be determined by choosing an appropriate number of no less than five shareholders based on the size of business operations, the shareholdings of key shareholders, and practical operational needs.
Diversity is advised in the determining the composition of the Board of Directors. An appropriate diversification policy should also be devised based on the Board’s operations, type of business and development requirements. This should include but not be limited to standards in the two following general aspects:

I. Basic requirements and values: Gender, age, nationality, and culture.
II. Professional knowledge and skills: Professional background (e.g., law, accounting, industry, finance, marketing, or technology), professional skills, and industry experience.
All members of the Board shall possess the knowledge, skills, and experience necessary to perform their duties. To achieve the ideal goal of corporate governance, the Board of Directors shall on the whole possess the following abilities:
I. Ability to make business judgments.
II. Accounting and financial analysis ability.
III. Business management ability.
IV. Crisis management ability.
V. Industry knowledge.
VI. International market perspective.
VII. Leadership ability.
VIII. Decision-making ability.

Independent Director System
The Company shall appoint no less than two independent directors in accordance with the articles of incorporation. At least one-fifth of all directors must be independent directors.
Independent directors shall possess the necessary professional knowledge. Restrictions shall apply to their shareholding and concurrent positions. They must maintain their independence during the performance of their duties, and shall have no direct or indirect interest in the Company.
The professional qualifications, restrictions on both shareholding and concurrent positions held, determination of independence, method of nomination and other requirements with regard to the independent directors shall be set forth in accordance with the Securities and Exchange Act, the Regulations Governing Appointment of Independent Directors and Compliance Matter for Public Companies, and the rules and regulations of the TWSE or TPEx.
Establishment of Functional Committees

To strengthen supervisory functions and enhance management capabilities under the corporate governance structure, the “Audit Committee” and “Remuneration Committee” shall be established by the Board of Directors based on the size of the Board an the number of independent directors for the implementation corporate governance.

۩ “Audit Committee”
The Audit Committee established by the Company shall be made up of all independent directors and may not be smaller than three in number. One member shall be the convener and at least one member must possess accounting or financial qualifications.
All regulations governing supervisors under the Securities and Exchange Act, Company Act, and any other laws and regulations, apply to the Audit Committee established by the Company.

۩ “Remuneration Committee”
The Company shall establish a Remuneration Committee: The professional qualifications for the committee members, the exercise of their powers of office, the adoption of the organizational charter, and related matters shall be handled in accordance with the “Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter.”
The Remuneration Committee shall exercise due care of a good administrator in faithfully performing its duties, and shall submit its recommendations for deliberation by the Board of Directors

Stakeholder Section
The Company shall maintain open channels of communications with its banks and other creditors, employees, consumers, suppliers, local community, or other stakeholders. The Company shall also respect and protect their legal rights and interests, and set up a “Stakeholder section” on the corporate website.
The Company shall pay attention to the rights and interests of consumers, environmental protection in the local community, public interest and other topics during the course of normal business development and the maximization of shareholder returns. The Company shall also pay attention to its social responsibility.
Disclosure on Corporate Governance

Disclosure is an important duty of the Company. The Company shall faithfully fulfill its obligations in accordance with the relevant laws, regulations, and rules of the TWSE and TPEx. The Company shall establish an Internet-based reporting system for public information, designate dedicated personnel for the collection and disclosure of Company information, and establish a spokesperson system to ensure that information that may influence the decision-making of shareholders and stakeholders can be disclosed in a proper and timely manner.
A company spokesperson and deputy spokesperson have been appointed by the Company to increase the accuracy and timeliness of important announcements.
The Company shall hold investor conferences in accordance with the regulations of the TWSE and TPEx. Audio or video recording of the conference shall also be retained. Financial and business information disclosed during the investor conference shall be disclosed on through the online reporting system designated by TWSE or TPEx regulations. It shall also be possible to make queries through the Company website or other suitable channels.

【Shareholders Meeting】
【Shareholder Information】
【Investor Conference】

Letters to Shareholders

2016 Letter to Shareholders
2015 Letter to Shareholders
2014 Letter to Shareholders

Nomination and Appointment of Directors

The Articles of Incorporation authorize the Company to appoint 7 ~ 9 directors for three-year terms.
The current Company Board of Directors was appointed by the shareholders meeting on June 24, 2016. The directors’ profiles are shown in following table.

Title Name Education/Experience
(Legal representative of Lucky Investment Co., Ltd.)
Huang, Wen-Chang Department of Business Administration, Oriental Institute of Technology
Chairman, Pili International Multimedia Co., Ltd.
Vice Chairman
(Legal representative of Shi Mao Investment Co., Ltd.)
Hwang, Wen-Tze Department of Business Administration, Oriental Institute of Technology
Director, Pili International Multimedia Co., Ltd.
Hsieh, Chien-Nan Department of Business Administration, Chung Yuan Christian University
Gourmet Master (Cayman) Co., Ltd.
Vice-President and CEO, President Chain Store Corp.
Lin, Hui-Ping MBA, Brooklyn College of the City University of New York
Special Assistant to the Chairman, M.J. International Co., Ltd.
Vice-President of Underwriting, Grand Cathay Securities Corp.

Nomination and Appointment of Independent Directors

A nomination system has been adopted by the Company for the election of independent directors in accordance with Article 192-1 of the Company Act and Article 17 of the Company’s Articles of Incorporation.
The candidates for this session of the Board were discussed and approved by the Board of Directors. Nominations were also accepted from shareholders holding over 1% of Company shares between April 11 and April 21, 2016, in accordance with Article 192-1 of the Company Act. After the deadline for nominations had passed, the list of candidates for independent directors were reviewed by the Board of Directors on May 3, 2016. Those determined by the Board to satisfy the criteria for independent directors were submitted to the shareholders meeting for election.
The following independent directors were elected by the Company shareholders meeting held on June 24, 2016, from the list of candidates: Shen, Da-Bai、Wu, Ming-Te、Jan, Chao-Huan.

Title Name Education/Experience
Independent Director Shen, Da-Bai Ph.D. in Economics, Tulane University, U.S.
Professor of Accounting, Soochow University
Director of Business Research Center, Soochow University
Legal Representative for Supervisor, First Commercial Bank
Director, SolidWizard Technology Co., Ltd.
Independent Director Wu, Ming-Te Ph.D. in Chinese, National Taiwan Normal University
Professor, Graduate Institute of Taiwanese Literature, National Changhua University of Education
CEO, Chinese Folk-Arts Foundation
Independent Director Jan, Chao-Huan Department of Economics, National Taiwan University
Director, Taipei Customs Office
Director, Taichung Customs Office

Governing Performance Evaluation of the Board of Directors

2017 Board of Directors Performance Self-Assessment

Audit Committee

The purpose of the Audit Committee is to assist the Board of Directors with performing its supervisory function, and other missions as defined under the Company Act, Securities and Exchange Act, and any other relevant laws and regulations. An Audit Committee made up of all three independent directors was established by the Company on November 28, 2013. The Audit Committee is convened at least once every quarter.

Remuneration Committee

The purpose of the Remuneration Committee is to assist the Board of Directors with implementing and evaluating the overall salary and benefits policy of the Company, as well as the remuneration of directors and managerial officers. A Remuneration Committee made up of all three independent directors was established by the Company on September 2, 2013. The Remuneration Committee is convened at least once every quarter.

Functional Committees Convener Members
Audit Committee Shen, Da-Bai Shen, Da-Bai、Wu, Ming-Te、Jan, Chao-Huan
Remuneration Committee Shen, Da-Bai Shen, Da-Bai、Wu, Ming-Te、Jan, Chao-Huan

*For more information on the operation of the functional committees, please visit the "Market Observation Post System” website.

Internal Audit Organization and Operation

◆The Company has established an internal audit unit (Audit Office) that reports directly to the Board of Directors. One full-time chief auditor with the appropriate background and qualifications is appointed based on the company’s size, business situation, management requirements and other statutory requirements. A deputy shall also be appointed.

◆Internal Audit Enforcement Rules - The general rules explicitly state that the purpose of internal audits is to examine and assess the internal control system for any deficiencies, measure its operational efficiency, and provide suggestions for improvements when appropriate to ensure that the internal control system can continued to be implemented in an effective manner and to assist the management with fulfilling its responsibilities.

◆The internal audit unit develops an annual audit plan in accordance with the “Criteria Governing Establishment of Internal Control Systems by Public Reporting Companies” issued by the Securities and Futures Bureau and risk assessments. The plan is submitted to the Board of Directors for approval before it is implemented by the audit unit. Special audits or reviews may also be conducted as necessary. The execution of general and special audits provide the management with a picture of internal control operations.

◆Auditors shall carry out their duties in an independent and impartial manner. They must also report their audit activities to the Audit Committee and the Board of Directors.

◆The internal audit unit is responsible for reviewing the self-assessment reports from each unit and subsidiary. These along with the internal control deficiencies and corrective actions taken on anomalies are used by the Board of Directors and the President to evaluate the overall effectiveness of the internal control system and to serve as the primary basis for the issuing of internal control system declarations.

◆The internal audit unit must complete the following online reporting operations within the time period given by the Securities and Futures Bureau:

  • Submit the “Chief auditor and audit personnel details” for the year by the end of January.
  • Submit the “Audit Plan Outcome” for the previous year by the end of February.
  • Submit the “Internal Control System Declaration” for the previous year by the end of March.
  • Submit the “Internal Control System Deficiencies and Corrective Actions” for the previous year by the end of May.
  • Submit the “Annual Audit Plan” for the following year by the end of December.

Establishing a dedicated/partially dedicated unit to cope with governance

On Oct. 16, 2018, the chairperson of the board approved a plan to set up a “corporate governance task force” under the office of the chairperson. The plan was submitted to the board for endorsement on Nov. 6, 2018. The task force’s leader is the Company’s chief financial officer, a certified accountant. Its members include chiefs of relevant departments, who are tasked with the extra mission of facilitating the Company’s management affairs such as those related to the board, shareholders’ meetings, relationships with investors and other governance items established in accordance with the Company’s regulations or contracts, which include:

  • providing directors of the board and independent directors with material they need to conduct business, preparing according to relevant regulations for board meetings and shareholders’ meetings, handling company registration and registration change affairs, doing the minutes for meetings of board meetings and shareholders’ meetings, and releasing and updating information via the market observation post system and the Investor Zone on the company’s website. The aim is to protect shareholders’ rights and interests, treat them in an equal way, strengthen functions of the board and increase information transparency.
  • Emailing information about advanced studies courses to directors of the board on an irregular basis. Registering for the courses for them.
  • Contacting directors of the board every quarter: communication meetings between certified accountants, independent directors, financial and accounting department chief and audit department chief.
  • Planning the Company’s participation in or holding of institutional investor conferences.

Members of the “corporate governance task force” and their functions:

Work plan:

1. Verify every January the results of Corporate Governance Self-assessment Report of the previous year.
2. Bring forward every April priority items for improvement and corresponding measures according to Corporate Governance Evaluation Indictors of the year.
3. Start to conduct corporate governance self-assessment every October. Review assessment results and propose improvements.
4. Handle according to relevant regulations affairs related to the board, shareholders’ meetings and relationships with investors.
5. Report to the board on plans executed on a regular basis (at least once a year).

Execution status:

Date of report to the boardExecution status
Nov. 6, 2018

Policy for Communications Between Independent Directors, Auditors and Accountant

I.The independent directors of the Company meet a regular time each year. The accountant reports the Company’s financial situation, the financial situation of local and foreign subsidiaries, their overall operations, and internal audit outcomes to the independent directors. Governance matters are also communicated in full; an extraordinary meeting may also be convened at any time over major anomalies.

II.An Audit Committee made up of three independent directors has been established by the Company. Whenever the Audit Committee is convened, the chief auditor is invited to attend as a non-voting participant and must present a report on the Company’s internal audit and control operations at least once every quarter; an extraordinary meeting may also be convened at any time over major anomalies.

Communications Between Independent Directors, Chief Auditors and Accountants:

Communication outcome