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Article 10
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The corporate governance report shall include the following:
1. Organizational system: Show the company's structure and the tasks of its principal divisions.
2. Information on the company's directors, supervisors, general manager, assistant general managers, deputy assistant general managers, and the supervisors of all the company's divisions and branch units, as follows:
(1) Directors and supervisors: names; principal work experience and academic qualifications; position(s) held concurrently in the company and/or in any other company, date on which current position was assumed; term of contract; the commencement date of the first term, shares held by directors/supervisors and their spouses, children of minor age, and held through nominees; professional expertise; and whether they are independent directors/supervisors. For directors and supervisors acting as the representatives of institutional shareholders, this section shall indicate the names of the institutional shareholders, and shall further indicate the names of its 10 largest shareholders and the holding percentage of each. If any of those 10 largest shareholders is an institutional shareholder, the name of the corporate shareholder and the names of its 10 largest shareholders and the holding percentage of each shall be noted (see Appendix 1).
(2) The general manager, assistant general managers, deputy assistant general managers, and the chiefs of all the company's divisions and branch units: names; principal work experience and academic qualifications; date on which current position was assumed; term of contract; and shares held by them and their spouses, children of minor age, and held through nominees (see Appendix 1-1).
(3) Remuneration paid during the most recent fiscal year to directors, supervisors, the general manager, and assistant general managers (see Appendix 1-2 and Appendix 1-3):
(i) The company may opt either to disclose aggregate remuneration information, with the name(s) indicated for each remuneration range, or to disclose the name of each individual and the corresponding remuneration amount.
(ii) If any of the following applies to the company, it shall disclose the remuneration paid to each individual director and supervisor:
(a) A company that has had consecutive after-tax deficits in the most recent two fiscal years shall disclose the remuneration paid to individual directors and supervisors.
(b) A company that has had an insufficient director shareholding percentage for three consecutive months or longer during the most recent fiscal year shall disclose the remuneration of individual directors; one that has had an insufficient supervisor shareholding percentage for three consecutive months or more during the most recent fiscal year shall disclose the remuneration of individual supervisors..
(c) A company that has had an average ratio of share pledging by directors or supervisors in excess of 50% in any three months during the most recent fiscal year shall disclose the remuneration paid to each individual directoror supervisor having a ratio of pledged shares in excess of 50% for each such month.
(4) Separately compare and describe total remuneration as a percentage of net income as paid by this company, and by each other company included in the consolidated financial statements, during the past two fiscal years to its directors, supervisors, the general manager, and assistant general managers, and analyze and describe remuneration policies, standards, and packages, the procedure for determining remuneration, and its linkage to operating performance and future risk exposure.
3. The state of the company's implementation of corporate governance:
(1) The state of operations of the board of directors: Number of meetings; attendance rate of each director; an evaluation of targets for strengthening of the functions of the board during the current and immediately preceding fiscal years, and measures taken toward achievement thereof; and any other matters that require reporting (see Appendix 2).
(2) The state of operations of the audit committee or the state of participation in board meetings by the supervisors: Number of meetings; rate of attendance (or of attendance as a non-voting participant) of each independent director or supervisor; and any other matters that require reporting (see Appendix 2-1, Appendix 2-1-1).
(3) The state of the company's implementation of corporate governance, any departure of such implementation from the Corporate Governance Best-Practice Principles for TSEC/GTSM Listed Companies, and the reason for any such departure (see Appendix 2-2).
(4) If the company has a compensation committee in place, the composition, duties, and operation of the compensation committee shall be disclosed.
(5) The state of the company's performance of corporate social responsibilities: systems and measures that the company has adopted with respect to environmental protection, community participation, contribution to society, service to society, social and public interests, consumer rights and interests, human rights, safety and health, and other corporate social responsibilities and activities, and the state of implementation.
(6) If the company has adopted corporate governance best-practice principles or related bylaws, disclose how these are to be searched.
(7) Other significant information that will provide a better understanding of the state of the company's implementation of corporate governance may also be disclosed.
(8) The section on the state of implementation of the company's internal control system shall furnish the following:
(i) A Statement on Internal Control.
(iii) Where a CPA has been hired to carry out a special audit of the internal control system, furnish the CPA audit report.
(9) For the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, disclose any sanctions imposed in accordance with the law upon the company or its internal personnel, any sanctions imposed by the company upon its internal personnel for violations of internal control system provisions, principal deficiencies, and the state of any efforts to make improvements.
(10) Material resolutions of a shareholders meeting or a board of directors meeting during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report.
(11) Where, during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, a director or supervisor has expressed a dissenting opinion with respect to a material resolution passed by the board of directors, and said dissenting opinion has been recorded or prepared as a written declaration, disclose the principal content thereof.
(12) A summary of resignations and dismissals, during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report, of persons connected with the company's financial report (including the chairman of the board of directors, general manager, principal accounting officer, and chief internal auditor; see Appendix 2-3).
4. Information on CPA professional fees: The company may opt to disclose professional fees of certified public accountants either by fee range or by individual amount disclosure (see Appendix 2-4), and given any one of the following conditions, shall disclose information as follows:
(1) When non-audit fees paid to the certified public accountant, to the accounting firm of the certified public accountant, and/or to any affiliated enterprise of such accounting firm are one quarter or more of the audit fees paid thereto, the amounts of both audit and non-audit fees as well as details of non-audit services shall be disclosed (see Appendix 2-4-1).
(2) When the company changes its accounting firm and the audit fees paid for the fiscal year in which such change took place are lower than those for the previous year, the amounts of the audit fees before and after the change and the reasons shall be disclosed.
(3) When the audit fees paid for the current year are lower than those for the previous fiscal year by 15 percent or more, the reduction in the amount of audit fees, reduction percentage, and reason(s) therefor shall be disclosed.
The professional fees for auditing services referred to in item (1) means the professional fees paid by the company to a certified public accountant for auditing, review, and secondary reviews of financial reports, financial forecast reviews, and tax certification.
5. Information on replacement of certified public accountant: If the company has replaced its certified public accountant within the last two fiscal years or any subsequent interim period, it shall disclose the following information: (see Appendix 2-5)
(1) Regarding the former certified public accountant:
(i) Date of and reason for replacement of the certified public accountant, specifying whether it was the certified public accountant that voluntarily ended the engagement or declined further engagement, or the company that terminated or discontinued the engagement.
(ii) If the former certified public accountant issued an audit report expressing other than an unqualified opinion during the two most recent years, furnish the opinion and reason.
(iii) Indicate whether there was any disagreement between the company and the former certified public accountant relating to any of the following matters:
(a) Accounting principles or practices.
(b) Financial report disclosure.
(c) Auditing scope or procedure.
If any disagreements did exist, the company shall describe in detail the nature of each such disagreement, how the company handled them (including whether the company has authorized the former certified public accountant to respond fully to the inquiries of the successor certified public accountant concerning the subject matter of each such disagreement), and how the disagreements were finally handled.
(iv) If any of the following matters has arisen, they shall also be disclosed:
(a) The former certified public accountant advised the company that it lacked the sound internal controls necessary for the preparation of reliable financial reports.
(b) The former certified public accountant advised the company that he or she was unable to rely on the company's written representations, or was unwilling to be associated with the financial report prepared by the company.
(c) The former certified public accountant advised the company of the need to expand the scope of the audit, or of information showing that an expanded audit might impact the reliability of either a previously issued financial report or the financial report to be issued but, due to replacement of the certified public accountant or for any other reason, the former certified public accountant did not expand the scope of the audit.
(d) The former certified public accountant advised the company that information collected might impact the reliability of either a previously issued financial report or the financial report to be issued but, due to the replacement of the certified public accountant or for any other reason, the certified public accountant did not deal with the issue.
(2) Regarding the successor certified public accountant:
(i) Name of the successor accounting firm, name of the certified public accountant, and date of engagement.
(ii) If prior to the formal engagement of the successor certified public accountant, the company consulted the newly engaged accountant regarding the accounting treatment of or application of accounting principles to a specified transaction, or the type of audit opinion that might be rendered on the company's financial report, the company shall state and identify the subjects discussed during those consultations and the consultation results.
(iii) The company shall consult and obtain written views from the successor certified public accountant regarding the matters on which the company did not agree with the former certified public accountant, and shall make disclosure thereof.
(3) The company shall mail to the former certified public accountant a copy of the disclosures it is making pursuant to items (1) and (2)(iii) of this subparagraph, and advise the accountant of the need to respond by mail within 10 days should the accountant disagree. The company shall disclose the content of the reply letter from the former certified public accountant.
6. Where the company's chairperson, general manager, or any managerial officer in charge of finance or accounting matters has in the most recent year held a position at the accounting firm of its certified public accountant or at an affiliated enterprise of such accounting firm, the name and position of the person, and the period during which the position was held, shall be disclosed. The term "affiliated enterprise of a certified public accountant's accounting firm" means one in which the certified public accountants at the accounting firm of the attesting certified public accountant hold more than 50% of the shares, or of which such accountants hold more than half of the directorships, or a company or institution listed as an affiliated enterprise in the external publications or printed materials of the accounting firm of the certified public accountant.
7. Any transfer of equity interests and/or pledge of or change in equity interests (during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report) by a director, supervisor, managerial officer, or shareholder with a stake of more than 10 percent during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report. Where the counterparty in any such transfer or pledge of equity interests is a related party, disclose the counterparty's name, its relationship between that party and the company as well as the company's directors, supervisors, and ten-percent shareholders, and the number of shares transferred or pledged (see Appendix 3).
8. Relationship information, if among the company's 10 largest shareholders any one is a related party, as defined in the Statement of Financial Accounting Standards No. 6, or is the spouse or a relative within the second degree of kinship of another (see Appendix 3-1).
9. The total number of shares and total equity stake held in any single enterprise by the company, its directors and supervisors, managers, and any companies controlled either directly or indirectly by the company (see Appendix 4).
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Article 11
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The section on capital and shares shall include the following information:
1. Source of capital stock: Disclose the types of shares issued by the company during the preceding fiscal year and in the current fiscal year up to the date of the printing of the report. If approval has been granted to offer and issue securities by shelf registration, additionally disclose the approved amount and information regarding securities to be issued or already issued (see Appendix 5).
2. Shareholder structure: Provide statistics on the ratios between the various types of shareholders (see Appendix 6).
3. Diffusion of ownership: Describe the diffusion of ownership of common shares and preferred shares. Provide a table that groups shareholders according to the number of shares held, and that further indicates the percentage of shares held by each different group (see Appendix 7).
4. List of principal shareholders: List all shareholders with a stake of 5 percent or greater, or the names of the top ten shareholders, specifying the number of shares and stake held by each shareholder on the list (see Appendix 8).
5. Provide share prices for the past two fiscal years, together with the company's net worth per share, earnings per share, dividends per share, and related information. If shares are distributed in connection with a capital increase out of earnings or capital reserve, further disclose information on market prices and cash dividends retroactively adjusted based on the number of shares after distribution (see Appendix 9).
6. Company's dividend policy and implementation thereof: Disclose the dividend policy adopted in the company's articles of incorporation, as well as the dividend distributions proposed at the most recent shareholders' meeting. If a material change in dividend policy is expected, provide an explanation.
7. Effect upon business performance and earnings per share of any stock dividend distribution proposed or adopted at the most recent shareholders' meeting.
8. Employee bonuses and compensation of directors and supervisors:
(1) The percentages or ranges with respect to employee bonuses and director/supervisor compensation, as set forth in the company's articles of incorporation.
(2) the basis for estimating the amount of employee bonuses and director/supervisor compensation, for calculating the number of shares to be distributed as stock bonuses, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period.
(3) Information on any employee bonus distribution proposal approved by the board of directors:
(i) Distribution of cash bonuses or stock bonuses to employees, and compensation for directors and supervisors. If there is any discrepancy between such an amount and the estimated figure for the year these expenses are recognized, the discrepancy, its cause, and the status of treatment shall be disclosed.
(ii) The amount of any proposed distribution of employee stock bonuses, and the size of such an amount as a percentage of the sum of the current after-tax net income and total employee bonuses.
(iii) The annual report shall assess the effect upon imputed earnings per share of any proposed distribution of employee bonuses and director/supervisor compensation.
(4) The actual distribution of employee bonuses and director/supervisor compensation for the previous fiscal year (with an indication of the number, dollar amount, and stock price, of the shares distributed), and, if there is any discrepancy between the actual distribution and the recognized employee bonuses and director/supervisor compensation, additionally the discrepancy, cause, and how it is treated.
9. Share repurchases: Where a company has applied in the preceding fiscal year or during the current fiscal year up to the date of printing of the annual report, to repurchase its own shares, the company shall explain the purpose, period, and price range of the repurchase, the types, quantity, and total value of shares repurchased, the number of shares retired or resold, the quantity of total treasury stock holdings, and total treasury stock holdings as a percentage of total shares issued (see Appendix 10).
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Article 18
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The overview of business operations shall include the following:
1. A description of the business:
(1) Scope of business: the company's major lines of business and the relative weight of each, current products (services), and new products (services) planned for development.
(2) An overview of the industry: the current status and development of the industry, the links between the upstream, midstream, and downstream segments of the industry supply chain, and development trends and competition for the company's products.
(3) An overview of the company's technologies and its research and development work: a listing of research and development expenditures as well as technologies and/or products successfully developed during the most recent fiscal year or during the current fiscal year up to the date of printing of the annual report.
(4) The company's long- and short-term business development plans.
2. An analysis of the market as well as the production and marketing situation, including:
(1) Market analysis: analysis of the geographic areas where the main products (services) of the company are provided (supplied), the company's market share, demand and supply conditions for the market in the future, the market's growth potential, the company's competitive niche, positive and negative factors for future development, and the company's response to such factors.
(2) Usage and manufacturing processes for the company's main products.
(3) Supply situation for the company's major raw materials.
(4) A list of any suppliers and clients accounting for 10 percent or more of the company's total procurement (sales) amount in either of the two most recent fiscal years, the amounts bought from (sold to) each, the percentage of total procurement (sales) accounted for by each, and an explanation of the reason for increases or decreases in the above figures. Where the company is prohibited by contract from revealing the name of a client, or where a trading counterpart is an individual person who is not a related party, it may use a code in place of the actual name (see Appendix 16-1 and Appendix 16-2).
(5) An indication of the production volume for the two most recent fiscal years (see Appendix 17).
(6) An indication of the volume of units sold for the two most recent fiscal years (see Appendix 18).
3. The number of employees employed for the two most recent fiscal years, and during the current fiscal year up to the date of printing of the annual report, their average years of service, average age, and education levels (including the percentage of employees at each level) (see Appendix 19).
4. Disbursements for environmental protection: total losses (including damage awards) and fines for environmental pollution for the two most recent fiscal years, and during the current fiscal year up to the date of printing of the annual report, and an explanation of the measures (including corrective measures) and possible disbursements to be made in the future (including an estimate of losses, fines, and compensation resulting from any failure to adopt responsive measures, or if it is not possible to provide such an estimate, an explanation of the reason why it is not possible).
5. Labor relations:
(1) List any employee benefit plans, continuing education, training, retirement systems, and the status of their implementation, and the status of labor-management agreements and measures for preserving employees' rights and interests.
(2) List any loss sustained as a result of labor disputes in the most recent fiscal year, and during the current fiscal year up to the date of printing of the annual report, disclose an estimate of losses incurred to date or likely to be incurred in the future, and indicate mitigation measures being or to be taken. If the loss cannot be reasonably estimated, make a statement to that effect.
6. Important contracts: the contracting parties, major content, restrictive clauses, and the commencement dates and expiration dates of supply/distribution contracts, technical cooperation contracts, engineering/construction contracts, long-term loan contracts, and other contracts that would affect shareholders' equity, where said contracts were either still effective as of the date of printing of the annual report, or expired in the most recent fiscal year (see Appendix 20).
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