investor relations

Major Board Resolution

Internal Control System

Compal builds up its internal management system in accordance with the “Regulations Governing Establishment of Internal Control Systems by Public Companies” and the applicable laws and regulations. In addition, Compal sets the risk management policy and standard of measuring risk for managing and controlling the Company’s extension of credits, loans and/or guarantees/endorsements to its vendors, customers and/or affiliates, and conducts risk assessment and review in accordance with the established procedures to reduce the risk of credit transactions. Meanwhile, Compal sets up a dedicated department responsible for the corporate risk management policy and the implementation of risk assessment.

Statement of Internal Control

Internal Audit

1. Establishment

The Internal Audit Office is established under the board of directors with an appropriate number of qualified persons, there are total 8 internal auditors including the chief internal auditor located in Taipei Headquarter and major production plant in China. The auditing scopes cover the functions of Taipei headquarter and controlled subsidiaries of non-public company. The operations include: annual audit plans, special projects and reported matters.

2. Operation

A. The Internal Audit Office formulates annual audit plans based on the results of the risk assessment on law requirements, internal incidents and external environment. The plans are approved by the board of directors before execution.

B. Every audit, following the audit plan, is prepared by working papers and all related information. The audit procedures include review documentations and walk through processes, auditors fully communicate with the auditees. When there are findings, improvements will be discussed with the auditees immediately. Complete results are disclosed in the audit reports.

C. After an audit is completed, a report is presented to the president, chairman and independent director to review.

D. Previously reported issues and their progresses are followed up on quarterly basis.

E. The internal audit officer attends to the audit committee and board meetings and presents the audit findings and progresses.

F. The Internal Audit Office presents a review of the Compal and its subsidiaries’ annual self-evaluation, audit findings, corrections and improvements on the internal control system to the board of directors and the president. This review is an important reference for the board of directors and the president to evaluate effectiveness of the internal control system and issue the Statement of Internal Control.

G. The annual audit plans for subsidiaries are designed based on Compal’s holding ratio, business importance, and operation type. The Internal Audit Office communicates audit findings to the subsidiaries for corrections or improvements, and follows up periodically to ensure the appropriate actions are taken.

Ethics Management

The purpose for Compal to establish the Code of Conduct is to enhance the moral cultivation and professional capabilities of our employees. As a credible enterprise, Compal believes that the behavior of its employees will affect the organization and credibility of the Company. Any employees in the Company shall carry out his/her own duty to maximize the interest of the Company in a reasonable extent; also has a duty to prevent the Company’s interest from losses.

For the public trust and the sustainable growth and development of the Company, Compal expects its employees shall follow the Code of Conduct upon engaging in the daily work and carrying out a task.

1. Comply with the national laws and regulations.

2. Ensure the rights of employees, customers, stockholders, suppliers, community and related organizations.

3. Insist on business honesty, the principles of fair trade, advertising and competition, no improper advantage and disclose information, respect for intellectual property right, protect privacy and identify, non-retaliation and be responsible sourcing of minerals.

4. Continuously improve, implement and outreach the Ethics policy to related organizations.

Major Shareholders

Date: April 24, 2017

Name of Shareholder Number of Shares Percentage of Total Issued Shares
Kinpo Electronics Inc. 151,628,692 3.39%
Bank of Taiwan in custody for Silchester International Investors International Value 76,904,000 1.74%
Standard Chartered in custody for Vanguard Stock Index Fund 75,897,629 1.72%
Standard Chartered in custody for Fidelity Puritan Fund: Fidelity Low-Priced Stock Fund 72,000,000 1.63%
Citi (Taiwan) Commercial Bank in custody for Dimensional Emerging Markets Value Fund 67,242,333 1.52%
Yung-Kun Hsieh 64,598,000 1.46%
FuBon Insurance 64,200,991 1.45%
Shin Kong Life Insurance Co., Ltd. 62,330,500 1.41%
JPMorgan Chase Bank N.A. Taipei Branch in custody for Saudi Arabian Monetary Agency 55,367,000 1.25%
Citi (Taiwan) Commercial Bank in custody for Norges Bank 53,620,697 1.21%

The company has established a dedicated unit for business integrity

The Company has appointed its Human Resources, Administrative Management Unit and Legal Affairs Office as the competent unit in charge of the Company’s ethical matters. Together, these units set the guidelines and policies. The performance are monitored by the internal auditors and reported to the Board of Directors on annual basis. To prevent potential conflicts of interest, the Company has established the “Ethical Corporate Management Best Practice Principles” and “Business Integrity Procedures and Behaviors” in 2014 and 2015 respectively. In addition, to facilitate the promotion of honest management, the Company has also designed relevant course for its online e‐Learning, including legal affairs related training on information security, personal information protection act, relevant company policies and employees’ code of conduct to educate all employees the aforementioned guidelines. In 2016, a total of 2,457 trainees participated in the trainings and a total of 12,304 hours of training completed.

Record of Directors Communication

Status of communication between independent directors, internal audit supervisor and accountant

1. Method of communication between independent directors, internal audit supervisor and accountant:

After the internal audit supervisor has submitted an audit report and follow-up report, he/she should provide the completed audited items to the independent directors for their review by the end of the following month. Should the independent directors require clarification of the audit and follow-up, they could contact the internal audit supervisor at any time. The internal auditor shall report audit results to the Audit Committee on a quarterly basis and discuss relevant matters in person with the committee.

The independent directors must communicate with the CPA once a year through the Audit Committee or Board of Directors’ Meeting. The CPA shall report to the independent directors on the results of financial statement audit and other pertinent legal requirements while the Audit Committee shall also evaluate the selection, independence, and fitness of the engaged CPA.

2. Summary of the communication between independent directors and internal audit supervisor:

Date Key point of communication
2016/3/30 Report on audits carried out between 2015/11/1~2016/3/4
2016/5/11 Report on audits carried out between 2016/3/5~2016/5/4
2016/8/11 Report on audits carried out between 2016/5/5~2016/7/31
2016/11/9 Report on audits carried out between 2016/8/1~2016/10/31 and the compilation of Audit Plan for 2017
2017/3/28 Report on audits carried out between 2016/11/1~2017/1/31, internal audit self-evaluation review results and internal audit declaration
2017/5/10 Report on audits carried out between 2017/2/1~2017/4/20
2017/8/10 Report on audits carried out between 2017/4/21~2017/7/31
2017/11/9 Report on audits carried out between 2017/8/1~2017/11/2 and the compilation of Audit Plan for 2018

3. Summary of the communication between independent directors and accountant:

Date Key point of communication
2016/3/30 Report on the outcome of audit for 2015 consolidated and individual
financial statements
2017/2/8 Report on the key audit items for 2016 consolidated and individual
financial statements
2017/3/28 Report on the outcome of audit for 2016 consolidated and individual
financial statements

Diversification of the Board Members

The Company has established rules and regulations such as the “Corporate Governance Guidelines” and “Rules for Director Election” to ensure diversified board member composition, and build up suitable guidelines for diversification based on the Board’s operation, the Company’s business model format and its needs and developments. And as such, board members are required to possess the required knowledge, skills and character in order to accomplish the goal of ideal corporate governance.

Status of board member diversification :

Core items for diversification
Name of director
Gender Operation
management
Leadership
and decision-
making
Knowledge
of the
industry
International
market
perspective
Finance
and
accounting
Sheng-Hsiun Hsu Male
Jui-Tsung Chen Male
Wen-Being Hsu Male
Shyh-Yong Shen Male
Charng-Chyi Ko Male
Sheng-Chieh Hsu Male
Yen-Chia Chou Male
Wen-Chung Shen Male
Yung-Ching Chang Male
Chung-Pin Wong Male
Chiung-Chi Hsu Male
Chao-Cheng Chen Male
Min-Chih Hsuan Male
Duei Tsai Male
Duh-Kung Tsai Male

The company has established a dedicated unit responsible for corporate governance affairs

VP Ching‐Hsiung Lu has been appointed to take charge of and supervise affairs pertaining to corporate governance in accordance with the Company’s "Corporate Governance Guidelines", while the HQ Accounting Department is assigned as the Company’s responsible unit for corporate governance to handle relevant affairs including arranging director and shareholder meetings as required by pertinent regulations, /shareholders’ meeting, processing changes in company registration, periodically examining and revising the Company’s corporate governance guidelines and relevant procedures, and providing the requisite information/data to independent directors or Audit Committee to perform their duties and to ensure legal compliance so as to improve disclosure transparency, safeguard shareholder rights and better corporate governance.