iii. corporate governance report · 8 teco electric & machinery co., ltd. annual report 2011...

www.teco.com.tw 5

Chairman

Internal Audit Division

Legal Division

Business Development Center

Secretariat Division

President

Office of President

Finance Group

CRP Team

Quality Assurance Dept

Safety & Health Dept

Information Technology Dept

Asset Management Dept

Corporate Purchasing Division

Finance Division

Management Accounting Division

Human Resources Division

Green Electric

Machine Group

HouseholdAppliances

Group

IndustrialMotors &

ApplicationsGroup

IndustrialProduct &

SystemAutomation

Group

ECOEnergyGroup

TecoGroup

ResearchInstitute

PowerBusinessGroup

Smart Home Dept

III. Corporate Governance Report3.1 Organization

3.1.1 Organization Chart

TECO ELECTRIC & MACHINERY CO., LTD.6

3.1.2 Major Corporate Functions

Business Unit Operations

Industrial Motors & Applications

Production and sales of medium to large-sized 3-phase motors, medium to large-sized high-efficiency motors, medium to large-sized explosion-proof motors, medium to large-sized inverter-duty motors, DC motor and medium to large-sized generators.

Green Electric Machine

Production and sales of single-phase motors, vehicle-used motors, permanet magnet motors, small-sized 3-phase motors, small-sized high-efficiency motors, small-sized explosion-proof motors, small-sized inverter-duty motors, small-sized generators, aluminum refining and smelting, small-sized coolant compressors.

Industrial Products & System Automation

Production and sales of AC/DC motor controls, molded-case circuit breakers, electronic relays, inverters and programmable logic controllers, servo controllers.

Power Business

R&D, design, production, and sales of equipment and systems meant for the supply of electrical power; undertaking of projects related to power distribution and generation, alternative energy, and rail stations and depots.Air-conditioning equipment for specific environments such as clean rooms; design, construction, and management of electrical engineering systems for high-rise buildings; integration of air-conditioning and electrical engineering systems for hospitals and hotels; water pump stations and other related projects. Ultra-high pressure 161KV/69KV substations switchgears and installation projects.

Household Appliances

Production, assembly, sales, and repair of air conditioners, refrigerators, washing machines, dehumidifiers, dryers, televisions, LCD monitors, air purifiers, small appliances, DVD recorders, stereo systems, health appliances, beauty appliances, freezer storages, loe-temperature caged carts, freezers, chillers for machine tools, condensing units ; dealership of other domestic and foreign home appliances brands.

ECO Energy GroupDevelopment, manufacturing, sales, and system integration of wind-power turbines, related equipments for solar power generators, wind/solar hybrid street lights.

Teco Group Research InstituteResearch and development catering to requirements of the medium-to-long term development of new products and technical support to members of the TECO group.

Intelligent System DivisionChip-embedded cards for financial, medical, national defense, and public transportation services; systems integration for ITS- and RFID-based cards; non-person vending machine.

www.teco.com.tw 7

3.2 Directors, Supervisors and Management Team3.2.1 Directors and Supervisors

April 30, 2013

Title Name Date Elected Term(Years)

Date First Elected(Note)

Shareholding when Elected Current Shareholding Spouse & Minor

Shareholding

Shareholding by Nominee Arrangement Experience (Education) Other Position

Executives, Directors or Supervisors who are spouses or within two degrees

of kinship

Shares % Shares % Shares % Shares % Title Name Relation

ChairmanTong Ho Gloabl Investment Co., Ltd Representative : C.K. Liu

2012.6.152012.6.15

33

2000.4.212000.4.21

2,240,2620

0.12%0

2,240,262300,000

0.12%0.02%

0122,018

00.01%

00

00

Ph.D,University of IllinoisChairman of Tecom Co., Ltd. & TECO Holdings USA, Inc.

- - -

Managing Director

Theodore M.H. Huang 2012.6.15 3 1972.5.12 18,486,633 1.00% 18,486,633 0.98% 5,839,071 0.31% 0 0Master, University of Pennsylvania

Chairman of An-Tai International Investment Co., Ltd. & TECO Australia Pte Limited.

DirectorYu-Ren, Huang

Father & Son

Managing Director

Fred P.C. Huang 2012.6.15 3 1988.3.28 21,614,831 1.17% 21,614,831 1.14% 230,588 0.01% 0 0Master, University of TokyoBachelor, National Taiwan University

Chairman of Tecom Co., Ltd.,.. - - -

Managing Director

John C.T. Huang 2012.6.15 3 1991.5.8 15,279,849 0.83% 15,279,849 0.81% 2,110,934 0.11% 0 0Department of Economics,, Fu Jen Catholic University

Chairman of Sen Yeh Construction Co., Ltd. & Wan Yu Development Co., Ltd.

- - -

Managing & Independent Director

Sush-Der, Lee (Note) 2012.6.15 3 20012.6.15 0 0 0 0 0 0 0 0 Minister, Ministry of FinanceChair Professor Emeritus of Department of Finance, Chung Yuan Christian University

- - -

Independent Director

Tian-Jy, Chen 2012.6.15 3 20012.6.15 0 0 0 0 16,356 0.00% 0 0

Minister without Portfolio, Executive Yuan Chairperson of Council for Economic Planning and Development

Professor of Department of Economics, National Taiwan University

Independent Director

Chen, Chin-Chien 2012.6.15 3 20012.6.15 0 0 0 0 989 0.00% 0 0Director-General, Taipei National Tax Administration, Ministry of Finance

None

Director Hsien Sheng Kuo 2012.6.15 3 1982.3.27 9,126,238 0.49% 9,126,238 0.48% 1,573,020 0.08% 0 0 Tamkang UniversityChairman of Ping Tung Bus Lines Co., Ltd. & Nantou Bus Lines Co., Ltd.

DirectorYaskawa Electric Corporation. Representative : Masao Kito

2012.6.152012.6.15

33

2006.6.152007.4.30

29,541,0890

1.60%0

29,541,0890

1.58%0

00

00

00

00

Nagoya Institute of Technology

- - -

DirectorKuang Yuan Industrial Co., Ltd. Representative: Shih Chien Yang

2012.6.152012.6.15

33

2009.6.192009.6.19

22,033,9190

1.19%0

22,033,9190

1.16%0

00

00

00

00

Ph.D.,Northwestern University, US

Chairman of Global Strategic Venture Capital Co., Ltd. & Huan Xun Venture Capital Co., Ltd.

- - -

DirectorTung Kuang Investment Co., Ltd.Representative : Sohpia Chiu

2012.6.152012.6.15

33

2000.4.212006.6.15

30,341,3642,241,964

1.64%0.12%

30,341,3641,741,964

1.60%0.09%

016,987

00%

00

00

Master, University of Michigan, Ann-Arbor

Chairman of Asia Pacific Telecom Co., Ltd. & Taiwan Pelican Express Co., Ltd…

- - -

DirectorTung Kuang Investment Co., Ltd.Representative : Hong-Xiang, Lin

2012.6.152012.6.15

33

2000.4.212006.6.15

30,341,3642,923,893

1.64%0.16%

30,341,3642,923,893

1.60%0.15%

00

00

00

00

Master, University of Houston

Chairman of Tong Dai Co., Ltd. & TECO Electric & Machinery Pte Ltd.

- - -

DirectorLien Chang Electronic Co., Ltd.Representative: Chin San, Chien

2012.6.152012.6.15

33

2009.6.191997.5.24

4,173,0005,417,181

0.23%0.29%

4,173,0005,417,181

0.22%0.29%

01,285,214

00.07%

00

00

Director of TECO Electric & Machinery Pte. Ltd.

Director of Lien Quan Investment & Development Co., Ltd.

- - -

DirectorMao Yang Co., Ltd. Representative: Yong-Xiang Chang

2012.6.152012.6.15

33

1994.4.282006.9.6

5,000,8930

0.27%0

5,000,8930

0.27%0

00

00

00

00

Minghsin University of Science & Technology

Chairman of Hong Tong Co., Ltd. & Vice Chairman of Taiwan Wax Company Ltd.

- - -

DirectorCreative Sensor Inc.Representative: Yu-Ren, Huang

2012.6.152012.6.15

33

2009.6.192012.6.15

10,000,000234,623

0.54%0.01%

10,000,000234,623

0.53%0.01%

00

00

00

00

Master,Columbia UniversityChairman of Creative Sensor Inc. & TECO Image Systems Co., Ltd.

Managing Director

Theodore M.H. Huang

Father& Son

Note: To be the Chairman of Taiwan Stock Exchange, the company’s Managing & Independent Director, Mr. Sush-Der, Lee resigned on Feb. 25, 2013.


Annual Report2011

Datas for Directors and SupervisorsApril 30, 2013

Criteria

Name

Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience Independence Criteria(Note)

Number of Other Public Companies in Which the Individual is Concurrently Serving as an Independent Director

An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University

A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company

Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company 1 2 3 4 5 6 7 8 9 10

Tong Ho Gloabl Investment Co., Ltd Representative : C.K. Liu

V V V V V V V V V

Theodore M.H. Huang V V V V V V V V 1

Fred P.C. Huang V V V V V V V V

John C.T. Huang V V V V V V V V V V 1

Tian-Jy, Chen V V V V V V V V V V V V 2

Chin-Chien, Chen V V V V V V V V V V V

Hsien Sheng Kuo V V V V V V V V V V V

Yaskawa Electric Corporation. Representative : Masao Kito V V V V V V V V V V

Kuang Yuan Industrial Co., Ltd.Representative : Shih Chien Yang V V V V V V V V V

Tung Kuang Investment Co., Ltd.Representative : Sophia Chiu V V V V V V V V

Tung Kuang Investment Co., Ltd.Representative : Hong-Xiang, Lin

V V V V V V V V

Lien Chang Electronic Co., Ltd.Representative : C. S. Chien V V V V V V V V V V

Mao Yang Co., Ltd. Representative: Yong-Xiang Chang

V V V V V V V V V V

Creative Sensor Inc.Representative: Yu-Ren, Huang V V V V V V

Note: Please tick the corresponding boxes if directors or supervisors have been any of the following during the two years prior to being elected or during the term of office.1. Not an employee of the Company or any of its affiliates.2. Not a director or supervisor of the Company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the Company, its

parent company, or any subsidiary in which the Company holds, directly or indirectly, more than 50% of the voting shares.3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate

amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings.4. Not a spouse, relative within the second degree of kinship, or lineal relative within the fifth degree of kinship, of any of the persons in the preceding three subparagraphs.5. Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the total number of outstanding shares of the Company or that holds shares

ranking in the top five in holdings.6. Not a director, supervisor, officer, or shareholder holding 5% or more of the share, of a specified company or institution that has a financial or business relationship with the Company.7. Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal,

financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof.8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.9. Not been a person of any conditions defined in Article 30 of the Company Law.

10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.

www.teco.com.tw 9

Title Name Date Effective

Shareholding Spouse & Minor Shareholding

Shareholding by Nominee

Arrangement Experience(Education) Other Position

Managers who are Spouses or Within

Two Degrees of Kinship

Shares % Shares % Shares % Title Name Relation

President Sophia Chiu 2005.6.1 1,741,964 0.092% 16,987 0.001% - -

Master, University of Michigan, Ann-Arbor

Supervisor of Tecom Co., Ltd. - - -

Executive Consultant S.C. Lin 2000.7.1 1,532,245 0.081% 40,434 0.002% - -

National Taiwan University

Chairman of Teco Westinghouse Motor Company

- - -

Vice President George Lien 2001.8.1 1,403,130 0.074% 0 - - -

Master, Stevens Institute of Technology

Chairman of Media Vision Inc. - - -

Assistant Vice President

Hong Xiang Lin 1998.8.21 2,923,893 0.154% 0 - - -

Master, University of Houston

Chairman of Tong Dai Co., Ltd. - - -


Yu Kuang Wang 2003.10.01 757,806 0.040% 28,622 0.002% - - Tatung

University

Director, Micropac (BVI) Worldwide

- - -


Steven Chiang 2011.12.25 0 - 0 - - - Ph.D,University of Florida

Chairman of Yatec Engineering Corporation

- - -


Chin-Liang Yang 2013.3.26 323,938 0.017% 133,998 0.007% - - National Cheng

Kung University

Chairman of Tong Tai Jung Co., Ltd.

- - -

3.2.2 Management TeamApril 30, 2013


3.2.3 Remuneration of Directors, Supervisors, President, and Vice President

Remuneration of Directors(Including Independent Directors) Unit: NT$ thousand

Code Title Name

Remuneration Relevant remuneration received by directors who are also employees

Compensation paid to directors from an invested

company other than the

company’s subsidiary

Base Compensation(A) Severance Pay(B) Bonus to Directors(C) Allowances(D)Ratio of total remuneration

(A+B+C+D) to net income(%)

Salary, Bonuses, and Allowances (E) Severance Pay (F) Profit Sharing- Employee Bonus (G) Exercisable Employee

Stock Options (H)

Ratio of total compensation (A+B+C+D+E+F+G) to net

income(%)

The company

Companies in the

consolidated financial

statements

The company

Companies in the


statements

The company

Companies in the


statements

The company

Companies in the


statements

The company

Companies in the


statements

The company

Companies in the


statements

The company

Companies in the


statements

The company

Companies in the


statements

The company

Companies in the


statementsThe company

Companies in the


statements

The company

Companies in the


statementsCash Dividend

Stock Dividend

Cash Dividend

Stock Dividend

1 Chairman

Tong Ho Gloabl Investment Co., Ltd Representative : C.K. Liu

- - - - Total:101,269

Total:101,269

Total:785

Total:1,256 3.44% 3.46% Total:

7,632Total:8,832

Total:108

Total:108

Total:3,238 - Total:

3,238 - - - 3.81% 3.87% Yes

2 Managing Director

Theodore M.H. Huang

3 Managing Director Fred P.C. Huang

4 Managing Director John C.T. Huang

5Managing & Independent Director

Sush-Der, Lee

6 Independent Director Tian-Jy, Chen

7 Independent Director Chin-Chien, Chen

8 Director

Yaskawa Electric Corporation. Representative : Masao Kito

9 Director

Kuang Yuan Industrial Co., Ltd.Representative: Shih Chien Yang

10 Director

Tong Kuang Investment Co., Ltd.Representative: Hong-Xiang, Lin & Sophia Chiu

11 Director Hsien Sheng Kuo

12 Director

Lien Chang Electronic Co., Ltd.Representative: C. S. Chien

13 DirectorMao Yang Co., Ltd. Representative: Yong-Xiang Chang

14 Director Creative Sensor Inc.

15Managing & Independent Director

Hong Chang Chang

16 Director

Jung Gi Investment Co., Ltd.Representative: Emilie Sun

17 Director

Grand Pacific Investment & Development Co., Ltd.Representative: Mao-Nan Jian

Note: No actural retirees in 2012; the figures in this column refer to provision or earmarking for severance and retiretn funds.

www.teco.com.tw 11

Bracket

Name of Directors(Note 1)Total of (A+B+C+D) Total of (A+B+C+D+E+F+G)

The companyCompanies in the

consolidated financial statements

The companyCompanies in the

consolidated financial statements

Under NT$ 2,000,000 5,6,7,15 5,6,7,15 5,6,7,15 5,6,7,15NT$2,000,000 ~

NT$5,000,00016, 17 16, 17 16, 17 16, 17

NT$5,000,000 ~

NT$10,000,0002, 3, 4, 8, 9, 10, 11,12,13,14 3, 4, 8, 9, 10, 11,12,13,14 3, 8, 9, 10, 11,12,13,14 3, 8, 9, 10, 11,12,13,14

NT$10,000,000 ~

NT$15,000,000 1 1, 2 1, 4 1, 4

NT$15,000,000 ~

NT$30,000,0002 2

NT$30,000,000 ~

NT$50,000,000NT$50,000,000 ~

NT$100,000,000Over NT$100,000,000Number of Directors 17 17 17 17

Note 1: Shown by code of Directors in the previous table

Remuneration of SupervisorsUnit : NT$ thousand

Code Title Name

Remuneration Compensation paid to

supervisors from an invested company

other than the company’s subsidiary

Base Compensation(A) Severance Pay(B) Bonus to Directors(C) Allowances(D)Ratio of total

remuneration (A+B+C+D) to net income (%)

The company

Companies in the consolidated

financial statements

The company

Companies in the


statements

The company

Companies in the


statements

The company

Companies in the


statements

The company

Companies in the


statements

1 Resident supervisor Tong Shung Wu - - - - 825 825 61 67 0.03% 0.03%

None

2 Supervisor

Tung Kuang Investment Co., Ltd.Representative: Bo Yuan Wang & Hsin-Yi Lin (Note 1)

- - - - Total:4,635

Total:4,635

Total:0

Total:0

Total0.16%

Total0.16%

(Note 1) Compensations for the supervistor should be publized separately, since over 50% of his shareholding has been mortgaged.

BracketName of Supervisors (Note 1)

Total of (A+B+C+D)The company Companies in the consolidated

financial statementsUnder NT$ 2,000,000 1 1NT$2,000,000 ~ NT$5,000,000 2 2NT$5,000,000 ~ NT$10,000,000NT$10,000,000 ~ NT$15,000,000 NT$15,000,000 ~ NT$30,000,000NT$30,000,000 ~ NT$50,000,000NT$50,000,000 ~ NT$100,000,000Over NT$100,000,000Number of Supervisors 2 2

Note 1: Shown by code of Supervisors in the previous table


Compensation of President and Vice PresidentUnit : NT$ thousand

Code Title Name

Salary(A) Severance Pay (B)Bonuses and Allowances

(C)Profit Sharing- Employee Bonus (D)

Ratio of total compensation (A+B+C+D)

to net income(%)

Exercisable Employee Stock Options

Compensation paid to the

president and vice president from an invested company

other than the company’s subsidiary

The company

Companies in the consolidated financial

statements

The company


statements

The company


statements

The company

Companies in the consolidated

financial statements

The company


statements

The company


statementsCash Stock Cash Stock

1 President Sophia ChiuTotal:

17,986Total1:8,604

Total:1,530

Total:1,530

Total:17,218

Total:19,250

Total:15,016

-Total:

15,016- 1.86% 1.88% - - Yes

2Executive Consultant

S.C. Lin

3 Vice President George Lien

4Assistant Vice President

Hong Xiang Lin


Yu Kuang Wang


StevenChiang

Note: No actural retirees in 2012; the figures in this column refer to provision or earmarking for severance and retiretn funds.

Bracket Name of President and Vice President (Note 1)The company Companies in the consolidated

Under NT$ 2,000,000

NT$2,000,000 ~ NT$5,000,000

NT$5,000,000 ~ NT$10,000,000 2, 3, 4, 5, 6 3, 4, 5, 6

NT$10,000,000 ~ NT$15,000,000 1 1, 2

NT$15,000,000 ~ NT$30,000,000

NT$30,000,000 ~ NT$50,000,000

NT$50,000,000 ~ NT$100,000,000

Over NT$100,000,000

Number of Executives 6 6

Note 1: Shown by code of Executives in the previous table

www.teco.com.tw 13

Unit : NT$ thousand

Title Name

Employee

Bonus- in

Stock(Fair

Market Value)

Employee

Bonus- in

Cash

TotalRatio of Total Amount

to Net Income(%)

Executive

Officers

President Sophia Chiu

Total:

17,620

Total:

17,6200.59%

Executive Consultant S.C. Lin

Vice President George Lien

Assistant Vice President Hong Xiang Lin

Assistant Vice President Yu Kuang Wang

Assistant Vice President Steven Chiang

Group Director Andy Liu

Group Director Kevin Yeh

3.2.4 Comparison of Remuneration for Directors, Supervisors, Presidents and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Supervisors, Presidents and Vice Presidents

Unit : NT$ thousand

YearTotal remuneration paid to directors, supervisors,

presidents and vice presidents

Ratio of total remuneration paid to directors,

supervisors, presidents and vice presidents to

net income (%)

2012 174,630 5.89%

2011 164,917 5.93%

The company’s compensations are set according to levels offered by peers for the same positions, responsibilities of the positions, and their contribution to the company in achieving its business goal. The determination of compensations is based on the company’s guidelines for performance and compensations, which take into account the company’s overall business performance, achievement of an employee’s personal performance goal, and his/her contribution to the corporate performance, in order to reach reasonable levels of compensation. Year-end bonus is paid out according to a fixed share of net profits, which can only be changed by a resolution of the board of directors.


3.3 Implementation of Corporate Governance3.3.1 Board of Directors

A total of 9 meetings of the board of directors were held in 2012, director attendance was as follows:

Title Name Attendance in Person(B) By Proxy Attendance

rate (%)B/A Remarks

Chairman Tong Ho Gloabl Investment Co., Ltd Representative : C.K. Liu 9 0 100 % Continued (2012.6.15 Re-election)

Required Attendance Times: 9

Managing Director Theodore M.H. Huang 9 0 100 % Continued (2012.6.15 Re-election)Required Attendance Times: 9

Managing Director Fred P.C. Huang 7 2 78 % Continued (2012.6.15 Re-election)Required Attendance Times: 9

Managing Director John C.T. Huang 8 1 89 % Continued (2012.6.15 Re-election)Required Attendance Times: 9

Managing & Independent Director Sush-Der Lee 5 0 100 % New elected (2012.6.15 Re-election)


IndependentDirector Tian-Jy Chen 2 3 40 % New elected (2012.6.15 Re-election)Required Attendance Times: 5

IndependentDirector Chin-Chien Chen 5 0 100 % New elected (2012.6.15 Re-election)Required Attendance Times: 5

Director Yaskawa Electric Corporation. Representative : Masao Kito 1 8 11 % Continued (2012.6.15 Re-election)


Director Kuang Yuan Industrial Co., Ltd.Representative: Shih Chien Yang 6 3 67 % Continued (2012.6.15 Re-election)


Director Tung Kuang Investment Co., Ltd.Representative: Sophia Chiu 5 0 100% New elected (2012.6.15 Re-election)


Director Hsien Sheng Kuo 7 2 78% Continued (2012.6.15 Re-election)Required Attendance Times: 9

Director Lien Chang Electronic Co., Ltd. Representative : Chin San Chien 8 1 89 % Continued (2012.6.15 Re-election)


Director Mao Yang Co., Ltd. Representative: Yong-Xiang Chang 5 4 56% Continued (2012.6.15 Re-election)


Director Tung Kuang Investment Co., Ltd.Representative: Hong-Xiang Lin 5 0 100% New elected (2012.6.15 Re-election)


Director Creative Sensor Co., Ltd.Representative: Yu-Ren Huang 5 0 100% New elected (2012.6.15 Re-election)


Managing & Independent Director Hong Chang Chang 4 0 100 % Already existed (2012.6.15 Re-election)


Director Creative Sensor Co., Ltd.Representative: S. C. Lin 3 1 75% Already existed (2012.6.15 Re-election)


Director Lien Chang Electronic Co., td.Representative: Sophia Chiu 4 0 100% Already existed (2012.6.15 Re-election)


Director Jung Gi Investment Co., td.Representative: Emilie Sun 4 0 100 % Already existed (2012.6.15 Re-election)


Director Kuang Yuan Industrial Co., td.Representative: Chung Te Chang 3 1 75 % Already existed (2012.6.15 Re-election)


DirectorGrand Pacific Investment & Development Co., Ltd.Representative: Mao-Nan Jian

4 0 100 % Already existed (2012.6.15 Re-election)Required Attendance Times: 4

Other mentionable items:1. If there are the circumstances referred to in Article 14-3 of Securities and Exchange Act and resolutions of the directors’ meetings objected to by Independent Directors or

subject to qualified opinion and recorded or declared in writing, the dates of meetings, sessions, contents of motions, all independents’ opinion and the Company’s response to independent directors’ opinion should be specified: None

www.teco.com.tw 15

2. The execution of Directors’ avoidance of motions in conflict of interest: i. Director’s Name:

Fred P.C. Huang (Managing Director).Contents of the case: Donation to “TECO Technology Foundation” for various events in 2012. (22-18 Board of Meeting, 2012.4.12)Reason for avoidance of conflict of interest and the status of voting: Since the aforementioned managing director also serves as director of the targeted property of the case (TECO Sci-tech, Culture, and Education Foundation), he left the meeting and abstained from taking part in the voting. Other directors passed the case without objection.

ii. Director’s Name:Tian-Jy Chen (Independent Director).Contents of the case: Appointment of members of the company’s second term of compensations committee. (23-1 Board of Meeting, 2012.6.15)Reason for avoidance of conflict of interest and the status of voting: Since the aforementioned independent director also serves as the membership of the compensations committee, he left the meeting and abstained from taking part in the voting. Other directors passed the case without objection.

iii. Director’s Name:Sush-Der Lee (Managing & Independent Director).Contents of the case: Share release in line with the application of Taiwan Pelican Express Co., Ltd. for share listing on the emerging enterprise market. (23-4 Board of Meeting, 2012.10.16)Reason for avoidance of conflict of interest and the status of voting: Since the aforementioned director also serves as the Chairman of Gre Tai Securities Market, he left the meeting and abstained from taking part in the voting. Other directors passed the case without objection.

3. Measures taken to strengthen the functionality of the Board: i. According to “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” promulgated by the Financial Supervisory Commission on March 18, 2011, the company’s board of directors resolved to set up compensations committee on August 22, 2011, whose members will be appointed by the board of directors. The committee will operate according to the company’s “organizational charter for compensations committee” and help improve the performance evaluation and compensations management system for ranking managers, so as to materialize corporate governance:

ii. In accordance with the corporate-governance norm and the guidance of Taiwan Stock Exchange, the board of directors passed the “Criteria for Ethic Behaviors of Directors and Managing Officers ” on Dec. 15, 2011, in order to induce conformance of the behaviors of the company’s directors and managerial staffers to ethical standards and strengthen corporate governance.

iii. According to the “Regulations Governing the Exercise of Powers by Audit Committees of Public Companies” promulgated by the Financial Supervisory Commission on March 28, 2006, the board of directors resolved to set up “audit committee” on June 15, 2012. The committee consists of independent directors (three seats) and operate according to “the organizational charter of auditing committee,” in order to assist the board of directors with policy making and improve corporate governance.

iv. The company arranges regular advanced-study courses for directors and supervisors, helping them obtain related information and retain the advantage and competence for core value and expertise.

The Operation of Supervisors and the Board of DirectorsThe Company set up “Audit Committee” on June 15, 2012 to replace the original supervisor system. A total of 9 meetings of the board of directors were held in 2012, and 4 meetings of the board of directors were held from Jan. 1, 2012 to June 14, 2012. Supervisor attendance was as follows:

Title Name Attendance in Person(B)

Attendance rate (%)B/A Remarks

Resident supervisor Tong Shung Wu 4 100 % Already existed (2012.6.15 Re-elected)Required Attendance Times: 4

Supervisor Tung Kuang Investment Co., Ltd.Representative: Bo Yuan Wang 3 75 % Already existed (2012.6.15 Re-elected)


Supervisor Tung Kuang Investment Co., Ltd.Representative: Hsin –Yi Lin 4 100 % Already existed (2012.6.15 Re-elected)


Other mentionable items:1. Composition and responsibilities of supervisors: (1) Communication between supervisors and employees/shareholders:

Supervisors have good communications with employees and shareholders, such as direct communication with shareholders during the annual shareholders’ meeting. Email address of Supervisors: [email protected]

(2) Communications between supervisors and the Company's Chief Internal Auditor and CPA (e.g. the items, methods and results of the audits of corporate finance or operations, etc.):A. The company’s supervisors have direct communications channel with in-house auditing chief and certified public accountants. In compliance with the regulations of the

regulator, they carry out check of the company’s finance and business status regularly, as well as communicate with management and governing units directly.B. In addition to the reception of monthly auditing report, supervisors can require auditing chief to make business report for them. Auditing chief also has to deliver

business report on the quarterly meeting of the board of directors, assuring full communications on the execution and efficacy of auditing operation. C. Certified public accountants also report to supervisors on the result and finding of the auditing of financial statement every quarter.

2. If a supervisor expresses an opinion during a meeting of the Board of Directors, the dates of meetings, sessions, contents of motions, resolutions of the directors’ meetings and the Company’s response to supervisor’s opinion should be specified: None


3.3.2 Audit Committee

The Company set up “Audit Committee” on June 15, 2012 to replace the original supervisor system. The committee consists of independent directors (three seats), who select one among them as the convener and chairman of its meeting, and functions according to the company’s “organizational charter for the audit committee,” with the scope of its auditing covering the company’s financial statement, the company’s auditing and accounting policy and procedure, the company’s internal-control system, major transactions in assets or derivatives, raising or issuance of securities, appointment and dismissal of, along with compensations for, certified public accountant(s), and appointment and dismissal of financial, accounting, and internal-auditing managers.

A total of 5 meetings of the Audit Committee were held in 2012, and the Audit Committee attendance was as follows:

Title NameAttendance in Person

By ProxyAttendance

rate (%)Remarks

Convener & Chairman

Sush-Der, Lee 5 0 100 %New-elected (2012.6.15 Re-elected)Required Attendance Times: 5

Member Tian-Jy, Chen 4 1 80 %New-elected (2012.6.15 Re-elected)Required Attendance Times: 5

Member Chin-Chien, Chen 5 0 100 %New-elected (2012.6.15 Re-elected)Required Attendance Times: 5

Other mentionable items:

1. Items specified in article 14-5 of Securities Transaction Law and other items resolved by the board of directors with support of two thirds of directors but without

approval of the auditing committee.: None

2. The execution of Independent Directors’ avoidance of motions in conflict of interest:

i. Director’s Name: Sush-Der, Lee (Convener & Chairman).

Contents of the case:

Comply with the application of OTC trading - stock release case of Taiwan Pelican Express Co., Ltd. (1-4 Audit Committee Meeting, 2012.10.15)

Reason for avoidance of conflict of interest and the status of voting:

Since the aforementioned convener, Mr. Sush-Der, Lee, also serves as the chairman of Taiwan Stock Exchange, he left the meeting and abstained from taking part

in the voting. Mr. Tian-Jy, Chen was the deputy Chairman, and other directors passed the case without objection.

ii. Director’s Name: Tian-Jy, Chen (Independent Director).

Contents of the case:

Appointment of members of the company’s second term of compensations committee. (23-1 Board of Meeting, 2012.6.15)

Reason for avoidance of conflict of interest and the status of voting:

Since the aforementioned independent director also serves as the membership of the compensations committee, he left the meeting and abstained from taking

part in the voting. Other directors passed the case without objection.

3. Communication conditions among Independent Directors, Internal Audit Managers, and Accountants:

i. The company’s independent directors, internal-auditing managers, and certified public accountant(s) have direct contact channel. According to the regulations of

the regulator, they carry out regular check of the company’s financial and business status and directly communicate with the management unit and governing unit.

ii. In addition to the reception of monthly auditing report, an independent director can summon auditing chief to make business report to him/her. During the quarterly

meeting of the auditing committee, auditing chief would make internal-auditing report, thereby achieving full communications for the execution and achievement of

auditing operation.

iii. After completing the auditing of semi-annual or annual financial statement, the company’s certified public accountant(s) would report the results of his/her auditing

or perusal, as well as other mandatory items of communications, at the meeting of the audit committee.

www.teco.com.tw 17

3.3.3 Corporate Governance Execution Status and Deviations from “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies”

Items Implementation status Discrepancy with “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies “ and reasons

A. Company’s shareholding structure and interests of shareholders a. Method for handling shareholders’ suggestions or disputes b. Grasp of the list of major shareholders and the ultimate controllers

behind major shareholders c. Method for the establishment of risk control mechanism and firewall

vis-à-vis affiliates

a. The company has instituted stock-affairs units for tackling shareholders’ opinions or disputes.

b. The company constantly grasps the list of major shareholders and the ultimate controllers of major shareholders.

c. There exist distinct separation between the personnel, assets, and financial management between the company and its affiliates. The company regularly inpsects the accounts and internal control system of affiliates and establishes proper risk control mechanism and firewall.

a. Compliance with “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies “

b. Compliance with “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies “

c. Compliance with Compliance with “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies “

B. Constitution and responsibilities of the board of directors a. Status for the institution of independent directors b. Regularly evaluate the independence of certified public accountants

a. From the shareholders’ meeting on June 18, 2009, the company has instituted one independent director. From the shareholders’ meeting on June 15, 2012, the company has instituted three independent directors, for taking part in the company’s management and the operation of investment evaluation committee and other committees.

b. The company replaced certified public accountants in 2003, 2007, and 2010, which was approved by fifth meeting of the 20th board of directors (2003.9.18), tenth meeting of the 21st board and directors (2007.10.16), fifth meeting of the 22nd board of directors (2010.3.26), and sixth meeting of the 23rd board of directors (2013.3.26).

a. Compliance with “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies”.

b. Compliance with “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies”.

C. Establishment of communications channel with related parties The company has maintained good communications channel with related parties, including corresponding banks and other creditors, employees, consumers, suppliers, communities, in addition to respecting and upholding their legal rights.

Compliance with “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies “

D. Information publication a. The company sets up corporate website to disclose information on

finance and corporate governance. b. The company also publicizes information via other methods (such

as the setup of English-language website, designation of specific persons for the collection and disclosure of company information, implementation of spokesperson’s system, and posting of the process of investors’ conference on the website).

a. The company institutes website for disclosing the status of finance and corporate governance. The address of the corporate website: www.teco.com.tw

b. The company institutes English-language website (http://www.teco.com.tw/en_version/index.asp), designates specific persons for the collection and disclosure of corporate information, and implements spokesperson’s system.


E. The status of the operation of nomination, compensations and other functional committees

The 22nd board of directors approved the establishment of “Salary and Compensations Committee” at its 13th meeting (2011.8.22) and the committee already held its first meeting on Dec. 30, 2011. The 23rd board of directors approved the establishment of “Audit Committee” at its 1st meeting (2012.6.15) and the committee already held its first meeting on Jul. 5, 2012.


F. Should the company has formulated guidelines for corporate governance according to “Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies,” describe its operation and its difference with the latter.

The company has formulated guidelines for corporate governance and reported its contents to shareholders’ meeting in 2009. It has fully implemented the regulations of the guidelines.G. Other important information conducive to the understanding of the company’s governance (such as employees’ interest, concern for employees, investor relationship, supplier relationship, the rights of related

parties, advanced study of directors and supervisors, the implementation of risk management policy and risk appraisal criteria, implementation of client policy, and the taking out of liabilities insurance for directors and supervisors):

a. The company has formed labor union, which convenes regulation and communication with the management, so as to uphold the interest of employees. Regarding investor relationship, the company has established a specialized unit for regular disclosure of the company’s key business information, thereby enhancing transparency of corporate information, as well as feedback mechanism allowing investors to express their opinions on corporate development. The company also actively takes part in investors’ conference, informing investors of the company’s current operational status and development plan.

b. Attendance of directors in the meetings of board of directors is good and supervisors are also present. c. The company has taken out liabilities insurance for directors and supervisors. d. In 2012, the company’s directors undertook 42 hours of advanced study, and managerial staffers 21 hours.H. Should a company evaluate its corporate governance by itself or entrust specialized unit to undertake the evaluation, describe the evaluation outcome, major defects (or suggestions), and status of improvement.

In 2010, the company passed the evaluation of “Taiwan Corporate Governance Association” according th the criteria of “CG6005 common version.”The association put forth the following suggestions:

a. As members of the board of directors possess expertise in finance, accounting, and industry, the association suggested to convert professional external institutional directors as independent directors, to strengthen the governance performance of the board of directors.

b. The board of directors should evaluate the performance of ranking managers, to assure faithful implementation of the company’s development strategies in the short, medium, and long term. c. The company should formulate the group’s risk management policy and system, to as to monitor the company’s overall risk. Status of Improvement: a. According to the decree of FSC No. 1000010723, Mar. 22, 2011, the company has planned to institute three independent directors during the election for new directors at the shareholders’ meeting in 2012. b. The 22nd board of directors approved the establishment of “Salary and Compensations Committee” at its 13th meeting (2011.8.22) and the committee already held its first meeting on Dec. 30, 2011. The committee

will regularly evaluate the performance of directors, supervisors, and managerial staffers, as well as the policy, system, standard, and structure of salary and compensations, before putting its proposal to the board of directors for discussion.

c. The 23rd board of directors approved the establishment of “Audit Committee” at its 1st meeting (2012.6.15) and the committee already held its first meeting on Jul. 5, 2012. The “Audit Committee” will supervise the following items:

(a)Propriety of the company’s financial statement (b)The selection (dismissal) of certified public accountants, their independence and performance (c)Effective implementation of internal control (d)Compliance with related laws and regulations (e)Management of existing or potential risks.


3.3.4 Compensations Committee

Information on Members of Compensations Committee

Status(note 1)

Conditions

Name

Whether or not possess over five years of working experience and following professional qualifications Conformance to independency (note 2)

Number of part-time positions on the compensations c o m m i t t e e s o f other companies

Note (3)

I n s t r u c t o r s o r h i g h e r p o s i t i o n i n t h e f i e l d s o f c o m m e r c e , l a w, finance, accounting o r o t h e r re l a t e d d e p a r t m e n t s a t universities

Judges, prosecutors, lawyers, certified public accountants, o r o t h e r re l a t e d p ro f e s s i o n a l s o r t e c h n i c i a n s w i t h government licenses

W o r k i n g e x p e r i e n c e i n c o m m e r c e , l a w , f i n a n c e , a c c o u n t i n g , o r o t h e r r e l a t e d fields

1 2 3 4 5 6 7 8

IndependentDirector

Tian-Jy, Chen v v v v v v v v v 1

Hong Chang, Chang v v v v v v v v v 1

Yong Ho, Chiu v v v v v v v v v 0

Norte 1: For the column of status, please fill in director, independent director, or other positions.

Note 2: For members conforming the following conditions during the two years before the appointment or the term of the position, please give a check mark “v”in the

black space under the code of various conditions:

(1) Not an employee of the company or its affiliates

(2) Not a director or supervisor of the company or its affiliates, excluding independent director at companies in which the company or its parent company owns

over 50% of voting right directly and indirectly

(3) Not a shareholder owning over 1% stake in the company, in the names of himself/herself, the spouse, offspring before the age of majority, or others, or not

one of the top-10 natural-person shareholders

(4) Not spouse or relatives within second kinship or relatives of direct lineage within third kinship of the aforementioned three kinds of persons

(5) Not director, supervisor, or employee of institutional shareholder owing over 5% stake in the company directly, or director, supervisor, or employee of the

top-five institutional shareholders

(6) Not director, supervisor, manager, or shareholder with over 5% stake of specific company or institution with financial or business dealing with the company

(7) Not professionals providing commercial, legal, financial, and accounting services or consulting to the company or its affiliates; not owner, partner,

director, manager, or spouse of such person of firms of sole proprietorship or partnership, companies, or institutions providing aforementioned services or

consulting to the company and its affiliates.

(8) Without cases mentioned in various clauses of Article 30 of Company Law

www.teco.com.tw 19

A. There are three members of the Compensations CommitteeB. The term of the current committee: June 15, 2012 to June 14, 2015. The committee has met twice (A) in the

recent year. The attendance and qualifications of committee members follow:

Title Name Number of

attendance (B)

Number of attendance via

proxy

Actual attendance rate (%) (B/A)

(note) Note

ChairmanHong Chang, Chang

2 0 100%2012.6.15 Reelection: Continued

MemberYong Ho, Chiu

2 0 100%2012.6.15 Reelection: Continued

Member Tian-Jy, Chen 2 0 100%2012.6.15 Reelection: New-elected

Member Cheng, Li 2 0 100%2012.6.15 Reelection: already existed

Other items needing registration: 1. In case the board of directors declines or modifies the suggestions of the compensations committee, specify

the date, number, contents, and resolutions of the meeting of the board and its handling of the opinions of the compensations committee. (If the compensations approved by the board are higher than the level suggested by the compensations committee, specify the difference and reason.)

2. If a member opposes or has reservation, on record or in written form, about the resolutions of the compensations committee, specify the date, number, and agenda of the meeting of the committee, as well as the way for the handling of member’s opinions.


3.3.5 Social Responsibility

Fulfillment of social responsibility: The company’s system, measures, and fulfillment for events related to social responsibility, including environmental protection, communal participation, social contribution, social services, public benefits, consumer rights, human rights, and security and hygienic.

Items Concrete measures

Difference with the "Corporate Social Responsibility Best

Practice Principles for TWSE/GTSM - Listed Companies"

and reasons A. Implementation of corporate governance a. Formulation of the policy or system for corporate social

responsibility and review of their implementation

b. Status for the institution of specialized unit, or unit on a partial-responsibility basis, for pushing corporate social responsibility

c. Regular undertaking of education, training, and promotion on corporate ethics for directors, supervisors, and employees, associate the events with performance evaluation system for employees, and the establishment of an effective system for incentives and punishment.

a. The company has distinct social responsibility policy, complies with international norm, and designates specific unit to handle the issue on a partial responsibility basis.

b. The company regularly undertakes education and training (including promotion) for directors, supervisors, and employees. No difference

B. Environment for sustainable developmenta. Status for the dedication of the company to enhancing the

utilization efficiency of various resources and utilizing recycled materials in lowering the impact on the environment;

b. Status of the company in establishing proper environmental-management system according to its industrial features;

c. Status of the company in the institution of specific environment-management unit or personnel to uphold environment;

d. Status of the company in formulating carbon-abatement and greenhouse-gases reduction strategy, in line with its concern for climatic change on its operation.

a. Develop IE4 high-efficiency motor and high-efficiency air-conditioners home appliance products to save the electricity ; the use of environment-friendly coolant, environment-friendly foaming solution for refrigerators, and the recycling and reuse of paper boxes;

b. Passage of the certification of ISO 14001, OHSAS18001, and TOSHMS.

c. The institution of specific safety and environment-protection unit and

personnel; d. Pushing of greenhouse-gas inspection, Chung-Li plant was already

certified, and formulation of energy-conservation and carbon-abatement program.

No difference

C. Upholding of public benefitsa. Status of the company in instituting proper management

methods and procedures concerning labor-related laws/regulations and the protection of the employees’ legal right;

b. Status of the company in providing a safe and healthy working environment for employees and carrying out safety and health education for employees regularly;

c. Status of the company in formulating and publicizing consumer interest policy and providing transparent and effective procedure for consumer complaints concerning its products and services;

d. Status of the company in cooperating with suppliers for jointly

fulfilling corporate social responsibility; e. Status of the company in participating in communal development

and events of charity/public-benefit bodies via commercial events, donation of physical goods, corporate volunteer service or other professional services.

a. Posting of employee work rules, performance evaluation measures, rules for employee leave on corporate poster;

b. Randomly publicity of health information, holding of fire-fighting safety drill and health lectures every half a year, and holding of safety education training and health promotion event annually;

c. Adoption of the quality policy of “topnotch products and zero consumer complaint”; provision of toll-free 365-days-a-year around-the-clock call center service and online repair request and inquiry service; instant notification for accidents of designated products, according to the policy of the Bureau of Standards, Metrology, and Inspection;

d. Cooperation with suppliers in undertaking carbon-footprint certification;

e. Regular sponsoring of “TECO Sci-Tech Award,” via TECO Technology Foundation, so as to encourage the development of Taiwan’s technological innovation; pushing of creativity education; and support for the sustainable development of aboriginal culture.

No difference

D. Intensification of information disclosurea. Method of the company in disclosing information on relevant and

reliable corporate social responsibility;b. Compilation of report on corporate social responsibility to

publicize its effort in pushing corporate social responsibility.

a. Publicize “Corporate Social Responsibility report” on the company’s website.

b. Plan to publicize 2011 “Corporate Social Responsibility report” on the company’s website in Dec. 2012.

No difference

E. Describe the operation of company’s guidelines for corporate social responsibility, should it exist, and its difference with “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM - Listed Companies.”No difference

F. Other key information conducive to the understanding of the operation of corporate social responsibility (such as system and measures, as well as their fulfillment, of the company concerning environmental protection, communal participation, social contribution, social service, public benefits, consumer interest, human right, safety and hygienic).

Related information will be publicized by “Corporate Social Responsibility” report on the company’s website.

G. In case the company’s report on products or corporate social responsibility has passed the certification of related certification bodies, describe the inspection standards: a. The company’s report on products and corporate social responsibility complies with the standards of GRI (The Global Reporting Initiative). b. The compay doesn’t apply for external inspections yet.

www.teco.com.tw 21

3.3.6 Adherence to the Management Principle of Integrity and Measures

The company executes integrity-based management based on “Corporate Social Responsibility Best Practice Principles for TWSE/GTSM-Listed Companies.”

Items Status of operation

Difference with guidelines for integrity-based

management of listed companies and reasons

A. Formulate policy and program for integrity-based management (1) The company explicitly stresses the policy of integrity-based

management in its regulations, charters, and external documents and pledge of the board of directors and management for materializing the policy.

(2) Status of the company in formulating programs, as well as operating procedure, behavior guidelines, and education and training contained in the programs, to prevent dishonest behaviors.

(3) Status of the company, as specified in the program against dishonest behaviors, in preventing bribery, corruption, and provision of illegal political donations, when undertaking business activities with higher risk of dishonest behaviors

(1) Although the company has yet to formulate “guidelines for integrity-based management,” the company’s directors and management have been cautiously fulfilling their duties in compliance with the obligation of attention of a prudent administrator.

(2) The company has formulated behavioral guidelines, strictly forbidding employees to accept, without permission of superiors, gifts valued over NT$1,000 from companies or individuals with business dealings with the company. With permission of superiors, the gifts must be used for lot drawing at year-end party.

(3) The company’s legal-affairs office screens contracts and prevents violation of law in signing contracts, while the auditing office irregularly checks and continuously tracks status of improvement.

No major difference

B. Materialize integrity-based management(1) The company should avoid business dealings with parties with

dishonest behaviors on record and specify in business contracts articles of integrity-based behaviors.

(2) Status of the operation of the company’s unit responsible for pushing integrity-based management either on a specialized or part-time basis and the status of the supervision of the board of directors.

(3) Status of the company in formulating policy to prevent conflict of interest and providing proper reporting channel.

(4) Operation of the company’s effective accounting system and internal control system, designed to materialize integrity-based management and status of the operation of the company’s internal auditors.

(1) The legal-affairs office examines the contracts signed for external business activities, to avoid dealing with parties with dishonest behaviors on record.

(2) The company’s auditing office, overseen by the board of directors directly, audits the company’s internal operation and uncovers violation of integrity-based management.

(3) The company has formulated “behavioral guidelines,” forbidding all employees to accept benefits, to avoid sacrifice of company’s interests in exchange for employees’ personal interests.

(4) To materialize integrity-based management, the company has established effective accounting system and internal control system and internal auditors regularly check compliance with the two systems.

No major difference

C. Status of the company in establishing a reporting channel and penalty and complaint system for violation of integrity-based management.

The company stresses internal promotion of ethic ideas and encourages employees to report suspected or confirmed violations of laws/regulations or company regulations and charters to managerial staffers, internal auditing directors, supervisors, or other proper persons.

No major difference

D. Intensify information disclosure (1) The company discloses information related to integrity-based

management on its corporate website. (2) The company embraces other information disclosure methods

(such as setup of English-language website, designation of persons responsible for collection of company information and placement of information on the company’s website).

(1) The company doesn’t disclose information related to integrity-based management on website.

(2) The company has disclosed information to the regulator or the public in a complete, proper, timely, and correct manger on Market Observation Post System.

No major difference

E. Should the company formulate own guidelines for integrity-based management according to “Guidelines for Integrity-Based Management of Listed Companies,” specify its execution and difference with the guidelines.The company has not formulated yet.

F. Other key information conducive to the understanding of the company’s integrity-based management (such as promotion of the company’s determination and policy for integrity-based management among business partners, invitation of business partners for attending related education and training, and review and revision of the company’s guidelines for integrity-based management): The company materializes integrity-based management via compliance with Company Law, Securities Transactions Law, and regulations and laws governing listed firms, in addition to forbidding dishonest behaviors in business dealings.

3.3.7 Corporate Governance Guidelines and Regulations

The company has instituted “”Corporate Governance Principles”, and implemented the regulations of the guidelines faithfully. The docunment could be accessed on Market Observation Post System (http://mops.twse.com.tw) comforming to related regulations.


3.3.8 Other Important Information Regarding Corporate Governance

1. The important information regarding corporate governance has been disclosed on Market Observation Post System (http://newmops.twse.com.tw) comforming to related regulations.

2. Advanced studies for directors and supervisors in 2012:Title Name Date Organizer Training Course Time

Chairman Tong Kuang Investment Co., Ltd Representative : C.K. Liu 2012.12.4

ChunghwaCorpporateGovernanceAssociation

The Antitrust You Don’t Know 3 hrs

ManagingDirector Theodore M.H. Huang 2012.12.4



ManagingDirector Fred P.C. Huang 2012.12.4



Managing Director John C.T. Huang 2012.12.4



Managing & Independent Director

Sush-Der, Lee 2012.12.11


The Audit Committee Practice 3 hrs

Independent Director Tian-Jy, Chen

2012.5.11 Securities & Futures Institute

Forum for dut ies of L isted Companys’ Independent Directors 3 hrs

2012.8.3


Corporate Governance and Criminal Risk Management/ Operation Privacy Protection 3 hrs

Independent Director Chin-Chien, Chen 2012.12.4



Director Kuang Yuan Industrial Co., Ltd.Representative: Shih Chien, Yang 2012.12.4



Director Tung Kuang Investment CO., Ltd.Representative: Sophia Chiu 2012.12.4



Director Lien Chang Electronic Co., Ltd.Representative: Chin San, Chien 2012.12.4



Director Mao Yang Co., Ltd. Representative: Chin San, Chien 2012.12.4



Director Tung Kuang Investment CO., Ltd.Representative: Hong-Xiang, Lin 2012.12.4



Director Creative Sensor Inc.Representative: Yu-Ren, Huang 2012.12.4



www.teco.com.tw 23

3. Advanced studies for managing staffers in 2012:Title Name Date Organizer Traning course Time

President Sophia Chiu 2012.12.4



Vice President George Lien 2012.12.4



Assistant Vice President Hong-Xiang, Lin 2012.12.4



Assistant Vice President Steven Chiang 2012.12.4



Assistant Vice President Yu Kuang, Wang 2012.12.4



Group Director Andy Liu 2012.12.4



Group Director Kevin Yeh 2012.12.4



3.3.9 Internal Control System

Please refer to page 33 of the Chinese annual report.

3.3.10 In the recent year and up to the publication of the annual report, legal penalties for the company and internal staffers, penalties of internal staffers by the company for violation of internal control system and regulation, major defects and improvement status

None


3.3.11 Major Resolutions of Shareholders’ Meeting and Board Meetings

2012/03/20

(1) The Board of Directors resolved 2011 financial statements with operating revenue NT$25,798,135,000, EPS 1.54, and related financial reports material would be resolved by 2012 shareholders’ meeting.

(2) The Board of Directors resolved to hold the Annual Shareholders’ Meeting on June 15, 2012, where shareholders would deliberate on a proposed cash dividend of NT$0.90 per share, or a total of NT$1,654,922,000.

(3) The Board of Directors resolved to invest in China with a total amount of US$ 800,000 dollars to invest in Shanghai TECO Trade Co., Ltd., which will be responsible for the marketing planning and sales development of electric related products.

2012/05/02The Board of Directors resolved the 3rd issue of Domestic Unsecured Convertible Bonds with total par value up to NT$ 3 billion, issued period 3 years, and the raised funds would be used to redeem bank loans to reduce interest expense.

2012/06/15

Shareholders’ meeting(1) Acknowledged 2011 business report and financial statement. (2) Acknowledged 2011 earnings allocation, amounting to NT$0.90 per share for cash dividend payment.(3) Approved revision of “Articles of Incorporation”(4) Approved revision of “Procedure for Acquisition or Disposal of Assets”(5) Approved revision of “Rules Governing Shareholders’ Meeting”(6) Election of the 23rd term Board of Directors(7) Removal of restrictions on non-competition clauses for the 23rd term Board of Directors (including

Independent Directors)

2012/06/15The board of directors set the “ex-dividend base date” on July 9, 2012, paying out cash dividend of NT$1,654,921,724, or NT$0.9 per share, and setting the dividend payout date on August 3, 2012.

2012/06/15 The board of directors selected C.K Liu to be the new Chairman.

2012/07/30The board of directors resolved to dispose securities of Taiwan Pelican Express Co., Ltd., with 17,200,000 shares, total amount NT$ 344,000,000, and the total disposed value was NT$ 132,364,000.

2012/08/24The board of directors acknowledged the financial statement for the first half of 2012, showing revenue of NT$12,811,108,000 and after-tax net profit of NT$0.69 per share.

2012/10/16Board of Directors resolved to participate private placement project for convertible peferred stock of Tecom Co., Ltd., trading volume is about 320,000,000 shares, and total amount was under NT$ 500,000,000

2012/12/20Teco's Board of directors announced the resolution regarding strategic alliance with Kuenling Machinery Refrigerating Co., Ltd. to increase revenue in Southeast Asia and cultivate the market in China.

2013/03/26

(1)The board of directors resolved to convene 2013 shareholders’ meeting on June 21, 2013.(2) The Board of Directors resolved 2012 financial statements with operating revenue NT$25,461,139 thousand,

EPS 1.63, and plans to pay cash divident NT$ 1 per share, and the total amount was NT$ 1,866,650,000. The related financial reports material would be submitted to 2013 shareholders’ meeting.

2013/04/16The Board of Directors resolved to issue the 1st Domestic Unsecured RMB Bonds in 2013, with par value up to RMB 3 billion. The raised funds would be used to expand the working capital.

NumberResolution of 2012 Shareholders’ Meeing

(June 15, 2012)Implementation

1Acceptance of the 2011 Business Report and Financial Statements

※ The proposal was approved by the participating Shareholders with 82.52% approved percentage.

2Approval of cash dividend payout of NT$0.9 per share for the distribution of 2011 profits.

1. The proposal was approved by the participating Shareholders with 82.70% approved percentage.

2. Ex-Dividend Trading Date: 2012/07/09. Cash Dividend Payout date: 2012/08/03.

3 Approval of amendment to the Articles of Incorporation※ The proposal was approved by the participating

Shareholders with 76.53% approved percentage.

4Approval of amendment to the Procedure for Acquisition or Disposal of Assets


5.Approval of amendment to the Rules Governing Shareholders’ Meeting


6Approval of the proposal for removal of restrictions on non-competition clauses for the company’s 23rd term newly elected Directors, including independent directors


www.teco.com.tw 25

3.3.12 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors

None

3.3.13 Resignation or Dismissal of Personnel Involved in Preparation of Financial Reports

None

3.4 Information on CPA fee3.4.1 Accountant Information

Name of accounting firm CPA names Auditing period Note

Pricewaterhouse Coopers, Taiwan Ping-Chiun Chih Audrey Tseng 2012

3.4.2 Table of Brackets for CPA Fees

Fee item

Fee bracketsAuditing fee Non-auditing fee Total

1 Lower than NT$2 M.

2 NT$2-4 M. V V

3 NT$4-6 M.

4 NT$6-8 M.

5 NT$8-10 M.

6 NT$10 M. and higher V V

3.4.3 Non-inspection fees for CPAs, accounting firms, and its affiliates account for over one quarter of inspection fee: Nil

3.4.4 Replacement of accounting firm and auditing fee for the replacement year is lower than amount in the year prior to the replacement: Nil

3.4.5 Auditing fee decreases by over 15% from the previous year: Nil

3.5 Information on replacement of CPA: Not applicable

3.6 Information on service of the company’s chairman, president, and financial or accounting managers at the accounting firm or its affiliates: Nil


3.7 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders

3.7.1 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders

Unit: Share

Title Name

2012 Apr. 30, 2013

HoldingIncrease

(Decrease)

PledgedHoldingIncrease

(Decrease)

HoldingIncrease

(Decrease)

PledgedHoldingIncrease

(Decrease)

ChairmanTong Ho Gloabal Investment Co., Ltd.Representative : C. K. Liu

- (1,410,000) - -

Managing Director Theodore M. H. Hunag - - - -

Managing Director Fred P. C. Huang - - - -

Managing Director John C. T. Huang - (4,105,000) - 3,128,000Managing & Independent Director Sush-Der, Lee (Note 3) - - - -

Independent Director Tian-Jy, Chen - - - -

Independent Director Chin-Chien, Chen - - - -

Director Hisen Sheng, Kuo - - - -

Director Yaskawa Electric CorporationRepresentative : Masao Kito - - - -

DirectorKuang Yuan Industrial Co., Ltd.Representative: Shih-Chien, Yang

- (1,300,000) - 570,000

Director

Tong Kuang Investment Co., Ltd.Representative: Chwen-Jy, Chiu (Sophia Chiu)/ Hong-Xiang, Lin

- (11,542,000) - (2,200,000)

DirectorLien Chang Electronic Co., Ltd.Representative: Chin San, Chien

- - - -

DirectorMao Yang Co., Ltd. Representative: Yong-Hsiang, Chang

- - - -

Director Creative Sensor Inc.Representative: Yu-Ren, Huang 2,600,000 - - -

President Sophia Chiu 700,000 - - -

Executive Consultant S. C. Lin - - 1,200,000 -

Vice President George Lien 785,000 - - -

Management Hong-Xiang, Lin - - - -

Management Yu Kuang Wang - - - -

Management Steven Chiang - - - -

Management Chin-Liang Yang - - - -

Major Shareholder None - - - -

Note 1: Shareholders with more than 10% holdings shall be noted as “Major Shareholder” and listed separatelyNote 2: Shares transfer and shares pledge with related parties should fill out the following columns.Note 3: To be the Chairman of Taiwan Stock Exchange, the company’s Managing & Independent Director, Mr. Sush-Der, Lee

resigned on Feb. 25, 2013.

www.teco.com.tw 27

3.7.2 Shares Transfer with Related Parties

Name Reason of Transfer Date of Transaction Transferee

Relationship between Transferee and

Directors, Supervisors, Managers and Major

Shareholders

SharesTransaction Price

(NTD)

Not Applicable

3.7.3 Shares Transfer with Related Parties

NameReason of

PledgeDate of

TransactionTransferee

Relationship between Transferee and Directors, Supervisors, Managers and Major

ShareholdersShares

Shares holding

%

Shares Pledged

%

Pledged Amount

Not Applicable

3.8 Information Disclosing the Relationship between any of the Company’s Top Ten Shareholders

April 30, 2013

NameShareholding Spouse & Minor

Shareholding

by Nominee

Arrangement

The relationship

between any of the

Company’s

Top Ten Share

holders

Remarks%

Shares % Shares % Shares % Name Relation

Cathay Life Insurance 53,510,000 2.83% - - - - - - -

WGI Emerging Markets Smaller Companies

Fund, LLC38,241,000 2.02% - - - - - - -

IShare MSCI Emerging Market Index Fund 36,664,000 1.94% - - - - - - -

Vanguard Emerging Market Stock Index Fund 34,296,000 1.81% - - - - - - -

Tong Kuang InvestmentCo., Ltd. 30,341,364 1.60% - - - - - - -

Yaskawa Electric Corporation 29,541,089 1.56% - - - - - - -

Dimensional Emerging Markets Value Fund 26,004,725 1.37% - - - - - - -

Stichting Depositary APG Emerging Markets

Equity Pool23,792,833 1.26% - - - - - - -

Goldman Sachs International 23,442,816 1.24% - - - - - - -

Russell Investments Ireland Limited 22,302,300 1.18% - - - - - - -


3.9 Long-Term Investments Ownership Unit: As of December 31, 2012

InvesteeOwnership by TECO

Direct / Indirect

Ownership by

Directors, Supervisors

and Management

Total Investment

Shares % Shares % Shares %

Tong Dai Co., Ltd. 5,290,800 92.63% 0 0.00% 5,290,800 92.63%

Teco Nanotech Co., Ltd. 21,502,098 86.01% 205,000 0.82% 21,707,098 86.83%

TECO International Investment Co., Ltd. 50,562,000 100.00% 0 0.00% 50,562,000 100.00%

TECO Holding, USA 1,680 100.00% 0 0.00% 1,680 100.00%

TECO Electric & Machinery Pte Ltd. Singapore 7,200,000 90.00% 800,000 10.00% 8,000,000 100.00%

TECO Electric Europe Ltd. 4,500,000 100.00% 0 0.00% 4,500,000 100.00%

Tong An Assets Management & Development

Co., Ltd.102,224,193 100.00% 0 0.00% 102,224,193 100.00%

Appliance (HK) Ltd. 1,499,999 99.99% 0 0.00% 1,499,999 99.99%

Tong An Investment Co., Ltd. 369,686,118 99.60% 1,484,682 0.40% 371,170,800 100.00%

TECO Electro Devices Co., Ltd. 15,386,949 62.57% 371,324 1.51% 15,758,273 64.08%

Tecnos International Consultant Co., Ltd. 2,876,000 57.52% 801,000 16.02% 3,677,000 73.54%

Tong Tai Jung Co., Ltd. 3,960,000 60.00% 0 0.00% 3,960,000 60.00%

UVG Investment Co., Ltd. 225,782,346 100.00% 0 0.00% 225,782,346 100.00%

Information Technology Total Services Co., Ltd. 12,123,248 60.62% 2,135,250 10.68% 14,258,498 71.30%

Tesen Electric & Machinery Co., Ltd. 20,000,000 100.00% 0 0.00% 20,000,000 100.00%

GD TECO Taiwan Co., Ltd. 22,400,000 100.00% 0 0.00% 22,400,000 100.00%

Taitec Technology CO.,LTD. 950,000 95.00% 0 0.00% 950,000 95.00%

Yatec Engineering Corp. 7,799,996 64.95% 0 0.00% 7,799,996 64.95%

Taian (Subic) Electric Co., Inc. 17,131,155 76.70% 0 0.00% 17,131,155 76.70%

Taian (Malaysia) Electric Sdn. Bhd. 13,113,235 66.85% 0 0.00% 13,113,235 66.85%

An Tai International Investment Co., Ltd. 15,000,000 100.00% 0 0.00% 15,000,000 100.00%

Micropac (BVI) Worldwide Investment Co., Ltd. 6,883,591 100.00% 0 0.00% 6,883,591 100.00%

Taian-Etacom Technology Co., Ltd. 7,033,000 84.73% 0 0.00% 7,033,000 84.73%

Taian Electric Co., Ltd. 100,000 100.00% 0 0.00% 100,000 100.00%

Tecom 400,602,050 63.52% 0 0.00% 400,602,050 63.52%

E-Joy International Co., Ltd. 5,000,000 79.37% 999,810 15.87% 5,999,810 95.24%

A-Ok Technical Co., Ltd. 1,300,000 86.67% 0 0.00% 1,300,000 86.67%

TECO Technology (Vietnam) Co., Ltd. 13,772,799 100.00% 0 0.00% 13,772,799 100.00%

TECO (Philippines) 3C & Appliances, Inc. 651,000 60.00% 0 0.00% 651,000 60.00%

An-Sheng Travel Co., Ltd. 480,000 19.20% 1,920,000 76.80% 2,400,000 96.00%

Taiwan Pelican Express Co., Ltd. 24,559,700 28.56 10,105,000 11.75% 34,664,700 40.31%

iii. corporate governance report · 8 teco electric & machinery co., ltd. annual report 2011...

Documents