iii. corporate governance report€¦ · 6 teco electric & machinery co., ltd. 2013 annual...

www.teco.com.tw 5

Annual Report2013

Chairman

Internal Audit Division

Legal Division

Innovation Project

Business Development Center

Secretariat Division

President

Office of President

Finance GroupCRP Team

Quality Assurance Dept

Safety & Health Dept

Information Technology Dept

Asset Management Dept

Corporate Purchasing Division

Finance Division

Management Accounting DivisionHuman Resources Division

Green Electric

Machine Group

HouseholdAppliances

Group

IndustrialMotors &

ApplicationsGroup

IndustrialProduct &

SystemAutomation

Group

ECOEnergyGroup

TecoGroup

ResearchInstitute

PowerBusinessGroup

III. Corporate Governance Report3.1 Organization

3.1.1 Organization Chart

TECO ELECTRIC & MACHINERY CO., LTD.6

Annual Report2013

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, variable –frequency water/oil cooling machine tool set, assembly-type air-conditioning box, VRF air conditioning set, centrifugal ice-water machine, remote control system for home appliances, 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.

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Annual Report20133.2 Directors, Supervisors and Management Team3.2.1 Directors and Supervisors

April 30, 2014

Title Name Date Elected Term Date First Elected(Note)

Shareholding when Elected Current Shareholding Spouse & Minor

ShareholdingShareholding by

Nominee 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., LtdRepresentative: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 0.92% 5,839,071 0.29% 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 1.08% 230,588 0.01% 0 0 Master, University of Tokyo 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 0.76% 2,110,934 0.11% Fu Jen Catholic UniversityChairman of Sen Yeh Construction Co., Ltd. & Wan Yu Development Co., Ltd.

- - -

Managing & Independent Director

Tian-Jy, Chen 2012.6.15 3 2012.6.15 0 0 0 0 8,000 0% 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

Chin-Chien, Chen 2012.6.15 3 2012.6.15 0 0 0 0 989 0% 0 0

Director-General, Taipei National Tax Administration, Ministry of Finance

None - - -

Independent Director

Jing-Shown, Wu 2013.6.21 2 2013.6.21 0 0 0 0 0 0.00% 0 0Ph.D,Cornell University

Professor of Department of Electrical Engineering, National Taiwan University

Director Hsien Sheng Kuo 2012.6.15 3 1982.3.27 9,126,238 0.49% 9,126,238 0.46% 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 : Hiroyuki Ougi(Note)

2012.6.152013.6.18

32

2006.6.152013.6.18

29,541,0890

1.60%0

29,541,0890

1.47%0

00

00

00

00

Keio UniversityDirector Of Yatex Engineering Corporation

- - -

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

11.10%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

1.52%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%

30,341,3643,523,893

1.52%0.18%

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

0.21%0.27%

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

0.25%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

0.50%0.01%

00

00

00

00

Master,Columbia University

Chairman of Creative Sensor Inc. & TECO Image Systems Co., Ltd.

Managing Director

Theodore M.H. Huang

Father& Son

Note:Due to Yaskawa Electric Corporation changed its representive on June.18th 2013.


Annual Report2013

Datas for Directors and SupervisorsApril 30, 2014

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 0

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 0

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

Jing-Shown, Wu V V V V V V V V V V V V 0

Chin-Chien, Chen V V V V V V V V V V V 0

Hsien Sheng Kuo V V V V V V V V V V V 0

Yaskawa Electric Corporation. Representative: Hiroyuki Ougi V V V V V V V V V V 0

Kuang Yuan Industrial Co., Ltd.Representative: Shih Chien Yang V V V V V V V V V 1

Tung Kuang Investment Co., Ltd.Representative: Sophia Chiu V V V V V V V V 0

Tung Kuang Investment Co., Ltd.Representative: Hong-Xiang, Lin V V V V V V V V 0

Lien Chang Electronic Co., Ltd.Representative: C. S. Chien V V V V V V V V V V 0

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

V V V V V V V V V V 0

Creative Sensor Inc.Representative: Yu-Ren, Huang V V V V V V V 0

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.

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Annual Report2013

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 0.087% 16,987 0.001% 0 -

Master, University of Michigan, Ann-Arbor

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

- - -

Executive Consultant S.C. Lin 2000.7.1 1,532,245 0.077% 40,434 0.002% 0 -

National Taiwan University

Chairman of Teco Westinghouse Motor Company

- - -

Vice President George Lien 2001.8.1 783,130 0.039% 0 - 0 -

Master, Stevens Institute of Technology

Chairman of Media Vision Inc. - - -

Assistant Vice President

Hong Xiang Lin 1998.8.21 3,523,893 0.176% 0 - 0 -

Master, University of Houston

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


Yu Kuang Wang 2003.10.01 1,007,806 0.050% 28,622 0.002% 0 - Tatung

UniversityHunan TECO Wind Energy Limited - - -


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

Chairman of Yatec Engineering Corporation

- - -


Chin-Liang Yang 2013.3.26 323,938 0.016% 998 0.007% 0 - National Cheng

Kung University

Chairman of Tong Tai Jung Co., Ltd.

- - -

3.2.2 Management TeamApril 30, 2014


Annual Report2013

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:135,355

Total:135,826

Total:926

Total:1,081 3.62% 3.64% Total:

7,804Total:9,004

Total:108

Total:108

Total:3,314 - Total:

3,314 - - - 3.9% 3.97% 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

Tian-Jy, Chen

6 Independent Director Jing-Shown, Wu

7 Independent Director Chin-Chien, Chen

8 Director

Yaskawa Electric Corporation. Representative : Hiroyuki Ougi

9 Director

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

10 Director

Tong Kuang Investment Co., Ltd.Representative: Sophia Chiu

11 DirectorTongKuang Investment Co,LtdRepresentitive: Hong-Xiang, Lin

12 Director Hsien Sheng Kuo

13 Director

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

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

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

Note: No actural retirees in 2013; the figures in this column refer to provision or earmarking for severance and retiretn funds.

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Annual Report2013

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 5,6,7 5,6,7 5,6,7

NT$2,000,000 ~

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

NT$10,000,0008,9, 10,11,12,13,14,15 8,9, 10,11,12,13,14,15 8,9,10,11,12,13,14,15 8,9, 10,11,12,13,14,15

NT$10,000,000 ~

NT$15,000,000 2,3,4 2,3,4 3,4 3,4

NT$15,000,000 ~

NT$30,000,0001 1 1,2 1,2

NT$30,000,000 ~

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

NT$100,000,000

Over NT$100,000,000

Number of Directors 15 15 15 15

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


Annual Report2013

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 Chiu

2Executive Consultant

S.C. Lin

3 Vice President George Lien

4Assistant Vice President

Hong Xiang LinTotal:

18,901Total1:22,160

Total:1,265

Total:1,265

Total:21,306

Total:23,176

Total:16,787

-Total:

16,787- 1.55% 1.69% - - Yes


Yu Kuang Wang


StevenChiang

Note: No actural retirees in 2013; 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 6 6

NT$5,000,000 ~ NT$10,000,000 3,4,5,7 3,4,5,7

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

NT$15,000,000 ~ NT$30,000,000 1

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

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

Over NT$100,000,000

Number of Executives 7 7

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

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Annual Report2013

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:

19,785

Total:

19,7850.53%

Executive Consultant S.C. Lin

Vice President George Lien

Assistant Vice President Chin-Liang Yang

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 (%)

2013 212,720 5.66%

2012 174,630 5.89%

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.


Annual Report2013

3.3 Implementation of Corporate Governance3.3.1 Board of Directors

A total of 7 meetings of the board of directors were held in 2013, 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 7 0 100 %

Managing Director Theodore M.H. Huang 7 0 100 %

Managing Director Fred P.C. Huang 5 2 71 %

Managing Director John C.T. Huang 6 1 86 %

Managing & Independent Director Tian-Jy Chen 5 2 71 %

Independent Director Chin-Chien Chen 7 0 100 %

Independent Director Jing-Shown, Wu 4 0 100 % New elected (2013.6.21 Re-election)RequiredAttendanceTimes: 4

Director Hsien Sheng Kuo 5 2 71 %

Director Yaskawa Electric Corporation. Representative: Hiroyuki Ougi 3 4 43% 2013.6.18

Reassignment

Director Kuang Yuan Industrial Co., Ltd.Representative: Shih Chien Yang 7 0 100 %

Director Tung Kuang Investment Co., Ltd.Representative: Sophia Chiu 7 0 100 %

Director Lien Chang Electronic Co., Ltd. Representative: Chin San Chien 7 0 100%

Director Mao Yang Co., Ltd.Representative: Yong-Xiang Chang 7 0 100%

Director Tung Kuang Investment Co., Ltd.Representative: Hong-Xiang Lin 7 0 100%

Director Creative Sensor Co., Ltd.Representative: Yu-Ren Huang 7 0 100%

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

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Annual Report2013

2. The implemention of Directors’ avoidance of motions in conflict of interest:i. 23-6 Board Meeting: 2013.3.26

Director’s Name: Fred P.C. Huang (Managing Director).Contents of the case: Donation to “TECO Technology Foundation” for various events in 2013. Reason for avoidance of conflict of interest and the status of voting: Since the aforementioned managing director also serves as director, he left the meeting and abstained from taking part in the voting. Other directors passed the case without objection.

ii. 23-7 Board Meeting: 2013.4.15Director’s Name:Sophia Chiu (Director).Contents of the case: Share release in line with IPO plan of Asia Pacific Telecom Reason for avoidance of conflict of interest and the status of voting:Director Sophia Chiu abstained from discussion and voting for the motion, due to her capacity as chairperson of Asia Pacific Telecom. Other directors passed the case without any opposition.

iii. 23-8 Board Meeting:2013.5.10Director’s Name:C.K. Liu (Chairman), M.H. Huang (Managing Director), Sophia Chiu (Director), Hong-Xiang Lin(Director)Contents of the case: Discussion on loan extension between the company and affiliates Reason for avoidance of conflict of interest and the status of voting: C.K. Liu (Chairman), Theodore M.H. Huang (managing director), and Sophia Chiu (Director), director abstained from the discussion and voting of the motion, due to their capacities as chairman or director of Qingdao TECO Century Advanced High-tech Electromechanical Co., Ltd., so did Hong-Xiang Lin (director), due to his capacity as chairman of TECO Vietnam. Tian-Jy, Chen, independent director, served as the acting chairman for meeting. Except C.K. Liu (Chairman), M.H. Huang (Managing Director), Sophia Chiu (Director) and Hong-Xiang Lin (Director). Theodore M.H. Huang, Chiu Chun-chih, and Lin Hung Hsiang, other directors passed the case without any opposition, when responding to the inquiry of Chen Tien-chih in exercising his duty as the acting chairman of the meeting.

iv. 23-11 Board Meeting: 2013.11.14Director’s Name:Yu-Ren Huang(Director)Contents of the case:Acknowledgement of the plan to take part in the first capital increase by cash of Nano Bit Tech Co., Ltd. in 2013. Reason for avoidance of conflict of interest and the status of voting: Yu-Ren,Huang, director, abstained from discussion and voting for the motion, due to his capacity as the chairman of Nano Bit Tech. Except Huang, other directors passed the case without any opposition.Director’s Name:Sophia Chiu (Director)Contents of the case:Share release in line with the share-listing plan of Taiwan Pelican Express Co., Ltd. Reason for avoidance of conflict of interest and the status of voting: Sophia Chiu, director, abstained from discussion and voting for the motion, due to her capacity as the chairman of Taiwan Pelican Express Co., Ltd. Except Chiu, other directors passed the case without any opposition.Director’s Name:Hong-Xiang Lin(Director)Contents of the case:Divestment of the stake in Sichuan TECO Changhong. Reason for avoidance of conflict of interest and the status of voting: Hong-Xiang Lin, director, abstained from discussion and voting for the motion, due to his capacity as director of Sichuan Changhong TECO. Other directors passed the case without any opposition.

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 of 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 “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.


Annual Report2013

The Operation of Supervisors and the Board of Directors

The Company set up “Audit Committee” on June 15, 2012 to replace the original supervisor system.

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 of 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 9 meetings of the Audit Committee were held in 2013, and the Audit Committee attendance was as follows:

Title NameAttendance in Person

By ProxyAttendance

rate (%)Remarks

Convener & Chairman

Tian-Jy, Chen 9 0 100%

Member Jing-Shown, Wu 4 0 100 %New-elected(2013.6.21Re-elected)Required Attendance Times: 4

Member Chin-Chien, Chen 9 0 100 %

Other mentionable items:

1. Items specified in article 14-5 of Securities and Exchange Act 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 implementation of Independent Directors’ avoidance of motions in conflict of interest: None

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

Annual Report2013

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 shareholdersa. 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, and set up “Audit Committee”.

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 the percentage of attendance on person is about 90%.c. The company has taken out liabilities insurance for directors and supervisors. d. In 2013, the company’s directors undertook 48 hours of advanced study, and managerial staffers 33 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. 1. In 2013, the company won the award for corporate citizen granted by Commonwealth magazine, in acknowledgement of the company’s excellent performance in corporate governance, corporate commitment,

social participation, and environmental protection. 2. In 2013, the company was granted an A-rating by Securities and Futures Institute in its evaluation of the information disclosure of listed firms.


Annual Report2013

3.3.4 Compensations Committee

A.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 “√”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

B. There are three members of the Compensations CommitteeC. 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 proxyActual attendance rate

(%) (B/A) (note) Note

Chairman Hong Chang, Chang 2 0 100%Member Yong Ho, Chiu 2 0 100%Member Tian-Jy, Chen 2 0 100%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.

www.teco.com.tw 19

Annual Report2013

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 “ Corporate Social Responsibilty Best

Practice Principles for TWSE/GTSM-Listed Company”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, as spots for improvement, in this aspect when producing the CSR report in the following year. Meanwhile, the company reviews quarterly its performance in the cultivation of key talents, passage of experience, and development of green products.

b. The CSR commission pushes various functional committees to take charge of all CSR-related affairs, including promotion, coordination in the collection of related data, review, report compilation, and improvement.

c. The company organizes regularly education and training, as well as promotion to directors, supervisors and employees for corporate ethics.

No difference

B. Environment for sustainable development a. 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 air conditioners and home appliances with first-grade energy performance, and achieve energy conservation in production process via adoption of high-efficiency motor and energy-saving lighting. Recycle and melt scissels of silicon-steel plants for motor for casting of motor housings. Use environmental protection coolant, material and recyclable containers.

b. Set up Environment management system based on ISO 14001 and passed the certification.

c. The institution of specific safety and environment-protection unit and personnel. Take charge of the promotion and continuing improvement of environment-management system, so as to alleviate the impact of production and business activities on environment.

d. Regarding climate change, the company, adhering to the vision of “TECO GO ECO,” develops wind-power products and high energy-efficiency products, in order to make maximum contribution to the cause of energy conservation and carbon abatement.The company’s factories have incorporated energy conservation and carbon abatement in production process into their management programs. In addition, TECO carried out external checkup for greenhouse gases, in order to assure data accuracy for use as the foundation of the company’s energy conservation and carbon abatement program, which is included in the company’s annual CSR report.

No difference


Annual Report2013

Items Concrete measures

Difference with “ Corporate Social Responsibilty Best

Practice Principles for TWSE/GTSM-Listed Company”and

reasons C. Upholding of public benefits

a. 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. Establish a mechanism to communicate the company's employees regularly. And notify the staff in a reasonable manner that operations could have a significant impact on the change of circumstances.

d. 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;

e. Status of the company in cooperating with suppliers for jointly fulfilling corporate social responsibility;

f. 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. In accordance with labor laws and regulations, the company has employees undertake job-related safety and hygiene education, exercise for disaster prevention, and physical examination. Meanwhile, affairs related to the protection of equipment safety and personal safety are executed according to norms, with responsible managers supervising regular safety inspection, so as to assure the safety of employees in workplace;

c. The company has set up an “opinion mailbox” for employees to communicate directly with the management and obtain rapid services from the company. Labor-management meetings are held regularly, to facilitate communications between laborers and management and solve problems via negotiation.

d. 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;

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

f. 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. In 2013, the “TECO Sci-Tech Award” was granted to six recipients in five scientific, technological, and humanistic fields. The company organized 64 sessions for the experience of life, art, and innovation, attracting 2,872 teenagers, including 1,748 aboriginal students. These events particularly offer a stage for tribal students to accept cultural heritage, augment self

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. Publicize annual “Corporate Social Responsibility” report on the company’s website. Year 2012 version was certified by the third party.

No difference

E. Describe the operation of company’s guidelines for corporate social responsibility, should it exist, and its difference with “Corporate Social Responsibilty Best Prectice 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: The company’s 2012 CSR report was certified by BSI according to AA1000 guarantee criteria and GRI G3.1 guideline on global sustainability report.

www.teco.com.tw 21

Annual Report2013

3.3.6 Adherence to the Ethical Corporate Management and Measures

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

Items Status of operation

Difference with “Ethical Corporate Management Best Practice Principles for TWSE/GTSM-Listed

Companies A. Formulate policy and program for ethical corporate management

(1) The company explicitly stresses the policy of ethical corporate 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 unethical behaviors.

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

(1) Although the company has yet to formulate “guidelines for Ethical Corporate 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 managers, the gifts must be used for lot drawing at year-end party.

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

No major different up to now

B. Materialize ethical corporate management(1) The company should avoid business dealings with parties with

unethical behaviors on record and specify in business contracts articles of ethical corporate behaviors.

(2) Status of the operation of the company’s unit responsible for pushing ethical corporate 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 ethical corporate management and status of the operation of the company’s internal auditors.

(1) The legal division examines the contracts signed for external business activities, to avoid dealing with parties with unethical 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 ethical corporate 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 ethical corporate 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 ethical corporate 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 ethical corporate

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 ethical corporate 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 ethical corporate management according to “Ethical Corporate Management Best Practice Principles for TWSE/GTSM-Listed Company,” specify its execution and difference with the guidelines: Not formulated yet

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

3.3.7 Corporate Governance Guidelines and Regulations

The company has instituted “the related guildlines for corporate governance”. The docunment could be accessed “Corpoarte Goverance” on Market Observation Post System (http://mops.twse.com.tw) comforming to related regulations.


Annual Report2013

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

ChairmanTong Kuang Investment Co., Ltd Representative: C.K. Liu

2013.12.12 Chunghwa Corpporate Governance Association

Game for the transformation of Taiwanese enterprises 3 hrs

Managing Director Theodore M.H. Huang 2013.06.14 Chunghwa Corpporate Governance Association

Corporate governance and securities law/regulation 3 hrs

Managing Director Fred P.C. Huang 2013.12.12 Chunghwa Corpporate Governance Association


Managing Director John C.T. Huang 2013.12.12 Chunghwa Corpporate Governance Association


Managing & Independent Director Tian-Jy, Chen 2013.08.14 Chunghwa Corpporate

Governance AssociationGame for the transformation of Taiwanese enterprises 3 hrs

Independent Director Jing-Shown, Wu 2013.12.12 Chunghwa Corpporate Governance Association


Independent Director Chin-Chien, Chen2013.11.28 Financial Supervisory

CommisionThe ninth Taipei forum on corporate governance 3hrs



Director Hisen Sheng, Kuo 2013.08.06 Securities & Futures InstituteExplanation session on legal compliance for insider share trading in 2013

3hrs

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



DirectorTung Kuang Investment CO., Ltd. Representative: Sophia Chiu





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



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



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



DirectorCreative Sensor Inc. Representative: Yu-Ren, Huang

2013.6.19 Chunghwa Corpporate GovernanceAssociation


www.teco.com.tw 23

Annual Report2013

3. Advanced studies for managing staffers in 2013:Title Name Date Organizer Traning course Time

President Sophia Chiu

2013.03.08Chunghwa Corpporate

Governance Association

Corporate governance and

securities law/regulation3 hrs

2013.12.12Chunghwa Corpporate


Game for the transformation of

Taiwanese enterprises3 hrs

Vice President George Lien 2013.12.12Chunghwa Corpporate




Assistant Vice President Hong-Xiang, Lin 2013.12.12Chunghwa Corpporate




Assistant Vice President Chin-Liang Yang 2013.12.12Chunghwa Corpporate




Assistant Vice President Steven Chiang 2013.12.12Chunghwa Corpporate




Group Director Andy Liu 2013.12. 12-13 Securities & Futures InstituteCourses for continuing study of

accounting chiefs12 hrs

Group Director Kevin Yeh 2013.12.12Chunghwa Corpporate




3.3.9 Internal Control System

Please refer to page 37 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


Annual Report20133.3.11 Major Resolutions of Shareholders’ Meeting and Board Meetings

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.

2013/05/10 The board of directors approved the list of candidates for an independent director: Jing-Shown, Wu

2013/06/21

Shareholders’ meeting(1) Acknowledged 2012 business report and financial statement. (2) Acknowledged 2012earnings allocation, amounting to NT$1.0 per share for cash dividend payment.(3) Approved revision of “Procedures for Lending of Capital to Other Parties”(4) Approved revision of “Procedures for Endorsement and Guarantee”(5) Approved revision of “Procedure for Acquisition or Disposal of Assets”(6) By-election for a seat of Independent Director: Jing-Shown, Wu

2013/06/21The board of directors set the “ex-dividend base date” on July 24, 2013, paying out cash dividend of NT$1,866,650,016, or NT$1.0 per share, and setting the dividend payout date on August 9, 2013.

2013/08/14The board of directors acknowledged the financial statement for the first half of 2013, showing revenue of NT$28,288,402,000 and after-tax net profit of NT$1.01 per share.

2013/11/14The board of directors acknowledged the financial statement for the first nine months of 2013, showing revenue of NT$42,851,076,000 and after-tax net profit of NT$1.57 per share.

2014/02/21

TECO's Board of Directors approved an investment project in Mainland China.Company name of the investee:Jiangxi TECO Electric & Machinery Co., Ltd.Transaction volume, price per unit, and total monetary amount of the transaction: Not exceeding the amount of RMB equal to USD$ 40,000 thousand.

2014/03/24

(1)The board of directors resolved to convene 2014 shareholders’ meeting on June 23, 2014.(2) The Board of Directors resolved 2013 financial statements with operating revenue NT$56,618,537 thousand,

EPS 2.01, and plans to pay cash divident NT$ 1.1 per share, and the total amount was NT$ 2,202,962,000. The related financial reports material would be submitted to 2014 shareholders’ meeting.

(3) The board of directors changed the usage of proceeds of 1st Unsecured Corporate Bond in 2013. Before: Enriching Working CapitalAfter: Enriching Working Capital and Overseas Reinvestment

(4) Board of Directors approved the plan of subsidiary "Tong An Asset Development and Management Co., Ltd” to dispose the property in Wugu.

2014/04/24

Board of Directors resolved a disposal for subsidiary"Tong An Asset Development and Management Co., Ltd.Subject Matter: Land and building on Wugong section., Wugu Dist., New Taipei CityArea of Land:1,843 pingsArea of Building:6,426 pingsAmount: NT$1.23 Billion

NumberResolution of 2013 Shareholders’ Meeing

(June 21, 2013)Implementation

1Acknowledged of the 2012 Business Report and Financial Statements

※ The proposal was approved by the participating Shareholders with 77.73% approved percentage.

2Acknowledged of cash dividend payout of NT$1.0 per share for the distribution of 2012 profits.

1. The proposal was approved by the participating Shareholders with 77.73% approved percentage.

2. Ex-Dividend Trading Date: 2013/07/24. Cash Dividend Payout date: 2013/08/09.

3Approval of amendment to the Procedures for Lending of Capital to Other Parties


4Approva l o f amendment to the Procedures for Endorsement and Guarantee


5.Approval of amendment to the Procedure for Acquisition or Disposal of Assets


6 By-election for a seat of Independent Director※ Elected as independent director by winning 708,181,419

voting rights from shareholders.

www.teco.com.tw 25

Annual Report20133.3.12 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 Albert Hsueh Audrey Tseng 2013

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

Note: NT$2,520,000 of non-auditing public expense, including certification expense for auditing business income tax return and English-language translation fee for financial report and consolidated report.

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


Annual Report2013

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

2013 Apr. 30, 2014

Holding Increase

(Decrease)

Pledged Holding Increase

(Decrease)

Holding Increase

(Decrease)

Pledged Holding Increase

(Decrease)

Chairman Tong Ho Gloabal Investment Co., Ltd. Representative: C. K. Liu - - - -

Managing Director Theodore M. H. Hunag - - - -Managing Director Fred P. C. Huang - - - -Managing Director John C. T. Huang - 4,152,000 - (500,000)Managing &Independent Director Tian-Jy, Chen - - - -

Independent Director Chin-Chien, Chen - - - -Independent Director Jing-Shown, WuDirector Hisen Sheng, Kuo - - - -

Director Yaskawa Electric Corporation Representative: Hiroyuki Ougi - - - -

Director Kuang Yuan Industrial Co., Ltd. Representative: Shih-Chien, Yang - 2,091,000 - -

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

- (3,900,000) - -

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

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

- - - -

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

President Sophia Chiu - - - -Executive Consultant S. C. Lin 1,200,000 - -Vice President George Lien (620,000) - - -Management Hong-Xiang, Lin 600,000 - - -Management Yu Kuang Wang 320,000 - (70,000) -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.

www.teco.com.tw 27

Annual Report2013

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, 2014

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 53,563,101 2.67% 0 - 0 - None - -

WGI Emerging Markets Smaller Companies Fund, LLC

38,241,000 1.91% 0 0 None

Employee Provident Fund 36,819,039 1.84% 0 0 None

Government of Singapore 33,291,000 1.66% 0 0 None

Dimensional Emerging Markets Value Fund 32,704,725 1.63% 0 0 None

Stiching Depositary APG Emerging Markets Equity Pool

32,419,833 1.62% 0 0 None

Tong Kuang InvestmentCo., Ltd. 30,341,364 1.52% 0 0 None

Vanguard Emerging Market Index Fund 30,154,000 1.51% 0 0 None

Yaskawa Electric Corporation 29,541,089 1.47% 0 0 None

Dimensional Emerging Markets Value Fund 28,848,000 1.44% 0 0 None


Annual Report2013

3.9 Long-Term Investments Ownership Unit: As of December 31, 2014

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.107,203,907 100.00% 0 0.00% 107,203,907 100.00%

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

Tong An Investment Co., Ltd. 384,473,564 99.60% 1,544,068 0.40% 386,017,632 100.00%

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% 1,100,000 10.00% 14,213,235 76.85%

An Tai International Investment Co., Ltd. 16,500,000 100.00% 0 0.00% 16,500,000 100.00%

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% 1,000,000 15.87% 6,000,000 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. 24,121,700 25.27 9,843,800 10.31% 33,965,500 35.58%

iii. corporate governance report€¦ · 6 teco electric & machinery co., ltd. 2013 annual...

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