HTC 2008 Annual Report Download - page 36

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compliance, and internal auditing matters, among which is
included a joint assessment with the supervisors and CPA on the
principles and appropriateness of the various allowances and
reserves set out in the financial statement, in order to enhance
appropriate expression of those matters in HTC financial reports.
> HTC has also been endeavoring in recent years to enhance the
timeliness and transparency of its information disclosure. In
addition to making timely posts of important information on
financial and business matters on the Market Observation Post
System, HTC also provides early announcement (on 6th every
month) of its monthly revenues, and at the beginning of the month
following the end of each quarter, it announces its preliminary
revenue figures, while also convening online investor conferences
on a regular, quarterly basis to allow investors timely access to
information on company operations and performance in each
quarter. In December 2008 the HTC Investor Relations Website was
revised. A special corporate governance page was added along with
disclosures of financial information, in order to make disclosures of
information through the website more complete and allow investors
IV. CO RPO RATE GOVERN AN CE
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2OO 8 HTC AN N UAL REPO RT
Other matters to be included:
1. For the matters listed under Article 14-3 of the Securities and
Exchange Act and other matters on which independent directors have
expressed opposition or reservations for which there is a written
record or a written statement of a board of director's resolution, the
date, period, content of related proposals, and the opinions of all
independent directors and the company's response to the opinions
must be given.
There were no independent directors expressing opposition or
reservation with respect to any board of directors meeting during the
preceding fiscal year, and no written record or written statement of
related board resolutions.
2. For implementation of director recusal for proposals involving
personal interests, the name of the director, content of the proposal,
reason for the recusal, and participation in voting must be given.
>Director: Cher Wang, Wen-Chi Chen
Content of proposal: Discuss the planned capital increase of
US$5,040,996 at HTC Asia Pacific PTE. Ltd. to acquire HTC
Electronics (Shanghai) Co., Ltd., which is 100 percent owned by
HTC related party Landtek Corporation (BVI).
Reasons for recusal and voting participation: According to the
strict, substantive measures for determination adopted by HTC, the
sole director and shareholder of the counterparty, Landtek
Corporation (BVI), is a related person of Chairman Cher Wang and
Director Wen-Chi Chen. The two directors therefore voluntarily
recused themselves and did not attend this meeting of the board of
directors or participate in the deliberation and voting.
>Director: Cher Wang, Wen-Chi Chen
Content of proposal: Discuss proposed purchase of related party
Syuda Construction Company land.
Reasons for recusal and voting participation: The sole juristic-
person shareholder of the counterparty in this transaction, Syuda
Construction Company, is Hongmao Investment Corporation Ltd.,
whose Chairman, Cher Wang, is also the Chairman of HTC. Two
directors voluntarily recused themselves and did not participate in
the deliberation or voting on this proposal.
>Director: Cher Wang, Wen-Chi Chen
Content of proposal: Discuss payment of compensation for
relocation costs to related party Xander International Corporation.
Reasons for recusal and voting participation: As Director Wen-Chi
Chen is chairman of Xander, the party to receive compensation, two
directors voluntarily recused themselves and did not participate in
the deliberation or voting on this proposal.
>Director: HT Cho
Content of proposal: Discuss allocation of NT$20 million in special
funds for donation to the HTC Social Welfare and Charity
Foundation, to be used for for disaster relief in the earthquake
disaster region of Sichuan Province.
Reasons for recusal and voting participation: Director HT Cho, as
Chairman of the HTC Social Welfare and Charity Foundation, the
subject recipient of the donation under this proposal, voluntarily
recused himself and did not participate in deliberation or voting.
3. Assessment of goals for enhancing functions of the board during
current and preceding fiscal years (such as establishing an audit
committee and increasing transparency) and the status of
implementation.
>At the time of the end-of-term elections for directors and
supervisors in the 2007 fiscal year, the HTC voluntarily selected
two independent directors in accordance with the provisions of the
Securities and Exchange Act in order to create sound corporate
governance, strengthen the independence and functions of
directors, and enhance the operational effectiveness of the board of
directors. In 2008 the " Guidelines for the Corporate Governance"
were completed and adopted, guaranteeing that the board of
directors has the authority to independently supervise corporate
operations and to make all corporate decisions necessary to fulfill
its responsibilities to shareholders and to society.
>In accordance with provisions of the Compensation Committee
Articles of Incorporation drafted by the board of directors, i.e., that
the Compensation Committee shall be composed of three directors
with the chairman of the board as ex officio chairman and the
remaining two appointed by the board of directors, and that it shall
include at least one independent director, HTC also, in its board of
directors meeting of 22 June 2007, appointed director HT Cho and
independent director Chen-Kuo Lin to the Compensation
Committee, while Chairman Cher Wang was made its chairman.
The principal duties of the Compensation Committee include
assisting the board of directors in supervising the company's
compensation system and making appropriate recommendations to
the board.
>Currently, prior to the establishment of the audit committee, most of
its functions are performed by the supervisors meetings. That is, in
accordance with Article 14-5 of the Securities and Exchange Act,
matters intended to be handled by resolution of the audit committee
may first be passed with no opinion by the supervisors meeting
and submitted to the board of directors meeting for deliberation and
voting. In addition, regular supervisors meetings are convened on a
quarterly basis to hear reports on important financial, legal
to obtain important information on our corporate finances and
operations in a more timely manner and better understand the state
of corporate governance matters. HTC has maintained its "A" rating
in the Securities and Futures Institute's information evaluations in
three successive rating periods, and during the fifth evaluation, it
was also rated high in transparency among exchange or OTC listed
companies for its voluntarily disclosures of information.
Note 1: For juristic person directors and supervisors, the names of the juristic person's
shareholders and its representatives shall be disclosed.
Note 2: When a director or supervisor leaves his post prior to the closing date of the fiscal
year, the date shall be noted in the "notes" column and their attendance rate (as a
percentage) calculated based on the ratio of the number of directors meetings
during their term to the actual number of meetings at which they attended or
observed.
If an election for directors or supervisors is held prior to the closing date of the
fiscal year, the old and new directors and supervisors shall be listed, and a
designation placed in the "notes" column beside each indicating the date of the
election and whether each is new, old, or serving successive terms. Their
attendance rates (as a percentages) shall be calculated based on the ratio of the
number of directors meetings during their term to the actual number of meetings at
which they attended or observed.
(2) Supervisor participation in board of directors meetings
>The Board of Directors conducted Eight Meetings in 2008. The Supervisors' attendance status is as follow:
Title Name Addendance in Person (B) Attendance Rate in Person (%) [B/A] (Note ) Notes
Supervisor Wei-Chi Investment Co., Ltd. 5 62.50%
Representative: Shao-Lun Lee
Supervisor Po-Cheng Ko 7 87.50%
Supervisor Caleb Ou-Yang 0 0.00%
Other matters to be included:
1. Identity and Responsibilities of Supervisors:
HTC currently has two independent directors and is not yet able to
establish an audit committee. Currently, therefore, the only choice has
been to establish supervisors and use supervisor's meetings to carry
out most functions in place of an audit committee.
>Supervisor communication with employees or shareholders (e.g.,
Channels and methods of communication)
Supervisors can make use of channels such as supervisors
meetings, board of directors meetings, shareholders meetings, and
internal audit reports to communicate with management-level
officers and with shareholders.
>Supervisor communication with chief internal auditors and CPAs
(e.g., financial and operational matters on which they communicate,
their methods, and results)
HTC supervisors can communicate through their regular quarterly
supervisor meetings with HTC's financial, legal, and internal
auditing officers, who report to the supervisors on such issues as
risk management, assessment of risk of major litigious actions, and
internal auditing reports, so that the supervisors are familiar with
the company's assessment and management of risk.
Based on HTC's principle of sound, conservative accounting, its
supervisors and CPAs regularly undertake joint reviews of major
account titles in its quarterly financial statements, examining basic
assumptions underlying the allocation of allowances and reserves
under those titles and assessing the reasonableness and accuracy
of book value estimates in order to ensure that the statements fairly
and reasonably present allowances and reserves. Adjustments to
accounting estimates during the 2008 fiscal year included setting
the reserve rate of allowance for doubtful accounts at 1.81 percent
of accounts receivable, a slight increase from the previous fiscal
year. In allowances for reduction of inventory to market, because
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