CHENG LOONG

CLC takes "the sincerity and trustworthiness" as the operating philosophy and emphasizes stable operation and law-abiding governance. The Board of Directors is the highest governing unit of the Company. It is mainly in charge of supervising the management team for the operation and management of the Company. In addition to the complete organizational structure and compliance with the laws and regulations relevant to the business operation, we establish the Compensation Committee, Audit Committee, and Auditing Division under the Board of Directors to enhance the supervision and control functions. CLC improves the transparency of the management and protect the rights and interests of the employees and shareholders by upholding the implementation of a fair, just and open management system.

To implement the corporate governance and upgrade the function of the Board of Directors, we establish performance goals to enhance the efficiency of the Board of Directors. We revised the "Cheng Loong Corp. Regulations on Performance Evaluation of the Board of Directors" on December 24, 2020. The performance evaluation of the CLC Board of Directors shall be implemented every year. External performance evaluation shall be implemented by a third-party professional institution or a team formed by external experts and scholars at least once every 3 years. The evaluation results serve as a reference for selecting or nominating directors.

Internal Evaluation: Since 2021, CLC has conducted annual board performance evaluations. We have conducted the 2020~2023 performance evaluation, which scope includes the overall board, individual directors, the audit committee, and the remuneration committee, with results reported to the board as required. The 2023 performance internal evaluation was reported the improvement plan to BoD on March 12, 2024 and were disclosed on the corporate website.

External Evaluation: We outsourced "Taiwan Institute of Ethical Business" to conduct the 2022 performance evaluation of the BoD. The scope of assessment covers the whole board of directors, the Audit Committee, and the Compensation Committee. The assessment results of External Evaluation were disclosed on the board meeting on December 22, 2022 and reported the improvement plan to BoD on March 14, 2023 , and were disclosed on the corporate website.

The composition of the company's Board of Directors shall be based on diversification, and an appropriate diversification policy shall be developed in terms of its own operations, types of operations, and development needs, which shall include, but not limited to, the following two major dimensions:
 
(1) Basic conditions and values: gender, age, nationality, and culture.
(2) Professional knowledge and skills: professional backgrounds (such as law, accounting, industry, finance, marketing, or technology), professional skills, and industrial experience. Board members shall generally have the knowledge, skills and competence necessary to perform their duties. To achieve the ideal goal of corporate governance, the Board shall have the following overall capabilities:
(a) operational judgment
(b) accounting and financial analysis capabilities
(c) management capabilities
(d) crisis management capabilities
(e) industry knowledge
(f) international market vision 
(g) leadership
(h) decision-making ability.

2. Implementation situation:

The company held an election for the 18^th Board of Directors on June 10, 2022. The Board of Directors consists of 9 Directors, including 1 female Director (accounting for 11%), 2 Directors with a professional background in finance and accounting (accounting for 22%), 6 Directors with practical management experience in the paper industry (accounting for 67%), 3 directors have an employee status (accounting for 56%), and 3 are Independent Directors (accounting for 33%).

Among the Independent Directors, one has a tenure of 1 to 3 years, the other has a tenure of 7 to 9 years, and another has a tenure of more than 9 years. 2 of the Directors are under 49 years old, and 7 Directors are over 50 years old. Please refer to (Note1) for the professional backgrounds and capabilities of the Board members as a whole.

The company passed a resolution by the Board of Directors on June 24, 2022, designating Kun-Ming Yang, Associate Vice President, as the Corporate Governance Officer to protect shareholders' rights and strengthen the functions of the Board of Directors. Associate Vice President Kun-Ming Yang has more than three years of experience at an management position in public offering companies in financial and equity affairs. According to the Operation Directions for Compliance with the Establishment of Board of Directors by TWSE Listed Companies and the Board’s Exercise of Powers, the main duties of a corporate governance supervisor are to handle relevant matters of the Board of Directors and shareholders' meetings in accordance with the laws, prepare the minutes of the Board of Directors and shareholders' meetings, assist Directors (including Independent Directors) in their appointments and further training, provide information required by Directors (including Independent Directors) to perform business, and assist Directors (including Independent Directors) to comply with laws and regulations.
 

(1) The Board of Directors shall be notified in a timely manner of the revision and development of the latest laws and regulations related to the company's business field and corporate governance.
(2) Review and provide relevant company information required by Directors to maintain smooth communication and exchanges between Directors and supervisors of
each business unit.
(3) Assist with arrangement of relevant meetings, when the Independent Directors need to meet with the internal audit supervisor or CPAs individually to understand the
company's financial business in accordance with the Corporate Governance Best Practice Principles.
(4) Assist the Independent Directors and Directors in formulating annual training plans and arranging courses in accordance with the company's industrial characteristics and Director's academic
 

(1) Ensure that the convening of shareholders' meetings and board meetings complies with relevant laws and corporate governance codes.
(2) Assist and remind directors to comply with regulations when conducting business or making formal board resolutions, and provide advice when the board is about to pass an illegal resolution.
(3) Supervise the release of major information regarding key board resolutions to ensure the legality and accuracy of such information, thereby protecting the equality of information for investors in their transactions.
 

I. In 2022, the company's Board of Directors approved an amendment to the "Insider Trading Prevention Management Guidelines," adding Article 3-1: From the date when insiders become aware of the company's financial reports or related performance information, including (but not limited to) directors, they are prohibited from trading the company’s stock during the blackout period, which is thirty days before the annual financial report announcement and fifteen days before each quarterly financial report announcement.

II. The implementation status for 2023 is as follows: In addition to notifying all directors thirty/fifteen days before the financial report announcement, internal operations also simultaneously notified senior management, clearly indicating the blackout period during which stock trading is prohibited. This measure aims to prevent directors and senior management from unintentionally violating this regulation.