Basis for the establishment of the board of directors:
In order to establish a good board of directors governance system, improve supervision functions and strengthen management functions, the company has formulated the rules of procedure for board of directors in accordance with Article 26-3, Paragraph 8 of the Securities and Exchange Act (hereinafter referred to as the Securities and Exchange Act).

Board Diversity Policy

Article 20 of the Company's "Corporate Governance Code of Practice" (Competencies that the Board of Directors as a whole should possess) clearly stipulates that the composition of the Board of Directors should consider diversity. In addition, directors who are also managers of the company should not exceed one-third of the number of directors. , operation type and development needs to formulate appropriate diversification policies.

Currently, there are 12 directors among the current members of the 11th term of the board of directors (4 employees with employee status, accounting for 33.33%; 4 independent directors, accounting for 33.33% (none of whom have served for more than three terms); 2 directors are male between 30 and 50 years old) Persons and directors: 0 women aged 30 to 50 years old, 9 men over 51 years old, 1 women over 51 years old; female directors account for 8.33%), directors are based on their professional background (such as law, accounting, industry, finance, marketing or technology), and provide relevant opinions needed for the company's operations with its overall capabilities such as operational judgment, accounting and financial analysis capabilities, business management capabilities, crisis management capabilities, industry knowledge , international market outlook, leadership capabilities, and decision-making capabilities. In addition, the company also pays attention to gender equality in the composition of the board of directors. The target for female directors is to have more than 1/3 (inclusive) of the seats on the board of directors. It is expected that the number of female directors will be gradually increased in the 12th term to achieve the goal.

The professional background and overall ability of board members are evaluated as follows:

 

Board and functional committee performance self-evaluation

The company's board of directors adopted the "Board of Directors Performance Evaluation Measures" on December 27, 2018, The Board of Directors also performs at least one performance evaluation on the Board of Directors, individual board members, Audit Committee and Remuneration Committee before the end of each fiscal year according to the “Regulations Governing the Board Performance Evaluation.” The results of the internal performance evaluation in 2023 indicated excellent performance. In addition, we engage a professional third party to conduct an external evaluation of the Company every three years. In November 2022, we commissioned the Taiwan Corporate Governance Association to conduct an evaluation, and the evaluation report was issued in December of the same year.

The measurement items of the company's board of directors' performance evaluation include the following five aspects:
1. Degree of participation in company operations.
2. Improve the decision-making quality of the board of directors.
3. Board composition and structure.
4. Selection and continuing education of directors.
5. Internal control.

The measurement items for director members’ self-performance evaluation should include at least the following six aspects:
1. Mastery of company goals and tasks.
2. Cognition of directors’ responsibilities.
3. Degree of participation in company operations.
4. Internal relationship management and communication.
5. Professional and continuing education of directors.
6. Internal control.

The measurement items for functional committee performance evaluation should include at least the following five aspects:
1. Degree of participation in company operations.
2. Cognition of functional committee responsibilities.
3. Improve the decision-making quality of functional committees.
4. Composition and selection of members of functional committees.
5. Internal control.

The administration unit shall conduct the board’s internal evaluation, collect relevant information about the board of directors, individual directors and functional committees by December 31 of every year, and distribute following surveys:

1. “Self-assessment for the board’s (including functional committee) performance”: Individual director’s evaluation on the board of directors’ performance as a whole (including functional committee)

2. “Self-assessment on individual board member’s performance:” Self-evaluation on each individual director’s performance.

 

When administration unit calculates the evaluation results, it shall count the self-assessment score for the board of directors (including functional committee) and board members separately. The self-assessment score is the average of sum of scores from all items, and the average score represents evaluation results as follows:

1. For average score equal or above 4, the evaluation result is “Excellent.”

2. For average score less than 4 but above 3, the evaluation result is “Good.”

3. For average score less than 3, the evaluation result is “To be improved.”

The performance evaluations on the board as a whole, individual directors, audit committee and remuneration committee were completed on December 31, 2023, and the average score for the year 2023 were 4.64, 4.82, 4.84 and 4.64, all representing excellent performance. The result was reported in the board of directors’ meeting on February 16, 2024 and it concluded a review and corrective measure as follows: Directors of TPEx-Listed companies were required to take three hours of course in the year they took office. To cope with planning for Corporate Governance 3.0 Blueprint, taking three hours of course has become mandatory since 2023. The Company arranges training courses held by Senao International, competent authority and the parent company Chunghwa Telecom in order to offer diverse courses for all directors every year.

External performance evaluation of the Board of Directors

The Company’s Regulations Governing the Board Performance Evaluation was established and passed by the board of directors’ meeting on December 27, 2019, stipulating that External professional independent institutions or external expert and scholar teams evaluate the performance at least every three years. Results of external performance evaluation of the Board of Directors shall be completed before the end of Q1 of the next year.

The external evaluation institution or external expert and scholar team appointed for performance evaluation of the board of directors shall meet the regulations below:

1.  The external evaluation institution or external expert and scholar team appointed for shall be professional and independent.

2.  The external evaluation institution is primarily the relevant institution or management consultant company holding the education training course and providing the enterprise corporate governance service.

3.  In the external expert and scholar teams, at least three experts or scholars in the Board of Directors or in the corporate governance field shall be assigned to evaluate performance evaluation of the Board of Directors and write the external evaluation analysis report.

In October 2022, the Company entrusted the external institution “Taiwan Association of Board Governance” to appoint three independent experts who has no business relation with the Company and signed declaration of independence and declaration of data protection and liability to conduct evaluation). The experts are Chou Chih Pang, President of Taiwan Association of Board Governance, Wang Tai Chang, Director of Independent Director Association Taiwan, and Chang Chu Hsuan, Associate Professor of the Department and Graduate Institute of Finance, National Taipei University of Business.

The overall evaluation of the board performance by external entities, the suggestions, and the improvements made by the Company are as follows:

一、General evaluation results:：

1. The board members are from diverse backgrounds in terms of gender and professionalism; there are two female directors on the board, and five independent directors are specialized in finance, information, and communications, respectively.
2. Six board meetings were convened in 2022, with only one of the thirteen directors absent once, showing that all members fulfilled their duties as required.
3. The board leads by example. In addition to conducting self-evaluation per year, it appoints an external independent agency to evaluate the board performance, demonstrating the board’s self-discipline and fulfilling its responsibility.
4. Chunghwa Telecom have control over more than half of Senao International’s board directorships. However, the board members, either from Chunghwa Telecom or Senao International, believe that the transaction terms between the two companies are in alignment with the principle of fairness.
5. During the management process by the board, managers, and other employees, the Company’s internal control system can ensure operational efficiency, as well as the reliability, timeliness, and transparency of reporting.
6. The Company established the Senao Technical and Cultural Foundation in 1997, which has hosted many social charity events, and the Company has recently won numerous awards and been recognized by the public in the ESG field.

二、Suggestion and the improvement made by the Company：

1.  Suggestion: Regularly submit the issues reported by the shareholder and stakeholder to the Board of Directors. Provide the email on the company website for independent directors to send and receive the issues synchronously for whistleblowing. Improvement plan: Irregularly submit the issues reported by the shareholder and stakeholder to the Board of Directors. The company stakeholder’s email is set to forward the email to the independent director’s email synchronously for shareholder and stakeholder to report issue.

2. Suggestion: over half of the directors are from Chunghwa Telecom, hence it is suggested that the Board of Directors must protect the rights and interests of company’s shareholders and employees while the Board of Directors makes various resolutions in the future.

3. Suggestion: It is suggested that the Company may consider to establish the Information Security Management Committee, disclose the convener, member and operating method of the Committee and consider to enroll in information security protection insurance. Additional description: the Company reports the information security situation to the Audit Committee and the Board of Directors regularly. The benefit will be evaluated for the Information Security Committee and information security protection insurance.

Succession plan and its operation of the board members

(1) Our “Articles of Incorporation” explicitly specified that all candidates are nominated for election of the directors. “Corporate Governance Best-Practice Principles” and “Procedures for Election of Directors” explicitly stated that composition of the Board of Directors shall put diversity into consideration. The diversity approach is set up according to our operation, operational status and development need, including but not limited to standards in two aspects, basic condition and value, and professional knowledge and skill.

(2) As for the director succeeding plan that the Company continues to carry out, the director candidate database is built according to the standard below:

• Integrity, responsible, innovative and decision-making ability. Meet our core values. Have the professional knowledge and skill helpful for our operating management.
• Have the industrial experience associated with our business
• Expect that this member can help us continue to provide an effective, synergic and diverse Board of Directors that meet the Company’s requirements Expect to have at least one female director. For evaluation of competency of the overall Board of Directors, ability to conduct crisis management, international market perspective, ability to lead and ability to make policy decisions are required.

The election of director candidate of our Company must meet qualification examination and relevant regulations to ensure that if there’s vacancy or the Company plans to add more seats, the Company can identify and select appropriate new directors.

(3) Meanwhile, the Company explicitly formulates the “Regulations Governing the Board Performance Evaluation.” Through the performance evaluation items, the Regulations cover participation in company operation, enhancement of decision-making quality of the Board of Directors, composition and structure of Board of Directors, selection and continuing education of directors, and internal control, to ensure effective operation of the Board of Directors and evaluate performance of director as reference for direction selection.