Chapter 1  General Provisions

Article 1  The system is established to defend company interests, prevent fraudulent behaviors, to standardize the management of reporting, and to lower the risks of company operations.

Chapter 2  Definition of Frauds

Article 2  The term of fraud defined in this system refers to behaviors in seek of illegitimate individual benefits through deception or other law/regulation breaking means carried out by persons internal or external to the company, including but not limited to the followings:

  (i) the illegal use, defalcation, embezzlement, stealing, misappropriation, or illegal trading of company assets

  (ii) abuse of authority by management personnel to carry out illegal economic activities

  (iii) falsifying, padding, concealing or deleting/altering accounting records, information documents, business transactions, etc.

  (iv) leaking the company’s confidential business information, violating noncompetition agreements

  (v) falsifying, unauthorized using, or stealing of the company seal

  (vi) other behaviors relating to commercial bribery, such as bribing, or receiving a bribe

  (vii) other behaviors detrimental to company’s economic interest or in seek of illegitimate individual benefits.

Chapter 3  Rights and Obligations Related to the Informant

Article 3  The informant should obey the followings:

  (i) abide by the law and related regulations of the company

  (ii) state the name of the violator, specific details of the violation with relevant proof, and be responsible for its authenticity

  (iii) not to perpetrate law/regulation breaking activities under the guise of reporting

  (iv) report through channels specified by the company, including the publicized telephone hotlines, emails, websites, etc.

  (v) when the informant’s cooperation is needed for performing investigation, informant should cooperate and not to provide false information.

Article 4  the person receiving and processing the reporting should obey the following working principles:

  (i) a reporting received face to face should be processed in a confidential location by designated personnel; unrelated personnel should not be present, nor should anyone inquire or record the conversation

  (ii) the receiving, reading, registering and keeping of the reporting letter, and the reception and recording of telephone reporting should be in strict accordance with confidential principle

  (iii) the informant’s identity should be kept confidential; under no circumstance should the reporting material be presented to, the reporting process be told to, or the content of the reporting be discussed with the violator or unrelated personnel

  (iv) unauthorized transcription, copying, detaining, concealing or destroying of the reporting material is strictly prohibited

  (v) creating difficulties for or threatening the informant is strictly prohibited

  (vi) reportings are specifically processed and managed by designated personnel

  (vii) for personnel violating the above regulations, the company will investigate relevant liabilities; cases involving suspected crimes will be transferred to judicial authorities.

Article 5  After completion of investigation, investigators should feedback related information to the informant by proper means depending on the channel of reporting.

Article 6  Investigation and processing of the reporting should not be interfered by any other unit, department or individual within the company

Chapter 4  Handling of Fraud Cases

Article 7  Auditing and Legal Affairs Centre is responsible for organizing the anti fraud work within the company, including fraud risk evaluation activities, establishing/maintaining/publicizing fraud reporting channels/procedures, receiving and investigating fraud cases, issuing fraud evaluation, providing handling opinions, etc.

Article 8  Investigator should promptly analyze the fraud case received along with related clues. If preliminary results indicate the case to be truthful, investigation protocols should be made and processed according to the following principles:

  (i) in normal situations, for fraud cases involving general staffs, after primary assessment, the general manager or person in charge of the related business module should be notified while further investigation/processing is initiated

  (ii) after primary assessment, major fraud cases involving midlevel management (including management of owned subsidiaries) or senior management are submitted to the board for further decisions

  (iii) complaints and reports involving the fraud-case-handling personnel are submitted to company management for further processing

  (iv) under specific circumstances, with the approval/instruction of related management, the investigator is authorized to investigate independently

  (v) disciplinary violations by other personnel are processed as per related handling procedures of the company

Article 9  Under approval of management, Auditing and Legal Affairs Centre may exercise its discretion regarding the establishment of investigation team, scope of investigation, coverage period, investigation method, etc. Active cooperation is required for other departments/individuals when necessary; unauthorized interference is prohibited.

Article 10  Based on the needs of investigation, investigator is entitled to require documents/information from the department/personnel under investigation, including accounting documents, financial statements, etc. Explanation may be needed from related personnel regarding case-related issues; cooperation is required.

Article 11  For employees perpetrating the fraud behavior, based on investigation results and handling proposal, the investigator should transfer the case to related department for handling; cases violating criminal laws are transferred to judicial authorities.

Article 12  In the case where a fraud reporting is clarified not to be truthful due to the informant’s incomprehensive knowledge of the fact, then the case is not regarded as malicious accusation or defamation; related liabilities will not be investigated.

Article 13  If a reporting is confirmed to be malicious accusation or defamation, handling proposal will be submitted to the company depending on the severity of influence made to the related person or the company; measures will be take accordingly.

Article 14  After completion of investigation, investigation results, handling opinions, remedial measures, internal control evaluation reports, etc. should be issued by the investigators and reported to company management and the board, with the case report materials promptly archived.

Chapter 5  Informant Protection and Rewarding Measures

Article 15  Anyone should not retaliate the informant under any excuse.

Article 16  For any retaliation to the informant, including conniving, shielding, buying out or inciting others to encroach on the personal rights, property rights, etc. of the informant or his relatives, the company will investigate liabilities of the retaliator; cases violating criminal laws will be transferred to judicial authorities. The informant is entitled to require the retaliator to cease such encroachment, to apologize and compensate for related loss; prosecution could also be made directly to the court.

Article 17  If retaliated, the informant is entitled to report the issue to related departments or his superior. When the informant’s personal safety is threatened, protective measures should be taken promptly by related departments and in cooperation with related external institutes if necessary.

Article 18  If the informant received unfair treatment due to his reporting, after confirmation, the Auditing and Legal Affairs Centre should order the related unit or its superior units to correct the situation.

Article 19  If the reporting proves to be truthful and has recovered loss for the company, the informant could be rewarded as appropriate according to the following terms:

  (i) the object of the reward is limited to the informant by principle; for anonymous reporting, when the informant could be identified, he is also rewarded

  (ii) when the same clue is reported by two or more informants, the first informant is rewarded; when a combined reporting is performed by two or more informants, reward is granted as one case.

  (iii) amount of the bonus is proposed by the investigator after the case is closed, and granted under approval of company management.

  (iv) informant should fetch the bonus within one month after being notified of the reward; exceeding the time limit will be regarded as giving up the reward.

  (v) for personnel violating terms of this system, leaking informant’s information, or those attempting to gain the bonus through deception, the company will investigate related liabilities; cases violating criminal laws are transferred to judicial authorities.

Article 20  when propagating or rewarding the informant for his reporting, unless under consent of the informant, his name, telephone number or any other information should not be publicized.

Chapter 6  Supervision of the Anti-fraud Work

Article 21  The board of directors is responsible for supervision and instruction of anti-fraud work of the company. Auditing and Legal Affairs Centre reports periodically to the board regarding anti-fraud work plans, its implementation, receiving of fraud reporting cases, investigation results and handling proposals, receives related opinions and instructions and keeps related paper records.

Article 22  When making annual audit plans, Auditing and Legal Affairs Centre should adequately consider the identification and evaluation of fraud risk factors, and should give instructions regarding anti-fraud work implementation within the company.

Chapter 7  Prevention of Frauds

Article 23  Each level of company management should, within its respective range of function, propagate the company culture of “friendship, responsibility, diligence and efficiency”, advocate a team atmosphere of “fairness, equity and transparency”, maintain a benign internal control environment and perfect the internal control system, including but not limited to taking practical actions to abide by company regulations, organizing risk evaluation, internal control activities and anti-fraud activities, encouraging employees to obey the law and to undertake moral and honest behaviors, establishing and implementing rewarding/punishment measures, etc.

Article 24  In high risk areas and critical working positions, related person in charge should undertake control measures such as separation of incompatible duties, along with related control measures such as signing self-discipline commitment letters, establishing registering and handover systems, etc. Anti-fraud training and honesty/morality education should be performed on employees, with fraud risk control regarded as an essential component of their work duties.

Article 25  Personnel specifically responsible for the anti-fraud work should consciously improve their anti-fraud awareness and technical ability, actively acquiring knowledge of the development and plans of company’s production/business activities, and should also establish relationship with related external institutes with regular communications made.

Chapter 8  Supplementary Provisions

Article 26  This system comes into effect since 1 November 2018.