All BOD members are elected by all shareholders through voting. Based on the operational model, and development and practical needs, the Company selects the candidates for directorship based on their professional backgrounds, education (experience), integrity, profession or relevant professional qualifications, and experiences. The diversity in their backgrounds and viewpoints are also taken into consideration, including gender, age, nationality and culture. The BOD selects qualified candidates with extensive industrial experience to improve the Company’s overall professional knowledge and skills, so as to achieve the ideal goal of corporate governance. As such, the directors and managers are also arranged to take part in courses related to economy, society, and environment.

Based on the policy of diversification and strengthening of corporate governance in order to promote the sound development of the Company’s board composition and structure, the nomination of candidates for directors of the Company shall be adopted the candidate nomination system in accordance with the provisions of the Company's Articles of Incorporation. Each candidate’s academic qualifications, work experience, professional background, integrity or relevant professional qualifications, and others are evaluated and considered. After the Board of Directors passed the resolution, the proposed nominees will be submitted to the Shareholders Meeting for election. With regard to the board composition, it is advisable that the number of the directors who concurrently serve as the managers of the Company should not exceed one-third of the board seats. In addition, the Company has, based on its own operations, operational patterns and developmental needs, formulated appropriate diversification policies including but not limited to the following:

1. Basic conditions and value: gender, age, nationality and culture.
2. Professional knowledge and skills: operational judgment capability, accounting and financial analysis capability, business management capability, risk management capability, industry knowledge, international market outlook, leadership capability, and decision-making capability.

The board of directors is composed of 9 directors, all of whom have diverse backgrounds, different professional abilities and practical experience. They provide professional advice for different aspects of the company. The functions of the company’s board of directors are strengthened by the ability of directors’ abundant business management, leadership decision-making, industry knowledge and risk management.

According to Articles of incorporation, the Board of Directors of the Company consisting of five to thirteen directors who will be elected by the shareholders meeting from the director candidate list via the candidate nomination system. Each director will serve an office term of three years and may be re-elected.

The 9th term of directors (including independent directors), the term of office is from May 30, 2023 to May 29, 2026.

Succession planning and operations of board members

1. The nomination of director candidates of the company is based on the candidate nomination system in accordance with the provisions of the company's policy, and each term is three years.
2. According to the company's "Code of Corporate Governance Practice" and "Procedures for Election of Directors", it is stipulated that the composition of the board of directors should be diversified, and formulate a diversity policy based on the company's operation, business types and development needs.
3. Board succession plan:
   1. The professional abilities of the board members include business management, industry management, risk management, investment, finance, etc.
   2. The appointment of female directors
   3. Hold the same ethical values with the company’s business philosophy
   4. Plan director training courses (12 hours for first-time directors and 6 hours for renewed directors), and use diversified courses to help all directors enrich their knowledge and deepen the role, functions, responsibilities and obligations of the board of directors, thereby optimizing the board of directors and achieving the corporate sustainable development.
   5. The annual "Board of Directors Performance Evaluation Results" is used to confirm the effective operation of the Board of Directors and serve as a reference for selecting directors in the future.
4. PSMC use this operating cycle as the implementation of the corporate governance system and board succession plan. Board of Directors must have integrity, responsibility, innovation and decision-making ability, and have professional knowledge and skills that are consistent with the company's core values and contribute to the company's operation and management.

1. The company's human resources unit coordinates the establishment of a career development and succession mechanism for managers at all levels. Each key position will submit 2 to 3 succession candidates during the annual performance appraisal, and the succession timetable will be estimated based on their abilities and characteristics. We also plan training courses that each succession candidate should focus on, and provide intensive training and development, including international market outlook, decision-making ability, risk management and control, and job rotation, etc. Starting from the year following the nomination, each succession candidate will be reviewed to see how their development fits the mission goals of the company and unit, and will strengthen their superior capabilities to complete the succession process.
2. Senior Executives Strategy Workshop: It is expected to be held twice a year to discuss the company's product research and development direction, grasp industry business opportunities, and discuss operating strategies based on future global industry development trends. Workshop topics include innovative thinking, strategic planning, high-performance leadership, risk management, sustainable business management, etc.
3. Mid-level Supervisor Management Training: PSMC plan to conduct two levels of mid-level supervisor management ability training every year. In addition to internal senior managers sharing operational experience to drive corporate culture, we also invite external lecturers from academia and industry to deliver new technological knowledge, legal regulations, and information security management, intellectual property protection, sustainability concepts, etc., to enhance operational management capabilities.

• After submitting the audit report and follow-up report for approval, the audit supervisor of the Company will deliver the audit report and follow-up report to each independent director before the end of the next month when the audit item is completed, and report it at the Audit Committee meeting. Both parties communicate smoothly. The Company's audit supervisor also maintains a smooth communication channel with the certified public accountants, and has sent one copy each of the audit plan for the next year, the implementation status of the annual audit plan for the previous year, as well as the improvement status of the annual internal control deficiencies and abnormalities to the certified public accountants for the record and reference in accordance with the regulations of the competent authority after completing the filing operations.
• The Company invites its independent auditors to attend the Audit Committee meeting to report and communicate with independent directors on the quarterly and annual financial statement review or audit results, key audit matters, amendments to IFRSs or the impact of the release of other laws on the Company.

On April 9, 2021, the Company’s Board of Directors appointed Ms. HSU, MEI SHAN - the assistant vice president of the Financial Division - as the corporate governance supervisor , and set up a corporate governance promotion unit to safeguard shareholders’ rights and interests; as well as to strengthen the functions of the Board of Directors, including handling matters related to the Shareholders Meeting, Board of Directors, Audit Committee and Remuneration Committee in accordance with the law; assisting directors in their taking office and continuing further education; providing directors with information needed to perform their duty; and assisting directors in complying with laws, as well as Articles and regulations of the Company.

The continuing education courses attended in 2021 & 2022 of the corporate governance supervisor.

In order to implement the prohibition of insider trading, the company formulated the "Management Measures for Preventing Insider Trading" and revised Article 10 of the "Corporate Governance Code of Practice" through a resolution of the board of directors on February 8, 2011, requiring insiders to be informed of the company's financial reports or relevant stock trading control measures from the date of the performance content include (but are not limited to) that directors are not allowed to trade their stocks during the closed period of 30 days before the announcement of the annual financial report and 15 days before the announcement of the quarterly financial report.

The implementation of the company's publicity is as follows:

1. For board directors, a publicity manual for the prevention of insider trading and the code of practice for corporate governance shall be provided when being on board.
2. For all employees, to strengthen the concept of insider trading and awareness of legal compliance, the company regularly organizes education and training courses on the prevention of insider trading-related laws and regulations every year, and implements online tests. In 2023, 7,570 employees participated in the training. The complete rate reached 100%.
3. During the closed period before the quarterly or annual financial report announcement, the company will send letters to remind insiders of the provisions of Article 10 of the "Corporate Governance Practice Code" to prevent insiders from accidentally violate the regulations. The above-mentioned control measures have been effectively implemented in 2023.

The Auditing Office of PSMC is an independent unit directly under the Board of Directors and is allocated adequate qualified persons as full-time internal auditors. Chief Internal Auditor reports the audit operations to the Audit Committee and the Board of Directors on a regular basis and attends the Board of Directors meetings, and reports to the chairman and each independent director on as needed basis. The appointment, dismissal, evaluation, and salary and compensation of internal auditors shall be all handled in accordance with PSMC’s human resources operation regulations, in addition, the appointment or dismissal of Chief Internal Auditor shall be approved by the Audit Committee and submitted to the Board of Directors for a resolution.

The Auditing Office shall formulate annual audit plans based on the results of the risk assessment, to conduct the audit items monthly in accordance with the annual audit plan approved by the Audit Committee and submitted to the Board of Directors, also to conduct special audits as needed, in order to discover any defects and irregularities of internal control systems and propose recommendations for improvement, and to prepare audit reports with the corrective measures of the audited departments. After having presented the reports, follow up on the matters and prepare follow-up reports on a quarterly basis until such time as correction is made, to ensure that the relevant departments have taken appropriate corrective measures in a timely manner. After having presented the reports and follow-up reports, the Auditing Office shall submit the same for review by each independent director by the end of the month next following the completion of the audit items.

The audit scope of the Auditing Office covers the internal control system of PSMC and subsidiaries, including various control activities which be divided by operating cycles and non-operating cycles, to audit on control activities such as research and development, sales, procurement, production, labor and wage, financing, Property, plant and equipment, investment, and management, in order to assist the board of directors and mangers in inspecting and reviewing defects in the internal control systems as well as measuring operational effectiveness and efficiency, and shall make timely recommendations for improvements to ensure the sustained operating effectiveness of the systems and to provide a basis for review and correction.

The Auditing Office sees that all departments and subsidiaries conduct self-assessment of internal control system every year, and reviews the self-assessment documents to ensure the quality of implementation, in order to implement the company's self-monitoring mechanisms. The results of the self-assessment, together with the reports on the correction of defects and irregularities of internal control systems discovered by the Auditing Office, to serve as the primary basis for the board of directors and general manager to evaluate the overall efficacy of all internal control systems and to produce Internal Control System Statements.

IP Management Plan:

PSMC has devised an intellectual property right management plan aligned with its three primary foundry services (i.e. customized logic, integrated circuits, and discrete components), and the Open Foundry operation model. The goals are to strengthen innovation, optimize patent portfolio, ensure that the R&D results are fully protected, and provide customers with advanced and comprehensive foundry services.

• Innovation
  Based on operational strategies, we have been drawing roadmaps for the technologies and products, specifying scopes of work for industry-academy cooperation, and improving innovation in conjunction with relevant patent applications.
• Patent
  We consolidate patent portfolio according to our technology milestones in pursuit of qualities as well as quantities with annual adjustment of application nations and volumes. With respect to core technologies, our IP team conducts patent mapping analysis for R&D engineers to develop optimal IP layout and avoid potential patent infringement.
• Implementation
  We have enacted the rule "Procedures for Intellectual Property Management" and provided IP training to encourage employees to contribute their ideas and make new invention proposals for relevant technologies in R&D, production and operations. With the efforts of employees, IP team, Intellectual Property Committee which reviews our internal patent proposals, and IP management system, we endeavor to continuously achieve annual target of patent applications.

IP Management Achievement:

We have been granted 1277 global patents by December 31, 2023, mainly in Taiwan, USA and China. Among them, 146 patents were approved in 2022 and 162 patents were approved in 2023. We expect to have a steady growth of patent volume year by year.

We regularly report the intellectual property management plans and implementation status to the board of directors every year. The intellectual property management direction and implementation results and performance for 2022 were reported to the board of directors on February 1, 2023, and the intellectual property management plan and implementation results for 2023 will be reported to the board of directors in the first quarter of 2024. In 2023, we applied for the Taiwan Intellectual Property Management System (TIPS) A-level certification from the Industrial Development Administration of the Ministry of Economic Affairs, and completed relevant systems and document updates and conducted financial education and training courses in accordance with the verification requirements to ensure that the operation and effectiveness of the intellectual property management system meet expected goals. Our TIPS A-level verification application was approved on December 29, 2023, and the certificate is valid until December 31, 2024. We will continue to strengthen the acquisition, management and application of intellectual property rights, improve technological innovation, optimize patent layout, and strengthen our competitiveness with complete intellectual property rights management in accordance with the company’s strategies and operational goals.