Corporate Operations and Governance

Two Major Globalization Strategies :

"Establishing foreign subsidiaries" and "Partnering in-licensing, out-licensing and development"

Three primary strategic pillars

Upholding our mission, PharmaEssentia strives to give back to the society and to create values in Taiwan’s biotechnology industry chain. We collaborate with every partner throughout our industry chain based on the spirit of “creating the common good and co-prosperity” to strive toward mutually sustainable value.

We uphold the attitude of business ethics and integrity to instill 100% of the Company’s corporate sustainability belief into our DNA. With the global commercialization of business operations, we have to abide by the code of business conduct and ethics, layout R & D patents, pay attention to the protection of cybersecurity and data privacy, and gradually lay the rock for the enterprise's sustainable operation.

Implement a specialized and diverse Board of Directors

The Board of Directors is the highest level of governance and consists of 11 directors, each tenure is 3 years, and the current tenure is from August 5, 2021 to August 4, 2024.The members have abundant experience in and professional knowledge of biology, electronics, food, education, and marketing to provide professional advice on operating judgment, accounting and analysis, operation management, industry knowledge, and international market outlook. The 11 seats of Directors include 3 seats of Independent Directors, accounting for 27.2% of the total number of Directors. The Board of Directors meets at least once a quarter, with the manager and the treasurer present for the consultation, and the audit director was reporting to the Board of Directors on audits. Total 13 Board meetings were held in 2023 with an actual attendance rate of 100%.

Board Effectiveness

• The company has establishedBoard Performance Evaluation Guidelinesand theBoard Self-Evaluation or Peer Evaluationto implement corporate governance and enhance the functions of the board of directors. The guidelines aim to establish performance goals and evaluation systems. At least one internal board performance evaluation is conducted annually, and every three years, an external and independent professional organization is commissioned to conduct an annual board performance evaluation. Regular evaluations are also conducted for functional committees, and evaluation reports and specific improvement proposals are submitted to the board of directors. The results of the internal board and director performance evaluation for 2022 were reported to the board of directors on February 24, 2023, in accordance with the law. The evaluation results were unanimously approved, and there were no other suggested improvements.

• The directors of PharmaEssentia commissioned the Taiwan Corporate Governance Association, a third-party organization, to conduct a board performance evaluation for the period from November 1, 2020, to October 31, 2021. The evaluation report (please refer to thewebsitefor details) made four recommendations for improvement: strengthening the director nomination mechanism, developing a plan to cultivate important management talent, establishing a sound whistleblowing mechanism and communication channel, and setting up a corporate governance section on the company's website. The company has already set up a corporate governance section and a grievance channel on its website, and the other recommendations will be implemented gradually as needed in the future.

Linking Director Remuneration Policy with Sustainable Performance

The director remuneration policy of our company is governed by the internal bylaws and is based on allocating up to 5% of the net profit after offsetting the accumulated losses for the year as director compensation. We also consider the level of participation, performance contributions and results of the director's board performance evaluation in determining the reasonable salary compensation for each director. Information on director and senior executive compensation can be found in the annual report. Currently, our HR department is actively developing related operational procedures for linking director remuneration policy with sustainable performance in line with our company's sustainable development process with the aim to reflect the directors' efforts in supervising and executing sustainable development goals and strategies.

• Rules of Procedure for Board of Directors’ Meetings
• Election of Directors
• The Rules for Performance Evaluations of the Board of Directors
• 2022 Performance Evaluations of the Board and Directors by internal self-evaluation
• Board Member Diversity Policy
• Communication Between the Independent Directors, Internal Audit Executive, and Accountant
• 2021 External performance appraisal results of the Board of Directors

Operation of Functional committees

Two functional committees have been set up under the Board of Directors, which are the Audit Committee and the Remuneration Committee. These committees comprise of the Independent Directors, and the Remuneration Committee also has an external expert (Professor Ming-Chuan Hsieh) to jointly supervise and inspect the management mechanism of Directors and Managers.

• Remuneration Committee
• Audit Committee
• 2022 Performance evaluation results of Audit Committee and Remuneration Committee

Internal Controls and Auditing

The audit office of the Company is directly subordinated to the Board of Directors with full-time auditors. The auditors report to the Audit Committee and the Board of Directors on the quarterly execution of the audit operations. Through routine and ad hoc inspections, the internal auditors grasp the operating status and potential risks of internal control functions and assist the Board of Directors and management to fulfill their responsibilities to implement the corporate governance system.

Biopharmaceutical is a highly regulated industry, and all business conduct and products of the Group, from R&D, clinical trials, drug manufacturing and production, regulatory marketing approval review, to post-marketing safety monitoring, shall comply with relevant regulations from various countries.

Global Compliance Strategy framework & Business Conduct

US subsidiary Legal Compliance Strategy

Enterprise employees are required to comply with Business Conduct and Ethical Standards

Compliance with Regulations and Specific Actions Throughout the Product Life Cycle

Action the Principles of Ethical Corporate Management

We must adhere to the Principles of Ethical Corporate Management in every aspect of our operations and production. The Company’s Code of Integrity promotes the objectives: specifications of anti-corruption, corporate social responsibility, trade secrets, and conflicts of interest.

Specific Measures for Prohibition Against Insider Trading and Material Non-Public Information

The company has formulated the rules and regulations of " Operating Procedures for Handling Material Nonpublic Information and Preventing Insider Trading ". The Procedures has been approved by the board of directors, and the relevant specifications have been disclosed on the company's website. Thereby preventing improper information disclosures, ensuring the consistency and accuracy of information released to the public, and strengthening the prevention of insider trading.

The Internal Audit Department/Legal Unit conducts training & education and outreach on relevant laws at least once a year for current directors, executives, and employees. The specific implementation for the current year is as follows:

   Two sessions were held on June 7 and November 29, 2023, providing relevant education and training on significant information regulations and the inclusion of insider short-term trading rights (including online) for a total of 31 individuals, including directors, managers, employees, and subsidiary managers.The course covered topics such as equity declaration regulations, insider trading, public operations, and violation handling, with a total training duration of 31 hours.

   On November 9, 2023, an educational training session was conducted for directors and corporate governance executives, involving a total of 11 individuals. The course covered topics such as "The Explosive Growth of Artificial Intelligence - Technological Developments and Business Opportunities of ChatGPT" and "Prospects and Challenges of Artificial Intelligence in Taiwan." The total training hours amounted to 66 hours, and the overall training hours for all directors complied with legal regulations.

• Principles of Ethical Corporate Management
  

【Reporting of Violating Ethical Corporate Management】

• Stakeholder Contact：Human Resource unit of PharmaEssentia
• Telephone：+886.2 26550-7688
• Email Box：hr@pharmaessentia.com

• Codes of Ethical Conduct
• Principles of Ethical Corporate Management
• Sustainable Development Best Practice Principles
• Procedures for Ethical Management and Guidelines for Conduct
• Operating Procedures for Handling Material Nonpublic Information and Preventing Insider Trading
• Corporate Governance Code

PharmaEssentia attaches importance to the security control of confidential business secret information at each stage of the product life cycle.
In order to strengthen information security protection and management mechanisms as well as comply with the Guidelines for Public Companies to Establish Internal Control Systems, our company passed the new Information Security Control Measures in a board meeting in 2022 and established an information security promotion organization to enhance risk control for information security. This organization is responsible for promoting, coordinating, supervising, and reviewing matters concerning the management of information security, and the information security manager reports on the status of affairs to the board of directors annually.

The annual information security policy and goals are approved by executives at or above the general manager level, and the policies and goals are reviewed regularly and effectively communicated to employees. We also plan to introduce ISO 27001: Information Security Management System in 2024, establishing an effective information security management mechanism.

Policy on Cybersecurity Control

In order to strengthen the data security protection & management mechanism, and comply with Article 9 of the " Regulations Governing Establishment of Internal Control Systems by Public Companies ", the company has established “Policy on Cybersecurity Control” and approved by the Board of Directors on May 13, 2022. We set up a Cyber Security Promotion team to promote, coordinate, supervise and review the data security management. The annual policies and objectives shall be approved by the supervisor above the General Manager, and be reviewed regularly to effectively convey the importance of employees.

【Annual implementation of Data Security management】

As the group expands its global commercialization, PharmaEssentia has planned to build an IT team and will recruit relevant professionals. The resources invested in Data security management are as follows:

• Personnel/operational invested: At least 5 people for IT team
• Expense invested: More than 10 million NT$ has been invested in upgrading software and hardware equipment
• Education & Training: According to the annual hacking prevention plan, we invite external professional lecturers of CHT Security Co., Ltd. with rich experiences to conduct two social engineering online education & trainings for all employees for the first time. To formulate employees’ awareness of information security and to practice such awareness in our day-to-day operations. Employee feedback is used to ensure employees’ recognition and responsibility to data security management.

• Training topic：The data security and privacy protection social engineering online education & training
• Date of Training：3/17/2022 &3/25/2022
• Sessions：2
• Participants：All colleagues of Headquarter and Subsidiaries: Panco / Beijing / Hong Kong. Total Invitees: 258
• Number of Participants: 185 / Ratio of Participants:71.71%

US subsidiary Cybersecurity Strategy