1.

Corporate Governance Implementation

(1)

Does the company declare its corporate social responsibility policy and examine the results of the implementation?

V

(1)

Not yet established.

The Company will plan the same, if necessary.

(2)

Does the company provide educational training on corporate social responsibility on a regular basis?

V

(2)

In order to strengthen corporate social responsibility, the Company organizes education and training relative to social responsibility (including Ethical Management, Prevention of Insider Trading, anti-terrorism, occupational safety and health, etc.) for internal employees to enhance their awareness on corporate social responsibility. The internal/external educational training was attended by a total of 1,996 persons for 2,924 working hours in 2018.

No significant difference

(3)

Does the company establish exclusively (or concurrently) dedicated first-line managers authorized by the board to be in charge of proposing the corporate social responsibility policies and reporting to the board?

V

(3)

The Company has set up the audit department to promote Ethical Management which is responsible for the development and supervision of the policies and prevention programs on good faith management. Although there is no regular report to the board of directors, the Company has disclosed the “Principle for Ethical Corporate Management Best Practice and Guidelines for Codes of Ethical Conduct” on the Company’s website. It also announced the Ethical Management in the provisions governing interior personnel management, and all employees are required to comply with the provisions and participate in annual education and training, in order for full implementation. The internal/external educational training was attended by a total of 611 persons for 446.5 working hours in 2018.

The Company will report to the board of directors on a regular basis when necessary, depending on the Company’s development needs.

(4)

Has the Company defined some reasonable compensation policy, integrated corporate social responsibility with employees’ performance evaluation, and established some clear and effective reward/disciplinary system?

V

(4)

1.

According to the provisions of Article 27, Paragraph 3 of the Company’s Articles of Incorporation, after the total profit in the current year make up for loss, no less than 1% of the total amount shall be allocated as compensation to employees. No employee compensation has been paid as the Company had encountered loss in 2018.

2.

The Company authorizes the salary level based on the employees’ educational background/working experience, expertise, seniority and personal performance. The employees’ basic pay will not vary based on their gender, race, religion, political affiliation, marital status and labor union/society.

3.

The employees’ performance evaluation system and reward & punishment policy shall be subject to the Company’s personnel management regulations.

4.

In consideration of the revisions of the Regulation for Basic Wages, the operating performance and price index, the Company does not regularly adjust the salary to meet regulatory requirements and maintain the standard of living of employees (the 2018 average annual adjustment is approximately 4%).

No significant difference

2.

Sustainable Environment Development

(1)

Does the company endeavor to utilize all resources more efficiently and use renewable materials which have low impact on the environment?

V

(1)

For water resource, the Company installed the equipment engaged in recycling water. Treated wastewater would be used to water plants and flush in the toilet to diversify the purpose of water and make use of resources smartly. The scraps generated in the process of production were recycled or reused in various manners by attributes to raise the life cycle of resources.

No significant difference

(2)

Does the company establish proper environmental management systems based on the characteristics of their industries?

V

(2)

The Company has obtained ISO-14001 certifications for its factories since July 3, 2007, and the most recent certification was obtained in July 31, 2018, and is valid until July 2, 2019.

No significant difference

(3)

Does the company monitor the impact of climate change on its operations and conduct greenhouse gas inspections, as well as establish company strategies for energy conservation and carbon reduction?

V

(3)

1.

The Company adheres to the guideline of “Renewable Resources and Unlimited Carbon Reduction” for sustainable environment. The environmental improvement plan was announced annually by the Department of General Affairs, and is regarded as the basis for the Company’s goal on environmental management to optimize energy efficiency. The 2018 environmental improvement plan aims to reduce 0.5% of electricity consumption by reducing the number of amendments to the specification of the product, combining multiple items for test trials, and avoiding energy waste from the machine, and saved 1.6% more electricity compare with last year, with the success rate of 220%.

2.

The 2019 environmental improvement plan aims to reduce waste by 0.5%, and the Company plans to provide waste recycling programs by actively seeking external manufacturers, in order to reduce waste that cannot be recycled at this stage, in the hope to reduce environmental impact, activate resources, and achieve a circular economy.

3.

The Company completed the installation of the 499.24 kW solar photovoltaic power generation system at the end of 2018 in order to reduce carbon emissions. By the end of March, the total power generation was 134,884 kW, which can be converted to about 135.8 tons of CO₂, equivalent to 9.12 hectares of afforestation area, and CO₂ reduction is estimated to reach up to 600 tons in 2019 by use of this generation system.

4.

The Company reduced carbon dioxide emissions by 10% compared with the previous year, of which the statistics of emissions from resources such as water, electricity, liquefied petroleum gas (LPG) and fuel oil are as follows:

Statistic Unit: /Year (Ton)

5.

The Company has established Business Continuity Planning (BCP) to provide corresponding contingency measures for various types of emergencies, in order to resume its business operations in a short period of time and minimize losses in response to business disruption caused by a disaster. The climate change risks identified in the BCP includes floods, wind disasters and earthquakes. The Company strengthened emergency response teams of the five major groups by conducting two drills each year to increase the resilience of SOP in the face of various natural disasters. 2 drills and 0 natural disasters in 2018.

No significant difference

3.

Preserving Public Welfare

(1)

Does the company formulate appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights?

V

(1)

The Company adheres to the principles promulgated by the “UN Universal Declaration of Human Rights”, the “UN Guiding Principles on Business and Human Rights”, the “UN Global Compact” and the “UN International Labor Organization”, and respects internationally recognized basic human rights, including freedom of association, caring for vulnerable groups [disabled employees: 7 people, aborigines: 5 people], banned child labor [number of child workers: 0 people, controlled according to check-in data], eliminating all forms of forced labor, and eliminating discriminations in employment [incidents violating the Labor Act in 2018: 0 incidents]. In addition, the Company abides by the labor-related regulations of its business location, respecting and maintaining dignity for current employee contract and temporary personnel, interns, etc. The information is disclosed in the Company’s official website (human resources/human rights policy), and is also specified in the Company’s management rules and regulations (for example, principle 4.1 of the Employee Recruitment and Management Practices).

No significant difference

(2)

Has the company set up an employee hotline or grievance mechanism to handle complaints with appropriate solutions?

V

(2)

The Company has set up relevant measures to handle employee complaints (such as work rules, internal communication implementation procedures, sexual harassment prevention procedures, etc.), and has set up the “Suggestion Box”, “Opinion Response Mailbox (EMAIL)” and “Sexual Harassment Complaint Mailbox ( EMAIL) and Hotline” for employees to file their complaints. In addition, the Company had 0 employee complaints and 0 employment disputes and litigation penalties in 2018.

No significant difference

(3)

Does the company provide a healthy and safe working environment and organize training on health and safety for its employees on a regular basis?

V

(3)

The Company and its factories regularly conduct testing with a total of NTD 177,000 invested in the workplace to provide employees with a safe and healthy working environment in 2018, and invested a total of NTD 195,000 in 2018 for related prevention and control operations (including human hazard, unlawful infringement, maternity protection and abnormal work load) carried out according to occupational safety and health requirements. Employee health checks are held on a regular basis to ensure good health (Total health checks in 2018: 382 people, with total investment cost of NTD 95,000). In order to promote the safety and health of employees, not only is the “Safety and Health Code” set up by factories, the Company also sends health-related information (such as dengue fever prevention) by e-mail and posted it on the internal website and bulletin board.For safety and health education and training, the newcomers must complete relevant education and training, and on top of that, the Company also conduct relevant training on a regular basis (a total of 1,062 people with a total of 2,040.5 hrs in 2018).

No significant difference

(4)

Does the company setup a communication channel with employees on a regular basis, as well as reasonably inform employees of any significant changes in operations that may have an impact on them?

V

(4)

The Company communicates issues of labor and management through labor-management meetings, and appoints the employee welfare committee to promote relevant employee benefits (four labor-management meetings and four employee welfare committee meetings are held in 2018). If there are major changes in operations, the Company will advocate and communicate through briefing sessions and internal e-mails in addition to labor-management meetings (the changes in operations have no significant impact on employees in 2018).

No significant difference

(5)

Does the company provide its employees with career development and training sessions?

V

(5)

The Company has standardized provisions for each unit and position (please refer to the job description and departmental training manual), and implements educational training in accordance with the approved annual education and training program.

No significant difference

(6)

Does the company establish any consumer protection mechanisms and appealing procedures regarding research development, purchasing, producing, operating and service?

V

(6)

1.

The Company has established the “Regulations Governing Customer Service”, and set up the consumer service hotline at 0800-213168 via which dedicated personnel would be assigned to process customers’ complaints, and the QA Center would be required to verify the cause and feed back complete investigation report within ten (10) days at latest. All of the products have been insured under product liability insurance.

2.

The Company established the standard operating procedures for marketing of products and recycling of waste to maintain the quality stability and consumers’ trust.

3.

The Company arranged the communication meetings with major customers each year.

No significant difference

(7)

Does the company advertise and label its goods and services according to relevant regulations and international standards?

V

(7)

1.

The Company has passed the ISO 9001 quality management system certification, ISO 13485 medical equipment quality management system certification, and ISO 22716 cosmetics safety management system certification.

2.

The Company marketed and labeled the products strictly in accordance with the international standards,and related laws and regulations prevailing in the sales market.

No significant difference

(8)

Does the Company has assessed the supplier’s record in environmental protection and society before trading with the supplier?

V

(8)

The Company performed evaluation on important suppliers and contractors to ensure their compliance with the local laws and regulations.

No significant difference

(9)

Does the contract between the Company and its main supplier include the provision stating that where the supplier is suspected of violating its corporate social responsibility policies or renders remarkable effect to the environment and society adversely, the Company may terminate or rescind the contract?

V

(9)

The Company asked the main suppliers and contractors to sign the “Code of Conduct for Suppliers” to undertake compliance with the local laws and regulations. If the suppliers or contractors caused significant effects to the society and environment, the Company would terminate or rescind the cooperation at any time.

No significant difference

4.     

Enhancing Information Disclosure

Enhancing Information Disclosure Whether the Company discloses relevant and reliable information relating to corporate social responsibility on its website or Market Observation Post System?

V

The Company disclosed related information via website, annual report and MOPS.

No significant difference

5.

If the Company has established the corporate social responsibility principles based on “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies”, please describe any discrepancy between the Principles and their implementation:

The Company has not yet established its own corporate social responsibility best-practice principles, but it upheld the “Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” to feed back to the society and strengthen its corporate social responsibility. So far, no significant deviation of its policy from said Principles has existed.

6.

Other important information to facilitate better understanding of the company’s corporate social responsibility practices:

The Company has been operating in Tainan for 50 years, and is one of the top 40 non-woven companies in the world. It has taken the lead in donating facemasks to disaster relief and disease control units during SARS and bird flu as a service to the community. It will always care for the disadvantaged groups and support the local people’s beliefs by means of donations, in order to maintain cultural assets and promote local tourism to enhance economic activity. For the implementation of corporate social responsibility, specific contents are briefly described as follows:

(1)

Donated items:

The Company has cooperated with the “United Way of Taiwan” since 2008, and obtained the demand for maternal and child health products from various social welfare units through the association. It directly transports maternal and child health products to social welfare units in need, which thereby assisted many social welfare organizations. The recipients in 2018, such as the The Garden of Hope Foundation and the Good Shepherd International Foundation, with a total of 39 donations thath amounted to NTD 1.5 million.

(2)

Cooperating with companies, government and academic resources:

The Company built the first non-woven tourism factory in 2013 named as the “KNH Non-woven Creative Kingdom” under the concept of innovation breakthrough, industrial knowledge transfer, talent cultivation and social feedback, and carefully planned themes such as the “corporate stories”, “production processes”, “Knowledge related to Women and Children” and “The Non-woven World” to convey knowledge on industrial and women’s health. Through the establishment of digital multimedia and interactive facilities, it enables visitors to engage in the “experience on five senses” and provide a model of cooperation between industry, government and academic resources to lead the public to further understand the non-woven industry. In 2018, the Company completed the establishment of leisure areas, exhibition rooms, and DIY classrooms. In order to achieve the corporate spirit of serving the community, the Company has provided free admission since 2018, which increased the number of visitors to 7,000 in 2018, and hopes to combine the traditional manufacturing industry with the tourism service industry in order to let more people know the non-woven industry with the understanding of knowledge, education, inheritance and industrial sustainability.

(3)

Providing high quality products:

The Company has a strong sense of social responsibility, and apart from the moving toward low price and high quality, the products are oriented to enhance socially beneficial products as the spirit of R&D. For example, the Company’s “Pure Cotton Sanitary Napkin” have won the 2018 Taiwan Excellence Awards, and “Carnation Cool Cotton Sanitary Napkin” have won the Taiwan Excellence Awards in 2018 and 2019.

7.

A clear statement shall be made below if the corporate social responsibility reports were verified by external certification institutions:None.