1.

Does the company establish and disclose the Corporate Governance Best-Practice Principles based on “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”?

V

The Company has formulated the “Corporate Governance Best Practice Principles for KNH” with reference to the “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies,” jointly formulated by the Taiwan Stock Exchange Corporation (TWSE) and the Taipei Exchange (TPEx). Each amendment must be resolved and passed by the board of directors and it is disclosed on the Company’s website for shareholders

https://en.knh.com.tw/governance4.html.

No material gap was found.

2.

Shareholding structure & shareholders’ rights

(1)

Does the company establish an internal operating procedure to deal with shareholders’ suggestions, doubts, disputes and litigations, and implement based on the procedure?

(2)

Does the company possess the list of its major shareholders as well as the ultimate owners of those shares?

(3)

Does the company establish and execute the risk management and firewall system within its conglomerate structure?

(4)

Does the company establish internal rules against insiders trading with undisclosed information?

V 

   V

   V

    V

(1)  The Company’s “Corporate Governance Best-Practice Principles” expressly states that the spokesman should process suggestions, questions and dispute from shareholders via phone and email, and should retain legal advisors for help, if necessary.

        The Company calls the shareholders’ meeting pursuant to the Company Act and related laws, and formulates the sound parliamentary rules. The Company executes the resolutions made by the shareholders’ meeting strictly in accordance with the parliamentary rules. The resolutions made by the shareholders’ meeting also comply with laws and the Articles of Incorporation.

(2)  According to Article 25 of the Securities and Exchange Act, the Company shall declare to the competent authority and shall place a public notice, changes in the equity held by the insiders (directors, supervisors, managerial officers, and shareholders holding more than 10% of the total shares of the Company), on a monthly basis.

(3)  The Company’s Board of Directors passed the “Regulations Governing Supervision of Subsidiaries” and “Regulations Governing Management of Transactions with Related Parties” to enforce the risk control and firewall mechanism between the affiliates.

(4)  The Company’s Board of Directors passed the “Procedures for Handling Material Inside Information and Management of the prevention of insider trading” to establish the basis for the Company’s processing of internal material information and disclosure of the information. The Company will periodically review relevant regulations to keep them in line with the existing laws and practices. On September 25 and November 5, 2020, the Company carried out educational promotion - “Prevention of Insider Trading and Insider Equity Trading” and “The Handling of Internal Material Information and Prevention of Insider Trading” on the 18th Board of Directors, with a total of 9 participants for a total of 27 training hours. In 2020, the Company carried out education and training - “Procedures for Handling Material Inside Information and Management of the Prevention of Insider Trading” on employees, with a total of 853 participants for a total of 695 training hours.

No material gap was found.

                                                                                                                        No material gap was found.                                                                                                                                                           

No material gap was found.

No material gap was found.

3.

Composition and Responsibilities of the Board of Directors

(1)

Does the Board develop and implement a diversified policy for the composition of its members?

        (2)

              Does the company voluntarily establish

              other functional committees in addition

              to the Remuneration Committee and

              the Audit Committee?

        (3)  

              Has the company established the Board

              of Directors’ performance evaluation

              and its evaluation methods, and does

              the company perform regular

              performance evaluation each year and

              submit the results of performance

              evaluations to the board of directors

              and use them as reference in

              determining compensation for

              individual directors, their nomination

              and additional office term?

         (4)  

               Does the company regularly evaluate

               the independence of CPAs?

V

V

V

 V

(1)  The Company’s “Procedures for Election of Directors  ” and the “Corporate Governance Best-Practice Principles” have diversified policies for the composition of the members of the Board. The Company considers its business model and development needs and has planned an appropriate diversity policy, including but not limited to the following two major criteria:

1. Basic requirements: Gender and age.

2. Professional knowledge and skills: Industry experience and professional competence.

The objectives of the Company’s diversity policy management are as follows:

        As of the publication date of the annual report, independent directors account for 25%; directors serving as the Company’s employees account for 25%. Independent directors with under 3 years of service is 1. Directors over the age of 71 is 1; between the age of 61-70 is 2; and under the age of 60 is 5. All directors have extensive experience in diversified industries, including: nonwoven, industrial machinery, daily necessities, construction engineering, electrical and mechanical engineering, water treatment engineering, banking, securities, law, and development of process equipment diagnostic technology. These directors also possess a wide range of professional capabilities, including: management, leadership, risk management, marketing, financial accounting and finance, international economics, industrial technology and manufacturing, business law, information technology, asset management, data analysis and market research, so as to strengthen the structure of the Company’s Board of Directors. For the implementation of diversity of the board members, please refer to “Note 2.“

(2)  The Company established the Remuneration Committee on November 28, 2011. The Remuneration Committee is responsible for the recommendation of the policies, systems, standards and structures for the performance evaluation of directors and managerial performances as well as the periodic evaluation of the remuneration to directors and managerial officers. The Company also established the Audit Committee on June 11, 2020. Recommendations shall be provided by the Audit Committee to the Board of Directors as a reference for decision making regarding matters that may have a significant impact on the Company’s financial operations.

(3)  The Company has formulated the “Procedures for the Board of Director’s Performance Evaluation” on May 14, 2018 and it requires to carry out a performance evaluation within three months after the end of year on the Board of Directors as a whole, each board member and each functional committee. At the end of the year, the Finance Division collects relevant information and is responsible for filling out the “Self-evaluation Questionnaire of the Performance” for the Board of Directors as a whole, the Remuneration Committee and the Audit Committee. The “Self-evaluation Questionnaire of the Board Member” will be filled out by the board members. The results of the said questionnaires are disclosed on the Company’s website and the annual report 27~28.

      The 2020 performance evaluation results of the Company’s Board of Directors as a whole, board members, the Remuneration Committee and the Audit Committee are excellent. These results have been reported to the Board of Directors’ meeting held on January 20, 2021.

      The Company’s Remuneration Committee reviews the rationality of the remuneration to directors, members and managerial officers based on the said performance evaluation results and the “Procedures for the Board of Director’s Performance Evaluation Results” and “Procedures of Remuneration to Directors, Functional Committees' Members,Managers and Internal Auditors”, which will also be used as a reference for the nomination for reappointment.

(4)  The Company evaluates the CPA’s independence and competency once per year. The evaluation result of 2020 has been proposed for a resolution by the board of directors and was reviewed and approved by the Board of Directors on February 24, 2020, the CPA met the Company’s requirement about independence and competency and should be held qualified to act as the Company’s CPA. For the standards for evaluating the CPA’s independence and competency, please see “Board of Directors-Evaluation on the Certified CPA's Independence.”

No material gap was found.

At present, the Company has established the Remuneration Committee and the Audit Committee as required by the law. Other functional committees will be established in accordance with the Company’s future development needs.

No material gap was found.

No material gap was found.

4.   

        Where the company is a TWSE/TPEX

        listed company, has the company

        designated an appropriate number of

        personnel that specializes (or is

        involved) in corporate governance

        affairs (including but not limited to

        providing directors/supervisors with

        the information needed and assist

        directors and supervisors in complying

        with the laws and regulations to

        perform their duties, convention of

        board meetings and shareholder

        meetings, preparation of board meeting

        and shareholder meeting minutes etc.)?

V

The Company has established a full-time legal manager under the President’s Office to be responsible for the registration of companies and registration of changes; and a Legal Compliance Team under the Finance Division to be responsible for matters associated with the Board of Directors’ meeting and shareholders’ meeting. Therefore, a number of suitable and appropriate corporate governance personnel has been assigned.

Also, the Company has assigned the vice president of the General Management Office, Wu, Jeng-Rong, as the corporate governance manager by resolution of the Board of Directors’ meeting held on February 24, 2021. Wu will be responsible for the supervision and planning of corporate governance. Responsibilities of the Corporate Governance Manager include:

A. Handles matters in relation to the board meeting and shareholders’ meeting.

B. Produces minutes for the board meeting and the shareholders’ meeting.

C. Assists in the appointment of directors and continuing education.

D. Provides information necessary for the directors to carry out their business.

E. Assists the directors in legal compliance.

Corporate governance keys for the year:

A. A total of 10 board meetings and 4 Audit Committee meetings were held in 2020.

B. A total of 1 annual general meeting was held in 2020.

C. All members of the Board of Directors have completed at least 6 credits for their continuing education courses.

D. The Company takes out liability insurance for the directors and key employees, and reports to the Board of Directors after the insurance renewal.

E. The Company conducted the performance evaluation on the Board of Directors and functional committees. The evaluation results for the Board of Directors, the Audit Committee and Remuneration Committee were excellent.

F. The Company was ranked in the top 6% to 20% of the 6th annual corporate governance evaluation.

G. From the date of appointment up until the publication date of the annual report, the Corporate Governance Manager received a total of 3 hours of continuing education. The Corporate Governance Manager will subsequently complete the continuing education hours as required by the law.

No material gap was found.

5.   

       Does the company establish a

       communication channel and build a

       designated section on its website for

       stakeholders (including but not limited

       to shareholders, employees, customers,

       and suppliers), as well as handle all the

       issues they care for in terms of

       corporate social responsibilities’

       meetings?

V

The Company has maintained good communication with investors, employees, consumers, public associations, banks, etc., through labor conferences, consumer/customer service lines, procurement, finance and other dedicated units, and sets up an area for stakeholders on the Company website in order to respond to important matters of corporate social responsibility in relation to stakeholders. For the implementation of the stakeholder issues, communication channels, communication content and frequency of different types of stakeholders in 2020, please refer to “CSR-Interested Party.”  The communication situation with stakeholders has been reported to the Board of Directors on February 24, 2021.

No material gap was found.

6.    

        Does the company appoint a

        professional shareholder service agency

        to deal with shareholder affairs?

V

The Company appointed Shareholders Service Dept. of KGI Securities Co., Ltd. as the Company’s shareholders service entity dedicated to assist in the handling of the shareholders’ meeting affairs.

No material gap was found.

7.   

        Information Disclosure

       (1) 

             Does the company have a corporate

             website to disclose both financial

             standings and the status of corporate

             governance?

       (2) 

             Does the company have other

             information disclosure channels (e.g.

             building an English website, appointing

             designated people to handle

             information collection and disclosure,

             creating a spokesman system,

             webcasting investor conferences)?

      (3) 

            Has the company published and

            reported its annual financial report

            within two months after the end of a

            fiscal year, and published and reported

            its financial reports for the first, second,

            and third quarters, as well as its

            operating status for each month before

            the specified deadline?

V

V

V

(1)   The Company has a website: http://www.knh.com.tw/ and has established a dedicated section “Investor” to disclose the Company’s latest financial affairs and a dedicated section “Corporate Governance” to disclose information regarding the Company’s execution status of corporate governance.

(2)  The Company set up the website in Chinese and English languages, and had various responsible units collect information by business type, and delegated the dedicated personnel to maintaining the disclosed information. The Company disclosed the information about the spokesman system and investor conference on the Company’s website as required.

(3)  The Company publishes and reports its financial report within two months after the end of each fiscal year, and publishes and reports its financial reports for the first, second, and third quarters, as well as its operating status for each month.

No material gap was found.

 No material gap was found.

No material gap was found.

8. 

       Is there any other important

       information to facilitate a better

       understanding of the company’s

       corporate governance practices (e.g.,

       including but not limited to employee

       rights, employee wellness, investor

       relations, supplier relations, rights of

       stakeholders, directors’ and supervisors’

       training records, the implementation of

       risk management policies and risk

       evaluation measures, the

       implementation of customer relations

       policies, and purchasing insurance for

       directors and supervisors)?

V

(1)   Employee rights and wellness:

      The Company organizes the communication meeting between the labor and management for 4 times per year, and sets up the “employees mailbox” and “sexual harassment prevention hotline”. The Company also establishes the worker welfare committee, which will hold the meeting at least 4 times per year to discuss the motions about employees’ welfare, and also provide the gift money for marriage or celebration, or monetary condolences for funeral services, group insurance and accident insurance, etc. Meanwhile, the Company establishes the regulations government employees’ retirement and forms the Labor Pension Supervisory Committee according to the Labor Standards Act. The Company contributes a specific percentage of the salary to the pension account opened at Bank of Taiwan as the labor pension reserve on a monthly basis, in order to cover the future payment of pension to labors. According to the Labor Pension Act, the Company has contributed no less than 6% of the salary to each employee’s personal account maintained at Bureau of Labor Insurance on a monthly basis since July 1, 2005.

(2)   Investor relations and rights of stakeholders:

A. Offer the stakeholders the email, CSR@knh-global.com, to help them communicate with the Company about the issues including environment, society and corporate governance.

B. Set up the email, whistleblower@knh-global.com and hotline at 02-2349909 #2268, as the channels for internal and external stakeholders to report on any corruption or unethical conduct.

(3)   Supplier relations:

A. Qualified raw material suppliers are required to sign the “Code of Conduct for Suppliers” and promise to abide by matters such as labor rights, environmental safety and ethical laws and regulations.

B. In order to verify that the suppliers’ product quality satisfies the Company’s requirements, the Company establishes the “Regulations Governing Management of Suppliers”, and arrange the on-site audit at the suppliers’ premises by the type of supplies and risk level.

C. Carried out 17 times of auditing related to matters such as safety and health at the supplier’s business location in 2020, followed by improvements and tracking.

(4)   Directors’ training records:

        The directors may pursue their continuing education per their personal need, and shall disclose the continuing education on the website designated by the competent authority. For the contents of the in-service training courses for directors as of the publication date of the annual report, please refer to “Board of Directors-Director's Attendance And Continuing Education.”

(5)   Implementation of risk management policies and risk evaluation measures:

A. The Company requires visitors and contractors entering the production area to sign an undertaking of confidentiality related to health and security to protect the Company and its own interests. A total of 1,367 persons signed the statement in 2020.

B. 6 fire drills with a total of 235 employees taking part were carried out in the Company’s plants in 2020 in order to reduce operational risks. Information security promotion is performed each December or the next January. The office building in Taipei also held a fire talk with a total of 30 persons/hours taking part.

C. The Company establishes the “Regulations Governing Management of New Product Risk” with respect to new products, and has its R&D unit call related personnel to analyze risk and complete risk assessment report based on the “Failure Mode Analysis Form”. A total of 5 reports have been issued in 2020.

(6)  Implementation of customer relations policies:

        The Company has maintained good relations with its customers. It has accepted audits and evaluations of important customers in an irregular basis, carried out various improvements on product quality and management according to customer needs, and implement matters related to corporate social responsibility. A total of 270 questionnaires for customers’ satisfaction were distributed in 2020, and the average satisfaction attained 96 scores.

(7)  Purchasing insurance for directors and supervisors:

        The Company has purchased the liability insurance for the directors and supervisors, and reported the insured value, coverage and insurance premium to the Board of Directors. The liability insurance coverage applicable for 2020 has been reported to the Board of Directors on February 24, 2020.

No material gap was found.

9.    Please description the improvement of the result of Corporate Governance Evaluation System by the Corporate Governance Center of the Taiwan Stock Exchange announced in the last year.

(1)  The evaluation result for the “7th Corporate Governance Evaluation” in 2020: The Company was ranked in the top 6% to 20% for the category of listed companies. Compared to the previous year, improvements to be made are as follows:

◆ The Audit Committee was established in conjunction with the election of directors at the Annual General Meeting of Shareholders in 2020.

◆ At least two independent directors attended the board meeting in person in 2020.

◆ The annual financial reports in English were updated 7 days prior to the annual general meeting in 2020.

◆ The financial reports in English for 2020 Q1 and Q3 were disclosed on the Company’s official website and on the MOPS within two months of the deadline as required by the law.

◆ The waste management policy has been disclosed in the Company’s 2020 annual report. The potential risks and opportunities of climate change for present and in the future have also been evaluated and measures taken to address climate-related issues.

(2)  Among the indexes that the Company did not score in 2020, the strengthening items of the Company’s corporate governance evaluation in 2021 are prioritized as follows:

◆ It is expected that 2021 financial reports in English will be updated 16 days prior to the annual general meeting.

◆ It is expected that an additional independent director will be added at the re-election held in the 2023 annual general meeting.

◆ It is expected that a Corporate Governance Manager will be established in 2021 and the scope of their responsibilities, business execution keys and continuing education will be explained on the Company’s website and annual report.