lcy chemical corp. 2017 csr reportthe british standards institution (bsi) was commissioned as the...

CSR Report2017

LCY CHEMICAL CORP.

L C Y C H E M I C A L C O R P . 2 0 1 7 C S R R e p o r t

LCY 2017 CSR Report 2About UsAbout the Report

Economic Performance

Corporate Governance

Environmental Protection

Supply Chain Management

Employee Care

Social Engagement

AppendicesOccupational Safety and Health

Chairman's Letter

This is the 6th CSR Report of LCY CHEMICAL CORP. LCY has always considered corporate social responsibility as the foundation of sustainable development. Thus, we are committed to providing products and services that can increase the quality of life. We never cease to improve the manufacturing process, supply differentiated products and value stakeholders, including employees, customers, suppliers, and communities. Our goal is to contribute to the well-being of the industry and the public by upgrading and facilitating the industry.

Occupational safety is an unaltered core value of LCY CHEMICAL CORP. We continually raise the standards of workplace safety and enhance equipment safety. In addition to the Process Safety Management (PSM) model, all of our factories and business sites have phased in the Environmental Health and Safety (EHS) programs with the integration of big data and industry 4.0, to establish an evidence-based culture of decision-making and ensure our employees' safety and health. For us, EHS is public goods. Not only do we expect to set a good example by implementing the EHS programs in the company, but also look to create a positive impact and encourage our suppliers upstream and downstream to follow suit. Hopefully, this will help raise the awareness and promote the implementation of occupational safety within the petrochemical industry.

In terms of environmental governance, LCY CHEMICAL CORP. has long upheld the principle of Eco+ Prosperity. In response to the government's policies, the Company purchases green power. LCY also takes the initiative in developing green products to meet the environmental requirements and the needs of industries. For instance, the Performance Membrane Bioreactor (MBR) is exactly the result yielded by LCY's relentless effort on innovation research and development of high value-added products based on the circular economy. The wastewater filtered by our MBR can be 100% recycled in our Kaohsiung plant.

Chairman's Letter becoming the leading quality water management and recycling technology in the industry. Apart from making profits, MBR also helps to improve the quality of life and contributes to the development of Taiwan's industries and environmental protection.

As for talent cultivation, in keeping with the corporate social responsibility in fostering local talents, LCY CHEMICAL CORP. has offered scholarships for seven years consecutively, presents awards to distinguished professors with outstanding research results and has been funding Taiwanese students to go abroad for postdoctoral studies. We've launched creative and unconventional scholarship competitions for young students to improve their teamwork abilities across a wide range of disciplines and become suitable next-generation talents. This year, following the example of the Gordon Research Conference, LCY organized the first Bowei Research Conference (BRC). Many international scholars from the top-notch universities in the world and Academia Sinca were invited to the event, exchanging and sharing professional ideas and experiences in depth.

Regarding contributions to the society, in order to ensure the nearby communities a safe living environment with total peace of mind, LCY has conscientiously and carefully implemented safety and health practices, identified potential hazards and controlled risks, continually given back to communities and cared for their developments. We participate in several community activities regularly, such as the repair and renovation of Chung Yun Elementary School in Linyuan District. Moreover, LCY invites local residents and students and professors from colleges and universities to visit our factories on a regular basis. By open to the public, we hope the neighboring communities can learn more about the outcomes produced in line with the Company's primary goal of "Zero Incident, Zero Discharge, and Zero Injury", such as LCY's advanced manufacturing process, safety practices, and workplace safety, to establish a rapport with the nearby villages and communities.

LCY CHEMICAL CORP is a corporate citizen as well as a global citizen. We spare no effort on fulfilling our corporate

Chairman, TH Hong

social responsibility. Looking ahead, we will continue to innovate, create sustainable value with the whole human society, share more responsibilities and work toward a respectable international business.

LCY 2017 CSR Report 3Chairman's Letter

About the Report





Employee Care

Social Engagement


About Us

About UsChapter 1

LCY 2017 CSR Report 4Chairman's Letter

About the Report





Employee Care

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About Us

Dashe Site

Taipei Office

R&D Center

KaohsiungHeadquarters& Site

Xiaogang Site

Linyuan Site

KaohsiungTerminalStation

About Us

LCY CHEMICAL CORP. (LCY) was founded in 1965. It had a share capital of 8,554,323,680 NTD and hired 1006 employees in 2017. The Company is listed for trading on Taiwan Stock Exchange Corporation (TWSE) with a stock ID of 1704.

Main products and services

LCY is mainly involved in the research, development and manufacturing of chemicals such as polypropylene, isopropyl alcohol and downstream products, using rigorous scientific methods. LCY's principal products and services include Performance Plastics (PP), Methanol, Solvents, Thermoplastic Elastomers (TPE), Energy and Storage & Warehousing. For detailed information, please visit LCY website - Products and Services. Taiwan, Southeast Asia, China, Europe, United States, Japan and Korea.

Corporate values

LCY's corporate values are Integrity, Teamwork, Innovation and Accountable Leadership.

• Integrity

• Teamwork

• Innovation

• Accountable Leadership

Main business locations

• Kaohsiung Headquarters & Site: No.3, Zhonglin Rd., Xiaogang Dist., Kaohsiung City 812

• Taipei Office: 3F, No.85, Sec. 4, Bade Rd., Songshan Dist., Taipei City 105

• Dashe Site: No.2, Jingjian Rd., Dashe Dist., Kaohsiung City 815

• Xiaogang Site: No.16, Zhonglin Rd., Xiaogang Dist., Kaohsiung City 812

• Linyuan Site: No.11, Shihua 3rd Rd., Linyuan Dist., Kaohsiung City 832

• Kaohsiung Terminal Station: No.2, Guohua 2nd St., Qianzhen Dist., Kaohsiung City 806

• R&D Center: No. 68, Yan-Fa Rd., 2nd Dist, Nanzhi Export Processing Zone, Kaohsiung City 811

Subsidiaries

• LCY TECHNOLOGY CORP.

• Zhenjiang Lee Chang Yung General Chemical Co., Ltd.

• Zhenjiang LCY Warehousing & Storage Co., Ltd.

• Huizhou LCY Elastomers Corp.

• LCY Elastomers L.P.

.

LCY 2017 CSR Report 5Chairman's Letter About Us





Employee Care

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About the Report

About the ReportChapter 2






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Dual certifications of GRI Standards & AA1000 by BSI

Overview of the report

This is the 6th corporate social responsibility (CSR) report of LCY CHEMICAL CORP. In the future, we will continue to publish the report on a yearly basis to disclose achievements other than financial results, and show the public how we have taken actions toward achieving our corporate vision of sustainability.

Reporting period

The information disclosed in the 2017 CSR Report covers the period from January 1 to December 31, 2017.

Publishing date of the previous report & Reporting cycle

The 2016 CSR Report was published in June 2017. The report is published once a year.

Major changes

Compared to the previous reporting periods, the major changes in topics and boundaries include (1) LCY CHEMICAL CORP. is expected to transfer rubber business to its subsidiary company, the LCY Grit Corporation; (2) LCY TECHNOLOGY CORP. (LCYT), an emerging stock company founded by LCY CHEMICAL CORP., applied for listing on the Taiwan Stock Exchange in December, 2017. The application was approved in March, 2018.

Preparation guidelines

The report conforms to the Global Reporting Initiative (GRI) Standards and fulfills the "in accordance" criteria with the core options with related General Standard Disclosures to be reported. A complete chart of the GRI Standards is provided as a reference to the relevant chapters.

Assurance: Awarded an Independent Third Party Assurance Statement

According to the assurance statement issued by BSI, the report met the requirements of information disclosure (completeness, materiality, and responsiveness). It also made the following remarks in the audit report, "The report has made a full presentation and disclosure of sustainability issues; we recognize the organization's effort of involving the management in corporate social responsibility issues and look forward to further implementation of the corporate social responsibility policy." BSI issued an Independent Third Party Assurance Statement to LCY.

Assurance criteria and the certifier

As a result of an internal meeting by the highest executive management, the decision was made to obtain external certification to enhance the credibility of this report. Thus, the British Standards Institution (BSI) was commissioned as the third-party certifier. The AA1000 Assurance Standard Type 1 (2008) and Moderate Assurance developed by the global non-profit organization AccountAbility were used as two assurance standards.

Other assurances

All financial information disclosed in this report was based on the consolidated financial statements audited by Deloitte Taiwan following the International Financial Reporting Standards (IFRS). Furthermore, the Company has been certified by third parties for compliance with ISO 14064-1 Greenhouse Gases Emissions, ISO 14001 Environmental Management, ISO 50001 Energy Management, OHS18001 standards and ISO 14046 Water Footprint.

Contact Information

Should you have any suggestion regarding " LCY CHEMICAL CORP. 2017 Corporate Social Responsibility Report", please contact us via the following ways. The report will also be available on our website for ease of use.

Address: 3F, No.85, Sec. 4, Bade Rd., Songshan Dist., Taipei City Website: http://www.lcygroup.com/lcy/tc/index.asp Contact person: Shu-Fang Ke TEL: 02-27631611 Email: [email protected]






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3. Green chemical products

• Corresponding GRI material Aspect and disclosures: GRI 301-2 Materials

• Policies, commitments, and action plans: 1. The introduction of the new generation Thermoplastic vulcanizates (TPV); 2. Successful development of PP plastic foam cups that are more environmentally-friendly than paper cups

• Assessment result of management approaches: Revenues

• Impacted boundaries: LCY CHEMICAL CORP., investors, and customers

2.Circular economy

• Corresponding GRI material Aspect and disclosures: Energy GRI 302-4 /Water GRI 303-3

• Policies, commitments, and action plans:1. Participating in the World Economic Forum in Davos and seeking innovative circular economic opportunities for the chemical material industry; 2. Supporting the Kaohsiung Linhai Industrial Park and turning one plant's exhaust fumes to another's resources; 3. Utilizing the membrane bioreactor technology for water recycling; 4. Providing Electronic Grade Isopropyl Alcohol (EIPA) Recycling services.

• Assessment result of management approaches: LCY won the 2017 Circular Economy Awards.

• Impacted boundaries: LCY CHEMICAL CORP., investors, and communities

▶ Identification of material topics/Aspects and boundaries

Identification of material topics/Aspects and boundaries

The organizational structure of the CSR team

LCY CHEMICAL CORP. established a corporate social responsibility team that comprises representatives from different departments. The senior management was authorized by the board of directors to serve as the coordinator. The responsibilities of the CSR team are to study the latest trends of sustainable development, learn about stakeholders' needs, and identify risks and opportunities in relevant issues as well as collaborate with various functional committees on formulating strategies and executing associated projects. Moreover, by conducting inter-department meetings to review issues such as corporate governance, green production and products, and employee benefits, different departments work together on the related matters, report outcomes and implement relevant programs. The planning and results of CSR strategies are reviewed during monthly KPI (Key Performance Indicators) meetings and reported to the board of directors in the following year.

Boundaries of disclosures

The economic data in the report was sourced from audited consolidated financial statements. The disclosure covers all entities under the LCY GROUP. As for disclosures on environmental and social impacts, LCY's seven business sites in Taiwan were used as the reporting boundaries. Please refer to the chapter - About Us for the addresses of the seven business locations.

1. Public safety

• Corresponding material Aspect and disclosures: Occupational Health and Safety GRI 403-2

• Policies, commitments, and action plans: 1. Realize the Company's promise to public safety; 2. Public safety education and training; 3. Emergency responses training; 4. Optimization and maintenance of equipment; 5. Pipelines optimization and maintenance; 6. Pipeline management and audit system.

• Assessment result of management approaches: The Disabling Injury Frequency Rate (FR) and Disabling Injury Severity Rate (SR) of LCY were lower than the average values of the chemical material industry. The five major business sites, including Dashe Site, Kaohsiung Site, Xiaogang Site, Linyuan Site and Kaohsiung Terminal Station, and R&D center all passed the OSHAS 18001 standards of Occupational Health and Safety Management Systems.

• Impacted boundary: LCY CHEMICAL CORP., suppliers, and communities

LCY's employees visited the Training Center of the National Fire Agency in Zhushan Township, Nantou County and learned how to wear self-contained breathing apparatuses (SCBA) at a weight of 22 kg.

LCY has successfully developed PP plastic foam cups that are more environmentally-friendly than paper cups.






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4. Regulatory compliance in all business activities• Corresponding GRI material Aspect and disclosures:

GRI 419-1 - Non-compliance with laws and regulations in the social and economic area/ GRI 307-1 - Non-compliance with environmental laws and regulations

• Policies, commitments, and action plans: LCY monitors and assesses regulatory changes on a regular basis, identifies legal obligations, and conducts training to familiarize employees with the latest laws and regulations.

• Assessment result of management approaches: No violation of major laws and regulations in the social, economic and environmental areas.

• Impacted boundaries: LCY CHEMICAL CORP., investors, and customers

A wide range of indicators of sustainability as reference resources

Apart from GRI Standards, we also expect to include more global indicators of sustainability and international initiatives as reference resources in preparation for the CSR report and formulation of CSR strategies, including:

• The 17 Sustainable Development Goals (SDGs) of the United Nations

• Dow Jones Sustainability Index (DJSI)

• The 21st Conference of the Parties of The United Nations Framework Convention on Climate Change (COP 21)

• The Fifth Assessment Report (AR5) of The United Nations Intergovernmental Panel on Climate Change (IPCC)

• Carbon Disclosure Project (CDP)

• Bloomberg ESG (Environmental, Social, Governance) Survey

• ISO 22301 - Business Continuity Management

5. Supplier management• Corresponding GRI material Aspect and disclosures:

GRI308-1 - New suppliers that were screened using environmental criteria/ GRI414-1 - New suppliers that were screened using social criteria

• Policies, commitments, and action plans: Questionnaires are designed to assess supplier's environmental impacts and performance of workplace safety and human rights. Document reviews are conducted.

• Assessment result of management approaches: Suppliers had no violation of major laws and regulations in the social and environmental areas.

• Impacted boundaries: suppliers

6. Proper waste treatment and disposal• Corresponding GRI material Aspect and disclosures: GRI306-

2 - Waste by type and disposal method• Policies, commitments, and action plans: Hazardous and

non-hazardous industrial waste disposal achieves 100% compliance with local environmental regulations.

• Assessment result of management approaches: No violation of local environmental laws and regulations on waste treatment and disposal

• Impacted boundaries: LCY CHEMICAL CORP., government agencies

7. Chemical innovations and robust revenue growth• Corresponding GRI material Aspect and disclosures: GRI

201-1 - Direct economic value generated and distributed• Policies, commitments, and action plans: Introducing

differentiated and high value-added products and services to inject innovative power into the business

• Assessment result of management approaches: 1. A successful launch of new products, such as high purity IPA and DMK for electronics manufacturing, high purity product portfolio (control limit < 0.1 ppb) and Electronic grade IPA & Acetone recycle service; 2. LCYT passed the review of securities listings on February 13, 2018; 3. For the polypropylene products under the Performance Plastics (PP) Division, we have successfully developed healthcare grade polypropylene products that are specifically designed for medical devices.

• Impacted boundaries: LCY CHEMICAL CORP., investors

8. Respect for human rights• Corresponding GRI material Aspect and disclosures: GRI 406-

1 - Incidents of discrimination and corrective actions taken• Policies, commitments, and action plans: Enforcement of

human rights and the right to equality regardless of race, gender, age or any other differences

• Assessment result of management approaches: No incidents of discrimination were reported during the reporting period


9. Employee salaries, benefits, and fair job opportunities• Corresponding GRI material Aspect and disclosures: GRI

401-2 - Benefits provided to full-time employees that are not provided to temporary or part-time employees

• Policies, commitments, and action plans: Creating a happy workplace; providing fair employment opportunities and promoting inclusion and diversity in the workplace; taking the initiative in promoting equality to offer fair opportunities for employment and career advancement to job-seekers

• Assessment result of management approaches: Employee salaries and benefits are compliant with local labor laws.

• Impacted boundaries: employees, government agencies






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The great accomplishment of the greening of Dashe Site

10.Customer satisfaction surveys• Corresponding GRI material Aspect and disclosures:

self-defined material topic• Policies, commitments, and action plans: Providing

quality products and services based on our customer-first philosophy and conducting satisfaction surveys on a regular basis

• Assessment result of management approaches: The satisfaction surveys conducted scored higher than 70 on the average.

• Impacted boundaries: LCY CHEMICAL CORP., customers

11.Marketing• Corresponding GRI material Aspect and disclosures:

GRI 417-2 - Incidents of non-compliance concerning product and service information and labeling

• Policies, commitments, and action plans: Carefully selecting sources of components and service providers for products; Implementing hazardous substance management and creating safety data sheets (SDS), which are available on the Company's website

• Assessment result of management approaches: No incidents of non-compliance concerning product and service information and labeling

• Impacted boundaries: LCY CHEMICAL CORP., customers

Multiple ways to identify and respond to stakeholders' concerned issues

We use four steps, Identification, Prioritization, Validation, and Review, to identify material topics/Aspects and respond to issues that stakeholders are concerned. For some material topics/Aspects, questionnaire surveys are conducted, such as customer satisfaction surveys, surveys of supplier's environmental impacts and performance of human rights, and questionnaires distributed during campus career fairs. Apart from that, we also use multiple channels to communicate with stakeholders one by one or group by group. The following is the process of how department heads answer to stakeholders'

concerned issues through monthly, quarterly and annual review meetings during our daily operation and regular activities of OpenHouse.

• Each department review and reflect on external stakeholders' concerned topics during internal meetings on a regular basis.

• Each department head regularly reports to the senior management about stakeholders' concerned topics and related plans in response.

• The CSR office is established to analyze the impacts of each relevant aspect on the Company.

• After frequent internal meetings and discussions, the CSR office reports to the highest management about the conclusions, identifying material topics/Aspects and internal and external boundaries to be disclosed and determining how the Company will respond.

• Internal audits are carried out to ensure the information to be published has sufficient supporting evidence.

• All digital or paper records regarding the processes and results of all internal discussions and meetings are reserved, if requested, as proofs for third-party audits.

• The disclosed aspects and boundaries of the year are confirmed and published through reports or press releases to address stakeholders' concerned issues openly.






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14.Next generation cultivation• Corresponding GRI material Aspect and disclosures:

GRI 203-1 - Infrastructure investments and services supported

• Policies, commitments, and action plans: In keeping with the Company's vision of fostering the younger generation for Taiwan's industries, LCY spares no effort on cultivating inter-disciplinary talents to inject new energy to Taiwan's chemical industry. The Company also established LCY Education Foundation, creating scholarship programs and organizing forums.

• Assessment result of management approaches: Each year our scholarship programs had fruitful results, attracting many skilled talents from home and abroad to join the company.

• Impacted boundaries: LCY CHEMICAL CORP., communities 13.Environmental pollution prevention• Corresponding GRI material Aspect and disclosures: self-defined

material topics/Aspects• Policies, commitments, and action plans: 1. Purchasing new

equipment for pollution prevention; 2. Allocating budgets for the operation and maintenance of equipment for pollution prevention; 3. Participating in the Pollution Abatement Costs and Expenditures survey conducted by the Environmental Protection Administration of the Executive Yuan

• Assessment result of management approaches: The information about pollution prevention, including newly-purchased equipment, the maintenance costs, was disclosed. No major incidents of environmental pollution were reported.


The 7th LCY Scholarship competition

12.Staff training• Corresponding GRI material Aspect and disclosures: GRI

404-1 - Average hours of training per year per employee• Policies, commitments, and action plans: To put the

right person in the right place, we structure employee training programs for various job levels.

• Assessment result of management approaches: The information about average hours of training per year per employee was made public.







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Step 1

Step 4

Step 2 Step 3

High

High

Medium

MediumLow

Significant Economic, Environmental, and Social Impact

Assessm

ent and Decisions A

ffecting Stakeholders

Drafting of CSR report Cross-department photo gathering Preparation of figures and charts

Cover page, back page, and content layout design Publication

Economic Category Environment Category Social Category

The sequence of material topics/Aspects






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Investors

Revenues, financial

performance, corporate

governance, and corporate

social responsibilities

Employees

Salary, benefits, training,

occupational health and

safety

Government

Agencies compliance

Suppliers

Supplier management policy

Clients

Product quality, delivery

Community

Cooperative education,

talent development,

public safety

Media

Cooperative education, talent

development, public safety

Communication with stakeholdersTo ensure the sustainability of our operations, we have created transparent, effective and diverse channels to communicate with all of our stakeholders. Stakeholders' needs and expectations provide an important reference for us in the establishment of CSR policies and the formation of relevant programs. Through internal meetings, we have identified stakeholders that are relevant to our operations, including (1) Employees, (2) Government agencies, (3) Investors, (4) Customers, (5) Suppliers, (6) Communities, and (7) Media. We hope that the quality of information here would enable stakeholders to make rational assessments of our performance. In the future, we shall continue to gather opinions to devise appropriate solutions and actions of sustainability, engage internal and external stakeholders on relevant issues on an irregular basis, and actively respond to concerned issues. Please refer to the following information for the method and frequency of stakeholder engagement.

Disclosure of business performance through regular financial reports

• Annual financial reports: published before March 31 each year. The Company follows Article 36 of the "Securities and Exchange Act" and publishes audited financial reports within three months after the end of an accounting period. The reports are published on the Company's website and the Market Observation Post System (MOPS), thereby enabling shareholders and stakeholders fast and transparent access to financial information.

• Quarterly financial reports: The 1st

quarter financial reports are published before May 15 each year; the 2nd quarter financial reports are published before August 15 each year; the 3rd quarter financial reports are published before November 15 each year. The Company publishes financial reports review by auditors and the board of directors within 45 days after the end of each quarter each fiscal year in accordance with the Article 36 of the "Securities and Exchange Act". Publications are made on the Company's website and MOPS.

• Monthly revenue report: published once per month; consolidated revenue reports are published before the 10th day of each month. Publications are made on the Company's website and MOPS, thereby enabling shareholders and stakeholders convenient and transparent access to financial information.

Regularly releasing non-financial performance reports to reveal sustainable strategies to all stakeholders

LCY publishes CSR reports on a yearly basis to show non-financial performance results in many areas, such as corporate governance, green production, environment-friendly management measures, employee safety software/hardware upgrade, on-the-job training, welfare policy and charity, thereby conveying LCY's corporate vision and mission to all stakeholders. The reports are released on the Company's website and Market Observation Post System, enabling shareholders and stakeholders fast and transparent access to non-financial information.






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Stakeholder: Internal- Employees

Concerned issues Means of communication Frequency of communication "Records &

Salary, benefit, on-the-job training, and workplace safety and health"

Labor-management meetings Each quarter Labor-management meeting minutes

Employee Welfare Committee Each quarter Meeting minutes and announcements

Employee appraisal interviews Twice a year Employee performance evaluation worksheet

Occupational Safety and Health Committee Each quarter Meeting minutes

Internal communication: E-mail, posters, e-bulletin

Unscheduled E-mail, posters, pictures and announcements

Stakeholder: External- InvestorsConcerned issues Means of communication Frequency of communication Records & documentation

Shareholder meetings, investor seminars, financial reports, monthly revenue reports, CSR reports

Annual general meetings Once a year Shareholder meeting minutes

Investor seminars Once a yearInformation released in investor seminars, available on the website of MOPS

Financial performance report: annual financial reports

Before March 31 each year Company portal, MOPS

Financial performance report: monthly revenue reports

Before the 10th calendar day each month.

Same as above

Financial performance report: quarterly financial reports

May 15, August 15, November 15 Same as above

Non-financial reports: CSR reports Each June Same as above

Stakeholder: External- CustomersConcerned issues Means of communication Frequency of communication Records & documentation

Quality of products, delivery Product specification inquiry Case by case






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Stakeholder: External- SuppliersConcerned issues Means of communication Frequency of communication Records & documentation

Supplier audit, supplier appraisal

Supplier audit: audits are conducted on existing suppliers

Unscheduled Supplier evaluation or survey

Supplier appraisal: performance appraisals are conducted on existing suppliers

Once a year

Stakeholder: External- Government agenciesConcerned issues Means of communication Frequency of communication Records & documentation

Correspondence Exchange of correspondence Unscheduled Written or digital correspondence

Stakeholder: External- CommunitiesConcerned issues Means of communication Frequency of communication Records & documentation

Cooperative education, talent cultivation, public safety Conferences Unscheduled Press releases

Open HouseLocal residents, students and teachers, and outside parties are invited to visit the Company's factory

Unscheduled Documents and photos

Stakeholder: External- MediaConcerned issues Means of communication Frequency of communication Records & documentation

Material information of the groupFace-to-face interview, written interview, or phone interview

Unscheduled Press releases

Economic PerformanceChapter 3


About the Report




Employee Care

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About the Report




Employee Care

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Consolidated revenues - 2017

Growth from the previous year

13.07 %

2017 Gross profit

7,231

Revenues of LCY in the last 5 years

2013 2014 2015 2016 2017

49,838,862

41,980,225

35,965,047

40,080,184

45,320,290

50

45

40

35

30

million dollar

2013 2014 2015 2016 2017

Share capital 8,532,424 8,529,594 8,529,594 8,560,094 8,553,274

Consolidated Operating revenues

49,838,862 41,980,225 35,965,047 40,080,184 45,320,290

Gross profit 2,054,709 899,753 5,094,633 6,950,603 7,231,971

Income tax 746,400 5,272 490,157 652,765 946,105

Consolidated net income 1,745,554 13,158,889 9,764,483 3,993,860 3,672,663

After-tax earnings per share 0.26 9.76 11.69 4.65 4.20

Book value per share (unit: NTD)

25.93 16.72 28.75 31.18 31.67

Employee salary and benefits (Note 2)

1,972,577 1,911,294 1,859,472 2,352,385 2,513,978

Payments to capital contributors: Shareholders' dividends paid by cash

426,621 0 1,279,439 2,558,878 Note 3

Note: 1. From 2013 onwards, financial statements are being prepared using International Financial Reporting Standards

(IFRS) instead of Generally Accepted Accounting Principles (GAAP).2. Based on International Accounting Standards 19 - Employee Benefits (IAS 19).3. Pending resolution at a shareholder meeting as of 20180322.

▼ Key Performance Indicators - Economic (Note 1), Unit: NTD thousands

Economic PerformanceConsolidated revenue amounted to 45.32 billion NTD in 2017, up 13% from 2016. Generally speaking, LCY's consolidated revenue has shown steady growth in 2017. The production volume of polypropylene products has increased as a result of product differentiation. The competition between standardized products is expected to become fiercer. Therefore, LCY will continue to develop more high-value differentiated products to accommodate the ever-changing market. As for thermal plastic vulcanite, the hydrogenated product series, SEBS, was highly recognized by customers last year. The overall demands in the European and the US markets were stronger than expected. For methanol solvents, we will keep improving the production process and efficiency, moving toward high value-added Electronic grade chemicals and designing products for circular economy to increase the competitiveness of our products.


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Rubber

43.56%

PP

26.32%

Methanol and solvents

17.57% Copper foil

8.33% Others

4.22%

▼ 2017 Revenues by Product

• Rubber 43.56%

• PP 26.32％

• Methanol and solvents 17.57％

• Copper foil 8.33％

• Others 4.22％

▼ Participated Associations and Roles - 2017

Name of Association Accountable Department Method of Participation

Micro- and Nano-Metallization Process Technology Alliance, NCHU

R&D Center Chairman was invited as guest speaker

Association of Bio-based Material Industry R&D Center The department participated in training courses

Taiwan Chemical Industry Association (TCIA) Head QuarterLCY Chairman assumed the role of chairperson in the association

Chinese Institute of Engineers R&D Center Possesses membership

NCKU Cultural & Educational Foundation of Chemical Engineering Department

R&D Center Possesses membership

Kaohsiung Commerce & Trade Development AssociationKaohsiung Terminal Station (Qianzhen Site)

Possesses membership

International Methanol Head Quarter Possesses membership

Monte Jade Science & Technology Association of Taiwan Head Quarter Possesses membership

Taiwan Mergers & Acquisitions and Private Equity Council Head Quarter Possesses membership

ROC-USA Business Council Head Quarter Possesses membership

Taiwan Association of Petrochemical Industry Head Quarter Possesses membership

Taiwan Responsible Care Association Head Quarter Possesses membership

Association of Industry for Environmental Protection R.O.C. Head Quarter Possesses membership

Taiwan Institute of Chemical Engineers Head Quarter Possesses membership

The Third Wednesday Club Head Quarter Possesses membership

Cross-Strait CEO Summit Head Quarter Possesses membership

Cross-Strait CEO Summit Head Quarter Possesses membership


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To continually grow and enhance strength in innovation, LCY CHEMICAL CORP. proactively recruits talents from industries and academia to participate in various research and development projects. The goal is to facilitate the development of Taiwan's chemical industry by introducing high-value green products and technologies with lower pollution. In response to the government's policy of high value-added Chemical industry, LCY has developed green products and created differentiated value to increase competitiveness for sustainability.

In 2017, the Company invested approximately 418 million NTD in research and development. LCY obtained fruitful results from patent application, with 23 cases applied and seven patents granted. Looking at the development of new TPEs, we continue our investments in SEBS, SEPS and so on. The new TPEs can be used in areas like fiber optics, synthetic lubricants, and shock absorption, as well as temperature and pressure-resistant hydrogenated elastomers used in automobiles. As for SIS, the new products can be applied to packaging materials and used as an adhesive for medical supplies.

More than 300 million NTD was invested in green chemical R&DAlso, many new polypropylene products have been introduced and used for food grade containers, medical instrument components, and electrical appliance cases due to their properties of heat resistance and thermal stability. Meanwhile, LCY is developing foam-grade polypropylenes that, given their thermal resistant, non-toxic, eco-friendly and recyclable nature, are suitable for high value-added applications such as automobiles, electronics, and food packaging.

As for the reuse of C5 and development of related derivatives, LCY had developed new technologies and begun production integration in 2017. The production process is expected to be revisited and on-site verification will be conducted in 2018. Development of alternative materials remains an ongoing process, while the bioprocess is being adopted for laboratory assessments and C4/C5 production. Several R&D teams, including a chemical science team, a materials science team and an engineering science team, have been assembled to improve production processes for special chemicals for electronics, electronic materials, printed electronics and electronic grade solvents, and design the

hydrogenation process for the aforementioned products. The R&D teams provide hydrogenation technology and molecular design services for customers and are actively involved in the markets of special chemicals and chemical materials. They have successfully commercialized polymer catalyst and next-generation display materials.

Meanwhile, the Company continues its focus on the application of Polypropylene Composite Materials and Alloys (PCMA) and has produced various advanced PCMA that can be widely used in the industries, such as the cable industry, the healthcare industry or the food packaging industry. After joining the automobile industry alliance, the Company developed Globalene TM TPV, which, with its properties of high heat-resistance, high oil resistance and pressure resistance against deformation, is suitable for automotive components. LCY also keeps working on researching and developing thin film filter technology and relevant products that can be used for chemical engineering, healthcare, and water recycling and reuse to satisfy current and future needs.

▼ R&D Expenses- Consolidated (Unit: NTD thousands) ▼ Research and Development Expenses – Standalone (Unit: NTD thousands)

Item\Year 2013 2014 2015 2016 2017

R&D expenditure 310,717 310,823 194,803 346,603 418,167

Net operating revenues 49,838,862 41,980,225 35,965,047 40,080,184 45,320,290

Ratio of R&D expense to net operating revenues

0.62% 0.74% 0.54% 0.86% 0.92%

Item\Year 2013 2014 2015 2016 2017

R&D Expenditure 205,142 238,642 262,371 332,375 403,161

Net Operating Revenues 30,663,860 24,679,654 18,510,694 21,314,102 24,210,890

Ratio of R&D Expense to Net Operating Revenues

0.67% 0.97% 1.42% 1.56% 1.67%


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Innovation, research & development and future engine for growth

Investing in Gecko Robotics

In 2017, the company made one million USD investments in Gecko Robotics. It is hoped to bring in the industrial robot that can be used for boiler inspection in petrochemical plants to Taiwan and tap into the factory inspection business once the technology is mature.

Collaborating with the Plastics Industry Development Center to promote 3D printed shoes

LCY CHEMICAL CORP. focuses on the research and development of flexible filaments such as SEBS and SIS and possesses the critical design of fed printing machines. Through collaboration with an R&D alliance named " Printed Cloth Product Applications" established by the Plastics Industry Development Center, with the application of machine IoT and industrial Fused Deposition Modeling (FDM) machines built by both parties, LCY has moved into the industrial process area by introducing the digital manufacturing process and debuted its new 3D printed shoe with an SIS sole.

Attending the World Economic Forum to look for the future growth engine

LCY upholds dynamic, positive and innovative entrepreneurial spirit and is actively involved in external organizations to reach out to global business leaders, technology experts, academia, NGOs, members from various forums and partners for an exchange of opinions, in the hope to boost the economy and promote international cooperation.

LCY CHEMICAL CORP. has been in membership of the World Economic Forum (WEF) since 2012. WEF is a non-profit foundation established in 1971, based in Geneva, Switzerland. The forum is best known for its annual meeting, also known as Davos Forum, held each winter in the Swiss town of Davos. The conference brings together international business and political leaders, academia, and media to discuss the most pressing economic issues facing the world.

In 2017, Chairman Bowei Lee attended the WEF, marking his 6th consecutive year of participation in the event. Through the experience gained from the economic forum, LCY aims to facilitate the development of Taiwan's Chemical industry.


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LCY TECHNOLOGY CORP. is expected to go public in 2018LCY TECHNOLOGY CORP. (LCYT), an emerging stock company founded by LCY CHEMICAL CORP., specialized in innovative and quality copper foil products. Established in 1997, LCYT is a major supplier of copper foil products in the domestic printed circuit board (PCB) and copper clad laminate (CCL) markets. Its principal products include 9um thin foil, 1/2oz, 1/3oz, 1oz and 2oz copper foil, high-quality copper foil products that focus on niche-market applications. As the lithium-Ion battery industry thrives on the flourishing electric vehicles market, demands for standard copper foil from PCB manufacturers are increasing as well. LCYT applied for listing on the Taiwan Stock Exchange and passed the review of securities listings on February 13, 2018.

What is copper foil?

Copper foil is the upstream raw material of PCB which is also the core of the electronics industry. As a medium for data transfer, the copper foil used in circuit boards plays a crucial role in the smooth transmission of signals. Copper, silver, and gold are all highly conductive, among which copper has an incomparable price advantage. Therefore, the material has been widely used in printed circuit boards for signal and current transmission. In recent years, along with the emergence of in-car consumer electronics and IoT, demands for various PCB copper foil products have grown stronger.

Excellent performance of LCYT's copper foil products

Diversity and tailor-made services are the biggest competitive advantage of LCYT. The Company can produce high-purity copper that is nearly 99.99% and cut products according to the size required by customers. Copper foil products look similar from outside; however, the difference is easily seen under the microscope. The surface structure of copper foil can affect its conductivity and the adhesive strength between the copper foil and PP. Therefore, it is a challenging and craftsman-like work to produce thinner and smoother copper foil with strong physical properties that can be used in circuit boards smaller than a thumb and achieve swifter signal transmission in a shorter distance. LCYT has highly flexible production lines and continues to identify and remove bottlenecks to increase production efficiency. Therefore, our production lines are of high quality and stability. In the future, LCYT looks to develop copper foil products for multilayer, high density, thinner and high-temperature PCBs.

Future development potential

Facing the increasing demands for thinner, smaller and more efficient consumer electronics and rapid advancement of IoT and cloud computing technologies, the downstream CCLs also need thinner copper foil with lower surface roughness. Currently, LCYT has launched products with the ultra-low roughness that can be applied to HDI and high-frequency PCBs, which are used for automobile collision warning radars, GPS systems, servers, etc. The business prospects of LCYT is looking bright in the future.

LCYT supplies copper foil products in the domestic PCB and CCL market. Copper foil, the upstream raw material of PCB, is used for data transmission and crucial for smooth signal transmission in circuit boards.

▼


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High-performance plastics Healthcare-grade PP productsLCY takes the initiative in adjusting the product portfolio, marching toward high-profit and high-value products. For the polypropylene products under the Performance Plastics (PP) Division, we have successfully developed healthcare grade polypropylene products that are specifically designed for medical appliances. The newly-developed polypropylene features high-transparency, low migration, and low ash content, and can be applied to medical products, such as dialyzer housing, contact lens molds/blister packages, non-prefilled syringes and IV bottles. In 2017, healthcare grade products accounted for 16% of revenues in the Performance Plastic Division.

From formula design, production, clean room packing, traceability, marketing to the final usage, every aspect of our products all comply with the highest industry standards: ISO13485 - Quality Management System for Medical Devices. LCY only provides best-quality products. The manufacturing process and packaging system of our products are ensured to be the cleanest and the most secure to provide customers in the medical field with healthcare grade raw materials that are safe and of consistent quality. LCY thus is the most trusted PP brand in the healthcare industry. Also, our healthcare grade PP products all have passed relevant standards for medical devices and obtained certifications, including USP, DMF and applicable medical standards and regulations in China, to endorse the use of our healthcare grade products in medical applications.

▼Healthcare grade PP products are certified with national and international standards:

• US Pharmacopoeia Class VI

• YBB002-2002 (PP infusion bottle)

• Polypropylene material for the manufacture of infusion, transfusion and injection equipment for medical use

• United States Pharmacopeia (USP)

• Drug Master File (DMF)

• European Pharmacopoeia

• ISO 10993-Biological Evaluation of Medical Devices

• Biotoxicity safety test

▼Share of Revenues from Healthcare-grade Products in the Performance Plastic Division

02016 2017

5

10

15

2016%

13%


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Increasing TPE production to tap into the business opportunities offered by American Infrastructure Initiative

To seize the business opportunities offered by President Trump's American Infrastructure Initiative, LCY will continue to upgrade our production processes. Currently, our Xiaogang Site, US Site and Huizhou Site in China have constructed new plants to expanded production of TPE. From the first quarter of 2017 to the first quarter of 2018, the new plants have been commissioned. The total output is estimated to reach 59 tons, achieving an annual growth rate of 25%. TPE can be applied to many areas. Among those, improvement in asphalt pavements consumes the largest amount of TPE. Since the US has been promoting its infrastructure plans, it is expected that the Company's business will grow further.

In 2017, TPE products accounted for 43.56% of revenues. The application of TPE mainly involves five areas. It, in replacement of PVC and natural rubber, can be used for shoe

soles, asphalt modifiers, roof waterproofing, adhesives (SEBS, SBS, SIS) and medical devices (PP with SEBS).

LCY's global output of TPE is around 470 thousand tons in total, earning its place as the second largest TPE producer in the world. This year, our Xiaogang Site, US Site and Huizhou Site in China will continually expand production capacities. By the first quarter of 2018, TPE production is expected to increase to 560-590 thousand tons, only a step away from approaching 600 thousand tons and with a 25% growth.

Currently, in the Huizhou Site, the output is 300 thousand tons. A new SEBS production line with the annual production of 40 thousand tons will be added and commissioned this quarter. As for the Xiaogang Site in Kaohsiung, the third SEBS production line is removing bottlenecks. It is expected that its annual production capacity will increase to 110 to 120 thousand tons, rising from 70 thousand tons. The third SEBS production line is planned to be commissioned in the fourth quarter, with the aim of increasing the output of the Xiaogang Site from 120 thousand tons to 180 thousand tons. Following on, the US TPE production line will proceed to remove bottlenecks, increasing its production from 50 thousand tons to 70 thousand tons. Its bottleneck removal work will be completed in the first quarter of 2018.

TPE can be employed for a broad range of products, including shoe soles, asphalt modifiers, waterproofing coatings, adhesives, plastic products and medical devices. Among these, asphalt modifiers take up the largest consumption of TPE. As the US President Trump unveiled the American Infrastructure Initiative, undoubtedly, the demand for asphalt will grow, and so will the business of LCY's US Site.

The use of PVC is restricted in some countries, where TPE could act as a suitable replacement. Also, natural rubber needs to undergo the process of vulcanization to be used for tires. However, it decomposes very slowly and requires recycling. TPE, instead, breaks down by exposure to the UV radiation and can replace the natural rubber. Moreover, since President Trump has emphasized the importance of infrastructure after taking over the office, the demand for TPE used for asphalt modifiers is believed to increase.


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Corporate GovernanceChapter 4


About the Report




Employee Care

Social Engagement



Shareholders

Board of Directors

Chairman

President

Chief OperatingOfficer

Rubber Business Unit

R&D Dept Finance Center

Procurement Division

Finance Department

Environmental RiskManagement Dept

Methanol and SolventsBusiness Unit

Performance PlasticBusiness Unit

Strategic Division

Supervisor

Secretariat

Audit Department

Special Committee onMergers and Acquisitions

RemunerationCommittee

Legal AffairsDepartment

Managementand Planning Dept

HumanResources Dept

The highest standard of corporate governance practice to ensure functionality of the board of directors

All of our directors have deemed the Company's and shareholders' long-term interests as the top priority, and exercise their duties independently and objectively. We are also deeply aware of the fact that corporate governance and the existence of independent directors, increasingly, are becoming major indicators for local and foreign institutional investors and stakeholders in considerations of their investments. For this reason, we continue to act up to the principles of corporate governance by having shareholders elect the board of directors and creating functional committees to support the operation of the board. We adopt the highest standard of corporate governance practice to ensure the functionality of the board of directors, and thereby protect shareholders' interests.

▼ Organization Chart


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Enhanced functionality of the board of directorsThe board of directors is the highest corporate governance unit. There were six directors in the year of the report, two of whom were independent directors. Independent directors made up 33.33% of the board in order to create a more independent and diverse board and fulfill the function of supervision and strategic guidance. The board meeting was convened at least once per quarter. In 2017, there were seven board meetings in total. The average attendance rate was 97.96%. The chairman of the board of directors was Mr. TH Hong, who oversaw all corporate governance practices and hosted board meetings. Following "Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies," LCY stipulates that when choosing board nominees, the board's composition should be taken into account. The considerations to establishing a board of directors include the good judgment in business running and management, analytical skills in accounting and finance, crisis management ability, industry knowledge, global vision, leadership and decision-making ability. The board also complies with "Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed Companies" and organizes training courses for board members.

In keeping with corporate governance principles, the board of directors reviews the company's business performance and discusses critical strategic issues, including economic, environmental and social impacts, risks and opportunities associated with business activities. Significant resolutions of the board are announced immediately on the websites of MOPS and LCY CHEMICAL CORP. Information, such as the Articles of Incorporation, the Rules of Procedure of the Board of Directors, directors’ remuneration, operations of the board and implementation of conflict of interest management policies, has been publicized and made readily accessible to local and foreign investors. The LCY board of directors also established the Remuneration Committee which consists of independent directors, experts, and scholars. The board has elected supervisors as well.

▼ The training courses and hours received by the board members

Title NameInaugural

date

Training

course

date

Organizer Course Hours

Total

training

hours in

2017

Independent director

Liu San-Chyi

2016/06/21

2017/11/28 Taiwan Corporate Governance Association

Corporate Governance and Securities Regulation

3

92017/09/07 Securities and Futures Institute Case Studies on Offenses of Breach

of Trust and Special Breach of Trust Committed by Independent Directors

3

2017/07/07 Securities and Futures Institute The Presentation of Insider Trading Compliance

3

Independent director

Wang Ya-Ger

2016/06/21


3

62017/05/31 Taiwan Corporate Governance

AssociationCorporate Governance and Securities Regulation

3

ChairmanTsai-Hsin Hung

2017/04/25



3

12

2017/10/18 Securities and Futures Institute Corporate Strategies and Key Performance Indicators

3


3



3

Director of Board

Wei Cheng-Chen

2016/06/21



3

92017/08/01 Securities and Futures Institute The Presentation of Insider Trading

Compliance3



3


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▼ The training courses and hours received by the board members

Title NameInaugural

date

Training

course

date

Organizer Course Hours

Total

training

hours in

2017

Director of Board

Wang Shou-Ren

2016/06/21



3

92017/08/01 Securities and Futures Institute The Presentation of Insider Trading

Compliance3



3

Director of Board

Li Ming-Kung

2016/06/21



3

62017/05/31 Taiwan Corporate Governance

AssociationCorporate Governance and Securities Regulation

3

SupervisorWang Kuen-Tsann

2016/06/21


The 13th International Forum on Corporate Governance

6

18

2017/09/28 Taiwan Stock Exchange Corporation

2017 Mr. Y. D. Sheu Memorial Economic and Financial Forum

6


3



3

SupervisorChuang Hsun-Chia

2016/06/21


The 13th International Forum on Corporate Governance

3

6Securities and Futures Institute The Presentation of Insider Trading

Compliance3


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The establishment of the Remuneration Committee to assist in salary evaluation

The Company established the Remuneration Committee in accordance with the Article 14-6 of the Securities and Exchange Act. Members of the committee are appointed by the board of directors and shall be no fewer than three people. The Remuneration Committee consists two independent directors and one expert. In 2017, the committee convened four meetings and achieved 100% attendance. The Remuneration Committee helps the board assess the compensation of directors, supervisors, and managers by associating it with the company's business performance, determine bonus allocation, and make suggestions about managers' salary and the company's salary policy. The committee also devises company-wide compensation strategies based on the industry competition, business performance, and market rates. Furthermore, LCY participates in salary surveys conducted by industry associations and consultancy companies and regularly reviews and compares the company's salary/ benefits relative to the labor market to design a system with greater incentives for employees. Employee remuneration is approved by the board of directors, reported in shareholder meetings, and disclosed in the company's annual report on a yearly basis.

Election of supervisors to oversee all activities and operations related to finances, human resources, and audits

LCY CHEMICAL CORP. elected two supervisors in accordance with the “Securities and Exchange Act.” Seven board meetings were held in 2017, with 100% attendance of the supervisors, one of who specializes in accounting or finance. Supervisors are responsible for supervision of the company’s financial statement presentation, appointment/dismissal of the independent auditor, review of the independence and performance of independent auditor, implementation of the internal control system, regulatory compliance, and management of existing or potential risks.

Maintaining business integrity for better protection of shareholders' interests

We have drawn up: (1) LCY Chemical Corporation Corporate Governance Principles, (2) LCY Chemical Corporation Integrity Code of Conduct, and (3) LCY Chemical Corporation Insider Trading Prevention Policy, in compliance with the "Corporate Governance Best-Practice Principles for TWSE/TPEX Listed Companies" and "Corporate Governance Self-evaluation Criteria" developed by TWSE Corporate Governance Center. The board of directors and management are committed to fulfilling their promises of business integrity and enforcing the business integrity policy through internal management and commercial activities. In 2017, the Company received no complaint concerning the Company or employees' violation of business integrity or involvement in illegal activities.

▼ Board of Directors

Title The 21st board of directors/ supervisors Gender30 years old and

above

ChairmanRepresentative of Huili Enterprise Co., Ltd.: TH Hong

Male ✓

Director of Board

Representative of Huili Enterprise Co., Ltd.: Wang Shou-Jen

Male ✓

Director of Board

Representative of Shihua Investment Co., Ltd.: Li Ming-Kung

Male ✓

Director of Board

Representative of Huili Enterprise Co., Ltd.: Wei Cheng-Chen

Male ✓

Independent Director

Wang Ya-Ko Male ✓

Independent Director

Liu San-Chi Male ✓

SupervisorTaiwan Polypropylene Co., Ltd. Representative: Chuang Hsun-Chia

Male ✓

SupervisorTaiwan Polypropylene Co., Ltd. Representative: Wang Kun-Tsan

Male ✓


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Precautionary principle and risk managementRegarding the Company's risk management policies and assessment criteria, LCY has established and effectively implemented a comprehensive internal control system in accordance with the Regulations Governing Establishment of Internal Control Systems by Public Companies. We also review and examine the system on a regular basis, to respond to changes inside and outside the company and ensure the design and implementation of the system to be effective continuously.

Risk management policies are crucial for organizations. The

▼ Risk Management Structure

RiskResponsible units for

risk management

Financial risk

(1) Fund management (2) Foreign exchange risk management (3) Property security risk

Financial Department

Operational risk

(1) Internal control risk (2) Legal risk (3) Cyber security (4) Investment risk

Auditing Office Legal Department IT Department Business Planning Department

Environmental risk

Risk in factories

Environmental Risk Management Department Industrial Safety and Environmental Protection Office of each factory

way of a company being responsible for strengthening its operation is to identify accident risks and precisely carry out risk management measures, reducing risks and dangers for business running to achieve sustainability.

• Board of directors (auditing office included)

○ Establishing the risk management policy, structure, and culture

○ Ensuring the effectiveness of risk management systems and distributing resources

• Senior management (Steering Committee)

○ Executing risk management decisions made by the board of directors

○ Coordinating risk control activities and communication between departments

CY has precisely implemented various risk management measures to reduce risks and dangers for business running and achieve sustainability.

▼

• All responsible units of the headquarter (the environmental risk management department as planned)

○ Compiling information on the practices of risk control

○ Assisting and overseeing the risk management operation of subordinate units

○ Modifying risk categories and advising response measures according to environmental changes

○ Conducting performance assessment and coordination of risk adjustments

• Subordinate units

○ Carrying out daily operations of risk management

○ Self-assessment of risk control


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Regulatory compliance

All of our business activities are compliant with local and international laws and regulations, which provides the foundation for business continuity. We established a series of internal rules in 2017, including “Confidential Document Management Policy” in accordance with the Trade Secrets Act of the Intellectual Property Office, Ministry of Economic Affairs, and “Information Security and Personal Information Protection Policy” in response to the Personal Information Protection Act. Furthermore, we have reviewed the results of the internal rules enforcement according to the three compliance indicators required explicitly in the GRI standards.

• Environmental compliance: Please refer to “Appendix 4: Violation of Environmental Regulations and Penalties received - 2017” for a detailed list of violations against environmental laws and regulations and penalties received in 2017.

• Compliance with social regulations: The Company committed no violation and was not subject to any significant fines for non-compliance with laws and regulations concerning financial reporting, workplace discrimination, corruption or any other social issues in 2017. The Company did not receive any non-monetary sanctions during the year for the above issues.

• Compliance with regulations on the sale of products: The Company committed no violation and was not subject to any significant fines for non-compliance with laws and regulations concerning the provision and use of products and services in 2017.

• No incidents of corruption were reported in 2017.

• No substantiated complaints regarding breaches of customer privacy and losses of customer data in 2017.

• No incidents of non-compliance with regulations and voluntary codes concerning marketing communications in 2017, including advertising, promotion, and sponsorship.

• No sale of disputed products in 2017.

• No incidents of non-compliance with regulations and voluntary codes concerning product and service information and labeling in 2017.

• No incidents of non-compliance with regulations and voluntary codes concerning the health and safety impacts of products and services during their life cycle in 2017.

We regularly organize meetings to identify the latest legal obligations, conforming to applicable regulatory requirements during daily operation.

The person in the picture is the Factory Director of Kaohsiung Site, Sheng-ting, Lin, who conducted a meeting to discuss EHS regulations and review the outcomes of EHS regulatory enforcement.


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Customer satisfaction survey

2013 2014 2015 2016

91%

2017

91%

90%90%90%

Customer satisfaction surveyWe conduct customer satisfaction surveys on a yearly basis. According to the results of the surveys, LCY scored 91 averagely. Domestic customers were especially satisfied with and gave positive feedback on business services and customer services, while export customers had higher satisfaction with product quality, business services, and customer services. For more details about the methods and results of the survey, please refer to customer satisfaction surveys statistics.

Customer satisfaction surveys statistics: Domestic customers

• Sampled period: 2016/08/01~2017/7/31

• Sampled subjects: Customers that accounted for 91.5% of total shipments

• Effective samples: 148

• Recovery rate: 71%

• The average score of overall performance by customers: 91.2

• Business services - 99%, customer services - 99%

Customer satisfaction survey statistics: Export customers

• Sampled period: 2016/08/01~2017/7/31

• Sampled subjects: Customers that accounted for 89.9% of total shipments

• Effective samples: 132

• Recovery rate: 88%

• The average score of overall performance by customers: 91

• Product quality - 97%, business services - 96%, customer services - 96%


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Environmental ProtectionChapter 5


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▼ List of Third Party EHS Management Certifications Obtained by Each Business Site

Energy-saving program

ISO14064-1 - Organisation Quantification and Reporting

of Green House Gases

ISO 14001 - Environmental management

systems

ISO 50001 - Energy

management

OHSAS 18001 -

Occupational Health and

Safety

AED certification issued by MOHW

ISO 14046 - Water footprint

Dashe Site

✓ ✓ ✓ ✓ ✓

Kaohsiung Site

✓ ✓ ✓ ✓ ✓

Xiaogang Site

✓ ✓ ✓ ✓ ✓

Linyuan Site

✓ ✓ ✓ ✓ ✓ ✓

Kaohsiung Terminal Station

✓ ✓ ✓ ✓

R&D Center

✓ ✓ ✓

Obtaining various third-party accredited certifications for EHS and implementing EHS standardsLCY has continually implemented the Environment, Health, and Safety (EHS) standards and been verified by third-party agencies. We establish a comprehensive set of policies encompassing areas of environment, safety, health, security, and energy. The Company is committed to conforming to rules and regulations and requirements of international quality standards, carrying out the policies and standards during our daily operations. Up to date, the Company has acquired various third-party accredited certifications, including ISO14064-1 - Organization Quantification and Reporting of Green House Gases, ISO 14001:2015 - Environmental management systems, ISO 50001 - Energy management, OHSAS 18001 - Occupational Health and Safety, the AED certification issued by the Ministry of Health and Welfare (MOHW). Also, our Linyuan Site has earned the ISO 14046 certification of the water footprint. To learn more about the third-party accreditation and certification obtained by each business site, please refer to the "List of Third Party EHS Management Certifications Obtained by Each Business Site."

Kaohsiung Site earned several EHS awards and third-party certifications in 2017


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LCY CHEMICAL CORP. is the only company in Taiwan that produces high-purity Electronic-grade Isopropyl Alcohol (IPA) and acetone (DMK) through vertical integration. The Company also provides the high purity product portfolio (control limit < 0.1 ppb) and Electronic-grade IPA & Acetone recycling services. LCY accounts for 80% market share in Taiwan's TFT-LCD industry. Our excellent quality products have been extensively used by leading high-tech companies; for instance, the cleaning agents that are used by high-tech industries (e.g., IC, TFT-LCD, and LED) and are highly effective in removing water spots and particles. We also provide ODM services for renowned international chemical companies.

IPA is an essential raw material for petrochemicals. Reagent-grade IPA (for general use) can be used to produce flavoring essences, solvents, and cosmetics, while Electronic-grade high-purity IPA is used for wafer cleaning to remove organic substances on the surface of wafers. When IPA is elevated to Electronic grade, apart from wafer cleaning, it can also be applied to the photoelectric industry, such as use for panels, solar power,

and semiconductors. In recent years, consumption of Electronic-grade IPA by Taiwan's semiconductor industry has been increasing.

The waste from the use of Electronic-grade IPA will cause pollution if downstream factories incinerate it. As the largest scale manufacturer of Electronic-grade IPA in Taiwan, LCY has shifted traditional ways of waste management and successfully developed a new waste liquid recycling technology, assisting our downstream clients in recycling and reusing IPA waste liquid. The method we adopt is purifying the waste liquid first and then recycling it. First, 10% waste is mixed with 90% water and then separated by using our purification technology to produce industrial grade products, which maximizes surplus value, reduces environmental impacts significantly and forms a beneficial circular economy.

Moreover, the Company also established an IPA analysis laboratory to perform quality assurance before delivery, ensuring that water content, impurities, and metal ion content of our products are standards-compliant. LCY, as a major supplier of cleaners for the semiconductor cleaning process,

▼The manufacturing process of Electronic-grade IPA

Petroleum Chemicals

Wafers Solar panels Led bulb

High purityLCY Electronic-grade IPA、A cetone

TFT-LCD、

Touch Panel

Electronic products are available in a variety of packaging

LCY's high-level Electronic-grade IPA and Acetone recycling service won the Award for Circular Economy Contribution in 2017

Green Product -1

again proves to the world its dominant position in leading the transformation of the petrochemical industry in Taiwan by addressing pollution from the source and keeping up with global trends. In the past, the petrochemical

industry was often regarded as a high-polluting industry. The Company now has moved toward green and high value-added products, striking a balance between economic development and environmental protection by turning waste into gold.


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LCY's MBR technology for wastewater recycling and reuse won the Award for Circular Economy Contribution in 2017Despite that industrial water accounts for less than 10% of water consumption in Taiwan, it presents the high potential to reduce water consumption substantially through recycling and reuse. In February 2016, LCY introduced its proprietary Membrane bioreactor (MBR) technology. Along with the Company's biological waste treatment system, the MBR system is effective to recycle up to 90% of industrial wastewater generated from the chemical manufacturing process and household sewage for reuse, making it a high-quality water treatment system pulling ahead of the industry and marching toward zero liquid discharge. To add additional splendor, LCY's MBR technology for wastewater recycling and reuse won the Award for Circular Economy Contribution in 2017.

The MBR vessel features fiber membranes that look like white threads to filter chemical substances and sludge in the wastewater. The treated water filtrated through the MBR system (reclaimed water) can be reutilized directly for the cooling tower make-up water or exhaust cleaning of flares. Industrial water is filtered and treated through the MBR process to generate clean water for sanitary usage. Thanks to the proprietary MBR technology for wastewater recycling, LCY has become one of the few manufacturers in Taiwan who are capable of locally producing the PVDF Hollow Fiber MBR System for

large-scale production and commercial applications. The pore size is only 0.05 μm, so small that even Escherichia coli cannot penetrate. The MBR system currently is in use in our Kaohsiung Site. Every day, the Kaohsiung Site produces700 tons of effluent containing various heavy metals. With three MBRs in place, the factory's wastewater is treated, fully recycled and converted into water that can be reused for other purposes. By doing so, not only will the business have sufficient water supply, but also the industrial water consumption can be significantly reduced.

LCY CHEMICAL CORP. is the only company in Taiwan involved in the commercial use of the MBR water recycling system, aiming to turn the industrial waste into raw materials for other usages. The proprietary MBR technology demonstrates our effort invested in innovation, research and development and high value-added products based on the focus of circular economy. This is our first step to test the water of the recycling business. Although several multinational companies have been strong market players, their focus is mainly on high volume orders. Given that, LCY looks to tap into the niche market of small and medium-sized factories by offering customized solutions. We are confident to see higher revenue growth from the benefits unlocked by the circular economy of wastewater recycling.

Green Product - 2

The Membrane bioreactor (MBR) technology developed by LCY features fiber membranes that look like white threads to filter chemical substances and sludge in the wastewater.


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▼本公司採MBR技術的化學薄膜，能讓工廠無須消耗能源，便可完全回收廢水。

The demonstration area of the MBR water-recycling system in Kaohsiung Site. After filtration, the recycled water can be used for the fishpond.

The central control room of the MBR water-recycling system in the Kaohsiung Site.

Teaming up with the Aqua A-Team of Taiwan Water

Corporation

In November 2017, LCY joined the “Aqua A-Team. Taiwan (AATT)” assembled by Taiwan Water Corporation. AATT then participated in the exhibition of SMART ASIA 2017 hosted in India, showcasing Taiwan's strength in smart water management. Although LCY did not go to the

LCY's MBR system for water recycling makes the Company one of the few manufacturers in Taiwan who are capable of locally producing the PVDF Hollow Fiber MBR System for large-scale production and commercial applications. The pore size is only 0.05 μm, so small that even Escherichia coli cannot penetrate. The system now is in use in LCY's Kaohsiung Site.

▼

exhibition with the team, our advance MBR technology has already drawn attention at the international stage.

The Aqua A-Team led by Taiwan Water Corporation scrutinizes potential niches of water management. Also, Taiwan's water industry has accumulated sufficient strength for a takeoff in smart applications and integrated the high-end supply chain of the local water industry, which led to the creation of AATT in a bid to compete for international orders as a group.


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Thermoplastic vulcanizates (TPV) - the new generation green rubber

Rubber, a polymer with high elasticity, is an essential industrial raw material, also called elastomer. Rubber can be divided into two types by its sources, natural rubber (NR) and synthetic rubber (SR). Both need to be vulcanized and processed to turn into usable rubber products.

Traditional vulcanized thermoset rubber products are highly energy-consuming, highly-polluting, inefficient and difficult to recycle with high residues. These issues have limited further development of rubber products in recent years due to the increasing environmental awareness. It is pressing to develop the new generation green rubber, which offers a rare business opportunity for thermoplastic elastomer (TPE) and Thermoplastic vulcanizates (TPV) .

LCY has focused on expanding the product lines of TPE and TPV over the past few years. Compared to traditional rubber products, TPE and TPV have several advantages: easier to process, lower energy consumption during manufacturing process, less pollution, higher efficiency, reusability and recyclability.

TPE can possess the same elastic properties as the vulcanized rubber under room temperature. However, at elevated temperatures, TPE is more susceptible to deformation compared to vulcanized rubber.

TPV, as one of the thermoplastic elastomers with a broad range of hardness values and a variety of applications, has excellent elastic properties with compression set resistance and high-temperature resistance. TPV can be used for either extrusion or injection molding, mainly in the following areas: (1) Architecture seals; (2) Automotive weatherstripping, such as door seals, quarter window seals, glass run channels and belt line seals; (3) Wire and cable; (4) Other applications such as overmolding,, seal rings and gaskets.

TPV is convenient for recycling to save cost. Scrap and rejected products from the injection molding or extrusion manufacturing process can be recycled and reutilized directly. Used TPV products are also easy to recycle and can be remade into other items, helping reduce environmental impacts and increase the utilization rate of renewable resources.

TPV features

• In possession of physical and mechanical properties of vulcanized rubber and the processability of plastics

• TPV can be applied to a wide range of manufacturing processes using various thermoplastic processing technologies, such as injection, extrusion molding, blow molding, and compression molding.

• Scrap and waste generated during the manufacturing process and rejected products can be recycled and reused straightaway, which helps save the total production cost.

• Used products are easy to be remade into other items to reduce environmental impacts and increase renewable resources.

• No need for vulcanization and energy-saving.

• Simpler formula than thermoset rubber lower the influence of compounding ingredients on polymers, enabling more controllable quality and performance.

LCY has focused on expanding the product lines of TPE and TPV over the past few years.

Green Product - 3

▼


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PP foam cups that are more eco-friendly than paper cups Safe, heat-resistant, non-toxic and 100% recyclableLCY employed the company's 40-years experience in the production and research and development of polypropylene (PP) products, developing its innovative proprietary product - linear crystalline polymer: PP foam, which broke the limit of the foamability that only possessed by high melt strength PP. The PP foam products produced through physical foaming process can be widely applied to different products and used in various applications; for example, food packaging, medical devices, automobiles, construction, industrial products and baby products.

Take food packaging as an example. Many people probably do not know that the material of paper cups they use for takeout is hard to recycle. The reason is that conventional paper cups are made from paper laminated with plastic, making them difficult to separate and recycle. Therefore, most paper storage containers are incinerated, resulting in environmental pollution and increased carbon emissions. Also, the most common packaging material for instant noodle containers is styrofoam. However, styrofoam is not resistant to high temperature, so it is not suitable for the packaging of instant products. PP foam, instead, is light, hot and cold insulated, non-toxic, heat-resistant, eco-friendly and fully recyclable, making it an environmental-friendly, safe and healthy food packaging material.

LCY's newly developed PP foam is produced through physical foaming process by using liquefied gases, such as carbon dioxide, butane, pentane, and eco-friendly refrigerants. By means of their high solubility and diffusivity, the properties possessed by supercritical fluids, pores of the PP foam product are even and smooth. Also, high-magnification foam

products can be manufactured unremittingly. Compared to chemical or electron crosslinking, this approach is low-cost, environmental-friendly, recyclable, without chemical residues of foaming agents, and scentless. Because PP foam is more-friendly to the environment than other foam materials, it is also called "green foam." Its remarkable performance makes PP foam products an ideal replacement for polystyrene (PS), polyurethane (PU) and polyethylene (PE), becoming a rising star with the merit of extensive applications and market potential.

LCY passed the Safety Verification of Food-contact Plastic Materials (FCPM)

Polypropylene is safe, heat-resistant, non-toxic and recyclable. Due to these features, PP is widely used in various daily supplies and regarded as one of the most earth-friendly plastic materials. LCY has been working with research institutes and leading enterprises in the country and abroad to develop differentiated products. The Company is pioneering in production process improvement, catalytic reaction, processing, and applications, accommodating the ever-changing market and diverse needs of the customer. We are the first in the industry to introduce the ISO 13485 Medical Devices Quality Management System as well as the first company to obtain the Safety Verification of Food-contact Plastic Materials (FCPM). Also, the Process Safety Management (PSM) system has been implemented to ensure the quality of products with the highest standard.

Green Product - 4


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Responsible utilization of materials and packaging materialsWe recognize that, under the idea of circular economy, we are supposed to create a closed-loop supply chain to well-utilize renewable resources or recycled materials to produce products. Despite that we have successfully launched several outstanding projects of the circular economy, such as the MBR system for water management and the IPA and DMK recycling service, at this stage, it remains difficult to realize the circular idea in the areas of raw materials and packaging materials.

LCY is an upstream supplier of raw materials for many industries, providing all sorts of sophisticated chemical products for our clients who then process them into finished products. Given that, formulas of these raw materials must meet the requirements made by our clients, without impurities mixed up causing damages to the precision of finished products. Therefore, most of the raw materials and packaging materials we use are unrenewable. However, we have done all we can to use these valuable materials and packaging resources responsibly and avoid any unnecessary waste, trying as hard to contribute as much as possible to protect our planets. The Company has been collecting more detailed and complicated data every year to enhance the efficiency of our procurement strategies of materials and supplies. For more details about the materials used, please refer to the "Statistics: Materials Used & Recycled Products and Its Packaging."

▼Statistics: Materials Used & Recycled Products and Its Packaging

Type Name Unit

Renewable Unrenewable

Subtotal

Volume Percentage Volume Percentage

Raw material

Butadiene ton 39,065 100% 0 0% 39,065

Styrene ton 24,684 100% 0 0% 24,684

Propylene ton 0 0% 387,617 100% 387,617

Process oil ton 11,208 100% 0 0% 11,208

Hydrogen ton 0 0% 156 100% 156

Water ton 0 0% 131,854 100% 131,854

Ethylene ton 0 0% 20,096 100% 20,096

Subtotal 74958 12% 539,723 88% 614,681

Sub-material

Lubricant ton 1 0% 0 0% 1

Process Residual Gases (boiler)

km3 3,330 0% 0 0% 3,330

Subtotal 3,331 100% 0 0% 3,332

Semi-finished product or component

PP Flake (monomer and dimer included)

ton 0 0% 336,669 100% 336,669

Subtotal 0 0% 336,669 100% 336,669

Packaging material

Bulk bag (assembly) ton 0 0% 363 100% 363

PE bag ton 0 0% 7 100% 7

Laminated woven bag for resin

ton 0 0% 656 100% 656

Subtotal 0 0% 1,026 100% 1,026

Total 78,289 8% 877,418 921% 955,708


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Energy managementTo achieve our goal of climate change mitigation, LCY has made efforts in improving energy management. With more sophisticated and complicated data collection year by year, we have kept track of the amount of purchased electricity and the use of renewable energies and other energies, to support our energy policies and increase energy efficiency. These long-term records and information disclosures help us revisit our energy policies and measures every year to see if we have progressively achieved the established targets each year. Electricity takes up a large proportion of the Company's energy consumption. For more information, please see the Energy Consumption Statistics. What's worth mentioning is that in 2017, LCY purchased 388,089 tons of steam, the by-product generated from the manufacturing process of the China Steel Corporation (CSC). This excellent idea came up 25 years ago converting CSC's unwanted exhaust into a usable resource of ours, exemplifying the best case of a circular economy.

▼ Energy Consumption in 2017

Energy Sources UnitKaohsiung

SiteR&D Center Dashe Site

Kaohsiung

Terminal

Station

Linyuan Site Xiaogang Site

1 - Natural Gas (NG)thousand cubic meters

1,956 0 1,556,007 0 7,394,410 1,752

2 - Liquefied Petroleum Gas (LPG) ton 0 0 0 245 0 0

3 – Steam (self-produced) ton 91,726 0 126,913 0 0 32,661

4 – Steam (purchased) ton 251,618 0 0 0 144,692 243,397

5 - Diesel kiloliter 28 0 9 1 9 33

6 - Petroleum kiloliter 2 0 2 1 1 2

7 – Purchased Electricity thousand kWh 55,090 1,439 133,548 39,054 25,377 55,192

Note: the 2017's data have not been verified with ISO 14064-1 standards.


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Taking the lead in the Kaohsiung LinHai Industrial Park and turning one plant's exhaust into another plant's resourceIn the summer of 1993, southern Taiwan suffered from the drought. The water level of Donggang River, where is critical to the development of the Kaohsiung LinHai Industrial Park, decreased significantly, resulting in seawater intrusion and the salinization of stream water. Chemical plants needed to boil water to generate a considerable amount of steam for the use of production. However, the salinized stream water pumped into water pumping stations was utterly unusable. Local plants were forced to shut down.

LCY was the first to propose turning one plant's exhaust into another plant's resource 25 years ago.

To prevent the risk of water shortage, LCY CHEMICAL CORP. called for a meeting to address the issue and invited other companies in the industrial park to join the discussion. During the meeting, we found out that CSC's cogeneration plant generated a large amount of steam that the company did not need. Given the finding, we took the initiative in making arrangements with CSC. Within three months, LCY completed pipeline construction from CSC to our plants. The Company has since had an endless source of steam without worrying about water shortage. We have purchased a total of 9,925,206 tons of steam from CSC Since 1994.

The collaboration between the two parties yielded tangible benefits, and the news quickly spread around in the industrial park. Many companies followed suit, the China Petrochemical Development Corporation (CPDC) for instance. In the past, the chemical plants in the area used to build boilers, burn heavy oil and boil water to produce steam, which was costly and caused air pollution. What's worse, boiler explosion might occur if any mal-operation. Now, purchasing steam from CSC can not only reduce water consumption and exhaust emissions but also increase occupational safety.

Circular economy delivered distinguished results in the Kaohsiung LinHai Industrial Park

Today, headed by CSC, there are 14 plants in the Kaohsiung LinHai Industrial Park. Through the connected pipelines between plants, each plant helps supply what the other needs. Resources are shared by converting one plant's exhaust into another plant's supply. Apart from steam, nitrogen, hydrogen, and waste gas now are also made into use. Walking into the industrial park, Yanshuei Harbor Creek comes into view, cutting through the park and separating CSC from other plants. Then, what jumps to the eyes is the so-called "pipeline bridge" made up by several pipelines with different widths strides across Yanshuei Harbor Creek and links CSC with the surrounding chemical plants. On the exterior of the pipes, the type of gas carried is explicitly labeled, with an arrow marking the direction to be delivered. Steam is transported from CSC to LCY through the pipeline bridge equipped with gas flow meters that are circuit box-like and used to monitor gas transmission. This approach helps to reduce resource consumption, exhaust emissions, and production cost as well as brings economic benefits, making the first step in forming a circular economy inside the industrial park.

A drought built a bridge of shared-resources between our neighbors and us in Kaohsiung Industrial Park to provide our unwanted waste gas for others to reuse, further bringing about a wave of the circular economy inside the industrial park. As a matter of fact, like CSC, many large heavy-chemical plants produce a significant amount of gas, solid or liquid waste during manufacturing, most of which are recyclable and reusable energy or resources for other plants. LCY is honored to be in the vanguard of the circular economy. In the future, we will continue to lead the way, assisting local industries in turning one's waste into another's gold.

▼The Amount of Steam Purchased from CSC Each Year

(Unit: tons)

YearThe amount

of steam

1994 142,106

1995 138,256

1996 168,169

1997 230,936

1998 227,608

1999 251,535

2000 264,598

2001 283,633

2002 421,712

2003 407,335

2004 424,540

2005 498,355

YearThe amount

of steam

2006 527,642

2007 564,857

2008 555,962

2009 544,179

2010 526,872

2011 520,069

2012 538,141

2013 547,399

2014 550,054

2015 546,182

2016 527,613

2017 517,453


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25 years ago, LCY first proposed turning one plant’s exhaust into another plant’s resource. Since 1994, we have purchased 9,925,206 tons of steam from CSC, effectively reducing water consumption and exhaust emissions and increasing on-site workplace safety. In one fell swoop, we have gained many advantages. The pipeline in the right side of this page is the steam pipeline between CSC and LCY constructed by our Kaohsiung Site.


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Utilization of renewable energy Purchasing 1.35 million kWh of green power

Taking responsibility for every drop of water we used Recycling 99,053 thousand liters of waterIn support of the voluntary green energy purchase trial program (Green Power Purchase)

introduced by the Ministry of Economic Affairs, LCY's Dashe Site, Kaohsiung Site, and Kaohsiung Terminal Station bought 1.35 million kWh of green power at a premium of NT$1.06 per KWH

to supply energy for our operations. According to Taiwan Power Co, the volume of electricity generated by renewable energy in the previous year is the cap on the sale of green power next year. Proceeds from the program go to a renewable energy fund to support renewable energy infrastructure and applications. “Green Power” refers to electricity generated by Taiwan Power Co using renewable energy sources. Green power emits zero or close-to-zero carbon dioxide, thereby causing a lower impact on the environment than thermal power generation. Significant sources of green power include solar, wind, biofuel, and thermal. In Taiwan, solar power and wind power are the primary sources of renewable energy.

Water is the source of life. We need water to drink, grow food, and maintain the ecosystem of the planet. Despite that water is a reusable resource, many regions in the world have suffered from water shortage. Therefore, water is considered highly valuable. In 2017, we collected more abundant and accurate data about the use of water resource, to support and strengthen our water conservation policies. From the information on the sources of water, the total volume of intake water is revealed, helping us extend our view of how we use water and concrete results of water recycling. The total amount of intake water is 1,577,466.80 thousand liters, with 99,053 thousand liters of water being recycled and reused. The reclaimed water accounted for 6.28% of total water intake. The technology used to reclaim water is the Membrane Bioreactor (MBR) system that we developed on our own.

▼Green Power Purchased by LCY in 2017 ▼The Use of Water Resource and Water Recycling in 2017

Business SiteGreen Power

Purchased (kWh)No.

Dashe Site 1,000,000 1061000840

Kaohsiung Site 250,000 1061001250


100,000 1061000280

Water Source Unit Statistics

Public Water Supply or Other Public/Private Water Supply Systems

Thousand liters 1,577,467

Total volume of intake water Thousand liters 1,577,467

Total volume of recycled water (Dashe & Kaohsiung) Thousand liters 99,053

Total amount of recycled water as a percentage of total water intake

% 6%


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The control of greenhouse gas and other pollutant gas emissionsAir pollution caused by greenhouse gases and other pollutant gases is detrimental to weather, ecosystems, air quality, natural habitats, agriculture, human health and animal well-being. Due to the exacerbation of air quality, acid rain, forest deterioration, and public health concerns, national and international laws and regulations have been imposed to regulate gas emissions.

▼GHG Emissions Statistics (Unit: ton CO2e)

Item

Kaohsiung Site Dashe Site Xiaogang Site Linyuan Site Kaohsiung Terminal Station

2016 2017 2016 2017 2016 2017 2016 2017 2016 2017

1 - Scope 1: Direct Emissions 27,382 26,500 24,562 23,958 9,229 9,008 19,336 15,564 843 843

2 - Scope 2: Indirect Emissions 80,108 72,296 66,595 70,647 76,973 77,373 35,882 40,151 695 695

▼Pollutant Gas Emissions Statistics (Unite: tons)

Category

Kaohsiung Site Dashe Site Kaohsiung Terminal Station Linyuan Site Xiaogang Site

the maximum

permitted amount of

emissions

Emissions

the maximum

permitted amount of

emissions

Emissions

the maximum

permitted amount

of emissions

Emissions

the maximum

permitted amount of

emissions

Emissions

the maximum

permitted amount

of emissions

Emissions

NOx 11 7 48 21 n/a n/a 13 2 15 5

VOC 54 50 55 15 34 11 72 42 84 28

SOx 4 2 1 0 n/a n/a 2 0 1 1

TSP 3 2 2 2 n/a n/a 0 0 0 0

Given that, we have regularly measured gas emissions in relation to air pollution as well as monitored values of Nitrogen Oxide (NOx), Sulfur Oxides (SOx), Volatile Organic Compounds (VOC), and Total suspension particle,TSP), in a ceaseless effort to reduce emissions of air pollutants. For more information, please refer to the "2017 GHG Emissions Statistics" and the "2017 Dangerous Gas Emission Statistics."


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Waste water managementRivers play a significant role in water resource systems, providing essential habitats for a variety of species that live by water. In this light, keeping rivers clean is also an integral part of our environmental programs. Through the statistical data of the total volume of water discharged, we self-examine the effectiveness of effluent management. Part of our environmental programs includes water quality testing to measure contamination. During the reporting period, no incidents of non-compliance with major environmental laws and regulations were reported. The wastewater discharges in 2017 were all lower than the permitted amount. For more information, please see the "Waste Water Discharges in 2017."

▼Waste Water Discharges in 2017 (Unit: tons)

Boundary

Permitted

Amount of

Discharges

Actual

Amount of

Discharges

Kaohsiung Site 375,950 299,236

Dashe Site 547,500 313,444

Xiaogang Site 346,750 232,963

R&D Center 59,020 6,075

Linyuan Site 726,350 340,560

A central control room was established in Dashe Site to monitor the operations of environmental equipment in real time and ensure the implementation of EHS.


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Waste managementThe quantitative data of waste generation enable us to keep track of the information disclosures in the long term and review our waste management measures that are conducive to our planet every year to see if we are progressively getting close to our established goal. Please refer to the "2017 Waste Management" for more details. There is no severe leakage during the reporting period.

▼2017 Waste Management (Unit: tons)

Category Code Name Disposal Method Quantity Percentage

Hazardous Waste C-0301Liquids with a flash point less than 60°C (Alcohol exclusion – less than 24% alcohol by volume)

Incineration 11 1%

Hazardous Waste in Total 11 1%

Non-Hazardous Waste D-0104 Faeces, urine and manure Intermediate treatment 1 0%

D-0299 Plastic mixture waste Incineration 63 5%

D-0399 Waste rubber mixture Incineration 58 5%

D-0499 Waste glasses, ceramics, bricks, tiles and clay Treated by physical methods 12 1%

D-0499 Waste glasses, ceramics, bricks, tiles and clay Treated by physical methods/ remade into products 17 1%

D-0599 Mixed waste of civil engineering and construction Treated by physical methods 23 2%

D-0699 Waste paper Incineration 39 3%

D-0799 Waste wood Incineration 7 1%

D-0899 Waste fiber, cotton waste and fabrics Incineration 18 1%

D-0901 Organic sludge Treated by thermal methods (incineration excluded) 132 11%

Non-Hazardous Waste D-0902 Inorganic sludge Treated by thermal methods (incineration excluded) 151 12%

D-1504 Non-hazardous organic waste liquids or solvents Incineration 40 3%

D-1504 Non-hazardous organic waste liquids or solvents Treated by physical methods / landfills 9 1%

D-1703 Lubricant waste Treated by thermal methods (incineration excluded) 2 0%

D-1801 Household garbage Incineration 61 5%

D-2399 Mixtures of general chemical waste Incineration 157 13%

Non-Hazardous Waste in Total

1,213 99%

Total 1,224 100%


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Reduction of energy consumption Operating expenses of environmental protection equipment

We have identified two primary risks associated with climate change: rising cost of electricity and carbon tax. To address the risks, LCY has continually implemented energy management, increased energy efficiency, promoted low-carbon procurement and utilized low-carbon transportation at our major business locations. Also, we devote constant attention to climate change and closely monitor and manage the related risks.

Given the world’s rising awareness of environmental protection and energy conservation, we have long been exploring various method to reduce energy consumption. We began by reducing the use of electricity and heavy oil in our productions, effectively reducing our impact on the environment. Below is a list of GHG reduction solutions executed in 2017.

LCY regularly tracks and analyzes the company's environmental expenditures. By monitoring several kinds of data, we have paid close attention to waste management, emission management, costs of remedial measures and costs of prevention and environmental control. Monitoring and analyzing these data comprehensively over the long term enables us to assess the efficiency of executing environmental measures and examine the internal cost-benefits. Moreover, the environmental expenditure data also help the highest level of management to determine the sustainable values generated by investments in complex organization and environmental hardware and software made by the Company to reduce environmental impacts.

▼ GHG reduction solutions in 2017

▼Environmental Equipment Expenditures

Business Site Energy Saving SolutionEnergy Saved

(kWh)

Reduced CO2

emission (kg CO2e)

Kaohsiung Site

C2 Air compressors were replaced with inverter air compressors.

308,661 163,282

69KV substation chiller system 288,530 152,632

Dashe SiteMercury lamps at PCMA/WH were replaced with electrodeless lamps

95,114 50,315

Xiaogang SiteThe manufacturing process of SEBS products was streamlined and PC-9252AB was no longer in use.

66,442 35,148


FRIGAID additive was used on the refrigerant-side of refrigerating units.

96,360 50,974

Linyuan SiteHV & LV Transformers were replaced with three energy-efficient transformers.

157,443 83,287

Total 1,012,550 535,638

Item Description Unit 2015 2016 2017

1Newly- purchased pollution contro equipment

10 thousand NTD 4,137 1,273 12,057

2Operating and maintenance costs of pollution contro equipment

10 thousand NTD 9,756 9,422 9,166

Total 13,893 10,695 21,223

Note: Based on the 2016 electricity emission factor (0.529 kg CO2e/kWh) of the Bureau of Energy, the Ministry of Economic Affairs.


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Occupational Safety and HealthChapter 6


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Establishment of the Occupational Safety and Health CommitteeWe have established an Occupational Safety and Health (OHS) Committee under Article 23 of the "Occupational Safety and Health Act" to review occupational safety issues. The committee serves as LCY's formal unit for employee health and safety management, in which the labor representatives who are responsible for supervising and advising on occupational health and safety programs take up at least 30% of the committee. Also, the Environment Health Safety (EHS) Committee convenes quarterly, presided by the top management and participated by all department heads and OHS committee members. The EHS Committee aims to formulate the company's EHS strategies, set up EHS targets and continuously promote and improve relevant programs. In addition, none of our employees were involved in job activities with high risks or high occupational incidence rates of illness. Our main business sites, including Dashe Site, Kaohsiung Site, Xiaogang Site, Linyuan Site, Kaohsiung Terminal Station, and R&D center, all passed the OSHAS 18001 audits.

▼ Statistics on Type and Rates of Work Injuries, Occupational Diseases, Lost Days, and Absenteeism- 2017

Work Injuries

Male Female

Count 9,694 1,921

Lost Hours 368 0

Lost Days 46 0

Absenteeism Rate (AR) 0.22%

Disabling Injury Frequency Rate (FR) 1.04

Disabling Injury Severity Rate (SR) 24

Frequency-Severity Indicator (FSI) 0.15

Note:Absenteeism rate (AR) = total days absent in 2017 / total working days in 2017 Disabling injury frequency rate (FR) = (number of disabling injuries × 106) / total man-hours workedDisabling injury severity rate (SR) = (number of work days lost ×106) / total man-hours worked Frequency-Severity Indicator (FSI) = √(FR× SR) ÷1000The number of disabling injuries is 2 people.Work days lost are 46 and SR is 24.


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More than 40 emergency response exercises held each yearThe Company places great emphasis on environmental, safety and health training. The Environmental Risk Management Department is responsible for planning courses and drills appropriate to safety awareness, environmental protection, workplace health, fire safety, and emergency response. Except for the Taipei Office, LCY's business sites all completed their emergency response drills in 2017. More than 40 exercises were conducted during the year; please see the "Emergency Exercise Scheduled in 2017" for more details. Also, in compliance with Paragraph 2, Article 4 of Taiwan Stock Exchange Corporation Rules Governing the Preparation and Filing of Corporate Social Responsibility Reports by TWSE Listed Companies: Listed companies within the chemical industry shall disclose emergency response measures against accidents inside and outside the factories, our emergency response measures for incidents inside and outside the factories are disclosed accordingly. Furthermore, LCY has a robust EHS system in place and participates in mandatory training courses as required by law and operation needs, to ensure the safety of production and operating activities. For the quantitative data of on-the-job training, please refer to the "Statistics on Occupational Safety Trainings - 2017."

▼ Statistics on Occupational Safety Trainings - 2017

▼ Emergency Response Exercises – 2017

Subject ItemKaohsiung

Site

Dashe

Site

Xiaogang

Site

Linyuan

Site

Kaohsiung

Terminal

Station

Contractors Training session

272 436 274 10 150

No. of trainees 2,098 1,132 618 437 350

Training hours 1,049 1,132 412 1,748 150

Mandatory EHS Training

Training session

95 166 59 146 30

No. of trainees 54 198 142 146 30

Training hours 112 1,691 1,038 937 260

Boundary Exercise ScenarioInside the

Factory

Outside

the

Factory

Dashe Site Rehearsal for emergency response to leakage of underground ethylene pipeline (held by LCY)

0 1

Emergency plan rehearsal of pipeline #8-Nanzih Road 0 1

Rehearsal for emergency response to leaks of cyanic acid from the neighboring factory and the evacuation plan

0 1

Xiaogang Site 2017 second half - ad-hoc rehearsal on fire caused by leakage of emulsion

4 0

2017 second half - ad-hoc rehearsal for leakage of toxic chemical (1,3-butadine)

2 0

2017 second half - general rehearsal on leakage of toxic chemicals (1,3-butadine)

1 0

The 2017 emergency management mutual aid system exercise of Kaohsiung Linhai Industrial Park

1 0

Linyuan Site EIPA equipment leakage and on fire 1 0

V-1402 feed line leaks and causes fire. 1 0


Leakage of the propylene loading unit (at an area of 100m2) 1 0

leakage occurs during IPM tanker loading due to blockage of interface valves

1 0

Total 12 3


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The Headquarters organized fire safety workshops and exercises to raise the awareness of fire prevention"What do you do when a fire breaks out?" asked by the fire service instructor during the fire safety training course. A participant answered, "Put out the fire first," while another said, "Run!" Everyone had different opinions. "All the answers are wrong. You should give the alarm," the instructor said and explained further, "How to give the alarm?" You notify people by pressing the fire alarm, so many people are aware of a fire in the first place. Then, some can help extinguish a fire, some call 119, and some can help evacuate other coworkers as soon as possible.

In the afternoon of November 23, 2017, LCY's Taipei Office held the annual Fire Safety Workshop and Exercise for the 7th consecutive year at Changde Building. Firefighters from the 3rd Emergency and Rescue Corps of the Fire Department of the New Taipei City Government, the fire service instructor Haowei Mu, and a fire prevention promotion officer were invited to give lectures about fire prevention and assist in the exercise. LCY's senior management, including the Chairman and GM, attended the workshop. A total of 107 employees from LCY CHEMICAL CORP. and 19 people from LCYT participated in the training courses.

The training courses of the workshop were divided into two categories. One was indoor lectures related to fire prevention knowledge and promotion; the other was hands-on fire response exercises, including evacuation exercise, earthquake response exercise, CPR practice, practical AED (Automated External Defibrillator) training, and practice for the use of fire hoses.

After the indoor lectures, the participants were separated into three groups to carry out real exercises on fire incident reporting, evacuation, and fire extinguishment. During the drills, everyone threw in themselves wholeheartedly to learn and practice how to respond to and handle with fire.

On the afternoon of November 23, 2017, LCY's Taipei Office held the annual Fire Safety Workshop and Exercise for the 7th consecutive year at Changde Building. Firefighters from the 3rd Emergency and Rescue Corps of the Fire Department of the New Taipei City Government, the fire service instructor Haowei Mu, and a fire prevention promotion officer were invited to give lectures about fire prevention and assist in the exercise.

Chairman TH Hong (left) participated in the fire prevention exercise, picking up a nozzle with a hose and aiming at the origin of fire under the guidance of the instructor.

▼The Agenda of the Annual Fire Safety Workshop and Exercise

1. Fire prevention lectures by the Fire Department of the New Taipei City Government

2. Earthquake simulation car exercise

3. CPR practice

4. AED training

5. Practice for the use of fire hoses

Practice for the use of an indoor fire hydrant

The fire hydrant is an efficient tool to put out a fire in the initial stage. Usually, an indoor fire hydrant comes with two hoses and one two-purpose (jet/spray) nozzle. The hoses and the nozzle are already attached to the fire hydrant and hung on the hose frame. When a fire breaks out, people can pull out the nozzle and the hoses and turn on the shut-off valve (also known as "Taiping Faucet) to extinguish a fire.

There are fire hydrants at the top floor of LCY's Taipei Office. Each one has two 15-meter long hoses attached to male/female quick couplings and a nozzle. Users can rotate the nozzle to control the water volume swiftly. Switching to the jet nozzle enables water to eject directly to the fire, if there are smoke and heat, you may change to the spray nozzle to protect people from a fire attack.


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Employee Care

Social Engagement


Visit the Training Center of the National Fire Agency for fire prevention trainingLCY sends our firefighting groups to the Training Center of the National Fire Agency of the Ministry of Interior for training on a yearly basis. In 2017, the annual training for firefighting and rescue exercises was scheduled during October and November, with the aim of reducing the risk of firefighting danger and promoting the awareness of vocational safety. The eight-hour training courses in a day included the wearing of self-contained breathing apparatuses (SCBA), practice for the use of SCBAs, hands-on training for the use of hoses and nozzles, and flashover container training.

Located in Zhushan Township, Nantou County, the Training Center was put into use in 2010. The Ministry of Interior spent around 2.3 billion NTD on the establishment of the Training Center, which has an area of 109 hectares and comprises of 12 live exercise training grounds and 49 real fire training facilities. It is the biggest training center of fire and disaster prevention and rescue in Taiwan, the third largest in the world and the top one in Asia. Members of the Special Search and Rescue Team and firefighters are all trained here for professional firefighting skills and knowledge.

Learning how to wear a 22 kg SCBA properly

Under the instruction of the trainer from the Fire Department, our coworkers put on fireproof headwear, firefighting coats, pants and shoes, air tanks, masks for breathing apparatuses, hats, and gloves in sequence. The SCBAs they wore weighs up to 22 kg. Then, the participants learned to simulate real-world SCBA breathing during fast movement under the fire.

Why do we arrange SCBA training? According to the regulations on firefighting operations of the New Taipei City Fire Department, as long as there is a fire accident, anyone who enters the fire scene for firefighting must carry an air tank on the back and wear the mask for the breathing apparatus to protect themselves, effectively conduct firefighting and rescue operations and lessen loss of property, injuries or casualties.

During the training, the trainer examined the participants' skills to see if they assembled the breathing apparatus correctly and accurately. They also inspected the air pressure of the air tanks, the protective suits and equipment, the attachment of the joints of SCBA back frames and the straps. Then, the participants began to put on SCBA, and in the meantime, checked the air pressure and the mask for tightness or leakage. This step

helped the trainees to understand the basic structure of the breathing apparatus and how to deal with issues that occur.

The training courses covered three sessions, including the wearing of SCBAs, troubleshooting of the breathing apparatus, and the air consumption drill while performing heavy or dangerous work. First, the participants wore the SCBA according to a checklist and once finished, they were checked by the instructor to see if they wore the apparatuses unmistakenly and adequately. Following on was simulating how to deal with technical hitches. Last, they proceeded

into the air consumption drill, where the participants had to carry a 22 kg SCBA on the back and climb up the stairs to calculate how much air they consumed under critical working conditions.

Hopefully, through the training and exercises, our firefighting groups can learn how to wear SCBAs correctly and the skills of troubleshooting and understand how long they are capable of using SCBA under critical working conditions, thereby ensuring their safety during performing firefighting rescue work and enhancing the awareness of fire prevention.

Under the instruction of the instructor from the New Taipei City Fire Department, our co-workers correctly wore the self-contained breathing apparatus that weighs 22 kg.


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Employee Care

Social Engagement


The curriculum arranged by the Train Center of the Nationa

• 0900-1000：Wearing firefighting coats, hats, and shoes and SCBAs

• 1000-1200：Practice for the use of SCBA

• 1330-1430：Hands-on training for the use of hoses and nozzles

• 1430-1730：Flashover container training

The Training Center of the National Fire Agency is equipped with the "flashover container" imported from Germany to serve as a simulated fire training classroom enabling firefighters to observe the indication and origin of a flashover. On the day of our visit, we also arranged for our coworkers to join in the flashover container training.

The participants all geared up and sat in orderly ranks closely observing the entire process of the fire in the flashover container, from the initial stage to full-room involvement. Experiencing the simulated fire in a confined space in realistic conditions enables the employees to have a real understanding of variations in smoke and temperature of the fire and judge the intensity of fire when a fire incident happens.

Our participating workers wore self-contained breathing apparatuses (SCBA), entered the training container that burned wood pallets and watched variations in the

Flashover container training in realistic conditions

Visiting the Training Center of the National Fire Agency for real fire exercise - flashover container training

閃燃貨櫃屋實火模擬演練

fire closely under the high temperature. They experienced the full fire scene, from the initial flame into the full-room involvement at 700℃. With an elaboration of the instruction, our employees could learn in-depth knowledge about changes of fire to assess the situation when a fire occurs.

The instructor who is responsible for firefighter training elaborated to the participants. The temperature inside the burning container exceeds 500℃. Under such circumstances, you can see flames rolling over in the overhead. It is as dazzling as if an angel opens its arms - the reason why rollover is sometimes called "dancing angels." In this situation, firefighters quell the blaze by using turbojet nozzles with the water-fog application, to prevent the chain reaction of flashover. If the fire is uncontrollable, evacuation is the only way to avoid injuries or casualties caused by flashover.

The instructor also pointed out that the fire scene is full of uncertainties because heat and gases can quickly accumulate into smoke and hot gas that lead to flashover or smoke explosion. In a short time, the fire would spread to the full room. In the future, participants must familiarize themselves with various professional skills and equipment so that they can save themselves and others while a fire accident happens.


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Employee Care

Social Engagement


Health checkup in care for employees' healthLCY formulates the physical examination policy and provides comprehensive employee health checkups in accordance with Article 20 of the Occupational Safety and Health Act and the Regulations on the Protection of Employee Health, to ensure that every employee is aware of their health conditions. The items of general physical examination cover blood pressure, blood sugar, total cholesterol, liver function, kidney function, and urine protein content. The checkup helps employees identify the potential illness. For those who work in hazardous conditions, such as exposure to noise, dust, ionizing radiation, hexane, nickel, chromic acid, and compounds, special health checkups are conducted once a year as required by laws. A total of 343 employees had undergone the checkup in 2017. The post-exam management of employee health is followed up according to health classification management standards. With the perfect complement of classification management, the Company can identify employees with higher health risks, continually working along both lines by improving working conditions on the one hand and providing health care on the other to build a healthier and more comfortable workplace. An occupational health care system has been created to cater for workers who are unwell and concerned about work-related diseases. To add on, in 2017, 66 workers in the Taipei Office got influenza vaccines to strengthen their immunity against flu.

▼Health Checkups Completed in 2017

Category Subcategory

R&D

Center in

Nanzi

Dashe

Site

Xiaogang

Site

Linyuan

Site

Kaohsiung

Terminal

Station

Kaohsiung

Headquarters

& Site

Taipei

OfficeTotal

General Physical Examination

n/a 99 244 160 160 33 128 162 986

Special Health Checkup for Workers in Hazardous Condition

Butadiene 0 0 4 0 0 0 0 4

n-Hexane 6 14 4 0 0 0 0 24

Dust 4 41 61 0 0 0 0 106

Chromic Acid and Other Compounds

0 0 4 0 0 0 0 4

Noise 0 39 65 0 0 87 0 191

Nickel 10 0 7 0 0 0 0 17

Ionizing Radiation 3 17 0 0 0 0 0 20

Level 1 management

n/a 0 77 136 0 0 51 0 264

Level 2 management

n/a 0 34 24 0 0 36 0 94

Level 3 management

n/a 0 0 0 0 0 0 0 0

Level 4 management

n/a 0 0 0 0 0 0 0 0


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Employee Care

Social Engagement


Continuous efforts on promoting various EHS projects for the safety of the operating environmentThe Company has established an Environmental Risk Management Division that specializes in compiling and presenting the results of various EHS projects that focus on the stakeholders' concerned issues, such as carbon footprint, energy saving proposals, greenhouse gas emissions, environmental protection, and health promotion. Since 2011, we have been aligning our daily EHS activities with the contents of the CSR report, not only to ensure the compliance with associated EHS laws and regulations but also to show our commitment to corporate social responsibilities. Below are the Company's significant EHS accomplishments in 2017:

Group-wide EHS audit

Coordinated by the Environmental Risk Management Division, factories in Taiwan carry out an audit every six months, while overseas factories do an audit once a year in principle. The schedule is flexible as needed. The audit team consists of employees from the EHS offices of each factories and representatives from technical functions, such as electrical instruments, machinery, and the production process. Depending on the type of production risks associated with a particular factory, we also invite external experts outside the

One of our employees from Kaohsiung Site was performing a routine check of fire-fighting equipmen

group to identify environmental risks, potential hazards, and areas for improvement. From the outside-in perspective, we are in a bid to implement risk control and drive continuous improvement within EHS.

Quantitative methods to assess the EHS performance of the LCY group

The effectiveness of the EHS activities undertaken by each site is presented during monthly meetings by adopting quantitative performance evaluation. The quantitative parameters include leading indicators and lagging indicators. "Leading indicators" could show trends upon EHS climate that helps reduce risk and gives an indication as to what might happen next, which enables the Company to proactively adjust its EHS systems to shorten each site's learning curve. "Lagging indicators" are used to evaluate EHS performance and optimize the ongoing projects of each site.

Establishment of PSI - Process Safety Information System

The implementation of Process Safety Management (PSM) has become essential for the petrochemical industry. It is also the focus when labor inspection Authorities carry out inspections. Process Safety Information (PSI) is the key to implementing PSM, but currently, the group hasn't had a proper tool to integrate and systematically manage each site's PSI. The Environmental Risk Management Division has been promoting and introducing the PSI system to all of our factories, to increase the efficiency of process safety management, establish readily access to the inquiry about PSI and improve the maintenance of PSI of each factory.

Realistic fire fighting training exercises

In an attempt to enhance employees' firefighting skills, the Company invited the National Fire Agency of the Ministry of the Interior to conduct realistic training exercises in Zhushan Township, Nantou County. A total of 32 training sessions have been completed since 2012. 895 employee in total participated in the training courses, 100% of whom had completed the entire training.


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Employee Care

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Establishing toxic substances management system

A toxic substances management system was established from the perspective of product lifecycle to deal with harmful substances at every stage, from transportation, in-plant operations and reports to emergency response. By having toxic substances recorded at every workstation, LCY has been able to keep track of toxic substances and analyze the data to gain insight into the effectiveness of the toxic substances management policy.

Training program for incident commanders in the LCY group.

To increase the emergency response abilities, the Company planned and organized a training program for incident commanders of the emergency response teams in each factory. Experts from the Emergency Response Information Center (ERIC) of the Industrial Technology Research Institute were invited to give lectures and provide training for factory directors and those who may assume the role of incident commander in factories. The training program focused on identification of hazards, emergency response operations and the principles of disaster prevention incorporating with response and rescue action plans formulated by incident commanders. Sand table exercises were conducted in scenario simulations to walk through the actions. A total of 136 participants completed the training program and obtained certificates.

Material Flow Cost Accounting (MFCA) certification

The Electronic-Grade Chemical Division of Linyuan Site has introduced the Material Flow Cost Accounting (MFCA) system. The framework of the system, based on the material flow in production processes, takes the business operational cost into account and reviews the energy and resource efficiency of our material practices. Also, by means of the MFCA analysis, the cost accounting information about overall resources, environment protection, and waste management is revealed. After the necessary steps, including document review, policy review, and on-site inspection, the Electronic-Grade Chemical Division of Linyuan Site was certified by SGS on February 7, 2018.


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Employee Care

Social Engagement



Supply Chain ManagementChapter 7


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Employee Care

Social Engagement



Maintaining close relationships with suppliersPolicies and directions

We demand more than just performance and quality from our suppliers. Before beginning a business relationship, suppliers are required to sign a commitment for strict compliance with the ethical code of conduct. We maintain regular contact with suppliers to make sure that they

follow the expected standards. Suppliers that do not to meet requirements will be instructed to make satisfactory improvements within a given time. If they fail to do it, we will look for other suppliers that meet our moral and environmental protection standards. Simply put, we have long realized the environmental and social responsibilities of our supply chain. Internally, we oversee our suppliers’ performance using the four general principles: Quality, Cost, Delivery and Service (QCDS), and have developed our own supplier management procedures in line with local and international initiatives, laws and regulations.

The Relation of Supply Chains

The relation between upstream, midstream and downstream suppliers of the industries is as follow:

• Petrochemical supply chain

○ Upstream: [Crude oil (Oil &Natural gas)] - Air distillation →[Naphtha] - Naphtha cracking →[Olefin, Aromatic Hydrocarbon] - Polymerization, Oxidation, Synthesis→

○ Midstream: [Plastics, Chemical fiber, Rubber, Chemical materials] - Process→

○ Downstream: [Plastic products, Textile products, Rubber Products, Other Products]

▼ Supplier Categories and Local Procurement - 2017

# of supplier Weight

Domestic 13 63%

Overseas 18 37%

Total 31 100%

• CCL supply chain

○ Upstream: [Bare copper wire]-Electrolysis→[Electrodeposited copper foil]

○ Midstream: →Process→ [Copper Clad Laminate(CCL), Other materials] →[Printed circuit board (PCB)] →

○ Downstream: [IT products, communication, consumer electronics, semiconductors, industrial control systems, automobiles, medical devices, aviation products and defense products]

Supplier categories and local procurement

We only have one supplier category, that is, suppliers of raw materials. Currently, there are 31 suppliers of raw materials. Judging by sourcing regions, raw material purchase accounts for 63% of local procurement.


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Employee Care

Social Engagement



The commencement of SER assessments of suppliersSince 2017, we have begun SER (Social & Environmental Responsibility) assessments of our suppliers. The assessment is made in three ways, including (1) Contract review, (2) Questionnaire survey, and (3) Suppliers' voluntary disclosure. We will continue the SER assessment of suppliers and make adjustments to assessed subjects and audit methods each year, to better the outcome of suppliers' SER assessment.

• By 2020, we expect 100% of new suppliers to be screened using environmental criteria.

• By 2020, we expect 100% of new suppliers to be screened using labor practices criteria.

• By 2020, we expect 100% of new suppliers to be screened using human rights criteria.

▼The SER Assessment Result of Main Suppliers in 2017

Item% of

suppliers

Quality

No critical incident of quality issues in 2017 100%

Environmental Aspect

ISO 14064-1: Organization Quantification and Reporting of Green House Gases passed

8%

ISO 14001: Environmental Management System passed

25%

ISO 50001: Energy Management System Audit passed

8%

No penalty for critical incidents of non-compliance with environmental laws in 2017

100%

Social Aspect

No violation of human rights or labor laws and regulations in 2017

100%

Establishment of the Integrity Helpline

Suppliers and their employees must adhere to the practices of integrity in all trading activities and transactions, including but not limited to procurement of materials, work contracting, outsourcing manufacturing, transfer of equipment, treatment of obsolete/waste materials, customs reporting, workforce dispatch, and subcontracting. They are prohibited from tunneling by offering or giving cash, securities, non-standard gifts, entertainment or travel incentives to any LCY employee or their relatives and friends or any person of interest. Neither are suppliers allowed to engage with any LCY employee or their relatives and friends in lending/borrowing, leasing, investments of any sort, or any activity that is not directly related to their job duties. They must not offer or provide, directly or indirectly, any rewards including offers of employment to any LCY employee or their friends and families. Suppliers and their employees must not commit any misconduct that causes damage to the Company's interests or image. Suppliers are encouraged to report LCY employees in any intentional or unintentional violation of sourcing discipline via letter or e-mail. The reporter's real name, contact information and details about the breach and relevant proofs must be enclosed. The LCY grievance mailbox: Audit Department and P.O. Box 36-587 Taipei; or e-mail to [email protected].

Authorized Economic Operator (AEO) is an internationally recognized quality mark indicating the secure international movement of goods

Our clients are more than 400 companies worldwide, many of which are global industry leaders. While our customers become increasingly aware of global cargo safety and supply chain safety, we are also striving to provide them the best assurance. For this reason, LCY has undertaken application for the AEO status since 2013. AEO is a certification scheme for the safety of cross-border cargo movement, implemented by more than 170 countries worldwide.

Becoming AEO optimizes LCY's service quality. To ensure the security and integrity of information and physical shipments of the supply chain, we have carried out the safety management system of supply chain through risk management and planning, documentation, operational controls and employee training. The safety management system is conducive to reducing risks existing in the supply chain and can ensure the confidentiality, completeness, and usability of business information, further enhancing customers’ trust. Facing customers' demand for swifter and more efficient services, AEO enables us to make sure the safety of international shipments, keep LCY highly competitive and build a close partnership with customers.

LCY has held AEO status for the secure international shipments.


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Social Engagement


Employee Care

Employee CareChapter 8


About the Report





Social Engagement


Employee Care

Providing equal job opportunities and recruiting first-rate chemical engineering professionals far and wideLCY is committed to providing equal employment opportunities and creating an inclusive and diverse working environment. We also proactively promote equality and offer equal opportunities for all job seekers to obtain employment or get a promotion. We seek to hire talents who are capable of producing petrochemical products and innovating the entire industry. From state of the art technologies to profound contributions to the environment, LCY always forges ahead, radiating innovative vitality.

We have categorized our employees by employment type, contract type,

and location to reveal the information about the Company's human resources, employee stability and benefits explicitly. Our employees then were further subcategorized by gender to reflect our HR policy that we only employ people according to their abilities. Below are vital statistics concerning our diverse human resources:

• Total employees: 1062 people, including 1,006 formal employees that account for 94.73% of the workforce and 56 informal workers that take up 5.27%.

• Formal employees: 1,006 people, including 834 males (83%) and 172 females (17%)

• Informal employees: 56 people, including 46 male employees (82%) and ten female employees (18%). Informal employees refer to temp or dispatch workers in factories, employees on a fixed-term contract and consultants.

• Employees with disabilities: 8 people

• Foreign employee: one German employee.


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Social Engagement


Employee Care

Enforcing the parental leave system in compliance with the Act of Gender Equality in EmploymentThe Company upholds and realizes gender equality by offering maternity leave, paternity leave, and other leave of absence so that we can recruit and retain great employees, further improving employees' morale and productivity. We also implement the unpaid parental leave system in line with the Act of Gender Equality in Employment. Both male and female employees are legally entitled to apply. In 2017, a total of four employees took parental leave, who were all females. Among them, two out of four were reinstated after the expiration of non-pay parental leave. So far, the reinstatement of those who returned from parental leave was 100%. The rest of the two employees are still taking leave (until 2018). A total of three employees were reinstated from parental leave in 2016, all of whom remained on the job after 12 months. The retention rate achieved 100%.

▼ Percentage of Employees Reinstated and Retained After Parental Leave, by Gender (Unit: persons)

Male Femal Subtotal

Number of employees entitled to parental leave and allowance in 2017 43 10 53

Number of employees who actually took parental leave in 2017 0 4(Note 2) 4

Number of employees reinstated after parental leave in 2017 0 5 5

Number of employees reinstated After parental leave in 2016 and remained employed 12 months later

1 2 3

Reinstatement 0 100% 100%

Retention rate 100% 100% 100%

Note: 1. We implement the unpaid parental leave system in accordance with the Act of Gender Equality in Employment. Both

male and female employees are legally entitled to apply. The application requirements include: (1) Both parents must be employed at the time of application; (2) The applicant has served the Company for at least six months; (3) The child is under the age of three years old; and (4) The period of leave each time shall not exceed two years.

2. Employees who extended parental leave included.


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Social Engagement


Employee Care

Employee education and training

In 2017, a total of 976 employees received training. Each employee underwent 24 hours of training a year on the average. A further breakdown by gender shows that male employees averaged 24.4 hours of training a year, and female employees averaged 22.3 hours a year. The reason why females' training hours were fewer than males’ is mainly because of course content. As LCY is a petrochemical company, most courses were related to professional petrochemical knowledge and statutory certifications. Thus, male participants tended to be more than females. However, judging by the overall planning of the training programs, all employees have enjoyed equal rights to on-the-job education and training regardless of gender. For more details about employee training statistics, please refer to the "Average hours of training per year per employee, by gender and by job position."

▼ Average hours of training per year per employee, by gender and by job position. (Unit: persons/ hours)

▼ Employee Career Development Plan

Formula ID Male Female Subtotal

Managerial role (Section Chief and above)

persons A 115 20 135


hours B 6,239.0 1,273.5 7,512.5


Average training hours for the given category

C=B/A 54.3 63.7 55.6

Administrative staff persons D 95 102 197

Administrative staff hours E 1,261.5 1,460.5 2,722.0

Administrative staffAverage training hours for the given category

F=E/D 13.3 14.3 13.8

Production and technical personnel

persons G 603 41 644


hours H 12,824.0 1,095.0 13,919.0


Average training hours for the given category

I=H/G 21.3 26.7 21.6

Total number of employees who received training

persons P 813 163 976

Total number of employees who received training

hours Q 20,324.5 3,82 24,153.5

Total number of employees at the end of reporting period

persons R 834 172 1,006

Average training hours per employee

hours S=Q/R 24.4 22.3 24.0

Note: Orientations for new recruits are not included.

高階管理訓練High level management training

中階管理訓練Middle level management training

基層管理訓練Basic level management training

新進人員教育訓練Training for new recruits

專業職能教育訓練Training for professional skills

員工職涯發展規劃Employees' career planning

High level management training

Middle level management training

Basic level management training

Training for new recruits

Training fo

r professio

nal skills

Employees' career planning


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Social Engagement


Employee Care

▼ The Planning of Education and Training Programs

Training

CategoryOrganizer Type of Training

Trainee

Senior

Management

Middle

Management

Junior

ManagementOther Staff New Employee

Transferred

Employee

Corporate culture training

Human Resource Department

Value/ Core Competency/ Vision/ Mission ✓ ✓ ✓ ✓ ✓ ✓

Statutory training

All DepartmentsStatutory certification training Factory affairs, audit, finance and others

✓ ✓ ✓ ✓ ✓ ✓

EHS trainingEnvironmental Risk Management Department

Environment, health and safety Environmental protection, safety, health, fire safety, emergency response and others

✓ ✓ ✓ ✓ ✓ ✓

Occupational training

All Departments

Training of professional skills Human resource, information, finance, accounting, procurement, audit, R&D, production process, EHS, machinery, electrical instrument, quality assurance, quality control, engineering technology and others

✓ ✓ ✓ ✓ ✓ ✓

Management training


Management capacity building ✓ ✓ ✓

Decision management training


Decision management ✓ ✓

Comprehensive planning of employee training programsProfessional on-the-job training

With the combination of internal training programs within the Company and external training courses provided by other institutions, our employees can increase their expertise and professional knowledge by studying, pursuing further education and sharing experiences and ideas with partners in the same trade.

We also employ rotation of job to help employees perform work roles or occupational functions successfully, improving their competencies profoundly and extensively.

Management capacity building

A progressive and prolonged training program of competency development for the management is designed to form a strong and effective management team. Various courses are provided for trainees at different levels and stages to foster management capacities in an all-round manner. Also, we have created shared managerial linguistics to improve the management efficiency of the organization.

New employee orientation

The HR department arranges orientations to keep new recruits up to speed about the organizational culture and system, enhance their identification and sense of community with the Company, understand each department's role and function,

and help newcomers blend into the work environment quickly. Also, the department head will arrange relevant training sessions for new employees so that they are clear about the workplace, their roles and duties, and equip them with professional knowledge and skills required for work.

EHS training programs required by law

LCY places a great emphasis on the EHS training. Courses appropriate to safety awareness, environmental protection, health, fire safety, and emergency response are planned by the Risk Management Department to develop a complete EHS system. As required by law and operational needs, our employees have been trained for various statutory certifications to ensure the safety of production and operations.


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Social Engagement


Employee Care

Periodic performance appraisal939 formal employees, or 93% of the Company's workforce, were subjected to regular performance appraisals and career reviews in 2017. A further breakdown by gender shows that 789 male employees had undergone periodic performance appraisals and career reviews and constituted 94.6% of total male employees at the end of reporting period, while female employees who went through periodic performance appraisals and career reviews were 150 people, accounting for 87.21% of total female employees. For detailed information about employees subjected to periodic performance appraisals and career reviews by job position in 2017, please see the "Percentage of employees subjected to regular performance appraisals and career reviews, by gender and job position."

▼Percentage of employees subjected to regular performance appraisals and career reviews, by gender and job position

Male Female Subtotal

Total employees

at the end of

reporting period

Number of male employees subjected to regular

performance appraisals and career reviews

Weight

Total employees

at the end of

reporting period

Number of female employees subjected to regular


Weight

Total employees

at the end of

reporting period

Number of male and female employees subjected to regular


Weight

Formula ID A B C=B/A D E F=E/D G=A+D H=B+E I=H/G


834

103 12.35%

172

21 12.21%

1,006

124 12.33%

Administrative staff 105 12.59% 90 52.33% 620 61.63%


581 69.66% 39 22.67% 195 19.38%

Subtotal 789 94.60% 150 87.21% 939 93.34%

A robust and tight communication network

We have put relentless efforts in creating open communication channels to establish a tight communication network that connects our employees with the Company and their coworkers. Employee grievance mailbox was designed to deal with employees' complaints. The e-mail address is [email protected]. We have disclosed the achievements regarding the protection of workers' rights according to the human rights indicators of the GRI Standards, including (1) No incident of discrimination; (2) No violation against freedom of association or rights to collective bargaining;

(3) No employment of child labor; and (4) No incident of forced or coerced labor. Below are the results we have achieved abiding by local labor laws and regulations.

• Should the Company encounter a significant operational change that affects employees' rights or terms of labor services, we fully abide by Article 16 of the Labor Standards Act and give minimum advance notice before terminating a labor contract as required by law.

• Under Article 56 of the Labor Standards Act, the Supervisory Committees of Works’ Retirement Preparation Funds convene unscheduled meetings or where necessary, ad-hoc meetings, to audit labor pension reserve funds that are appropriated, deposited

and anticipated and payments of worker pensions.

• Although LCY does not have a labor union, the Company still complies with the government's labor law and regulations and arranges regular labor-management meetings to facilitate bilateral communication and collective bargaining. Under Article 83 of the Labor Standards Act, the labor-management meeting is convened quarterly; when necessary, extraordinary meetings can also be arranged. Each business sites keep meeting minutes for further discussion with the HR department in Taipei during video conferencing. Issues concerning collaboration and coordination between the employer and employees, improvements in working conditions as well as workers' benefits are discussed.

Note:

1. Employees who were not subject to performance reviews include department managers and above, employees who did not complete probation (including trial recruits and interns).

2. Source: Appraisal records for the second half of 2017.


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Social Engagement


Employee Care

Employee salary and benefits Salary

• Fixed income.

• Bonus: including year-end, incentive, proposal and festive rewards.

• Employee Stock Ownership Trust: a program that allows employees to appropriate their monthly salaries, plus incentives offered by the employer, to purchase LCY's shares. The program is designed to retain talents and increase employee loyalty to the Company, while at the same time helps our workers save money and accumulate wealth over the long run to secure their lives after retirement.

Benefits

• Pension fund appropriation: currently, the new pension system under the Labor Pension Act applies to all our employees. The Company appropriates and deposits 6% of employees' monthly salary to their individual pension accounts held under the Bureau of Labor Insurance.

• Insurance: The Company provides group insurance for every employee. The insurance coverage includes term life insurance, accident insurance, transportation accidental death insurance, medical insurance for accident and hospitalization insurance. The premium is fully covered by LCY, so employees do not need to pay a penny to be insured. Moreover, LCY also pays for the hospitalization insurance (inpatient treatment) for employees’ spouses

and children, safeguarding our workers and their families by providing group insurance.

• Leave management system: LCY has a leave system better than what the Labor Standards Act prescribes. In addition to statutory special leave, maternity leave/paternity leave, family care leave, menstrual leave and other statutory holidays, the Company also offers 80 hours of paid sick leave annually, enabling our employees to have sufficient rest to recover without worries.

• Employee support and healthcare: including physical exam, dormitory, massage room, and psychological counseling. We have been working with Taipei Blind Welfare Association to arrange visually impaired masseurs to provide massage services for employees at factory premise. Workers can enjoy a massage at least once a week. This arrangement helps our employees to relax body and mind as well as provides job opportunities for the visually impaired, and thereby has been highly acclaimed by our workers.

• Welfare Committee: providing cash rewards during Chinese New Year, Dragon-boat Festival, Mid-autumn Festival, and employees' birthday. For more information about the welfare activities and spend in charge by the Welfare Committee, please visit LCY's website and click on Compensation & Benefit under the Recruitment section.


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Social Engagement


Employee Care

Hunting for petrochemical whizz-kids in campusAs the graduation season is approaching, many graduates are entering the workforce. Each year, Taiwan's universities organize campus job fairs to provide opportunities for businesses to interact and communicate with students or job seekers. The event also serves as a bridge for universities to be in step with the development of industries as well as to facilitate the mutual growth of companies and schools. Through the event, students can gain more insights about workplaces and companies and are motivated to realize their ambitions. Also, job fairs enable students to learn about the latest employment trends in advance and uncover their interests, encouraging a variety of communication and interaction. Hopefully, the efforts will finally bore fruit by making the best possible use of human capital and achieve a win-win situation for industries and academia.

At LCY CHEMICAL CORP., we consider talents the key to leading innovation in the local petrochemical industry, and the critical capital that helps a company deliver excellence. Therefore, LCY has been working closely with higher education institutions to look for innovative whizz-kids and continually provided resources and support for talent cultivation. This will be our consistent focus in the long term. We have been recruiting skilled students directly from campus every year since 2012. In 2017, LCY organized two recruitment events at National Cheng Kung University in Tainan and National Tsing Hua University in Hsinchu. The event lasted around six hours, during which a dedicated booth was set up in the campus with eight to ten staff on site. At least two engineers who are from engineering or R&D backgrounds were invited to join in and assist participating students to learn more about the Company and our organization structure, expressively explaining what precisely the job involves and sharing their thoughts and experiences since working in LCY, to increase a sense of cohesion between students and the Company.

In addition, we also printed and sent out 700 ingeniously-designed flyers that contained information about employees' salary and benefits, and current job openings so that students could understand the Company's salary structure and relevant benefits fully and quickly identify suitable job positions. By doing so, we can not only attract more excellent students but also continue to choose skilled talents that suit the company's needs, benefiting the business, schools, and students. The two recruitment events were both highly popular among students. We received a total of 304 resumes, among which 69 were promising candidates. During the events, participants were enthusiastic about the job openings and associated duties and eager to ask questions and express themselves.

We also asked about participants' thoughts on the events. "For fresh graduates who barely have work experience, the campus job fair allows students to learn about corporate cultures of various sectors and industries as well as the recent employment trends. More importantly, it provides an opportunity for students to speak to HR representatives directly so that we can know each other in a more relaxing setting. This event helped me understand my expectations for work, have clearer future direction, and know where I have to improve myself to enhance my professionalism and competitiveness, so I can have a better chance to land a job right after graduation," said Student Huang from National Tsing Hua University.

During the event, our staff quickly noted down feedback on the resumes submitted by job applicants, offering the fresh graduates more opportunities and advice. By organizing recruitment events, we are able to have more interaction and communication with new graduates. Apart from that, the event is also a good advertisement for the Company, allowing us to step out the comfort zone and never cease to innovate.


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Social EngagementChapter 9


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Employee Care

News coverage of LCY's contributions to the circular economy was playing at the venue of the event.

The 7th LCY Scholarship

In a bid to cultivate a new generation of talents for industries and inject new energy into Taiwan's chemical industry by fostering inter-disciplinary professionals, LCY Education Foundation founded by the LCY held its 7th scholarship competition in December 2017. This year's theme was "Circular Economy."

A total of 56 outstanding students from universities in Taiwan who specialize in different areas stood out from the competition. They not only gained valuable and pragmatic experiences from the two-day event but also won scholarships ranging from 10,000 to 60,000 NTD as encouragement to their participation. The scholarship competition has been held for seven years, attracting nearly a thousand students nationwide. Approximately 300 students were benefited from the program.

During the two-day competition, 56 students were divided into eight groups for group competition. Each team represented an enterprise, and the participating students played the role of senior management. They had to overcome a series of challenges and outperform other teams to score a victory at the end of the event.

The competition consisted of an abundance of exciting activities, such as group activities and discussions, horizontal alliances and rapid-fire questions with LCY's senior managers. It also engaged students in a series of team exercises and fun talent show. The participants delivered their best performances and showed a variety of talents. The event was full of laughter, making it a truly memorable moment.

Highlight of the Competition:

News coverage of LCY's contributions to the

circular economy

During the event, news coverage of LCY's contributions to the circular economy was playing at the venue. For instance, the news about LCY's MBR system. Since 2016, LCY has introduced the MBR water recycling system that can treat up to 700 tons of water per day. Along with the Company's biological waste treatment system, the MBR system is effective to recycle and reuse up to 90% of industrial wastewater generated from the chemical manufacturing process. The treated water filtrated through the MBR system (reclaimed water) can be reutilized directly for the cooling tower make-up water or exhaust cleaning of flares. By doing so, not only will the business have sufficient water supply, but also the industrial water consumption can be significantly reduced. The MBR technology for wastewater recycling and reuse won the Award for Circular Economy Contribution in 2017. Every student at the event was impressed by this advanced technology and surprised by how LCY took the initiative in moving away from the traditional business operation of the chemical industry and marching toward an enterprise of sustainability with the Company's unyielding commitment to developing new business projects that are environmental-friendly.


"Jump to Answer"

The rule is that each team sends a team member to the stage. After the presenter reads the question, the competitors on stage have to jump to their answers immediately. Those whose answer is wrong will not get the point. For example, when the presenter asks, "Which consumer behavior manifests the spirit of circular economy? Renting or purchasing?" Then, the competitor has to jump to "Renting" so that his/her team can earn a point. Another example is "Which of the following answers is a kind of circular economy, (A) shared bicycle or (B) chain restaurants?" Those who jump to A will score a point.

Each team sent one of their team members to participate in the game of "Jump to Answer" on the stage. Those who jumped to the right answer could get one point for his/her team. LCY's staff (first on the left) put a sticker on the participant for the correct count.


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“Resource Do Re me”

At this stage, the participants already had a basic understanding of the circular economy. The following activity was "Resource Do Re me." The eight groups were assigned to different industries, such as the industries of construction, chemical engineering, rubber, semiconductor, and cement. At this point, the eight groups were playing the role of senior management representing eight virtual companies. They had to brainstorm in devising business strategies to tap into the market of circular economy and blaze a trail in their own industry. Role-playing had intrigued the students as they used to focus more on theories and experiments. They never thought about being a business leader. This activity truly challenged their way of thinking.

Eight teams took turns to do their presentations. They made an all-out effort to impress the judges in an attempt to earn higher scores.

The management teams of each "company" were attentively discussing their strategies and preparing for their presentations.

LCY CHEMICAL CORP. mobilized nearly 20 senior managers to be the judges of the scholarship competition. The judges scored each group's presentation in a fair and objective manner.

One of the groups was assigned to the construction industry. They had to draw up their business strategies of circular economy and present to the judges. Playing the role of a company's manager was interesting to the students.


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“Annual Conference on the Circular Economy”

On the second day of the competition, each team was required to use the wooden materials prepared by the organizer to design and build their exhibition booths. They had to demonstrate their products and services to the judges or other teams who came to their booth. The team with the best result of cooperation was the winner. The goal was enabling the participants to replicate B2B activities between businesses and form a strategic alliance that achieves synergy with the utilization of both parties' strong suits and collaboration. Hopefully, through the exercise, the students could understand that competition and cooperation coexist in the real-world operations and a company can prosper by striking a balance between them.


Group discussion and reflection

The activities designed for the scholarship competition is to create an interactive space for students to learn voluntarily by introducing particular topics with assignments, to realize the idea of the flip classroom. Many activities required each group to do online research, formulate a plan, ask questions and discuss. The participant actively learned about the topic, explored relevant questions and contemplated, through game-based learning that guides students to have a full discussion, whether one-to-many or in a group. This way helps deepen student learning and develop a proactive learning attitude, further inspiring potential for innovation.

Each team must utilize the wooden materials prepared by the organizer to design and build their exhibition booths. They also had to find a partner to form a strategic alliance to strike a balance between competition and cooperation.

The activities designed for the scholarship competition aims to create an interactive space for active learning to realize the idea of the flip classroom.

The design of each activity is to guide students to have one-to-many or group conversations to foster an active learning attitude and inspire potential for innovation.


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LCY’s Chairman personally attended the event

to greet and interact with the students

For the participating students, one of their most unforgettable memories in the 7th LCY Scholarship event was that Chairman Bowei Lee and LCY's senior managers were fully engaged throughout the two-day competition. Not only did they provide timely and professional advice during the challenges, but they also encouraged students during break time, shared their experiences and talked with the participants in person. At the award ceremony, outside guests were invited to share with students on new industry knowledge. Meng-Yu Tsai, the then Director of Kaohsiung Environmental Protection Bureau, and Shadow Chen, Deputy CEO of Taiwan Circular Economy Network, were invited as our distinguished guests for this event.

Under the leadership of LCY's Chairman Bowei Lee, higher management participated in the two-day competition. Chairman also shared his experience in management and encouraged students to play an active role in the international arena.

The 7th LCY Scholarship

Honored guest – Chairman Bowei Lee participated in the entire event

Mr, Guoliang Lu (left), the secretary-general of LCY Education Foundation, presented a certificate of appreciation to the guest Shadow Chen (right), Deputy CEO of Taiwan Circular Economy Network.

Summary of the 7th LCY Scholarship

• Date: December 16 and 17, 2017

• Process:

○ Stage 1: Shortlisting 56 outstanding students through preliminary document review

○ Stage 2: Candidates selected from Stage 1 engaged in the two-day group competition

• Features:

○ Interactive scenario game

○ Critical problem-solving skills

○ Diversified thinking

○ Encouraging multi-lateral communication and cooperation

○ Full participation by LCY's higher management

○ Guest speakers


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The 2nd Biotech Conference created a platform for academia and industries to exchange ideasThe 2nd Biotech Conference was convened on April 22, 2017, by LCY Education Foundation in the Company’s Taipei Office. Young entrepreneurs and scholars and experts from the Industrial Technology Research Institute gathered to facilitate communication and exchange between the academia and industries of biotech. The event is arguably one of the most respectable startup communities in the biotech area in the country. According to Chairman Bower Lee at his speech, LCY has been dedicated to developing an ecosystem suitable for starting a new business, bridging the gap between academic researches and commercial production, inspiring start-ups to formulate feasible business models, and further answering to global market demands.

Not only a conference but also a startup community

What's worth mentioning is that last year's speakers were also invited to attend the event and shared their valuable experiences. Mr. Yi-Ping Chen, Assistant Professor of Graduate Institute of Nanomedicine and Medical Engineering (GINME) in TMU College of Biomedical Engineering, said that the most significant takeaway of his two-year participation was diversified thinking and brainstorming. Usually, when research results or findings came out, his job was done. However, to commercialize a product, you had to do a SWOT analysis, analyze your domestic and foreign competitors and control costs and benefits. He also indicated that this conference was also like a startup community meeting. He saw many young students had an immense passion for realizing their startup dreams step by step.

About the Biotech Conference

Organized by LCY Education Foundation, the Biotech Conference was first held in 2016. Within two years, it has become one of the most respectable biotech communities in Taiwan. LCY Education Foundation aims to connect top-notch entrepreneurs in Taiwan, provide opportunities and a platform for young people to start their own business. In addition to introducing their latest-developed technologies, startup teams also can take advantage of the occasion to learn from predecessors' experiences and receive advice and guidance from them as well as expand their interpersonal networks and build relationships with business leaders in the event, to gain the upper hand in critical resources and energy. More importantly, these teams do not merely grow strength in starting a new business through the event. They will come back next year to share their experience with other groups, spurring innovation and research and development.

▼Topics and Guest Speakers of the 2nd Biotech

Conference

• Topic: The Intersection of Design and Healthcare Entrepreneurship

Speaker: Yi-Zhen Jiang, MD, Co-founder of DTF, Inc.

• Topic: Biotech Startup in Silicon Valley established by a Taiwan student

Speaker: Dr. Sonny Hsiao

• Topic: A New Method of Allergy Immunotherapy

Speaker: Johnny Feng-Jen Tsai, Founder & CEO of Heals Biotech

• Topic: The Thermal Responsive Hydrogel and Its Medical Application

Speaker: Dr. Hsin-Hsin Shen, Director of ITRI’s Regenerative Medicine Technologies Division

• Topic: Ultrasound Body Contouring System

Speaker: Dr. Guo-Zua Wu, Research Director of ITRI’s Biomedical Electronics and Bioinformatics Team

• Topic: Next-Generation Skin Analyzer

Speaker: Ting-Wei, Chang, Principal Investigator of ITRI’s Biomedical Electronics and Bioinformatics Team

• Topic: The Development of New Ophthalmology Test Specimen

Speaker: Dr. Shi-Ren, Lu, CEO of Pelican Technology Corp.

• Topic:：Commercialization of Biotechnology - Challenges and Experiences

Speaker: Marina Tsai, CEO of Hygeia Touch Inc.


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Stakeholders from communities were invited to visit LCY's factoriesWe proactively invite stakeholders from local communities, including professors and students from colleges and universities and residents from local villages, to visit our business sites and take a factory tour, where they can learn about LCY's advanced technologies and efforts in creating a safe work environment. In 2017, several groups from various universities, institutes, and village communities visited LCY's business sites, including teachers and students from National Sun Yat-sen University, Kaohsiung Medical University, Renwu Senior High School, National Pingtung University, National Kaohsiung University of Science and Technology, Southern Taiwan University of Science and Technology, and Institute of Environmental Engineer of National Sun Yat-sen University, and groups from Wuchang Village in Nanzih District, Kaohsiung Linhai Industrial Park Service Center, and the Chungtao Detachment of the Kaohsiung Harbor Police Department.

▼ Visits of Stakeholders from communities in 2017

Site Date Group Purpose of visitNumber of

people

Kaohsiung Site

2017.05.19National Sun Yat-sen University

Tour of the MBR Wastewater Recycling System 7

Dashe Site 2017.01.17 Kaohsiung Medical UniversityFactory tour for the group from the Harvard School of Public Health and the Department of Public Health of Kaohsiung Medical University

33

2017.04.12 National Pingtung UniversityTour of “Simulated Logistics Application System” for the students from the Department of Marketing & Distribution Management

14

2017.04.20Wuchang Village in Nanzih District

Tour of occupational safety and environmental protection 21

2017.11.08National Kaohsiung University of Science and Technology

Students and teachers in the industrial pollution management course from the Department of Safety, Health and Environmental Engineering visited Dashe Site

32

2017.12.22

Dr. Hongmao, Lin and students from Southern Taiwan University of Science and Technology

Introduction of manufacturing process and workplace safety and health practices

42

Xiaogang Site

2017.07.14Kaohsiung Linhai Industrial Park Service Center

Tour of the factory’s daily operations 8

2017.11.24Institute of Environmental Engineer of National Sun Yat-sen University

Tour of the Regenerative Thermal Oxidizer (RTO) 15

Terminal Station

2017.06.16Chungtao Detachment of the Kaohsiung Harbor Police Department

Daily Operations of the Factory 13

2017.10.19National Kaohsiung University of Science and Technology

Daily Operations of the Factory 26

Linyuan Site 2017.02.21the Village Chief Union and the village chiefs in Linyuan District

Occupational Safety and Environmental Protection 10


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Employee Care

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Occupational Safety and Health

Appendices

AppendicesChapter 10


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Employee Care

Social Engagement


Appendices

Appendix A：BSI Assurance Opinion Statement


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Employee Care

Social Engagement


Appendices

▼ Full-time Employees by Gender (Unit: persons)

▼Full-time Employees by Age (Unit: persons)

Male Female

Number of People

PercentageNumber of

PeoplePercentage

834 83% 172 17%

Male Female Total

Number of People

PercentageNumber

of PeoplePercentage

Number of People at the end of reporting period

Under 30 83 8% 29 3% 112

31~50 years old

522 52% 122 12% 644

51 and above

229 23% 21 2% 250

Subtotal 834 83% 172 17% 1,006

▼ New Employees and Former Employees by Gender and Age Group (Unit: persons)

▼ Employees by Job Position (Unit: persons)

Male Female Total

Number of

People

% of Males of

Total Full-time

Employees at the

End of Reporting

Period

Number of

People

% of Females

of Total Full-

time Employees

at the End of

the Reporting

Period

Number of

People

% of Male

and Female of

Total Full-time

Employees at

the End of

the Reporting

Period

New Employee

Under 30 40 3.98% 11 1.09% 51 5.07%

31~50 22 2.19% 13 1.29% 35 3.48%

51 and above 4 0.40% 2 0.20% 6 0.60%

Subtotal 66 6.56% 26 2.58% 92 9.15%

Former Employee

Under 30 8 0.80% 0 0.00% 8 0.80%

31~50 31 3.08% 4 0.40% 35 3.48%

51 and above 13 1.29% 1 0.10% 14 1.39%

Subtotal 52 5.17% 5 0.50% 57 5.67%

Job PositionMale Female Subtotal

Number of People Percentage Number of People Percentage Subtotal

Management (Section Manager and higher levels) 115 11.43% 21 2.09% 136

Administration Personnel 127 12.62% 109 10.84% 236

Production Technician 592 58.85% 42 4.17% 634

Note: The total number of full-time employees at the end of reporting period for calculation was 1,006 people.


Appendix B: Human Resources Statistics


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Appendices

▼ Employees by Educational Attainment (Unit: persons)

▼ Employment of People with Disabilities

Education

Level

Male Female Subtotal

Number of

PeoplePercentage

Number of

PeoplePercentage Subtotal

Doctoral degree 18 1.79% 4 0.40% 22

Master’s degree

143 14.21% 50 4.97% 193

Bachelor’s degree

354 35.19% 71 7.06% 425

Associate’s degree

192 19.09% 36 3.58% 228

High school diploma

123 12.23% 8 0.80% 131

Junior high school diploma and less

4 0.40% 3 0.30% 7

Business Site Number of people hired

Taipei office 1

Kaohsiung Headquarters & Site

1

Dashe Site 1

Xiaogang Site 2

R&D Center 2

Kaohsiung Terminal Station 0

Linyuan Site 1


▼ Employment Statistics by Employment Contract, Gender and Location (Unit: persons)

No. Business Location

Formal and

Informal

Employees

Male Female Total

Number

of

people

PercentageNumber

of peoplePercentage Total

1 Kaohsiung Headquarters & Site: No.3, Zhonglin Rd., Xiaogang Dist., Kaohsiung City 812

Formal 132 94% 8 6% 140

Informal 2 100% 0 0% 2

2 Taipei Office: 3F, No.85, Sec. 4, Bade Rd., Songshan Dist., Taipei City 105

Formal 84 47% 93 53% 177

Informal 9 82% 2 18% 11

3 Dashe Site: No.2, Jingjian Rd., Dashe Dist., Kaohsiung City 815

Formal 219 94% 15 6% 234

Informal 16 100% 0 0% 16

4 Xiaogang Site: No.16, Zhonglin Rd., Xiaogang Dist., Kaohsiung City 812

Formal 157 93% 12 7% 169

Informal 0 0% 3 100% 3

5 Linyuan Site: No.11, Shihua 3rd Rd., Linyuan Dist., Kaohsiung City 832

Formal 132 88% 18 12% 150

Informal 16 84% 3 16% 19

6 Kaohsiung Terminal Station: No.2, Guohua 2nd St., Qianzhen Dist., Kaohsiung City 806

Formal 28 85% 5 15% 33

Informal 3 60% 2 40% 5

7 R&D Center: No. 68, Yan-Fa Rd., 2nd Dist, Nanzhi Export Processing Zone, Kaohsiung City 811

Formal 83 80% 21 20% 104

Informal 0 0% 0 0% 0

Total Formal 834 83% 172 17% 1,006

Informal 46 82% 10 18% 56

Total 880 83% 182 17% 1,062

Note:

1. Informal employees include temp or dispatch workers in factories, employees on a fixed-term contract and consultants.

2. Business location – based on employee attendance

Appendix B: Human Resources Statistics


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Employee Care

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Appendices

Appendix C：Incidents of non-compliance with environmental laws and regulations and penalties received in 2017

No. BoundaryLaws and Regulations Violated

Violation AuthorityFines and Punishments

1Kaohsiung

Headquarters & Site

Air Pollution Control Act - Article 20, Section 2, Line item 4

VOC emissions exceeded 2000ppm.Kaohsiung Environmental Protection Bureau

100,000 NTD

2 Dashe SiteAir Pollution Control Act - Article 20, Section 1

2017/3/27 - The Environmental Protection Bureau conducted a VOC audit on site, and found four leaks (2000~5000 ppm) on the components of the process equipment (M03) exceeded the emission limit (2000ppm) and imposed a fine.

Kaohsiung Environmental Protection Bureau

200,000 NTD


2017/5/2 - The differential pressure of the bag filters A924 and A925 in M04 process showed negative (□ 0 cmH2O) and didn’t conform to the allowable range (1~10 cmH20). In accordance with the provision of Article 24 of the Air Pollution Control Act, the Southern Branch, Bureau of Environmental Inspection (BEI) informed against Da-she Site to Environmental Protection Bureau Kaohsiung City Government (KSEPB).


100,000 NTD


2017/5/2- Esco was commissioned by the Environmental Protection Bureau to conduct a VOC audit on the components of the equipment PP4 (M04) with a set of EYE-C-GAS and two sets of TVA-1000Bs. A total of 257 points were checked with 2 leaks found.


200,000 NTD

5 Dashe SiteAir Pollution Control Act - Article 32

2017/8/21- Dashe Site received a written ruling from the Environmental Inspection Division of the Environmental Protection Bureau. A fine of 100,000 NTD was imposed for violation of Article 32 of the Air Pollution Control Act.


100,000 NTD

6 Dashe SiteOccupational Safety and Health Act – Article 6, Section 1

2017/11/30 - Dashe Site received an official document from Kaohsiung Labor Standards Inspection Office stating that the company’s contractor Nansong Electrical & Plumbing Co. Pte Ltd had workers burned in the arc flash incident on Nov 21, 2017. A fine of 60,000 NTD was imposed for violating the provision of Section 1, Article 6 of the Occupational Safety and Health Act.

Kaohsiung Labor Standards Inspection Office

60,000 NTD

7 Xiaogang SiteAir Pollution Control Act - Article 20, Section 1

The Environmental Protection Bureau conducted a regular audit on the equipment component of stationary pollution sources (M01) on Dec 7, 2016. A leak was found with the VOC emission exceeding the regulation limit of 2000 ppm under Article 4 of the Kaohsiung City Volatile Organic Compound Control and Emission Regulations. (The written ruling was received on Feb 3, 2017.)


100,000 NTD and two hours of environmental education


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No. BoundaryLaws and Regulations Violated

Violation AuthorityFines and Punishments

8 Xiaogang SiteAir Pollution Control Act - Article 31, Section 1, Line item 1

The Fire Bureau was informed of an incident at 22:53 on May 31, 2017. A fire company arrived at the site (No.16, Zhonglin Rd., Xiaogang Dist.) at 23:01, and the process equipment in the plant was seen smoking. The fire company started fire-fighting. On closer inspection, the result showed that the fire was caused by a leak of emulsion to the bearing resulted from a deformed flange gasket and a loose screw of the relief valve on the high-pressure pump (PD-9401B) sitting between the synthetic rubber process equipment (M01), the emulsion buffer tank (V-9401) and the preheater (E505D/Pollution Source No. E027). The fire accident caused particulate matter pollution. (The written ruling by the Bureau was received on June 29, 2017.)



9 Xiaogang SiteAir Pollution Control Act - Article 32, Section 1

The Fire Bureau was informed of an incident at 22:53 on May 31, 2017. A fire company arrived at the site (No.16, Zhonglin Rd., Xiaogang Dist.) at 23:01, and the process equipment in the plant was seen smoking. The fire company started fire-fighting. However, Xiaogang Site reported the fire accident to the Fire Bureau at 00:01 on June 1st, 2017 via fax, violating the regulation that an incident must be reported to the authority within an hour. (The written ruling was received on June 29, 2017.)



10Kaohsiung

Terminal StationFire Control

2017/5/31- The Fire Bureau conducted a fire safety inspection, the factory failed to meet the legal requirements.

Fire Bureau, Kaohsiung City Government

20,000 NTD

11Kaohsiung

Terminal StationEnvironmental Protection

2017/3/23 – The Environmental Protection Bureau carried out an audit on the components of the VOC equipment.


100,000 NTD

12Kaohsiung

Terminal StationEnvironmental Protection

2017/9/22 - The Environmental Protection Bureau carried out an audit and the VOC control exceeded the legal limit.


200,000 NTD

13 Linyuan Site

Pollutant Control and Emission Standards for Volatile Organic Compounds

VOC emissions from the components exceeded the regulation limits.Kaohsiung Environmental Protection Bureau

200,000 NTD

Appendix C：Incidents of non-compliance with environmental laws and regulations and penalties received in 2017


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Appendix D：Summary of Social Engagement

No. Boundary Date Community & Social Involvement

1Kaohsiung

Headquarters & Site2017.05.19 Kaohsiung Site received a certificate of appreciation from National Sun Yat-sen University for their visit to the MBR system.

2Kaohsiung

Headquarters & Site2017.05.31 Received the Green Power Label issued by the Ministry of Economic Affairs (No. 1061001250)

3Kaohsiung

Headquarters & Site2017.07.21

Received a certificate of appreciation from the sheltered workshop for people with disabilities for the purchase of products (eco-friendly ditch covers).

4Kaohsiung

Headquarters & Site2017.08.07

Received a certificate of appreciation from the Xiaogang District Public Health Center for participating in occupational health promotion activities. Kaohsiung Site was selected and recommended to represent Kaohsiung City for the 2017 National Competition of Dynamic Workplace Creativity organized by the Health Promotion Administration of the Ministry of Health and Welfare.

5Kaohsiung

Headquarters & Site2017.10.30 Promoting reduction of GHG emissions

6 Dashe Site 2017.01.20Received a certificate of appreciation issued by the Renwu Precinct of Kaohsiung City Police Department for a donation of 100 dash cams for police cars made together by the members of the Dashe Industrial Park Manufacturers Association

7 Dashe Site 2017.01.17Received a certificate of appreciation from Kaohsiung Medical University for organizing a plant tour for students from the Harvard School of Public Health and the Department of Public Health of Kaohsiung Medical University. The visiting group showed recognition for the OHS practices of Dashe Site.

8 Dashe Site 2017.02.02Chief Lin of the Renda Industrial Park Service Center presented an award for Dashe Site’s contribution to promoting the industrial park’s emergency management systems in 2016.

9 Dashe Site 2017.02.02Chief Lin of the Renda Industrial Park Service Center presented an award for excellence in the performance of the emergency management mutual aid system (No. 8 underground industrial pipeline).

10 Dashe Site 2017.02.02Chief Lin of the Renda Industrial Park Service Center presented an award for excellence in the performance of the emergency management mutual aid system (No. 6 underground industrial pipeline).

12 Dashe Site 2017.08.25Received a certificate of appreciation from Renwu Senior High School for organizing the factory tour for the "Petrochemical Special Class."

13 Dashe Site 2017.04.12Received a certificate of appreciation from National Pingtung University for organizing a tour of “Simulated Logistics Application System” for the students from the Department of Marketing & Distribution Management to learn about green marketing and characteristics of PP products.


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14 Dashe Site 2017.04.25

In the morning - Worked with the Fire Bureau of the Kaohsiung City Government to arrange the 2017 fire safety training courses at Dashe Elementary School to promote fire prevention. The personnel from the environmental section of Dashe Site were sent to assist the Dashe Branch of the Bureau and the Organization of Emergency Management Mutual Aid System in the industrial park to organize CPR+AED hands-on training courses to increase students’ knowledge and abilities in response to first aid emergencies.

15 Dashe Site 2017.04.20

In the morning, a group of local residents led by the chief of Wuchang Village in Nanzih District visited the factory. The factory director, managers of the manufacturing office, the environmental section and the milling workshop, and Chief Yan from the industrial park service center accompanied the group. The village chief and visitors praised the factory’s effort on promoting environmental protection and building a rapport with the village. The whole visit and associated presentation went smoothly.

16 Dashe Site 2017.05.16 Received the Green Power Label issued by the Bureau of Energy, the Ministry of Economic Affairs

17 Dashe Site 2017.08.25Received a certificate of appreciation from the Petrochemical Special Class of Renwu Senior High School under the industry-academia cooperation program.

18 Dashe Site 2017.08.16

The Factory Manager Rongxiong Lin, the Assistant Manager Qichang Chen and Wen Chen from the Environmental Section went to Nanzih Junior High School and signed an agreement with the school’s Director of General Affairs Junting Chen and Huizhu Huang, the representative from the Air Quality and Noise Control Division of the Environmental Protection Bureau, to commit to the maintenance of the clean air zones in Kaohsiung. (The object: Nanzih Junior High School)

19 Dashe Site 2017.11.08A total of 32 students and teachers in the industrial pollution management course from the Department of Safety, Health and Environmental Engineering of National Kaohsiung University of Science and Technology, including Professor Mengshan Li and her students, visited Dashe Site and gave positive feedback and recognition during the visit.

20 Dashe Site 2017.12.22In the morning, a group from Southern Taiwan University of Science and Technology comprising Dr. Hongmao, Lin and 42 students visited the factory. The factory director, HR department, the environmental section and the milling workshop accompanied the group. The professor and students had positive responses to the presentation of Dashe Site’s manufacturing process and OHS practices.

21 Xiaogang Site 2017.07.14 Organized an open house for Kaohsiung Linhai Industrial Park Service Center.

22 Xiaogang Site 2017.09.13Received a certificate of appreciation from the Xiaogang District Public Health Center on Sep 25 for incorporating the public health center’s HIV testing program into the annual employee physical exam.

23 Xiaogang Site 2017.09.14Received a certificate of appreciation from the Xiaogang District Public Health Center on Sep 25 for providing space for the lectures on work-related stress and healthy family relationships organized by the public health center.

24 Xiaogang Site 2017.09.13Received a certificate of appreciation from Kaohsiung Linhai Industrial Park Service Center on Oct 12 for conducting a fire drill to promote the emergency management mutual aid system in Xiaogang District and providing an opportunity for other companies to observe and learn.

Appendix D：Summary of Social Engagements


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25 Xiaogang Site 2017.11.24 Organized an open house with a RTO tour for the Institute of Environmental Engineering of the National Sun Yat-sen University.

26 Xiaogang Site 2017.12.08Donated raincoats and rain boots to the Fire Bureau of the Kaohsiung City Government and received a certificate of appreciation on Dec 8th.

27Kaohsiung Terminal

Station2017.01.05

Won the Award for the 2016 Outstanding Environmental Performance in the Promotion of Business Commitment to Clean Air Zones presented by Kaohsiung City Government.


Station2017.04.21 Environment, health & safety (EHS) programs: The Green Power Label received.


Station2017.06.16

Received a certificate of appreciation from the Chungtao Detachment of the Kaohsiung Harbor Police Department for an open house visit.


Station2017.08.13

Received a certificate of appreciation from the Second Detachment of the First District Emergency and Rescue Corps under the Kaohsiung Fire Bureau for organizing the fire and rescue work experience program at Taroko Park.


Station2017.10.19

Organized an open house for National Kaohsiung University of Science and Technology and received a silk banner and a memorial cup from the university after the tour.


Station2017.10.28

Participated in the Cross-department Cooperation Program for Greenhouse Gas Reduction implemented by the Environmental Protection Bureau and awarded for the outstanding performance at the award ceremony.


Station2017.10.28

Joined the beach cleanup event at Cijin organized by the Environmental Protection Bureau. The total weight of debris removed was 712 kg.


Station2017.08.01

Joined in the 2016 & 2017 Kaohsiung Clean Air Zone Management Program and committed to the maintenance of the clean air zone at Xingren Elementary School in Qianzhen District.

35 Linyuan Site 2017.01.05 Named the excellent environmental protection organization in air quality by the Kaohsiung Environmental Protection Bureau.

36 Linyuan Site 2017.02.21 The 2017 OPEN HOUSE Event (Opinion Leaders)

37 Linyuan Site 2017.03.08 Received a certificate of appreciation from the chairman of the Village Chief Union for an open house event (opinion leader).

38 Linyuan Site 2017.03.15 Received a certificate of appreciation from the Kaohsiung Fire Bureau for donating smoke detectors to low-income families.

39 Linyuan Site 2017.03.25Earned a commendation issued by the Occupational Safety and Health Administration for participating in the National Occupational Safety and Health Week.

40 Linyuan Site 2017.04.12 Earned the Water Footprint certification by accredited third-party organization TUV.



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41 Linyuan Site 2017.04.13 Passed the annual audit of the ISO 14001：2004 standards

42 Linyuan Site 2017.04.13 Earned the Green Energy Certification issued by Taiwan Power Company.

43 Linyuan Site 2017.04.22 Participated in the 2017 Beach Cleanup/Coastline Adoption Activity organized by the Environmental Protection Bureau.

44 Linyuan Site 2017.06.02 Named the Excellent Environmental Organization in Green Procurement by the Environmental Protection Bureau.

45 Linyuan Site 2017.06.04 Organized the Fire Prevention Promotion Event in the Happiness Park in Linyuan District upon the invitation by the Fire Bureau.

46 Linyuan Site 2017.06.05Organized the event of “Introduction of Petrochemical Production Process” upon the invitation by the Industrial Development Bureau of the Ministry of Economic Affairs.

47 Linyuan Site 2017.06.07 Obtained certification for 1,920,000 zero-accident work hours from the Occupational Safety and Health Administration.

48 Linyuan Site 2017.06.21 Received a certificate of appreciation from Chungyun Elementary School in Linyuan District for the support of campus maintenance.

49 Linyuan Site 2017.07.04 Obtained the 2016 Greenhouse Gas Verification Statement issued by SGS

50 Linyuan Site 2017.07.21 Engaged in the beach cleanup event “Health Promotion on World Oceans Day”

51 Linyuan Site 2017.08.30Participated in the 2017 Air Quality Improvement Program put forward by Kaohsiung City Government and committed to the maintenance of the clean air zone in Shanwei Elementary School.

52 Linyuan Site 2017.09.11Organized a fire prevention promotion event “Realization of the Dream of Fire Prevention” for Linyuan Fire Station incorporating the art activity of sand painting for parents and children and an introduction of fire safety.

53 Linyuan Site 2017.09.11 Received a certificate of appreciation from Shanwei Elementary School in Linyuan District for the improvement in air quality.

54 Linyuan Site 2017.10.28 Participated in EPAT’s Green Point program promoted by Kaohsiung Environmental Protection Bureau.

55 Linyuan Site 2017.10.28Joined in the Cross-department Cooperation Program for Greenhouse Gas Reduction launched by Kaohsiung Environmental Protection Bureau.



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56 Linyuan Site 2017.10.28Received public praise for participating in the “Beach Cleanup & Health Promotion Event in Autumn” organized by Kaohsiung Environmental Protection Bureau.

57 Linyuan Site 2017.11.14The Occupational Safety and Health Administration of the Ministry of Labor publicly commended the “2017 Excellent Organizations and Workers” listed by the Manufactures United General Association of Industrial Park of R.O.C on Nov 14. Linyuan Site was the organizer of the event and won the Award for Outstanding Performance in Occupational Safety Promotion.

58 Linyuan Site 2017.11.14The Occupational Safety and Health Administration of the Ministry of Labor publicly commended the “2017 Excellent Organizations and Workers” listed by the Manufactures United General Association of Industrial Park of R.O.C on Nov 14. Linyuan Site won the Excellent Member Manufacturer Award.

59 Linyuan Site 2017.11.14The Occupational Safety and Health Administration of the Ministry of Labor publicly commended the “2017 Excellent Organizations and Workers” listed by the Manufactures United General Association of Industrial Park of R.O.C on Nov 14. Linyuan Site was the organizer and won the Excellent Worker Award.

60 Linyuan Site 2017.11.28Linyuan Site served the principal role of the emergency management mutual aid systems in the industrial park and attended the Meeting on the Implementation and Results of Emergency Management Mutual Aid Systems on behalf of Linyuan Industrial Park. Linyuan Site won the Advanced Award for National (north/central/ south) Type 1 Emergency Management Mutual Aid System.

61 Linyuan Site 2017.12.04The front-page coverage of the TSSD News – Businesses engaging in the Cross-department Cooperation Program for Greenhouse Gas Reduction launched by Kaohsiung Environmental Protection Bureau showed fruitful results.

62 Linyuan Site 2017.12.04The press release of Kaohsiung Environmental Protection Bureau - Remarkable results yielded by enterprises' commitment to the clean air zone program promoted by Kaohsiung City Government. Kaohsiung now has the number one green areas in Taiwan.

63 Linyuan Site 2017.12.21Awarded the Badge of Accredited Healthy Workplace presented by the Health Promotion Administration of the Ministry of Health and Welfare.



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Appendices

Appendix E：GRI Standards Index

GRI Standard Number Material Topic Disclosure Number Description Page

GRI 102：2016

GRI 102 General Disclosures 102-1 Name of the organization 3

GRI 102 General Disclosures 102-2 Activities, brands, products, and services 3

GRI 102 General Disclosures 102-3 Location of headquarters 3

GRI 102 General Disclosures 102-4 Location of operations 3

GRI 102 General Disclosures 102-5 Ownership and legal form 3

GRI 102 General Disclosures 102-6 Markets served 3

GRI 102 General Disclosures 102-7 Scale of the organization 3

GRI 102 General Disclosures 102-8 Information on employees and other workers 77

GRI 102 General Disclosures 102-9 Supply chain 57

GRI 102 General Disclosures 102-10 Significant changes to the organization and its supply chain 6

GRI 102 General Disclosures 102-11 Precautionary Principle or approach 28

GRI 102 General Disclosures 102-12 External initiatives 8

GRI 102 General Disclosures 102-13 Membership of associations 17

GRI 102 Strategy 102-14 Statement from senior decision-maker 2

GRI 102 Ethics and integrity 102-16 Values, principles, standards, and norms of behavior 27

GRI 102 Governance 102-18 Governance structure 24

GRI 102 Stakeholder engagement 102-40 List of stakeholder groups 7

GRI 102 Stakeholder engagement 102-41 Collective bargaining agreements 7


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GRI 102：2016

GRI 102 Stakeholder engagement 102-42 Identifying and selecting stakeholders 7

GRI 102 Stakeholder engagement 102-43 Approach to stakeholder engagement 7

GRI 102 Stakeholder engagement 102-44 Key topics and concerns raised 7

GRI 102 Reporting practice 102-45 Entities included in the consolidated financial statements 6

GRI 102 Reporting practice 102-46 Defining report content and topic Boundaries 6

GRI 102 Reporting practice 102-47 List of material topics 6

GRI 102 Reporting practice 102-48 Restatements of information 6

GRI 102 Reporting practice 102-49 Changes in reporting 6

GRI 102 Reporting practice 102-50 Reporting period 6

GRI 102 Reporting practice 102-51 Date of most recent report 6

GRI 102 Reporting practice 102-52 Reporting cycle 6

GRI 102 Reporting practice 102-53 Contact point for questions regarding the report 6

GRI 102 Reporting practice 102-54 Claims of reporting in accordance with the GRI Standards 6

GRI 102 Reporting practice 102-55 GRI content index 6

GRI 102 Reporting practice 102-56 External assurance 6

GRI 103：2016

GRI 103 Management Approach 103-1 Explanation of the material topic and its Boundary 7

GRI 103 Management Approach 103-2 The management approach and its components 7

GRI 103 Management Approach 103-3 Evaluation of the management approach 7



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GRI 200：2016

GRI 201 Economic Performance 201-1 Direct economic value generated and distributed 16

GRI 201 Economic Performance 201-2 Financial implications and other risks and opportunities due to climate change 33-37

GRI 201 Economic Performance 201-3 Defined benefit plan obligations and other retirement plans 65

GRI 203 Indirect Economic Impacts 203-1 Infrastructure investments and services supported 67

GRI 204 Procurement Practices 204-1 Proportion of spending on local suppliers 57

GRI 300：2016

GRI 301 Materials 301-1 Materials used by weight or volume 38

GRI 302 Energy 302-1 Energy consumption within the organization 39

GRI 302 Energy 302-4 Reduction of energy consumption 46

GRI 303 Water 303-1 Water withdrawal by source 42

GRI 303 Water 303-3 Water recycled and reused 42

GRI 305 Emissions 305-1 Direct (Scope 1) GHG emissions 43

GRI 305 Emissions 305-2 Energy indirect (Scope 2) GHG emissions 43

GRI 305 Emissions 305-5 Reduction of GHG emissions 46

GRI 305 Emissions 305-7 Nitrogen oxides (NOX), sulfur oxides (SOX), and other significant air emissions 43

GRI 306 Effluents and Waste 306-1 Water discharge by quality and destination 44

GRI 306 Effluents and Waste 306-2 Waste by type and disposal method 45

GRI 306 Effluents and Waste 306-3 Significant spills 45



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GRI 300：2016

GRI 307 Environmental Compliance 307-1 Non-compliance with environmental laws and regulations 79

GRI 308Supplier Environmental Assessment

308-1 New suppliers that were screened using environmental criteria 58

GRI 400：2016

GRI 401 Employment 401-1 New employee hires and employee turnover 76

GRI 401 Employment 401-2Benefits provided to full-time employees that are not provided to temporary or part-time employees

64

GRI 401 Employment 401-3 Parental leave 61

GRI 402 Labor/Management Relations 402-1 Minimum notice periods regarding operational changes 64

GRI 403 Occupational Health and Safety 403-1 Workers representation in formal joint management–worker health and safety committees 48

GRI 403 Occupational Health and Safety 403-2Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities

48

GRI 403 Occupational Health and Safety 403-3 Workers with high incidence or high risk of diseases related to their occupation 48

GRI 404 Training and Education 404-1 Average hours of training per year per employee 62

GRI 404 Training and Education 404-3 Percentage of employees receiving regular performance and career development reviews 64

GRI 405 Diversity and Equal Opportunity 405-1 Diversity of governance bodies and employees 60

GRI 406 Non-discrimination 406-1 Incidents of discrimination and corrective actions taken 64

GRI 417 Marketing and Labeling 417-1 Requirements for product and service information and labeling 29

GRI 417 Marketing and Labeling 417-2 Incidents of non-compliance concerning product and service information and labeling 29

GRI 417 Marketing and Labeling 417-3 Incidents of non-compliance concerning marketing communications 29

GRI 418 Customer Privacy 418-1Substantiated complaints regarding concerning breaches of customer privacy and losses of customer data

29

GRI 419 Socioeconomic Compliance 419-1 Non-compliance with laws and regulations in the social and economic area 29


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