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Message from the Chairman

Chairman

Since our founding, Makalot Industrial Co. Ltd. has always acted in good business integrity and moved forward with a practical attitude. While the company's operating scale is expanding, we pay more attention to business ethics and abide by the rule of law, and contemplate how to contribute to society in a more comprehensive and effective way, with the aim of fulfilling the corporate responsibility, actively participating in public welfare, and pursuing sustainable development. For this reason, Makalot in 2014 expanded the corporate social responsibility (CSR) task force into an interdepartmental cooperative committee, and in 2016 with the assistance of external counsel, adopted the Global Reporting Initiative (GRI)as the reporting standard of its annual CSR report. By adopting GRI, we've fully revealed the concrete results in both business operation and social responsibility in 2016, and at the same time shouldered more responsibility of sustainable development of Makalot as the enterprise, and that as a part of the society.

Corporate Governance: High Operating Performance And High Transparency

Makalot has focused on the development of the core business (clothing development and manufacturing) since our founding. In order to provide customers with better services and more innovative and diversified products, Makalot has introduced the resources of external professions, executing R&D programs and creating new operation models, such as actively engaged in a series of business schemes, such as vertical integration with upstream mills, industry-academia collaboration, and building up horizontal alliances all in the effort to boost its operation performance and profitability. In the face of a rising online shopping market and the bidding strategy of customers, Makalot not only keeps on developing more competitive products, but fortifying the ability to react quickly to the demands, hoping to create more business opportunities for our customers, while reducing the risk of accumulating inventory.

Besides actively building high operational performance, Makalot is always watching closely on the constant changes happening in the global market, so as to prepare for risks both externally and internally. We've enhanced financial transparency, improved information disclosure, and implemented the internal audit and internal control more thoroughly. Though above concrete corporate governance, we've reached the balance among shareholders, employees, and all stakeholders. As a result, Makalot in 2016 was recognized as one of the top 35 companies by the Taiwan Stock Exchange's Corporate Governance Assessment, while in 2017 ranked 45th among selected large enterprises in CSR Corporate Citizenship Award by Common Wealth Magazine.

Sustainable Development: Environmental Conservation and Caring for the Planet in Practice

Global warming and climate change have been a global concern. As a global citizen, Makalot actively contributes to sustainable development and the conservation of Taiwan's natural environment with practical actions, hoping to create a better living environment for future generations. In late director Chi Po-lin's documentary "Beyond Beauty: Taiwan from Above," we not only see the beauty of Taiwan but also witness serious environmental problems, especially on the west coast of Taiwan, an area once dominated by aquaculture industry, where land subsidence due to excessive pumping of underground water has been ongoing, resulting in seawater intrusion, salinization of land, vegetation withering, along with other issues. To restore the fertility of soil in the said area, Makalot and the Tse-Xin Organic Agriculture Foundation in 2016 began to collaborate on the "Three-year Coastal Trees Adoption Plan" at Taixi Sea Park, where Makalot staff built wooden frames for supporting the seedlings of seaside plants, such as Casuarina equisetifolia, to increase their survival rate, in the hope of building a natural windbreak with the vegetation, providing enough protection of the coastal land.

In addition, Makalot has been teaming up with the Society of Wilderness (SOW) for a long time in promoting the volunteering activities on environmental protection. In 2015, we sponsor the SOW's work in Yilan's Masai, where the farmers, in collaboration with SOW, produced natural, healthy Makalot rice with environmentally friendly farming. In 2016, we began sponsoring SOW's work at Yilan's 52-Jia Wetland, officially announced as a "national important wetland," encouraging local farmers to grow the crops without the use of chemical fertilizers and pesticides, a method called "Natural Farming." By doing so, the farmers are able to produce natural, healthy crops, make both ends meet, while maintaining the biodiversity in the area as a natural habitat. With such effort, the land is kept from serious pollution.

As Makalot's five major production bases are located in South East Asia, where the temperature is higher, it is important that we provide our employees with a comfortable and safe work environment, while also meeting the requirements for energy conservation and environmental protection. Thus, we began in 2016 the disclosure of the amount of greenhouse gases (GHG) caused by the power consumption of our various factories. The data would serve as a comparison basis for their future goals on reducing such emission. At the same time, we worked on a GHG analysis program in Vietnam, one of our main production sites, with National Cheng Kung University's Industrial Sustainable Development Center, as a demonstration of various energy-saving measures to reduce greenhouse gas emissions among our factories.

Happy enterprise: employee care and physical and mental balance

"Manage professionally, and provide the employees a sense of belonging" is the tenet of the founding of Makalot. Since then, we've been pursuing to build up a friendly workspace where our employees could work healthily, positively and happily. In order to provide a more modern and comfortable work environment for employees, Makalot in 2016 moved into a new head office with good internal facilities and spacious room. We hope that all our employees are able to boost their work efficiency in the high-quality work environment.

Furthermore, Makalot also endeavors to provide a competitive remuneration system, establish a performance-oriented stimulating environment and a diversified talent development system, provide comprehensive welfare programs, plus open and transparent communication channels. So far, these measures have been very effective and we've been recognized by many external professional evaluation institutions. In addition to a number of healthy workplace-related awards, we've been named in 2017 the excellent enterprise for creating a friendly workplace at the 4th event by the Ministry of Economic Affairs.

Besides the business headquarters in Taiwan, Makalot arranges designated personnel in each of the five overseas production bases for supervising and assisting the factories to carry out codes of conduct, which conform to the local laws and standards and the rules regulated by customers. We also deem it our priority to provide a fair salary, welfare, and a safe and healthy work environment to our overseas employees. As of 2016, the CSR task force at the Taipei headquarters goes to overseas business locations every half a year for furthering the self-inspection mechanism and carries out relevant promotion and training.

Social Welfare: Makalot Mobilizes for Sharing Love

"Makalot mobilizes for sharing love" is a comprehensive public welfare drive initiated by Makalot at the headquarters and the overseas business locations, which draws up specific actions to create hope for the younger generation from three aspects: "talent education," "care for underprivileged groups," and "community care."

"Talent Education": at home, Makalot works with the Society of Wilderness (SOW) and the Chinese Childrenhome & Shelter Association (CCSA), teaching children at children's home on environmental conservation through volunteering activities; in overseas production sites, we collaborate with renowned brand client GAP on carrying out the Personal Advancement and Career Enhancement (P. A. C. E.) program, empowering our local female staffs with enhanced life skills, hoping to help them create a wonderful life. By working with GAP on this program across Indonesia, Cambodia and Vietnam, we're honored by our customer as an "Excellent Supplier in Social Responsibility Performance." Right now, another international Japanese brand client has also initiated yet another similar program, cooperating with Makalot on promoting the welfare of the female employees overseas.

With respect to "Care for Underprivileged Groups" and "Community Care," we collaborate with public welfare groups who we've been working with for a long time, including the Taiwan Fund for Children and Families (TFCF), the CCSA, the Taiwan Chief Executive Officer Club for Social Benefit (Taiwan CEO Club), and blood donation centers. In the coming years, we intend to expand the scope of implementation, especially at our overseas production sites. The most concrete feedback throughout the year has been the growing enthusiasm among our employees. We hope that these welfare activities, all together, would in return create a warm and friendly company culture.

Additionally, founded in 2007 by Makalot, the Makalot Humanities Development and Education Foundation has operated until now in the following aspects: initiating charity events, facilitating industrial innovation, cultivating talent, and fostering industry-academia collaboration. Hitherto, the Foundation has teamed up with a total of 49 domestic colleges and universities as well as technical training units, cultivating a number of excellent professionals in the textile industry.

Looking to the future, Makalot will continue upholding the commitment to business ethics. While pursuing stable growth with the innovation model, we'll take on more responsibilities and commit to the sustainable development of the enterprise and society. Through cooperation with professional consulting firms and performing in line with the GRI Standards, we truly believe that Makalot is ready to shoulder greater responsibilities, and make our environment a better place to live.

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