LITEON is dedicated to enhancing operational efficiency through digital transformation, while proactively addressing the increasing cybersecurity risks associated with this shift, particularly in light of the growing prevalsence of generative AI in 2023. To resolve these challenges, our Information Security Management System (ISMS) is designed to protect personal and confidential data, ensuring that all of LITEON's information assets remain secure. As we advance toward smart manufacturing, maintaining effective information security is essential for informed decision-making and mitigating risks.

Recognizing the vulnerabilities that AI tools can introduce, we continuously monitor for potential threats to data privacy and security, emphasizing the importance of robust protective measures against cyberattacks. The stakes are high; potential fines up to TWD 700 billion and reputational risks that could lead to order cancellations underscore the critical need for effective management of cybersecurity and data privacy.

To this end, we have implemented a comprehensive information security monitoring system, which includes hardware and software controls to conduct vulnerability assessments and prevent both external hacking attempts and internal data leaks. Our compliance with ISO/IEC 27001:2013, along with the PDCA operational model, ensures that our ISMS is continually improved and aligned with best practices in the field. We utilize the Azure Information Protection service to enhance data security, and all employees participate in annual information security training to foster a culture of awareness and vigilance.

Our strategic targets are ambitious: we aim to reach a Level 4 maturity in the NIST Cybersecurity Framework (NIST CSF), maintain our ISO 27001 certification through rigorous annual audits, and ensure that by the end of 2023, all production machinery is fortified against viruses and hacking. Additionally, we are implementing network segmentation and firewalls to provide proactive protection, while aligning our production environment with IEC 62443 and NIST CSF standards.

Currently, LITEON has achieved an average maturity level of Level 2 in the NIST CSF, with our ISO 27001 certification successfully updated in 2023. We are actively enhancing our global factories and offices with comprehensive information security analysis and early warning systems, with cybersecurity hardware installations expected to be completed by the latter half of 2023. Our New Taipei and Taoyuan facilities have been prioritized for enhanced protection using intrusion prevention systems.

To ensure accountability and alignment with our cybersecurity objectives, LITEON’s executive compensation structure incorporates key performance indicators related to information security. The compensation of our IT executive is closely tied to achieving Level 4 maturity in the NIST CSF, maintaining ISO 27001 certification, improving the security of production machinery, and advancing network security measures.

At LITEON, we recognize that robust information security and personal data protection are vital for building trust and sustaining growth in an increasingly digital world.

LITEON acknowledges the importance of addressing climate-related risks as a central aspect of our sustainability strategy. With net-zero emissions commitments from economies and key clients, we recognize the potential impact on our operations and the likelihood of increased production costs. To align with rising expectations for renewable energy, we have committed to sourcing 100% of our electricity from renewable sources, anticipating additional costs of approximately NT2.6 million per year due to regional Renewable Energy Certificates (RECs), and total expenditure ranging from NT3 million to NT7.5 million annually. Changing market dynamics and regulatory requirements may further compel us to increase renewable energy use or establish ambitious environmental goals, posing risks of cost transfer and reputational damage if compliance is not achieved. The ongoing lack of consensus on climate change regulations adds complexity and uncertainty to our operational landscape.

In response to these challenges, LITEON has conducted a thorough TCFD survey and launched its "555" carbon reduction action plan, which aims for a 5% annual reduction in carbon intensity and a commitment to achieving net-zero emissions by 2050. Our efforts focus on actively reducing scope 1 and 2 greenhouse gas emissions (GHG) while enhancing renewable energy usage and establishing a comprehensive carbon management platform. We also adjust our internal carbon pricing and integrate low-carbon sustainable practices within our supply chain. Key targets include:

• A 39.3% reduction in GHG emissions (Scope 1 and 2) intensity from a 2014 baseline.

• Achieving net-zero emissions by 2050 through the introduction of innovative materials, such as third-generation semiconductors, to improve product conversion efficiency and the use of recycled materials to minimize electronic waste.

• Committing to 100% renewable electricity by 2040 and adopting scientifically backed targets through the Science Based Targets initiative (SBTi).

As of now, LITEON has successfully reduced GHG emissions by 138,368 tons CO2e, achieving a 48% decrease in intensity. Our renewable energy usage has increased to 28.3% in 2023, supported by the implementation of 40 energy efficiency measures that saved approximately 15,530,000 kWh and reduced emissions by an additional 30,148 tons CO2e. We reaffirmed our commitment to 100% renewable energy in 2023 and joined the RE100 initiative in 2024. Our net-zero target is in the process of validation by SBTi.

To ensure accountability for our climate objectives, LITEON has integrated the "555 Carbon Reduction Action" into our executive compensation framework, linking key performance goals to incentive structures. Starting in 2023, the program focuses on achieving a 5% annual reduction in carbon intensity, a 5% decrease in the carbon footprint of next-generation products, and our net-zero commitment by 2050. This framework applies charges to our business units (BUs) and manufacturing Operational Combo Sites (OCS), directly influencing compensation and performance evalsuations for 70% of both corporate and executive teams based on progress against these metrics.

At LITEON, we are committed to proactive climate change strategies and energy management, striving to produce innovative solutions while minimizing our environmental impact and promoting a sustainable future.