PINE Technology : 2019 Environmental, Social and Governance Report

2019 Environmental, Social and Governance Report

PINE Technology Holdings Limited

About This Report

PINE Technology Holdings Limited (the "PINE") and its subsidiaries (hereinafter referred to as the "Group") are pleased to disclose the management approach, performance and achievements of our key operations in environmental, social and governance (the "ESG") aspects in this ESG Report ("ESG Report"). This ESG Report is prepared in accordance with the "comply or explain" and "recommended disclosures" provisions of the Environmental, Social and Governance Reporting Guide contained in Appendix 27 of the Listing Rules.

The purpose of this ESG Report is to communicate the Group's visions, policies, initiatives, performances and plans relating to material social and environmental issues. All disclosed information is compiled by existing policies or practices, and official documents or reports in an accurate and transparent manner. This ESG Report is endorsed by the Board of Directors (the "Board"), who is responsible for formulating strategies and managing ESG matters of the Group and is dedicated to monitoring our sustainability performance through publishing ESG Report on an annual basis.

Reporting Period

Unless otherwise specified, the content of this ESG Report covers the period from 1 July 2018 to 30 June 2019 (the "Reporting Period").

Reporting Scope

During the Reporting Period, the Group mainly engages in five operating divisions - manufacture and sales of market video graphics cards and other computer components under the Group's brand names ("Group Brand Products"); distribution of other manufacturers' computer components and consumer electronic products and others ("Other Brand Products"); money lending service; trading business; and computer software and hardware and system development.

With consideration to economic, environmental and social significance and materiality of the facility, this ESG Report covers the Group's operational and management business at our electronics manufacturing facility in Dongguan, China.

Feedback Contact

Your feedback on this Report and our sustainability performance is highly valued. Please feel free to share with us your comment(s) by:

Email:invest@pinegroup.com

Post: Unit 1201, 148 Electric Road, North Point, Hong Kong

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About PINE

PINE was founded in 1989 and was listed on the Growth Enterprise Market of the Stock Exchange on 26 November 1999. Since 18 November 2010, its listing of shares has been transferred to the Main Board of the Stock Exchange.

As a leading designer, manufacturer and distributor of personal computer-based products, PINE has two core business divisions - the XFX division and the distribution division. The XFX division specialises in the design and manufacturing of Group Brand Products, which include video graphics products for the PC and PC upgrade market; whereas the distribution division supplies a wide variety of Other Brand Products to gamers through the Gaming Power Supply Unit.

Headquartered in Hong Kong with well-equipped electronics manufacturing facilities in mainland China, PINE has set up research and development hubs in Asia, as well as a well-established global distribution and service network across North America, Europe and Asia. It is the Group's strategy to build upon its global XFX commercial success, expand its market share in the global PC gamers' market, and collaborate with strategic partners in the development and delivery of innovative products through national and regional system builders, distributors, resellers, retailers, as well as e- tailers.

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Our Approach to Sustainability

Corporate sustainability is a complex and exciting journey that requires the Board's dedication, comprehensive planning, systematic review and audit, as well as the support from our employees, customers and suppliers.

The Group undertakes to operate in a sustainable and responsible manner in terms of product and global development as well as the entire supply chain. We also attach great importance on environmental sustainability, product liability, occupational health and safety, labour wellbeing, as well as business ethics.

Our Board is committed to the development and implementation of ESG strategies, as well as the overall management of existing and potential ESG-related risks. To integrate sustainable corporate governance into our operational level, the Group has established committees that are responsible for facilitating the management of various sustainability matters, including environmental material safety, pollution control and occupational health and safety. Their duties also include overseeing our daily operations to ensure compliance on the fundamental principles of sustainability on every level of our business.

This Report is structured to follow the three core pillars of sustainability - economy, society and environment. Our strategies and practices that cater to key topics under the three cores of sustainability would help us visualise corporate sustainability.

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Stakeholder Engagement

To operate sustainably requires the collective effort and support from our external and internal stakeholders. Their interests, expectations and concerns intertwine with our performance. Thus, it is our goal to create a sustainable environment that favours both corporate growth and the wellbeing of our stakeholders.

During the Reporting Period, our stakeholder groups consisted of shareholders and investors, employees, customers, suppliers, community groups, media and regulatory bodies. In establishing positive and stable relationships, various communication channels have been employed to maintain open and ongoing dialogue with our stakeholders. Through engaging our stakeholders, we strive to identify, evaluate and manage ESG-related risks, while ensuring that an effective internal control system is in place to handle risks when discovered.

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Our Operation

At PINE, we value innovations and undertake to embed quality and safety in our daily operations. We attach great importance in establishing management systems and following international standards that regulate every aspect of our activities. We recognise that close relationships with customers and suppliers, as well as upholding business ethics are keys to thrive in the technological manufacturing industry.

Quality Assurance

The manufacturing process at our XFX division is governed by a quality management system in accordance with the requirements of ISO9001, which has been certified by the International Personnel Certification Association (the "IPC"). For instance, the manufacture of peripheral cards of computer has been recertified with ISO 9001:2015/GB/T 19001-2016 Quality Management System Standards (the "QMS") during the Reporting Period.

To facilitate trading in Europe and America, our manufacturing products comply with international requirements and industry standards, including the Conformité Européenne (the "CE") marking and certification from the Federal Communications Commission (the "FCC").

A documented quality assurance process has been devised to verify our system's compliance to the standard requirements. In addition to tests on products and materials, we also set up and monitor key parameters to ensure the stability of the process, hence safeguard its quality. For example, we documented the total number of recalled products, efficiency of machinery process, performance of research and development department, stability of labour supply and procurement procedures during the Reporting Period. From the quality test results, we have subsequently laid down future goals and plans for enhanced quality control performance.

To better distinguish and resolve uncertainties as well as potential product quality hazards in a timely manner, internally we have implemented the production inspection policy (產品測試大綱), detailing the quality inspection procedures to be carried out before being shipped and delivered. Our manufacturing process also follows the corrective and preventive control procedures (矯正和預防措施控制程序) in reporting and analysing of the causes of known incidents and potential risks of product non- conformity.

Product Safety

PINE pays attention to the impact of our products on the environment, our customers as well as our employees. We constantly evaluate and improve the safety and reliability, the use of restricted substances and the impact of conflict minerals of our products. For

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instance, our operations complied with the Restriction of Hazardous Substances (the "RoHS") regulation, whereas all our products have passed the Printed Circuit Boards Assembly (the "PCBA") appearance inspections.

The Environmental Material Management Task Force (環 境 物 質 管 理 推 行 小 組 ) continues to govern the handling of environmental material safety and compliance matters. In addition to planning, assessing, evaluating and implementing environmental targets, the task force also communicates with other departments on internal and regulatory requirements. To operate in accordance with the Waste Electrical and Electronic Equipment Directive (the "WEEE"), we continue to follow the Environmental Material Management Handbook (環境物質管理手冊) as our internal guiding principles and management policies.

During the Reporting Period, annual management meeting was organised to evaluate the effectiveness of our environmental material management system as well as our current performance, and further formulate future targets. Similar to last year, the environmental safety risk assessment is conducted to review environmental material risks associated on the Environmental Material Hazard Identification Table (環境物質危 害因素識別評價表). According to the assessment results, all identified risks were classified as 'low risks'.

To ensure the incoming materials do not contain relevant prohibited substances that may affect the environment and health of our people, we strive to cooperate closely with our suppliers to obtain comprehensive information of each material and product. We share with our suppliers about restricted substance control techniques and our management measures. We also request them to sign a guarantee agreement and provide warranty to confirm proper management of restricted substances. Each supplier is assessed by the procurement department and the quality control department based on the risk level of incoming material. For 'high risk' suppliers, we request them to provide laboratory report issued by third-party consultancy.

In determining the hazardous substances and making sure that our products are safe for use, the manufactured hardware are set to go through primary screening, and further wet chemical testing. During the Reporting Period, 111 sample hardware products were submitted to perform RoHS compliance test. The results have shown to comply with the RoHS Directive 2011/65/EU where no products were recalled due to health and safety reasons.

Customer Relationship

Customer loyalty forms the core of our commercial success. The Group is committed to product functionality and safety, as well as striving for positive relationships with our customers. The quality control department and customer service department follow our internal Customer-oriented Operating Standards ( 客戶導向作業標準) in providing

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quality customer service and after sales service.

We continued to distribute customer satisfaction survey to receive customer feedback on our communication, price competitiveness, product quality and service level. Our average score has slightly improved compared to last Reporting Period, from 164 to 165 out of 170 during this Reporting Period. Moving forward, we shall continue to endeavour to maintain high level of customer satisfaction.

To provide guidelines for our staff in response to complaints in an appropriate and efficient manner, we have also issued the Customer Complaint Handling Procedure ( 客戶抱怨處理流程). In complying with our QMS, the quality control department has set a quality assurance target to receive no more than one customer complaint per every two months. The target was well-achieved, and we did not receive any material complaints during the Reporting Period.

Supply Chain

At PINE, we adopt a systematic approach in evaluating, selecting and managing our suppliers. To comply with our QMS, RoHS and WEEE, it is our target to assure the quality of our procured materials, and to collaborate and communicate closely with our suppliers. We undergo careful selection and evaluation procedures on selecting prospective suppliers.

In addition, our procurement team conducts site inspections and annual supplier audits to assess and ensure our suppliers meet with our quality management, safety as well as environmental standards. Suppliers are graded in various aspects, such as their quality management system, procedural control, and contractor/supplier management. Together with the audit results, they are also provided with improvement recommendations.

During the Reporting Period, we sourced and procured materials from 35 suppliers, of which 6 of them are considered 'high risks'. Moving forward, we shall continue to monitor and communicate closely with our suppliers in order to ensure product quality and safety.

Business Conduct

Good corporate governance lays the foundation to sustain a healthy business growth. At PINE, we strive to uphold business conduct by constructing a corruption-free workplace, respecting intellectual property rights, as well as preserving the business and personal interests of our people.

We highly value honesty, integrity, fairness and do not tolerate any form of corruption and bribery under all circumstances. To prevent corruption, bribery, extortion, fraud and

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other illegal business acts amongst all stakeholders of the Group, we have detailed practices to be complied with in the Staff Handbook. All staff are prohibited to abuse their position for their own or someone else's benefits or improper personal gain. We also forbid anyone to solicit or receive any benefits from any party that has a business relationship with the Group.

Our procurement department also puts forward the Merchandiser Code of Conduct (採 購 員 行 為 準 則 ). When assessing suppliers, handling sensitive confidential information and communicating with suppliers and customers, the policy restricts any material or monetary exchange in pursuit of personal interests. Termination of employment might take place if a breach of code of conduct is found.

At PINE, we aspire to attain technological breakthroughs. Our technological innovation is dedicated to the creation of products with better performance. We endeavour to safeguard our intellectual property rights (the "IP") and are committed to the protection and respect of others' IP rights.

We require our staff not to violate any IP rights or pirate any third-parties'know-how and designs in the design, development, product production and other processes. For example, any inventions used or created by any staff while carrying out their duties to invent, innovate, design, compose or create shall be deemed as IP rights, regardless of whether any patents or copyrights have been registered.

To protect the privacy of our customers, staff and other stakeholders, we detailed in our Staff Handbook the importance to safeguard confidential and sensitive information. We require our staff to enter into a confidentiality agreement upon joining the Group. By entering into the agreement, disclosure or theft of any confidential information is strictly prohibited. Immediate dismissal may be resulted if such breach of code of conduct is found.

During the Reporting Period, we did not receive any complaints or noncompliance cases related to corruption and bribery, violation of IP rights, as well as privacy invasion.

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Our People and Community

PINE is committed to upholding the highest ethical standards in its business operations by managing our occupational health and safety, labour, ethics, training and development, as well as the wellbeing of the society.

Workplace Health and Safety

We strive to construct an occupational environment with managed safety risks and hazards for the protection of physical health and mental wellbeing of our employees. Our occupational disease prevention plan formulated under our occupational health and safety management system are in accordance with:

• The Law of the PRC on the Prevention and Control of Occupational Diseases (中華人民共和國職業病防治法);
• The Provisions on the Supervision and Administration of Occupational Health at Work Sites (工作場所職業衛生監督管理規定);
• The Occupational Exposure Limits for Hazardous Agents in the Workplace Part 1: Chemical Hazardous Agents (工作場所有害因素職業接觸限值第 1 部分：化學有 害因素);
• The Occupational Exposure Limits for Hazardous Agents in the Workplace Part 2: Physical Agents (工作場所有害因素職業接觸限值第 2 部分：物理因素 );
• The Specifications of Air Sampling for Hazardous Substances Monitoring in the Workplace (工作場所空氣中有害物質監測的採樣規範);
• The Determination of Toxic Substances in Workplace Air Part 26: Tins and its Inorganic Compound (工作場所空氣有毒物質測定第 26 部分：錫及其無機化合物
  );
• The Determination of Toxic Substances in Workplace Air Part 15: Lead and its Compound (工作場所空氣有毒物質測定第 15 部分：鉛及其化合物);
• The Determination of Toxic Substances in Workplace Air Part 78: Chloroethylene, Dichloroethylene, Trichloroethylene and Tetrachloroethylene
  (工作場所空氣有毒物質測定第 78 部分：氯乙烯，二氯乙烯，三氯乙烯和四氯乙 烯);
• The Determination of Toxic Substances in Workplace Air Part 84: Methanol, Propanol and Octanol (工作場所空氣有毒物質測定第 84 部分：甲醇，丙醇和辛 醇); and
• The Determination of Toxic Substances in Workplace Air Part 8: Noise (工作場所 物理因素測量第 8 部分：噪聲)

To assure consistent implementation of health and safety policies with clear procedures and division of responsibilities, we have established the Health and Safety Task Force (職 業衛生工作領導小組). The cross-functional committee takes up the role to collaborate closely with other departments with the collective goal of creating a more desiring and safer workplace. It is responsible for overseeing our regulatory compliance, organising trainings and events, implementing and monitoring measures, as well as improving existing policies in relation to occupational health and safety.

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Each year, we perform occupational health and safety risks assessment to ensure preventive measures are effective and that each risk is properly managed in compliance with respective laws and regulations. During the Reporting Period, the Workplace Occupational Disease Hazard Factors Test Results Report (工作場所職業病危害因素檢 測結果報告單) has indicated that our occupational health and safety measures are effective and associated risks are under proper management.

As a part of our commitment towards staff health and safety, we strive to ensure that all staff, ranging from management to frontline staff, are well-informed and aware of workplace health and safety matters. During the Reporting Period, various health and safety training courses were launched, where staff were later being assessed based on their knowledge on health and safety matters. Prior to work commencement, all newly joined staff also have to attend our safety training. For employees who are exposed to potential health risks, they are required to sign an agreement, proving their acknowledgement on their respective rights and obligations in prevention of health hazards.

Our occupational health and safety management system also details policies for the prevention of safety emergency or accident. For example, smoking is prohibited at all workstations to minimise the risk of fire outbreak. In the unlikely event of a safety incident, careful and comprehensive inspections will be carried out and documented to investigate the cause of the accident.

During the Reporting Period, no work-related fatalities were reported in our operations. We also did not receive any noncompliance cases in relation to occupational health and safety. We shall continue to constantly review the appropriateness of our existing policies and monitor the execution of related measures.

Employment

PINE is under an obligation to protect labour and human rights and guarantee a working environment that allows our staff to manifest their values, share their knowledge and innovate. We also understand the importance of offering competitive remuneration package that serves to attract and retain talents. The Group strictly complies with the Labour Contract Law of the People's Republic of China (中華人民共和國勞動合同法).

As an equal opportunity employer, we recruit, select and promote the most suitable candidates based on the duties and needs of the respective positions. Major criteria for selection include integrity, academic achievements, expertise, capability and aptitude. We have already laid down guidelines within our Staff Handbook to prohibit racial, religious, nationality, origin, age, disability, sex, pregnancy, sexual-orientation, social- orientation and other forms of discrimination in any employment decisions relating to, among other matters, recruitment, remuneration, training, promotion, termination,

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retirement, and wages, bonus, allowance and other payments payable to the workers.

In compliance with industrial practices against child and forced labour, we clearly inform our applicants of our policy against child labour during the recruitment process. Examination is also closely performed in verifying prospective employees' personal identity documents.

We comply with applicable laws and regulations relating to wages and benefit policies promulgated by local governments, fulfil minimum wage requirements, and offer discretionary annual allowances or performance-based bonus for certain positions. In addition, we offer our staff attractive employment benefits, including paid leave, marriage leave, compassionate leave, in-house medical services, overtime payment, continuous training, right to stay in staff hostel and access to recreational facilities. Rest time and other benefits are all commensurate as legally required.

To motivate staff in the pursuit of excellence, adequate incentives are provided according to their work performance. Our staff are fairly graded regularly where cash prizes are distributed as a recognition of their contribution.

Training and Development

PINE has formulated specific employee training and development policies to foster staff's self-improvement. At our manufacturing facility, we require our newly joined staff to complete induction programme and participate in our annual training. They are introduced and updated on the company's profile, relevant rules and regulations, occupational safety, and the quality assurance management system.

To enhance our human resources capacity, we organise ongoing trainings and development programmes for the continuous growth of our people, including, courses on production, technical product repairing, quality inspection, reporting and international standards. All internal trainings are carefully planned with consideration to current corporate needs and past employee performances.

Community Engagement

In showing care to the community we operate in; PINE strives to minimise our environmental impacts. We apply stringent control over environmental impacts and adopt appropriate measures to curb air, dust and noise emissions in order to cause minimal nuisance to the surrounding community.

It is also our agenda to maximise societal influence by navigating opportunities to empower the community at the same time by launching collaborative community projects and activities. During the Reporting Period, we have organised the Community Tug-of-war Competition, which was welcomed by our staff and the community.

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Our Environment

As a commitment to promote the sustainable development of the environment during our manufacturing process, PINE has set goals, formulated plans and carried out statistical analysis and audits to reduce resources, energy and water consumption, greenhouse gas emission and waste disposal.

In compliance with the Environmental Protection Law of the People's Republic of China (中華人民共和國環境保護法) and the Water Pollution Prevention and Control Law of the People's Republic of China (中華人民共和國水污染防治法), we emphasise material safety and strictly forbid the use of hazardous material. We also strive to manage pollutants and emissions, while optimising energy and resource efficiency within our daily operations.

Resource Management

While waste is inevitable in our manufacturing process, we are committed to the reduction of waste generation and diversion of useful resources from landfilling to recycling, as well as repurposing. During the Reporting Period, multiple initiatives have been devised to help accomplish our waste reduction vision.

In our daily operations, we customise the design of our packaging during the product design and development process to protect our calibrated products. Our general approach is to minimise the use of packaging materials as long as the packaging serves its purpose to reduce environmental impact. We also comply with RoHS to ensure harmful substances contained in the packaging materials are of acceptable extent.

Under our repair and reuse policy, we continue to run our carton boxes and cardboard boxes (板紙箱) reusing campaign where they are reused as transitional containers for internal use during this year. During the Reporting Period, we consumed approximately 223 tonnes of packaging material, whereas 1200 and 2200 sets of carton and cardboard boxes have been reused and repurposed respectively. The reusing campaign successfully minimises resource usage, as well as disposal at source, and has reduced resource expenditure by approximately RMB 56,000.

Our production process generates a small amount of hazardous waste. The only hazardous waste generated was the used plate washer water utilised for cleaning electric plates in our manufacturing facility. The collection and treatment are delivered by professional service provider. During the Reporting Period, all hazardous waste was processed responsibly.

Non-hazardous waste such as wastepaper, scrap metals and waste plastic are often produced during our production process, while household garbage are by-products of the daily life of our staff. We commission external waste collector to collect and handle non- hazardous waste for responsible disposal, including recycling, reusing and disposing. Any improper disposal of recyclable and reusable non-hazardous waste is prohibited. During the Reporting Period, about 22 tonnes of non-hazardous solid waste were

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generated from the production process, whereas 162 sets of plastic buckets were returned to the respective suppliers for further repurposing.

Air Emissions

Our operation principally involves assembly of technological hardware. Although the amount of air pollutant arise from our production is limited, we are committed to alleviating air pollution by devising appropriate measures.

During the Reporting Period, the greenhouse gas emissions involved in our operation were mainly energy indirect emissions, originating from combustion of fossil fuels for the use of purchased electricity, as well as purchased gas.

Our quantification methodology referenced the Emission Factor Baseline on Regional Grid in China (2015) (2015 中國區域電網基準線排放因子) as well as the Guidance for Quantification and Reporting of the Organisation's Greenhouse Gas Emissions (組織的

溫室氣體排放量化和報告指南).

Energy Consumption

At PINE, energy is essential in supporting our daily operations. Currently, purchased electricity and natural gas are the major energy sources. To minimise total consumption of energy, we identify improvement opportunities, implement energy reduction policies and evaluate the performance over our production process. We have also taken initiatives to strengthen energy management and refine energy use.

For example, we request our staff to turn off all energy-consuming equipment and appliances when are off duty. When procuring new equipment and machineries, we place significant consideration on energy efficiency in addition to cost and supplier reliability.

It is within our long-term sustainability initiatives and dedication to further cut down energy consumption. Moving forward, we shall continue to monitor our energy performance, search for more energy efficient and alternatives in our manufacturing process, as well as strive to innovate less energy-intensive products.

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Water Consumption

At PINE, water usage is relatively less material when compared to other resources consumption, such as energy and other raw materials, yet it remains our duty to minimise water consumption to the best of our capability as a corporate citizen.

Water is a resource that serves its purpose within our production and household use. At our manufacturing facility, we use water to clean electric plates in the plate washers. The used electric plate washer water is considered a hazardous waste, and it is carefully processed and treated by a professional service provider.

On the other hand, majority of our water usage occurs within the staff quarters to support their daily needs. To this end, awareness campaign has been conducted to raise awareness to the efficient use of water resource.

During the Reporting Period, approximately 25,518 m3 of water was consumed. Moving forward, we shall continue to put in effort to monitor our water usage and seek opportunities to improve water consumption efficiency, whenever possible.

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ESG Performance Table

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HKEx ESG Guide Content Table

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Aspect B7: Anti-corruption

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