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  Supplier Evaluation  
    Supplier Audit and Assistance  
    Longchen P&P has been treating suppliers as partners and is devoted to leading suppliers towards long-term partnership in order to jointly create a sustainable supply chain with steady developments. In order to reinforce the overall competitive advantages of the supply chain, Longchen P&P has created the management system for five major quality assurance operations, including (1) procurement regulations (2) contractor evaluation (3) centralized procurement (4) inclusion acceptance (5) use acceptance.  
    The Company conducts periodic supplier evaluation, which covers the supplier’s quality, price cost, service level, environment protection, work safety and health, and technology, etc. Audit results are evaluated by three classes, A, B, and C. The Company only does business with Class A suppliers to ensure the quality standard of upstream suppliers. In 2019, the ratio for selecting new suppliers using environment standards is 100%. To ensure that suppliers meet labor regulations of the local government, if the suppliers in violation of labor regulations are discovered during the audit, limited period will be given for improvement; if not improved, then they will be listed as unqualified companies.
Management item Action item 2020 Implementation outcome Mid-and long-term goals
Green supply chain options Dimensions of the evaluation include prohibited use of harmful substances, control, and disclosure management. For new suppliers and those being evaluated for the second time of supplies, the evaluation implementation rate is 100%. The fulfillment rate in prohibited use of harmful substances, control, and disclosure management of primary suppliers and contractors is 100%.
Safety and health management The contractors are asked to ensure the safety and health in the workplace and to protect the labor environment. Primary suppliers sign the declaration for compliance with the Code of Conduct. The signed target reached 87% accumulatively, which increased 1% from that in 2018. Primary suppliers sign the declaration for compliance with the Code of Conduct to aim for
88% for 2020;
100% for 2025**;
100% for 2030**.
Compliance with labor laws and regulations Compliance with local government labor laws and regulations and protection over the human rights of workers Suppliers found with disclosure in violation of labor laws and regulations are handled as follows:
(1) Those failing to improve by the given deadline are downgraded to a Class B backup supplier.
(2) Persistent failure to improve will be subject to further downgrade to a Class C disqualified supplier.
According to the current inspection findings, among the 144 suppliers inspected in 2020, were found to be violating labor laws and regulations. The suppliers were asked to provide substantial feedback on the violations. It is confirmed that all of the 2 suppliers have completed improvements and they are still listed as Class A suppliers.
After the rectification, compliance with local government labor laws and regulations is 100%
**Remark: Sign according to the major suppliers for the annual contract.