Responsible procurement practices

Sustainable Supply Chain Management Goal

Primax values the CSR of its suppliers. In order to practice the sustainable supply chain management, Primax reviewed its supplier management system comprehensively in terms of sustainability in 2023 . In addition to revising theinternal supplier management procedures, it also clarified the ESG management requirements of suppliers. It will work with its supplier partners to continue improving the compliance management, respond to the climate change and develop in-depth cooperation projects. Supplier partners are of essence forPrimax to move toward sustainability. In line with the ESG goals, such as SDG17 Partnerships and SDG 12 Responsible Production and Consumption, Primax continues to strengthen the sustainability of the supply chain and avoid internal business risks, while it also strives to mitigate the external risks over the societyand the environment, and seize market opportunities proactively.

Types of Supply Chain and Disruption Risk Control Suppliers' Profiles

The products served by Primax Group are compatible with desktops, laptops,tablets, and mobile phones. The products include keyboards, mouses, keyboard modules, touchpad modules, high-speed transmission docking stations, e-sportsgame devices, creator device peripherals and wireless chargers. Among them, the keyboards and mouses refer to the main products for sale. The raw materials inthe supply chain widely include IC, printed circuit boards, electronic components,plastic parts, metal parts and packaging materials, etc.. Primax works with 2,074 raw material suppliers around the world, including 1,622 material manufacturers, 405 electronic component material agents, and 47 outsourced businesses. Ifdistinguished by region, there are 273 suppliers in Taiwan, 1,406 suppliers inChina and Hong Kong, and 395 suppliers overseas. The total transaction amountis approximately NT$ 44,525 million in 2023 .

Primax Group implements a short-term local procurement short-chainlayout based on the location of the production plant, and evaluates whetherit is necessary to implement authorized material preparation and safety stockaccording to the characteristics of each product line's key components andmaterial preparation time. With respect to the control over key materials, thespot goods management mechanism is available to respond to the disruption risk caused by force majeure factors in a short time, and a second procurement source mechanism established by us to disperse the risk over single supplier to improvethe resilience of the supply chain.

Conflict minerals management and due diligence

Since 2012 , Primax has strictly complied with the "Conflict Mineral Law" and refrained from using and purchasing conflict minerals (such as: tantalum, tin, gold,and tungsten) that originate from Democratic Republic of the Congo, while at thesame time demanded all suppliers to make commitment to using responsible minerals and ensure that all minerals (such as: tantalum, tin, gold, and tungsten)used in production will not finance armed conflicts. This policy forms an essential part of our supplier management and product design, and we require suppliers todisclose information of their smelters and make announcements over GP-Portal^®for any conflict metal discovered in their supply.

In addition, with the rapid growth of the electric vehicle industry, the scopeof applications of rechargeable batteries is also expanding. Therefore, Primax Group has also required suppliers to disclose the use of cobalt ore since 2020 .Our current disclosures cover cobalt refineries (processing of cobalt concentratesand intermediate products) or recycling plants (processing of cobalt recycled materials). The intermediate products of cobalt include impure cobalt hydroxide,cobalt carbonate, and metallic cobalt. Recycled materials include industrial orpost-consumer waste (such as cobalt based alloys from metallurgical recycling processes). Factories that only produce battery cathodes, alloys, and ceramics are downstream factories rather than refineries.As per the disclosed information on smelters in the supply chain in 2023 ,suppliers announced a total of 257 smelters, most of which smelted gold, totaling94 . This is followed by 70 smelters for tin, 33 for cobalt, 30 for tantalum, and 30 fortungsten smelters. There are 3 qualified smelters located in high-risk areas ( 2 in the Democratic Republic of the Congo and 1 in Rwanda). The places of origin anddistribution of all smelters are listed below and can be traced.

During the survey process, we refer to the list of 3 TG qualified smelters formulated by the Responsible Minerals Initiative (RMI) and require suppliers towork with RMI-certificated smelters. Meanwhile, we regularly check the latest listof smelters to ensure that the materials uses can meet the latest requirements ofthe list. In 2023 , of the smelters we worked with, 46 of them failed to pass the RMIaudit and were removed from the list of the qualified smelters. We immediately launched a supply chain investigation, requesting suppliers to investigate thesmelters with which their upstream manufacturers worked to ensure that they would not work with unqualified smelters by accident.

Meanwhile, , we identified risks in the supply chain and evaluated them as perthe supply chain policy standards and due diligence recommendations under the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Area. 419 suppliers conducted risk assessment regarding conflict minerals management and due diligence in 2023 .

Supplier due diligence

Primax Group implements responsible procurement management, and suppliers are requested to properly comply with the local laws and the business code of conduct, toalso protect the legal rights and interests of employees. To further regulate the responsible procurement management operation, Primax Group hereby establishes the“ Supplier Code of Conduct” (hereinafter referred to as the“ Code of Conduct”) for compliance. It is established in accordance with the International Labour Organization (ILO), Responsible Business Alliance(RBA), generally accepted social responsibility related management systems (ISO 45001 ,ISO 14001 , etc.) and customers'  requirements on the labor human rights, environmental and occupational health and safety, conflict minerals management and business ethical standard.The Code of Conduct is applicable to all suppliers of Primax Group and subsidiaries.

As part of our corporate social responsibilities, Primax has implemented policies toprohibit use of child labor and forced labor, whereas stringent recruitment processes and regular internal reviews are being carried out to eliminate even the slightest chance of occurrence. Meanwhile, all potential and existing supply partners are required to comply with regulations and rules of RBA concerning prohibition of child labor.

In terms of integrity commitment, Primax requires all its suppliers and their employees to maintain integrity in all trading and transaction activities, including but not limited to:procurement of materials, work contracting, outsourced production, transfer of equipment,treatment of obsolete/waste materials, customs reporting, workforce dispatch, and subcontracting. Suppliers are encouraged to report any intentional or unintentional violationof proper procurement conduct by a Primax employee. These incidents may be reported viaphysical mail or e-mail through the following channels with details such as the employee's name, supplier's contact method, the violation committed or relevant evidence.

At the end of 2023 , Primax released the first version of the Supplier Code of Conduct and started to require suppliers to sign the Code. At the first stage, suppliers that have transactions from January to October and will continue to trade in the future are required to sign the Letter of Commitment to declare compliance with the RBA Code of Conduct and related requirements.Suppliers are encouraged to commit to controlling the quality, cost, and delivery period, andkeep improving in terms of environmental safety and health. In 2023 ,81.8% of the suppliers have signed the code of conduct. We will continue to expand the number of signatories toensure that all trading suppliers are included in the future.

From 2024 , the Letter of Commitment will be included as one of the documents to be executed by new suppliers. All new suppliers are required to undergo the quality, cost, delivery period, service and ESG evaluation before conducting business. Special suppliers (such as international leading manufacturers and customers' designated manufacturers) can only beadmitted to the Approved Vendor List (AVL) after Primax reviews and approves the alternative documents they submit with respect to environmental and social responsibility declarations.In 2023 , Primax Group had a total of 128 new suppliers, all of which underwent the supplierreview process.

Supplier Sustainability Governance Architecture 

With the authorization of the Board of Directors, the ESG Office has been established under the Chairman's Office. The supreme managerial officer, the Chairman, authorized Vice President Chiang, Yan-Ying to serve as the top person in charge.The supply chain sustainability management promotion projectis attended by the social and environmental task forces jointly,also with the procurement unit's collaboration. The relevant progress and results are reported to the Chairman on a quarterly basis. Primax cares about establishment of procurement personnel's capacity in practicing responsible procurement. In2023 , the participants attending the social responsibility internal training included procurement personnel. In 2024 , it also plansto arrange the procurement personnel to undergo the ESG related internal and external training.

Supplier Risk Identification and Hierarchical Management

Primax continues to improve the supplier management approach. In 2023 , it conducted a comprehensive review onthe supplier management system based on the needs for sustainable risk management, in order to define the supplier ESG management plan in terms of investigation and assessment,communication improvement and collaboration. We implementthe supply chain management sustainable development plan toensure that important issues are materialized in the sustainable supply chain management and achieve the establishment of a sustainable supply chain system. In order to improve management efficiency, hierarchical management measuresare adopted, which will be implemented comprehensively from 2024 .

The supplier ESG assessment covers the Supplier Code of Conduct primarily. Specific ESG topics are included to the assessment step by step based on international management trends, the needs for ESG promotion, and the supplier implementation level. First of all, important suppliers are scored based on the indicators referred to in the sustainability scorecard designed with respect to the important suppliers, including the acquisition of the social and environmental responsibility system certificates, compliance management, proactive environmental management measures, and degree of adaptability.

ESG Sustainability Scorecard and Transaction Elimination Mechanism

Based on the quarterly sustainability scorecard, Primax evaluates the important suppliers' ESG performance, and gives the suppliers up to + 10 %/- 10 % weight of the total QCDS scores for the quarter subject to the supplier's ESG score range. If the final comprehensive performance level ranks Level-C for two consecutive quarters (less than 60 points), it will activate the new project application suspension mechanism, hoping to elevate the overall supply chain's sustainable development level with the solid rolling mechanism. Suppliers with good performance or those with specific benchmarking practices will be publicly commended, and also share their experience, at the annual supplier communication conference,thereby promoting more experience-sharing in the industry.

Improvement of Suppliers' Sustainability

With the rapid development of sustainable development issues, Primax has never stopped or been absent. We aim to meet the expectations of our customers and investors and seek sustainable common solutions, and expect to maximize industrial resources and benefits through alliance with the partnersin the industry while aligning with the UN SDG 17 . Primax aims to work together with supplier partners through the "TEACH ESG Supplier Collaboration Project"on specific sustainability issues to gather suppliers as its partners, and striveto create more learning and improvement opportunities and resources for suppliers, in order to make progress together.

Primax has increased the involvement in suppliers'  social responsibility management for more than one decade. In 2023 , it called on potential suppliers from the SER model factories to become our partners for the first time, and set the goal of RBA VAP certification for their factories. In addition to continuously cultivating the internal audit team to take charge of the supplier on-site audit projects, Primax also appoints the professionally third partyto assist in professional knowledge training and compliance verification. A carbon reduction partnership project was planned in 2023 , and the on-site communication and visit were scheduled to be completed in Q1 of 2024.