ESG Report 2018

SUPPLY CHAIN MANAGEMENT The production of intermediate products, active pharmaceutical ingredients and lower-reaches preparation products require a large quantity of raw and auxiliary materials, packaging materials and production equipment, etc., hence the supply of materials and equipment are especially important for the production and operation of the Group. In order to achieve a high quality standard in the production process, effectively control the production costs and ensure a stable supply, the Group has established the vertical integration of production and operation mode of “pharmaceutical intermediate – active pharmaceutical ingredients – preparation products”. Inner Mongolia Company purchase major raw materials for the production of pharmaceutical intermediates and active pharmaceutical ingredients, and then deliver them to the Group's other production sites for the production of active pharmaceutical ingredients and preparation products. In order to maintain a healthy and ordered supply chain system, ensure the quality of suppliers, as well as reduce the environmental and social risks brought by suppliers with poor performance, the Group has always been dedicating to the improvement of the procurement process as well as the development, supervision, evaluation and management work of suppliers. The Group has formulated the relevant management procedures of material suppliers to manage the various raw materials and resources. When selecting new suppliers, we conduct a comprehensive evaluation on the suppliers' industrial standard, reputation, product price, quality and after-sale services, etc. based on the internal principles of “5S”, namely proper price, proper place, proper quality, proper quantity and proper time, so as to ensure the overall quality and material quality of the supply chain. Only the PROTECTION OF INTELLECTUAL PROPERTY RIGHTS The Group has made continual breakthroughs in the research and development of pharmaceuticals and innovative production technologies, hence the protection of products' patents and intellectual property rights become a non- negligible part. In order to promote the Group's management of intellectual property rights and to fully develop the benefits of patented commodities and assets, we have formulated patent related management methods to regulate the patent application and maintenance work. The Group has established a department specializing in intellectual property related matters, such as the application and maintenance of patents and intellectual property logos, the supervision of related units in stopping, reporting and obtaining evidence for the various infringement behaviors found, as well as the coordination with the government in cracking down infringement behaviors. The establishment of the related departments not only effectively protect the intellectual property rights of the products of the Group, the patent rewarding system of the Group can also further stimulate the initiatives of research and development personnel and strengthens the Group's technological innovation and production. While protecting the Group's own intellectual property rights, we never infringe the copyrights of the commodities of other individuals or enterprises. The Group owns a chemical research institute, a biological research institute and a clinical medical department. The production processes and technologies developed by the Group are all independently developed and have obtained the corresponding patents . During the Year, Zhuhai Company and Zhuhai Industry and Commerce Bureau have jointly held a seminar on intellectual property management to study the strategies for strengthening intellectual property rights in the pharmaceutical production industry, as well as promote the cooperation between the Group and relevant authorities in the field of safeguarding intellectual property rights. 34 Environmental, Social and Governance Report 2018 The United Laboratories International Holdings Limited