WCA_STD_2-173854-20141009132021 from QVC

Report No : F_IAR_23664 City : DongguanAudit Date : Sep 26, 2014 Country : ChinaLast Audit : Sep 10, 2013 (90%) Auditors : Primary: Rina FuAssessment Stage : Annual Secondary: None

Overall Facility Score : 89%

Service Provider: IntertekSchedule Type : Announced

OKEY-LA INTERNATIONAL LTDGENERAL INFORMATION

85-100%High Performance71-84%Medium Performance51-70%Low Performance0-50%Very low Performance

Assessmentarea Score results Number of non-compliances by rating

Zero Tolerance Major Moder

ate Minor Notscored

Overall 89% - - 3 4 -

Labor 100% - - - - -Wages & Hours 74% - - 2 - -Health & Safety 100% - - - - -Management Systems 86% - - - 4 -Environment 69% - - 1 - -

WORKPLACE PERFORMANCE INDEX AND SUMMARY Participating facilities: 14286

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Workplace Conditions Assessment ReportMeasured Results —Improved Performance

Facility Legal Name: Dongguan City Okey-La International LtdAudit Location: Building A, JiaWen Industry, No 3 WeiMing Road, HengZeng Street,ZengTian Village, Changan Town,City: DongguanCountry: ChinaContact Name: Mr. Thomson DongContact Title: General ManagerIndustry: Electrical and Electronics

Facility Name: Okey-La International LtdA. FACILITY PROFILEA1. FACILITY INFORMATION

Security systems inplace:

Yes Cameras were used to monitor the access door.

Building Description: The facility used 1/3 part with 220 square meters on 2nd floor of one 6-storey building as office, and used 1/2 part with 600 square meters on 3rd floor of one 3-storey building as production workshop and warehouse. No kitchen or canteen or dormitory was provided to employees.Special building type: Yes Multi-story building shared with other facilities/enterprises under separate ownership

During the audit day, it was noted that another five facilities named Xie Da Metal Ornament Factory, Kai Li Feng Limited Company, Chuang Xiong Metal Ornament Factory, Yu Sheng Mould Factory, and Hui Huang Electronic Factory, which located in the same building with independent business licenses, different products, different bosses and different management systems from Okey-La International Ltd.. Through interviewing the onsite employees, all interviewees said that they belonged to Okey-La International Ltd. and no employee mingling with other facilities. As per facility management interview, they could not provide the leasing contracts and business licenses of the other five facilities for review because they separately leased the production building with Dongguan Jia Wen Limited Co.. During facility tour, it was noted that facility names were also marked in the production workshops. Due to the above mentioned, another five facilities were not included in the audit scope.

Facility Legal Status: Privately ownedYear facility began operations:

2011Located in special economic zone:

NoPerson responsible for overall social compliance issues:

Ms. Wu Ying BiValid certificatefor social compliance certification program:

NoneVendor Name: Mr. Christmas Limited


Workplace Conditions Assessment ReportNr. F_IAR_23664Okey-La International Ltd

A4. SUBCONTRACTOR INFORMATIONNo subcontractor information given

Languages spoken in the facility:

ChineseManagement and employees speak same language :

Yes

Female Employees: 15 Male Employees: 16 Mgmt Employees: 11 Production (Non-Management) Employees: 20 Local Employees: 0 Foreign/Migrant Employees: 31

A3. EMPLOYEE INFORMATIONRange of total number of employees at the facility:

0-100 employeesUnion name: None Employs juvenileworkers:

None Employee nationalities/provinces:

Most migrant employees came from Guangdong and Hunan provinceHires throughemployment agent:

No All employees were employed by the facility directly.

A2. PRODUCTION INFORMATIONChemicals or hazardous materialson-site:

No As per facility tour, employee and management interview, no chemical or hazardous material was found in the facility on the audit day.

Time recordsystem(s) used:

Others, please specify

Current production/Services for client:

No

Products manufactured/Services provided:

LED decoration lightsProduction process/Service elements:

Assembly, Inspection and PackingProduction capacity a week: 25,000 piecesTotal number of machines:

2 assembly lines,no machine was used in the facilityMain machine types: N/AShifts andOperating hours:

All employees in the facility worked for 5 days per week in 1 shift. The normal working hour was from 8:00 to 17:30 with 1.5 hours’ break from 12:00 to 13:30.



A5. GENERAL INFORMATIONThis annual audit was conducted by Intertek Testing Services Shenzhen Ltd. One auditor assessed / verified the facility’s operations according to the requirement of client against and local laws. At 9:35 on the audit day, auditor entered the facility and then held an opening meeting according to audit requirement. The facility management Mr. Chen Zi Wu/ Office Director and Ms. Zheng Bing Chan/ Personnel Clerk were present in the meeting. They stated that they would be co-operative with this audit. The facility management showed a positive attitude to this audit during the whole process. All documentation requested for review was provided timely. A closing meeting was held with management Mr. Chen Zi Wu/ Office Director and Ms. Zheng Bing Chan/ Personnel Clerk. All findings were addressed. Mr. Chen Zi Wu/ Office Director said they would have an internal meeting to follow up and necessary changes would be made in accordance. A CIR report was left to management Mr. Chen Zi Wu/ Office Director before auditor left the facility.Emergency Preparedness SummarySufficient fire protection facilities such as fire extinguishers, fire hydrant, fire alarm and smoke detectors were available and easily accessible in production workshop and warehouse. There were two safety exits in the production workshop and all safety exit doors were clearly marked. All evacuation passages in the facility were unblocked. Evacuation plans with sufficient information were posted throughout the facility. Regular fire drill was conducted in the facility. Fire safety training was provided to all employees during orientation and annual training.



A6. AUDIT PROCESS

Payroll and attendance records sampling

Period From To Peak Season Records ReviewedCurrent Period 01-07-2014 31-07-2014 No 4 Period 1 01-05-2014 31-05-2014 No 3 Period 2 01-12-2013 31-12-2013 No 3 Total 10

Employee interview samplingIndividual 4 individualsGroup NilTotal interviewed 4 employeesAudit pay period provided for review

Records From To12 Months Payroll 01-08-2013 31-07-201412 Months Attendance 01-08-2013 26-09-2014Special Comments N/A

Personnel records Production recordsNon-Production records Employment contractsLegal Permits Social insurance documentationEmployee leave register

Other records reviewed

Other : Resign record



B. KEY PERFORMANCE METRICSB1. COMPARISON BENCHMARKCurrent performance — Global average, China average, Electrical and Electronics average

Labor Wages & Hours Health & Safety Management Systems Environment

Advancers DeclinerConstant

Section NameCurrent

(26-Sep-2014)

Last(Not Applicable)

First (10-Sep-2013)

Change(Current-Last)

Change(Current-First)Labor 100 Not Applicable 100 Not Applicable 0 %Wages & Hours 74 Not Applicable 85 Not Applicable -12 %Health & Safety 100 Not Applicable 86 Not Applicable 16 %Management Systems 86 Not Applicable 100 Not Applicable -14 %Environment 69 Not Applicable 69 Not Applicable 0 %

Overall Score 89 Not Applicable 90 Not Applicable -1 %

B2. PERFORMANCE TREND ANALYSIS

(26-Sep-2014) (Not Applicable) (10-Sep-2013)


PERFORMANCE RATING

Very Low (0% – 50%) Low (51% – 70%) High (85% – 100%)Medium (71% – 84%)


International Standard: 60 China average: 52 Highest hours this facility: 58 Last Audit average: 56

Normal Work Hours Overtime Work Hours B3. WORKING HOURS AND WAGES

58

Average total hours worked weekly

Average wages paid in local currency (RMB)

Special wage circumstances:Wages and hours summary: Finger scan system was used to record the working hours of employees. All employees in the facility worked in one shift. Normal working hour was from 8:00 to 17:30 with 1.5 hours lunch break from 12:00 to 13:30. The minimum wages paid by the facility was RMB 8.62 per hour, the overtime wages was paid as 150%, 200% and 300% of the normal wages for the overtime hours respectively on normal working days, rest days and statutory holidays. Based on the attendance records, no employee worked on statutory holidays. 4 randomly selected employees'' monthly overtime hours were 78 hours in July 2014, 3 randomly selected employees'' monthly overtime hours were 82 hours in May 2014, 3 randomly selected employees'' monthly overtime hours were 76 hours in December 2013.



100%C1. LaborC. PERFORMANCE DETAILSCurrent (26-Sep-2014) Last (10-Sep-2013)


PERFORMANCE RATING



74%C2. Wages & Hours

Sub Section: Working HoursStatus Findings % Global freq of

compliance

Moderate 120.00 : Total overtime hours exceeds allowable limits under applicable law or agreement.Auditor's comment Overtime hours exceeded the legal requirement. Through document review, auditor found that the monthly overtime hours of 4 out of 4 randomly selected employees were 78 hours in July 2014 (recent month), 3 out of 3 randomly selected employees were 82 hours in May 2014 (random month) and 3 out of 3 randomly selected employees were 76 hours in December 2013 (random month).People’s Republic of China Labor Law Article 41The employing unit may extend working hours due to the requirements of its production or business after consultation with the trade union and laborers, but the extended working hour for a day shall generally not exceed one hour; if such extension is called for due to special reasons, the extended hours shall not exceed three hours a day under the condition that the health of laborers is guaranteed. However, the total extension in month shall not exceed 36 hours.

55%


PERFORMANCE RATING



Sub Section: Wages and BenefitsStatus Findings % Global freq of

compliance

Moderate 148.00 : The facility does not provide social security, pensions, healthcare and/ or other insurance to employees as per legal requirement.Auditor's comment Insufficient social insurance participated. Through document review, auditor found that all 31 employees had participated in employment injury insurance and basic medical insurance (covering maternity insurance), only 8 employees had participated in basic endowment insurance and unemployment insurance.Social Insurance Law of the People’s Republic of China Article 53Employees shall participate in child-bearing insurance, and the child-bearing insurance premiums shall be paid by employers rather than employees in accordance with the relevant provisions of the state.Social Insurance Law of the People’s Republic of China Article 23Employees shall participate in the basic illness or injury insurance for employees, and the basic illness or injury insurance premiums shall be jointly paid by employers and employees in accordance with the relevant provisions of the state.Social Insurance Law of the People’s Republic of China Article 10Employees shall participate in the basic retirement insurance, and the basic retirement insurance premiums shall be jointly paid by employers and employees.Social Insurance Law of the People’s Republic of China Article 33Employees shall participate in the disability caused by work-related injury or occupational disease insurance, and the disability caused by work-related injury or occupational disease insurance premiums shall be paid by their employers rather than the employees.Social Insurance Law of the People’s Republic of China Article 44Employees shall participate in unemployment insurance, and the unemployment insurance premiums shall be jointly paid by employers and employees in accordance with the relevant provisions of the state.People’s Republic of China Labor Law Article 72The sources of social insurance funds shall be determined according to the categories of insurance, and an overall pooling of insurance funds form the society shall be introduced step by step. The employing unit and laborers must participate in social insurance and pay social insurance premiums in accordance with the law. Social Insurance Law of the People’s Republic of China

64%


PERFORMANCE RATING



100%C3. Health & Safety

Sub Section: Safety HazardsStatus Findings % Global freq of

compliance

Corrected 238.00 : Previous Non-Compliance : Construction projects do not have the proper fire service inspection certificate 72%

86%C4. Management Systems

Sub Section: Management SystemsStatus Findings % Global freq of

compliance

Minor 294.04 : The facility has comprehensive working hour and wages management processes and procedures in a written manual that support adherence to social compliance requirements but they are not all being properly implementedAuditor's comment It was noted that the facility had established the procedure. However, findings about social insurance and working hours were found during this audit, please refer to related section for details.

84%


PERFORMANCE RATING



Sub Section: Management SystemsStatus Findings % Global freq of

compliance

Minor 297.00 : The facility has not implemented any internal accountability standards and procedures for migrant employees (domestically and/ or internationally) at the facility and within suppliers/ sub-contractors that evaluate and address the risks of human trafficking and slavery.Auditor's comment No proceudure was provided for review. Through document review, auditor found that the facility could not provide such procedure for review.

73%

Minor 300.00 : There are no written records (correspondence, report, meeting minutes, etc) of a regular management review of the social compliance systemAuditor's comment No meeting minute was provided for review. Through document review, auditor found that the facility had established management review procedure, however, the facility could not provide the meeting minute for review.

58%

Minor 303.00 : The facility provides appropriate training for managers on how to implement its social compliance policies and procedures, however, incomplete training records or no training records are maintained.Auditor's comment No training record was provided for review. Through document review and management interview, auditor found that the facility had provided training for managers, however, no such training record was provided for review.

68%


PERFORMANCE RATING



69%C5. Environment

Sub Section: EnvironmentStatus Findings % Global freq of

compliance

Moderate 322.00 : The facility does not have all required environmental permits, licensees and / or registrationsAuditor's comment 1) In accordance with the PRC Environmental Impact Assessment Law Article 16, No environmental impact assessment for construction project. During facility tour, auditor found that products in the facility are LED lights, and the main processes are assembly, inspection and packing. However, the facility could not provide environmental impact registration form or impact report or impact report form for construction project for review. 2) In accordance with The PRC Environmental Impact Assessment Law article 22, No environmental impact assessment approval for construction project. During document review, the facility could not provide the environmental impact assessment approval for construction project for review.The Measures for Administration of Environmental Protection Acceptance Check upon Completion of Construction Project article 17For construction units accord with the acceptance check conditions prescribed in Article 16, competent departments of environmental protection administration shall approve the application report of environmental protection acceptance check, application form of environmental protection acceptance check or registration card of environmental protection acceptance check. For construction projects with a registration card of environmental protection acceptance check upon completion of project completed, competent departments of environmental protection administration shall, after checking, give the opinions on the registration card of environmental protection acceptance check and make approval decisions. Construction projects without official approval on the application report, application form or registration card of environmental protection acceptance check upon completion of projects shall not be put into production or use.

71%


PERFORMANCE RATING



% Global Frequency of Compliance: Represents the implementation percentage performance of all suppliers participating in the WCA Community globally for each issueIdentification numbers: Represents the finding ID associated with each checklist question

RECOMMENDATION FOR IMPROVEMENT PLAN TIMELINEMinor Take action within 0 ~ 6 months to make necessary improvements. Major : Take action within 0 ~ 1 month to make necessary improvements.Moderate: Take action within 0 ~ 3 months to make necessary improvements. Zero Tolerance: Take immediate action to make necessary improvements.


PERFORMANCE RATING



This report is for the exclusive use of the client of Intertek named in this report (“Client”) and is provided pursuant to an agreement for services between Intertek and Client (“Client agreement”). No other person may rely on the terms of this report. This report provides a summary of the findings and other applicable information found/gathered during the audit conducted at the specified facilities on the specified date only. Therefore, this report does not cover, and Intertek accepts no responsibility for, other locations that may be used in the supply chain of the relevant product or service. Further, as the audit process used by Intertek is a sampling exercise only, Intertek accepts no responsibility for any non-compliant issues that may be revealed relating to the operations of the identified facility at any other date. Intertek's responsibility and liability are also limited in accordance to the terms and conditions of the Client Agreement. Intertek assumes no liability to any party, for any loss, expense or damage occasioned by the use of this information other than to the Client and in accordance with the Client Agreement and these disclaimers. In case there is any conflict between the disclaimers stated herein and the applicable terms and conditions of Intertek incorporated into the Client Agreement, then these disclaimers shall prevail.

DISCLAIMER

D. STRENGTHS AND CHALLENGES

Challenges: Facility performance ranks in the bottom percentile of the population Rating Global Freq. of Compliance%The facility has comprehensive working hour and wages management processes and procedures in a written manual that support adherence to social compliance requirements but they are not all being properly implemented Minor

84%

The facility has not implemented any internal accountability standards and procedures for migrant employees (domestically and/ or internationally) at the facility and within suppliers/ sub-contractors that evaluate and address the risks of human trafficking and slavery. Minor73%

The facility does not have all required environmental permits, licensees and / or registrations Moderate 71%The facility provides appropriate training for managers on how to implement its social compliance policies and procedures, however, incomplete training records or no training records are maintained. Minor68%The facility does not provide social security, pensions, healthcare and/ or other insurance to employees as per legal requirement. Moderate64%

Facility Strengths: Facility performance ranks in the top percentile of the population and/or has implemented a best practice process

tiRatingng

Global Freq. of Compliance%



WCA_STD_2-173854-20141009132021 from QVC

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