CCOONNTTENETNSTS About the Report 01 Annual Topics Consolidating Foundations and Safety and Employee Strengthening Governance Management Chairman's Message 03 Special Focus 1: Driving Innovation 19 and Creating Value through Industry- Corporate Governance 31 Legal Employment 65About Shenma Corporation 05 Research Integration Compliance Management 37 Employee Rights and Benefits 66 Honors of 2024 11 Special Focus 2: Transformation and 25 Risk Management 39 Diversity Equity and Inclusion (DEI) 69 Sustainable Development 13 Upgrading – Supporting Shenma's Anti-Bribery and Anti-Corruption 41 Talent Development 70 Governance Global Expansion Investor Relations Management 43 Occupational Health and Safety 72 Fair Competition 44 Tax Management 44 Green Development and Shared Development and Responsible Commitment Corporate Responsibility Climate Change Response 47 Supply Chain Management 79 Environmental Compliance Management 52 Data Security and Privacy Protection 81 Discharge and Waste Management 57 Intellectual Property Protection 85 Energy Utilization 59 Product Safety and Quality 87 Utilization of Water Resources 60 Customer Service 89 Circular Economy 61 Equal Treatment of SMEs 91 Ecosystem and Biodiversity Conservation 62 Public Welfare and Philanthropy 92 Rural Revitalization 93 Looking Ahead to 2025: Shenma 95 Embarks on a New Journey Appendix 97Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix About the Report Report Information Explanation Terminology Notes This Report is the 2024 Sustainability Report released by Shenma Industrial Co. Ltd. (hereinafter referred to as "the Company"). It For ease of expression and reading "Shenma Industrial Co. Ltd." is referred to in this Report as "Shenma Corporation" "the Com- outlines the Company's sustainability philosophy and policies and presents its efforts in 2024 in the areas of environmental pro- pany" or "we".tection social responsibility and corporate governance in response to the expectations and concerns of stakeholders.Common Company Name Interpretations Shenma Cord Fabric Shenma Cord Fabric Company Refer to Shenma Industrial Co. Ltd. (Production Department) Time Frame Shenma Cord Fabric Development Co. Ltd. Refer to Pingdingshan Shenma Cord Fabric Development Co. Ltd.This Report covers the period from January 1st 2024 to December 31st 2024. To maintain continuity enhance comparability and Nylon Chemical Co. Ltd. Refer to Henan Shenma Nylon Chemical Co. Ltd.improve forward-looking insights certain information may extend beyond this timeframe. All data are sourced from internal re- cords and publicly available information. Shenma Engineering Plastic Co. Ltd. Refer to Pingdingshan Shenma Engineering Plastics Co. Ltd.Shenma Engineering Plastics Technology Develop- Pingdingshan Shenma Engineering Plastics Technology Devel- Refer to ment Co. Ltd. opment Co. Ltd.Organizational Scope Shenma Aramid Refer to Henan Shenma Aramid Technology Development Co. Ltd.The Report covers the major business activities of Shenma Industrial Co. Ltd. and its majority-owned subsidiaries consistent with Aidian Refer to Henan Shenma Aidian Chemical Co. Ltd.the scope disclosed in the Company's Annual Report.Shanghai Shenma Refer to Shanghai Shenma Engineering Plastics Co. Ltd.Shenma Jinhua Technology Co. Ltd. Refer to Henan Shenma Jinhua Technology Co. Ltd.Shenma Hydrogen Chemical Co. Ltd. Refer to Henan Shenma Hydrogen Chemical Co. Ltd.Data Interpretation Shenma Huawei Plastic Co. Ltd. Refer to Henan Shenma Huawei Plastic Co. Ltd.All data and case studies cited in this Report are sourced from official company documents and statistical reports. Unless other- wise stated operational data are derived from the 2024 Annual Report of Shenma Industrial Co. Ltd. (hereinafter referred to as "the International Trade1 Refer to China Pingmei Shenma Group International Trade Co. Ltd.Annual Report"). In the event of discrepancies the data in the Annual Report shall prevail. All monetary amounts unless otherwise specified are presented in RMB.Access to the Report This Report is available in printed form. Investors may also access the Report via the official website of Shenma Industrial Co. Ltd.Reference or the Shanghai Stock Exchange. Websites: http://www.shenma.com/ and http://www.sse.com.cn/ This Report has been prepared with reference to the following ESG disclosure standards: GRI Universal Standards (2021) issued by the Global Sustainability Standards Board (GSSB) Reference Indicator System for ESG Reports of Central SOE-Controlled Listed Companies by the SASAC Bureau of Property Rights Feedback and Contact Information Management and Social Responsibility Research Center Contact Information of the Report Guidelines No. 14 and No. 4 for Self-Regulation of Listed Companies on Sustainable Development Reporting (Trial) issued by the Shanghai Stock Exchange Position Securities Affairs Representative Environmental Social and Governance Reporting Code and Climate Disclosure Guidance issued by the Hong Kong Stock Ex- Contact Person Yike Zhang change Contact Address No. 63 Jianshe Road Pingdingshan City Henan Province China IFRS Sustainability Disclosure Standards S1 and S2 issued by the International Sustainability Standards Board (ISSB) Contact Number 0375-3921930 Ten Principles of the United Nations Global Compact Fax 0375-3921930 United Nations Sustainable Development Goals (UN SDGs) 1 The International Trade is a subsidiary of China Pingmei Shenma Group and is not included in the consolidated financial statements of Shenma Corporation. 01 02Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Chairman's Message For Shenma Corporation 2024 was a year that balanced systems and advanced the recycling of reclaimed and pre-colored nylon 66 industrial yarn—were se- challenges with opportunity. Amidst weak demand and water. In addition it has been building a green energy lected in China's 2023–24 and 2024–25 Fiber Trend intensified industry competition the Company upheld system by installing rooftop photovoltaic systems up- lists.President Xi Jinping Thought on Socialism with Chinese grading low-NOx burners and working towards creating This Year we reinforced shared development Characteristics for a New Era firmly embraced the "Six "Type I Three-Star" zero-carbon factories. By setting with corporate social responsibility. We integrat- Firmnesses" and maintained focus on "High Quality High science-based carbon targets the Company has demon- ed sustainability into supply chain management Efficiency High Growth High Returns High Standards High strated strong commitment to green and low-carbon through green and ethical procurement reducing Integration and Strong Execution." We actively responded development. supply chain risks and promoting joint responsibil- to fierce market competition through continuous efforts in This Year we prioritized people and reinforced safety. ity. We safeguarded data security with an annual technological innovation cost control market expansion We enhanced our compensation and benefits structure investment of RMB 1.09 million in technology de- and efficiency improvement—tackling adversity with ex- and increased equity-based incentives to stimulate em- fenses to support digitalization. We strengthened traordinary measures and overcoming extreme difficulties ployee motivation and innovation. Through our "I Serve IP protections for our own innovations and for our with resolute action. the People" campaign we addressed employees' daily partners fueling innovation. We enhanced cus- This Year we reinforced our fundamentals and govern- challenges enriched cultural life with sports and arts ac- tomer satisfaction—our tire cord products scored ance. The Company integrated Party leadership into stra- tivities and significantly boosted morale and belonging. 98.5% and industrial yarn 98.2%. We committed tegic decision-making reforms and safety production. We In safety and production we enforced accountability RMB 739000 to rural revitalization benefiting 3200 aligned Party goals with business objectives made key re- for environmental and safety responsibilities expanded people via consumption and industrial support pro- form priorities also Party priorities and turned Party-build- standardization and implemented a "Three-Year Safety grams. These actions reinforced our social contribu- ing outcomes into a key driver of high-quality growth. We Improvement" campaign and hazardous-material reme- tion and advanced shared prosperity.complied rigorously with laws and regulations standard- diation initiatives. We operationalized dual prevention With grand aspirations we will not relent. Having ized board operations strengthened risk prevention and systems emergency management and high-risk source overcome challenges we forge ahead toward great- elevated self-regulation and improvement. By digging inspections. Monthly risk assessments tiered hazard ness. In the future Shenma Corporation will contin- deeper into governance potential we optimized systems controls and precise accountability regimes created a ue to pursue high-quality development within the enhanced structure nurtured a governance culture and comprehensive safety oversight system. new economic pattern. We will focus on innovation crafted a sustainable standardized governance model to This Year we intensified innovation-driven re- and technology deepen green low-carbon trans- support long-term growth. search-and-development initiatives. The Company formation strengthen collaborative openness and This Year we steadfastly pursued green development prioritized technology innovation increased R&D shared value creation and elevate our core compet- and low-carbon transformation. The Company has been investment and expanded lab reserves. We put pilot itiveness and industry influence. We march toward Chairman of Shenma Corporation committed to green and low-carbon initiatives promot- bases into service established joint pilot labs for nylon the goal of becoming a world-class enterprise and Benbin Li ing advanced energy-saving technologies and processes intermediates and plastics and launched a full-process contributing further to high-quality sustainable so- throughout the industrial chain. Guided by green devel- adiponitrile lab. Key projects progressed: a 1000t green cio-economic progress.opment it has achieved high-quality growth earning an polyamide fiber pilot project started; 10.8 g/d ultra-high- A– rating in CDP China's corporate climate disclosure and strength industrial yarn entered continuous production; the global CDP Climate Leadership Award. The Company nylon 66 airbag yarn and civilian-grade half-dull nylon has implemented exhaust gas collection and treatment 66 resin projects advanced; R&D into high-strength fib- projects to reduce emissions. It has explored wastewater er chips PAMXD6 and long-chain PA1012 accelerated.management through separate stormwater and sewage "Shenma" brand products—high-strength nylon 66 fiber 03 04Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix About Shenma Corporation Company Overview Shenma Industrial Co. Ltd. (hereinafter referred to as "Shen- ing plastics industrial yarn (tire cord) airbag yarn and others.ma Corporation" or "the Company") originated as the Ping- Supported by hydrogen and ammonia industrial services the dingshan Nylon Cord Fabric Factory —one of nine key national Company has developed a unique well-coordinated nylon projects during China's early reform era. Construction began chemical industry ecosystem.in 1977 and production started in 1981. The Company was Build a million-ton-level nylon in-Shenma Corporation's main products are sold in over 40 coun- listed on the Shanghai Stock Exchange (SSE) in 1994 becom- dustrial base. Focus on technological innovation tries and regions across Europe the Americas and Asia. The ing the first listed company in Henan Province on the SSE. The structural upgrading intelligent Company has strategic and trade partnerships with more than stock abbreviation is "Shenma Co. Ltd." and the stock code is manufacturing and emission re-40 Fortune 500 and multinational companies including Invis- Company "600810". Establish an industrial ecosystem duction to achieve breakthroughs. ta BASF Michelin Goodyear and Bridgestone. The "Shenma" Development with nylon as the core supported This will promote large-scale and The Company's core business spans chemicals and chemical brand covers both nylon 66 and nylon 6 segments with a global Visionby extension industries emphasiz- high-level development forming fibers with key products including nylon 66 salt nylon 66 customer base and broad market reputation. ing synergy and interconnection a well-supported complete and intermediates (adipic acid hexamethylenediamine) engineer- full resource utilization and up- interconnected industrial cluster.stream-downstream integration.As of the end of 2024 Core Competitiveness Analysis of Shenma Corporation Total number of Employees R&D Advantages Marketing Advantages 8131 Established an integrated full-process R&D platform. Nationwide coverage and global sales and service people Obtained numerous patents and achievements. network.Participated in drafting national standards. Deepening customer service efforts.Continuous enhancement of market recognition.Total Assets RMB28.006 billion Industrial Chain Integra- Brand Advantages tion Advantages The "Shenma" brand has received numerous honors Strong product portfolio synergy.and enjoys a strong reputation both domestically and Strong market adaptability and risk resistance.internationally.Realized a vertically integrated operation from basic Complete certification system stable product quality. raw materials and intermediates to end products. 05 06Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Major Products and Business Segments Nylon 66 Tire Cord Fabric Adipic Acid The Company primarily produces high-end nylon 66 tire cord fabric used in semi-steel radial tires engineering tires and Adipic acid is an important dicarboxylic acid monomer that can react with diamines to form nylon 66 salt through poly- aerospace tires. Shenma Corporation's nylon 66 tire cord fabric features low denier variation high strength excellent fa- condensation. It is a key raw material for producing nylon 66 and related polymer series. It also serves as a plasticizer tigue resistance and abrasion resistance making it an ideal reinforcement material for aircraft tires large engineering tires adhesive lubricant additive and flavoring agent in daily chemical and pharmaceutical production.and high-performance new energy vehicle tires. It is a key supplier to global tire giants such as Michelin Goodyear and Bridgestone.Nylon 66 Industrial Yarn Nylon 6 Chips Nylon 66 industrial yarn is a high-strength yarn obtained via continuous polymerization or solid-phase polymerization Nylon 6 chips are thermoplastic polymers made from caprolactam via ring-opening polymerization. They are foun- and drawing of nylon 66 salt. It has advantages in fatigue resistance abrasion resistance and high strength and is pri- dational raw materials for the nylon industrial chain. Shenma Corporation's nylon 6 chips can be customized based marily used in tire cord fabric. It is also used in other fields such as automotive airbags conveyor belts geotextiles and on specific application needs and are mainly used in differentiated fiber products such as fine denier yarn ultra-fine industrial webbing. denier yarn and high-strength yarn as well as in engineering plastics and films. Downstream applications include au- tomotive parts consumer electronics textile fabrics and civil high-performance yarns.Nylon 66 Chips Nylon 66 chips are high-performance polymer materials known for high heat resistance and durability. They serve as a key raw material for producing industrial yarns high-strength textile yarns and engineering plastics. These chips are widely used in textiles electronics machinery instrumentation apparel aerospace and other essential sectors of the national economy. 07 08Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Development Subsidiary Highlights Company Abbreviation Main Business Full Name of the Company Since its inception in 1977 as the Ping- dingshan Nylon Tire Cord Plant—a key Shenma Cord Fabric Pingdingshan Shenma Cord Fabric Development Tire cord industrial yarn and their sales national project—Shenma Corporation 2024 Development Co. Ltd. Co. Ltd.has continually built momentum and expanded its business. It became the Phase I of Shenma Corporation Nylon Chemical Co. Ltd. R&D production and sales of nylon 66 in- Henan Shenma Nylon Chemical Co. Ltd.first company in Henan Province to be Thailand Project launched (including Adipic Acid) termediates listed on the Shanghai Stock Exchange Shenma Engineering Pingdingshan Shenma Engineering Plastics Co.and pioneered the development of ny- 2021 Production and sales of nylon 66 productsPlastic Co. Ltd. Ltd.2 lon 66 salt and chip projects success- Hydrogen-Ammonia fully realizing business diversification Project launched Shenma Engineering and extension. Pingdingshan Shenma Engineering Plastics Tech-Plastics Technology De- Production and sales of nylon 66 products nology Development Co. Ltd.In recent years the Company has suc- 2020 velopment Co. Ltd.cessively commissioned projects in- Nylon 6 Fiber Project commissioned Manufacturing of chemical raw materials cluding nylon 66 chips nylon 6 chips Jian Yuan Chemical Inner Mongolia Shenma Jian Yuan Chemical Co. Ltd.and chemical products nylon 6 fibers polycarbonate (PC) and hydrogen-ammonia (H2–NH3) further 2019 Composite material manufacturing sales of expanding its business scope.Nylon 6 Chip Project Shenma Puli composite materials and sales of industrial Henan Shenma Puli Materials Co. Ltd.commissioned textile finished products Production and sales of adipic acid and Aidean Henan Shenma Aidean Chemical Co. Ltd.other basic chemical raw materials 2018 Nylon 66 Chip Expansion Project commissioned Shanghai Shenma Production and sales of nylon 66 chips Shanghai Shenma Engineering Plastics Co. Ltd. 2015 Production and sales of hydrogen and oth-Long'an Chemical Henan Shenma Long'an Chemical Co. Ltd. Adipic Acid Project commissioned er related products Shenma Jinhua Technol- High-tech chemical fiber polymer materials Henan Shenma Jinlun Technology Co. Ltd.ogy Co. Ltd. 2012 Production and sales of rubber composites; New production base for nylon 66 industrial Zhongping Shenma Jiangsu New Material Tech-Jiangsu New Materials Sales of nylon 66 differentiated fibers and yarn and tire cord started operation nology Co. Ltd.2006 modified products Entered airbag yarn sector through Shenma Huawei Plastic partnership with Germany's PHP Production and sales of plastic products Henan Shenma Huawei Plastic Co. Ltd.Co. Ltd.Production and sales of differentiated nylon 1998 Shenma Longtai Shenma Longtai Technology (Thailand) Co. Ltd.66 colored fibers AH Salt & Nylon 66 Chip Production Line commissioned 1994 Production and sales of nylon 66 fiber prod-Shenma Yili Shenma Yili (Henan) Fiber Co. Ltd. Became the first Henan company list- ucts ed on the Shanghai Stock Exchange Production and sales of airbag yarn and re- Shenma Boliemai (Pingdingshan) Airbag Yarn Boliemai lated products Manufacturing Co. Ltd. 1981 Nylon 66 Industrial Yarn and Tire Cord Production Line Shenma Catalyst Co. Ltd. Production and sales of catalysts Shenma Catalyst Technology Co. Ltd.began operation 1997 Research and development of new material Pilot Base of Nylon Materials Shenma Pingding-Pilot Base technologies shan Co. Ltd. Began construction as one of China's key "Sixth Five-Year Plan" projects 2In June 2024 Henan Shenma Nylon Chemical Co. Ltd. acquired 100% equity of Pingdingshan Shenma Engineering Plastic Co. Ltd. and completed a merger by absorption. 09 10Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Honors of 2024 Highlight Performance Honors and Achievements Net Profit Attributable to Shareholders CQC Diamond Winner of the Global "Climate Change 经济Economic Operating Revenue Total Assets of the Listed Company Partner Leadership Award" 绩效Performance RMB1 3.968 billion RMB 28.006 billion RMB33.5298 million China Quality Certification Center CDP Environmental Protection Investment: Reduction in CO2 Equivalent Emissions RMB 91.3646 million 24229.93 tons Environmental Performance Consumption of Green Electricity Water Resource Recycling Rate Multiple Companies under the Nylon Selected as a Listed Company in the Henan 50880000 97.10% Sector Selected into the Henan Province Industry-Education Integration kWh Provincial SOE Directory Model Enterprises Cultivation Directory Henan Provincial SASAC Henan Provincial Development and Reform Commission Solution-Dyed Polyamide 66 High-Strength Polyamide 66 Fiber Occupational Injury Industrial Yarn Selected as One of Selected as One of the China Fiber R&D Investment R&D to Revenue Ratio Insurance Coverage the China Fiber Trends 2024–2025 Trends 2023–2024 RMB504.8165 million 3.61% 100% China Chemical Fiber Industry Association etc. China Chemical Fiber Industry Association etc.Social Performance Health and Safety Total Investment in Poverty Alleviation Investment and Rural Revitalization Projects Benefiting RMB9.51million RMB739000 3200 People ESG Rating Proportion of Independent Directors Proportion of Female Directors 33.33% 11.11% CDP China Corporate Environ- Global Supply Chain Sus- Governance mental Information Disclosure tainability Rating Wind ESG Rating Performance Number of Board Meetings Held Attendance Rate of Directors 24 100% A- Level 64 Points A Level 11 12Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Sustainable Development Governance Shenma Corporation consistently upholds the philosophy of sustainable development continuously strengthening its sustainability capabilities and enhancing ESG management as a key part of its long-term corporate strategy. We integrate sustainability principles into our operations and long-term strategic planning aiming to reduce environmental impact through management optimization and green innovation. This year we identified material issues based on the Company's specific context and formulated development strategies aligned with the United Nations Sustainable Development Goals (SDGs) striving to achieve a balanced approach to economic social and environmental development.Material Topics Addressed in This Chapter Stakeholder Communication Sustainable Development Goals (SDGs) of the UN Addressed in This Chapter 13 14Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Sustainable Development Governance System Board of Directors Responsible for making decisions on major sustainability matters of the Company including reviewing the Company's annual sus- Shenma Corporation incorporates the principles of sustainable development into practical action integrating Environmental tainability report and overseeing ESG-related issues.Social and Governance (ESG) factors throughout its operations. A systematic and institutionalized ESG management structure en- sures the effective implementation of sustainable practices.In 2024 the Company continued to improve its top-down ESG governance system. The ESG management framework covers the Group and its subsidiaries forming a well-structured clearly tiered and efficiently functioning three-level system: Governance Lev- ESG Management Team el – Management Level – Execution Level. This structure ensures efficient advancement of ESG-related work.The Board of Directors is responsible for making decisions and overseeing ESG matters. Under the Board's guidance the ESG man- The Board Office leads the ESG team in crafting sustainable strategies and policies ensuring their implementation through over- agement team coordinates the implementation of ESG activities across departments and subsidiaries. It is also responsible for sight inspection evaluation and recommendations. The team also coordinates ESG efforts across subsidiaries and reports peri- formulating sustainable development strategies ESG governance policies and specific action plans. odically to senior management.Business Units and Subsidiaries Shenma Corporation is responsible for Shenma Corporation's Sustainable jointly developing and implementing Development Philosophy Board of Directorsthe sustainability strategy and objec- tives establishing governance frame- ESG Management Team works and promoting the implemen- tation of related projects. Efforts are Core Philosophy Business Units and Subsidiaries focused on five key areas: upholding Corporate growth shared prosperity. business ethics protecting labor rights improving product quality enhancing Uphold Protect Improve Strengthen Focus on climate resilience and strengthening Business Labor Product Climate Safe workplace safety. Dedicated personnel Ethics Rights Quality Resilience Production ensure effective execution business Corporate Ethos Management Philosophy Safety Philosophy integration and performance tracking.Be truthful act solidly Everyone responsible all Life first safety foremost.seek results. tasks up to standard.Shenma Corporation Holds Carbon Neutrality Management Promotion Conference Marketing Philosophy Learning Philosophy Talent Philosophy On January 18th 2024 Shenma Corporation Grow with our partners. Grow with our partners. Doing the job well makes convened a Carbon Neutrality Management you talent. Promotion Conference in the East Annex Conference Room. Company leadership Quality Philosophy Cost Philosophy Integrity Philosophy relevant departments and representatives Quality is the lifeline of the Save every cent increase Clean work proud life. from 13 entities within the nylon business enterprise. every profit. segment attended the meeting. The agen- da covered the 2024 carbon reduction tar- gets and implementation plans. Attending executives reviewed and evaluated the targets and plans in detail providing tar- geted recommendations suggestions and specific requirements. 15 16Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Stakeholder Communication Materiality Analysis In 2024 Shenma Corporation continued to focus on the expectations and demands of stakeholders from various sectors of society During the topic identification phase the Company referred to the Global Reporting Initiative (GRI) the United Nations Sustainable including shareholders investors customers regulatory authorities employees and suppliers. Guided by ESG principles the Com- Development Goals (SDGs) domestic regulatory policies cutting-edge industry sustainability trends and the Company's develop- pany established regular communication mechanisms with stakeholders through multiple channels. Leveraging its deep industry ment strategy to identify issues relevant to both the Company and its stakeholders thereby establishing a material topics database.experience and thorough understanding of ESG the Company effectively addressed the concerns of all parties involved. In the materiality assessment phase the Company analyzed the degree and scope of actual or potential significant impacts of each topic on the economy society and environment over the short medium and long term to complete the impact materiality assess- Stakeholders Key Concerns Communication Channels ment. Simultaneously the Company assessed the actual or potential significant impacts of each topic on its business operations and financial performance over the same timeframes to complete the financial materiality assessment. Additionally stakeholders includ- Corporate Governance General Shareholders' Meeting ing sustainability experts were invited to complete questionnaires to evaluate the importance of each topic. These assessments were Investor Relations Management Information Disclosure supplemented by internal staff evaluations forming a two-dimensional materiality assessment framework.Communication Intellectual Property Protection Performance Briefings In the selection phase based on the results of the materiality assessment the Company developed the Materiality Matrix for the Year.Channels Anti-Bribery and Anti-Corruption Domestic and International Strategy Meetings Topics were prioritized accordingly with highly material issues highlighted and discussed in detail in this Report.R&D and Innovation Scientific and Technological Innovation Data Security and Customer Privacy Shenma Corporation's ESG Materiality Matrix Customer Privacy Protection Measures Customer Service Customer Customer Service System HighResponsible Marketing 6 8 9 15 Corporate Governance 11 18 Compliance and Risk Control 17 28 16 14 Supervision and Inspection 24 Anti-Unfair Competition 3 23 2 22 Official Visits and Receptions Government and Public Welfare and Charity 12 4 30 5 13 29 Regulatory Authorities Policy ImplementationRural Revitalization 1 7 Industry Collaboration 25 26 Employee Rights Employee Activities 20 21 Talent Development Employee Evaluation and Promotion Employees Occupational Health and Safety Employee Training 31 19 27 Supply Chain Security Collaborative Transactions Anti-Bribery and Anti-Corruption Routine Communication Fair Treatment of SMEs Suppliers Low Financial Materiality HighContract Execution Industry Collaboration Energy Use Governance Environmental Social Dimension Dimension Dimension Water Resource Utilization Waste Disposal 1 Anti-Unfair Competition 8 Energy Use 16 Data Security and Customer 24 Talent Development Waste Management Policy Climate Change Response 2 Corporate Governance 9 Waste Disposal Privacy Protection 25 Rural Revitalization Resource Conservation Policy Pollutant Discharge 3 Anti-Bribery and An- 10 Environmental Com- 17 Customer Service 26 Employee Rights Community and Low-Carbon Awareness Cultivation Environmental Compliance Management ti-Corruption pliance Management 18 Supply Chain Security Environment 27 Product Safety and Circular Economy 4 Compliance and Risk 11 Pollutant Discharge 19 Public Welfare and Philanthropy Quality Control Biodiversity 12 Biodiversity 20 Industry Collaboration 28 Fair Treatment of SMEs 5 Investor Relations Man- 13 Circular Economy 21 Responsible Marketing 29 R&D and Innovation R&D and Innovation Academic Exchange agement 14 Water Resource Utili- 22 Occupational Health and Safety 30 Intellectual Property Talent Development Industry-Academia-Research Collaboration 6 Stakeholder Communi- zation 23 Employee Equality Diversity Protection Public Welfare and Charity Talent Cooperation Programs cation Academic Institutions 15 Climate Change Re- and Inclusion 31 Technology Ethics Industry Collaboration Vocational Education 7 Due Diligence sponse 1718 Impact MaterialityOverview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Special Focus 1: Driving Innovation and Creating Value through Industry-Research Integration Guided by market demand and closely anchored to the nylon industry chain Shenma Corporation positions technological innovation as a core strategic driver to advance industrial upgrading and ensure the Company's long-term development. The Company has implemented a full-chain and highly focused innovation layout. It continues to make sustained efforts across key areas such as upgrading existing technologies solving core industry-wide challenges extending and reinforcing the industry chain promoting localization of raw materials bridging domestic technological gaps developing high-end and differentiated products and pursuing low-carbon green and sustainable development alongside energy conservation and emission reduction. These long-term endeavors have steadily enhanced the Company's reputation for high-quality growth.Material Topics Addressed in This Chapter Innovation-driven Development Product and Service Safety and Quality Sustainable Development Goals (SDGs) of the UN Addressed in This Chapter 19 20Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Governance Shenma Corporation has established a structured R&D innovation management framework and institutional system. The Henan Nylon New Materials Industry Research Institute oversees the Company's scientific research projects and comprises three daily Risk Type Description Mitigation Measures management offices—Research Project Management R&D Platform Management and the Technology Center—along with eight dedicated R&D institutions and one results transformation platform. The Company has issued a series of management documents governing the full lifecycle of research projects including performance evaluation mechanisms. During the Year the Company re- The Company's current products have under- Strengthen process R&D secure continuous vised the Measures for the Management and Evaluation of Research Projects optimized network node controls and introduced a gone process maturation and enjoy cost advan- R&D investment and enhance equipment performance evaluation system combining quarterly assessments with key project milestones. Looking ahead the Company plans tages. However if technological breakthroughs upgrades through technological advance- to further enhance its innovation system through the certification of its R&D and innovation management framework. fail to meet market needs or production pro- ment to ensure effective utilization. Focus on cesses lag behind advanced technologies this forward-looking technology development to The Company adheres to the principles of scientific ethics ensuring that its innovation activities do not harm the natural environment Technical may lead to a loss of cost competitiveness and improve decision-making in new product R&D.human health or public safety. Its operations do not involve ethically sensitive areas such as artificial intelligence or life sciences. Risk adversely impact the Company's development.Strategy Core technical personnel are vital to the Com- Improve performance evaluation and incen- pany's technological advancement and product tive mechanisms for core technical personnel performance enhancement. They play a crucial sign long-term agreements and establish As an industry leader in nylon new materials the Company adopts an innovation-driven development strategy to solidify its role in new product development. As industry retention systems. Implement equity-based technological edge in high-performance materials and green manufacturing processes accelerating the formation of a globally competition intensifies if management of this and performance-linked incentives to provide influential industrial hub. Upholding ESG principles the Company is advancing a sustainable development model that integrates Core Technical group is not handled properly the departure competitive and comprehensive compensa- economic and environmental benefits through intelligent upgrades and clean production systems. Leveraging the synergy among Personnel of key technical staff may adversely affect the tion increasing job satisfaction and loyalty production sales and R&D and backed by high-level platforms such as the National Enterprise Technology Center and Postdoc- Turnover Risk Company's future operations. among core technical staff.toral Research Workstation the Company has invested heavily in building three comprehensive laboratories: the Nylon Interme- diates Full-Process Key Laboratory the Nylon Engineering Plastics Full-Process Key Laboratory and the Nylon Fibers Full-Process Key Laboratory. Together these facilities form an integrated R&D system that spans the entire nylon value chain—from intermedi- The government is increasing support for high- Increase investment in R&D and innovation ates to engineering plastics and fibers—laying a solid foundation for product innovation and upgrades across the industry chain tech enterprises while consumers are placing deepen industry-academia-research collab- and comprehensively empowering the Company's high-quality development. greater demands on product performance oration explore new markets and enhance quality and environmental sustainability. These product competitiveness.Innovation trends are generating stronger market momen- Continuous R&D Investment Improving Innovation Platforms Opportunity tum for technological innovation.The Company fully utilizes external resources and The Company actively promotes technological inno- actively seeks collaboration opportunities with vation and encourages independent innovation strat- other enterprises research institutions and govern- egies by providing complete experimental platforms ment departments. By partnering with academic and R&D facilities. On one hand it enhances product Impact Risk and Opportunity Management institutions and other enterprises for joint technol- yield and efficiency through technical innovation; on ogy development the Company achieves resource the other it achieves energy conservation and con- Shenma Corporation consistently places great emphasis on managing various risks associated with its business development. The sharing and complementary strengths. sumption reduction through optimized formulations Company continues to improve its risk management system refine mechanisms for risk identification and response and regu- and processes. larly conducts comprehensive risk assessments. Major risks identified during the Year are subject to targeted management and a comprehensive risk management report is compiled accordingly. R&D and innovation-related risks have been fully integrated into the Company's enterprise-wide risk management framework. Following standardized procedures the Company carries out risk The Company strengthens the recruitment of R&D The Company fully utilizes external resources and identification assessment and mitigation activities. It continuously optimizes its internal control system and strengthens internal talent and deepens cooperation with external actively seeks collaboration opportunities with supervision and management thereby providing robust support for sustainable development.research institutions to accelerate the industriali- other enterprises research institutions and govern- zation of R&D projects ensuring that technological ment departments. By partnering with academic R&D and Innovation Risk Management Process achievements are effectively converted into pro- institutions and other enterprises for joint technol- ductive capacity. ogy development the Company achieves resource Risk Identification Risk Assessment Risk Prevention Risk Response sharing and complementary strengths.Technology Commercialization External Cooperation and Resource Integration 21 22Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Indicators and Targets Accelerating Digital and Intelligent Transformation At the end of 2024 Shenma Corporation launched its Intelligent Operations Platform which was piloted in four national demonstration In 2024 the Company continued to increase its R&D investment to drive breakthroughs in core technologies particularly in the units (Shenma Cord Fabric Shenma Cord Fabric Development Co. Ltd. Shenma Engineering Plastic Co. Ltd. and Shenma Hydrogen areas of high-performance nylon materials and green manufacturing processes ensuring its competitive edge in key sectors. Total Chemical Co. Ltd.) and put into normal operation. The platform is expected to be fully online by August 2025. The system is centered on R&D expenditure for the Year amounted to RMB 504.8165 million representing 3.61% of revenue providing strong financial sup- production and business data designed to support decision-making through comprehensive analytics. It integrates data from produc- port for technological innovation efforts. tion energy operations and finance enabling real-time automation and visualization of costs and benefits. By capturing and analyzing relevant operational data the platform performs intelligent diagnostics and automated assessments of enterprise operational status As of the end of the Reporting Period the Company had undertaken 162 research projects including 41 major projects. Among providing strong data support for management decision-making and production planning.them the performance of ultra-high-strength nylon 66 industrial yarns has reached internationally advanced levels. The Company accelerated the application of intelligent and digital technologies in twisting and weaving production units successfully estab- lishing automated production lines that precisely match production rhythms. By introducing advanced equipment the Company explored new processes for adipic acid production successfully achieving process innovation and upgrades. At the same time Key R&D and Innovation Indicators in 2024 the Company actively promoted the application of nylon 66 in civilian markets. Semi-dull nylon 66 resin for civilian use has been successfully supplied to clients and full-dull nylon 6 resin is currently under trial by downstream customers. The quality of nylon R&D Investment RMB 10000 50481.65 66 chips used in industrial yarns has been significantly improved and consistently meets customer requirements. In addition the Company has successfully developed and launched specialty nylon chip products for wind turbine vacuum bag films fishing lines R&D Investment as a Percentage of Operating Revenue % 3.61 and electric vehicles. Number of R&D Employees persons 689 Number of Newly Authorized Invention Patents items 22 2024 R&D Innovation Highlights Number of Newly Added Utility Model Patents items 49 Active Participation in Standards Development Strengthening Innovation Incentives Recognition as High-Tech Enterprises Specialized and Innovative SMEs etc. entities 7 Participated in drafting multiple industry standards including national standards The Company implements the Group's Per- for Rubber Dipped Yarn – Wire Cord – Test Method for Adhesion Strength and Spin- formance Appraisal and Incentive Measures dle Yarn Elongation as well as industry standards such as Specification for Colored for Technological Innovation Targets which Nylon 66 Civil Yarn and Specification for Nylon PA56 Fiber and Chip. assess innovation capabilities of affiliated entities and link results to leadership perfor- mance evaluations and compensation. Enhancing Digital Transformation and Smart Factory Development in Shenma Cord Fabric The Company hosts an annual Technol- Development Co. Ltd.Introduction of SAcientific and Technological Talent ogy Innovation Conference to recognize outstanding innovation units individuals Driven by both management and technological innovation Shenma Cord Fabric Development Co. Ltd. upholds smart Through the postdoctoral workstation the Company recruited postdoctoral re- and breakthrough teams. Awards based on services as its core concept and has deeply integrated information technology automation modern management searchers and technical experts to guide in-house teams on solving technical chal- project achievements and economic bene- techniques and manufacturing processes. The Company has established a networked collaborative intelligent manu- lenges. fits realized are granted bonus distribution facturing system tailored to enterprise operations. This platform not only enables high-efficiency internal coordination accordingly. but also promotes resource sharing across all operational stages significantly enhancing production efficiency product quality and innovation capabilities.Technology Commercialization The Company has introduced a range of advanced automated and intelligent On November 11th 2024 Shenma Puli officially launched a nylon 6 polymerization project with an investment of RMB 890 million for a equipment including automatic bobbin doffing machines automated yarn 200000-ton capacity line significantly enhancing the Company's nylon 6 supply capacity. transport and palletizing systems intelligent vertical storage systems automated On December 8th 2024 Henan Shenma Chemical Fiber Co. Ltd. launched a 50000-ton/year continuous fiber project integrating caprol- inspection robots unmanned weighbridges vertical fabric storage units and an actam polymerization slicing and spinning to form a complete industrial chain from nylon 6 chips to civilian-grade dyed filament yarns. AI-based dipping fabric photo inspection system. These technologies have con- In 2024 4000 tons/year of aramid composite materials were successfully developed. siderably reduced labor intensity optimized staffing structures and streamlined personnel allocation. Key facilities and critical equipment are now managed through unmanned operations contributing to the creation of an industry-first "dark factory" model in the tire cord fabric sector—an achievement empowered Expanding Laboratory Capacity for New Product Projects Accelerating Key Project Breakthroughs by intelligent manufacturing.A new pilot base was successfully constructed and put into op- A 1000-ton/year green polyamide fiber project en- eration housing six pilot projects including solid-state polymeri- tered the equipment installation phase. The 10.8 g/d The Company has implemented an online energy monitoring system and a compre- zation and non-lactam systems. The nylon materials pilot base is ultra-high-tenacity filament has achieved continuous hensive Manufacturing Execution System (MES). These platforms have minimized now operational and a second-phase pilot facility is under prepa- production. Significant progress has been made in key manual input in production management processes and freed management per- ration. technology R&D and industrialization for nylon 66 civilian sonnel from time-consuming data processing tasks. By centralizing control over By integrating pilot-scale engineering-scale and spinning-scale filament high-speed spinning PA66 PAMXD6 high-carbon production data and resources through intelligent systems the Company has sig- testing systems the Company reorganized the end-use rubber PA1012 and other civilian-use specialty nylon materials. nificantly improved operational efficiency and established a more streamlined and materials pilot line into a fully upgraded experimental platform. productive operational model. 23 24Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Special Focus 2: Transformation and Upgrading – Supporting Shenma's Global Expansion Shenma Corporation continuously optimizes its global supply chain system and actively adapts to changes in the international trade environment. As a leading enterprise in China's nylon industry its overseas expansion not only marks a solid step forward in the "Going Global" strategy of China's high-end new materials sector but also represents a strategic move by the company to seize global economic opportunities. Through overseas expansion Shenma Corporation can better meet international market demands enhance its global competitiveness while strengthening its ability to cope with international trade risks thereby laying a solid foundation for the company's high-quality and sustainable development.Material Topics Addressed in This Chapter Industry Collaboration Supply Chain Security Sustainable Development Goals (SDGs) of the UN Addressed in This Chapter 25 26Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Shenma Corporation actively responds to China's "Belt and Road" Initiative and strategies related to international industrial ca- pacity cooperation. The Company is committed to building long-term stable partnerships with global stakeholders. Guided by the Main Workshop of the Thailand Project (Phase I) Topped Off strategic vision of "bringing in and going out" it is accelerating the pace of "shifting eastward advancing westward and expanding overseas" restructuring its industrial layout to create new competitive advantages.Developing the Thailand project involved unexpected challenges due to the differences in local pace of life and work culture. To ensure steady construction progress the project team prepared schedules in advance and strengthened Strengthening export expansion. The Company contin- Accelerating progress of the thailand production base. communication with local authorities to improve efficiency. Team members stayed in the nearest town to the site and ues to deepen its presence in overseas markets acceler- The Company is expediting output at the Thailand base took shifts overseeing construction quality on-site.ating global deployment. It is working to restore original planning early certification and researching sales chan- "As the Thai Songkran Festival takes place in mid-April and local workers would be on holiday we devised an acceler- sales volumes in the U.S. consolidate its presence in nels. Products manufactured in Thailand are intended to ated construction plan in early April to complete the concrete pouring of the second floor of the main workshop before Europe and maintain market share in Asia. Shenma ac- be processed into fabric and exported directly to the U.S. the break" said a project manager.tively participates in textile trade exhibitions to enhance circumventing China-U.S. tariff barriers and maximizing global visibility. Targeted visits and exchanges are con- profit margins. After seven months of intense work the team overcame language barriers environmental adjustments and logistical th ducted in promising markets to raise brand awareness issues. On May 9 2024 the main structure of Shenma's 20000 t/year differentiated nylon 66 fiber project (Phase I) in and corporate image. Thailand was officially topped off—setting what was dubbed the "Shenma Speed" in Thailand.Developing overseas contract man- Strengthening international subsidiaries for ufacturing channels. Shenma is ad- export stability. The Company continues to vancing partnerships with Yili and In- reinforce its foreign trade team and solidify dorama to rapidly scale up airbag yarn its international subsidiaries including and civilian filament capacities. It is those in the United States Europe Japan also moving forward with cooperative and South Korea. These entities are helping fabric processing projects with Asian to expand international markets increase textile partners to supply tire manufac- exports of nylon chips and enhance Shen- turers in Southeast Asia and India. ma's global reputation and influence.Deepening engagement with overseas clients. Increased Promoting industry collaboration. The Company actively visits to overseas clients—especially executive-level communicates with overseas peers to strengthen industry exchanges—are stabilizing and expanding cooperation synergy and collaboration.with major tire companies. These efforts aim to drive col- laboration in new products and projects while seeking new business opportunities through active engagement.Under complex global market conditions Shenma's export advantage in the nylon 66 sector continues to grow. The 20000 t/year Shenma Corporation Partners with Shenma Yili in Deep Strategic Cooperation differentiated nylon 66 fiber project in Thailand marks the Company's first physical project under the "shifting eastward advancing st westward and going overseas" strategy. Once completed it will serve as a strategic stronghold in the Southeast Asian market with On May 31 2024 Shenma Yili (Henan) Fiber Co. Ltd.a planned capacity of 10000 tons/year—comprising 7000 tons of nylon 66 industrial yarn and 3000 tons of fine-denier yarn. The completed its business registration. Shenma Corpo- total investment is RMB 252 million covering 90 mu (approx. 60000 square meters) and includes facilities such as a spinning work- ration holds 51% of the registered capital and Shen- shop chip production line and wastewater treatment station. ma Yili holds 49%. The joint venture will construct a Phase I production line with a 7000 t/year capacity Establishing the plant in Thailand is a key component of Shen- for nylon 66 civilian yarn marking Shenma's official ma Corporation's urban-to-park industrial upgrade initiative entry into the high-end nylon 66 civilian fiber mar- and a major step toward its globalization strategy. The move ket. This in-depth partnership with Shenma Yili helps enables global optimization of productivity and premium re- Shenma Corporation seize first-mover advantage sources through international capacity cooperation serving rapidly gain market share in high-end nylon 66 fibers the growing needs of tire manufacturers in North America and and vertically extend the nylon industry chain. It also Southeast Asia. Leveraging Thailand's position as the world's provides a strategic pathway for executing Shenma second-largest tire exporter Shenma aims to supply the ASEAN Corporation's "Big Nylon" development strategy and tire market locally while using Thai-made products to bypass advancing the value chain toward the high end.tariff barriers into North America thereby improving the stabili- ty of the international supply chain. 27 28Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix 01 Consolidating Foundations and Strengthening Governance Shenma Corporation consistently prioritizes robust corporate governance as the cornerstone of sustainable development striving to build a transparent efficient and compliant governance framework. Upholding Party leadership as its guiding principle the Company strengthens the Board's strategic oversight refines information disclosure systems rigorously manages risk emphasizes business ethics and safeguards investor rights thereby laying a solid foundation for long-term growth.Material Topics Addressed in This Chapter Anti-Bribery and Anti-Corruption Compliance and Risk Control Anti-Unfair Competition Investor Relations Management Corporate Governance Sustainable Development Goals (SDGs) of the UN Addressed in This Chapter 29 30Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Corporate Governance Party Building Casts the Soul and Strengthens the Foundation Shenma Corporation advances the Party's innovative theoretical initiatives through diversified approaches—including Party work Shenma Corporation regards standardized operations as fundamental to corporate health. It integrates Party leadership into all as- review sessions theme-based activities and leadership political lectures—translating learning outcomes into concrete actions that pects of reform and development while strictly adhering to regulatory requirements. The Company continuously improves internal drive corporate reform and growth thereby underpinning the Company's development with robust ideological foundations.control mechanisms and governance practices to ensure long-term stability.Party Leadership Shenma Corporation unwaveringly upholds the leadership of the Party as its fundamental principle focusing on two priorities: strengthening Party organization and enhancing corporate governance. Centering on implementing the new development philos- Party Work Analysis Sessions Leadership Delivering Party Lectures ophy fostering a new development paradigm and promoting high-quality development the Company has decisively integrated Party leadership into all aspects of its operations and has achieved notable progress in incorporating Party leadership into corpo- rate governance. Shenma has established a comprehensive governance system grounded in Party building centered on integra- tion and driven by reform and innovation. This systematic well-defined and highly efficient governance framework has fostered a collaborative effective and stable modern enterprise governance paradigm providing solid assurance for the Company's pursuit of high-quality development.Key Initiatives Include Party Discipline Study & Compliance Alert Day Articles of association have incor- Preceding major decisions by the Clear boundaries have been estab- porated requirements for Party Board or management matters lished among the Party Committee building clearly defining the such as signif icant corporate the Board and executive manage- responsibilities institutional struc- decisions key personnel appoint- ment to standardize the procedures ture and operational mechanisms ments and removals major project and requirements for Party organi- Clean Governance Building of Party organizations. The "First arrangements and large capital zations' participation in major oper- The Company deeply understands President Xi Jinping's important remarks on comprehensively strengthening the Party's discipline Agenda Item" system for Party operations must first undergo de- ational discussions. This guarantees construction firmly grasps its spiritual essence and practical requirements takes discipline construction as the political guarantee for Committee meetings is strictly im- liberation by the Party Committee that Party organizations neither the high - quality development of the enterprise strictly adheres to the discipline red line and creates a clean and upright working plemented to promptly convey the before being submitted for formal overstep nor neglect their roles environment. It complies with the Regulations of the Communist Party of China on Disciplinary Sanctions firmly supports the "Two decisions and plans of the Central review. This ensures the Party's creating a governance framework Establishments " resolutely achieves the "Two Upholds" continuously strengthens the study and education of Party discipline en- Committee as well as the signif- leadership is effectively integrated marked by well-defined responsi- sures that its ideology is highly consistent with that of the Central Party Committee encourages Party members and cadres to play a icant speeches and directives of into every step of corporate gov- bilities efficient collaboration and vanguard and exemplary role guides all employees to transform discipline requirements into self - conscious actions promotes the President Xi Jinping. ernance driving the implementa- robust checks and balances. legal and compliant development of the Company's business consolidates the discipline foundation for building a modern enterprise tion of the Party's principles and with core competitiveness and leads the high - quality development with the high - quality Party building.policies.Strengthen Responsibility Commitment Shenma Corporation Party Committee Theoretical Study Group Holds Collective Study & Deliberation (Expanded) Session Shenma Corporation has always regarded Party building as the guiding force for corporate governance firmly grasping its politi- On April 24th the expanded meeting of the Central Group for Theoretical Study of the Party Committee of Shenma Corporation cal positioning to revolve around the central tasks and serve the broader goals. The Company continuously advances deepening was held. With the theme of "Studying the Regulations Observing Disciplines Correcting Deviations and Rectifying Words and reform initiatives ensures full implementation of the principal responsibility for comprehensive and strict Party governance and Deeds" the meeting organized the study of relevant contents of the "Regulations of the Communist Party of China on Disciplinary promotes the deep integration of Party building with enterprise management and production operations. Requirements for Party Sanctions" watched the Important Instructions of President Xi Jinping on the Occasion of building have been incorporated into the Company's articles of association strictly adhering to the "Triple-Major Decision-Mak- the Opening of the Young and Middle - aged Cadre Training Class in the Spring Semester ing" procedures and the pre-discussion list for matters reviewed by the Party Committee. This has standardized collective deci- of 2024 at the Central Party School (National Academy of Governance) conducted in - sion-making processes and elevated the level of corporate governance. depth study exchanges and discussions and talked about learning experiences and work measures in combination with ideological and work realities. The study of the Regulations The Company has established a clear three-tier linkage mechanism of "Party Committee-Board of Directors-Executive Manage- is integrated into daily work to lead all Party members and cadres by example to abide by ment" ensuring that Party leadership permeates every stage of corporate decision-making implementation and supervision. The regulations and disciplines fulfill their duties and effectively promote the in - depth and Party Committee rigorously implements the "first and foremost issue" system integrating the study of the Party's innovative theo- practical implementation of the study and education on Party disciplines to achieve tangi- ries with strategic planning. Through mechanisms such as observing and critiquing theoretical study sessions and reviewing study ble results.notes the political awareness and decision-making capabilities of the leadership team have been enhanced. 3132 Exposition Sessions on the 20th CPC Central Committee's Third Plenum EssenceOverview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix "Three Meetings and One Floor" Architecture General Meeting of Shareholders Board of Directors It is composed of all shareholders of the It consists of nine directors including three Company and is the authority of the Company. independent directors and one chairman.To exercise and decide on the Company's Convene the shareholders' meeting according business policy and investment plan according to law and report the work to the shareholders' to law elect and replace directors and meeting.supervisors who are not staff representatives To implement the resolutions of the and decide on the remuneration of directors shareholders' meeting.and supervisors.Decide on the Company's business plan and Review and approve the Report of the board investment plan.Corporate Governance Structure of directors and the Report of the board of supervisors. Formulate the Company's annual financial budget plan and final accounts plan.To examine and approve the Company's annual Shenma Corporation in accordance with the Company Law of the People's Republic of China the Securities Law of the People's financial budget and final accounts. To formulate the Company's profit distribution Republic of China the Listing Rules of the Shanghai Stock Exchange and other relevant laws regulations and normative docu- plan and loss compensation plan.ments has revised and improved its Articles of Association and rules of procedure. The Company has formulated systems such as To examine and approve the Company's profit the Rules of Procedure for the General Meeting of Shareholders the Rules of Procedure for the Board of Directors the Rules of Pro- distribution plan and loss compensation plan.cedure for the Board of Supervisors and the Detailed Rules for the Executive Management Team thereby standardizing the opera- tions of the "Three Meetings." The Company has reinforced the responsibilities of the General Meeting of Shareholders the Board of Directors and the Board of Supervisors further clarified the duties and responsibilities of external directors and senior manage- ment and ensured that independent directors perform their duties diligently in strict accordance with the Measures for the Admin- istration of Independent Directors of Listed Companies. A well-defined effectively balanced and coordinated "Three Meetings and One Management" governance structure has been established which protects the legitimate rights and interests of the Company shareholders employees and broader investors while also promoting an entrepreneurial spirit. Board of Supervisors Executive Management Team In 2024 the governance structure of the Company remained unchanged. During the reporting period the Company successfully convened 9 general meetings of shareholders; convened 24 board of directors meetings with a 100% attendance rate of directors; It consists of five supervisors with one There is one general manager and several deputy convened 13 meetings of special committees of the board of directors deliberating 23 proposals; and convened 10 board of super- chairman of the board of supervisors. general managers.visors meetings. All meetings fulfilled the announcement of obligation in accordance with relevant regulations and archived and Audit the Company's periodic reports Be responsible for the production operation backed up the meeting documents. prepared by the board of directors according and management of the Company organize to law and put forward written audit opinions and implement the resolutions of the board of which shall explain whether the Report directors and report the work to the board of Shareholder's Meeting preparation and audit procedures are in directors.compliance with relevant regulations and Responsible for organizing the implementation Board of Supervisors whether the contents are true accurate and of the Company's annual business plan and complete.Board of Director investment plan and drafting the Company's Check the Company's financial affairs internal management organization setting plan.according to law and supervise the actions of directors and senior managers in performing Strategy Committee Nomination Committee Compensation andEvaluation Committee Audit Committee their duties.Executive Management 33 34Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Board Diversity Shenma Corporation attaches great importance to the strategic value of board diversity deeply integrating the concept of diversity In addition the Company has incorporated ESG-related indicators into the performance assessment system for the operation of into the optimization process of the governance structure to improve scientific soundness of decision-making and enterprise com- directors and senior management personnel and evaluated them in the form of monitoring indicators. The assessment indica- petitiveness. The Company's board of directors is composed of 9 members covering experts in multiple fields such as technology tors comprehensively cover multiple key areas such as work safety (including but not limited to safety penalty incidents safety research and development capital operation legal compliance and international business including 1 female director accounting accidents occupational disease accidents etc.) environmental protection (including but not limited to environmental pollution for 11.11% and 3 independent directors accounting for 33.33%. The members are aged between 40 and 60 forming a gradient that accidents environmental protection penalties etc.) lawful and compliant operation and business ethics. For major derelictions combines the depth of industry experience and the breadth of innovative vision. To strengthen the synergistic effect of diversity of duty in these assessment areas the Company will in accordance with the relevant regulations of the human resources depart- the Company has established a director capability matrix evaluation mechanism regularly carrying out special evaluations around ment include them in the calculation process of performance assessment. The performance assessment results will be directly dimensions such as "professional complementarity" "strategic fit" and "risk sensitivity" to ensure the effectiveness of the board linked to remuneration to strengthen the sense of responsibility and promote the Company to achieve sustainable development making its decisions both forward-looking and practical. It has also solidified the special committees of the board explored the goals.research and decision-making mechanism of "directors + experts" and continuously improved predictability and decision-making ability. In the future the Company will continue to improve the effectiveness evaluation of the board optimize director selection criteria and explore innovative mechanisms such as inviting young backbones to attend board meetings as non-voting members driving high-quality development with the momentum of diversified governance.Information Disclosure Remuneration and Assessment of Directors and Shenma Corporation takes information disclosure as the core starting point for building a transparent governance ecology estab- Senior Executives lishes an information disclosure mechanism of "full cycle multi-dimension and strong interaction" and continuously improves the credibility of the capital market. The Company strictly follows the Measures for the Administration of Information Disclosure of Shenma Corporation follows the performance evaluation standards and procedures formulated by the Company to conduct per- Listed Companies builds a "1+3+N" system framework and realizes standardized and process-based control of information dis- formance evaluations of directors supervisors and senior management personnel and adjusts their remuneration accordingly closure. In 2024 a total of 4 periodic reports and 168 temporary announcements were issued covering key ESG issues such as stra- based on the evaluation results the Company's operating conditions and the positions they hold. The remuneration system con- tegic transformation environmental performance and work safety. The 2024 Wind ESG rating was A ranking 18th in the chemical sists of a basic salary performance salary special contribution awards and tax-deductible cash. The allowances for independent industry.directors are decided by the general meeting of shareholders to ensure democracy and fairness in decision-making. In addition the Company publicly discloses the remuneration information of directors supervisors and senior management personnel in the annual report every year.The Remuneration and Assessment Committee of the Board of Directors reviews the remuneration policies and plans for directors and senior management personnel in accordance with the Labor Law of the People's Republic of China and other relevant laws and regulations based on the Articles of Association of the Company the Company's development policies and objectives the remuneration levels of other companies in the industry and the specific responsibilities and working hours of the Company's di- rectors and senior management personnel and puts forward constructive suggestions on matters related to assessment. 35 36Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Compliance Management Shenma Corporation deeply integrates compliance management into the corporate governance DNA building a compliance pro- tection network covering all businesses and processes with "system foundation risk prevention and cultural infiltration" as the three pillars thereby strengthening the line of defense for sustainable development. Shenma Corporation Conducts Confidentiality Work Training Compliance System On September 27th 2024 Shenma Corporation conducted a confidentiality training conference. Confidentiality profes- sionals trained confidentiality work leaders from various departments and primary units. The conference focused on Strengthening law-based enterprise management advancing compliance manage- explaining relevant confidentiality systems and basic knowledge of confidentiality in state-owned enterprises. From ment and preventing operational risks have become inevitable trends for sustaina- aspects such as classified information management confidential personnel management confidential carrier man- ble enterprise development. Shenma Corporation complies with the requirements agement and network confidentiality management the training provided in-depth explanations on confidentiality of the Company Law of the People's Republic of China the Law of the People's knowledge prevention skills and risk points for leaks in daily work offering solutions to common problems. Through Republic of China on Enterprise State-owned Assets and the Corporate Governance confidentiality training employees were guided to enhance their sense of mission and responsibility for confidentiality Guidelines for Listed Companies. In 2024 the Company initiated the construction work based on actual work improve their confidentiality skills and awareness and specific requirements were pro- of a compliance management system established a compliance management de- posed for handling confidential documents and materials partment and a compliance management committee and formulated and issued a and using confidential computers resolutely guarding series of management documents such as the Compliance Management Measures the red line of confidentiality and preventing leaks. In the for Shenma Industrial Co. Ltd. and the Implementation Plan for Compliance System future Shenma Corporation will continue to conduct reg- Construction. The Company completed the preparation and finalization of five com- The Compliance Management System Certifi- ular confidentiality education continuously consolidate pliance management lists for over ten key business areas including investment and cation Certificate of Shenma Corporation the foundation of confidentiality management in various mergers financing guarantees safety production and labor employment as well units and departments classify information scientifically as the Company's compliance management manual and 14 process control docu- and normatively according to job responsibilities and ments. In accordance with the standards of the Compliance Management Guidelines create a good working atmosphere of "learning under- for Provincial State-owned Enterprises in Henan Province the Company has prelimi- standing knowing and keeping secrets" comprehensive- narily established a compliance management system. ly improving confidentiality management.Through internal audits and management reviews 9 compliance risk points in various business areas were identified all of which were graded and managed with corresponding countermeasures. In early November the Company passed the external audit of the China Quality Inspection and Certification Center improved individual systems and control procedures and ultimately received recognition from the China Quality Inspection and Certification Center. The Company completed the task of "achieving certification by the end of the year" assigned by the Provincial SASAC and the Group one month ahead of schedule becoming a benchmark for compliance construction among provincial state-owned enterprises.Compliance Management Demonstration Enterprise Promotion Meeting Full-Chain Protection of Trade Secrets In August 2024 Shenma Corporation held a promotion meeting for creating compliance management demonstration enterprises. The following documents were read at the meeting: Compliance Management System Construction Work Implementation Plan of Shenma Industrial Co. Ltd. Compliance Management Measures of Shenma Industrial Co. Ltd.and Notice on the Establishment of the Compliance Committee of Shenma Industrial Co. Ltd.. It required using compli- Organizational Empowerment Institutional Closure Cultural Infiltration ance management to deepen reforms piloting first and advancing gradually integrating compliance management into corporate governance clarifying the compliance management responsibilities of various governance bodies such as the For the protection of core technologies Issued 9 regulations including the Clas- Regularly organize confidentiality train- Party Committee Board of Directors and management optimizing the working mechanism of the Compliance Com- the Company innovatively builds a "net- sified Management Measures for Confi- ing invite experts to conduct specialized worked" confidentiality management sys- dential Positions clarifying management training on topics including intellectual mittee and comprehensively strengthening the organizational leadership of compliance management. Lawyers from tem. Led by the Group Party Committee standards for the "personnel venues property and trade secrets and strength- the third-party consulting firm Wuxi Law Firm introduced the Shenma Corporation Confidentiality equipment" triad. Through the "three en the confidentiality awareness of all the key points of corporate compliance management sys- Committee was established adding spe- agreements and one commitment" (la- employees through "case warnings + tem construction. Responsible persons from Yarn Fabric cialized groups for management R&D bor contract + confidentiality agreement knowledge dissemination" channels. Company and Nylon Chemical Co. Ltd. made statements production etc. Confidentiality leading + non-compete agreement + confiden- groups and management departments tiality commitment) dynamic control of on creating compliance management demonstration were established in affiliated and entrust- confidential personnel throughout their enterprises. The training activities helped improve oper- ed units of the Company building a grid- employment cycle (onboarding in-ser- ational efficiency reduce and avoid legal risks maintain based management system to form a vice departure) was achieved. corporate reputation and enhance the core and enduring new pattern of confidentiality work with competitiveness of the enterprise.coordinated efforts from top to bottom. 37 38Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Risk Management ESG Risk Management Shenma Corporation regards risk management as the core guarantee for the landing of the ESG strategy constructs a risk govern- ance system of "universal coverage precise identification and dynamic prevention and control" and realizes the transformation The Company integrates ESG risk management into its comprehensive risk management system. The Company integrates ESG risk and upgrading of risk control from passive response to active prevention through institutional innovation and digital intelligence management into its comprehensive risk management system with close collaboration between the ESG management team and empowerment building a safety barrier for the leading position in the global nylon industry chain. various functional departments to ensure timely identification and implementation of risk controls improve compliance manage- ment and support the Company's healthy and sustainable development.Risk Governance Structure and Mechanism Strategy and Market Risks Safety and Environmental Protection The Company establishes a comprehensive risk management system identifying assessing preventing and responding to risks Improve transaction management systems strictly im- Strictly implement national safety production and en- from top to bottom. plement decision-making approval procedures stand- vironmental protection laws and regulations improve ardize asset transactions and bidding activities and production standards and safety environmental and regulate anti-commercial bribery and other behaviors. occupational health systems strengthen supervision and inspection and promptly identify and rectify violations.Shenma Corporation's management conducts on- Using scientific methods the identified risks are quanti- going market research internal audits and external tatively analyzed to assess their likelihood of occurrence information gathering to comprehensively identify and potential impact on the Company. Product Quality Financial and Tax Compliance potential risk points in business operations. Based on the assessment results risks are prioritized to determine which ones require immediate attention and Improve the quality management system strengthen Improve the internal financial control system strictly action enabling more effective allocation of resources. process control strictly monitor quality at all stages implement financial operation and approval procedures and ensure the provision of high-quality products and adhere to financial discipline strengthen the awareness of services to customers. lawful tax payment and strictly comply with tax laws and policies.Risk Identification Risk Assessment Labor Employment Intellectual Property Manage labor relations in accordance with laws and Timely apply for and register intellectual property achieve- regulations strictly comply with labor laws improve ments standardize licensing and transfers strengthen the labor contract management system standardize the protection of intangible assets such as trade secrets the signing performance modification and termi- and trademarks compile and distribute the Compilation nation of labor contracts and sign supplementary of Intellectual Property Laws and Regulations organize agreements such as confidentiality agreements and confidentiality training and publicity classify confidential non-compete agreements to safeguard workers' legit- venues implement a full-cycle dynamic management imate rights and interests and prevent labor employ- mechanism for confidential personnel and lawfully use Risk Response Risk Prevention ment risks. others' intellectual property to prevent infringement.Corporate Governance and Business Partners Management of Controlled/ In the event of a risk incident the Company promptly For high-risk areas identified through evaluation Participated Companies activates its emergency response plan acts swiftly to detailed preventive measures are formulated Strengthen compliance investigations of key business Strictly comply with securities laws and regulations im- contain the situation and prevents further escalation. including strengthening internal controls enhanc- partners and promote compliance of business partners prove management of related-party transactions infor- ing employee training and optimizing business A thorough analysis of the incident is conducted to by signing compliance agreements and making com- mation disclosure and insider information prevent leaks processes. These measures are implemented to draw lessons learned refine the risk management sys- pliance commitments. of insider information illegal transactions using insider prevent the occurrence of risks or mitigate their tem and enhance the Company's ability to cope with information and false records in information disclosure; negative impact on the Company thereby ensuring future risks. standardize the management of controlled/participated continuity and stability of business operations. companies and prohibit improper affiliations. 39 40Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Anti-Bribery and Anti-Corruption Cultural Cultivation Shenma Corporation continuously deepens and consolidates the construction of anti-corruption systems and the work of Party conduct and clean governance further adhering to rules and discipline maintaining integrity and effectively enhancing red-line Shenma Corporation regards the cultivation of integrity culture as a key component of its anti-bribery and anti-corruption efforts and bottom-line awareness. Party members and cadres strengthened their study of the Regulations of the Communist Party of Chi- building a three-dimensional defense line of "no ground to be corrupt no opportunity to be corrupt and no desire to be corrupt" na on Disciplinary Sanctions and the Ten Red Lines for Party Building and Operations in the Group comparing them item by item through a mechanism of full participation. The Company provides tiered training to precisely match the compliance needs of identifying problems and shortcomings promptly alerting and correcting themselves always reminding themselves to uphold executives middle managers and grassroots employees promotes the transformation of integrity awareness from institutional integrity and accepting supervision from the organization and the masses at any time. constraints to behavioral consciousness through diverse publicity forms and activates the governance dynamics of all employees through a supervision system combining anonymous reporting and incentives. In 2024 Shenma Corporation had no major corrup- tion cases.Institutional System The Company solidly advanced the construction of anti-corruption policy systems achieving full coverage of relevant systems and policies at all levels providing a solid guarantee for the Company's long-term stable and sound development. In 2024 the Compa- Party Members and Cadres Visit Integrity Education Base ny formulated and revised the List of Responsibilities for the Party Committee of Shenma Corporation in Fulfilling the Principal Re- sponsibility for Comprehensive and Strict Party Governance the List of Responsibilities for the Discipline Inspection Commission On March 28ththe Party Committee of Shenma Corporation organized nearly a hundred Party members and cadres to of Shenma Corporation in Fulfilling the Supervisory Responsibility for Comprehensive and Strict Party Governance the Notice on visit the Pingdingshan Integrity Education Base in two batches to receive integrity education and further enhance the in- Concentrated Efforts to Rectify Unhealthy Practices and Corruption Among the Masses and the Work Plan for Special Rectification tegrity awareness of Party members and cadres. By visiting exhibition areas reviewing President Xi Jinping's important of Withholding Deducting and Fraudulently Claiming Employee Wages. The responsibility for Party conduct and clean governance expositions on comprehensively strict Party governance Party conduct and the fight against corruption and through was incorporated into the work objectives and post objectives of the Party and government leadership teams clarifying divisions viewing typical cases and listening to confessions they deeply understood the mental journey of public officials com- of labor detailing responsibilities forming a responsibility network and overall synergy and strengthening the supervision and re- mitting crimes. This made Party members and cadres more aware of the seriousness of disciplinary violations learn les- straint mechanism. sons deeply always maintain a clear mind strictly implement integrity and self-discipline regulations enhance integrity awareness and ensure constant vigilance.Risk Control The Company incorporates bribery and corruption risks into comprehensive risk management taking multiple measures to re- duce them.Cadres sign integrity responsibility letters annually and integrity talks are conducted irregularly.Regular releases of notifications on implementing the "Eight Provisions" during major holidays and case-based warning education strengthen anti-corruption reminders and education.Actively conduct publicity and guidance promote relevant policies through bulletin boards newspapers and public accounts and foster an atmosphere of integrity. Nylon Chemical Co. Ltd. Organizes Tiered Anti-Corruption Training Nylon Chemical Co. Ltd. systematically promotes anti-corruption education based on the principle of "stratification and classification precise teaching" driving the deep penetration of integrity awareness into different management levels.Broaden channels for whistleblowing and reporting expand methods for collecting In 2024 for the leadership team and key positions the Company's Discipline Inspection Commission organized learning clues and strengthen the tracking and handling of hot public opinions by setting up re- through the case analysis video Self-Destruction from Guarding Against Theft strengthening the red-line awareness of porting mailboxes opening network mailboxes and establishing reporting hotlines. the "key minority" through "using one's own affairs to warn others." For middle management and business backbones participation in the warning education meeting of China Pingmei Shenma Group deepened their understanding of pow- er operation risks through typical corruption cases in the industry building an ideological dam of "dare not corrupt." The activities covered the Company's leadership team Party branch secretaries heads of functional departments and Improve the complaint and reporting system by implementing whistleblower protection. For real grassroots section-level cadres forming a vertically integrated training pattern and promoting the construction of an- name reports and accusations priority is given to handling and whistleblowers are fully protected ti-corruption culture throughout the Company.with information confidentiality. Feedback is provided to whistleblowers promptly after resolution. 41 42Overview Annual Topics Consolidating Foundations Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma and Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Investor Relations Management Fair Competition Shenma Corporation regards investor relations management as an important link in practicing ESG governance concepts adhering Shenma Corporation adheres to the principles of compliance integrity and fairness strictly complies with laws and regulations in- to the core principle of "respecting investors rewarding investors" and building a diversified multi-dimensional two-way interac- cluding the Anti-Unfair Competition Law of the People's Republic of China and the Anti-Monopoly Law of the People's Republic of tion mechanism to continuously enhance capital market trust and consensus on sustainable development. China and has formulated and issued the Implementation Plan for Compliance Management System Construction while compiling the Compilation of Intellectual Property Laws and Regulations to establish business entities' awareness of integrity law-abiding and compliant operations insisting on coordinating anti-monopoly policies with industrial policies and enhancing fair competi- tion awareness. The Company requires fair competition from top leadership to middle management and grassroots employees and has taken measures such as strengthening fair competition and anti-monopoly training to reinforce anti-monopoly and fair competition risk prevention and control. When discovering unfair competition practices by other enterprises against the Company it actively adopts legal measures to ensure the sound operation of market order. In 2024 the Company did not experience any un- Institutional System fair competition penalties.The Company centered on the Investor Relations Management Measures supplemented by five specialized systems including the Information Dis- closure Management Measures and the Insider Information Registrant Tax Management Management System forming an institutional network covering corporate governance themes such as decision execution information disclosure Shenma Corporation strictly abides by the laws and regulations such as the Enterprise Income Tax Law of People's Republic of Chi- and compliance supervision. The Board Office has established an investor na (PRC) the Tax Collection and Administration Law of People's Republic of China (PRC) and the applicable laws of the locations relations management position staffed with professionals to continuously where overseas operations are located. The Company hires accounting firms and tax agents to carry out external audits every year maintain daily communication with investors. earnestly fulfills its compliance tax payment obligations and timely prevents and controls tax risks. During the Year the Company continued to cooperate with the tax authorities and other stakeholders participated in the tax meetings organized by the tax au- thorities earnestly fulfilled the prescribed tax obligations and established the Company's fiscal and taxation management system.In 2024 the Company's tax credit rating was Grade A and it was an export tax rebate enterprise.Protection of Small and Medium Tax Management System Shareholders' Rights The Company strictly implements the Group's Measures for Tax Control of China Pingmei Shenma Group (Trial) establishes and improves the tax management system and improves the level of tax control. The Company's senior management actively partic- The Company strictly follows the Rules for Shareholders' Meetings of Listed ipates in the supervision of tax risks. As the first person in charge of tax control the chief financial officer emphasizes the under- Companies ensuring resolutions are made fairly and openly through "ons- standing and control of phased tax policies makes full use of preferential tax policies pays attention to effective communication ite + online" dual voting mechanisms. Shareholders are notified 15 or 20 with the tax bureau and emphasizes risk control.days before the meeting. Directors supervisors and senior management attend shareholders' meetings and engage in in-depth exchanges with in- vestors fully safeguarding the rights of small and medium shareholders.Tax Risk Management The Company sets up a special tax risk management and control class led by the chief financial officer to carry out industrial and financial integration management and control and put tax risk management and control at the beginning of the business. The tax commissioner conducts a comprehensive tax-related audit of the contract according to the tax law simulates the whole process of invoice processing including invoice issuance receipt audit and storage and excavates the tax planning space through com- Diversified Communication prehensive measures such as contract tax control invoice tax reduction accounting tax reduction tax preferential policies and tax declaration and tax saving predicts different tax payment schemes and the financial controller selects the best tax risk control The Company proactively expands its investor-communication channels by scheme by combining various factors.maintaining daily interactions through telephone e-mail WeChat official Facing the digital and intelligent tax risk analysis golden tax collection and management system the Company made full use of the accounts and the SSE E-Interaction platform. It convenes regular earnings risk control index system of the group company with reference to the tax authorities and established a tax risk management and briefings incorporates dedicated ESG-focused sessions hosts on-site visits control system. The risk control module of the system can intelligently analyze the financial statements and tax returns of enter- from institutional and individual investors and takes part in the Henan-list- prises generate tax risk control reports and prompt tax risks item by item according to taxes. All units can use this system to con- ed companies' joint investor open-day events thereby ensuring compre- duct risk self-examination at any time find and properly resolve risks in time and reduce tax-related risks.hensive multi-channel engagement with the investment community. 43 44Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix 02 Green Development Embracing Responsibility Shenma Corporation consistently upholds a strong sense of environmental responsibility and mission integrating environmental protection into its core strategy. The Company thoroughly implements national ecological civilization initiatives advancing green and sustainable development by systematically promoting cleaner production processes.Through scientific process planning Shenma Corporation continuously improves energy efficiency and significantly reduces carbon intensity while increasing the adoption of clean energy. It actively participates in carbon trading markets leveraging market mechanisms to achieve carbon reduction goals. In pollution control the Company implements targeted energy-saving and emission-reduction measures to minimize pollutant discharge during production. By prioritizing ecological balance in facility layout Shenma Corporation safeguards regional ecosystems. Furthermore the Company champions green principles through advocacy for low-carbon lifestyles and production methods striving to set practical benchmarks for the green transformation of the energy industry and systematically fulfilling corporate responsibilities in climate action.Material Topics Addressed in This Chapter Climate Change Response Environmental Compliance Management Pollutant Emissions Energy Use Waste Disposal Water Resource Utilization Biodiversity Circular Economy Sustainable Development Goals (SDGs) of the UN Addressed in This Chapter 45 46Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Climate Change Response Climate Strategy As a leader in the chemical fiber manufacturing industry Shenma Corporation recognizes both challenges and opportunities Shenma Corporation acknowledges that climate change presents systemic risks (e.g. extreme weather policy shifts) while creating posed by climate change and proactively fulfills its corporate responsibilities. We vigorously develop clean energy build new opportunities for low-carbon innovation and green markets. Using the TCFD framework the Company conducts climate scenario power systems and increase the proportion of green electricity to effectively reduce greenhouse gas emissions. Climate risks are analyses to assess physical exposure and transition sensitivity across operations and supply chains formulating targeted risk man- integrated into our comprehensive risk management system to systematically identify assess and manage climate-related risks agement plans. In the future we plan to dynamically track and identify climate change-related risks and opportunities develop and opportunities. Concurrently we explore opportunities in new energy development to drive industrial upgrades harmonizing a more comprehensive climate risk and opportunity management policy system and ensure the Company continues to achieve environmental responsibility with sustainable growth. Our efforts contribute Chinese solutions to global climate governance and robust development in the context of climate change.support China's "Dual Carbon" goals. In terms of physical risk prevention and control the Company has established a real-time extreme weather monitoring and early warning mechanism incorporated infrastructure resilience assessment into the equipment maintenance cycle and reduced the impact of chronic climate change on asset efficiency through climate adaptation transformation. In view of the risk of transforma- Climate Governance tion we continue to promote the iteration of energy structure and the proportion of renewable energy in energy consumption is gradually increasing. In the future the Company will continue to deepen scenario analysis incorporate climate pressure into the Shenma Corporation actively responds to China's "Dual Carbon" strategy under a Board-led ESG governance framework. Climate strategic decision-making process and continuously improve the full-cycle climate governance system covering risk identification risk and opportunity management are core functions of the ESG team ensuring systematic climate governance. The Company em- quantitative assessment and coping strategies.beds climate response into its sustainable development strategy implementing a full-cycle management model from planning to execution oversight.Risk Type Risk Description Countermeasure The increasing frequency of extreme weather The possibility and harm of climate disasters should be con- Guides the formulation and improvement of climate-related strategies and events such as rainstorm typhoon and flood sidered in site selection and business planning and climate supervises the implementation of climate change response actions. may cause damage to the Company's produc- factors should be included in the assessment.The committee is responsible for the identification assessment and man- tion equipment increase the health and safe- ty risks of employees hinder transportation Do a good job in extreme weather monitoring and early warn- Board of Directors agement of major climate risks and opportunities. interrupt the supply chain and other risks ing formulate targeted disaster emergency plans according to resulting in a decline in operating capacity an the characteristics of the operating areas conduct emergency increase in operating costs and a decrease in drills regularly and pay attention to the daily reserve of disas- the Company's profitability. ter prevention and mitigation materials.Extreme weather events may cause secondary Regularly inspect the production and operation facilities and disasters and secondary production acci- upgrade them as needed to improve the level of disaster pro- dents which may pose a threat to personal tection.safety and ecological environment and cause Strengthen the ability of relevant personnel to cope with ex- economic losses. treme disasters and provide relevant training for employees.Discloses the results of climate-related risk and opportunity identification.Assesses the impact of risks and opportunities on the Company's business. Consider climate-related factors in site selection and business planning and purchase insurance for related assets in ad- ESG Management Team Develops relevant plans for green production and green operations. Changes in rainfall extreme climate fluctu-ations and long-term average temperature vance.rise may lead to an increase in the Company's Encourage subordinate enterprises to identify climate vulner- capital construction costs (such as prolonged abilities in their areas and include the assessment of climate construction period and early wear and tear of risks in infrastructure construction.equipment) and an increase in the insurance cost of equipment and personnel. Continue to strengthen energy conservation and emission reduction improve the efficiency of energy water and other The increase or decrease of the average temperature may lead to an increase in the resources and reduce dependence on natural resources.demand for cooling water for equipment Design climate risk response measures based on industry best practices and Widely carry out popular science education related to climate refrigeration and heating in production and the Company's actual conditions. change for stakeholders and advocate the practice of low-car- Business office places and may lead to an increase in Subsidiaries bon environmental protection concept.Departments Identify and conduct preliminary assessments of climate risks. the Company's operating costs.Continuously improve the occupational health protection sys- Carry out the Company's carbon emissions inventory. Temperature rise may bring chronic damage to the health of front-line employees. tem standardize the management requirements for high-tem- perature operations and provide protective equipment for employees according to the climate conditions. 4748 Acute Risk Chronic Risk Physical RisksOverview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Risk Type Risk Description Countermeasure Climate Impact & Opportunity Management Under the background of "Dual Carbon" goal and policy The Company has established a sound risk management system and managed climate matters according to the process of framework the government is promoting the transformation The Company firmly establishes the concept Climate Risk Identification Risk Review and Confirmation and Risk Control and management.of energy consumption control to the "Dual Carbon" mecha- of "energy transformation and green develop- nism of total carbon emission and intensity and the tighten- ment" and systematically promotes industrial ing of relevant laws and regulations will accelerate the green structure optimization and technological inno- transformation of high-emission industries. This policy orien- vation.tation may lead the Company to face the pressure of upgrad- Adjust the energy structure reduce coal heat- ing energy-saving and emission-reduction technologies and Climate Risk Identification Risk Review and Confirmation Risk Control and Managementing power generation vigorously develop clean then push up compliance operating costs. energy and maximize the use of new energy Through literature review internal in- The preliminarily identified risks are Relevant departments and subsidiaries The carbon quota system has been established and imple- sources such as wind power and solar power terviews and industry benchmarking reported to the Board of Directors and develop climate risk response actions mented in the national carbon emission trading market. If generation. the Company preliminarily identifies Executive Management for review. based on actual conditions (e.g. es-physical and transition climate risks Feedback is collected to confirm or tablishing natural disaster emergency the petrochemical industry is brought into the scope of con- Upgrade the product structure develop that may impact its business. adjust the identified climate risks. mechanisms developing low-carbon trol in the future the Company will face the risk of increasing high-performance green safe and special technologies etc.).the cost of carbon quota implementation. chemical industrial products enhance the With the deepening of methane emission control policy the added value of products and reduce the energy consumption per unit product. In business activities in order to control greenhouse gas emissions we have taken a series of energy-saving and emission-reduc-Company needs continuous investment in methane leakage monitoring (MRV system construction) emission reduction tion measures such as replacing energy-saving equipment and optimizing processes and increasing the proportion of clean en-Strengthen scientific and technological innova- technology application and facility renovation which may ergy use. The Company actively promotes the low-carbon development of the industry. In the future we will continue to increase tion strengthen energy-saving management increase the Company's operating costs. investment in green and low-carbon R&D strengthen cooperation in green and low-carbon projects and play a synergistic effect to adopt technologies such as system energy contribute to the country's goal of "Dual Carbon." optimization power saving and waste heat and Society pays more attention to climate change and sustain- pressure utilization upgrade and transform able development and more consumers will tend to use traditional equipment and popularize high-ef- Measures of energy saving and carbon reduction in Nylon Chemical Co. Ltd.green and low-carbon products and services in the future. ficiency and energy-saving technologies.Accelerate research on technical control of The high-quality N2O emission reduction project of Nylon Taking the lead in launching the "electric-for-diesel" The transformation of a low-carbon economy drives the rap- greenhouse gases and air pollutants. The ex- Chemical Co. Ltd. successfully passed the commissioning and initiative Nylon Chemical Co. Ltd. has progressively id development and iteration of technology. The Company isting CDM greenhouse gas emission reduction achieved complete success. In this project the existing 150000 t/ replaced coal transport vehicles with pure electric needs to continuously increase R&D and investment in the device is technically reformed and a new N2O a high-quality adipic acid plant of Nylon Chemical Co. Ltd. was heavy-duty trucks. Statistics show that a single pure fields of renewable energy energy conservation and emis- with high selectivity high activity low cost low transformed with proprietary technology to reduce N2O NO and electric heavy-duty truck achieves an energy con- sion reduction technologies which will lead to an increase in stack ratio and environmental friendliness is NO2 emissions during adipic acid production. It is estimated that sumption reduction of approximately 60% delivering operating costs. developed. CO2 emissions can be reduced by about 11 million tons per year remarkable environmental benefits. The comprehen- and the emission reduction rate is as high as 98%. The comple- sive total cost (including vehicle depreciation mainte- Actively cooperate with scientific research insti- The chemical industry's response to climate change has tion and commissioning of this project has effectively reduced nance insurance labor etc.) is reduced by over 10% tutes in colleges and universities to explore the become a key area of concern for stakeholders. If the Com- the emission of nitrogen oxides from the tail gas of adipic acid setting an exemplary model for establishing a new feasibility investigation and analysis of the pro- pany can't take measures with substantial influence it may plant which is an important measure for the Company to active- industrial structure of "green energy + green logistics" ject preparing chemical products with carbon be questioned by relevant parties including investors thus ly respond to the national green and low-carbon development eco-chain. Units such as Nylon Chemical Co. Ltd. and dioxide. policy and practice the new development concept of innovation Shenma Hydrogen Chemical Co. Ltd. are also actively affecting the Company's reputation. coordination green openness and sharing and is of great sig- advancing their "electric-for-diesel" plans with full nificance for achieving the goal of environmental protection and replacement of large transport vehicles expected to be emission reduction and generating significant social benefits. completed by the end of this year.Climate Related Opportunities Opportunity Description Development and By adopting low-energy equipment and developing energy-saving technol- Application of En- ogy the energy efficiency of business operations can be improved and the ergy-saving Technol- operating cost can be reduced. Energy-Saving and Carbon Reduction Measures in Shenma Cord Fabric Development Co. Ltd.ogy and Equipment Resource Promoting the construction of information platforms can help the Compa- Efficiency Information Plat- A 22 MW photovoltaic (PV) power generation facility has been By implementing waste heat recovery projects Shen-ny to better monitor and control the use of electricity and raw materials form Construction connected to the grid at Shenma Cord Fabric Development Co. ma Cord Fabric Development Co. Ltd. has completely improve operational efficiency and save related costs. Ltd. integrating various applications such as PV roads PV car- eliminated the need for externally purchased steam ports PV warehouses PV rooftops and PV pipe racks. The total achieving a 66% reduction in steam procurement an- Actively promoting the development and use of clean energy such as pho- installed capacity of PV power stations has reached 34 MW gener- nually.tovoltaic will help the project to further reduce greenhouse gas emissions Clean Energy ating 21.8706 million kWh of electricity in 2024.Energy and reduce energy procurement costs and it is in line with the national en- Source ergy industry transformation policy and won favorable policy support. 4950 Policy and Legal Risks Market Risk Technical Risk Reputation Risk Transition RisksOverview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Energy-Saving and Carbon Reduction Measures in Shenma Engineering Plastics Technology Development Co. Ltd. Environmental Compliance Management The Company plans to replace 39 existing streetlights with new solar-powered streetlights featuring Under the general trend that the country unswervingly promotes the reform of ecological civilization system vigorously practices photovoltaic panels and battery storage enabling automatic switching between grid power and solar the concept of green and low-carbon development and fully promotes the goal of "Dual Carbon" a series of laws and regulations energy. Upon completion the project is expected to achieve annual electricity savings of 18000 kWh such as People's Republic of China (PRC) Environmental Protection Law Air Pollution Prevention Law Water Pollution Prevention reducing carbon emissions by 8.98 metric tons of CO . Law and Solid Waste Pollution Prevention Law have been strictly and comprehensively implemented. Shenma Corporation also 2 actively responded to the national call for environmental protection put environmental protection work in an important position The centralized office area at Plastic Plant No. 4 utilizes a 36.4 kW fixed-frequency central air condition- and deeply integrated the concept of green development into the enterprise development strategy regarding it as the core ele- ing system. Due to 24/7 operational requirements the AC system runs continuously resulting in signifi- ment to promote the sustainable development of enterprises. Under the unified deployment and precise guidance of the Group cant energy waste. Through the implementation of an AC system retrofit in 2024 total electricity savings subsidiaries such as Shenma Cord Fabric Shenma Cord Fabric Development Co. Ltd. Nylon Chemical Co. Ltd. Shenma Engi- reached 765000 kWh reducing energy costs by approximately 520900 yuan and cutting carbon emis- neering Plastics Technology Development Co. Ltd. Boliemai and Shenma Puli focused on key areas such as environmental man- sions by 66.02 metric tons of CO2. agement system construction and risk control management actively explored innovative working modes and solidly promoted various environmental protection work.The original high-purity water production equipment consumed approximately 1861 kWh per day. By switching to outsourced high-purity water supply and decommissioning the in-house production sys- tem average daily power consumption was reduced to 109.5 kWh and annual carbon emission reduced Environmental Management System of 331.47 metric tons of CO2.Shenma Corporation continuously establishes and improves its environmental management system. The Company's senior man- agement oversees the overall progress of environmental initiatives while environmental protection leadership teams at subsidiar- ies supervise specific environmental management tasks in their operations. This systematic approach strengthens ecological safe- ty barriers across all fronts. The Company employs precise environmental monitoring to track real-time environmental conditions develops scientifically sound and effective emergency plans for sudden environmental risks to ensure rapid response when risks Indicators and Targets arise and conducts comprehensive environmental risk assessments to proactively identify potential hazards.In order to know more about the Company's carbon emissions Shenma Corporation actively organized various subsidiaries to conduct carbon emissions inventory and the organizational boundary of the inventory covered all production units of the Com- pany and organized the standard technical service company to conduct internal verification of carbon emissions data. With refer- Shenma Cord Fabric ence to the greenhouse gas accounting system GB/T 32150-2015 IS0 14064 and other standards the Company conducted carbon verification on major emission enterprises and this year's greenhouse gas emissions decreased by 24229.93tCO2 compared with System Establishment and Implementation the previous year. Shenma Corporation has established greenhouse gas emission reduction targets covering Scope 1 Scope 2 and Performance and ResultsSystem Framework : Focusing on strengthening the management Scope 3 which have been recognized by the Science Based Targets initiative (SBTi). The Company has also implemented a regular of wastewater waste gas and solid waste ("Three Wastes"). Shenma review mechanism to track progress toward these targets and ensure the effective execution of its carbon reduction initiatives. Cord Fabric strictly controls the total amount of pollutant discharge The annual discharge rate of wastewater and realizes the recycling of resources. In 2024 the environmental and waste gas is 100%. By strengthening Shenma Corporation Science-Based Carbon Targets management system passed the supervision and audit smoothly. the operation management of sewage Implementation Path: Make clear the goal of no environmental treatment facilities and upgrading waste Target Climate Scenario Base Year Target Year pollution accidents in the whole year carry out risk assessment of gas treatment equipment the discharge sudden environmental incidents according to regulations and car- is ensured to meet environmental protec- Reduce Scope 1 and Scope 2 GHG emissions by 42% 1.5° C scenario 2021 2030 ry out various environmental protection work and statistics to verify tion standards.the achievement of the goal. The compliance disposal rate of hazard- Reduce Scope 3 GHG emissions by 25% / 2021 2030 ous waste is 100%. With the help of the Risk Management internet of things monitoring system for Carry out the preliminary investigation work of replacing the burner solid waste pollution prevention and con- Shenma Corporation Greenhouse Gas Emissions of the heat medium furnace reduce the emission of nitrogen oxides trol all aspects of hazardous waste are by replacing the burner and reduce the risk of waste gas treatment monitored throughout the process.Category Unit Data from the source. No environmental pollution accidents oc- Implement the "one enterprise one policy" for emergency emission curred throughout the Year.Scope 1 tCO2e 1202020 reduction in heavily polluted weather and complete self-monitor- ing of radiation monitoring and volatile organic compounds leak- age detection through the Internet of Things monitoring system for Scope 2 tCO2e 1371178 solid waste pollution prevention and control so as to find and deal with potential environmental risks in time.Total Emissions (Scope 1 + Scope 2) tCO2e 2573198 51 52Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Shenma Cord Fabric Development Co. Ltd. Shenma Engineering Plastics Technology Development Co. Ltd.System Establishment and Implementation System Establishment and Implementation System Framework: According to ISO 14001 standard an environmental manage- Performance and Results System Framework: Implement the policy of "ecological priority prevention first energy saving and Performance and Results ment system covering the whole business is constructed and the objectives policies low carbon comprehensive management" and adhere to the route of "source prevention process con- and procedures of environmental management are defined to provide clear guid- trol and terminal management." Formulate a series of procedures related to environmental protection ance and operational norms for environmental protection work. The discharge of wastewater waste gas and noise is zero and the environmental system such as Detailed Rules for the Prevention and Control of Air Pollution in Shenma Engineering Actively welcome Plastics Technology Development Co. Ltd. and Detailed Rules for the Prevention and Control of Water more than 30 multi- Implementation Path: Set targets through environmental factor identification and protection facilities and production run Pollution in Shenma Engineering Plastics Technology Development Co. Ltd. to provide comprehensive level environmental risk assessment make plans and implement monitoring and finally conduct perfor- synchronously and efficiently and no and standardized guidance for the ecological environment protection of enterprises. inspections at the mance evaluation to form closed-loop management to ensure efficient operation of environmental accidents have occurred. national ministerial the environmental management system.Self-monitoring and online monitoring Implementation Path: In 2024 the Carbon Peaking and Carbon Neutrality Leadership Group was estab- and provincial levels equipment management compliance rate lished to actively meet environmental supervision at all levels complete the information filling of various Responsibility System: Establish a mechanism of "Party and government share environmental accounts and platforms and ensure that environmental information is accurate timely covering environmental responsibility one post and two responsibilities joint management and accounta- is 100%. and open and subject to social supervision. monitoring hazardous bility for dereliction of duty" and make it clear that each unit is the first responsible Strengthen the management of solid waste projects and other person for environmental protection so as to jointly manage environmental protec- waste generation temporary storage and Responsibility System: By formulating relevant procedural documents of environmental protection sys- aspects and successfully tion and business.disposal process formulate the solid waste tem such as Detailed Rules for the Implementation of Environmental Protection Monitoring and Manage- passing various stock system and carry out timely disposal ment of Shenma Engineering Plastics Technology Development Co. Ltd. the environmental protection inspections.and transfer with a disposal rate of 100%. responsibilities of all departments and posts are defined the main responsibilities are strengthened and the supervision and assessment are strictly carried out.Risk Management Complete the upgrading of waste gas treatment facilities in the first phase of Risk ManagementThrough the implementation of heat conduction oil furnace low-nitrogen combus- tion reform project the emission concentration of nitrogen oxides in waste gas is impregnation and the upgrading of low- Environmental risk identification and assessment will be carried out every year. After the second phase of effectively reduced and the risk of waste gas treatment is reduced from the source. nitrogen combustion in heat conduction oil the project is put into production in April 2024 the emergency plan for sudden environmental events will furnace. be re-compiled and filed in the county environmental protection bureau to accurately identify potential Organize emergency drills for sudden environmental incidents on a regular basis environmental risks.simulate scenarios such as waste water leakage and excessive emission of waste gas test the feasibility and effectiveness of emergency plans and improve the emergency response ability of employees.Boliemai System Establishment and Implementation Performance and Results System Framework: In 2024 it passed the certification review of BSI environmental management sys- Nylon Chemical Co. Ltd. tem ISO14001: 2015 and aligned with the international environmental management system standards. Entrust a qualified Implementation Path: Carry out environmental risk assessment every year improve risk prevention company to dispose measures and formulate and file emergency plans for sudden environmental incidents; Conduct of solid waste in System Establishment and Implementation self-monitoring of waste water waste gas and noise on a regular basis to ensure that the discharge reach- compliance with a System Framework: In combination with operational changes such as departmen- Performance and Results es the standard. disposal rate of 100% tal adjustment and the addition of hexanediol plant the environmental and occu- and achieve the goal of Risk Management pational health and safety system manual was revised and improved in 2024 and "zero death zero injury The discharge of wastewater waste gas implemented and passed the annual certification of relevant systems in August and At the beginning of the Year a safety and environmental protection conference was held to summarize and zero leakage."and noise is zero and the environmental obtained the certificate. the work throughout the Year. Strengthen daily monitoring and analysis of environmental data to prevent protection facilities and production run synchronously and efficiently and no risks in advance. Make emergency plans and put them on record to improve the ability to deal with sud-Implementation Path: According to the risk characteristics of production processes in various departments formulate management plans relevant work instructions environmental accidents have occurred. den environmental incidents.and emergency plans. Regularly entrusts a third party to detect emissions and envi- In 2024 Nylon Chemical Co. Ltd. strictly ronmental indicators such as soil groundwater and noise. implemented the relevant requirements for Shenma Puli Responsibility System: Formulate management systems such as environmental post-certification management of pollutant protection responsibility system for all employees and environmental protection discharge permits and the environmental assessment system such as Management Measures for Environmental Protection of protection facilities were 100% effectively System Establishment and Implementation Performance and Results Construction Projects of the Company and Environmental Protection Responsibility operated. System Framework: Adhering to the concept of safety and environmental protection energy saving and System to provide normative guidance for environmental protection work.consumption reduction will be included in the annual work focus. Successfully completed Implementation Path: Set annual energy-saving and consumption-reducing targets carry out various the environmental environmental protection work around the targets and save costs and reduce emissions by optimizing protection work of the Risk Management production processes and strengthening management. first phase of the project Carry out the preliminary investigation work of replacing the burner of the heat me- Risk Management in 2024.dium furnace and reduce the emission of nitrogen oxides and waste gas pollution from the source by replacing the burner. Entrust a third party to regularly test the Company's environmental factors such as sewage waste gas emission and noise grasp the effectiveness of environmental protection work in time and ensure that all indicators are under control. 53 54Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Green Factory Construction Practical Progress of Green Production Shenma Corporation actively practices the concept of green development promotes clean production from the aspects of pro- We place high importance on the environmental quality of our products and integrate green duction process optimization energy saving and emission reduction technology application and plans the construction of green and eco-friendly concepts throughout the entire product lifecycle. Through green design and factories in an all-round way striving to achieve the organic unity of high production efficiency resource saving and environmental green production we address environmental issues. The Company conducts annual Oeko-Tex friendliness and leading the industry to develop in a green and sustainable direction. Standard 100 certification and successfully renewed the TESTEX Oeko-Tex Standard 100 Class I certification in 2024. Additionally we completed the EU's highest-level green certification Continuous Optimization of Built Green Factories OEKO-TEX Class I allowing our products to be used in infant clothing production. We plan to promote green design in a more systematic and quantifiable manner and expand the coverage of green design certifications for related products.Shenma Cord Fabric Development Co. Ltd.Shenma Cord In terms of green production we adopt photovoltaic power generation to convert solar energy After successfully establishing a national-level green factory in 2022we have been Fabric into clean electricity reducing reliance on traditional energy sources. We implement exhaust implementing energy-saving and emission reduction projects. For example the heat recovery projects to improve comprehensive energy utilization and vigorously promote implementation of heat conduction oil furnace low-nitrogen combustion transfor- the use of recycled water to lower water consumption. Through these measures we actively mation projects can effectively reduce the emission of pollutants such as nitrogen advance green production laying the foundation for the construction of a green factory.oxides improve energy utilization efficiency and reduce energy waste. In addition the Company continuously optimizes production processes and adopts advanced technologies and equipment to reduce energy consumption and pollutant emis- sions at the source thereby consolidating the achievements of green factory de- Key Environmental Honors & Accreditations velopment. Shenma Corporation have made continuous progress in the field of environmental protection and won many important environ- Nylon Chemical Co. Ltd. mental honorary qualifications at different levels.It was awarded as a national-level green factory in 2022 and the dynamic man- agement report of the green factory in 2024 was audited by the Ministry of Industry Shenma Cord Fabric won the Grade I certification of OE- and Information Technology. In combination with operational changes such as KO-TEX the highest green certification in the European departmental adjustment and the addition of hexanediol devices the Company Union in 2024 which can be used in the production of baby has improved the environmental and occupational health and safety system and clothes laying a solid foundation for further exploring over- regularly entrusted a third party to detect environmental indicators such as waste seas markets and enhancing the brand's international influ- water waste gas soil groundwater and noise so as to ensure the effective opera- Certificate of green factory certification ence.tion of environmental protection facilities realize low-carbon energy consumption of Shenma Cord Fabric Development Co.and clean production and further improve the level of green factory construction. Ltd. and Nylon Chemical Co. Ltd. OEKO-TEX Certification Boliemai In 2024 Boliemai was rated as "Environmental Performance Leading Enterprise" which highlighted its leading role in the process of local green development. Shenma Puli and engineering plastics have won the title of "A-class enterprise with environmental It won the title of provincial green factory in 2024 and was rated as a performance-leading enterprise. The Company acceler- performance" with the development of science and technology.ates the construction of green manufacturing system actively explores digital and intelligent energy management promotes the construction of digital and intelligent factories improves production efficiency and reduces environmental impact by In terms of system certification Shenma Cord Fabric Shenma Cord Fabric Development Co. Ltd. Nylon Chemical Co. Ltd. Shen- real-time monitoring and optimizing energy use and injects new vitality into the construction of green factories. ma Huawei Plastic Co. Ltd. and other subsidiaries all maintain ISO 14001 environmental management system certification. This shows that Shenma Coporation's environmental management system has reached the international standard level with a sound environmental management framework and strong environmental risk prevention and control capabilities.Advance Trends of Green Factories to be Build Environmental Management SystemCertif icate Certificate No.：05323E30236R2L we hereby certify that Pingdingshan what curtain fabric Development Co. LTD.Registered/Production/Business/Office Address：South of Shahe 3rd Road Pingdingshan Chemical Industry Agglomeration Area Gongdian Township Ye County Pingdingshan City Henan Province Environmental Management System complies with Standard requirement GB/T 24001-2016/ISO 14001:2015 The certificate is valid for the following scope: In July 2024 the establishment of "Green Factory" was officially started and a clear Environmental management activities related to manufacturing of nylon 66 high performanceimpregnated cord fabric target plan was formulated. It is planned to pass the provincial review in 2025 and Certificate Date： 22-10-2023Certificate Valid Date： 22-10-2023~11-10-2026 Date of initial Certification： 12-10-2017 Unified Social Credit Code of the Certified Organization： 91410422594861253B the national review in 2026. At present all departments of the Company cooperate The validity of this certificate is maintained through regular supervision;The status of the certificate can be inquired by scanning the QR code or it can be found on the official website of the Certification and Accreditation Administration of the P.R.C(www.cnca.gov.cn).Shenma Engineering closely and actively carry out work around green production energy conservation Plastics Technology and emission reduction laying the foundation for the Company's green and sus- Beijing NGV Certification Center Co.Ltd.Address: Unit 1101Unit 210/FBlock 2-1No. 82East 4th Ring Middle RoadChaoyang DistrictBeijing.Tel: 010-87531300 P.C.:100124 Website: http://www.ngv.org.cn Development Co. Ltd. tainable development. 55 56Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Discharge and Waste Management Wastewater Treatment Our company fully implements clean production and strengthens the management of water pollution prevention facilities. We advance the enhancement of water pollution prevention work to meet discharge requirements stricter than national and local The Company strictly abides by the laws and regulations such as People's Republic of China (PRC) Water Pollution Prevention Law standards and rigorously control water pollution risks. In accordance with government requirements we have installed environ- People's Republic of China (PRC) Air Pollution Prevention Law People's Republic of China (PRC) Solid Waste Pollution Prevention mental online monitoring facilities for real - time monitoring of water pollutant emissions. We also entrust qualified third - party Law and People's Republic of China (PRC) Noise Pollution Prevention Law and builds a comprehensive pollution control system organizations to conduct monitoring in accordance with prescribed items and frequencies. The wastewater online monitoring covering the whole production cycle. In the production process international advanced pollution control technology and equip- system collects and monitors samples every two hours with a 100% compliance rate of monitoring data. We report monitoring ment are adopted to ensure that the emission concentrations of wastewater waste gas solid waste and noise at the boundary data through the discharge permit management system achieving 100% timeliness and completeness in reporting. In addition we of the factory meet the requirements of national mandatory standards such as GB 8978-1996 Integrated Wastewater Discharge have established a linkage mechanism between early warning and alarm systems. By tracking and analyzing real - time data we Standard and GB 16297-1996 Integrated Air Pollutant Discharge Standard. At the same time the Company has established a sound ensure timely detection and handling of abnormal situations to guarantee stable and compliant water pollutant emissions. Going management system implemented a whole-process environmental monitoring and refined management system and regularly forward Shenma Corporation will systematically enhance its wastewater management framework at the corporate headquarters conducted environmental compliance audits and pollution prevention performance evaluations to ensure the continuous and level by establishing specific wastewater control targets and implementing regular progress reviews thereby optimizing water pol- stable operation of pollution control facilities. In addition the Company attaches great importance to environmental training and lution treatment efficiency.regularly organizes relevant training activities to enhance employees' environmental awareness and operational skills. Through the above systematic environmental management measures we will promote green and low-carbon transformation and develop- ment and earnestly fulfill the main responsibility of the ecological environment. 2024 Wastewater Treatment Performance Pollutant Emission Qualification Rate of Timeliness and Completeness of Total Wastewater Discharge Monitoring data Monitoring data Submission Exhaust Gas Treatment 11428397.4 tonnes 100% 100% The Company strictly implements the standardized management of sewage outlets in accordance with the Regulations on the Administration of Pollution Discharge Permit. Through self-monitoring and online monitoring the Company monitors the exhaust outlet dynamically compares the monitoring data with national local and industry standards and implements compliance judg- ment. At the same time the Company constantly investigates and studies advanced treatment technologies and technologies sys- tematically evaluates and continuously optimizes production processes adjusts production structure improves energy utilization efficiency and reduces exhaust emissions through technical means. In 2024 the Company's main detection indicators are COD ammonia nitrogen total nitrogen total phosphorus suspended solids formaldehyde adsorbable organic halides etc. and the national standards such as Integrated Wastewater Discharge Standard and Pollutant Discharge Standard for Synthetic Resin Industry are implemented.Upgrading Waste Gas Treatment Facilities in Boliemai Name of the Company Unit COD Ammonia Nitrogen Boliemai has comprehensively upgraded the waste gas treatment facilities upgrading the original high-voltage electrostatic Shenma Cord Fabric ton 80.74 7.92 adsorption device+activated carbon adsorption device to an advanced combination of high-voltage electrostatic adsorption device spraying device dry filter box activated carbon concentration device and catalytic combustion device. After the trans- Shenma Cord Fabric Development Co. Ltd. ton 9.59 0.42 formation the pollutant discharge is effectively controlled further reducing the risk of environmental pollution. Nylon Chemical Co. Ltd. ton 175.38 9.02 Boliemai ton 0.44 0.03 In 2024 the Company's main pollutants are nitrogen oxides sulfur dioxide particulate matter non-methane total hydrocarbons Shenma Engineering Plastic Co. Ltd. ton / / formaldehyde ammonia etc. and the comprehensive compliance rate of the Company's exhaust gas is 100%. Shenma Engineering Plastics Technology Development Co. Ltd. ton 4.10 0.27 Name of the Company Unit Particulate Non Methane Shenma Jinhua Technology Co. Ltd. ton / /Matter NOx VOC SO2 Hydrocarbon Shenma Cord Fabric ton / / 33.98 / / Shenma Puli ton / / Shenma Cord Fabric Development Co. Ltd. ton 4.26 7.88 26.15 2.93 / Nylon Chemical Co. Ltd. ton 8.19 141.33 / 38.72 / Shenma Engineering Plastic Co. Ltd. ton 4.56 / / / 17.08 Shenma Engineering Plastics Technol- ogy Development Co. Ltd. ton / 4.2 / / 2.23 Boliemai ton / 1.08 / / 0.59 Shenma Jinhua Technology Co. Ltd. ton 1.24 / / / 2.69 Shenma Puli ton / / / / 0.09 57 58Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Waste Disposal According to the Law of People's Republic of China (PRC) on the Prevention and Control of Environmental Pollution by Solid Wastes the Company classifies and manages the wastes generated in production and operation and all of them are properly and comprehensively utilized or disposed Energy Performance in 2024 harmlessly. The Company adheres to the four solid waste management principles of "reduction recycling harmlessness and planning" and constant- ly improves relevant policies and systems.Shenma Cord Fabric Development Co. Ltd.The industrial solid waste produced by the Company including dry oil silk is reused which reduces the production of solid waste. The hazardous sol- id wastes generated are entrusted to qualified companies for treatment according to the requirements of relevant national laws and regulations and the treatment rate reaches 100%. The cumulative photovoltaic power station scale was34 MW and the power generation In the future Shenma Corporation plans to use quantitative targets as a key tool to further strengthen the management and planning of harmless and hazardous waste disposal. Achievements in 2024 was21.8706million kWh.of Photovoltaic Power Waste Management System Generation Shenma Engineering Plastics Technology Development Co. Ltd.Subsidiaries such as Shenma Cord Fabric and Shenma Huawei Plastic Co. Ltd. have established comprehensive waste man- Self-produced photovoltaic power generation was about596400 kWh.agement systems adopting a multi-tiered approach to waste reduction and compliant disposal.Reusable waste yarn is sold to external companies to promote resource recycling. Recyclable insulation materials are reused internally to reduce reliance on new materials. General industrial solid waste with no direct reuse value is entrusted to qual- ified third-party agencies for environmentally sound disposal. Hazardous waste is strictly managed in accordance with rele- vant regulations and disposed of by licensed professionals to ensure environmental safety and regulatory compliance.Utilization of Water Resources Energy Utilization Shenma Corporation aims to build a water-saving enterprise continuously improve the management level of water conservation and take reducing the water intake per unit product as the core to realize the optimal allocation of water resources and improve the comprehensive utilization efficien- cy. By strengthening water-saving publicity and education enhancing the awareness of all staff and building a long-term management mechanism Shenma Corporation always put energy management in an important strategic position for enterprise development and actively responded to the for water conservation we will contribute to the construction of a water-saving society. The main source of water used by the Company is municipal call of national energy conservation and emission reduction policies. Through improving laws and regulations strengthening performance manage- water purchased from outside and there is no influence on the use of local water resources.ment and other multi-dimensional measures the Company comprehensively promoted the in-depth development of energy management.Subsidiaries have established comprehensive water management frameworks and sys- In 2024 tems to enhance the rational use of water resources:Shenma Cord Fabric Development Energy Management Co. Ltd. has fortified its water-saving management structure and promptly updated and implemented the company's water supply and conservation management sys- tem including the Water Conservation Management System Water Use Management The total water consumption of Shenma Shenma Corporation strictly abides by national laws and regulations and takes People's Republic of China (PRC) Energy Conservation Law and Peo- Assessment Measures Water Conservation Personnel Position Responsibility System Corporation ple's Republic of China (PRC) Renewable Energy Law as the action program requiring its subsidiaries to build energy management structures and sys- and Water Metering Management System. These initiatives ensure that management tems in combination with their business characteristics. Shenma Cord Fabric Development Co. Ltd. has implemented an internal energy management responsibilities are effectively executed strengthen the control of the water usage pro- system to track and analyze energy consumption in real time integrating a performance evaluation plan that aligns energy efficiency targets with cess conduct comprehensive inspections to eliminate "leaks and waste" and ensure tons both departmental and individual employee performance metrics. The company also runs training programs to enhance staff awareness and skills the achievement of water usage targets with product water consumption below the in- 15158520 in energy conservation. Shenma Cord Fabric has established a comprehensive energy management system with dedicated roles and management dustry average.Nylon Chemical Co. Ltd. has established a water-saving leadership team personnel. This system covers the entire process from procurement to usage negotiates for favorable energy supply terms optimizes process and clarified the responsible departments and personnel for water use and conservation equipment parameters to reduce consumption and conducts energy audits to formulate improvement plans. Shenma Engineering Plastics Technol- and formed a hierarchical management structure.Shenma Cord Fabric in accordance ogy Development Co. Ltd. has set up a leadership group and developed the Energy Consumption Quota Management System with an early warning with the company's water conservation management system continues to deepen mechanism to encourage and reward energy-saving innovations among employees. Nylon Chemical Co. Ltd. has incorporated energy management water conservation management. It has commissioned professional underground pipe- The recycling rate of water resources into its strategic planning creating a robust regulatory system from planning to assessment. The company has optimized procurement strategies line leak detection agencies to conduct comprehensive leak detection on underground strengthened the management of key energy-consuming equipment and processes and established an information system for real-time monitoring water supply networks promptly repairing any detected leaks to reduce water resource and analysis of energy consumption. Shenma Puli has implemented a statistical system to monitor energy consumption trends increased investment loss.Subsidiaries have organized activities such as "Energy Conservation Promotion 97.10% .in energy-saving technology upgrades and integrated energy consumption into daily performance assessments with clear rewards and penalties. The Month" and "Water Conservation Promotion Week" and actively participated in central- company also enhances staff training on energy conservation to promote a culture of energy efficiency across the organization. ized promotions organized by higher authorities during "Energy Conservation Promo- tion Month" reinforcing staff energy conservation awareness across various dimensions.Moving forward the Company will strengthen its energy management framework by establishing quantifiable energy conservation targets and im- A regular energy inspection mechanism has been established with routine energy plementing regular progress reviews thereby systematically improving its energy-saving and emission-reduction system. At the operational level the inspections conducted monthly and surprise factory-wide inspections carried out from Company will rigorously implement clean production solutions while comprehensively advancing an energy utilization strategy characterized by "high time to time. This ensures that actions against "leaks and waste" and energy wastage efficiency and cleanliness low-carbon circularity and intelligent management." are taken seriously guaranteeing the effective implementation of water conservation measures. 59 60Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Circular Economy Reclaimed Water and Waste Recycling The recovery of reclaimed water in Nylon Chemical Co. Ltd. has achieved remarkable results and the ad- Shenma Corporation headquarters adheres to the circular development con- vanced treatment project was carried out. After completion about 1.3 million tons of fresh water was saved cept of "resources-products-renewable resources" and brings waste recycling and the recovery rate of reclaimed water rose to 67.5% reducing the discharge of circulating water and the into the overall strategic layout of the enterprise. It clearly sets the goals of demand for fresh water. In addition the Company's resource utilization of waste residue waste liquid and reducing waste generation improving waste recovery rate and reuse rate as other wastes has been transformed into by-products through technological innovation.the goal requiring all subsidiaries to formulate specific circular economy im- plementation plans in combination with their own business characteristics. High Water cycle and Waste Recovery Shenma Engineering Plastics Technology Development Co. Ltd. has excellent water resources management and the water recycling rate reaches 97%. Opti- Strategic Practice of "Three Wastes" Recycle mize process equipment to improve water reuse rate and reduce waste. It has established and improved the waste recycling system classified and recycled waste plastics and waste packaging materials and cooperated with professional Synergistic enterprises for reprocessing recycling or entering other industrial chains.Waste Heat Waste Utilization Water Saving and Waste Reduction Boliemai improves the efficiency of water resources utilization by building facilities such as air conditioning condensate collection system. At the same Shenma Cord Fabric Development Co. Ltd. actively responded to the strategy time Boliemai strengthened waste management optimized the process of the headquarters promoted the waste heat utilization project recovered improved the utilization rate of raw materials and reduced waste from the the production waste heat and stopped purchasing steam. The annual steam source. Inevitable wastes are collected and treated by classification to pro- purchase decreased by 66% reducing energy consumption and cost. At the mote reuse.same time the production waste and leftover materials are processed and reused by classification so as to improve the utilization rate of resources and reduce waste emissions. Resource Saving and Comprehensive Utilization of Waste Shenma Huawei tap water is cooled circularly and the power supply is turned off in time after production to reduce resource consumption. It paid attention to the comprehensive utilization of production waste recycled waste metal and wood Recycling of Spinning Waste and processed it into products or sell raw materials to maximize the value of waste.Shenma Cord Fabric Company and Shenma Cord Fabric Devel- Water Management and Waste Control opment Co. Ltd. developed regenerated chips and regenerated Shenma Puli hired a professional company to measure the leakage of the pipe network deal with the fibers from spinning waste which realized high-value recycling leakage in time strengthen inspections to prevent leakage and improve the management level of water re- of waste resources. Compared with primary chips and primary sources. In terms of waste management and control a strict system of classified collection and treatment is fibers it not only reduced production costs but also reduced car- established to ensure the reasonable disposal and recycling of waste.bon emissions which is of great significance for the Company to achieve green and low-carbon development. Shenma Cord Fabric Company and Shenma Cord Fabric Development Co. Ltd. have passed the global recycling standard certification (GRS).Ecosystem and Biodiversity Conservation Shenma Corporation fully recognizes the importance of biodiversity conservation and prioritizes it throughout the entire project lifecycle. The Company strictly adheres to ecological conservation redlines and environmental impact assessment requirements respecting the Convention on Biological Diversity. We ensure that project site selection and construction do not damage critical ecosystems such as natural habitats wetlands and forests. Through stringent water quality management and eco-friendly treat- ment processes we minimize pollutant discharge reduce impacts on aquatic ecosystems and contribute to the restoration and balance of regional ecosystems.We also encourage employees to coexist harmoniously with wildlife—neither disturbing nor harming animals encountered in the wild. If injured individuals are discovered employees are to immediately notify relevant authorities and take protective measures.Shenma Corporation will continue exploring more effective biodiversity conservation initiatives contributing our share to the eco- logical balance of our planet. 61 62Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix 03 Safety and Employee Management Shenma Corporation adhering to the core philosophy of "people-oriented development" regards enhancing employee well-being as a key mission. The Company is committed to fostering a healthy and safe working environment building a fair and equitable space for career advancement and creating a comprehensive talent development platform. By promoting the joint progress and mutual growth of employees and the Company Shenma supports employees in realizing their personal value and works hand in hand with them to create a brighter future.Material Topics Addressed in This Chapter Employee Rights Talent Development Diversity Equity and Inclusion (DEI) Occupational Health and Safety Sustainable Development Goals (SDGs) of the UN Addressed in This Chapter 63 64Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Legal Employment Employee Rights and Benefits Shenma Corporation strictly complies with the Labor Law of the People's Republic of China the Labor Contract Law of the Peo- ple's Republic of China and other relevant domestic laws and regulations. The Company also supports internationally recognized The Company remains true to its original mission and consistently standards and principles such as the International Bill of Human Rights the Declaration on Fundamental Principles and Rights at prioritizes the vital interests of its employees. It continuously im- Work and the Discrimination (Employment and Occupation) Convention. Internally the Company has formulated the Labor Em- proves the compensation and benefits system to provide a solid ployment Management Measures (Trial) of Shenma Corporation to ensure lawful and compliant employment practices throughout foundation for employees' well-being. By actively listening to em- the entire employment cycle—from recruitment onboarding and employment management to offboarding. ployees' voices and establishing smooth and effective communica- The Company rigorously controls employee onboarding requirements and conditions signing written labor contracts with em- tion channels the Company ensures that employee concerns are ployees based on the principles of equality voluntariness and mutual agreement. All contracts are either approved or supervised addressed and resolved in a timely manner. These efforts compre- by local labor authorities and include essential clauses such as contract term job duties and location working hours and rest hensively enhance employees' sense of belonging and happiness periods remuneration labor protection and occupational hazard prevention in compliance with the legal requirements for labor fostering a strong collective force that supports the Company's contracts. In 2024 the Company achieved a 100% labor contract signing rate and fully contributed to pension medical unemploy- stable and sustainable development.ment work injury maternity insurance and housing provident fund for all employees with a 100% contribution rate.The Company proactively opposes any behavior that disregards or violates human rights. It strictly prohibits discrimination in re- cruitment promotion training and compensation based on nationality gender age race religion pregnancy or disability. Shen- ma Corporation upholds the principles of equal consultation and mutual benefit working together with employees to achieve shared development.If any employee experiences harassment or believes they have been subjected to unlawful discriminatory treatment based on gender sexual orientation race ethnic origin age religion disability marital status or any other prohibited Employee Compensation grounds the employee is encouraged to report the situation immediately to their direct supervisor or the Human Resources De- partment of the relevant subsidiary. All incidents of harassment must be reported including those occurring outside the office or The Company ensures the full and timely payment of employee salaries on a outside of working hours. monthly basis and continuously improves its compensation and benefits system.In accordance with relevant national and local policies the Company makes full In 2024 and timely contributions to social insurance programs—including pension med- ical (including maternity) work-related injury and unemployment insurance— as well as to the housing provident fund thereby safeguarding employees' lawful The Company reported zero labor dispute cases arising from non-compliant employment practices. rights and interests.No incidents of discrimination harassment child labor or forced labor in violation of labor and hu- man rights standards occurred during the Year. The Company has formulated the Wage Management Measures of Shenma Corpo- ration and the 2024 Wage Linkage Management Measures of Shenma Corporation.In alignment with the Company's high-quality development strategy and scientific compensation distribution policies the total wage base is reasonably determined based on a comprehensive evaluation of factors such as annual production and During the Year the Company operational goals economic performance labor productivity employee wage actively responded to the talent levels alignment between wage distribution and business performance the strategy and implemented the Company's financial capacity and government wage guidelines. A linkage-based Group's unified "Seven-Step" performance assessment mechanism is applied to ensure dynamic and equitable procedure for the recruitment of salary distribution. The Company is deepening the reform of its wage distribution university graduates. Through system by optimizing performance appraisal schemes and establishing an income diversified recruitment channels "Seven-Step" Unified Recruitment distribution mechanism based on quality efficiency and effectiveness. A sound and innovative initiatives the Procedure for University Graduates incentive and restraint mechanism is being developed to uphold the principle Company made significant pro- of "more pay for more work no pay for no work." Compensation policies are de- gress in talent acquisition and tal- Unified Posting of Recruitment Unified Pre-Employment signed to favor employees in key technical positions those working under diffi-Announcements Education and Training ent pool development. Notable cult or hazardous conditions and individuals with high professional skills strong achievements were made in cam- Unified Registration via Designated Unified Management During the capabilities and significant contributions. This approach ensures a more rational pus recruitment university-enter- Recruitment Platforms Probationary Period wage distribution structure and strengthens the incentive role of the compensa- prise collaboration and social re- tion and benefits system.Unified Standards for Organizing Unified Processing of cruitment injecting strong talent Open Examinations Employment Formalities momentum into the Company's Unified Allocation to Hiring development. Departments According to the Plan 65 66Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Employee Care Democratic Management Upholding the core philosophy of "shared growth between the Company and its employees" the Company integrates humanistic The Company continues to strengthen its efforts in democratic management by establishing diversified communication channels care into daily management practices. It is committed to safeguarding the physical and mental well-being of its employees and and fostering an open and transparent work environment. It actively listens to and addresses employees' practical needs enhanc- providing strong support across all aspects of their lives. By organizing a wide range of cultural and recreational activities the Com- es employee satisfaction and creates a harmonious and inclusive workplace culture.pany fosters a sense of belonging and happiness allowing every employee to feel valued and supported as part of the Shenma family. Employee Benefits System of Shenma Corporation Medical and Health Care Housing and Transportation Allowances Employee Representative Rational Suggestions Employee Satisfaction The Company provides wellness retreats for outstanding To ease employees' financial burden related to housing cer- Conference System Collection System Survey employees hardship assistance and supplementary tain subsidiaries offer housing or rental subsidies.medical coverage. Special illness insurance is offered to The Company places great The Company actively encourages In 2024 the Company proactively female employees and all employees are covered by a emphasis on the role of the employees to submit rational carried out satisfaction surveys to critical illness mutual aid insurance plan. Employee Representative suggestions aiming to stimulate gather broad employee feedback Conference as a key platform employee engagement and through questionnaires. Each Paid Leave and Annual Leave Holiday and Birthday Benefits for employee participation in creativity. In 2024 employees questionnaire included 16 items corporate governance. During raised concerns about difficulties with 20 distributed monthly In accordance with national laws and regulations the On traditional holidays or Company-specific celebration the proposal solicitation period in accessing meals due to short totaling 240 questionnaires Company offers paid annual leave allowing employees days employees receive holiday gifts or bonuses. Birthday employees expressed a desire to lunch breaks shift duties and for the Year-all of which were to rest and recharge from their busy work schedules. cake vouchers are distributed quarterly to employees cele- receive a birthday gift from the long commuting distances. returned with a 100% effective brating birthdays. labor union. The Company took In response the Company's response rate. The results showed this feedback seriously and after leadership conducted in- an average public satisfaction Retirement and Pension Support Team-Building and Social Activities deliberation by the leadership depth discussions and decided rate of 99.17% for the Year. Based team decided to distribute during a leadership meeting to on these results the Company Certain subsidiaries contribute to pension insurance for The Company regularly organizes team-building events out- birthday cake vouchers quarterly provide monthly meal subsidies accurately identified areas for employees ensuring that they receive appropriate re- door excursions group dinners annual meetings and other to employees celebrating their effectively addressing the issue improvement and implemented tirement benefits after leaving the workforce. activities to strengthen communication collaboration and birthdays—demonstrating the and improving employee job targeted measures to team cohesion. Company's commitment to satisfaction. continuously enhance employee humanistic care. satisfaction and advance democratic management Support for Employees in Need practices.The Company identifies and assesses employees facing financial difficulties establishes hardship records and provides them with condolence funds and supplies to ensure that assistance policies reach those truly in need.Employee Fitness Walk Activity Employee Hardship Assistance Program Women's Day Movie Event Summer Heat Relief and Care Initiative 67 68Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Diversity Equity and Inclusion (DEI) Talent Development The Company is committed to building a compliant equitable and diverse employment system. In the recruitment process it ad- Shenma Corporation has established a comprehensive talent cultivation and incentive mechanism offering employees a clear heres to the core principles of fairness impartiality and merit-based selection fully ensuring equality and compliance throughout career development pathway. By closely aligning individual growth with corporate development the Company enables every em- all stages. The Company explicitly prohibits any form of discrimination based on ethnicity gender race skin color or religious be- ployee to fully realize their potential in their respective roles achieving mutual progress between employees and the Company.lief and ensures that all candidates compete under equal conditions. This approach fosters a diverse inclusive and vibrant work- place injecting varied perspectives and innovation into the Company's sustainable development. Career Development On December 31th 2024 the Company had a total of 8131 employees. The main employment categories include contract em- ployees retired rehires interns part-time workers and outsourced personnel. The Company has adopted multiple measures to Shenma Corporation consistently implements the talent development strategy set by the Party Committee of the Group adhering enhance employees' sense of belonging and satisfaction. For the Year the employee turnover rate stood at 0.46%. to the principle of Party-led talent management. Centered on a well-established position and rank system supported by a robust promotion and rotation mechanism reinforced with compensation and incentive measures and guided by tiered and classified management the Company has built a structured and dynamic career development system. First the Company has established a "Four-Category Three-Tier Six-Level" professional rank system that covers four major job categories: management R&D technical and skilled positions. This system enables seamless connection and mutual mobility across different career tracks. Second the Total Number of Employees in Service Number of Parent Company Employees Company has introduced the "NextGen Talent Program" for outstanding young talent. Through four core mechanisms—continuous talent sourcing systematic cultivation bold promotion and disciplined yet supportive management—the program aims to com- prehensively enhance young professionals' political integrity capabilities and professionalism. The goal is to build a high-caliber 10278 10164 8131 4043 2878 2616 professional loyal clean and responsible team of young talents that is sufficient in number and full of vitality. Equity Incentives In 2024 in accordance with relevant laws regulations and normative documents such as the Guidelines on Internal Compensation Distribution of State-Owned Enterprises issued by the General Office of the Ministry of Human Resources and Social Security and the Securities Law Shenma Corporation formulated the 2024 Restricted Stock Incentive Plan (Draft). The plan introduced restricted stock as a medium- to long-term equity incentive for outstanding talent with the aim of fully motivating and fostering innovation among key employees. It effectively aligned the interests of shareholders the Company and the core management team enabling 2022 2023 2024 2022 2023 2024 all parties to focus on the long-term development of the Company and supporting the realization of its strategic and operational objectives. On December 17th the Company publicly announced the list of participants in the first round of the restricted stock in- centive plan. The announcement clearly defined the rights and obligations of the incentive recipients and set profit growth targets for the Years 2025 through 2027.Employee Training and Development Number of Employees by Department Number of Employees by Education Level The Company places great emphasis on 2024 Training Plan and Targets employee training and development building upon a comprehensive training Each employee is expected to 208 215 2967 system. It fully implements the important receive no less than 100% continuing education participation among professional 2364 directives of President Xi Jinping on work- 40 training hours on average6123 749 and technical personnel.place safety firmly upholds the principle 182 of "putting people and life first" and with an employee training adheres to the "Six Firm Commitments." coverage rate of 100% 95% retraining rate for employees 862 Centering on the two core themes of ≥ . changing positions. safety and quality the Company strength- 2592 ens safety and skills training intensifies A total of business and management training and Production Staff Sales Staff Master's Degree or Above Bachelor's Degree enhances ideological and political educa- 100% onboarding training coverage for new hires including 8532 training sessions are planned across all business Technical Staff Finance Staff High School or Below Associate Degree tion. It has also improved the training re- completion of three-tier safety training.sponsibility and management system and segments for the Year.Administrative Staff advanced infrastructure for education and training providing strong talent support 100%certification rate for key personnel including enterprise for building a modern high-quality enter- executives safety management personnel special operations staff and prise. special equipment operators. 69 70Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Occupational Health and Safety "Shenma Lecture Hall" Executive Training Series To build a high-caliber and professional leadership team and enhance the core competitiveness of Shenma Corpora- Shenma Corporation thoroughly implements President Xi Jinping's important directives on workplace safety continuously strengthening tion the Company launched the "Shenma Lecture Hall" training series in 2024. This initiative targeted the leadership of safety foundations at the grassroots level. The Company upholds a strong awareness of red-line and bottom-line thinking regarding safety Shenma Corporation and its subsidiaries and comprised seven sessions throughout the Year. The training curriculum optimizes safety management processes and enforces strict accountability through assessments and audits. By embedding intrinsic safety into its operations the Company provides solid and reliable support for high-quality development.was designed around key themes including President Xi Jinping's important discourses on state-owned enterprises and state-owned assets Party building and the major reform priorities of state-owned enterprises. A wide range of top- ics were covered such as Party spirit and discipline SOE reform and corporate governance strategic planning business Occupational Health and Safety Management System operations investment and financing management safety and emergency response human resources management carbon neutrality and energy transition financial management supply chain management general management in- ternal enterprise governance and traditional Chinese cultural values. This comprehensive training program aimed to Shenma Corporation strictly complies with appli- systematically improve the leadership team's strategic thinking leadership capabilities decision-making skills and pro- cable laws and regulations such as the Work Safe-ty Law of the People's Republic of China Interim fessional competence thereby supporting the Company's high-quality development through strengthened executive Measures for the Investigation and Management capacity. of Potential Work Safety Hazards Implementation Guidelines for Hazard Investigation and Manage- Safety Production Committee chaired by the Company's primary ment in Industrial and Trade Enterprises and Im- responsible person.plementation Guidelines for Hazard Investigation and Management in Hazardous Chemical Enter- Joint Advanced Training Program with Zhengzhou University prises. Internally the Company has established a series of specialized safety policies and systems including the Shenma Corporation Safety Commit- Shenma Corporation in collaboration with Zhengzhou University launched an advanced training program as a key initi- tee Charter Accountability System for Work Safety Safety Production Governance Safety Supervi- ative for talent development in the nylon industry. A total of 87 young technical and R&D backbones under the age of 35 Leadership sion Department Occupational Health Safety and Environmental Level from various units within the nylon sector participated in the program. Renowned professors and experts from Zhengzhou Team led by the serving as the (HSE) Management Manual Occupational Disease Company's pri- dedicated safety University specializing in chemistry chemical engineering and materials science delivered lectures tailored to the stra- Prevention Policy and Management Measures for mary responsible production tegic needs of the nylon sector's transformation and upgrade forming a three-dimensional curriculum system of "theo- Personal Protective Equipment . In accordance person with the Execution Supervision management retical foundation – technological breakthrough – industrial application." Throughout the 12-month program (March 2024 with GB/T 45001-2020 Occupational Health and person in charge Level Level body within the to March 2025) participants not only gained solid theoretical knowledge but also enhanced their problem-solving skills Safety Management System Requirements the of safety serving as Company.through case studies and hands-on projects. The program successfully established a new model of university-enterprise Company has built a comprehensive management the deputy leader.collaboration for joint talent development. system that forms a systematic occupational health and safety governance framework. This sys- tem applies to all employees—including contrac- tors—and provides institutional support for safe and compliant operations across the organization.At the subsidiary level each entity has established its own safety management regulations to en- hance risk prevention and control. These include the Henan Shenma Jinhua Technology Co. Ltd.Safety Risk Classification Control and Hidden Hazard Investigation & Management Dual-Prevention Mechanism Management Regulations and the Shenma Boliemai (Pingdingshan) Air Bag Wire Co. Ltd.Work Plan for Establishing a Dual-Prevention Mechanism for Safety Risk Classification Control and Hidden Hazard Investigation & Management. These regulations aim to comprehensively strengthen safety management throughout each subsidiary's production process. In 2024 Shenma Engineering Plastic Co. Ltd. Nylon Chemical Co. Ltd. Shenma Cord Fabric Development Co. Ltd. Shenma Cord Fabric Company and Shenma Huawei Plastic Co. Ltd. all successfully obtained ISO 45001 Occupa- tional Health and Safety Management System Certification.ISO 45001 Certificate – Shenma Cord Fabric Company While ensuring the occupational health and safety of its own employees Shenma Corporation also places great emphasis on the occupa- tional health and safety of labor within its supply chain. The Company has established a supplier production safety management system and its subsidiaries have formulated specific policies such as the Regulations on Safety Management of Related Parties and Management Regulations for Outsourced (Contracted) Labor Construction (Operations). These documents define comprehensive safety management requirements across the entire operational cycle—from supplier selection onboarding training and on-site operation management to pro- ject completion and exit. Through mechanisms such as self-management by business departments localized supervision by designated grid managers in construction areas and safety supervision management the Company enforces strict control over the operational safety of suppliers and contractors to ensure business stability and continuity. 71 72Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Occupational Health and Safety Risk Management Occupational Health and Safety Protection Measures The Company adheres to a core philosophy of prioritizing prevention and integrating both preventive and corrective measures and rigorously implements proactive control of occupational health and safety risks. A comprehensive safety risk assessment process and quantifiable safety management measures have been established. Regular occupational health risk assessments are conducted across all workplaces to accurately identify potential hazards ranging from chemical and physical agents to equip- The Company utilizes automated safety interlock systems to ensure equipment ment operation and ergonomic factors. In response to these risks the Company has formulated and implemented targeted con- operates under safe conditions preventing unsafe operations and avoiding po- trol measures including but not limited to the enclosure of hazardous chemical substances and noise reduction treatments for Safety Interlock System tential accidents.high-decibel equipment. Additionally Shenma Corporation and its subsidiaries have developed Emergency Response Plans for Work Safety and regularly organize diverse emergency drills covering various scenarios such as seasonal extreme weather (summer Production units are equipped with alarm systems that monitor hazardous con- and winter) preparedness ammonia leakage response and accident response for injuries involving special equipment. These ef- ditions such as high and low liquid levels in real time enabling timely alerts and forts ensure that employees are well-prepared to respond effectively to emergencies in various conditions significantly improving Alarm System quick employee response.their safety awareness and emergency response capabilities. Ultimately these initiatives aim to minimize occupational health risks and foster a safe and healthy working environment throughout the Company.A series of technical safety measures are implemented to prevent risks such as Technical Safety fire explosion and poisoning. These include fire alarm systems high/low-level Measures for Equipment interlocks lightning protection and anti-static grounding systems.Occupational Health and Safety Risk Identification and Management Process Storage facilities for hazardous chemicals are specially designed to ensure safe handling and management. Safety features include high/low-level alarms and Define Risk Assessment Collect Identify and Develop and Track Performance Data Hazardous Chemicals emergency shut-off devices.Objectives and Scope Risk-Related Evaluate Hazards Implement Risk Continuous Improvement Storage SafetyData Control Measures and Feedback Automatic shutdown systems are installed in equipment to ensure immediate Automatic Shutdown cessation of operations in the event of an issue thereby minimizing the occur- System rence and spread of accidents.Employees are required to wear PPE—such as helmets safety goggles and ear- Use of Personal plugs—at all times when working on site to reduce the risk of injury in hazardous Protective Equipment environments.(PPE) The Company provides pre-employment and exit medical examinations for employees exposed to occupational hazards and conducts regular on-the-job Occupational Health health checks. Examination results are promptly communicated to employees Examinations and personal occupational health monitoring records are maintained. 73 74Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Occupational Health and Safety Indicators and Targets Enhancing Access to Quality Advancing Personalized Medical Resources Health Management Caring for Mental Health The Company is committed to fostering a safe healthy and efficient working envi- ronment. To this end the Company has formulated clear medium- and long-term The Company signed a cooperative Based on the analysis of health check- The Company conducts a variety of Occupational Health and goals with phased implementation plans. Quantitative objectives are established agreement with Pingdingshan First up data from various subsidiaries the mental wellness activities including Safety "Three Zero" Target People's Hospital to establish a med- Company provides targeted guidance psychological assessments and coun- as key performance benchmarks and progress is dynamically monitored and reg- ical consortium introducing a system and customized check-up packages seling. Assessment results are ana- ularly reviewed to ensure the continuous improvement of occupational health and of regular on-site consultations by for employees. Health records are lyzed and reviewed to continuously safety (OHS) management practices. By enhancing its OHS management system doctors from a tertiary hospital. This managed dynamically with statistical improve employees' overall mental and strengthening risk prevention and process control the Company integrates initiative ensures that employees re- categorization and tracking of results and emotional well-being.Zero Accidents standardized safety production practices with effective risk management. Employ- ceive scientific appropriate and con- to identify health issues early and in-tinuous tiered medical services and tervene promptly.ee training is a key focus with ongoing efforts to promote safety awareness and promotes the downward extension of improve operational and emergency response capabilities through targeted safety high-quality healthcare resources.education and skills training. In parallel the Company continues to increase invest- Zero Injuries ments in safety infrastructure and optimize working conditions to ensure the effec- tiveness and reliability of protective measures. The emergency response system is also being continually refined with regular drills conducted to improve response Zero Leaks time and handling capacity for unexpected incidents. Through these initiatives the 0 Special Safety Inspection Conducted Company strives to achieve its "zero accidents zero injuries zero leaks" safety ob- jective—safeguarding employee occupational health and laying a solid foundation On August 1st the Head of the Safety Technology Department of Shenma Corporation led an in- for sustainable corporate development. During the reporting period the Company spection team to conduct a special safety inspection at Shenma Cord Fabric Company Shenma invested RMB 9.51 million in safety-related initiatives achieving a 0% occupational Aramid and Shenma Hydrogen Chemical Co. Ltd. The inspection focused on current critical areas disease incidence rate and recording zero work-related fatalities. such as construction safety summer "Three-Prevention" measures (heatstroke flooding and fire prevention) and safety education. The team conducted a comprehensive review of the implemen- Indicator Unit 2022 2023 2024 tation of safety production management systems for ongoing projects the installation of protective facilities and warning signs as well as summer-related safety measures including heat prevention Investment in Occupational Injury Insurance 10000 RMB 130 91 55 flood control and fire safety management. For all safety hazards identified during the inspection immediate corrective actions with deadlines were mandated. The inspection team also provided Coverage Rate of Occupational Injury Insurance % 100 100 100 specific requirements to further strengthen safety management in construction operations.Number of Workplace Safety Incidents cases 1 2 3 Safety Incident Rate per Million Work Hours cases/million hours / / 0.18 Emergency Drill Conducted Number of Work-Related Fatalities persons 0 0 0 On September 26th 2024 in order to enhance emergency response capabilities for sudden safety incidents the Second Chemical Plant of Nylon Chemical Co. Ltd. organized a fire safety emergency Work-Related Fatality Rate % 0 0 0 drill. The drill simulated an explosion scenario involving a reactor focusing on the emergency re- Lost Work Hours Due to Safety Incidents hours 864 1680 2496 sponse procedures and actions of on-site personnel. Through this exercise employees' awareness of safety management before the holiday was further strengthened and their ability to respond to Occupational Disease Incidence Rate % 0 0 0 emergencies such as reactor explosions was improved providing strong support for the company's safe production.Number of Occupational Hazard Accidents cases 0 0 0 Occupational Health Examination Coverage Rate % 100 100 100 Proper Use and Availability Rate of PPE % 100 100 100 Occupational Health and Safety Training Occupational Health and Safety Highlight Case To enhance employees' awareness and capabilities in workplace safety Shenma Corporation or-ganized safety training sessions for all administrative personnel. The training was conducted in two sessions each lasting three days. During the training instructors combined theoretical knowledge Comprehensive Measures to Safeguard Employee Health with practical case studies covering topics such as the interpretation of the guiding principles from the 20th CPC Central Committee's Third Plenary Session President Xi Jinping's important state- In 2024 Shenma Corporation earnestly practiced the Group's core philosophy of "shared growth between the enterprise ments on production safety relevant safety laws regulations and standards risk classification and and employees" by actively caring for employees' physical and mental well-being. Through refined dynamic management hazard identification as well as emergency response plans and evacuation knowledge. The ses- sions were designed to address gaps and weaknesses in participants' safety knowledge systems.of employee health records and a combination of preventive therapeutic and psychological health services the Compa- To ensure training effectiveness participants completed online quizzes using their mobile phones ny has achieved effective integration of preventive care disease treatment and wellness management. These efforts con- at the end of the course with scores used to evaluate learning outcomes. In 2024 the Company tribute to stable labor relations and promote the Company's harmonious development. recorded an average of 48 hours of safety training per employee. 75 76Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix 04 Shared Development and Corporate Responsibility Shenma Corporation upholds the philosophy of sustainable development embedding responsibility and accountability throughout its operations. The Company works hand in hand with upstream and downstream partners to build a sustainable supply chain integrating a strong sense of responsibility into collaborative relationships. By strengthening information security measures and safeguarding customer privacy Shenma enhances its brand reputation through high-quality products and services. Embracing its social responsibility the Company actively participates in public welfare initiatives and contributes wholeheartedly to rural revitalization. Through concrete actions Shenma gives back to society and writes a compelling chapter in the joint pursuit of corporate growth and social progress.Material Topics Addressed in This Chapter Customer Service Public Welfare and Philanthropy Data Security and Customer Privacy Protection Rural Revitalization Responsible Marketing Intellectual Property Protection Supply Chain Security Industry Collaboration Equal Treatment of Small and Medium Enterprises (SMEs) Sustainable Development Goals (SDGs) of the UN Addressed in This Chapter 77 78Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Supply Chain Management Responsible Supply Chain The security stability and sustainability of the supply chain are critical to the Company's production and operations. While striv- Shenma Corporation is deeply committed to the principles of sustainable procurement by integrating ESG-related requirements— ing to build an efficient and standardized supply chain management system Shenma Corporation also promotes ESG principles such as human rights protection regulatory compliance and environmental stewardship—into the full life cycle of supply chain among its suppliers encouraging all parties to share responsibilities seize opportunities and work together toward a sustainable management. The Company works closely with its partners to share responsibilities mitigate supply chain risks and jointly build a future. sustainable and resilient supply chain.Supplier Management System ESG Dimension Specific Requirements To strengthen supply chain management and mit- Suppliers shall comply with the applicable environmental laws and regulations in their local ju- igate supply chain risks Shenma Corporation has Company Name Conduct Signing Rate Environmental risdictions. They should consider the environmental impact of their operations and take actions proactively developed and refined documents such Shenma Cord Fabric Company 100% Protection to eliminate or reduce such impacts. Suppliers are encouraged to establish an ISO 14001 Environ- as the Supplier Management Measures Import Mate- mental Management System for continuous environmental performance improvement.rial Procurement Procedures Supplier Quality System Shenma Cord Fabric Development 90% Evaluation Form and Guidelines for Supplier Quality Co. Ltd.Control and Evaluation Operations.These documents Domestic suppliers shall strictly comply with China's Labor Law regarding employment practic-Nylon Chemical Co. Ltd. 100% serve as standardized guidance for managing both es. International suppliers must adhere to relevant local labor laws and regulations. In principle Labor and domestic and international suppliers. They optimize Shenma Engineering Plastic Co. Ltd. 100% suppliers shall employ only individuals aged 18 or above. If minors aged 14–18 are hired suppliers Employment processes for supplier admission review evalua- must follow the latest local legal requirements and establish protective systems to safeguard their tion and classification while refining management Shenma Engineering Plastics 100% legal rights.requirements to achieve more precise and effective Technology Development Co. Ltd.supplier oversight. Supplier Code of Conduct Signing Rate Among Key Subsidiaries in 2024 Domestic suppliers shall comply with the statutory working hour system as stipulated in China's Compensation Labor Law. International suppliers must follow local labor regulations. Suppliers shall adopt a Supplier Management System of Shenma Cord Fabric Company and Working compensation system based on performance fairness and legal compliance. Wages and allow- Hours ances must be paid in a timely manner and overtime must be compensated or offset with time off.Wages shall not fall below the local minimum wage standard.To be registered as a supplier candidates must complete the Preliminary Supplier Information Ques- tionnaire which collects basic company information and supports an initial evaluation and supply risk Supplier assessment. Upon passing the preliminary review the Development Department coordinates with rele- Suppliers shall respect employees' rights to freedom of belief and association. Employees shall be Admission vant departments to conduct an on-site assessment. This includes evaluating the supplier's production Freedom of free to join participate in or withdraw from organizations (such as unions or associations) in ac- capabilities delivery performance corporate management risk profile laboratory testing capacity Association cordance with relevant laws and regulations.quality control processes and green manufacturing practices. The findings are documented in an in- spection report and filed in the supplier archive.Shenma Corporation respects cultural differences among suppliers and promotes equal opportu- Suppliers undergo a rigorous audit process to ensure they meet the following criteria: legal entity status nity in all aspects of employment (including hiring compensation benefits promotion dismissal and sound credit history a certified and comprehensive quality management system demonstrated Non-Discrimination and retirement). Employment decisions shall be based on merit and legal standards. Discrimina- contractual performance capabilities and full compliance with applicable safety and environmental tion based on gender race age religion disability political opinion or beliefs are not tolerated.Supplier regulations.Audit After all technical testing of supplied materials is completed the technical department prepares an evaluation report. Qualified suppliers are added to the annual approved supplier list which serves as a Suppliers shall comply with applicable occupational health and safety laws and regulations in key reference for future procurement decisions. their local jurisdictions. They must provide a safe and healthy work environment ensure proper Occupational issuance and use of personal protective equipment and minimize occupational hazards. Suppliers Health and Safety Periodic Approved suppliers are evaluated based on delivery quality reputation and quality assurance capabili- are encouraged to adopt an ISO 45001 Occupational Health and Safety Management System for Supplier ty. Category A suppliers are evaluated and graded annually while Category B and C suppliers are evalu- continuous improvement.Evaluation ated every two years.Business interactions with suppliers must adhere to fair trade principles. All major raw material Supplier Exit Mech- Suppliers that fail to meet requirements and refuse to make corrective actions will trigger the exit suppliers must pass small- medium- and large-scale trials before mass procurement. Unfair com- Fair Competition mechanism. These suppliers will be disqualified and removed from future cooperation. petition kickbacks gifts and bribes in exchange for business benefits are strictly prohibited. Shen-anism and Anti-Bribery ma has a disciplinary inspection office and any verified misconduct will result in disqualification and legal or disciplinary consequences. 79 80Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Data Security and Privacy Protection Information Security Protection Measures Shenma Corporation places great importance on information security and strictly complies with laws and regulations such as the In 2024 Shenma Corporation continuously strengthened its information security defenses. To enhance protection capabilities the Cybersecurity Law of the People's Republic of China the Data Security Law the Personal Information Protection Law the Regula- Company deployed a network situational awareness system integrating newly added traffic probes and log audit tools to provide tions on Classified Cybersecurity Protection and the Regulations on the Security Protection of Critical Information Infrastructure. 24/7 multi-dimensional monitoring of network threats. Additionally a bastion host was installed to ensure the compliant use of Internally the Company has established specialized policies including the Shenma Corporation Information Security Management administrative privileges. On December 27th 2024 Shenma Corporation's Intelligent Operations Platform successfully completed Measures the Confidential Information and Data Storage Device Management Measures (Trial) and the Employee Confidentiality the Information System Security Classified Protection Filing and was officially rated as Level 2.and Non-Compete Agreement Management Measures (Trial) among others. These internal systems ensure the secure and stable operation of the Company's information infrastructure and support the smooth advancement of digitalization initiatives. In 2024 the Company reported no major cybersecurity incidents or information leaks and received no complaints related to data security or privacy protection. Information Security Protection Measures Information Security Governance Structure Physical Security Controls Access Control Measures Password Policy To ensure the secure and stable operation of its information systems and to strengthen strategic guidance for key issues in the im- plementation of digitalization projects Shenma Corporation has enhanced its top-level design for information security. The Com- Secure access control systems User identity authentication Strong password requirements pany established a Cybersecurity and Information Technology Leadership Group which is responsible for the highest-level deci- video surveillance secure access rights management regular password updates non- sion-making regarding cybersecurity and information system project development and implementation. This group is tasked with transmission media and data multi-factor authentication reuse of passwords encrypted ensuring the stable operation of information systems and cybersecurity approving master design plans and project schedules center physical protection password storage making key investment decisions providing strategic guidance on critical project issues resolving decision-making deadlocks approving major project changes and coordinating the external environment for project execution. In 2024 the Company's top executive signed a Cybersecurity Commitment Letter further reinforcing the responsibility system for information security.Network firewalls intrusion Regular backups of critical Secure storage of media detection and prevention systems data and establishment of devices confidentiality labeling Information Security Management System antivirus software secure corresponding recovery and scheduled destruction of configuration and patching mechanisms to prevent data loss obsolete files and media Based on the international standard ISO/IEC 27001: Information Technology – Security Techniques – Information Security Man- agement Systems – Requirements the Company has fully established implemented and continuously improved a documented Network Security Controls Data Backup and Recovery Physical Document and Media Security information security management system (ISMS). From December 18th to 29th 2024 Shenma Corporation successfully passed the annual surveillance audit for ISO/IEC 27001 certification ensuring that the Company's ISMS remains effective and continuously op- timized in support of its stable business development. 81 82Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Information Security Risk Management Information Security Training The Company actively supported the Group's compliance system certification which included specific compliance requirements Shenma Corporation attaches great importance to information security training and related to data security. As part of this process a data security risk identification checklist was developed along with correspond- has carried out a variety of awareness and capacity-building initiatives. Training con- ing preventive control measures tailored to those risks. These efforts have significantly enhanced the Company's awareness of tent covers cybersecurity awareness as well as laws and regulations related to cyber- information security risks and elevated its standards in information security management. security data security and personal information protection. Participants include man- agement personnel from all departments of the Company's headquarters. Through the Information Company's "Learning to Strengthen the Enterprise" online training platform employ- Security Risk Manifestations Preventive Measures Risk Level ees across all subsidiaries can also access relevant information security courses. These programs clearly define employee responsibilities and obligations regarding informa- tion security enhance understanding of its importance and improve overall awareness Storage device failure causing Establish a robust data backup and recovery and accountability among staff.system inaccessibility mechanism to address emergencies Backup software failure leading to involving data loss or corruption In 2024 data loss or failed recovery Timely updates to backup-related hardware Major Data Storage and Information Security Investment Backup Recovery Human error resulting in accidental and software deletion or overwriting of inactive Strengthen operator training on security RMB 1.09milliondata protocols Shenma Corporation Launches Cybersecurity Week Campaign Sudden interruption of the Develop a comprehensive data security Company's information network With the acceleration of digital transformation cybersecurity has become incident emergency response plan rendering systems inaccessible a top priority for enterprise development. In response to the 2024 National Response to Major Data Security Establish a rapid and effective incident Cybersecurity Awareness Week and to mitigate systemic and regional infor- Loss or leakage of critical company response mechanism mation security risks Shenma Corporation organized a Cybersecurity Week Incidents data campaign from September 9th to 15th under the theme "Cybersecurity for the People Cybersecurity by the People." During the campaign Shenma Corpora- tion invited cybersecurity experts to deliver training sessions on fundamental cybersecurity knowledge common cyberattack techniques and correspond- ing prevention strategies. In addition to expert lectures the Company held a Internal personnel abusing series of engaging activities including cybersecurity skills training emergency access rights beyond their job response drills and a cybersecurity knowledge competition. These efforts Establish data access auditing procedures responsibilities aimed to further raise employees' cybersecurity awareness strengthen their and systems to promptly detect and handle Major protective capabilities and foster a strong corporate culture of cybersecurity.Data Access Unauthorized individuals or entities abnormal access behavior The initiative contributed to enhancing the overall cybersecurity posture of the Control accessing internal data illegally Company and reinforcing its information protection capabilities.Employees intentionally or Deploy a 24/7 intrusion prevention system unintentionally leaking data to and situational awareness platform; external parties regularly upgrade security devices Major Data Leakage Data breaches caused by external Conduct regular training on personal data hacking protection and information security 83 84Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Intellectual Property Protection Shenma Corporation actively implements the national intellectual property strategy and promotes rule-of-law thinking to strength- en the development of its trade secret protection mechanisms. On the basis of strict compliance with laws and regulations such as the Intellectual Property Law of the People's Republic of China and the Patent Law of the People's Republic of China the Company Strengthening Intellectual Property (IP) Management at Shenma Tire Cord Company has established a new IP protection framework featuring policy leadership categorized control and full-process coverage.The Company has organized legal professionals to compile the Compilation of Laws and Regulations on Intellectual Property and In 2024 Shenma Cord Fabric revised its IP Management Manual and IP Procedures Compilation in accordance with GB/ has issued nine core internal policies including the Administrative Measures for Confidential Personnel of Shenma Corporation T 29490 ensuring that the updated system operates effectively and efficiently. The Company's IP governance was fur- (Trial). These documents cover key areas such as classification of confidential positions management of information equipment ther reinforced through the following multi-faceted initiatives.control of storage media and site security. Subsidiaries have also formulated and continuously updated policies such as the Patent Management System Patent Administration Measures and the Opinions on Strengthening Legal Protection of Intellectual Property IP Recordkeeping and Risk Management Rights thereby establishing a well-structured clearly defined and highly operational system of intellectual property protection.Looking ahead the Company plans to enhance certification of its intellectual property management system. Through standard- The Company systematically documented all 80 registered patents assessing them based on ized regulated and refined management practices the Company aims to establish a comprehensive multi-level and robust trade importance protection level method status risk exposure and mitigation measures. It also cat- secret protection network providing a solid intellectual property safeguard for high-quality development. alogued seven categories of trade secrets specifying confidentiality level applicable scope and To further strengthen trade secret management the Company established a Confidentiality Committee under which a Confiden- storage method to ensure full traceability and protection.tiality Office operates along with cross-functional working groups in management R&D and production. It also encouraged its subsidiaries and entrusted units to establish their own confidentiality leadership teams and management departments thus form- ing a tiered coordinated management system. In September 2024 the Company's confidentiality management office organized a Confidential Area Zoning and Control training session for confidentiality officers and liaisons from various departments with a total of 40 participants. Confidential areas were classified into three levels: key confidential zones general confidential zones and restricted access zones. Over 50 sets of signage management protocols and access logs were deployed to strengthen site-level IP confidentiality management.Patented Nylon 66 Fiber Production Technology Empowers Overseas Expansion Shenma Corporation launched Phase I of its 20000-ton/year differentiated Nylon 66 fiber project in Thailand utilizing Confidential Documents and Academic Papers its independently developed four-head high-speed spinning technology with fully proprietary intellectual property All hard-copy confidential documents were marked with watermarks. Paper submissions were han- rights. This patented technology not only provides strong technical support for the Company's overseas business ex- dled in strict accordance with internal IP confidentiality procedures.pansion but also exemplifies Shenma's strategic use of intellectual property to advance its internationalization efforts.Supplier Confidentiality Audits A total of seven critical raw material suppliers (classified as Category A) were issued supplier back- ground check forms to ensure robust second-party IP confidentiality controls.Shenma Corporation Conducts Intellectual Property Protection Training Confidential Equipment Management In August 2024 Shenma Corporation in- vited a renowned intellectual property A registry for confidential-use equipment was established with regular tracking and inspections to scholar from Henan Province to deliver a ensure controlled use.special lecture titled "Strengthening Intel- lectual Property Protection to Safeguard Core Corporate Interests." A total of 90 IP Protection Training participants including senior executives and division leaders from various business The Company held a training session titled Overview of Laws and Regulations Related to Intellectu- units attended the training. The session al Property with over 30 participants and 10 instructional hours in total.further enhanced awareness of intellectual property protection across the Company. 85 86Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Product Safety and Quality Shenma Cooperation firmly believes that a robust and comprehensive quality management system is essential for ensuring Establishment of Performance product excellence winning market share generating profits and transitioning from speed-driven growth to quality-driven de- Implementation of Full-Process Incentive Mechanisms Launch of the "100-Day Quality velopment and from product-focused to brand-focused competitiveness. With a strong awareness of "quality first" the Company Quality Control Improvement Campaign"The Company has introduced remains committed to high-quality development and customer-oriented innovation laying a solid foundation for its ambition to The Company ensures product tha quality-efficiency-oriented On August 19 the Company become a world-class enterprise. quality stability by maintaining performance evaluation sys- held the launch meeting for the consistency across raw and aux- tem placing greater emphasis 100-Day Quality Improvement iliary materials equipment con- Campaign and issued the corre- Product Safety and Quality Management on profitability cost control dition production environment and per capita efficiency. It sponding action plan. The initia- personnel performance and implements differentiated as- tive focused on enhancing prod- The Company strictly complies with applicable laws and regulations such as the processing technology. Starting sessments and performance uct quality upgrading quality Product Quality Law of the People's Republic of China and has established a com- Full Life Cycle Quality from raw materials the Company evaluations across all employ- management systems and driv-prehensive Total Quality Management (TQM) system. This system emphasizes quali- Management classifies materials by category ees linking assessment results ing continuous quality improve-ty-centricity and full employee engagement aiming to enhance quality control across and conducts multi-dimensional to compensation and ranking ment. A shared quality testing all staff processes elements roles and data points thereby driving continuous Incoming Material evaluations of suppliers cultivat- thereby maximizing the leverage platform was established across improvement in product quality. In 2024: Shenma Cord Fabric Company and Shenma Quality Control ing strategic partnerships with effect of incentives. upstream and downstream enti- Cord Fabric Development Co. Ltd. completed conformity audits of their quality sys- key suppliers to drive innovation ties along with a differentiated tems by SGS. Shenma Aramid successfully obtained ISO 9001 certification. and ensure quality. Full-process supply mechanism for nylon Guided by a top-level strategic framework Shenma Corporation focused on core quality control is implemented intermediate products. These ac-Production Equipment products such as industrial yarn tire cord fabric and nylon chips. It decomposed with special focus on managing tions significantly optimized the Maintenance key quality indicators by product type and required each production unit to develop change points and abnormal industrial chain processes led to specific action plans aligned with current quality performance and improvement situations. A production plan- record-high quality indicators for targets. Efforts were also made to optimize and integrate existing quality systems and ning and management approach leading products such as nylon upgrade internal standards. A series of technical manuals and standardized proce- Standardized Production guided by process-wide and yarn and fabric and brought key dures were developed or revised including documents such as the Maintenance and Processes refined control goals has been quality metrics for adipic acid Key Measures Operating Procedures for Dipping Equipment and Abnormal Quality Indicators and established to create a tightly and hexamethylenediamine in Countermeasures for Bright High-Speed Spinning PO249F. Furthermore corporate connected quality management for Enhancing line with world-class standards.Product Quality standards for seven critical products—such as hexamethylenediamine nylon 66 salt chain.Non-Conforming solution and nylon 66 chips—were comprehensively updated to exceed national and Product Control industry benchmarks. Two new internal standards were introduced for 16-hexanediol and industrial-grade caprolactam. Each subsidiary also developed tailored internal Enhanced Skills Training for Establishment of a Full-Industrial- quality management systems based on their operational characteristics including Procedure Manuals Quality Handbooks and Production Process Control Protocols. Sales and Employees Chain Quality Testing Platform Customer Review These measures ensured strict quality control across the entire product lifecycle pro- The Company strengthened The Company unified testing viding a solid guarantee for product safety reliability and customer satisfaction. practical training and hands- methods and standards across on drills to improve operational Implementation of Product Quality the industrial chain organizing skills and overall staff compe- Enhancement Measures joint discussions with upstream tence. With a customer-centric and downstream stakeholders philosophy it aims to gain recog- The Nylon Segment has carried covering raw materials semi-fin- nition through superior product out a comprehensive quality en- ished products finished goods quality and satisfaction through hancement initiative for 12 core and packaging. A total of 54 test- high-quality services. By pursuing products across 12 upstream ing methods were standardized professionalism standardization and downstream affiliated enti- for products such as hexameth- and excellence the Company ties within the industrial chain. ylenediamine adipic acid nylon not only improves its own quality Through system optimization 66 salt caprolactam and nylon management level but also pro- standard redefinition and tech- 66 chips. This initiative led to vides cost-effective services to nological innovation the quality consistent test results mutual clients across the supply chain. of these leading products has product recognition and im- reached historic highs and the proved product quality through production processes have been unified verification practices.comprehensively optimized. 87 88Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Quality Culture Development Subsidiaries Promote Quality Culture Shenma Corporation fully recognizes the critical role of quality culture in driving corporate development. Embracing the philoso- phy of "Strengthening the Company Through Quality Creating Shenma Excellence" the Company regards quality as the essence of corporate credibility image and brand value. By strengthening employees' awareness of quality and instilling the crisis mindset of Shenma Cord Fabric Company Nylon Chemical Co. Boliemai Company engaged "No Quality No Market; No Market No Profit; No Profit No Development" Shenma Corporation is committed to winning through focused on the "Quality Month" Ltd. organizes annual a professional consulting firm campaign by promoting quality centralized training for to conduct company-wide quality. The concept of quality is deeply embedded in corporate culture and ingrained in the mindset of both management and culture through various channels such internal auditors inviting quality training which covered staff guiding their actions daily. In a highly competitive industry with stringent quality demands the Company emphasizes the as electronic display slogans themed third-party institutions both awareness enhancement enhancement of employee quality awareness and professional skills while also deepening organizational understanding of and exhibition boards and informative to deliver courses and the application of adherence to quality management systems. Through regular quality training programs Shenma Corporation ensures that all em- posters. These initiatives fostered and ensure proper statistical techniques.ployees actively engage in and contribute to quality management efforts. This collective commitment drives continuous product an environment where "Everyone Is certification is obtained. This initiative aimed to quality improvement strengthens market competitiveness and supports the Company's long - term sustainable development. Concerned about Quality" embedding strengthen employees' quality the "Quality First" concept deeply into consciousness equip them employees' minds. with management tools and skills and comprehensively improve the Company's overall quality performance.Customer Service Shenma Corporation complies with the Law of the People's Republic of China on the Protection of Consumer Rights and Interests the E-commerce Law of the People's Republic of China the Anti-Unfair Competition Law of the People's Republic of China and "1231" Rapid After-Sales Response Mechanism other relevant national laws and regulations. The Company strictly adheres to product labeling and service standards continuous- ly optimizes service procedures strengthens communication mechanisms actively listens to customer needs and is committed to "1" – Day 1 (Within 24 Hours): Upon re- "2" – Day 2 (Within 48 Hours): Respon- enhancing service quality and customer experience. ceiving internal or external complaint sible units must convene a dedicated information the Market Department analysis meeting to investigate the Customer Complaint Management of Shenma Corporation must forward root cause and clarify responsibili-the information to relevant responsi- ties. If necessary a team should be ble units and simultaneously upload dispatched to the customer site the The Company entrusts International Trade with product sales. The International Trade follows ISO 9000 certification standards and it to Shenma Corporation's Complaint same day for on-site resolution.has established a closed-loop complaint management system covering "Acceptance Processing and Follow-up" to ensure timely Information Sharing Platform.and appropriate resolution of customer feedback. Additionally Shenma Corporation has formulated the Customer Complaint 1 Management Regulations which clearly define responsibilities rapid response mechanisms and evaluation requirements for complaint handling. These measures aim to further standardize the complaint resolution process and effectively address customer concerns.Customer Feedback Handling Procedure 1 2 Production Technol- International Trade/ Technical Quality Assurance ogy Department Sales Company Logistics and Production Plants Receives customer Arrives on-site to verify Convene a special analysis meeting to iden- "1" – Week 1 (Within 7 Days): Respon- "3" – Day 3 (Within 72 Hours): Correc- complaints the issue tify root causes and assign responsibility sibility tracing must be completed 3 tive actions and preventive measures International Trade/ Production Tech- Sales Company nology Department Responsible Department and the results uploaded by the re- must be formulated and fed back to sponsible unit to the Complaint Infor- the customer as required. This infor- Communicates feedback to the Reviews and confirms the pro- Fills in the corrective actions and preventive mation Sharing Platform. mation must also be uploaded to the customer and conducts follow-up posed measures or 8D report measures as required by the customer using Complaint Information Sharing Plat- visits accordingly the customer-designated 8D report format form.or the Company's 8D report template 89 90Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Customer Satisfaction Management Public Welfare and Philanthropy During the Year the Company placed great emphasis on customer satisfaction man- agement. In accordance with the Work Instruction for Measurement Analysis and In 2024 Shenma Corporation actively fulfills its social responsibilities. While creating value through access to social resources the Compa- Evaluation of Customer Satisfaction a Customer Satisfaction Index (CSI) evaluation ny remains committed to public welfare and aspires to serve as a model enterprise known for social contribution environmental was conducted for in-sale products such as industrial yarn and cord fabric. This as- stewardship and a people-oriented approach. This commitment is reflected in years of tangible actions including donations of The Customer Satisfaction sessment focused on analyzing and evaluating the extent to which products met cus- funds and materials to disaster-stricken areas establishing charitable funds to support orphans' education and build Hope Primary Index for Shenma Cord Fabric's tomer needs in 2024 and on verifying the conformity of products and services. The Schools as well as creating special funds for fall semester tuition assistance and workplace injury relief. These initiatives exemplify products reached objective was to ensure the continuous improvement and effectiveness of the quality the Company's sense of responsibility and philanthropic spirit contributing a compassionate and impactful chapter to its sustain- management system gain deeper insight into how Shenma products are used by do- mestic customers and enhance customer satisfaction in a more targeted manner. 98.5% ability journey.Responsible Marketing While that for industrial yarn Nylon Chemical Co. Ltd. Carries Out a Series of Thematic Volunteer Service Activities products reached The Company strictly complies with relevant laws and regulations such as the Law of the People's Republic of China on the Protection of Consumer Rights and Interests and the Advertising Law of the People's Republic of China and is committed to build- 98.2% In December 2024 Nylon Chemical Co. Ltd. mobilized volunteers to conduct a series of activities themed around work safety environmental protection and civil conduct actively promoting the spirit of volunteerism and demonstrating the Company's commitment to corporate social responsibility.ing a professional marketing team. Through improving systems and standardizing business processes the Company ensures the compliance of all marketing activities and prevents any form of false or exaggerated advertising. Shenma Corporation in collaboration with International Trade has established internal policies that empha- Chemical Plant No. 4 organized six young league members to size the importance of honest promotion and responsible marketing. All product carry out the "Beautify Pingdingshan Walk Together" volunteer information provided must be based on real data and statistical results with all service campaign along the Zhanhe River dike on Kaifa Second promotional content well-supported and verifiable ensuring that customers receive Road. Volunteers collected plastic bags empty water bottles accurate and reliable information. Additionally product labeling strictly follows the discarded milk cartons and other waste then sorted the trash Hazard Communication Standard (HCS) the regulations of the Occupational Safety for proper disposal. Their efforts were well received by nearby and Health Administration (OSHA) and applicable laws in the jurisdictions of busi- residents and helped foster a positive atmosphere for building ness operations. Product labels clearly indicate composition hazardous substance a beautiful community together.content safe usage instructions and recycling/disposal methods ensuring transpar- ency in product information and usage safety and fully protecting customers' right to know.Equal Treatment of SMEs The Thermal Power Plant dispatched volunteers to the intersec-tion of Jianshe Road and Kaifa Road to conduct a traffic guidance volunteer activity. Wearing red vests and holding signal flags the Shenma Corporation strictly complies with the Law of the People's Republic of China on the Promotion of Small and Medium-sized volunteers guided passing vehicles maintained orderly traffic Enterprises the Regulations on Ensuring Payments to Small and Medium-sized Enterprises the Interim Regulations on Enterprise and helped ensure road safety—making a tangible contribution to Information Disclosure and other relevant laws and regulations. The Company respects and treats SME partners equally. By con- the civility of Pingdingshan.ducting compliance reviews optimizing contract terms and establishing two-way communication mechanisms Shenma has en- hanced payment timeliness management and safeguarded the legitimate rights and interests of SMEs in all aspects. These efforts contribute to building a sustainable industrial ecosystem characterized by shared responsibility and co-created value. During the reporting period the Company did not have any overdue payments to SMEs disclosed through the National Enterprise Credit Infor- mation Publicity System.The Power Plant organized six young employees to clean the pedestrian bridge near the Company premises. Volunteers thoroughly cleaned the road surface and bridge railings creat- ing a pleasant commuting environment and adding a vibrant touch to the image of a civilized Pingdingshan. 91 92Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Shenma Cord Fabric Love Service Alliance Launches "Smart Assistance for the Elderly Enjoying Life" Activity Shenma Cord Fabric Company Carries Out Care Activities for Left-Behind Children in Rural Areas In December 2024 the Love Service Alliance of Shenma Cord Fabric held the In September 2024 Wang Hanxiang the First Secretary of the "Smart Assistance for the Elderly Enjoying Life" activity in the second-floor con- Youth League stationed in Chengzhai Village from Shenma Cord ference room of the Shenma Community Center. During the event volunteers Fabric Company held a warmth-sending activity in the village patiently guided elderly participants on how to properly use smartphones. They committee meeting room delivering mooncakes extracurricular also provided essential education on cybersecurity aiming to enhance the el- books and Mid-Autumn Festival wishes to left-behind children.derly's awareness and ability to identify and prevent online scams. Community During the event company representatives shared selected police officers were specially invited to the scene to explain real-life online fraud passages from the book Youthful Eyes on China and distributed cases in detail further strengthening seniors' security awareness. Through one- mooncakes and books to six children encouraging them to study on-one coaching volunteers helped the elderly learn how to use their smart- hard read classical literature and carry forward traditional culture.phones for social security inquiries elderly subsidy verification and other daily Moving forward the Company will align its village-based efforts operations. By solving practical problems and teaching digital skills the volun- with the actual conditions of Chengzhai Village launching various teers built a warm and accessible bridge to the digital world for the elderly. volunteer support activities to serve the local youth with practical and meaningful actions contributing to rural revitalization.Nylon Chemical Co. Ltd. Organizes "Books of Warmth" Charity Book Donation Campaign To support charitable causes Nylon Chemical Co. Ltd. launched a book dona- Shenma Engineering Plastic Co. Ltd. Advances Rural Revitalization Strategy tion campaign titled "Books Deliver Warmth Love Brings Hope" encouraging employees to contribute to a public welfare initiative. The donated books were In 2024 Shenma Engineering Plastic Co. Ltd. successfully fulfilled its pairing assistance task for Liangou Village signifi- presented to Wawu No.1 Primary School in Lushan County. The event received cantly improving local living standards. The Company was honored as an "Outstanding Assistance Unit" with its efforts enthusiastic participation from over 300 employees across 10 grassroots units featured in multiple media reports.resulting in the collection of more than 500 books. This initiative demonstrates the Company's strong commitment to education and helped build a bridge of compassion with the school allowing more children to benefit and spreading Industrial Development: The Company actively promoted the growth of village collective knowledge and love throughout society. economies by guiding village work teams and local committees to focus on initiatives such as poverty alleviation workshops storage facilities and large-scale pig farming projects. It assisted nine households including Tian Guo in applying for RMB 7200 in crop planting Rural Revitalization subsidies; five households including Qin Wenchao in applying for RMB 7500 in livestock farming subsidies; and ten households including Nie Zhongli in applying for RMB 6852.96 in subsidies for household distributed photovoltaic systems—effectively enhancing the de- velopment capacity of local farmers.Shenma Corporation remains committed to a multi-pronged approach to consolidating the achievements of poverty alleviation and advancing rural revitalization. With industrial support and consumption-driven assistance as core strategies the Company ac- tively contributes to implementing China's rural revitalization agenda. In its efforts to support rural development Shenma Corpo- ration not only addresses the basic living needs of disadvantaged populations but also fosters local characteristic industries and Infrastructure and Living Environment Improvement: The Company achieved full realization enhances villagers' vocational skills through practical and targeted actions. These efforts provide sustained momentum for rural of the "Six Connections and Four Guarantees" throughout the village including complete in- revitalization and reinforce the foundation of rural development on all fronts. The Company has carefully selected and dispatched ternet coverage. It also promoted rural environment upgrades including the construction of dedicated village officials to work at the grassroots level. These representatives integrate deeply with local communities jointly over 1000 meters of stone embankments and the planting of more than 2000 Osmanthus promoting the growth of the village economy expanding sales channels and enabling agricultural products from poverty allevia- trees contributing to a picturesque rural landscape. Furthermore a household wastewater tion programs to reach a wider market. Through these concrete actions Shenma Corporation continues to contribute meaningful- drainage system was fully implemented fostering an ecologically livable village.ly to the long-term development of rural areas.In 2024 Employment Assistance: The Company actively provided job guidance services by establish- ing an employment service center to support laborers in seeking job opportunities outside their hometowns. It also arranged public welfare positions for several households that had The Company invested a total of Eenefiting approximately been lifted out of poverty. Additionally the Company helped 12 individuals including Zhang Xiufen apply for wage and transportation subsidies totaling RMB 7150 effectively boosting RMB 739000 in poverty alleviation 3200 individuals the motivation of formerly impoverished residents to pursue stable employment.and rural revitalization initiatives 93 94Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Looking Ahead to 2025: Shenma Embarks on a New Journey The year 2025 marks the conclusion of China's 14th Five-Year Plan and lays a solid foundation for the successful launch of People will remain at the heart of Shenma's development strategy as we strive to improve employee well-being. Guided by the 15th Five-Year Plan (2026–2030). In the Year Shenma Corporation will seize opportunities build on its momentum and the principle of "Development Shared by the Company and Its Employees" we will advance inclusive participation foster unity forge ahead with determination and hard work to secure a decisive victory in the 14th Five-Year Plan and write a new chap- through aligned values and implement thoughtful people-oriented initiatives. We aim to ensure that the achievements of corpo- ter of high-quality sustainable development. rate growth benefit every employee building a shared community of destiny between the Company and its people.Innovation will drive Shenma Corporation's efforts to foster new quality productivity. We will accelerate all-around Governance will be further strengthened to drive internal lean management. We will continue to improve its ESG governance innovation with a strong focus on technological advancement strengthen the foundation of science and technology and framework embedding sustainability into the core of corporate governance. ESG will serve as a vital lever to enhance governance push forward key R&D breakthroughs across major business segments. We remain committed to talent development as a capabilities and effectiveness. In parallel we will deepen reform efforts and work toward the successful completion of the state- strategic pillar cultivating and expanding new quality productive forces to shape new competitive advantages and power owned enterprise reform agenda shifting operational strategy to focus more on performance and efficiency.high-quality growth. With the journey far from over Shenma remains unwavering in its mission. We will stay true to our founding aspirations— Green development will serve as the foundation for building a low-carbon and safe ecosystem. We will adhere to steering by innovation rooted in sustainability and centered on people. With courage and conviction we will press forward toward the principles of "Source Reduction Process Control and End-of-Pipe Treatment" continue advancing clean production building a world-class enterprise and continuously create greater value for shareholders and society.technologies and improve environmental management and source-level controls. By ensuring stable operation of produc- tion and environmental protection systems we will guard against ecological risks and incidents and steadily enhance our green low-carbon development performance. 95 96Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Key Performance Table Indicator Name Unit 2024 Environmental Key Performance Indicators Table Environmental Training Sessions sessions 16 Environmental Training Participants persons 234 Indicator Name Unit 2024 Environmental Training Hours hours 92 Waste Energy Consumption Total Waste Generated ton 225127.12 Total Energy Consumption 10 thousand tce 85.46 General Industrial Solid Waste Generated ton 223799.47 Energy Intensity tce/10000 RMB 0.61 Hazardous Waste Generated ton 1327.65 Direct Energy Consumption 10000 tce 47.61 Hazardous Waste Disposal Rate % 100 Natural Gas 10000 m3 4622 Waste Recycled ton 6739.00 Coal ton 594885 Non-Hazardous Waste per Million Revenue ton/million revenue 16.02 Gasoline ton 49 Waste Recycled per Million Revenue ton/million revenue 0.48 Diesel ton 187 Water Pollutants3 Liquefied Petroleum Gas (LPG) ton 0 Chemical Oxygen Demand (COD) ton 270.26 Indirect Energy Consumption 10000 tce 37.85 Ammonia Nitrogen ton 17.65 Purchased Electricity 10000kWh 107584 Wastewater Discharge per Million Revenue ton/million revenue 818.18 Purchased Steam GJ 161569 Air Pollutants Clean Energy Usage 10000 tce 6609.31 Particulate Matter (PM) ton 18.25 Green Energy Consumption kWh 50880000 Nitrogen Oxides (NOx) ton 154.49 Total Self-Generated Photovoltaic (PV) Power Volatile Organic Compounds (VOCs) ton 62.13 kWh 50880000Generation Sulfur Oxides (SO2) ton 41.65 Clean Energy Usage Ratio % 0.77 Non-Methane Hydrocarbons (NMHC) ton 20.68 Resource Consumption Environmental Protection Investment Total Water Withdrawal ton 15158520 Environmental Protection Investment 10000 RMB 9136.46 Reclaimed Water ton 436382 Investment as % of Operating Revenue % 0.65 Total Water Use ton 517306110 3 The statistical caliber of data on water pollutants and air pollutants is the companies and their main subsidiaries of key polluting units announced by Water Recycling Rate % 97.10 the environmental protection department. 97 98Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Indicator Name Unit 2024 Indicator Name Unit 2024 Greenhouse Gas Emissions4 Safety Training Coverage Rate % 100 GHG Reduction Investment 100 million RMB 4 Average Safety Training Hours per Employee hours 48 Scope 1 (Direct) Emissions tCO2e 1202020 Number of Emergency Drills times 112 Scope 2 (Indirect) Emissions tCO e 1371178 Number of Participants in Safety Drills persons 34732 Total GHG Emissions (Scope 1 + Scope 2) tCO2e 2573198 Number of Occupational Disease Cases persons 0 Employee Employment Total GHG Emissions Reduced tCO2e 24229.93 Total Number of Employees persons 8131 Male Employees persons 5751 Social Key Performance Indicators Table Female Employees persons 2380 Indicator Name Unit 2024 Production Staff persons 6123 Employee Health and Safety Sales Staff persons 215 Investment in Work Injury Insurance 10000 RMB 55 Technical Staff persons 749 Coverage Rate of Work Injury Insurance % 100 Finance Staff persons 182 Number of Work-Related Fatalities persons 0 Administrative Staff persons 862 Work-Related Fatality Rate % 0 Master's Degree and Above persons 208 Number of Work-Related Injuries persons 3 Bachelor's Degree persons 2364 Work-Related Injury Rate % 0 Associate Degree persons 2592 Lost Hours Due to Safety Incidents hours 2496 High School and Below persons 2967 Health and Safety Investment5 10000 RMB 951 Health and Safety Investment / Revenue % 0.07 Ethnic Minority Employees persons 214 Number of Workplace Safety Incidents cases 3 Employees with Disabilities persons 63 Recordable Injury Rate per Million Work Hours cases/million hours 0.18 Employee Turnover Rate6 % 0.46 4 The carbon emission factors are sourced from the 2006 IPCC Guidelines for National Greenhouse Gas Inventories Accounting and Reporting Require- 6 Employee Turnover Rate=(Employees Left During the Year)/(Year-End Headcount+Employees Left During the Year)*100% ments for Carbon Emissions – Part 10: Chemical Manufacturing Enterprises (GB/T 32151.10—2023) and the 2022 National Average Carbon Dioxide Emission Factor for Power Generation in China. 5 This year's health and safety investment data includes Shenma Cord Fabric Shenma Cord Fabric Development Co. Ltd. Boliemai Shenma Puli Shenma Huawei Plastic Co. Ltd. 99 100Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Governance Key Performance Indicators Table Indicator Systems Referenced Indicator Name Unit 2024 GRI Content Index Anti-Bribery and Anti-Corruption7 Shenma Corporation prepared the Report with reference to the GRI Standards for the period from January 1st to December 31th 2024. The applicable GRI Standard is GRI 1: Foundation 2021. Total Hours of Anti-Corruption Training hours 5 Disclosure Item Section Location Number of Anti-Corruption Trainings times 3 GRI 2-1 Organizational Details About Shenma Corporation Number of Corruption Incident times 0 GRI 2-2 Entities Included in the Company's Sustainability Report About The Report GRI 2-3 Reporting Period Frequency and Contact Information About The Report Number of Legal Compliance Awareness Campaigns times 2 GRI 2-4 Information Restatement Key Performance Table Number of Legal Compliance Trainings times 2 GRI 2-5 External Assurance / Total Hours of Legal Compliance Training hours 36 GRI 2-6 Activities Value Chain and Other Business Relationships Company Overview GRI 2-7 Employees Legal Employment Attendance of Legal Compliance Training Persons persons 62 Diversity Equity and Inclusion GRI 2-8 Workers Beyond Employees (DEI) Board of Directors GRI 2-9 Governance Structure and Composition Corporate Governance Structure GRI 2-10 Nomination and Selection of the Highest Governance Body Corporate Governance Structure Average Term of Board Members years 3 GRI 2-11 Chair of the Highest Governance Body Corporate Governance Structure Does CEO Also Serve as Chairman Yes/No No Oversight Role of the Highest Governance Body in Managing Sustainable Development Govern- GRI 2-12 Impacts ance System Proportion of Independent Directors % 33.33 Sustainable Development Govern- GRI 2-13 Delegation of Responsibility for Managing Impacts ance System Proportion of Female Directors % 11.11 Sustainable Development Govern- GRI 2-14 Role of the Highest Governance Body in Sustainability Reporting Number of Board Meetings Held times 24 ance System GRI 2-15 Conflict of Interest Corporate Governance Structure Attendance Rate of Board Members % 100 Sustainable Development Govern- GRI 2-16 Communication on Material Concerns ance System Number of Directors Attending Less Than 75% of persons 0 Meetings Refer to the 2024 Annual Report for GRI 2-17 Collective Knowledge of the Highest Governance Body Details Number of Audit Committee Meetings times 8 GRI 2-18 Performance Evaluation of the Highest Governance Body Corporate Governance Structure GRI 2-19 Compensation Policy Corporate Governance Structure Number of Remuneration and Appraisal Committee times 2 Meetings GRI 2-20 Process for Determining Compensation Corporate Governance Structure Undisclosed for Confidentiality Number of Nomination Committee Meetings times 3 GRI 2-21 Annual Total Compensation Ratio Reasons 7 The statistical scope for anti-commercial bribery and anti-corruption data is the headquarters of Shenma Corporation. 101 102Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Disclosure Item Section Location Disclosure Item Section Location GRI 2-22 Statement on Sustainability Strategy Chairman's Message GRI 207-2 Tax Governance Control and Risk Management Tax management system GRI 2-23 Policy Commitments Refer to Relevant Sections Stakeholder Engagement and Management Related to Tax GRI 207-3 Tax management system Concerns GRI 2-24 Policy Integration Commitments Refer to Relevant Sections GRI 207-4 Country-by-Country Reporting / GRI 2-25 Procedures for Remedying Negative Impacts Refer to Relevant Sections GRI 301-1 Weight or Volume of Materials Used Key Performance Table GRI 2-26 Mechanisms for Seeking Advice and Raising Concerns Stakeholder Communication GRI 301-2 Recycled Input Materials Used Circular Economy GRI 2-27 Compliance with Laws and Regulations Refer to Relevant Sections GRI 301-3 Recycled Products and Packaging Materials Circular Economy GRI 2-28 Association Membership Product Safety and Quality GRI 302-1 Internal Energy Consumption Circular Economy GRI 2-29 Stakeholder Engagement Methods Stakeholder Communication GRI 302-2 External Energy Consumption / GRI 2-30 Collective Bargaining Agreements Employee Rights and Benefits GRI 302-3 Energy Intensity Utilization of Water Resources GRI 3-1 Process for Identifying Material Issues Materiality Analysis GRI 302-4 Reducing Energy Consumption Utilization of Water Resources GRI 3-2 List of Material Issues Materiality Analysis GRI 302-5 Reducing Energy Demand for Products and Services Utilization of Water Resources GRI 3-3 Management of Material Issues Refer to Relevant Sections GRI 303-1 Company's Interaction with Water as a Shared Resource Utilization of Water Resources GRI 201-1 Direct Economic Value Generated and Distributed Key Performance Table GRI 303-2 Managing Wastewater Impacts Utilization of Water Resources Financial Impact of Climate Change and Other Risks and GRI 201-2 Climate Change Response Opportunities GRI 303-3 Water Withdrawal Utilization of Water Resources GRI 201-3 Defined Benefit Plan and Other Retirement Plans Employee Rights and Benefits GRI 303-4 Wastewater Discharge Not Applicable Refer to the 2024 Annual Report for GRI 303-5 Water Consumption Not Applicable GRI 201-4 Government Financial Subsidies Details Operational Sites Owned Leased or Managed by the Company in GRI 304-1 Not Applicable Ratio of Standard Entry-Level Wage to Local Minimum Wage by Undisclosed for Confidentiality or Near Biodiversity-Rich Areas Inside or Outside Protected Zones GRI 202-1 Gender Reasons Significant Impacts of Activities Products and Services on GRI 304-2 Not Applicable GRI 202-2 Proportion of Senior Management from the Local Community / Biodiversity Public Welfare and Philanthropy GRI 304-3 Protected or Restored Habitats Not Applicable GRI 203-1 Infrastructure Investments and Support Services Rural Revitalization Species in Habitats Affected by Operations Listed in the IUCN Red GRI 304-4 Not Applicable Public Welfare and Philanthropy List and the List of State Key Protected Wild Animals (LSKPWA) GRI 203-2 Significant Indirect Economic Impacts Rural Revitalization GRI 305-1 Direct Greenhouse Gas (GHG) Emissions (Scope 1) Climate Change Response GRI 204-1 Proportion of Expenditures on Local Suppliers Supply Chain Management GRI 305-2 Indirect GHG Emissions from Energy (Scope 2) Climate Change Response GRI 205-1 Operational Sites Assessed for Corruption Risks Key Performance Table GRI 305-3 Indirect GHG Emissions from Energy (Scope 3) Climate Change Response GRI 205-2 Communication and Training on Anti-Corruption Key Performance Table GRI 305-4 GHG Emission Intensity Climate Change Response Policies and Procedures Confirmed Corruption Incidents and GRI 205-3 Anti-Bribery and Anti-Corruption Actions Taken GRI 305-5 GHG Reductions Climate Change Response Legal Proceedings Regarding Anti-Competitive Behavior Anti-Trust GRI 305-6 Emissions of Ozone-Depleting Substances (ODS) Climate Change Response GRI 206-1 Anti-Bribery and Anti-Corruption and Monopoly Practices Emissions of Nitrogen Oxides (NOX) Sulfur Oxides (SOX) and Other GRI 305-7 Key Performance Table GRI 207-1 Tax Policies Tax management system Major Gases 103 104Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Disclosure Item Section Location Disclosure Item S章e节cti位on置 Location GRI 306-1 Waste Generation and Significant Impacts of Waste Discharge and Waste Management Corporate Governance GRI 405-1 Diversity of Governance Bodies and Employees Diversity Equity and Inclusion GRI 306-2 Management of Significant Impacts Related to Waste Discharge and Waste Management (DEI) GRI 306-3 Waste Generated Discharge and Waste Management Undisclosed for Confidentiality GRI 405-2 Ratio of Basic Salary and Remuneration by Gender Reasons GRI 306-4 Waste Transferred for Disposal Discharge and Waste Management Corporate Governance GRI 306-5 Waste Entering Disposal Discharge and Waste Management GRI 406-1 Discrimination Incidents and Corrective Actions Taken Diversity Equity and Inclusion New Suppliers Screened based on Environmental Assessment (DEI) GRI 308-1 Supply Chain Management Criteria Operational Sites and Suppliers at Risk of Violating Freedom of Employee Rights and Benefits GRI 407-1 Negative Environmental Impacts of the Supply Chain and Actions Association and Collective Bargaining Rights Supply Chain Management GRI 308-2 Supply Chain Management Taken Operational Sites and Suppliers at Significant Risk of Child Labor GRI 408-1 Supply Chain Management GRI 401-1 New Employee Recruitment Rate and Employee Turnover Rate Key Performance Table Incidents Full-Time Employees Benefits (excluding temporary or part-time Operational Sites and Suppliers at Significant Risk of Forced or GRI 401-2 Employee Rights and Benefits GRI 409-1 Supply Chain Management employees) Compulsory Labor Incidents GRI 401-3 Parental Leave Employee Rights and Benefits GRI 410-1 Security Personnel Trained in Human Rights Policies or Procedures Not Applicable The Company Issues Notifications GRI 411-1 Incidents Involving Violations of Indigenous Rights Not Applicable GRI 402-1 Minimum Notice Period for Operational Changes in Accordance With National Laws Equal Treatment of SMEs and Regulations. Operational Sites with Local Community Engagement Impact GRI 413-1 Public Welfare and Philanthropy Assessments and Development Plans GRI 403-1 Occupational Health and Safety Management System Occupational Health and Safety Rural Revitalization GRI 403-2 Hazard Identification Risk Assessment and Incident Investigation Occupational Health and Safety Operational Sites with Actual or Potential Significant Negative GRI 413-2 Not Applicable Impacts on Local Communities GRI 403-3 Occupational Health Services Occupational Health and Safety GRI 414-1 Social Standards Applied to Screen New Suppliers Supply Chain Management Occupational Health and Safety Matters: Worker Involvement GRI 403-4 Occupational Health and Safety Consultation and Communication GRI 414-2 Negative Social Impacts in the Supply Chain and Actions Taken Supply Chain Management GRI 403-5 Occupational Health and Safety Training for Workers Occupational Health and Safety GRI 415-1 Political Donations Not Applicable GRI 403-6 Promoting Worker Health Occupational Health and Safety Assessment of Health and Safety Impacts of Product and Service GRI 416-1 Product Safety and Quality Preventing and Mitigating Occupational Health and Safety Impacts Categories GRI 403-7 Occupational Health and Safety Directly Related to Business Activities Violations Related to Health and Safety Impacts of Products and GRI 416-2 Product Safety and Quality Workers Covered by the Occupational Health and Safety Services GRI 403-8 Occupational Health and Safety Management System GRI 417-1 Requirements for Product and Service Information and Labeling Customer Service GRI 403-9 Workplace Injuries Occupational Health and Safety GRI 417-2 Violations Related to Product and Service Information and Labeling Customer Service GRI 403-10 Work-Related Health Issues Occupational Health and Safety GRI 417-3 Violations Related to Marketing Communications Customer Service GRI 404-1 Average Training Hours Per Employee Per Year Talent Development GRI 404-2 Employee Skill Enhancement and Transition Assistance Programs Talent Development Confirmed Complaints Involving Violations of Customer Privacy GRI 418-1 Customer Service and Customer Data Loss Percentage of Employees Receiving Regular Performance and GRI 404-3 Key Performance Table Career Development Assessments 105 106Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Content Index of the Guidelines No. 14 of Shanghai Stock Content Index of the Reference Indicators System for ESG Exchange for Self-Regulation of Listed Companies— Reports of Listed Companies Controlled by Central Sustainability Report (Trial) State-owned Enterprises Level No. Corresponding Section Section Location Disclosure Items Section Page Number or Other Notes 1 Campaign against Climate Change Climate Change Response Company and Report Basic Information About Shenma Corporation 2 Pollutant Discharge Discharge and Waste Management ESG Management Sustainable Development Governance 3 Waste Disposal Discharge and Waste Management ESG Risks and Opportunities Sustainable Development Governance Environmental Compliance Management 4 Ecosystem and Biodiversity Protection Ecosystem and Biodiversity Conservation Stakeholder Communication Sustainable Development Governance Environment Climate Change Response Assessment of Material Issues Sustainable Development Governance 5 Environmental Compliance Management Environmental Compliance Management 6 Energy Use Energy Management 7 Water Resource Utilization Utilization of Water Resources 8 Circular Economy Circular Economy Public Welfare and Philanthropy 9 Rural Revitalization Rural Revitalization Environment Public Welfare and Philanthropy 10 Social Contributions Rural Revitalization Disclosure Items Section Page Number or Other Notes 11 Innovation-driven Development Special Focus 1: Driving Innovation and Environmental Indicators Focusing on Value Creation in Production 12 Technology Ethics Primary and Research Secondary Indicator Tertiary IndicatorIndicator 13 Supply Chain Safety Supply Chain Management E.1.1.1 Freshwater Consumption The Company makes payments to suppli- E.1.1.2 Recycled Water Consumption Utilization of Water Water Resources ers in accordance with internal regula- E.1.1.3 Proportion of Recycled Water Resources Equal Treatment for Small and Medium 14 tions. As of the end of 2024 the balance E.1.1.4 Water Resource Consumption IntensitySocial Enterprises of accounts payable is disclosed in the E.1.2.1 Non-Renewable Material Consumption Discharge and Waste 2024 Annual Report. Materials E.1.2.2 Toxic and Hazardous Material Consumption Management Resource E.1.2.3 Material Consumption Intensity Safety and Quality of Products and 15 Product Safety and Quality Consump- E.1.3.1 Fossil Energy Consumption Services tion E.1.3.2 Non-Fossil Energy Consumption Energy Management Data Security and Customer Privacy Energy E.1.3.3 Proportion of Non-Fossil Energy 16 Data Security and Privacy Protection Protection E.1.3.4 Total Energy Consumption Climate Change Response Legal Employment E.1.3.5 Energy Consumption Intensity Employee Rights and Benefits E.1.4.1 Packaging Material Usage 17 Employees Diversity Equity and Inclusion (DEI) Packaging Materials E.1.4.2 Reduction and Lightweighting of Packaging Mate- Circular Economy Talent Development rials Occupational Health and Safety E.2.1.1 Compliance with Wastewater Discharge Standards Pollution E.2.1.2 Wastewater Management and Reduction Measures Stakeholder Communication Discharge and Waste 18 Due Diligence Prevention Wastewater E.2.1.3 Wastewater Discharge Volume Materiality Analysis Managementand Control E.2.1.4 Wastewater Pollutant Emissions Sustainable 19 Stakeholder Communication Stakeholder Communication E.2.1.5 Wastewater Pollutant Concentration Development-Related Governance Anti Commercial Bribery and Anti E.2.2.1 Compliance with Exhaust Emission 20 Anti-Bribery and Anti-Corruption Pollution Corruption Standards Discharge and Waste Prevention Exhaust Gas E.2.2.2 Exhaust Emissions Management 21 Anti-Unfair Competition Anti-Bribery and Anti-Corruption and Control E.2.2.3 Exhaust Emission Concentration 107 108Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Disclosure Items Section Page Number or Other Notes Society E.2.3.1 Compliance with Solid Waste Disposal Regulations Disclosure Items Section Page Number or Other Notes Pollution E.2.3.2 Management of General Industrial Solid Waste Discharge and Waste S1.1.1 Company Recruitment Policies and Prevention Solid Waste E.2.3.3 General Industrial Solid Waste Disposal Management Implementation Legal Employment and Control Volume Recruitment and S1.1.2 Employee Structure Diversity Equity and E.2.3.4 Hazardous Waste Management Employment S1.1.3 Prevention of Child Labor or Forced Inclusion (DEI) E.2.3.5 Hazardous Waste Disposal Volume Labor E.3.1.1 GHG Sources and Types S1.2.1 Compensation Philosophy and Policies E.3.1.2 GHG Emission Management Employee Compensa- S1.2.2 Working Hours and Leave Policies Employee Rights and Climate E.3.1.3 Scope 1 Emissions Climate Change tion and Benefits S1.2.3 Compensation and Benefits Assurance S1.2.4 Benefits GHG Emissions Change E.3.1.4 Scope 2 Emissions Response Employees' Employee Democratic Management E.3.1.5 Scope 3 Emissions (Certain Subsidiaries) Rights and S1.3.1 Occupational Health and Safety Management E.3.1.6 GHG Emission Intensity Interests Occupational Health S1.3.2 Occupational Safety & Risk Prevention Occupational Health and and Safety S1.3.3 Response to Safety Incidents and Work Injuries Safety Emission Reduction Climate Change S1.3.4 Employee Care and Support E.3.2.1 GHG Emission Reduction Management Management Response S1.4.1 Employee Incentive and Promotion Policies Environmental Climate Change Employee Develop- S1.4.2 Employee Education and Training - Talent Development Rights Trading Response ment and Training S1.4.3 Employee Career Planning and Job Transition Biodiversity Climate Risk Climate Change Support E.3.4 Climate Risk Management Management Response Employee Rights and Employee Satisfaction S1.5.3 Employee Turnover Impacts of Production Ecosystem and Benefits E.4.1.1 Impacts of Production Services and Services and Products Biodiversity S2.1.1 Policies and Measures for Production Standard Products on Biodiversity on Biodiversity Conservation Management Low-Carbon Devel- Safety and Quality of S2.1.2 Quality Management Product Safety and E.5.1.1 Establishment of Low-Carbon Goals and Strategic Climate Change opment Goals and Products S2.1.3 Product Recall and Withdrawal Quality Initiatives Response Strategic Initiatives S2.1.4 Negative Incidents Related to Products or Ser- E.5.2.1 Water Resource Management Product and vices Resource Management E.5.2.2 Material Usage Management Service S2.2.1 Customer Satisfaction Measures E.5.2.3 Energy Usage and Conservation Customer Service and Utilization of Water Management S2.2.2 Customer Complaints and Handling Customer ServiceManagement Rights Resources S2.2.3 Protection of Customer Information and Privacy Statistics Monitoring Circular Economy S2.3.1 R&D and Innovation Management System Special Focus 1: Driving and Evaluation Sys- E.5.3.1 Monitoring Statistical Reporting and Energy Management Innovation and Devel- S2.3.2 R&D Investment Innovation and Focusing tems for Energy Con- Evaluation System for Energy Conservation and Carbon opment S2.3.3 Innovation Achievements on Value Creation in Pro- servation and Carbon Reduction S2.3.4 Intellectual Property Protection duction and Research Policies and Reduction Supply Chain Manage- S3.1.1 Supplier Selection and Management Supply Chain Measures Environmental Compli- ment S3.1.2 Supplier Quantity and Distribution Management on Resource ance Management Supply Chain S3.2.1 Policies and Measures for Supply Chain Manage- and Envi- E.5.4.1 Clean Production Supply Chain Manage- Safety and ment ronmental E.5.4.2 Green Technology Upgrades and Recycling ment Supply Chain Link Man- Supply Chain Manage-Green Initiatives and Management S3.2.2 Supply Chain Safety Assurance and Emergency Manage- E.5.4.5 Green Procurement and Supply Chain Circular Economy agement ment Environmental Actions Response Planning ment Management Climate Change Re- S3.2.3 Major Risks and Impacts (Supply Chain) E.5.4.6 Environmental Public Welfare Activities sponse Public Welfare and Tax Payments S4.1.1 Tax Payment Status Tax management system Philanthropy S4.2.1 Policies and Measures for Participation in Local Community Building Rural Revitalization Community Development E.5.5.1 Environmental Management System Certification Public Welfare S4.3.2 Investment and Outcomes of Participation in Public Welfare and Green and Low-Carbon E.5.5.2 Green and Low-Carbon Enterprise Certification Environmental Compli- Certifications E.5.5.3 Green and Low-Carbon Product and Service Certi- ance Management Social Activities Public Welfare Activities Philanthropy fication Contributions S4.4.1 Industrial Transformation S4.4.2 Rural Revitalization and Regional Coordinated Public Welfare and E.5.6.1 Emergency Response Planning for Environmental Response to National Environmental Environmental Compli- Development Philanthropy Incidents Strategies Compliance ance Management S4.4.4 Industry-Specific and Other Social Responsibili- Rural Revitalization E.5.6.2 Environmental Violations and Legal Compliance ty Fulfillment 109 110Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Governance Disclosure Items Section Page Number or Other Notes Disclosure Items Section Page Number or Other Notes S1.1.1 Company Recruitment Policies and Implementation Legal Employment Public Welfare S4.3.2 Investment and Outcomes of Participation in Public Public Welfare and Recruitment and S1.1.2 Employee Structure Diversity Equity and Activities Welfare Activities Philanthropy Employment Social Con- S1.1.3 Prevention of Child Labor or Forced Labor Inclusion (DEI) tributions S4.4.1 Industrial Transformation Public Welfare and Response to Nation- S4.4.2 Rural Revitalization and Regional Coordinated Development Philanthropy S1.2.1 Compensation Philosophy and Policies al Strategies S4.4.4 Industry-Specific and Other Social Responsibility Fulfillment Rural Revitalization Employee Compen- S1.2.2 Working Hours and Leave Policies Employee Rights and sation and Benefits S1.2.3 Compensation and Benefits Assurance Benefits G1.1.1 Formulation of Governance Strategy Governance S1.2.4 Employee Democratic Management G1.1.2 Supervision Procedures for Governance Strategy Corporate Strategy and Employees' G1.1.3 Approval and Review Procedures for Governance Strategy Governance Structure S1.3.1 Occupational Health and Safety Management Procedures Rights and G1.1.4 Leadership through Party Building Occupational S1.3.2 Occupational Safety & Risk Prevention Employee Rights and Governance Interests G1.2.1 Ownership Responsibilities Health and Safety S1.3.3 Response to Safety Incidents and Work Injuries Benefits Strategy and Organizational G1.2.2 Organizational Structure and Functions of the Board of S1.3.4 Employee Care and Support Organi- Corporate Composition and Directors Board of Supervisors and Management zational Governance Structure S1.4.1 Employee Incentive and Promotion Policies Functions G1.2.3 Appointment Procedures and Composition of the Board Employee Develop- Structure S1.4.2 Employee Education and Training Talent Development of Directors Board of Supervisors and Management ment and Training S1.4.3 Employee Career Planning and Job Transition Support G1.3.1 Compensation Plans for Directors and Supervisors Compensation Corporate G1.3.2 Transparency of Board Compensation Employee Satisfac- Employee Rights and Management Governance Structure S1.5.3 Employee Turnover G1.3.3 Rationality of Management Compensation tion Benefits G2.1.1 Internal Audit Compliance Manage- Internal Control G2.1.2 Internal Control Structure Mechanisms and Procedures ment S2.1.1 Policies and Measures for Production Standard Management Safety and Quality S2.1.2 Quality Management Product Safety and Regulatory G2.2.1 Integrity Promotion Policies and Regulations Anti-Bribery and Integrity Promotion of Products S2.1.3 Product Recall and Withdrawal Quality Governance G2.2.2 Effectiveness of Integrity Promotion Anti-Corruption S2.1.4 Negative Incidents Related to Products or Services G2.3.1 Fair Competition Policies and Regulations Anti-Bribery and Fair Competition G2.3.2 Effectiveness of Fair Competition Measures Anti-Corruption Product S2.2.1 Customer Satisfaction G3.1.1 Investor Relations Management Strategies and Service Customer Service S2.2.2 Customer Complaints and Handling Customer Service Investor Relations G3.1.2 Investor Communication Corporate Manage- and Rights S2.2.3 Protection of Customer Information and Privacy Management G3.1.3 Establishment of Investor Relations Management De- Governance StructureInvestor ment partmentRelations G3.2.1 Shareholder (General) Meetings Special Focus 1: Driv- Manage- S2.3.1 R&D and Innovation Management System ment and G3.2.2 Shareholder Communication Corporate ing Innovation and Shareholder Rights Innovation and S2.3.2 R&D Investment Shareholder G3.2.3 Shareholders' Right to Information and Participation in Governance StructureFocusing on Value Development S2.3.3 Innovation Achievements Decision-Making Creation in Produc- Rights S2.3.4 Intellectual Property Protection tion and Research G3.3.1 Credit Status Corporate Creditor Rights G3.3.2 Performance in the Bond Market Governance Structure Supply Chain Man- S3.1.1 Supplier Selection and Management Supply Chain Man- Supply agement S3.1.2 Supplier Quantity and Distribution agement Transpar- Information Disclo- G4.1.1 Financial Information Disclosure Corporate Chain Safety ency of sure Policies G4.1.2 Non-Financial Information Disclosure Governance Structure and Man- S3.2.1 Policies and Measures for Supply Chain Management Information Supply Chain Link S3.2.2 Supply Chain Safety Assurance and Emergency Re- Supply Chain Man- Disclosure Information Disclo- G4.2.1 Regular Monitoring Auditing and Evaluation of All Dis- Corporate agement Management sponse Planning agement sure Quality closed Information Governance Structure S3.2.3 Major Risks and Impacts (Supply Chain) G5.1.1 Compliance Operations Policies Compliance Compliance Compliance G5.1.2 Compliance System Development Tax management Operations Management Tax Payments S4.1.1 Tax Payment Status and Risk G5.1.3 Specific Processes for Compliance Review Social Con- system Manage- G5.2.1 Risk Identification and Early Warning tributions ment Risk Management Compliance S4.2.1 Policies and Measures for Participation in Local Commu- G5.2.2 Risk Control and Tracking Community Building Rural Revitalization and Control Management nity Development G5.2.3 Risk Reporting and Management 111 112Overview Annual Topics Consolidating Foundations and Green Development and Safety and Employee Shared Development and Looking Ahead to 2025: Shenma Strengthening Governance Responsible Commitment Management Corporate Responsibility Embarks on a New Journey Appendix Reader Feedback Form Dear Reader Thank you for reading the 2024 Sustainability Report of Shenma Industrial Co. Ltd.. To provide more valuable information to you and other stakeholders and to effectively enhance the Company's ability and performance in fulfilling corporate social re- sponsibility we sincerely look forward to your opinions and suggestions.Please rate the following questions on a scale of 1 to 5 (1 being the lowest score 5 being the highest): 1. How would you rate this report 7. How would you rate the level of information disclosure in this report 1234512345 2. How well do you believe Shenma Corporation is fulfilling its economic responsibilities 8. How would you rate the quality of the writing in this report 1234512345 3. How well do you believe Shenma Corporation is addressing its environmental responsibilities 9. How would you rate the design and style of this report 1234512345 4. How do you evaluate Shenma Corporation's performance in corporate governance 10. Which topics in this report stood out to you the most 12345 5. How would you rate Shenma Corporation's performance in terms of employee responsibility 11. Do you have any additional opinions or suggestions for this report 12345 6. How well do you think Shenma Corporation handles its social responsibilities Please leave your contact information: 1 2 3 4 5 Name: Phone: Email: Organization: 113114