2023/24 Environmental, social and governance report

E N V I R O N M E N T A L , S O C I A L A N D G O V E R N A N C E R E P O R T

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OVERVIEW

The board of directors (the "Board") of L. K. Technology Holdings Limited (the "Company") is pleased to present the Environmental, Social and Governance ("ESG") Report (the "Report") of the Company and its subsidiaries (collectively as the "Group" or "we") for the year ended 31 March 2024 (the "Reporting Period"). The Report outlines the policies, sustainability strategies, management approach and initiatives implemented by the Group and the performance of the Group in ESG aspects of its business.

REPORTING SCOPE

The Report covers the Group's business in the manufacture and sale of die-casting machine, plastic injection moulding machine and computerized numerical controlled ("CNC") machining centre and the manufacture of casting in Shenzhen, Shanghai, Chongqing, Fuxin, Ningbo, Zhongshan, Kunshan, Taiwan and Italy, which are the core business and major source of revenue of the Group. Other companies of the Group are not covered in the Report because their impact on the ESG performance is not significant. During the Reporting Period, there were no significant changes to the reporting scope.

REPORTING BASIS

The Report discloses the required information of the Environmental, Social and Governance Reporting Guide as set out in Appendix 27 (which has been re-organised as Appendix C2 with effect from 31 December 2023) to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the "Stock Exchange"), and has complied with the "comply or explain" provisions set out in Part C of Appendix 27. The relevant provisions and details are set out at the end of the Report.

REPORTING PRINCIPLES

The Group adheres to the following reporting principles as the basis for the preparation of the Report.

1. Materiality

The threshold at which ESG issues determined by the Board are sufficiently important to investors and other stakeholders of the Group that they should be reported, details of which are set out in the sections headed "Stakeholders' Engagement" and "Materiality Assessment" below.

2. Quantification

The quantified environmental and social key performance indicators ("KPIs") are disclosed in the Report to give stakeholders of the Group a comprehensive picture of the Group's ESG performance. The information is accompanied by a narrative, explaining its purposes and impacts.

3. Balance

Every effort has been made in the Report to reflect the performance of the Group's ESG activities impartially and avoid selection, omission or presentation format that might inappropriately influence the decision or judgment of the readers of the Report.

4. Consistency

As far as is reasonably practicable, the Group has used consistent methodologies to allow for meaningful comparisons of ESG data over time.

BOARD STATEMENT

The Board takes overall responsibility for ESG matters and integrates such matters into the management approaches and strategies of the Group. It guides the management and monitors ESG matters that have been identified as relevant to the Group, and reviews the progress made against ESG-related goals and targets. For the disclosures about the supervision of the Board over ESG matters, the ESG management policies and strategies of the Board, the review progress of the Board made against ESG-related goals and targets and their relationship with the business of the Group, please refer to other disclosure in the section headed "Management of Environmental, Social and Governance", which form part of the Board Statement.

The Group is committed to corporate social responsibility and balancing environmental, social and economic benefits. It also aims to balance its business development with the interests of its key stakeholders and operates its business in a sustainable manner. To achieve this vision, the Group has set a sustainability framework that focuses on environmental protection, resource management, employee and community well-being and guides its sustainability efforts to ensure that sustainability elements are integrated into every business process and all business decisions. The Group has participated in the "ESG Pledge Scheme" which is organized by The Chinese Manufacturers' Association of Hong Kong and co-operated with Hong Kong Brand Development Council. It improves the ESG performance through signing the pledge and implementing the action plans, promotes corporate sustainable development and work together to build a sustainable environment in future, which shows that the Group attaches great importance to the concept and practice of sustainable development.

Global warming is a major concern of different countries worldwide. The governments of different countries have developed more stringent environmental laws and regulations. The Group takes the environmental protection policy of the government and environmental management system as the development blueprint, aligns with the strategy of safe, harmonious, green development and clean production, instill the concept of environmental management into the core of its operating activities, and invest resources to optimize the air emissions, sewage, solid waste treatment facilities, etc. The Group at the same time pays attention to and loves nature, and makes joint efforts with employees to build an environmental- friendly and resource-saving enterprise.

The COVID-19 pandemic has been raging around the world in the past few years and the epidemic situation has undergone various changes. Since the end of 2022, the compulsory prevention measures in various regions have been gradually relaxed or cancelled, and the economy is gradually recovering. However, due to the global inflation and rising interest rates, the economic situation this year has still been very difficult. While praying these crises will pass, the Group keeps paying attention to the employee remuneration and benefits, career development opportunities, provides a safe working environment to employees, keeps the initial aim of embracing corporate social responsibility, actively participates in public welfare undertakings, continues to allocate resources to optimise various emission treatment facilities, adjusts the product structure and manufactures more environmental-friendly products continues to assess climate risks. By doing these, we can seize opportunities in the face of crisis during hard time.

To achieve this vision, the Board has set a number of environmental and social KPIs and taken a top-down approach to disintegrate the KPIs into the functional departments and urged us to make changes in different areas, such as reducing greenhouse gas emissions, making good use of resources and improving the well-being of employees. ESG matters that the stakeholders of the Group rate as priorities are tracked through the stakeholders' engagement exercise (Please refer to the section headed "Stakeholders' Engagement" below for details). At the same time, the management team and all the employees actively support the Group's sustainable development strategies and objectives; and has made some achievements. The scope, progress and achievements relating to the environmental and social KPIs will be disclosed in the Report.

The Group hopes to play an important role in changing the world and is committed to establishing a cost-effective platform to meet the needs of the global manufacturing industry; we will provide reliable and economical solutions to increase investment returns in the manufacturing industry.

THE BOARD

Board members are responsible for:

• Developing long-term sustainable development policies and strategies
• Assessing and identifying risks and opportunities associated with ESG
• Ensuring appropriate and effective ESG risk management and internal monitoring systems
• Reviewing and approving policies, objectives and action plans or measures related to ESG
• Approving ESG reports

MANAGEMENT TEAM

The management team is responsible for:

• Developing and reviewing ESG-related policies, objectives and action plans or measures
• Monitoring and reporting to the Board on the progress and quality of implementation of the action plan or measures
• Identifying ESG risks and opportunities
• Reviewing the ESG report

GOVERNANCE STRUCTURE

The Board believes that sound ESG strategies can create investment value for the Group and deliver long-term returns to its stakeholders. The establishment of an appropriate governance framework is critical to successful implementation of the ESG sustainability strategies of the Group. Therefore, the Group sets up the ESG governance structure with clear duties and responsibilities. The Board sets long-term policies and strategies for all sustainability matters, reviews the implementation status and progress of ESG work annually and reports on its performance. The Board also identifies, reviews and evaluates the corporate responsibility, sustainability and climate change response of the Group through internal meetings. The management team reports to the Board on a regular basis to assist the Board in assessing and determining whether the Company has established an appropriate and effective internal control system to contain the ESG risks. At the operational level, functional units are responsible for ensuring the integration of sustainability strategies and practices into the Group's business operations and exploring new action plans or initiatives.

FUNCTIONAL DEPARTMENT

The functional departments are responsible for:

• Identifying, assessing, defining and reporting to management on significant ESG issues
• Performing ESG risk management and internal monitoring
• Ensuring ESG policies, objectives and action plans or measures are integrated into business operations
• Reporting to management on progress and quality of action plan or measures

The Board has appointed an independent consultant to provide advice on the ESG matters of the Group and assist in collecting data and information for conducting various analysis and providing improvement recommendations on ESG performance. The Group has also collected the views of key stakeholders on ESG matters during daily operations and conducted a materiality assessment to identify important ESG issues for the Group, details of which are disclosed in the sections headed "Stakeholders' Engagement" and "Materiality Assessment" below. To effectively lead the ESG process of the Group, the Board monitors the work of all departments to ensure that they work closely together to achieve the sustainable development goals of operational compliance and social responsibility.

STAKEHOLDERS' ENGAGEMENT

While the Group is committed to maintaining the sustainable development of its business, it also actively bears the social responsibilities, hoping to achieve both economic and social benefits. It has also provided support in environmental protection to the communities in which it operates for years. The Group maintains a close tie with its stakeholders, including government/regulatory organizations, shareholders/investors, employees, customers, suppliers, community, etc., gain a better

understanding of all parties and strive to balance their opinions and interests through constructive communications in order to determine the directions of its sustainable development. We assess and determine our ESG risks, and ensure that the relevant risk management measures and internal control systems are operating effectively. The following table shows the means of communication with the stakeholders and the management response to the stakeholders' expectations and concerns:

Stakeholders

Government/ regulatory organizations

Shareholders/ investors

Expectations and concerns

• Compliance in laws and regulations
• Fulfill tax obligation
• Green operation
• Safety production
• Return on investment
• Information transparency
• Corporate governance system
• Operational risk management

Means of communication

• Periodic report/ announcement
• Regular communication with regulators
• Handle official business through government affairs website or application
• Information disclosed on the website of the Stock Exchange
• Official website of the Company
• Annual general meeting and other shareholders' meetings
• Opinion mailbox/email

Management response

• Uphold integrity and compliance in operations
• Pay tax on time, and contribute to the society
• Establish comprehensive and effective internal control system
• Fully implement safety production accountability system
• Management possesses relevant experience and professional knowledge in business sustainability
• Ensure transparent and efficient communications by dispatching information at the websites of the Stock Exchange and the Company
• Continue to improve the internal control system and focus on risk management
• Continue to communicate efficiently with investors through various communication channels

Stakeholders

Employees

Customers

Expectations and concerns

• Labor rights
• Career development
• Compensation and welfare
• Health and occupational safety

• High quality products and services
• Timely delivery
• Reasonable price

Means of communication

• Staff activities
• Employee performance evaluation
• Induction and on the job training
• Internal meetings and announcements
• Contact via email, phone and communication applications
• Employee rewards and punishments, and innovation and improvement proposal management system
• General manager mailbox
• Business visit
• Contact via email, phone and communication applications
• Conference and exhibition
• Customer service team
• Customer satisfaction survey

Management response

• Set up contractual obligations to protect labor rights
• Encourage employees to participate in continuous education and professional trainings to enhance ability
• Establish a fair, reasonable and competitive remuneration scheme
• Pay attention to health and occupational safety
• Regularly provide medical check to employees and conduct occupational disease hazard inspection on key positions to identify various occupational hazard source and adopt appropriate response plans as soon as possible
• Establish an efficient and rewarding communication mechanism to motivate employees to actively provide opinions to the company and bring opportunities for mutual development to both parties
• Improve the quality of products and services continuously in order to maintain customer satisfaction
• Establish an effective, efficient and green supply chain system and actively conduct developments on different type of products to meet customers' requirements
• Formulate comprehensive quality assurance process
• Ensure fulfillment of contractual obligations
• Establish and continuously improve the pre-sales,in-sales,after-sales service and customer training service

Stakeholders

Suppliers

Community

Expectations and concerns

• Stable demand
• Good relationship with the Company
• Corporate reputation
• Environmental protection
• Reduce greenhouse gas emissions
• Reduce waste generation
• Effective resource utilization
• Community contribution
• Economic development and community employment

Means of communication

• Business visit
• Contact via email, phone and communication applications
• Conference and exhibition
• Official website of the Company and information publicity website of government departments
• Community activities

Management response

• Ensure fulfillment of contractual obligations
• Establish policy and procedures in supply chain management
• Establish and maintain strong and long-term relationship with suppliers
• Select suppliers with due care
• Pay attention to climate change and actively take various clean production measures
• Continue to invest resources in environmental protection
• Actively innovate environmental protection technology
• Strengthen energy saving and emission reduction management
• Instill environmental protection knowledge into employees
• Encourage employees to actively participate in charitable activities and voluntary services
• Maintain good and stable financial performance and business growth

MATERIALITY ASSESSMENT

During the Reporting Period, the Group held discussions with the management and conducted materiality assessment through various channels to identify ESG issues in which both the Group and its key stakeholders are interested and assessed the level of concern as viewed by them so as to select the relatively important ESG issues. For the materiality assessment, the Group has adopted the following three processes:

IDENTIFICATION

• Through diverse channels and internal discussions
• Examines and adopts the ESG issues of concern in the past stakeholders' engagement
• Draws attention to emerging ESG issues

• Product labeling and traceability