Hengxin Technology : Environmental, Social And Governance Report

ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT OF HENGXIN TECHNOLOGY LTD.

Hengxin Technology Ltd. (the "Company" and together with its subsidiaries, the "Group" or "we") recognises the importance of sustainability in creating long-term values for all of our stakeholders. We manage the business with caution and are committed to providing premier products and services for our customers. By keeping close contact with all stakeholders, including shareholders, customers, employees, suppliers, creditors, regulators and the public, we strive to strike a balance of differing views and interests of all parties concerned to allow the Group and the community to achieve a clear and long-term direction.

The Group hereby presents the environmental, social and governance (the "ESG") report for the period from 1 January 2016 to 31 December 2016 (the "Reporting Period"). This report mainly covers two major operating subsidiaries of the Company, namely, Jiangsu Hengxin Technology Co., Ltd. and Jiangsu Hengxin Wireless Technology Co., Ltd.

The senior management (the "Management") has confirmed to the board of directors of the Company (the "Board") the effectiveness of the ESG risk management and internal control systems for the financial year ended 31 December 2016.

ENVIRONMENTAL

The Group is committed to environmental protection by minimising the environmental impact of its business activities. It supports natural and environmental protection programs and has been in strict compliance with environmental laws, regulations and policies of the government. Currently, the Group occupies a total area of approximately 122,827 square metres, among which approximately 18,144 square metres or approximately 14.7% consist of green landscaping. In 2006, the Company was named Jiangsu Province Environmentally Friendly Enterprise by the Environmental Protection Department of Jiangsu Province. Meanwhile, Jiangsu Hengxin Technology Co., Ltd., a major operating subsidiary of the Group, consistently passed the certification of ISO14001:2004 environmental management system since 2007.

Emissions

The Group has set forth strict control regulations in relation to, amongst others, operating equipment in workshops, vehicle exhaust, operations of outsourcing units in the Company, regular clearing of other wastes. For example, the Group has entered into the Transportation Agreement with its transportation suppliers and has promulgated the Solid Waste Control Procedures and the Pollutant Emission Control Procedures internally to monitor and regulate pollutant emissions and waste disposal. For instance, all vehicles of the Group must use unleaded gasoline. Filters are installed in waste water discharge ports to reduce sewage discharge; the canteens use non-phosphorus detergents and grease trap, fume purification and other equipments have been installed, while a qualified third party is commissioned to clean up the equipment regularly; refrigerators, freezers and central air conditioners all employ fluorine-free equipment. All these control measures are implemented throughout the manufacturing plant. At the same time, the Group has also installed special purification equipment to treat domestic sewage and exhaust gas discharged by high-temperature workshops.

In addition, the Group commissions relevant municipal environmental protection departments and Jiangsu Levei Testing Co., Ltd. to monitor the factory premises and its surrounding environment each year.

The following table lists out the gases and waste discharged by the Group during the Reporting Period:

Volume Per Production Unit (Tons)
Emission Type	Emissions	Volume	RF Cable	Accessories	Others
(tons)	(per km)	(per unit)	(per unit)
Gas emissions	Isoparaffin	11.54	N/A	N/A	0.9 kg
Alcohol compounds	8.98	N/A	N/A	0.7 kg
Hazardous waste	Waste oil	0.14	0.001 kg	N/A	N/A
Non-hazardous waste	Waste oil rags	0.22	0.0016 kg	N/A	N/A
	Ribbon	0.002	N/A	0.00001 kg	N/A
Waste solvent box	2	0.014 kg	N/A	N/A
Toner cartridges	0.014	0.0001 kg	N/A	N/A
Scrap copper (bronze, brass), scrap aluminium, and waste plastic	0.8	N/A	0.004 kg	N/A
Waste plastic film, waste cartons, and waste paper	80.96	0.5724 kg	N/A	N/A
Waste wooden frame	60	0.4243 kg	N/A	N/A
Waste sawdust, and waste wood blocks	20.4	0.1443 kg	N/A	N/A
Household waste	73	0.5162 kg	N/A	N/A

The following table lists out the measures adopted by the Group to reduce gas emissions and results achieved during the Reporting Period:

Emission Type	Emissions	Reduction Measures	Achievements
Gas emissions	Isoparaffin	1. To improve the extrusion process and to reduce the consumption of isoparaffin.	The actual consumption of isoparaffin decreased from 1 kg/km to 0.9 kg/km.
2. Upon installation of the exhaust gas treatment device, it condenses the gaseous isoparaffin into liquid through water cooling. The liquid material is given to third parties for recycling.	No gaseous isoparaffin was discharged into the atmosphere.
Alcohol compounds	1. To improve the sealing of the solvent tank and to reduce volatilisation.	The actual consumption of alcohol compounds decreased from 0.8 kg/ km to 0.7 kg/km.
2. To enhance the process of drying for immersed cables to reduce actual consumption.

The following table sets out the Group's methods of treating hazardous and non-hazardous wastes, measures of reducing waste generation, and results achieved during the Reporting Period:

Emission Type	Emissions	Treatment Methods	Reduction Measures	Achievements
Hazardous waste	Waste oil	Hand over to qualified third parties for centralised disposal.	Dry paint is used to replace cooling oil for machine tools, and used materials are recycled.	Consumption decreased by approximately 10%.
Non-hazardous waste	Waste oil rags	Hand over to local third- party sanitation service companies for disposal.	Reduce gas and liquid leakage.	Consumption decreased by approximately 15%.
Ribbon	Sort out and recycle by category under ledgers, and hand over to qualified solid waste treatment companies for disposal and recycling.	On top of existing ribbons, two small ribbons are added specifically for label printing to reduce the usage of ribbons and cartridges. The templates are unified for printing labels of connectors, arresters and jumpers to reduce the usage of ribbons and cartridges.	Consumption decreased by approximately 8%, saving around RMB27,000.
Waste solvent box
Toner cartridges
Scrap copper (bronze, brass), scrap aluminium, and waste plastic	Hand over to waste recycling personnel for recycling.	Improve the utilisation rate of materials and use hot extrusion pieces for production.	Consumption decreased by approximately 50%.
Waste plastic film, waste cartons, and waste paper	Hand over to waste recycling personnel for recycling.	N/A	Waste volume decreased.
Waste wooden frame	Hand over to local farmers for recycling.	N/A	Waste volume decreased.
Waste sawdust, and waste wood blocks	Hand over to local farmers for recycling.	N/A	Waste volume decreased.
Household waste	Hand over to local third- party sanitation service companies for disposal.	N/A	Waste volume decreased.

By implementing projects including the change of chassis without stopping in the coaxial workshops and improving the utilisation rate of raw materials, the Group identifies waste items in its production and business processes and then mitigates or eliminates the waste through project-based control. The Group has reduced the number of runs and scrap materials, thereby reducing the amount of waste generated.

To alleviate the environmental pollution caused by solid waste, the Group specifies a storage location for dangerous waste and general waste by category, sorts them out centrally, and then transfers them to a qualified institution for disposal. The treatment methods are as follows.

The on-duty workers place waste oil rags, waste oil, waste solvent boxes, waste chemical containers, and other dangerous waste generated during the production process to the dangerous waste collection location. The Group has entered into the Dangerous Waste Disposal Agreement with Yixing Lingxia Solid Waste Treatment Co., Ltd., a qualified institution, which will handle the waste uniformly. At present, the dangerous waste generated by the Group in the course of production includes the following:

1. As at 31 December 2016, the Group recycled approximately 98 tons of waste wood.

2. As at 31 December 2016, the Group disposed approximately 73 tons of household waste.

Category of waste	Type	Storage Location	Treatment Methods
Dangerous waste	Waste batteries, waste fluorescent lamps, waste bulbs, waste oil rags, and waste oil	Dangerous waste collection point	Hand over to qualified third parties for centralised disposal.
Waste electronic devices
Cartridges and ribbons
Waste paint barrels and waste spray paint bottles
Waste chemical solvent boxes
Waste saponification solution
General waste	Scrap copper (bronze, brass), scrap aluminium, and waste plastics	Scrap warehouse	Hand over to waste recycling personnel for recycling.
Waste plastic film, waste cartons, and waste paper	Sundry warehouse	Hand over to waste recycling personnel for recycling.
Waste wooden frames	Sundry warehouse	Hand over to local farmers for recycling.
Household waste	Sundry warehouse	Hand over to local third-party sanitation service companies for disposal.
Waste sawdust, and waste wood blocks	Woodworking room	Hand over to local farmers for recycling.