“An Idea for Cost Reduction and Efficiency Improvement” – We invite you to join our call for rationalization suggestions!

In accordance with the arrangements made at the Group’s 2024 Annual Meeting, and in order to broaden channels for open communication, fully harness the collective wisdom of all employees, further motivate and strengthen their sense of responsibility and proactive engagement in cost‑reduction and efficiency‑enhancement initiatives, and foster a company‑wide culture of participation, we will implement measures to achieve the best performance in our history and benchmark against industry leaders. This will involve comprehensively and systematically reducing costs across all operational links, thereby effectively improving operational efficiency and profitability. After careful deliberation, it has been decided to launch, throughout the entire Group in March, a “I Contribute an Idea for Cost Reduction and Efficiency Enhancement” rationalization‑suggestion campaign. Relevant details are hereby notified as follows:

II. Purpose of the Event By launching the “I Offer a Proposal to Reduce Costs and Boost Efficiency” initiative, we aim to help all employees deeply appreciate the critical importance of cost reduction and efficiency enhancement for the company’s high‑quality development. We will encourage them to confront difficulties and challenges head‑on, firmly embrace the principles of cost reduction, efficiency gains, and total‑cost leadership, and strengthen their sense of ownership and responsibility. Employees will be actively engaged in the company’s growth, focusing on improving profitability and cutting costs, proactively offering suggestions and insights, benchmarking best practices for targeted improvements, and continuously driving cost‑reduction and efficiency‑enhancement across the entire value chain. Our goal is to reinvent Yuegong’s core competitiveness through superior quality, exceptional service, and competitive cost structures.

III. Implementation of the Activity

1. Activity Preparation and Mobilization Phase: To be completed by the end of February 2024. The main activities include: at the Group’s 2024 Annual Meeting, the Group will issue a call to all employees to participate in the “I Offer a Proposal for Cost Reduction and Efficiency Improvement” rationalization initiative and provide overall deployment; issue the “Notice on Launching the ‘I Offer a Proposal for Cost Reduction and Efficiency Improvement’ Rationalization Initiative”; convene a kickoff meeting for the initiative; and require each subsidiary and business unit to establish a leading group for the initiative, chaired by the general manager, to drive and implement the program.

2. Proposal‑Making and Full‑Staff Participation Phase: March 1–31. March is designated as the “One Idea for Cost Reduction and Efficiency Improvement” Month, during which all employees are encouraged to actively contribute ideas and suggestions. Every employee is expected to draw on their own experiences and job responsibilities, take proactive steps, and focus on identifying key challenges, critical areas, and weak points across all aspects of the company—such as material procurement, design refinement, production and manufacturing, process flows, transportation and installation, marketing, technological development, facilities and equipment, financial management, human resources, and logistics services—that hinder cost reduction and efficiency gains. Employees should analyze the root causes and submit well‑reasoned, actionable recommendations. Suggestions may be submitted through both online and offline channels: offline, departments will collect and compile employee proposals; online, employees can log in to the Yuegong Group WeChat official account, access the “One Idea for Cost Reduction and Efficiency Improvement” proposal‑submission page, complete the required fields according to the prompts, and then upload their submissions.

3. Statistical Compilation and Analysis & Evaluation Phase: Conducted concurrently with the employee suggestion‑submission phase, this phase primarily involves each subsidiary, business unit, and group department compiling and summarizing the collected improvement proposals. Relevant personnel are promptly convened to analyze and evaluate the proposals’ rationality, feasibility, and other pertinent factors, thereby determining their viability. Proposals deemed feasible following this analysis and evaluation should be promptly implemented and subjected to practical testing.

4. Autonomous Implementation and Promotion Phase: This phase spans the entire year. Its main focus is for each subsidiary, business unit, and group department to, in the course of carrying out activities, align with its own specific circumstances and adhere to the principle of self‑initiated, autonomous implementation. They are to promptly apply, on their own initiative, any well‑evaluated and practical suggestions they have collected; actively explore and put these into practice; continuously innovate management approaches and methods; and develop distinctive experiences in cost reduction and efficiency enhancement. The Group’s Corporate Management Department shall provide ongoing oversight of the activity’s progress, distill and summarize effective practices and recommendations emerging throughout the process, and promote their widespread adoption across the entire group. Moreover, proven, effective measures should be formalized through policies, regulations, or other appropriate mechanisms.

5. Summary, Improvement, and Recognition Phase: This phase will be integrated with the year-end “Innovation and Excellence” summary and awards ceremony. Based on the implementation of the “I Contribute a Proposal for Cost Reduction and Efficiency Enhancement” rationalization initiative and the tangible results achieved in cost reduction and efficiency gains, outstanding individuals, exemplary rationalization proposals, and units (departments) that have excelled in organizing the campaign will be selected and recognized with appropriate awards.

1. Strengthen leadership and foster a conducive atmosphere. All subsidiaries, business units, and group departments must deeply recognize the importance and urgency of reducing costs and improving efficiency in the current environment. General managers and heads of each department should proactively assume primary responsibility for this initiative, strengthen leadership, launch comprehensive promotional campaigns, ensure coordinated efforts across all levels, and rigorously implement measures at every tier. In doing so, they should fully unleash the enthusiasm and ingenuity of employees, fostering a positive culture in which everyone shares responsibility and contributes to cost reduction and efficiency gains.

2. Everyone participates, with a focus on quality. Reducing costs and improving efficiency are critical to the company’s development and closely tied to the interests of all employees. Launching the “I Offer a Proposal for Cost Reduction and Efficiency Improvement” initiative is a key priority for the entire Group in March—a mass‑participation campaign that calls on every employee to adopt a broader perspective, gain a deep understanding, and actively engage. Start now—begin with yourself, focus on the small details, and take action at your own post. Carefully identify weak links, vulnerabilities, and bottlenecks around you, and, drawing on your role and the company’s realities, put forward well‑targeted, practical, and high‑quality suggestions.

3. Strengthen feedback and emphasize practical results. All subsidiaries, business units, and group departments must attach great importance to employees’ rationalization proposals. Designate dedicated personnel to collate and organize the suggestions received, promptly relay feedback to the relevant units, and swiftly implement the proposed measures to ensure that these suggestions are put into practice and yield rapid results. At the same time, promptly inform the proposers of the status of proposal adoption and implementation, and regularly communicate and publicize the progress and outcomes of the initiative to boost employee engagement and broaden its impact.

All subsidiaries, business units, and corporate departments are to integrate the organization of this initiative with the Group’s existing programs—such as the “Innovation and Excellence” campaign, Safety and Quality Month, QC group activities, the 6S+ management initiative, the Welding Master Studio, and skills‑competition labor contests—by adopting a coordinated approach, ensuring orderly implementation, achieving tangible results in each area, and fully leveraging the synergistic effects of these initiatives. This will help the Company secure new competitive advantages in the market and usher in a new phase of corporate management and operations.

Hereby notified.

Yuegong Holding Group Co., Ltd.

February 22, 2024