China Weaving Materials : Environmental, Social and Governance Report

ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT

The board of directors (the "Board") of China Weaving Materials Holdings Limited (the "Company") is pleased to present the Environment, Social and Governance ("ESG") Report for the year ended 31 December 2016 for the Company.

The Company and its subsidiaries, (together, the "Group") believes that good business practices and corporate social responsibility are essential to its long term sustainable development and success. In addition to striving to achieve business goals and financial returns, the Group is also committed to supporting the well-being of our employees and their families, the community and efficient use of resources.

INTRODUCTION

The Group is principally engaged in the business of manufacturing and trading of yarns products and related raw materials. The manufacturing facilities of the Group are based in Fengxin County, Jiangxi Province, the People's Republic of China (the

" PRC").As at the end of 2016, the production capacity of the Group was

approximately 690,000 spindles. The production and sales volume of the Group for the year ended 31 December 2016 was approximately 118,709 tonnes and 122,351 tonnes respectively.

REPORTING PERIOD AND REPORTING SCOPE

This report, which was prepared according to the ESG Reporting Guide as set out in Appendix 27 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited, covers the period from 1 January 2016 to 31 December 2016 (the "Reporting Period").

This report covers the following subsidiaries of the Company only (the "Reporting Entities"):

Jinyuan Textile Co. Ltd. Jiangxi ("Jinyuan")

Jiangxi Huachun Color Spinning Technology Development Co. Ltd. ("Huachun")

During the year ended 31 December 2016, the Reporting Entities accounted for over 99%of the turnover and 98% of the headcount of the Group.

STAKEHOLDERS COMMUNICATIONS

The Group believes communication with different stakeholders including employees, customers, suppliers, local government bodies and investors is important as a fair and comprehensive evaluation on the Group's performance on environmental, social and governance aspects relies on the feedback from the stakeholders. Hence, the Group continues to communicate with different stakeholders on these aspects through various channels during its daily operations.

1. ENVIRONMENT

   Echoing the national policy of "constructing an energy saving and environment friendly society", the Group strives to reduce impact on environment and climate changes through energy saving and emission reduction policies and measures.

   The Reporting Entities are not engaged in a highly-polluting industry and our production processes primarily involve technical processing and manufacturing. Our operations are mainly subject to, among other relevant environmental protection laws and regulations, the following: (i) the Environmental Protection Law; (ii) the Prevention and Control of Water Pollution Law; (iii) the Prevention and Control of Atmospheric Pollution Law; and (iv)the Prevention and Control of Solid Waste Pollution.

   A1. Emissions

   The Board believes that the operations of the Reporting Entities currently do not generate any pollutant which may cause significant adverse impact on the environment. During the Reporting Period, since no dyeing was involved in the production process of the Reporting Entities and the production had not created any environmentally harmful by-products, no special waste treatment had been considered necessary. Where applicable, the Reporting Entities have implemented environmental standards for our production processes and have set out environmental procedures,

   such as those related to recycling of loosened cotton/polyester tufts with impurity from the blowing process. With regard to the operations, the Group is committed to strict and full compliance with the relevant PRC environmental protection requirements. To prevent that the environment is negatively affected as a result of the operations of the Reporting Entities, technologies that conserve and efficiently use resources are adopted in our production process so as to reduce any adverse impact on the environment. During the Reporting Period, the Reporting Entities did not engage in operations that produced environmentally harmful by-products or otherwise polluted the environment.

   During the Reporting Period, there was no incident of non-compliance with the relevant environment laws and regulations that had a significant impact on the Reporting Entities and the Reporting Entities had not been subject to any material environmental claim, lawsuit, penalty or disciplinary actions.

   The greenhouse gas emitted from the production processes was carbon dioxide ("CO2"), which arises from the electricity consumption. The amount and the intensity (emission per ton of production) of CO2 emitted during the Reporting Period was 198,013 tonnes and 1,667 kg respectively.

   A2. Use of Resources

   The Group aims at maximizing the effect of energy conservation during the manufacturing process by promoting efficient use of resources and adopting green technologies. The Group also encourages staff members to be more serious and responsive to energy conservation and efficient use of resources.

   The Reporting Entities' use of resources mainly results from electricity consumption and minor water consumption. No other natural resources are used in the production process. The electricity consumption (kWh) and the electricity consumption per yield (kWh per ton of production) during the Reporting Period was 252,246,753 kWh and 2,124 kWh respectively.

   The finished goods of the Reporting Entities are yarns, of which the production involves use of paper cylinder for winding and nylon bags for packaging. The total volume of paper cylinder and nylon bags packing materials used during the Reporting Period was approximately 2,861 tonnes and 474 tonnes respectively.

   A3. The Environment and Natural Resources

   Save for the consumption of electricity and water as disclosed in section A2 of this report, the production activities of the Reporting Entities do not have a significant impact on the environment and natural resources.

   The Reporting Entities have obtained the ISO 14001 certificate on environmental management. Jinyuan has over 25,000 square meters of green area within its factory premises and Huachun has installed solar panels on the workshop rooftop to supply electricity for workshop lighting.

2. SOCIAL

B1. Employment

The Group is committed to complying with relevant laws and regulations, the Labor Law of the PRC, the Contact Law of the PRC and other applicable laws and regulations. The Group endeavors to provide a fair and equitable work environment. The Group has enforced a range of human resources management policies and procedures such as Recruitment Process, Regulations on Employment, Dismissal and Transfer Process and the Employee Handbook with a view to providing a fair and equitable work environment.

The Group has set up a fair and reasonable remuneration regime, adhering to the principle of fairness, competitiveness, incentive, reasonableness and legality. Employees' compensation consists of basic salary, performance salary, overtime pay, position subsidy and other subsidies and bonuses, which are adjusted annually based on national policies, price level, industrial and geographical difference and the Group's overall performance.

The Group is committed to the protection of legitimate rights and labor interest. The Group respects the employees' entitlement to rest, holidays and regulated working hours in accordance with national and local laws and regulations.

The Group tolerates no discrimination against any employee on the basis of race, gender, color, age, family background, ethnic tradition, religion, physical appearance and national origin, etc. and treats every employee fairly in every aspect of