On June 1, the 23rd weekly meeting of DEMC and the first 2026 "Group-wide Employee Connect Forum" of HCD Group were held. Participants spoke freely, raising questions and concerns regarding company operations, daily work, system implementation, and other issues, including urgent difficulties, operational bottlenecks, and management loopholes. Chen Ze, HCD Group President, actively responded to each question, provided solutions, and arranged for follow-up actions. He also deeply analyzed HCD Group's current situation, clarified the responsibilities of each role, upheld management principles, and simultaneously established a "normalized communication mechanism" and standardized the regular convening of the "Employee Connect Forum." He expressed the hope that, with unwavering commitment, unity, and joint efforts, HCD Group and employees can achieve symbiosis, mutual success, and shared development. The following is a compiled summary of the President's remarks.

Dear Colleagues,

The industry is currently in a period of deep adjustment, and our company is at a critical stage of tackling challenges, transforming, and upgrading. To align the thoughts of all employees, clarify the direction of our efforts, break down management barriers, and consolidate team strength, I am here today to have an open and honest conversation with all of you about our current situation and future. Whether you are a key business expert on the front line, a colleague traveling for projects, or a management and support staff member working behind the scenes, each of you is an indispensable core force in HCD Group's development. In tough times, we must remain true to our original aspirations, share the same direction, fight side by side, overcome difficulties with responsibility, and win the future with hard work.

I. Stay True to Our Mission, Create Core Value Through Each Role

All managers and key employees must constantly ask themselves: What is our role? What is the core value of our existence in HCD Group?

The answer is always singular: The purpose of all management work is to achieve the operating budget, and the core value is to support and advance the development of products and business. This is the sole starting point and ultimate goal of all our work. Any work that deviates from the product business, front-line operations, or operations is ineffective and worthless.

Our colleagues who have long been embedded in project front-line work, traveling frequently and facing market and project pressures directly, are HCD Group's strongest foundation and most valuable asset. The core responsibility of back-office functions and management at all levels is never to create rigid rules or do paperwork, but to actively serve the front line, fully empower business, and collaborate efficiently – that is our core value. HCD Group demands a complete abandonment of bureaucratic and siloed thinking. We must engrave "solving front-line problems and creating value for operations" into our work instincts, providing tangible support to help front-line colleagues fulfill contracts efficiently, explore markets, overcome challenges, and ensure that every contribution in every role is valuable and every action serves the business.

II. Uphold Clear Rewards and Penalties, Promote a Spirit of Courage and Responsibility

Recently, some colleagues have been concerned: Does the comprehensive implementation of special audits mean "the more you do, the more mistakes you make, and the less you do, the fewer mistakes"? I believe this is a simple workplace principle: In the workplace, everyone should be diligent, responsible, and committed to doing their job well – this is a basic standard.

If an individual makes a major mistake at work or causes serious consequences due to personal error, that individual must bear the corresponding responsibility and accept penalties – that is also the responsibility one should take in the workplace.

If we do not hold people accountable for their mistakes, allowing wrongdoers to escape responsibility, and if rewards and punishments are not clear, that is management's inaction.

The vast majority of us work with dedication, always thinking about HCD Group's best interests, and have nothing to worry about...

Here, I make my stance clear to all colleagues: We will absolutely not allow a negative atmosphere of "lying flat for fear of mistakes, or doing nothing to avoid responsibility" to take root and spread in HCD Group. Many long-serving employees, some with over twenty years of service, have always rolled up their sleeves, led by example, worked on the front lines, shouldered the heaviest workloads and the greatest responsibilities, and have never stopped or shirked their duties for fear of making mistakes or taking responsibility. Daring to take responsibility is the most fundamental professional quality for us in the workplace; admitting and correcting mistakes is also a necessary path for HCD team to grow.

HCD Group's management principles are clear and firm: clear rewards and penalties, tolerance and correction of mistakes, rewarding excellence and punishing poor performance. For employees who dare to act, are capable of acting, achieve results, create value for HCD Group, solve difficult problems, and remain dedicated to their posts, HCD Group will provide appropriate recognition, incentives, and growth opportunities. For behavior that shows slackness in duty, perfunctory work, repeated errors, or damage to HCD Group's interests, HCD Group will take corrective action and deal with it seriously in accordance with regulations.

The strengthening of audits and management oversight is not a shackle on your hands and feet, but a cornerstone for regulating operations, avoiding risks, protecting doers, and purifying team culture. HCD Group resolutely eliminates the perverse incentive of "lying flat to avoid blame," fully protects those who take responsibility, incentivizes doers, and holds the inactive accountable, so that those who want to act have a stage, those who can act are rewarded, and those who do nothing face constraints.

III. Break Down Management Barriers, Serve the Front Line with a Factual Mindset

All back-office managers and colleagues in functional roles must regularly self-reflect: Has our management reduced the burden on the front line? Do our systems align with business realities? Has our work truly solved operational problems?

Office policies provide standards, but the actual situation on the front line is fundamental. We firmly oppose dogmatism, formalism, and rigid one-size-fits-all management. Systems are meant to standardize 80%–90% of routine work. The remaining 10% of special scenarios and unexpected problems test the manager's sense of responsibility, empathy, and ability to take initiative.

We must both uphold bottom lines, strictly control costs, eliminate waste, and ensure compliant operations, while also being people-oriented, adapting to realities, and guaranteeing basic working conditions on the front line. Taking essential needs on project sites, such as temporary vehicle use, as an example: all reasonable, company-oriented, project-advancing requests from the front line should be seen, responded to, and resolved. The essence of management is not control, but empowerment; not restriction, but support. Managers at all levels must step out of their offices, get close to projects, listen to the front line, empathize with grassroots colleagues, truly understand the difficulties of the front line, solve their problems, fully break down front-end and back-end barriers, and make management both effective and warm.

IV. Strengthen Industry Confidence, Recognize the Broad Market Prospects

Many colleagues have doubts right now: Is the industry declining? Does HCD Group have a future? Are new projects and orders secure? Today, I want to reassure all of you with real data.

Looking at our existing business: DEMC alone currently has over 1.4 billion RMB in orders in hand. Our business foundation is solid, our performance foundation is strong, providing firm support for DEMC's continued operation.

Looking at the industry landscape: Taking the welding automation business as an example, from 2025 to 2028, the average annual domestic market size is about 44 billion RMB, the North American market about 35 billion RMB, and the European market about 30 billion RMB. The total global industry scale is stable in the range of 110–120 billion RMB. The industry track exists for the long term, market demand remains stable, and will not diminish due to short-term fluctuations. Our goal is to become the top player in this niche industry.

As the industry undergoes intense consolidation and shakeout, what will be eliminated are always small workshops and weak teams with loose management, poor delivery, and lack of core competitiveness. What will ultimately remain are the lean-managed, high-quality delivering, strong-brand and legitimate enterprises. As a listed company, we have stronger financial reserves, more complete systems, stronger resilience, and brand credibility – far surpassing smaller competitors in the industry.

Looking to the long term, the track remains, opportunities remain, and the future is promising. HCD has a solid foundation and strong resilience, and will surely break through against the trend and develop steadily during the industry shakeout. I ask all colleagues to strengthen your confidence in the industry, in HCD Group, and in yourselves.

V. Confront Operational Challenges, Honestly Acknowledge Current Development Difficulties

We do not avoid problems, nor do we hide shortcomings. Confronting problems is the first step to solving them.

In the first half of 2026, HCD Group's profitability has been strengthening. The impact of cyclical industry adjustments is in line with the annual operating budget and the overall industry trend, and remains within HCD Group's budget and controllable range. To cope with intense industry competition, reduce operating costs, and improve operational efficiency, HCD Group has implemented a series of cost-reduction, efficiency-enhancing, and lean management measures. The original intention behind these policies was to improve quality and efficiency, strengthen our foundation, and protect the common interests of all employees. However, it is undeniable that in implementation, some systems have shown rigid processes, inflexible execution, detachment from reality, and excessive constraints. This may have missed the goal of improving quality and efficiency, increased the burden on the front line, and potentially hindered business progress.

Currently, the industry is under pressure, market competition is fierce, and no company is immune. The more difficult the times, the more we need all employees to set aside selfishness, unite warmly, focus together, and overcome difficulties collectively. Only with full unity, facing our shortcomings honestly, thorough rectification, and pragmatic breakthroughs can we navigate the industry cycle and achieve symbiosis and mutual success for HCD Group and its employees.

VI. Build a Direct Platform, Establish a Normalized Closed-Loop Communication Mechanism

To thoroughly break down hierarchical barriers, smooth channels for front-line voices, and address management rigidity, HCD Group will formally establish a normalized communication mechanism called HCD Group-wide Employee Connect Forum.

The meeting will adopt a hybrid online/offline model, regularly inviting Group executives, heads of functional departments, subsidiary leaders, and front-line employee representatives to participate. The core purpose of the platform: equal communication, direct confrontation of issues, free speech, and a pragmatic pursuit of truth.

We will completely break free from hierarchical constraints and encourage all employees to dare to speak, dare to tell the truth, dare to make suggestions, and dare to raise issues. Whether about work difficulties, role confusion, process bottlenecks, life challenges, or suggestions for improving company management, systems, and development – all can be raised frankly.

For the urgent difficulties, operational bottlenecks, and management loopholes raised by everyone, HCD Group will establish a full closed-loop management mechanism of collection, supervision, rectification, feedback, and review. Every issue will receive a response, every matter will be followed up, and each time there will be improvement. We will continuously iterate HCD Group's operational management system, respond to everyone's expectations with real corrective actions, and drive quality and efficiency improvement through institutional innovation.

VII. Strengthen Management Responsibility, Stabilize Morale, Build a Foundation of Confidence

As the troops follow their generals, the team's confidence comes from management's sense of responsibility; HCD Group's hope comes from the dedication of its core backbone.

Our managers and key employees at all levels are the mainstays of HCD Group and the anchors of the team. In times of crisis, it is all the more important to shoulder responsibility, lead by example, and roll up your sleeves. Systems provide the baseline; responsibility reflects one's breadth of vision. When facing unexpected business issues or reasonable front-line requests, as long as they are for public duty, for HCD Group's business, and in support of operations, management must dare to sign and take responsibility, dare to break through rigidity, and dare to support the front line.

If management is timid, dares not take responsibility, is unwilling to break new ground, and only mechanically enforces rules, then such managers are unqualified. We will not be able to cope with fierce market competition, nor lead the team out of difficulties.

Here, I solemnly promise: I will always stand with all colleagues, sharing pressure, bearing risks, and overcoming difficulties together.

Confidence comes from perseverance; achievements come from hard work. I hope all managers will lead by example, stabilize the team, guide the team well, provide good service, and manage effectively. I hope all colleagues will adjust their mindset, strengthen their beliefs, stay grounded, and move forward together.

Adversity reveals true courage; hardship forges jade. Short-term difficulties are temporary. As long as we are united at all levels, perform our respective duties, act with responsibility, and work together as one, HCD Group will surely turn the situation around and steadily improve. When the industry warms up and spring arrives, we will together ride through the cycle, share in the dividends of corporate development, and create a more enduring and brilliant future for HCD Group!

Thank you all!