Supply Chain Policy

Throughout its years of development, the Company has consistently adhered to the principle of integrating corporate development with social responsibility. By continuously deepening reforms, strengthening management, and accelerating development, the Company has continuously enhanced its overall competitiveness. The Company has always regarded technological innovation, management innovation, production safety, employee rights protection, environmental protection, energy conservation and emission reduction, and public welfare as the core components of fulfilling its social responsibilities, striving to enhance sustainable development capabilities, create value for all stakeholders, and achieve long-term sustainable development.

I. Commitment to Due Diligence

The Company commits to strictly following the five-step framework set forth in the Organisation for Economic Co-operation and Development (OECD) Due Diligence Guidance in conducting supply chain due diligence work, as well as complying with the Supplement on Tin, Tantalum, and Tungsten. The implementation steps are as follows:

First, establish and improve the Company’s management systems to ensure that existing due diligence and management mechanisms are capable of addressing risks related to minerals sourced from conflict-affected and high-risk areas (CAHRAs);

Second, identify and assess risks associated with the extraction, trade, handling, and export of minerals originating from CAHRAs;

Third, formulate and implement corresponding risk mitigation strategies for identified risks in order to prevent or mitigate adverse impacts. Where necessary, independent third-party audits will be commissioned to verify whether the Company’s due diligence practices comply with the OECD Due Diligence Guidance requirements;

Finally, publish an annual supply chain due diligence report to publicly disclose the Company’s efforts regarding responsible mineral supply chains from conflict-affected and high-risk areas.

In summary, the Company fully recognizes that mineral extraction, trade, handling, and export activities in conflict-affected and high-risk areas may give rise to significant adverse impacts. The Company acknowledges its obligation to respect human rights and avoid contributing to conflicts. The Company adopts a Responsible Sourcing Policy for minerals from conflict-affected and high-risk areas and promotes this policy across the supply chain, incorporating it into contracts and/or agreements signed with suppliers. Within the framework of the OECD Due Diligence Guidance, the Company will conduct necessary due diligence on the sources of all tantalum raw materials used in processing.

II. Risks to Be Identified and Avoided

The Company is committed to becoming a highly responsible and accountable tantalum and niobium manufacturer. To ensure the legitimacy and traceability of tantalum raw materials, the Company hereby establishes this Supply Chain Policy. This policy follows the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas and complies with the Model Supply Chain Policy set forth in Annex II of the Guidance.

The Company will promote this policy to upstream and downstream suppliers throughout the supply chain and will make every possible effort in business activities to identify and avoid the following risks:

1. Serious Human Rights Abuses Associated with the Extraction, Transport, or Trade of Minerals

When sourcing from conflict-affected and high-risk areas, we will neither tolerate nor by any means profit from, contribute to, assist with, or facilitate:

· Any forms of torture, cruel, inhuman, or degrading treatment;

· Any forms of forced or compulsory labor. Forced or compulsory labor refers to work or service exacted from any person under threat of penalty and for which the person has not offered themselves voluntarily;

· The worst forms of child labor;

· Other gross human rights violations and abuses, such as widespread sexual violence;

· War crimes, serious violations of international humanitarian law, crimes against humanity, and genocide.

Risk Mitigation Strategy: If we have reasonable grounds to believe that an upstream supplier is sourcing from or is linked to any party committing the above-mentioned serious abuses, we will immediately suspend or discontinue cooperation with that supplier.

2. Direct or Indirect Support to Non-State Armed Groups

We will not tolerate any direct or indirect support to non-state armed groups through the extraction, transport, trade, processing, or export of minerals. “Direct or indirect support” includes, but is not limited to, purchasing minerals from non-state armed groups or their affiliates, making payments to them, or otherwise providing logistical assistance or equipment. Such armed groups or affiliates include those that:

1. Illegally tax or extort money or minerals at mine sites, along transportation routes, or at points where minerals are traded;

2. Illegally control mine sites, transportation routes, points where minerals are traded, or upstream actors in the supply chain;

3. Illegally tax or extort intermediaries, export companies, or international traders.

Risk Mitigation Strategy: If we have reasonable grounds to believe that an upstream supplier is sourcing from or is linked to any party providing direct or indirect support to non-state armed groups, we will immediately suspend or terminate cooperation with that supplier.

3. Public or Private Security Forces

We prohibit direct or indirect support to public or private security forces that illegally control mine sites, transportation routes, upstream actors in the supply chain, illegally tax or extort money or minerals at mine sites, along transportation routes, or at mineral trading points, or illegally tax or extort intermediaries, export companies, or international traders.

We recognize that public or private security forces may be present at or around mine sites and along transportation routes solely for the purpose of maintaining the rule of law, including protecting human rights, ensuring the safety of workers and facilities, safeguarding mine sites or transportation routes, and ensuring that legitimate extraction and trade activities are not disrupted.

Risk Mitigation Strategy: If we have reasonable grounds to believe that such risks exist to some extent, we will, according to our position in the supply chain, immediately develop, adopt, and implement a risk management plan with upstream suppliers and other stakeholders to prevent or mitigate the risk of direct or indirect support to public or private security forces. If the implementation of the risk management plan proves ineffective, we will temporarily suspend or discontinue cooperation with the upstream supplier.

4. Bribery, Fraudulent Misrepresentation of Mineral Origin, Money Laundering, and Payment of Taxes, Fees, and Royalties to Governments

We will neither offer, promise, give, nor demand bribes in any form, and we firmly oppose bribery aimed at concealing or falsifying the origin of minerals or misrepresenting taxes, fees, and royalties paid to governments for mineral extraction, trade, handling, transportation, or export.

Money Laundering: If we have reasonable grounds to believe that there is a risk of money laundering resulting from or connected to the extraction, trade, handling, transportation, or export of minerals derived from illegal taxation or extortion at mine sites, along transportation routes, or at mineral trading points in the upstream supply chain, we will support and take measures to contribute to the effective elimination of such money laundering activities.Taxes, Fees, and Royalties Paid to Governments

We will ensure payment of all legally required taxes, fees, and royalties related to the extraction, trade, and export of minerals from conflict-affected and high-risk areas. According to our position in the supply chain, we commit to disclosing such payments in accordance with the principles of the Extractive Industries Transparency Initiative (EITI).

Risk Mitigation Strategy: According to our position in the supply chain, we commit to cooperating, where appropriate, with suppliers, central or local government authorities, international organizations, and affected third parties to take significant measures within a reasonable timeframe to prevent or mitigate adverse impacts, and to improve and monitor performance. If risk mitigation measures prove ineffective, we will temporarily suspend or discontinue cooperation with upstream suppliers.

5. Transportation

We strictly comply with international transportation standards for Class 7 materials and ensure that the disposal, storage, and transportation of hazardous materials comply with relevant laws and regulations. We guarantee that no leakage will occur during transportation and production processes so as to prevent adverse impacts on the environment and human health.

We will continuously identify and investigate risks related to illegal taxation or extortion during transportation within the supply chain. If such illegal activities are confirmed, we will immediately adjust transportation cooperation arrangements and terminate cooperation with any parties involved in illegal taxation or extortion. We will never tolerate such unlawful activities and will ensure lawful and compliant transportation operations within the supply chain.

III. Supplier Management

For each supplier, we require completion of a KYC (Know Your Counterparty) questionnaire and submission of supporting documentation regarding the source of tantalum raw materials. We assess the supplier’s risk level in accordance with our risk management procedures and conduct procurement based on our due diligence purchasing process, which is aligned with the Responsible Minerals Assurance Process (RMAP) and OECD Guidance. For every transaction, we strictly review all corresponding documents and maintain records accordingly.

IV. Grievance Mechanism

We have established a comprehensive grievance mechanism intended to widely collect opinions from all parties and continuously improve our work based on such feedback. We will comprehensively promote the above procurement policy to suppliers, customers, employees, and the general public.

At the same time, we solemnly commit to strictly complying with relevant United Nations sanctions resolutions and to observing applicable Chinese laws and regulations related to the implementation of such resolutions. We will ensure that we do not participate in any activities that may contribute to or facilitate conflict.

If procurement objectives related to risk mitigation cannot be achieved in a timely manner, we will take decisive action to suspend or discontinue procurement cooperation with the relevant suppliers.

(Our “Grievance Mechanism” is published on the Company’s official website: http://www.hnhyhkxc.com/ssjz.html)

V. Supplier Commitment Declaration

To ensure compliance and transparency throughout the supply chain, the Company has formally established and implemented the “Supplier Commitment Declaration” system. All suppliers of tantalum raw materials are required to sign and strictly comply with this declaration before establishing a business relationship with the Company.

This declaration applies to all business areas involving tantalum raw materials under the Company and is intended to standardize raw material procurement procedures, strengthen supplier accountability, and ensure the legality and traceability of raw material sources. Please refer to Appendix I for details.

Hengyang King Xing Lifeng New Materials Co. Ltd

Jan 12, 2025

Appendix I

Supplier Commitment Declaration

To: Hengyang King Xing Lifeng New Materials Co. Ltd

According to your company’s relevant regulations regarding the prohibition of sourcing tantalum and niobium raw materials from conflict-affected areas, our company, as your raw material supplier, hereby formally makes the following commitments and declarations:

1. Our company commits that we will never procure or sell any tantalum or niobium raw materials originating from conflict-affected areas or from unknown sources, nor use such materials to produce intermediate products for sale. We strictly ensure that all raw materials are sourced legally and are fully traceable, and that all sourcing activities comply with raw material traceability management requirements.

2. During the period from X Month X, XXXX to X Month X, XXXX, all tantalum and niobium raw materials entrusted to your company and other domestic smelters for processing were fully processed within XX territory. The logistics transportation and product circulation of such materials and products did not transit through any other countries. All raw materials for the above-mentioned products originated from non-conflict-affected areas, and all sales activities were conducted strictly in accordance with national laws, regulations, and industry standards.

3. Our company hereby declares that neither the company nor any of its shareholders has made any investment outside China, nor do they have any beneficial affiliation in overseas entities.

4. Our company voluntarily accepts your company’s supervision and audit throughout the procurement, production, processing, and circulation processes of raw materials. If any of the above commitments are violated, our company agrees that your company may reserve the right to reject or return the goods at any time, and our company shall bear all resulting costs and related liabilities.

Our company always adheres to compliant operations, strictly controls product sources and the entire process flow, earnestly fulfills corporate social responsibilities, and abides by the cooperation agreements established with your company.